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Home My WebLink AboutRESO 98211 Resolution No. 9821 Resolution of the Council of the City of Palo Alto Approving the Amended and Restated Water Supply Agreement Between the City and County of San Francisco and Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County R E C I T A L S A. Water supply agencies in Alameda, San Mateo and Santa Clara Counties have purchased water from the City and County of San Francisco (San Francisco) for many years. B. The San Francisco Public Utilities Commission (SFPUC or Commission) Water Enterprise operates the Regional Water System, which delivers water to communities in Alameda, San Mateo and Santa Clara Counties, as well as to customers within San Francisco (collectively, “the Parties”). C. The Parties entered into the “Settlement Agreement and Master Water Sales Contract between the City and County of San Francisco and Certain Suburban Purchasers in San Mateo County, Santa Clara County and Alameda County” in 1984. D. In April 2003, water supply agencies in Alameda, San Mateo and Santa Clara Counties established the Bay Area Water Supply and Conservation Agency (BAWSCA), as authorized by Water Code Section 81300 et seq. E. Upon expiration of the 1984 “Settlement Agreement and Master Water Sales Contract,” the Parties entered into the “Water Supply Agreement between San Francisco and Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County” ("Water Supply Agreement") on July 1, 2009, authorized by SFPUC Resolution No. 09-0069. F. On September 10, 2018 this Council, by Resolution No. 9791, delegated authority to BAWSCA to act as its authorized representative in discussions and negotiations with San Francisco to amend the Water Supply Agreement. G. Each of the other 25 entities which are members of BAWSCA similarly delegated negotiating authority to BAWSCA. H. BAWSCA has submitted periodic reports to the City on progress during the negotiations and has provided detailed briefings on all significant elements of the amendments. I. The Parties now desire to adopt an amended and restated Water Supply Agreement in order to: (1) require the SFPUC to adhere to a formal program to engage with BAWSCA on its 10- year CIP development; 2 (2) adjust the provisions of the Water Shortage Allocation Plan regarding the initial allocation of water during shortages between San Francisco Retail and Wholesale water customers; (3) extend the December 31, 2018 deadline for the SFPUC to complete a water supply planning process and decide whether or not to (a) grant permanent customer status to the cities of San Jose and Santa Clara, dedicating a permanent share of the SFPUC water supply to these two wholesale customers, who currently have temporary, interruptible status, and (b) increase the 184 million gallon per day (mgd) Supply Assurance created as a permanent dedication of water supply in the 1984 “Settlement Agreement and Master Water Sales Contract” and carried forward into the 2009 Water Supply Agreement (collectively "the 2018 Decisions"); (4) change the classification of certain Hetch Hetchy Water and Power capital projects, adjusting the amount of capital funding to be provided towards these projects by the Parties and the SFPUC Power Enterprise through the term (June 30, 2034) of the Water Supply Agreement; (5) modify provisions related to the SFPUC’s administration of the Wholesale Capital Fund to more closely align with the historic rate of capital project spending by the SFPUC and prevent volatility in the annual determination of the Wholesale Revenue Requirement; (6) extend the estimated timing of the completion of the WSIP to reflect the currently adopted program completion date; (7) clarify the cost allocation and water accounting provisions used for the Regional Water System's Groundwater Storage and Recovery Project; and J. In addition to the substantive modifications set forth above, the amended and restated Water Supply Agreement also includes a number of non-substantive updates and revisions to incorporate previously approved modifications, such as the First Amendment to the Water Supply Agreement, adopted in 2013 as new Section 3.18, prohibiting San Francisco from draining Hetch Hetchy Reservoir or decommissioning O'Shaughnessy Dam without securing Wholesale Customer approval in the form of an amendment. K. In 2008, through SFPUC Resolution No. 08-0200, San Francisco approved the Water System Improvement Program (WSIP) to upgrade San Francisco's regional and local water system and achieve Level of Service Goals and Objectives, which include meeting average annual water demand of 265 million gallons per day (mgd) through 2018; reevaluation of forecasted 2030 Regional Water System demand projections and water supply options by 2018, and SFPUC’s decision in 2018 regarding Regional Water System deliveries after 2018; and meeting dry year delivery needs while limiting rationing to a maximum of twenty percent system wide during droughts. (1) Prior to approval of the WSIP, San Francisco prepared a program environmental impact report (PEIR) for the WSIP in compliance with the California Environmental Quality Act (CEQA) and the San Francisco Planning Commission certified the WSIP Final PEIR in Planning Commission Motion No. 17734. 3 (2) The Wholesale Customers reviewed the Final PEIR and CEQA findings and, in conjunction with approval of the Water Supply Agreement in 2009, the Wholesale Customers also adopted CEQA findings that were relevant to each Wholesale Customer's decision to approve the WSA. (3) The amendments considered now are not a "project" for the purposes of CEQA as they involve an administrative activity that does not result in a direct change to the environment (see 14 CCR Section 15378(b)(5)), and would not result in a direct or reasonably foreseeable indirect physical change in the environment (see 14 CCR Section 15060(c)(2)). (4) In the event the amendments are considered a "project," they would be subject to the categorical exemption for operation, repair, and maintenance of existing facilities (see 14 CCR Section 15301) and the amendments do not implicate substantial changes that involve a new significant environmental effect (see 14 CCR Section 15162(a)). L. The Parties recognize that, both before and after the most recent statewide drought, after meeting drought-related conservation mandates, several BAWSCA member agencies were unable to meet their respective minimum purchase requirements described in Article 3.07 of the Water Supply Agreement, which requires payment for water below the required minimum purchase level even if such water is not delivered and used. (1) BAWSCA and San Francisco have identified intra system water transfers in general as one potential solution to long-term water reliability needs among the Wholesale Customers, and Section 3.04 of the Water Supply Agreement provides a simplified process for permanent Individual Supply Guarantee (ISG) transfers among certain Wholesale Customers. (2) Several of the Wholesale Customers with minimum purchase requirements might be interested in transferring water within their respective ISGs, if doing so would also reduce their minimum purchase requirements and corresponding financial impact of paying for water that is not used. (3) The Parties to the Water Supply Agreement have a collective interest in working to promptly identify a resolution to this as part of a future contract amendment. (4) BAWSCA and San Francisco will begin discussions to address this issue commencing in January 2019. M. San Francisco's currently adopted WSIP program completion date is December 30, 2021. 4 N. One of the remaining final projects in the WSIP, the Alameda Creek Recapture Project, is the subject of a revised environmental impact report that has not yet been published for public review and comment. (1) On April 3, 2018, the Wholesale Customers provided formal comment to the SFPUC, as part of its action to adopt the most recent WSIP completion date, that the proposed WSIP completion date and accompanying construction schedule extension date for the Alameda Creek Recapture Project to December 30, 2021, may not be sufficient to accommodate any project modifications that might be necessary as a result of the ongoing revised environmental analysis, increasing uncertainty associated with the adequacy of the Project schedule as proposed by the SFPUC. (2) The SFPUC has indicated that it's Hetch Hetchy Local Simulation Model (HHLSM) hydrologic modeling identifies the supply yield anticipated by the Alameda Creek Recapture Project as critical to achieving and maintaining drought year reliability and achieving the WSIP Water Supply Level of Service Goal. (3) The Wholesale Customers acknowledge that the Alameda Creek Recapture Project cannot proceed to construction until environmental review under CEQA is successfully completed, and the past practice of BAWSCA has been to support extensions of individual WSIP project schedules and overall WSIP scheduled completion, including past extensions for the Alameda Creek Recapture Project, if supported by technical and other analysis as necessary to successfully complete the project and achieve project objectives. (4) BAWSCA intends to act in a manner that represents the best interests of all of its member agencies’ water supply while avoiding any harm alleged by any one member agency’s water supply as a result of any future action by SFPUC. O. The Wholesale Regional Water System Security and Reliability Act (AB 1823, Water Code Section 73500 et seq.) continues the Legislature's oversight of SFPUC’s implementation of the regional projects included in WSIP through January 1, 2022. P. BAWSCA intends to ask the Legislature again to extend its oversight of the WSIP program in anticipation of the SFPUC’s need to extend the WSIP completion date to accommodate individual project schedules with reasonable delays, such as the Alameda Creek Recapture Project. Q. An amended and restated Water Supply Agreement, in the form negotiated by BAWSCA, was presented to and approved by the Commission on December 11, 2018. The Council of the City of Palo Alto RESOLVES as follows: 5 SECTION 1. The analysis contained in the WSIP PEIR, and the CEQA findings adopted by the City in connection with the adoption of the Water Supply Agreement in 2009 remain adequate for purposes of this approval action because there are no substantial changes proposed in the WSIP that was approved in 2008, and there are no substantial changes in circumstances that would require major revisions to the WSIP PEIR due to the involvement of new significant environmental effects or an increase in the severity of previously identified significant impacts, and there is no new information of substantial importance that would change the conclusions set forth in the WSIP PEIR. SECTION 2. The City Council approves the modifications included in the attached amended and restated "Water Supply Agreement Between the City and County of San Francisco Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County" dated November 2018 (Amended and Restated Water Supply Agreement). // // // // // // // // // // // // // // // // // 6 SECTION 3. The City Manager is authorized and directed to sign the Amended and Restated Water Supply Agreement, in the form previously approved by the San Francisco Public Utilities Commission and attached hereto. INTRODUCED AND PASSED: March 4, 2019 AYES: CORMACK, DUBOIS, FILSETH, FINE, KNISS, KOU NOES: ABSENT: TANAKA ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Assistant City Attorney City Manager _____________________________ Director of Utilities _____________________________ Director of Administrative Services Emergency Response and Recovery Plan: Regional Water System (1)(2) WHOLESALE CUSTOMER 100 Cubic Feet (per year)1 Million Gallons Per Day (MGD)1 Amended Attachment M-3 Wholesale Capital Fund and Balancing Account Adjustment Reference Amended Section 6.08E A. Cash Flow in Wholesale Capital Fund FYE 2010 FYE 2011 FYE 2012 FYE 2013 1 Beginning Total Balance (1) - 8,818,323 12,404,275 15,761,658 2 Annual Appropriation (2) 10,476,724 8,636,920 21,737,468 11,285,643 3 Annual Expenditures (3) (1,778,695) (5,202,897) (18,553,119) (10,916,349) 4Interest Earnings (4) 120,294 151,929 173,034 137,113 June 30 Balances Before Balancing Account Transfers 5Total Balance (5)8,818,323 12,404,275 15,761,658 16,268,065 6 Amount Encumbered as of June 30 (6) 7 Unencumbered Balance (7)n/a n/a n/a n/a 8 Transfer From/(To) Balancing Account (8)n/an/an/an/a Ending Balances After Balancing Account Transfers 9 Ending Total Balance (9)8,818,323 12,404,275 15,761,658 16,268,065 10 Unencumbered Ending Balance (10)n/a n/a n/a n/a B. Calculation of Target Balance 11 Target WCF Balance (11) C. Calculation of Remaining Cumulative Appropriation 12 Cumulative Appropriation Since FYE 2010 (12)10,476,724 19,113,644 40,851,112 52,136,755 13 Cumulative Expenditures Since FYE 2010 (13)(1,778,695) (6,981,592) (25,534,711) (36,451,060) 14 Total Remaining Cumulative Appropriation (14) 15 Amount Encumbered as of June 30 (15) 16 Unencumbered Remaining Cumulative Appropriation (16)n/a n/a n/a 17 D. Lesser of Target Balance and Unencumbered Remaining Cumulative Appropriation Lesser of Target Balance (line 11) and Unencumbered Remaining Appropriation (line 16) (17) E. Calculation of Excess Fund Balance and Refund to Wholesale Customers Through Balancing Account 18 Is Unencumbered Balance (line 7) more than line 17? (18) 19 Excess WCF Balance (applied as a negative entry on line 8) (19) F. Calculation of Deficiency Fund Balance and Charge to Wholesale Customers Through Balancing Account (This Section is O 20 Is Unencumbered Balance (line 7) less than line 17? (20) 21 Tentative Amount Before Application of $4 million cap (21) 22 Is line 21 more than $4,000,000 maximum? (22) 23 Balancing Account Charge (applied as a positive entry on line 8): Original 5 Year Tr Notes: (1) Beginning Total Balance (encumbered and unencumbered). Equal to the prior year ending total balance after balancing ac (2) Wholesale Share of Revenue Funded Appropriations for Regional capital projects, adjusted for de-appropriations which ha Detail by Regional project in the format used in the 2010 - 2014 true-up to be separately provided. (3) Wholesale Share of actual Regional capital expenditures funded from Revenue Funded Capital, determined based on propo Detail by Regional project in the format used in the 2010 - 2014 true-up to be separately provided. The figures in line 3 for FYE 18 and on are for illustrative purposes only. (4) Line 1 times the assumptions below for the SFPUC pool rate. FYE 2010 - 2014 figures are actual and tie to the first 5 year r Pool rate assumptions: (5) Total encumbered and unencumbered balance of the Wholesale Capital Fund before Balancing Account adjustments: Line (6) Wholesale Share of the encumbrances for purchase orders or contracts in connection with revenue-funded Regional capita Not applicable in years with no true-up (FYEs 2010-13 and 2015-18). FYE 2014 figure is actual. FYE 2019 and forward are (7) Unencumbered Balance Before Balancing Account transfers: Line 5 + line 6. FYE 2014 figure is actual. Not applicable (n/a (8) Negative entries represent refunds to the Wholesale Customers through the Balancing Account and are calculated per Sec Positive entries represent charges to the Wholesale Customers through the Balancing Account and are calculated per Sect (9) Total Ending Balance After Balancing Account Transfers = Line 5 + line 8. (10) Unencumbered Ending Balance After Balancing Account Transfers = Line 7 + line 8. Must not exceed the amount on line (11) Starting in FYE 2019, the Target Balance is calculated by the formula below, where CY represent the Current Year (for wh [line 2: CY]*(4/5) + [line 2: CY-1]*(3/5) + [line 2: CY-2]*(2/5) +[line 2: CY-3]*(1/5); rounded to the nearest dollar. The FY (12) Cumulative Appropriations Since FYE 2010 = prior year line 12 + current year line 2. (13) Cumulative Expenditures Since FYE 2010 = prior year line 13 + current year line 3. Does not include encumbrances. (14) Total Remaining Cumulative Appropriation (encumbered and unencumbered) = line 12 + line 13. (15) Amount encumbered as of June 30 = line 6. Encumbrances are not cumulative. (16) Unencumbered Remaining Cumulative Appropriation = line 14 + line 15. (17) Lesser of Target Balance (line 11) and Unencumbered Remaining Cumulative Appropriation (line 16). Used in formulas in (18) If Yes, go to line 19 for calculation of the excess unencumbered balance. If No, go to line 20. (19) Calculation of Excess Balance: If line 18 = Yes, then line 7 minus line 17. The result appears as a negative amount on line (20) If yes, then go to lines 21-23 for calculation of charge to Wholesale Customers. (21) Initial step in calculating charge: If line 20 = Yes, then line 17 minus line 7; go to line 22. (22) If the result on line 21 is greater than $4,000,000, then the charge to the Wholesale Customers is capped at $4,000,000. (23) Equal to the lesser of line 21 or $4,000,000. The result appears as a positive number on line 8. 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