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HomeMy WebLinkAbout1993-09-02 City CouncilTHE HONORABLE CIT¥ COUNCIL Palo Alto, California Members of the council: '." This is an informational report and no Council action is necessary. _!pOrt fA Brie, In July 1992 (CMR:358:92J, Brown and Caldwell consultants provided a water Reclamation Master Plan wni~~ listed up to $30 million of potential projects. Hilton Farnkopf • Hobson ~a9 hired to review the financial feasibility of the water reclamation proposal. The attached study gives estimates ot" the impact on wastewater and water rates. The study concludes that, while reclaimed water is more eKpensive to pr.oduce than potable water, it may be required by the Reqional Water Quality Control Board~ San Francisco Bay Region {Regional Board). This report provides additional financial information .. hich will assist the council in the assessment of water reclamation projects. A joint session of the city Council and the utility Advisory co_ission is scheduled for October 4, 1993, to discuss this analysis, as well as the CH2M Rill pre-design study, which includes a pre-Environ:aental Impact Report (ErRJ screening study. The Regional water Quality Control Plant (Re9ional Plant) is run by the City of Palo Alto and. provides vaste.ater treatment and disposal services for the cities of Palo Alto, Mountain View, and Los Altos, the Town of Los Altos Hills, East Palo Alto Sanitary District, and Stanford University. CMR:464:93 T!"'.'S-R~t;rj c:-nd.~ ;:.,;.l?ln'i: is requlated bjl the Regional B'Oard, In 1988 the Reg-ionio,l Boa ... ·d asked Palo Alto to increase the mO::1itorinq of disch'lr~e .and req-.J.ired several studies d~aling with metals, In ~_990 the Re-qional ~oarrl l-owered the allowable Gancentration limits, ;:'e([;,.;trinq tt.l.e Regional Plant to reduce the amount o:f pollutants in eacl; qallon of wa"ter qoinq into the Bay, In 1991 the Regional Board iSS.·..;;2U ,e. r~vlsed. per5it and required maas loading limits (limits on the total nu-mber of' pounds of pollutants, such as copper, that would qo into the Bay each day). At the same time, due ~o ~~ d~QU9ht~ the Utili~ies Department vas lookinq for a new wate.i.' supply. As a result of k"oth the interest in meeting permit requirements and in developing additional water supplies, in 1991 ths Regional Plant Partn~rs (Partners~ and Palo Alto Water Utility h.I.,,:,ed Brown and Calu:well Consultants to pr-epare C!I Water R.eclamation Master Plan (Master Plan). The 1992 Master Plan evaluateu the potential for reclaiming and reusing treated effl~ent from the Reqi~nal Plant for the service area of the Re~ional Plant. The Mastsr Plan identities a reco~­ mended Reclaimed Water Program ~or the cities and aqencies fOr the ~tudy ar~a. The ~eclamation Master Plan focuses on water reclama­ tion as a means of: (1) providing additional water supply to the water utilities in the study arec, and (2) reducing the wastewater constituent mass emissions discharged to south San Francisco Bay from the Regional Plant. Tbe Master Plan concluded 'that 'itrater reclamation projects are technically feasible and that they are economically comparable with new sources of water supply and 'Wit..ll conservation measures, In addition, they reduce the discharge of vastewater effluent to South San Francisco Bay. The Master Plan recommended a three-stage approach to implementing reclamation projects 'Within the study area. Costs for the first stage 'Were estimate.d at $8 million. Construction of all stages 'Was estimated to cost $30 million. The Hester Plan recommended that P5lo Alto and its Regional Plant Partners proceed to the next step towards developinq the Recla~a­ tion program. The Master Plan Executive Summary was presented to Council in a staff report dated July 30, 1992 (CMR;358:~2J. The Master Plan dealt with assessinq the market for reclaimed water in the Reqional Plant's service area and the costs of providing reclaimed water to various locations within the study area. Additional costs would be to ensure the irriqation system is not cross-connected to any potable. system on the site. Impact for City of Palo Alto parks identified in the project is minimal. Most parks have an isolated supply line for restroom and drinking fountains; minor piping changes at the meter are all that is required. The Kaster Plan wa5 the first of a three-part Reclamation Program: the second part of the program is to develop institutional arranqe­ ments among the agencies involved; develop finanCing, funding and CMR:464:93 2 "~> "" i reclaimed ·""ater pricing policiesi' develop policies to encour­ age/require the use of reclaimed 'Water; and, most importantly, develop the data for an EIR, so that Council could have all the data needed to decide whether to proceed with the project, or a portion ot it~ The third part woulQ be final approval and implementation. The Master Plan 6uggested the financing would be through the issuance of debt instruments. The debt could be sold by a joint powers authority, the City of Palo Alto, or the Regional Plant Partners. All forms of tinancjng will be considered, including revenue bon~s, certificates of participation, and loans or qrants. The major fundinq issue concerns identifyinq who ~ill be responsi­ ble for re~ayin9 the debt. Due to the size and cost of the project~ staff recommended hirinq a consultant to prepare a report addre6sinq the financial issues. In October 1992, council approved a contract 'With Hilton F'arnkopf and Hobson to address the financial feasibility of the recommended Reclamation Program {CMP.:454:92). yater Recl •• etion rinancial AnAlYsi~ The attached Financial Plan is divided into an executive summary and three detailed chapters. The executive summary co~rludes the proposed reclamation project is a realistic vaste water discharqe option and a realistic water supply option~ The Study identifies the i_pact of developing the recommended Reclamation Program on the water and wastewater utilities, given several cost sharinq alternatives~ Alternatives range from h;).vinq all costs paid by vater ratepayers to having all costs paid by sewer ratepayers. The decision to proceed with or to halt plans to develo? reclamation at this time is a policy decision, which is clearly beyond the scope of the technical report. However, the consultant indicates there is an expectation in a ~equlatory cli~ate that reclamation is the next appropriate measure to take, now that all of the other comparatively inexpensive options have been exhausted~ In spite of its comparatively high unit ~ost, the proposed project is reqar~ed by the consultant as havinq a small financial impact. Chapter II reviews other operational Bay Area reclamation projects, and points out that the projects identified in the Brot..'J1 and caldwell Water Reclamation Master Plan would be larger than any eXistinq reclaimed water project in the Bay Area. The project is, however, similar in scope to projects in the planning stages at other Bay Area cities and smaller than projects in the planning staqes in San Jose and San Francisco~ Reclaimed water is ·.Jsually more expensive to produce than potable water; and according to the consultant, it can be expected that for the foreseeable future~ reclaimed vater will remain a subsidized commodity. CMR:t64:93 3 Chapter III discusses groundwater, conservation, and reclaime4 water as the realistic options for additional water supply. The development of the Water Recl~mation Ma~ter Plan was started during the recent drought. For this reason, the opportunity for addition­ al water supply appeared very important. The he.avy rains this winter have reduced some of the supply concerns. However, in July 1993, Palo Al to received a final Cease and Desist Order from the Regional Board, roquiring mass discharge limits to be achieved by July 1996. The Regional Board was concerned about reducing the copper mass emissions, so that the feasibility of water reclama­ tion, a.or.g other options, continues to be a siqnificant concern to the city. Chapter IV describes the potential impacts that the proposed reclamation projects "'ill have on each ot the Partners. A financial model was created to provide information that policy makers can weiq~ in considering whether to proceed further with the development of the proposed reclamation f3:cilities. First, it projects revenue requirements for 20 years, excludinq reclaimed water, for both the water and wastewater utilities~ The revenue requirellIent determines the total dollars needed without determininq whe (residential, industrial, etc.) will actually pay. A determi­ nation of who pays what increase in rates will be determined later and is a policy decision beyond the scope of this technical report~ Second, it calculates a revenue requirement th~t inCludes the entire reclaiQed water project, including an adjustment for blending a SJlla.ll portion (10 percent) of potable water with the reclaimed water to improve the quality of reclaimed water. Third, it computes the 4ifferences between the two revenue requirements; this is the cost o~ build.ing and operating the reclaimed water project. The financial model was used to determine the maximum impact on revenue requirements. Various scenarios were constructed to determine the maximu. impact on the wastewater system and the water system, respectively; the model also considered t~o cases between these extremes. The model looks at several wholesale pricing philosophies, including four scenarios: 1J reclaimed water is provided free to the water utilities (i.e.# the wastewater utilities pay ~he full cost of the project); 2) the wholesale purchase price of replace­ ment reclaimed water equals the wholesale cost of potable water; 3) the percentage iwpact on the revenue require~ent5 would be equal tor .both ~ater and waatew-ater systems; and 4) the wholesale purchase price of reclaimed 'Water equals the cost of pr-odllcing reclaimed water (i.e., the water utilities pay the full cost of the project) . The impact on the revenue requirements for both the water and waSTewater (including both the treatment and collection) utilities is summarized belQw. CMR:464:93 4 • Who If!:sa Ie !mpact on Revenue Reclaimed B~~j.:r:~m~ns;~ water Rate Waste pricing Scenario ($1 AF) Water Water 1) Reclaimed water at no cost to vater utilities $0 +9.8' -2.4t 2) Reclaimed water rate equals wholesale potable water rate $321 +6.5\ O.ot 3) Reclaimed water rate bal- ance. impacts on revenue requirements $688 +2. at +2.8' 4) Reclaimed water purc1'~a& ed at CO&.t $959 0.0\ +4.81 Concly.ion This study gives parameters to the financial aspects of the proposed project. Althouqh the study establishes that the Water Recla.ation ProgriUI is financially feasible., it still must be determined if the benefit justifies the cost. Along with the other reports, such as the pr.-Enviro~ntal Impact Report study by CH2M Hill, it will give the Council additional information yith which to make a decision~ Is. joint session of the City council and the. Utility Advisory commission is scheduled for October 4, 1.993~ to discuss this analysis, as well as the CH2M Hill pre-design study. During the joint session# staff will recommend whether or not CH2M Hill should proceed to an Environaental Impact Report .. Respectfully submitted, ~~75-~· GORDON B. FORD Treasury Manager 5 I , ~ .•. -c'" -c.; ~" ... rc ~.' ",' LK' ere: :x: s: c ~ c ,:( ' .. WATER RECLAMATION FINANCIAL PLAN HILTON FARNKOPF &. HOBSON 19}j,QQ\:.:c.rntt-s C\-I~. 51.>jlC" 100 ~~~45JS..ZHI ~" 5LO,'11J·.nm, NJC: SI"11n-)?~ , .--' """-. I , -- -WATER RECLAMATION -FINANCIAL PLAN - -10 the ClTY OF PAW ALTO FINANCE DEPARTMENT .. HILTON FARNKOPF & HOBSON ---------' --- • t ----... - }Ql;': O'.I~ ,::""rll~1 t),,,C", ~l>Lt< 1((' Freml'l';l. Qld.>m1J '~~ >~.~ 111 ~k-pt.-,,,,,,. 5 I,;' ;1J.·1!T~~ F.a~' SI{lnI l. 12';14 August 12, 1993 Mr. Gordon B. Ford Treasury Manager City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Subject Water Reclamation Financial Plan Dear Mr. Ford: h,·"",,,r :-';"" r' ,n ~,'~~ Hilton Famkopf & Hobson is pleased to submit this Water &cla"",tio" FiromcUlI Pia". The Plan comprises four chapters: • • Executive Summary· Sw:nmari7.e; the contents or Chapters n, ill, and IV. Projecl Background -Delineates the scope of the Plan, descrlbes California curren! practices, and provides a general context for the economic and financial analyses. • Resource and Economic Analysjs . Evaluates the resource issues and compares the costs of altemali ves. • Financial Analysis -Explains the funding options and the potential impacts that the proposed reclamation project could have on waste water and water revenue re­ quirements. We have enjoyed working with the Partners on this challe!1gmg project and hope that this Plan is useful to them in further studying the proposed reclamation facilities. Very truly yours, HILTON FARNKOP[ "" HOBSON .. .. .. .. • • WATER RECLAMATION FINANCIAL PLAN TABLE OF CONTENTS Table of Contents List of ExIu"bits Acknowledgments Abbreviations CHAPTERL EXECU'i1VE SUMMARY PRO~CTBACKGROUND SCOPE AND OB~C11VE5 RECENT RECLAMATION PLANNING GUIDELINES EMERGING FROM AGENCY PRAcrICES RESOURCE AND ECONOMIC ANALYSIS RESOURCE EVALUATION ECONOMIC EVALUATION FINANCIAL ANAL ¥SIS POTENTIAL RJNDlNG OPTIONS ASSESSMENT OF FUNDING OPTIONS FINANCIAL IMPACTS Modeling Assumptions Project Ot.'SCription Reclaimed Water Use Unit Costs Reclaimed Water Users Wholesale Reclaimed Wat.r Rates Financial Impacts CONCLUSIONS ellA}" i bii n. PROjECT BACKGROUND SCOPE AI"D OBJECTIVES j v viii I-I I-I 1-2 1-2 1-2 1-3 1-3 1-4 I-4 I-4 I-4 1-5 1-5 1-5 1-5 1-5 1-6 1-6 1-7 !I-I il-2 RECEl'Io'T RECLA]l.IA noN PLAl"-NING -HILTON FAA.'.oPf & HOBSON III) ---- RWQCP RECLAMA nON PROJECI'S Past and Pr .. ent Projects Proposed Projects onrER SAY AREA RECLAMATION PROJECTS RECLA.'-!ATION CASE SIUDIES Retail Agencieo; . . Eastern Municipal Water DlStnct Irvine Raru:h Waler District Las Virgenes Municipal Water District Los Afu;os Water District East Bay Municipal Utility District Coachella Water District Santa Margarita \,\7 a.te.! Di:itrict City of Santa Clara Mllrin Municipal Water District ·Wholesale Agencies Metropolitan Water District of Southern California Central &sin Municipal Waler District Orange County Water District Santa Clara Valle)' Water Distri..-t GUIDELINES EMERGING FROM AGENCY PRACTICES RATE-MAKING ISSUES Subsidies Rate Design Distribution Requiremenls Water Quality Differences Demand Chara~istics ISSUES RELATED TO OIliER RATES AND CHARGES Capacity Fees Surchilrges Acreage Charges Spedal Assessments CONTRAC1UAL ISSUES Voluntary Versus Mandalory Participation C"ntracts With Wholesale Reclaimed Water Suppliers Contracts With Retail Customers Take or Pay Contracts SUMMARY REFERENCES U-2 Il-2 11-3 fl-3 U-7 II-7 11-7 11-9 II-9 U-9 11-9 U-10 n-l0 ll-lO U-11 II-ll II-It II-12 ll-12 U-12 II-13 II-13 I1-13 U-14 Il-14 II-14 ll-15 II-IS IT-1S 1l-l5 II-16 Il-16 Il-16 U-16 11-17 11-17 U-17 U-19 ll-20 - - -- - --- - -.. .. • • CHAPTER Ill. RESOURCE AND ECONOMIC ANAL YSIS RESOURCE EVALUATION WASTE WA UR Dl.<''X)SAl OPTIONS ShaJ:ow Watee Outfall Deep Water Outfall R<lgional Export Source Control Improved Treaunent Land Oispooa! (i.e., Reclaimed W at.r) WATER SUPPLY OPTIONS Imported Water Supplies San Francisco Wa ter Department: Sant.1 Clara Valley W.ter Distnd Other Imported Water Supply Options Local Water Supplies SUlface Water Desalina bon Ground Water Conservation Reclaimed Waler ECONOMIC EVALUATION W A5TE WATER DI5P1."l5AL OPTIONS \VATER SUPPLY OPTIONS SUMMARY REFERENCES CHAPTER IV. FINANGAL ANALYSIS POTENl1AL FUNDING OI'TIONS DEBT FUNDING OPTIONS RWQCP IPartner Indebtedness Revenue Bonds General Obligation Bonds Lease I Purchasing Financing internaL Debt State and Federal Loan Programs State R<lvolving Fund Water Reclamation Loan Program ill-I ill-2 ill-2 ill-2 ill-3 ill-4 ill-4 ill-4 ill-4 ill-S lU-7 ill-9 m-9 ill-lO ill-10 ill-10 ill-10 ill-ll ill-12 ill-12 UH2 ill-13 lll-H ill-17 lV-1 IV-2 lV-2 IV-2 IV-2 1':-2 lV-3 IV-3 IV-3 lV-4 --------HILTON '''''!'IXOP>'' HOBSON e --~ iii Water Conservation Bond Law of 1988 Small Reclamation Projects Act EQUITY FUNDlNG OPTIONS Rate Revenues Contributions Capacity CnaISes . Contributions in Aid cl Construction (ClAC) Customer Advances for Construction (CAC) Regional Co-fundir'g/Grants San Francisco Water Departmenl Santa Clara Valley Water District ASSESSMENT OF FUNDING OPTIONS DEBT FUNDING EQUITY FUNDING FINANOAL IMPACTS STRUCTURE OF THE FlNANClAL MODEL KEY MODEUNG ASSUMPTIONS Sources of Da ta Allocation of Reclamation Costs Reclaiined Wale< Wholesale Purchase Price MODELING RESULTS SUMMARY REFERENCES -e Im.TON FAR..~1(O!'F & HOBSON ____ ~ ____________________ _ iv 1V-4 IV-5 1V-5 IV-S IV-S IV~ IV~ JV~ IV~ IV~ 1V-6 1V-7 JV-7 1V-9 IV-9 1V-9 IV-IO IV-IO 1V-12 1V-12 1V-l4 IV-I 6 1V-20 - - - - --- ---- '- - - - - - - LIST OF EXHIBITS Exhibit !-t. Revenue Requirement Impacts and Wholesale Rates by C.se Exhibit 1-2. Percentage Change in Revenue Requirement> at Full Development Exhibit 1-3. Summary of Revenue Requirement Impacts at Full Development Exhibit D-l. Existing and Proposed RWQCP Reclamation Sites Exhibit I!-2. Summary of RWQCP Proposed Reclamation Project Exhibit n-3. Operational Bay Area Reclam.tioI'. Projects Eltlubit n-4. Reclaimed Water Pricing Comparison Exhibit IT-5. Potential Provisions of Reclaimed Water User Contracts Exhibit ill-l. Qualitative Resource Evahtation -Waste Water Disposal o"tions Exhibit ill-2. Wal';" Supply Agencies Serving the RWQCP rartners Exlubit ill-S. Qualitative Resource Evaluation -Water S"pply Options Exhibit ill-4. Economic Evaluation -Waste Water Disposal Options Exhibit ill-S. Economic Evaluation -Water Supply Options Exlubit IV-l. Summary of Debt and EquirJ Funding Options Exhibit IV-2. Outline of Financial Model Structure Exhibit N-3. Water Supply, Waste Water Disposal, and Reclaimed Water Cycle Exhibit IV-4 Reven"e Requirement Impacts and Wholesale Rates by Case Exlubit IV-5 Peroentage Change in Revenue Requirements at Full Developmutt Exhibit!V-6 Summary of Revenue Requirement Impact. at Full Development LIST OF APPENDICES A. Financial Models B. Debt Service Calculations ~ [-7 1-10 1-11 D-4 D-S IT-6 II-8 D-18 ill-3 ill-6 ill-7 ill-IS 1lI-16 IV-8 !V-l! IV-l3 !V-I 6 IV-IS IV-19 -HilTON fARNKOPf 6. HOBSON -.- v ACKNOWLEDGMENTS Hilton Fan\kopf & Hobson expr"'-"" its pahtude \0 the City of Palo Alto, !he Palo Alto Regional Water Quality Control Plant, the Partner agenci.,,;, and others for !llcir c0op­ eration and contnbutions during the preparation of this report. We wish to extend special thanks 10 the following people: John Farnkopf Project Manager Randy Baldsc/lun. PaJo Alto Bruce Bane, 1.<>0 Altos Phil Bobel, RWQCP Rac/lna Dhir, Intern Jenny Fire, Mountain View Gordon Ford, Palo Alto Mark Harris, Mour.tain VIeW u.e Hawkins, Eas! Palo Alto Sanitary District Tom Lockard, Stone &: Youngberg Bob Locke, Mountain VIeW Mike MdCnight, Stanford Bill Miks, RWQCP Rubin Nmo, Menlo Park Paul Olmos, Mountain VieW Jeff Peterson, Los Altos Hills Kevin Riper, Palo Alto Jane Ratc/lye, Palo Alto Dave Richard""", CH2M-Hill Daisy Stark, RWQCP Rich Young. Palo Alto HILTON FARNKOPF &: HOBSON Scott Seeley Associate Analyst Bonnie Dooley Production Coordinator -tt Hl LTOr>o f"ARt"KOPF &. HOBSO~ ______ _ ---------- vi ...- I ...... -- ..... - .... - - - - - • aI B&C Regional Board CVP EBDA gpd hd HF&H Ib mg mgd MUD MWDSC O&M ppm RWQCP 5CVWD SD SFPUC SFWD SWP WD Y ABBREVIATIONS acre-feet (I aI = 325,851 gllllons) Brown &: Caldwell Regional Waler Quality Control Board Central Valley Project East Bay Discharger. Authority gallons per day hun<! red cubic feet (435.6 hd = 1 af) Hilton Farnkopf &: Hobson pounds million gallons (1 mg = 3.07 af) million gallons per day murJcipaI utility district Metropolitan W. ler District of Southern California operations and main!mance parts per milJion Palo Alto Regional Water Quality Control Plant Santa Cora Valley Water District sanitar! di.trict San Francisco Public Utilities Commission San Francisco Water Department State Water Project water district year .. "'LTO'" fA.NKOP' .. HOHSON iii) -."-"_ --...... .... - - --- - - - CHAmR I. OOamyE ~MMAR)' Project Background R .. "urce and Ewnomic Analysis Financial ANlysis Conclusions CHAWR I EXEcrrnyE StlMMARX ' ....... CHAPTER I. -.. EXECUTIVE SUMMARY - This dlapLer provides an overview of the main chapters in this Wafer R~clamJlticn --Firumcial Plan, Project Background, Resource and Economic Analysis, and Financial Analysis. -- - - - PROJECT BACKGROUND Chapter II describes the relevant project background, which is presented to provide a ronrext for the economic and financial issues that are addressed in the remainder of this Plan. SCOPE AND OBJECTIVES The City of Palo Alto Finance Department retained Hilton Famkopf & Hobson to study the economic justifiability and iinancial feasibility of the reclamation projects identified in the April, 1992, Wattr Reclomalicm Mils!er Plan prepared by Brown &< Caldwell under the direction of the Palo Alto Regional Water Quality Control Plant. This Master Plan identified sites fo, the application of reclaimed water, volumes of applied redaimed water, the facilities required to distribute reclaimed water £roo the RWQCP to the sites, the cos! of construction, and the scherlule for completion. B&C organized its fadlities into three stages, of which the firs! was recently studied in greater detail by CH2M-Hill in advance of preparing a pre-design EIR. HF&H incorporated the findings from these engineering studies into a financial model to estimate th" amount by which these proposed facilities would increase the waste water and water revenue requirements of the Oty, as well as those of the other RWQCP Partners. CHAWR I EXECWJYE SUMMARY RECENT RECLAMATION PLANNING Thi secti describes the RWQCP's past, present, and proposed reclamation projects andS com;;es them with other Bay Area reclamation projects. By compar~SOfL wIth these other projects, the proposed project would become the Bay Area s largest reclamation project. To provide additional background, case studies are p~ted for nine retail and four wholesale agencies that purvey reclaim water. ll\ Califo~.. These case studies describe, among other things, the basis for the pnce of reclaimed water. ~ng these agencies there was no identical comparison that could be found ~nslshng .of a partnership of waste water agencies. All four of the wholesale agenC1~ we.r. smgle water districts that were responsible for some or all of the water supply U\ theu servlce areas. The fact that the proposed reclamation project is relatively large and involves waste water partner agencies, rather than a single district suggests that the level of institu­ tional complexily will be above average. Therefore, the City is advised to make an allowance for the substanbal contractual and other institutional arrangements that may be required, particularly with respect to the expansion of the existing joint powelS agreement. GUIDELINES EMERGING FROM AGENCY PRACTICES A number of the practices regarding price subsidies, rate design, and other rates and charges are described; major contractual issues are also summarized. Based on these case studies, it can be seen that there is considerable variation in pricing. Some prices purport to be C06t base:<I, while most are. subsidized to one degree or another by waste water or water rates In order to prt>vlde customers an incentive to use reclaimed water, particularly when such uses repla<:e the use of potable wale:'. s..bsidies of the rnagnitud~ required for reclaimed water ar., apparently acceptable to waste water an.d water rate payers wben constraints on waler supplies t t dischar ell .. I .. L.. or was e wa er ges rea -a cntica u ...... hold. This threshold varies from ag t depending the th t dischar ency 0 agency, . on 0 er was e water' ge and water supply options that may be available. RESOURCE AND ECONOMIC ANALYSIS Chapter ill discusses the influence of waste wat d economics of the proposed reclamati . er an wa ter resources issues en the rosts of •....... c •• V._ .. iable n=urce Options'::~ a=ses ~ ~~:~;e~:~~7sares the unit ___ .. fUlTO~TA1L""KOPF&HOB5ON____ ___ _____ __._-: 1-2 CHAptER [. EXECliTlVE SUMMAlj.Y JU!SOURCE EV ALUA TlON ~~e issues surrounding the propoSEd pro;..:t con.titute a complex multi- lona array. there are .ten waste water options, thirteen water supply opf.ons, ~en potable water agencies, and six Partners, not 10 mention the ssible 1J'tv~lvement of non~Partners like ~~en)o Parle and the evolving influencro£ thE' Reg'"",,! Water Quality Conlrol Board. To IT'anage this complexity, each of '.he waste water discharge and water supply options Wen-ranked using the foJJowing criteria' physic.a) ayana~iJ,Hy /limitations. regulatory constraints, environmental impact~ ope.rational feaslbllity, and drought reliability; an overall assessment was then ~enved that reflec~d the combined indiyidual rllnkin.gs. The overall assessment indkate,d whethe~ a particular option was 21 realistic fewurCe worthy of fwther econonuc evaluation. It was found that source control, expanded treatment, and redama~ion are realistic waste water discharge options and that ground water. conservation.. and reclamation are realistic water supply options'. ECONOMIC EV ALVA nON A comparison of the estimated lUllt costs of each of the waste waler discharge and water ... ;;ply options is presented using the best available d.t.-. Sufficient engineering date requiud to make. sound economic analysis are currently unavanable in several key .... as. In order to accurately compare redamat!Oi't with thE. other realistic wastp water dis­ charge options, engineering studies need to be performed to quantify the costs of ex­ panded source control and improved ueatmenl. At present, there are no current cost estimates of e.panded source control and improved tnoatrnen\ •• either individual ai­ t-ematives or as alternatives jmpl~mented in concert with reclamation.. F'.lIther studies are also required in order to accurately compare reclamation "'rith the other realistic water supply options. Studies by the utilities departmMts of the uties of Palo Alto and Mountain View and consultants were helpful and were generafu:ed acT(lSS .11 the Partners. However, further analyses should be performed by Mountain View wilh respect to the use of treated contaminated ground water fM blending water and the costs of and savings from implementing cons~r\lation best management practiCf>5. Further analyses should also be performed to estimate the amount of blending water that may be required, regardless of sourO', particularly .tStanfc"d. 1 Red~m.t1on WiIS not-evatuattd ooly in b'orm5 of its valLIe during droughts, whfi,.h is significant because of redam;ttloo'S COr(lptluuveJ'Y h!.gll reliability. As an addltionar source of suppty, reclamation also pwvtdes water s\lpply beneflt:s."ln non..<frought y .•.... " ... ' ..... ' .... " .... d ...... ' ... h .... O .... U .. ld. ' .. h .. ere{ore still be cunsldC'rerl even though ..A.. the recent drought has p.nd(ld. _ ~ '___ _ _______________________ . H1LTO:-': FAR!'.'KOI'f &. HOBSO~ 'W -----------------------------------------------------------------------------------------~# 1-3 'HArrER I EXECunyE SllMMAR,\:: ed din E'COnomic assessment cannot be made. Until these analyses are perform ,an ex. r!cue economic dala, it does not "ppe"" NOlU!theless, based even on the current .unp lei the base, of the wa!er supply that reclamation should t>e pursued at this time so y on benefits tha t it provide •. FINANCIAL ANALYSIS Chapter N evaluates the potential sources of fwlding and presents the results of the financial analysis that was performed usic;g a specia1ly desIgned spre.dsheet mOOel. POTENTIAL FUNDING OPTIONS The sources of fwlding for the proposed reclamation project could come from either debt or equity. Debt could be issued at rroarket rates by either the RWQCP or a financ­ ing authority established by the Partners; today'. interest rates rw: about 6%. DeJ:>t funding in the form of low-ic;terest State loans may also be accessIble, although this option is uncertain. Equity from either waste water or water rate revenues is a...,othet' source of potential funding, but will depend on the financial resources of the individual Partners. Olher minor sources 01 "",,-operating equity may also exist. ASSESSMENT Of FUNDING OmaNS For the purposes of this study, it was assumed that the proposed reclamation facilities would be debt financed by the RWQCP and that the cost of debt service would be allocated among the p .. tners using the current plant allocation percent.ges. At such time as the decision is made to proceed with the construction of the reciarna tion fadlities (a decision that might also embrace the development of other related options such as expanded source control and upgraded treatment), an "ptirnal funding arrangement could be developed. As,urnmg that the facilities would be financed bv the RWQCP at market rates yields results that should be Sufficiently .CCUl"ate for the Partners to decide whether 10 proceed further. FlNANClAL IMPACTS The financial impacts that the proposed reclamation :3cilities could have on the PaT~~rs were modeled to det~e the amount by which reclamation would in­ ?,ease waste water and watpJ utility revenue requirements. At the Partners' direct:ioft l It .was assumed that the RWQCP would fund the reclamation facilities and be reh~~~reclfraimed~m waste wtha3ter rates and from revenuel if any. from the sale of w 0""""" water t Ieplaces potable water. --e H":r".".,."~"OPf .. ~""SO~ ----, -------_______________ _ 1-4 -.-. - ---- ------ - - - --- -- - - CHAPTER [ EXECIJTlVE SUM!ltARX Modeling A6sumptlon. Tne following major assumpHons are incorporated in the moOel; ;I'OJ~cI de8('ript~on. The reda.mation projf>C'f compri~ true€' stagf's. The volume of . t"('i.a1m.ed water mdudes blendmg WaiN but excludes certain existing r«laimed waler proJeCIS thaI are unafleeled by the propos<'d lacilities. 1 1 and 2 1,2, and 3 Cost 00l!l1l $8.100 $22;700 $3(),100 Acre-F~t Completion ApPl'ed Da.ll: 634 1994 1,779 1995 2,987 1997 Reclaimed water use. II was assumed tha~ 10% blending water would be required. The amount of water reclaimed, net 'Of blending waterl is about 9% of the total RWQCP effluent. ~ 1 1 and 2 1,2, and 3 RWQCP efflt;enl (AF) 571 1,601 2,688 Blending Waler CAE) 63 178 299 Total AI'I1Hed (AFl 634 1,779 2,987 Unit cosls. The first-year cost of r.damation (08cM and debl service divided by the number of acre-feel of recbimli"'d R"'}QCP f'fflner.t) )fields t!-'...e !ollo\.· ... i...g ' .. i.rJt costs. ~ 1 1 and 2 1,2, and 3 Annual ~!!$(AJ-1 51,232 $1,203 $959 Reclaimed wafer users_ With the completion of Stage 3, reclaimed waler would be applied at Partner locations in the amounts shown below. "Replacement reclaimed water" refers to reclaimed water that rf"pliJces potabJe water. "Supplemental reclaimed water" supplements current water supplies but does not replace potable water; supplemental reclaimed wah"1" has no re>fail value and is essentially a form of Jand disposal of waste waler effluent.::! 2 In the parly stages of this study. apptOXi'1l<llP'Y 45% Ot the total reclaimea water W<'I!I c1a,:sified as supplemental. Ouring the cour!JE' of the study, t.'1e demand for reclaimed water at Stan ford ",,",as reassessed. At present nearly all of the reClaimed waler protect's productiOO is da9sified as replacement reclalmlPd water. ... --------------HILTON FAJL'lKOPF &. HOBSON 1f6!J' ---_. 1-5 Palo AJ~o Mountain View Los Alto. East Palo Alto Stanford Los Alto. Hills Total CHArrm L EXEgmyE SllMMARX {AFI SIolI1I1p.llie:omllle",n",ta ... 1 ,. '" Tmal (AEJ Rep13ccment ___________ ..J.DoU 634 1,204 o o 500 --'l 2,983 o c o 4 o --'i 4 634 1.204 lJ 4 500 ---l1 2,987 Wholesale reclaimed water Rites. The cost of delivering suppiernf'ntal rttclaimed water, which provides no water supply benefit, would be bornl' by the Partner's through their waste water rates; in other words, recipients of supp!emental reclaimed water would not have to purc.hase it &om the RWQCP. The cost of delivering re­ placement reclaimed water would also be supported by waste water r.tes, but could be offset by .Ipvenue, if any. from sales to the Part:nPrs' water utilities. This wholesale rate couId range anywhere from zero (i.t., replacemf'nt redcimed water is also provided al no cost to users) to the cost of delivery (i.t" the water utilities pay the entire cost). In this study, these two extreme conditions were modeled as well as two intermediate, illustrative cales. These four rates are presented as four cases: • Case 1. Reclaimed water provided ~t no cost to water utilities, • Case 2. R!>daimed waler rate equals tI-.e wholesale potable water rate. • Cue 3. Reclaimed water rate equaliz.es percentage impacts on revenue require­ments, • Case '-Reclaimed waler purchased at cost of delivery. The r..tail rate for replacement reclaimed water, which would be paid by the Partners' r~tall ~esldentia1, corr..merc:zal, and lflstitutional customers, was not studied in this F"umcuzl Plan, Financial Impacts The estimated financial impacts were measured in terms of how ~ ch th f _1 ___ f-" • t d ' Io4~U e cost 0 re<"'.J4lHd.UOfl IS proJe-<: e to mcrease wastf> water and water . ( hich' I " .L_ b revenue reqwrements w. IS no necessaruy u"' amount y which rates would have to be increased) The projected resulls lJ\ the fllst year of opera lion of Stage 3 are .: following three exhibits. surrunanzed in the Exhibit 1-1 shows the percentage impacts on the ag aled P wholesale rate for each case. As the wholesale r~eg artn~,= and the associated e mc:reases. Ute lUlpacts on waste til """'" 'AR,m" " HOB",,· --. ---------------___ __._____ ._. -------£s 1-6 .. .. .. .. .. • • ------------____ -'COJH~AUPIJiql'll. I. EXEcUTIVE SUMMARY water and water utilities dec-tease and . . plotted in Exhibit 1-2 This r h' . lIlereaS<', respt><bve'ji. TnlS relationship is with the Wholesale t g ap llldlcates the percentage impact. that correspond ~I=~~ts by Pa::'::. 57.:' :!~~i~;h~*ts E::b/:c:-~!ta ~:~i~~~~~ ~; . n oodlcombmed waste water and water revenu£.' requi.rements is a 28o/r: x:ncrease ... regar ess of the wholesale rate. . . 0 Exhibit 1-1 Revenu. Requiremenllmpacts and Wholesale lYtes by Case an the first year of Stage 3 opention) lr.lpact on Revenue Whole.hre Requirements Reclaimed Water Rate Case Waste Water Water ($/AF) (1) Reclaimed water provided a' no cost to water utilities +9.8% -2.4% $0 (2) Reclaimed water rate equal> wholesale potable water rate +6.5% 0.0% 5321 (3) Reclaimed water rate balan""" impacts on revenue reQ'uirements +2.8% +2.8% $688 (4) Reclai!ned water purchased at cost 0.0% +4.8% $959 CONCLUSIONS The key findir..gs of this Financial Pill. are as {aDow.: ,. Elsewhere in Cahforn.ia ... agencies prk.e reclaimed water in a variety of ways~ nearly all of which do ""I provide full cost recovery. As a matter of policy, agendes typically dlarge no more than the retail or w}-\..oIesa1e potable water rate in order to provide an incentive to use reclaimed water. • The proposed reclamation project is • realistk waste water dis.:harge option, but further engineering studies are required to determine the extent to which recla­ mation is economic compared with. the other re.alistic options. namely. expanded source control and improved waste ~aler~eatJnent.pend~~~)~::,:o~~:~.~!S __ ~ __ ~. 1-7 CHAPTER I EXEQITIVE SUMMAR)' d I sole)"· ott the merits its possible that reclamation will be <ecnomic to eve or J was!e water discharge benefits. Th ed ecl ti pro'-"' is also a realistic water supply option; further • e propos r ama on J-~----'---ti n can be ecconomically in-analyses are required to deternune whether , ........ ~ a . tegrated into Palo Alto's and Mountain View's current and potennal water su~­ pli-es. However, based on incomplete data. it would appear that reclamation IS currently U''l.conomic to develop solely for waler supply purposes. • Tn. proposed redarration project would reclaim approximately 9% of the RWQCP effluent at a cost of $959 per acre-foo! in the first year of Stage 3 operation. • Reclamation would increase the Partnus' combined waste water/water revenue rpquIrements by 2.S%. The separate impacts on waste water and water depend on the wholesale reclaimed water rate that th<! waret utilities pay. • The effluent thaI is reclaimed either replaces potable water demands or supple­ ments water supplies (without replacing or reducing potable water demands). The cost of delivering supplemental reclaimed waler should be supported entirely by waste water rates. The cost of delivering replacement reclaimed water could be either partially or fully reimbursed by the users of replacement reclaimed water. • In delivering replacement reclaimed water, the RWQCP would act as a wholesale water supplier. Various wholesale reclaimed waler rates were modeled in this study, but no recommendation is made as to an appropriate rale. That issue is an institutional matter to ~ negotiated among th<! Partners. The decision to proceed with oc to halt plans to develop reclarnation at this time is a policy decision. whidt is clearly beyond the scope of this technical report. Although this report .contains no explicit policy recommendation in this regard, the prepon­ derance of lis fmdmgs, whidt have emerged from a conservative sct of assumptions designed not to oversell reclamation, support reclamation. • As a ~urce, th~ is • growing expectation by state and federal regulators that reeI.manon shaul a be dev~oped ~use. of its dual waste wa\er discharge and water, supply benefits. This e~pectat1On 15 fOrming in • regulatory climate that regiJ.r<lS reclam~tion ~5 the n~t apprDpriate meuW"e to take now that all of the ot.'1", comparatively U1eXpenslVe options ha"e been ewusted In th d !her . d' th f . 0 er wor s, e IS . ecreasmg sympa y .I'om regulators toO economic arguments opnnsing reclamation. r- • The economic analysis in this report compares resource v ti the b . f uni! costs using the best available data, which only acco~~~~r G~ erat:~d capltal costs and do not account for regulatory and other intangible ~nefjts, ~hidt HILTON FARNKOPF &. HOBst».· _________________________ _ ---- .... -- -- • • • • CHAPTEt! I EXEctJIIVE SUMMARY re5OW't:1' eamomists today attempt (with little recognized suo:ess) to account for in benefltl cos! analysis. The comparison 01 unit costs indicate. that reclamation is currently not cost effective for watn supply 0]""", but is probably cost effective as a combined waste water di!iChar!;E'/water supply option, pending further engineering and retail rate studies . • The finandaJ analysis in this report shows that the economic analysis may give an oVl!rly negallve rating to reclamation. In spite of its comparatively high unit cost, the magnitude 01 the propwed reclamation project is such thai its financial impact (a 2.8% increase in waste water and water revenue requireIItento) falls within the fina.ncial model's numerical predsion limit and is therefore regarded as a very smaU financial impact. 1-9 , ·1 jj CHAmR I. EXEC\JTIVE SUMMAR): Exhibit 1·2 . nl •• , Full [Hvelol'menl Percentage Change i n Rt'yenu~ Re'l U lIeme r , (firsl year of Stage 3 opera .on 1O.!'IO'l. ~ 9.!'1O'l. 8.00., ! 7.00'1. Jl 6.00'1. • v i 5.ocn. ~~, r II •. 00'1. I 3.00% ea.Z C-. v C-l .. .!! I, 2.00\\ d 1.0011. D.lXl% j- -j ~ 8 51 8 ~ a ~ ~ ~ :;: ~ iii ~ ~ i j ~ :;: § ·l.roJli ;;; ;;; .. ~ =< ~ III ;;; .2.0011. .J-OK Wholaalr Red~ W .. terRaft ($1M) • Waste-Water Utilities ---G---Water Utilities --e Hll""; FAR",",,,,, HOBSON '-----'------.----'--_______ . ___ I HO -CHAPTER I. EXECUTIVE SUMMARY ..... -.. £x]Ub;,,·l Summary of Rrvenue ReqtJire'ment Impacts at Fu n Development IF"" Year 01 Stag<" 3 Oper.!i<m) -ea.e 1 Case 2 easel Ca5e ..... W~ W .... Utilities --Palo Alto '.9'1> 5.3'1> 2.2'1> 0..11'1 Mountain View 13.0'1> 8.''1> 3.''1> 0..0'1 -Stanford 9.''1> 6.2'1> 2,7'1> cm -too AI"", 11.8"" 1.11'1> 3.3'1> OM Ea>t Palo AI'" 7.~ H'\, :'.0% o.Cl<; -too AI\OS HIlls 12,5'1> 8.3% 3.5% 0..0% -Avera&" 9.8% 6.5'1> 2.11% C.O'JI tweter Utilities -PaJaAJto (2.0%) 0..0'11. 2.3'11 '.0'iI Moun..mView (2.5"") 1>.0'11. 1.9'11 sn S!anIon! (4.2,,' 0..0% U'Jo 8.3' -too Alb -----Ea>t Pale Alto -----too AI"", Hills ---- A"""'g<" (2 •• "') 0..0% 2.8% U'.I - - ~ned Waate Waterl Water 2.'1 Palo Alto 21'10 2.1'" 2.3", Mountaln VIeW !o1'" 3.1'10 3.2'10 3.21 Stanford (1.4'10) 1.3'10 4.3'10 66' too AI.,. -----East Polo AI to ---- too AI"" HODs ---- A.-mIg<" 2.8% 2.8'10 2.1\'10 2.1\' - - ICise 1: Reclaimed water provided at J'K) cO'5t \0 walM utilities C::.se 2: Wholesale rt'daifl"lt'<i wale'!' rare ~ual.s wbclesalE' potable water rale . pse 3: ReclAimed watu rate equalizes Impacts on wasre watt'r and water revenue requIrements ~., RecWrned waOer 0""""""'" at rest - • • 1-11 ....... -- ... --.. .. • • • • • OiAPlllB IL PROJECT BACKGROUND &ope and Obj«l:ives Recml Redamation Planning Guidelines Emetging fro ... Agency Practices Summary Ref .... nee • . ." .... . .., - - ' .. • • • ----------------------"---------lCHA~~PTER~~IUL~PResCHICTBACKGROiITiP CHAPTER II. PROJECT BACKGROUND This, chapter 'provides " gen .. ,al introduction to this study. One part of this intro­ duction COnsISts of • bnef review of the study srope, objectives, and methodology which WIll be followed to produce the Wain R"lamation Financu,1 Plan. The other part.co.n5lSts .of a description of the recent trends in redamation planning, This descnption IS ~tended t<: provide i!'.sight into how other California agencies have developed the" reclamation projects. SCOPE AND OBJECI1VES The City of Palo Alto in conjunction with its RWQCP partner. (i.e., the City of Mountain View, the City of Los Altos, the Town of Los Altos Hills, Stanford University, and the East Palo Alto Sanitary District) have uruIertaken a comprehen­ sive water reclamation planning effort that began with the preparation of a Watn hclilmtltUm Master Plan by B&C, dated April, 1992. In this Mastn Plan, B&C iden­ tified potential redailr.ed water users and the required distribution facilities. As part of L"" B&C study, the amount of reclaimed water was determined and the as",­ dated capital and operating costs of the distribution facilities were esti!nated Since that time, the City retained CH2M-HiU to condue! • preliminary engineering study building on and refining the cost estimates in the B&C Masler Plan related to Stage 1 (al5o known as Project A) development, The City retained HF&H to prepare this Waltr Recio_lion FjnJlncia/ Plan to eval­ uate the projects identified in the eng'.neering studies in terms of their economic justifiability and financial feasibility. This Finane",1 Plan includes a resource evalu­ ation that assesseS the development of reclaimed water within the context of the other waste wa!<'r discharge dnd water supply options that are available 10 the part­ ners. The Finan.cial Plan was developed as a series of "~chnicai memoranda, which were submitted to the Partners for their review. The comments received from the Partners were incorporated into what are now Chapters n, Ill, and IV of this -----.. --. HlITON HII""OP'" HOBSON \III --~ U·l CHt.nJlR n, PI!OTECT BACKGROUND . . I Plan indicates the financial i=npact fi1Ul7lciai Plan. Taken as a whole, the Ft""nCUl ti oJ'ects identified in the that i. likely to occur in developing the redama on pr !l&C /CH2M-Hill engineeriilg studIes, RECENT RECLAMA nON PLANNING -me following discu.ssian of recent reclamation p!anning is presented to serve itS an informative backdrop for the Financial Pl.,". RWQCP REC'LAMA nON PRO/EO'S Past and Present Projects The RWQCP'. earliest attempt at using reclaimed water dates back to the late 1970's when effluent was used to irrigate the Palo Alto MunicipaJ Golf Course. Because of the accumulation of sodium and other dissolved solids in the soils and high ground water levels, t1,e turf grass roots were damaged, whim led to the abandon­ ment of this project. Since then, facilities have been designed to enable irrigation at the Golf Course using reciaimed water blended with potabie water, The facilities are projected to come on line in 1994. Mountain View has experienced grea!!!r success in irrigating the Shoreline Park Golf llnks, where reclaimed water (200 af/year) is bJen&,d with an equal amount of potable wa!!!r, thereby reducing the concentration of sodium and .... wting salt load. At Greer Park in Palo Alto. a reclaimed water !e..'"Vke Cvi:1r~ticn wa~ n:(;entiy in­ stalled. VJater ;rom. this connection is used by contractors for soils compa.ction and dust control and by CaITrons for highway medIan strip irrigation. Mountain View hal; two reclaimed water hydrants, one of whim (T~rminal Boulevard) serves 100% reclaimed water and one (C.ittenden Lane) serves blended reclaimed water for tree irrigation. In totat. there are currently 90 permit holders that are able to take water from the above connections, TIteir combined permitted capacity is l.l mgd. An analysis of their ~ in 1991 (ll&C, p, ,2-19) shows a total volume of 121 mg (33,150 gpd on aver­ age), w.th about 60% hemg taken '1'. the peak irrigation months of July through Sep!!!mber (2,4,2.4, and 2.6 mg, respectively). HILTON fAR:-"1(OPf &. UOHSON _____ _________________ ____________ _._.___ • ___ ~ ..... n-2 • • • .. .. • OiAITER II. PROTECT BACKGROlJND In preparing its Ma.t~ Plan, B&C surveyed sites within the Parlne,,' service are ... ~ asse~s their ~~tenti.il to util~ re~aimed water. Out of this survey, 37 sites (",eluding 3 "XlSttng ~'Ies) were .dentified as having the greatest potential. These S.les were configured mto three proje<:1S as shown in Exhibits 11-1 and 11-1; the pro­ )e<:1S can be consldered eIther as stages of Project D or as mdividua! developments . As can be seen In these tables, the majority of uses are for irrioation of publk and private parks and open space. In the case of Stanford, Exhibit 0.1 shows 1,800 afly being used, which is based on &l..-C's estimate. Stanford has since indicaled that this amount is too high and that 500 afly is more realistic. For purposes of preparing this Financial PlJm, it was assumed that Stanford would U!'E' 500 ally of reda!med water to replace Cu.rrent potab~t=' watp! $Our:=oes. However, for purposes of preparing the engineering pre-design study, CHZM-Hill based its cost estimate on a flow of 1,B00 a!/y, which aUows for L'le possibility of disposing of an additional ),300 afly if conditions at Stanford allow this to OCcur. (Because of concerns about salt loading, the situation at Stanford is presently uncertain.) It is possible that a portion of the Stage 1 facilities could be deferred until the condi­ tions at Stanford become dearer. For purposes 01 preparing \hi. Fjtumcii11 Pum, it wa. assumed that the taU Stage 1 would be developed <at CH2M·Hill'. estimated costs) and that B&C'. cost estimates for Stages 2 and 3 would be unchanged. (The CHZM-Hill and B&C cost estim.tes include all facilities within the Partner>' service areas, which are required. to deliver rec:laimed water to individual sitesi on-sits im­ provements were not indu.ded.) OrnER BAY AREA RECLAMA nON PROJECTS ThE' r-ecIarna.tion projects currently operational in the Bay Area are,Hstoed in Exhj~it n.3. This ta.ble consists primarily of irrigation uses. It does not mdude,re:cychng within treatment plants, which is an inddent~l. ~orm Of. reuse, nor does l~ Indu?e recycling within industrial manufacturing facllihes, which, although, ronsldera,ble .. is an unknown quantity. The table ~lso does not include ~ff1uent dIscharged mto marshlands, which is simply another form of waste water dJsposaL It is recognized that the L.,ventory of projects in Exhibit lJ-3 ~',Y have Inadvertently 'tl d th Bay Area reclamation proiects such as for lrnganon or mdustrlal onu e 0 er " tl he"1 ' f I cooling water. However, even if the list were ~tec y lC~Pdre. nsr:'te, Im,slSla e 0 503 that the total amount of Welter currently. bemg ree alme IS ~Ul e s a corn- y d ·th .~-a--"-t of potable water that IS consumed (approxImately 1,.200,000 pare WI u", -.~.. . f! ) af/ye.r) and waste water that is discharged (approxunately 600,000 a year. n-3 '~x ~ ,~ ! .. I ,~ CJf _____ --"'CHII6l ... m:aRIULD,.a"'9I.1J11I1!C'1'~WKGR01ITiD ~, f!)11 -- BIIhlbll 1J..1 BlI"Hna and '_Hi .woeP a.t:t.,...,I-SltH Pr.I ... t !!In. LDutlon A Plio Alto MW'ltdpll CoIf CQUI"H PI\ptJro Blylandl Athleii, Can* PaloAiIo £lunor Parll; ,.\1)11.110 Riconada Park at.l h\QAlto Pftrtl'll.:'lt P.loAlto Stal'lfotd Uni\lomUy (pownUal uUlmltf' (fplliopmet\t) Stlinfutd US lOt 0.\ Embt.~&d,,1'Q PaioAlb..\ Project Tptjll\ Alt8 US to1 at Ulllvllrtlty P.lo Alto US 1m tot Or-soo P.\t'JAbo c:_ P-rk Palo Alto Pfll('1 AUo Munic\JWI\ $Mrrvl«t Centln" P.loAho Nhtchen Park P.loAlto (tamo. Park PaloAleo FAlt M.eadow Cirell/Fabian Way Indulbil.l Aru. ".Ia Alto (Ioulwal1! rlfk Palo Alto v."tutt. ('.ater ralo Alto Itobllts Par .. Palo Alto ~.niotrl Rowan:h Palk PaID A\\o Dol park P.loAho V.mlna ",dmlniltutiol'l Mfldkal CfrI'ltet PawAho Alt. M .... Mltmonal ParI< I'alo Alto larman Park PllloAlm Pro,,,,1 T'lUlI 0 US tOt lnttKhilln8* (,,\).MoundllJl V,_ Mountain View US 101 m,erehAI'lS. (1}.~.t Palo Alto Eall Plio Alb;) Shonth .... Coif Llnk./Puit Moun18tn View Am"" Il-... rch ClII1hl'r IMoffett Plfld Mountain Vil'W RwgltortJ Park Mountain View McKelyey BIll Plri. Mountllirl View P-,o~ Memona1 Patk Mountain View US)" Plrk Mountain View Bubb Plrk Mountain View Cuntll PlIlk Mountain View Stl'Ven;o(m School/Park M(lw'lbim Vi .. w Ctittenden 5chool/Puir; Motmtllin View Coopllr Park Mountlin View Protec:t Total T01AL 'ioulOl" IHoC M.,tn Pl.", TIt-I .. &-1 vu:lh-2. • Ex_ ... Ae: .. ·fut P., Vlt.r 355' l' " 51 35 1,600 • 2,'''' • , ". ,. 141 " 30 ,; , J9 '" " 1\1 , ISO 121 1)20 11 , ... ... 7il 15 " " 30 11 " 17 " 1,208 4,!£-.. I[ "la' J, 1[. ]:tI If i.]", •• Ii }, ~. ] I~· J [ -l [ .~ .~ [ .J ( J [~ c-, l ~, I~ ~ ; ;11- K.nG" .. """'''''''"'"' --~~--'------.--~-.---~~ =: ---e ~CltmJNl) Ihrh1biIO..2 Sum .... ." 01 RWQCP Pmpotecl Rod_oIlon Project Stogel Stoge 2 Stage 3 (Project A) (Pro). Alt, Bj (proje::l DJ Total Sites Set'v'!:d" 6 13 13 34 Acre-feet per Year-- Per Stage 634 1,145 1,208 2,Qfg Cumulatively 634 1,779 2,987 Capital Cost ller Stage: $8,100,000 $14,600,000 $7.400,()()I) S30.100,000 Cumulatively $8,100,000 522,700,000 S30,I00,ooo Annual Q&M i Per Stage $8(J,000 $105,000 $6(),000 $245,000 I Cumulatively $8(J,000 $185,000 $245,000 Compl@tion Date 1994 1995 1997 -Sourct:!s: Stage 0 .. ~ CH2M-Hin cost estimates, Stages 2 and 3 • l!&C M •• ter Pllln, Tabl •• ~2, 6-3, 8-1. --Excludes existing £rojects and l",-:mo acre-feet at Stanford. ThE> limited development of reclamation proje:cts in the Bay Area dots not reflect tM extent to which it has been Sl:\\died. Planning 5tudies ate currently underway that would result in ." additional 20,090 af/year 01 developed reclaimed water by the middle to late 1990" Conceptual studies could yield 65,000 af/y'" more w.thin the fotes~Bble futu~, However# by comp.rison with southern California1, the amount of developed reciaim",d water in the 'Bay Area would seem to ~ dispropor­ tionately smallo 1 Approltima«;ly 250,(00 .lly 81"\" currently rf'(laimed within the Metropolitall W.lPr Dt.trlct 8t'I"Vice dorM. Howcver, tNt. on'oOunt. inch:a6e~ tome of..,. fOnnll 01 reclamltion tNt are ndudM' from EJChibit 11-3. ------H1LT"NfA .. """"' .... )~""'" e 0·5 1 " 1 ~ :\ , ." ~ ~, CHAPI'I!R IL PROJECT BACKGROUND IlxbiblilM Operational Ba~ A_ aecla_lion I'l'oiedl --I.e'" Aaencv ProIOd Acre-I .. , ".r V'"' Haywatd/EBDA Skyw •• t GoII Course itrig,tion 222 I Union Sanitary District Irrigation 15 South San Franci5co Construction tontra~tots 40 I Polo Alto Greer Park 35 Palo Alto Truck standpipe for irrigation 35 Mountain View Shoreline Park irrigation 155 Mountain View Street sweeping 10 S. Bayside System Authority Truck standpipe for irrigation 220 Santa Clara Phase I irrigation 370 EBMUD Industrial users and irrigation 1,000 Marin Mvnicipal WD Irrigation 350 Contra Costa. WD Industrial recycled water 462 Dublin/San Ramon SD I·680/Stonebridge irrigation 7 Dublin/San Ramon SD TrUCk loading IDO TOTAL 3,121 Sou,ces: Surveys by City 01 Palo Alto and HF&H, July 1992. Note: Uses cited exclude waste water disposal into marshlands for e(\VlrOnMe~- !~_~nhance~t and in-plant use at waste water treatment Elant"'. Much of the reaSon that reclaimed we-toer has not bt1en deveroped aft extensively in northern CaHforru. as it has in the southern patt of the State is attributabl(' to the differences in land use. The greatest uses of reclaimed w.tcr State~wide are agrkill­ tUI',l irrigation and ground water t'e.charg~ (54% and 21% of total reclaimed water use, respectively). The optimal conditions required for agricultural irrigation and ground water t~charg.;> do not exist within th~ Bay Area, where there is very little ir­ riga-ble land avaiJable between ~he enveloping Coast Range mountains and the San Francisco Bay and whel-'e the use of reclaimed watel.' for ground water re>:harge is currently not aBowed by State pUblic health regulators, Another advantage that facilitates the development of red"mation in southun C~lifornia. is the manner in which development is occurrmg. Dev@loprnt(lt in lhe hmer Bay Area consists predominantly of in-fiD and detuiification, whereas in pal'ts of southern California. dtvelopment cOll5ists of growth in undeveloped areas, It is (----, r • -.' [ ".,. a J "" ( .]~ [ 'J''!I .' I[ • }< Ie '~ " .~ r ~ -. j , - I~, 1 IL i.: \f'. L .... , I, :. L - Il :. ~ I[ 1. J 1. J I[ J Il,. : II ,::, :. ' .. ~k . I. ' 1~ ------,---* j , -----'. j~ --e KILTON FARNKO"" HUm"'" ------ D-6 Il __ _ QlAP1'JI u. pBQJIQ-ItAf'KG80UNQ mud> eaaier to construct d..al distribution .y.tem. for reclamation in undevelopod ...... rather 'han in previously developed .r .... Southern Californla has also had • stronger motivation to dttVeiop rcdaimed, water because the need to augn\ent lOCI) potAble water supplies if particularly acute in 'View of the fact that southern California is f.rther rl'!!moved ftom its sources Of potable water, wruch sources ate diminishing as a result of environmental fegulll~ tioo and litigati.on. It is importl'nt to note that by cOI'nparison with the reclamation projects that are currently operational, the magnitude of the redamation projects identified in t"le 8&.C Mast~r Plan repres.ents the lDrgest reclamation development in the Bay Atf'a to date. RECLAMA nON CASE STUOIES Th@ following C.lse studies Include several retail and wholeSIIe agei\C1t~5 in California that have been icwolveQ in purveying fedaimf'd -i\'ater in signific:ant amounts. Considerable variation is eviden~d by the diffef~n! .pproaches that have been adopted with fespect to pricing and &ubsidi@s, Exhibit II .... contains a summary . Retail Agencies Ret~il ageJ\ties. as dlstinct from whole8l1e agtncie!i. deliver cecl.imed water directl), to retail tustomers The retail ageru::y ,.5 either self~upplled or acquire'S reclaimed water ftOm a neighboring sanitary district E;Jstern Munidplil Water District. In addition to providing reclaimed water for irri­ gation putpo:;f'S, EMWD (San Jacinto, between Riverside And fain' Springs) pro­ Vides water to the Department of Fish and GaJ'he for wetlands and to the EI~inore Valley Munidpa1 Water Distrii.t for stabilization of Lake Elsinore. No W4Jter i& 'ur~ rently used for residential purposes; MWeV(!r. developers are 1!'e-quire-.1 to install dual distribution systems and customers are required to (O[U\ect to reclaimed niait'lS when they become available. Each reclaimed water user i!i currefltly required to sigf\ d five~year uSer t\grecm~lt, The terms of these agreements .lfe expected to in­ creaSl~ to 10 to 15 years in tlle near future. Demand for reclaimed wa~t"r iJ\ 1991 was 14.600 .If and IS expected to continue tv grow rapidly. EMWD applied fer, lind re~ cc>o-("ed, twO il)i\J\S totaling $74 million to support its reclaimed water program from the Fedetal B\.lfeaU of Recl,mation . ~ , ;1 i • ---------~---------.---------H'llON FA"'"",",~ ItOSSON e ---I I B·7 ~. QiAPTRB no PBf!IECT BACJ(G&C!lJ.Wl ' IbhdJll n04 RMI ..... d W ..... r PriM, eo ... pa"'lIIn A •• acy ~~~~.-'! .. -.~-~ (AP/yur) PIt~ .... ,1. (IIA" 1t.,.II.n "S.SO '" .,.,,_SO .opondlr. '" I E.I"'m MWD ,...., ~ 'tU IJIJ'If. of '1M po1M>I. ta'. cap.ndlftj on ... and qualiry. UN .. nd (jlMhty 'rvan. Ranch WD 12.000 90% 01 pot.IItd. flIll, whld, ft· "96 tMCtt till'" \0\'._ riM. 1... 'w'lrs:en .. MWD ~OOO Four4hwd recbsim.d w"tt!r $300 -f645 u,. luunww which tl 7'5% of putabl. WI,. rill •. LO$ AlillDl Wo 1.200 l4"1!. of potab). ra~. 5161 E.ul (by MUD 1.000 6O'Y....75't.. ot potable rata. $~88 -"-160 :E~ !ncru_ In IIS% in nAt futuRo C~ch.J1a V .. IlIl), WO 1.000 11 ..... at po~. file. ... "" Sarita Mar&"ri~ Wo 900 10G% nf potable rlw. 1579 C,ty of Sant .. elltll "'" 90% of potable nil •. .". M.nn Municipill WD ,., 5O'Y. "f potable til,. S". Whol ..... I .. ,. MWDSC ".000 SIS4/acre-foOt .. ubs'dy - C.,.,lr .. 1 Ila,in MWD >.500 75% of whol.uJ1t " .. , S23!i Orang'" County WD \,100 aJ"l(. of ralllt dlafled ~ l-.tailt!'!. ...... Sll\t.I. Clau_ Vall..,. WD 0 A.1" \II'Id.m-mmlld tap'la1 -cuntr1butl~1 or .ublid, .. p!lf aCfPfO(It. StIUKIl Hilton F.nakopf" Hobaon. OctotMr 1m. (~"'"Jf t~··J1 t~··"j t.J, ( .]~ { -J~ ( •. J' .--\ L • ..! . -\ , ... I (--r-­-­, .-I l [ -. .~ , EMWD originally paid larme" and golf c<lu".' $40 PO' acre loot 10 use reclaimed • ~, water, As demand gtE!w/ the District started dUirginl~ $25 per acre loot. For the lost • . ' [ three years. the District has retailed reclaimed wetter for amounts ranging from $18 to $300/ af, dependil".g on the quality (secondary or tertiary treatment) and use -; -.'1, (agrlculture. M&d, or construction water), The District's tertiary tatE is gHghtly \ess • .' .. .. --V HILTONFARNICOPI'.s.UOBSON -~-----------i .)~ ( __ 1:. n-s ___ ~n.l'II.OIl!C:r~G"OUND thon 50% 01 ... potable role. It la EMWD's poli<y 10 .... p thla ~ at • level 01 at 1 ••• 115%. ltvl ... Ranch Wiler DlsWcl. IRWO (City of Irvine. Lao Mgelo. bUin) purveys 13.000 oJ/year I(l • variety of aboull.OOO <Witmnon for _. lhat include landocapo irrigoti"" (tM single large •• \lac). ind""lrlal COOling. ,,!fiCl! bwldings, ogricullur.l ir· rigati<>n. dusl control, etc.; the DiltrkI ""P'cto t1!clai_d water to be used lor rei­ derttia! itrigation in li<te near futuM. lRWD has. an ordin&nce thAt requires the USE of reclaimed water when th-wat@r is avaU.bl~ and the use is appropriate, Although redaimt::d water ifJ sold to both tteat2d and n'W water customers. there is only a single r@-Claimed water flte, The: rate equals 90% Gf the tr~at@d water rate, which exceeds thE' raw water rate, The District does not he.ve caplcity fees for l~­ daimed water connections:, The District's goal is to seU 28,000 at of reclaimed watf'r .nnua Uy by the year 2020. lRWD received loans totaling 54 milHon frorn th£. Statf" (or its reclaimed water pro~ gram. These funds were used io a number of ways to help the District complete the cady phases of its project La8 Vilgenes Municipal W.ter District. LVMWD (Calabasas. between Simi Valley and Santa Monica) retails ~laimed water via a four-tiered rate t;tructure. The first twelve-hundred cubic feet (ost $3001 at. This rilte incre-asn as consumption in­ crease~ 50 that when Over ]00 hcf Qf reclaimed water are used, the rilte is $E-AS/af. This structure rrurrors the District's four-tiered potable water rate structur~; how­ E'\f~r. recia.itl\@d water is di5COW"'lted 2S% from the potable water rate. The Distnct also uses a cormectiol'l fee for potable water customers to help provide funding fot reclaimed water projects, LVMWn mandates the use of reclaimed water when it if. a\lailabie and tequjrH each reclaimed water custOmer to obtain II District water use pe-rmie. Thill permit Stat"'"" tha.t the Di,trict must be aUowed to insPf'ct the project'!> installation and have 24-hour access 10 the project's landscape 5upenrioor. LO!t Ahios Water District. Th~ lAWn (El Toro, southern Los Angeles basin) cur· rently purveys reclaimed water to 175 customers who use up to 175 af per month. The District charges $161/af for reclaitn@d water, which is on~third of the Distnct's potable .. to 01 $479/.1. LAWD requires that cuslomer. wishing '0 use reclaimed wattt tilgn iong·tetm contracts, ; .~ Ea" B.y Municipal UtilUy DIslricl. EBMUD has sold reclaimed w.~r Sm"" 1984. AI tha,t time a golf C(lurse purchased redaimed water for $300 per month to COVf'r ad· minlstre.tive costs plus the waste water treatment cost tor labor and materials (testing, pumping. chlorination, and overhead), Since then EBMUL> ~s sold rco­ claimed water to several other industrial and irrigttrlon custo~[&. The cost is typi­ ca.Uy 60·75% of the potable water cost, including O&CM and c,-pital OOIits, which are amot'tl'l.ed over tw~nty~years; a§ such, each reclaimed water custOmer pays a rate 1 ---------HlLTONfAKNKOP,&HO.SON e ---~ n-9 I, , QiAM'E!! II. rJlOJECT BACKG&C>JJM2 that In moet c ..... is caet based over the long term. E.ch of I!BMUD'. reclaimed wa­ ter custo~s has entered into 21)..year water supply contracts, The reclaimed water rates are tn-iewed annually .Ind escalahtd to account for potable water rate increases and inflation. 'I'he Di&trict plana to ,Increase Us redaim@d water rare to 85% of its potable rate in the neat fu.ture. EBMUO cuttently sells about 1,000 al of reclaimed water ~r y~ar, Chevron is EBMUD's largest teclaimed water customer. The rate Chewon Pi)" for reclaimed water i5 de~rmined by first cakuli1ting how much Chevron would nave paid for an equiv.lent amount of potable water_ Chevron then [emves a credit be~ cause it contributed S2 million toward capital funding. The tftulting rate approxi­ mai¥[t the cost of service over the period 01 amortization. &c.use of th£ l()wer quality of reclaimed water, however, Chevron', dem.nd Inc"'a .. d 15%, B)' the time Ch~vron buys 15% more reclaimed water at a reduced tlte, it is paying about the saine as it was for 15% less potable water. Th@ company hOpes to eventuall '! re­ place over 5 mgd of potable water used in cooling towers with reclaimed water. EBMUD received low-interest loans from the State totaling $1.5 million for itl; re­ claimed water projects. A St.te loan for a new phase of the Chevron project has also been approved. Coachella Waler Distri(t. The Coa~heUa Water Dir.trkt (Coachella, north of the Salton Sea) retails reclaimed water to golf courses and green belt irrigators. ))err,and is quite seasonal and can reach 1.5 mgd during the summer, The District charges $46.58/ at for reclaimed water, which compares with 52101 af for po1abl~ water a.nd $75 to S85/af for pumped ground water. The ratt' only covers the cost of the tuns­ mission system's operation, maintenance, and debt repayment. It does not cover the COf;t of producing the techlimed. water. If the reclaimed water were not used for irrigation, large land areas wouJd have to be purchased for u~ as percolation ba~,ins, The costs for such Jand purdtfJ,5e5 and for pumping the witter to the5e bash\S w(luld be very high. The District currently does not have an ordinance requiri1lg the use of reclaimed water, but strongly encour.ges any new development to make USl~ of the resource, Santa Marg.uit. Waler DistriCL SMWD (Mission Viejo, southern Los Ang,~les bllsin) sells __ bout 900 af/yeilr of reclaimed water primarily to residential cU5toffio!!rS, who ate required to use it, if a-.. ailable, for irrigatmg open 'pac., The District p!lYs the cost of the connection and elected not to have contracts with its customers. ·,rhe rt"daimed water rate is the same as the potable water rate. SMWD applied ior lind fea-ived .. $1,4 million State loan for its project, City of Sanu a.ra. The City of Sal'ltJ Clara dli!livers ove, 450 af of reclaimed water annually for $326/ ~f. Four of th(l City's SfV(l1'l cu.stOm~r5 are city departments; no long-term contracts art' requited. The City originally set its reclaimed water rate at riJ~ C Jt -J'f [ .,.' [".J~ C.J'I [ J" -.. C.: r ' •• [ .~ ( · ... il .' ,. I: iL ... '"~ I !L .,~_ .. • I I _ · 1(. • , , ·:1 !L •• r J" "~-~ e IIILTON fARNKOPF& HO"SON -~----'--------'-'-~----~~---t{ , ·i~ .j,. n-IO [ ------------------------------ CHAPIllB II p!!QJI!CJ'B4CKGIOI.JND 900/0 of the potable .. t.; however, .lthough tIw Oly'. l'klailNd r.'" has remlined constant, the current drought has caUJOd the CIty's pot.ble r .... to incru ... signifi­ cantly" Con"'quently, the rec\aimed r .... is now 67% 01 the potable r ..... The City re­ ceived $910,000 trom the Sta'" in low-inter .. , loans I<J help cover 73% of ,he origi­ nal project's construction coats. Marin Munlclpal W.,er Dlltticl. MMWD otIglnolly d .. lgnoted cenain parts of ill; service .rea as teclaimed watt'!r zones. Since then, the entire District service area has been deemed to be a reclaimro water zone. This means tM.t the Distrkt may tf!'~ quire existing customers to cOMed W nearby r~dailned water facilities at the Disttkt's cost, Not OIuy are new customers required to connect to .fIvailabJe re­ claimed w,ter facilities, they must also pay a cilpa.:ity charge '!qual to 90% of tr,. portable water cap.city charge. MM\VD has approximately 100 reclaimed water customers rangmg from ill priSOI\ to apartment and office complexes. These custornel'6 purchase abotJt 350 at of re· claimed water annually. The District expects to have clnse to 200 reclaimed water customets in the next five years. It currently bills its reclaimed water customers at 50% of 'lhe portable water rate but expects to reduce the di5count in the future. MMWD does flot require loog-term contracts of its redaimed water customers. The State approved a $5 million loan to MMWD to help the Disrrict expand Its te­ c1aim,pd water system to Hamilton Air FOtl~e Base; however, this project has bN'n delayed untiJ tM Base is (onverted to non-military status. Wholelliale Ageodes By compa.ri~on With retail agencies, wholesale agencies generally have no direct re­ lationship with retail customers. If the wholesale agency is solely a pot,blf' water purveyor, its iflvQlvE'ment is generally limited to prOViding economic meer-hves or capital (ontribution5 to those of it5 reta.il agencies that use reclajmed water; the~e in· centives uS1Jally take the fortn of price SUPPO"' that are subsidized by potable water rates. In those cases where the wholesale agency also pr~uces reclaimed water, subsidies can be ~upported by both potahl'" water and waste water rates . Metropolitan Water Districe of Southern C"..alifornia. MWD hit." a tocal Projects Fillancial Contribution Prt)grarn that provides financial assistance (0 Its member agencies to develop economic local water supplies; these projects are typically water reclamation projects. MWD will provide $l54/af of financial assistance to new local projects that reduce demands on MWO's imported supplies and that need MWD's aS5Jstance to be financially Masible, Project, must deliver ill minimum yield of 100 "I per year and comply with the provisiono of the Califonua Environmental Quality Act to be eligible lor funding, During the period 1981 to 1991, the MWO Board has HILTON tARN .. '" ~ "COO,," _ noll " ~ ~ ~ " ~t" '~~ 'ii" ~-~ " r CHAPID II, PROJECT RACKGROl1NI2 approved participation in l' local reel_matleln projects wlth • combined ultimate yield 01 41,000 allyelt, Control Buln Mllnldpill Water Dl.trl,L The Cl!MWD (Carson, near Long B"aeh, Los Angeles basin) is • water wholesaler that purch~se5 wilter from the Metropolitan W.ter District ilnd wholesales it to water ~tai1etj within its sel:vice area. In October 1992, the second phase of the District's Cet\tuty Reclaimed Water Project began operation. This projecl'. S""l is to sell 5,500 af of redalmed walei' per year to over 150 customers. By the year 2020, the District hopes to sell c!Ofle to 100,000 af of reclaimed willeI'. Currently, the Disttict sells reclaimed water at 75% ot MWD'. potable rate Or.t 5235/01, Originally, the Di.lrkl plaruled to ch.rge 90% of MWO's rate, tJut it modified this plan based on comments by its retailers. The C8MWD currently pays. the locals.nitary district $5/ilE for tertiary treated f,ffiu· ent. This sales agreemerlt will l.ast for three yt!&rt; at which point a complicated fOf4 mula will be used to determine the water's cost to CBMWO. The Distri.ct has ~X~­ rienced no problems getting its retailer, to use reclaimed water ilnd consequ"ntJy I:\as not r~quir~ them to enter into ~ong·tetm Wllt'!f supply contracts· C8MWD help' hmd its redaimed water projects via: a property tn. aUf!ument caUl~d A standby charge. This temporary chprge raises $13.5 l'fliHion per year, which l5 used to payoff the project's fixed debt paym('nt obligations. Reclaimed water sales pay (or the project's operation "rid maintenance costs. Ar. reclaimed water sales increase, the stllndby charge will be dect~B5ed because water revenues will be able to meet the debt payment I'E!'quirements. Orange County Water District. OCWD iii primJrily a ground water managf!m~mt agency that has taken the pOSition that it will encourage the use of reclaimed water to r(!:li~ve demands (In its basin without becoming: a competitor with the water sup­ ply agencies in its service area, Because OCWD acts as a wholesaler, it ~arJ\ot man~ date the use of redaimed water within the retail agency's service area, The Dis'triet ~ns reclaimed water at 80% of the retail agency's cost of purchased water, the SOurce of which is typically MWD. OCWO pays the entire cost to constru('~ distribution mains to connect the customerfi. The District currently supplies about 1,100 af ot re­ claimed water per year to 6 major customers, It hopes to expand its sales to 3,000 at in the next few years. OCWO received about $2 million from the State in the form of low~intere6t loans for its reclaimed water p:mgram, and has applied for an acldi~ tiona I $20 milliot\ for the second phase of the project, [---]I r-]f r-·~Jt •• r.l;' t .J»' C .J C. j ( ~ ( ., [ .~ ( •. [ ."., [ ·:1 [ ."~ [ •. Sant, Clar. Valley Water Dl,ttict. TI\e Dishic:\ recel,tly adopted a policy Statement • th(it supports and encourages the \.Ise of redaimed water in the District's sf."Jvice ( .. area, To impJement this policy, tM District plans either to CO-Venture in reclaimed ! water projects or financially support independent proj@cts. A cO-ventured project is • one in which tM District financially participates in the project's capit3.l cost and [ .. then supports the operation and mainteM.nce uf the project. An independ.ent p~~ _ ---e HILTO",\R"'Oef"tlO."'lN----·~-, .. --------------[ ·i,~t r '.~ P.. _ :. •• - 11-12 C6P1D II.. PIQUI7.AaGBOUNlZ jeet is one that" BpoN<lred by one 01 the District's water "'tallen; the Diatrict is not actively involved in the project's implementation but, r.ther, provides firtancill:l incentives tol' the reclaimed WI-ret produced. Beth type! of projKtI m\l&:t deliver at t.ast 100 af/y •• r 01 reclaimed water that displ.ees existing or planned potable w .... ' demand on the District. CUlDElINES EMERGING FROM AGENCY I'RACTIcrs Certain common practices are noticeable among the foregOing agencies and, frurn these practice6, general guidelines are em.erging. These guidelines are either directly related to rate making, such as Subsidy levels. or indirectly, suet\ at> the conditions of service. RA 'fE-MAKING ISSUES Subsidies Two considerations btar on deciding the extent to ..... hich teclaimtd water should be: !fubsidit.ed; (1) th~ need to prOVide an incentive to potential CUStomers and (2) the impact on potable WAtel' and waste water ratt's from absorbing the subsidy. The need to provide Incentives depends all the number of options that are-avail­ able to the potential reclaimed w •• et cu&tomer-~. Usittg MWD's Loc(ll Projec1s Program as an t'J(ample, MWD has gradually tedu«d tt\e amwnt of subsidy it gives locaJ agencies for developing supplemental supplIes becaur.e M\VD's ability to Oleet growi.ng demands is dirrunishing and, hence, those agenCies that a~ growing have 00 choh:e but to develop supplemental supplies, There are sometimes special circumstanc@5 to consider when determining how mucl\ of an incentive is r-equired. For exampl~, a greater incentive might be pro­ vided to customers that have expenslye site conversion costs, monitOring costs, or replanting costs. The impact of the subSidy on rate payers un vary 6e-pending on whether the re­ clajmed water replacefii the use of potable or augtnent$ ?O-tabl~ wilter supphes. If fi'­ claimed water ceplaces2 PQtable w,ter, potable WAter rates will go up not only be~ Cause the pot2JIble watn-rf"Venue requirement is increased by the amount of the sup. 2 Th\", dllKuaaicm dlanngullhPa behvetn "repla(~t~ and -Iupplttmt'nbll" reclaimt'(l wllter. Thi" 1 ~ .1; t di.tincHon l1i1 defined In Chapter lV under Key Modti\ng AD\lf'\ptions HILTON""NK~I'F&HO''''N e --- D-I3 I ,'",' r ~ QfAMJBn.l'I!QJl!C'T~ sldy. but alto bfc ..... leu potable water wID be ",ld; 11\ atho. wor.1.s, tho n""'<t'.tor (i. t" revan~ requizem<mt) Inttl~. and tilt dmlomilla,c)r (I, e .• potable water ... leo) deere .... , Ii reclalmed wate. ~upplemen/$ potable water suppli ... tho impact on ra", pay ... ""'y no! be a. grot beoo_ potsl>le w •• .,. demand. (i, t" the d,nomi- naro,) Itt no! ~Nd, In tlw linal anaJysis. the-need to provide lin incentive. to use reclaimed wat(!r i8 cl.,..,ly ",l.ted to tn. options thot a,., available to cU5tome .... IWclaimed WI"" d .... not ha1(oC to be 6ubgjdj:zed as much when CUGt{tme{"ft nave no other alternative w~ter supply. Thi. also "",ans that 11\. amount of 11\ •• ub";Qy should be periodically .d· j\tstp.d not mdy to reflect incte&liied ,"om but a~w to ~ tht-diminishing nuniliM 01 water supply t1ptiof\5, 11\8e optioos should he balanced wHh equity coM:idera .. tions and customer .ccepta~, Rat.O .. ign P'otabt~ w.atec-and w«.Stf water rate &ttutbJ.rti ar-e be~ns desig~d by agencies to ~-o. .. (ourage customers. to use reclaimed water. In ell.('!, cu.&fomers that do not \.ISCf or Who refuse to U&e' recla.imed. water will b~ charged higtN?r potable water and W.J$te water t'att"£ than CU6tortWrs th.t use subsidize-d redatmed watet. As an e:{ample, reciaruatlon capita) costs ar(l i~duded in potablp water f&tt!S; rechtimed water (.J.tf!5 are set to recover just :reclamation O&:M cosu, Other lactors art-being tonsidered when designing redaime'(i water tates, which could tesult in different reclAimed w.ter rateS to! 4i.fl.erent oCUfltQnters, The ioll!)ww 109 artl some (!:"ampJ~Jj. Distribution R.eq:uirements. Should customers pay duterent rat:e5 fot rtfclaimed wa­ ter dependmg on th@ amount of distribution IadHties that ~re required to servt theml or $Mula individu.al distribution costs he averaged over aU costomt·ts'] lik~\\'i5@. should flevatiOfi and distance from the rf!daimed willt~r source be cot'\\lid­ f>red in dl!'termjnitlg the price of reclaimed water? In other wOlds~ should the ";>ostag-e stamp" Qt' "tai.1«.md tkb!t" approa-eh ~ IJ.Md tt\ pridng redi\~nwd water? ---t '.,. ... 1'" t J' t '· JJI ... t J"'" ." t'. 'I;;; ~. r .J t J .­t ., .­( i (. : [. - ( ... ( .~ i { ... \ ( .~ [.~ '. --[. "'!., ~--.~---~-~~. [. ~-[ .~. Water Qualit)' Oifier~n<e.. Should custome", that ,equi'" higher quality redaim"d water {e, g,~ indUSf,:rij!.~ 'C'.lStomers.} pay mor~ than custGmotss that t'M\ use ~daitl\td waler of Jesser quabty (eo, g., agricultural custOtltt'NI)? 1t should be remembered that, as water quality improves, tes6 water is required for the same purp<lS(', FOor example8 industrial customers UGf less higher quoilUty water beeauSf' their blowdown water reO' quirement is reduced; agricultutal r.U:5tomers use-Jess higher quality water UecausE! th"ir I.aching watl!r rtqu"ement i. reduced, As. result. the quality (,f the r~. claimed watl?'r may not changl" the cost to the CU&tomel: customers may actually ei .. thet pay more per unit for fewer units of higher quaLity water or ply l@s) pet unit f01 more units of lowtT quality water, ----e HIUt" ... ""' ....... ,""', n'14 __ , JAt< rn ....... n.DQJJiCI "CJ<G!Ql1IlO Demand Cha_ri.tlcs. Should cutl<lmetl that place "..... ... ound. predi<tabJe d ... malildi (In M:lalnwd wale, pay more 0< I ... than " .. """"'. l11li1 .~rt only ... ...,...1 ot shorter d~mAnd8 on recl.imed watm-7 lnduatml customeft. may b.t wilUng to pay at 'Ught premium for redalmed wattr 'ooUUH it its II Vtry reliable source 01 sUp'" ply and boca" .. they requlto • comp .... tively constant wot ... quality. Cu.to"""" that do rot require-as high a level 01 RtVlOO De-cause tlwy, for instance-, can to1~ra{lZ In'''trupli<m4 or lower p ..... ure, <Quld be onered a <light di><ount. Exper3e-11tt' to date indicates thttt all oi the ahave factor$ have influenced reclalrn~d watEr peking ~-:isi()J'\S.. particull\dy with NS-pe'ct to. d~,tributio-n costs. find w .. tel' quality differences, Although some ap:ndes have e9tablis~ different redaimf'd WSW! rate-s for e4tch (U$toroer or tustomer dass) ,. single ratp i& sufficient if l:kw cl~ss of tedaimea water customers iff f.1irly homag:e1WO\1S., !SSUES RaA Tf[I TO OTHER RATES AND CHARGES QUimtity charges are not the only way to pay lor J'1!'claimed water. Agendle"~ haVf? explQred thE' foUowing r.)tes and charges ali potential sour~s of ~venue lOt ft"da. ma1ion projects_ CapacltyF ... Ag'fndt$ charge capacity feefj (also known .,5, for hampJe, contlection~ developer, or impact fees} to new customer& that are connecting to water or waste wat!!'r systems for the first time. TheIW f~es. ate inwnded to reimbuJ'se-eXJsting fate pareni for hav>­ ing proVIded surplus capacity that makes it po .. ible for neW connection. \0 oecru. Ca?~dty feE'S are sometimes reduce-d or waived when customt1'5 agree to COf\J:'\Cct 1'0 redaimt.'1i WllItM facihtitt.: th~ teduetion can be-based .on tlre ilvoidrd cost of dispos­ ing waste water d'spos~l. Other agendn chargE' (:llpaclty fees tt.at are based <m the incremental cost ol constructing reclamation facilities, which an be: much great#!T than the incr.",eM'[ <a<\ of providing pDt.t>!e wot~r «potity SUf\:harses Some agencies are cons,jdering Jevying redamatioll sUIcharges~ which are added to th.e quantity and $QlVice ,hatgeji paid by existing: potttble wa(tt customers or to th'? user cha(g~s paid by waste watef customers. Ri>v~ues collected from these sur­ charge. are spedally a«aunted for and .et •• ide oolely for tho purpo .. <>f funding ,.clam.lioll proje<CS. Tho .. surcharge, can be .flected as the highest ~r of an in· creasing block rate sttucture in either wat@l or waste water <tu4nt~ty charges, Alternatively J the stUcherges can take the fonn of nat mo~'hly charges per (Us­ tomE!tl wluch might dl/fer by t\1stomer cla$$ to icroun~ lor 4pf!ciaJ ciretunt:tances, -~-------~---~--~ILroN fMN"",'''' ""B""" e n·ts ?;, I r * ~ \ , CHAP'J'BB H, PROIRCT RAClCGRQUlm For example, tho n.t charll" per midential <UllOm., might be gretter thon lor ,the, <1_ in re<08nitioll of tho loct thai the potable w.~ di>ploced by ,ecl.inwd water Ulen (i, e., collUllOJ'cl.1 and Industri.1 customer.) l>ec:omo. avall.ble for ...., by resi­ dential customer •. Aaeopa..rpl Acre_&" chars •• (also known a. ~lRdby or availability <harges) can be used 10 genet- • t~ irn:om~ in the initi.l Itagel of developing '@tvkE' when the number of eus" tomKl is fewest. Land owners can be UHtsed pal'cel or a<-nag. c:hargfl to help de .. fray the initiaJ COSt of constructing fedamation facilities. Over time, the number of rt!cllmation customers will increase and tlwir ability to bear,. greater Jhare (\f both capital and a Ik M rosts through Tates in('n!llse5 accordingly, ACf'E'lige charges can be ~adually reduced and ev~ntually phased out and the financial burden shifted from land owners to tatE' payers, Specl.1 Asstssments SpeCHll asseSSment districts r:an be formed whl-reby the capital costs of reclamation {"dilties can be amorhnd and paid through property taxes. 0 &: M costs would be paid through reclaimed water rates. CONTRAcruAllSSUES Thert are issues related to pricing red,imed wati'r that lire not directly related to rate making but 1«' influenti.al 11\ determining th~ conditions of $etvlcP'. These conditions are usuaHy take the form of ft!solutitlru;, ordinances, or contracts. Voluntary VeNus Mand.tory Partltipation The extent to which agencies have compelled custOmers to use J@ciaimed watE'r has "Iso depended 01\ the options that are available both to the producer, supplier, and custom@f. A very compelling reason to mandate thE:' use of reclaimed water ~~hera evel it \5 availa.blt! in the HtVice area ~ri8e5 when debt must be issued, This is par­ ticularly true in States like California. where low .. interest loans ate provid~d. The State I'E'quires that agencies either mandate th~ use of reclaimed water or entel into cOntra.ets with customers· By doing 50, the State his the highe6t ass uta nee of t~v­ t!1\ue from sales. which in turn will be used to setVia the debt, A part from debt issl~ancc and bond covenant requirements, some agencies wilJ al~ low existing customers to connect to reclaimed water facilities 0)1\ it voluntary basil> but will mandate that aU new construction be plumbed for reciairned water at such time "s the water becomes available. Natutally. water supply agencies mu&t coordi.------e ""n>N tARNKOPF& HOB'''N -----,.--------,,----.--.• - ll-16 • • • • • f];; " ___ OJAngO PIOIICrWKG'Q]!Nl> nate th.i, policy with bui1dins departrnenll to guar._ tho, new c:onatructiot\ ""n­ form,. Ccnltl<ts with WhoIOfale I!oclalmed Wam S.pplJ. .. Wit .. supplie .. and sanitAry di>trkta have ontuld into aupply contractli that would specify kooy whole,oIe IOrvice condltiOtl6, I. shown in Exhibit 11.5, Such contract, ate particulorly important in catabliahlng limitatiON in o!",rationai ..... ponaibility at'ld tinanciai obligations . Contracts with Retail Cu,tome.m The need for contracts with retail cuSWmer& has v.tied. In many C .. lies, agendp5 have mandated the uS(! of reclaimed water within their setvice areas to avoid the need for contracts with individual rostomers. How~ver, agencies that do not ruan­ date th€ use of reclaimed water may be required to enter into contra~ts with major CU!ltomeni (particularly large industrial or agricultural custcmers) as a precondition to receiving l(\w4 interest State funding or 1f the agency intends to issue df'bt; con­ tract$ proviJe H guaral\tee to bond hol~rs. In practice, ag('ncif!s hke EBMUD entered into COtitracts with their industrial cus· tvmer$ in order to t>tipulate thE! mf,.l'\t\t!r by wtuch the price of redaimed water IS dea terrruned_ Other age"cies sllch a5 Marin Municipal Water District, which markets reclaimed watet to numerous diverse, small customers, have .voided individual cootracts by mandating the use ot reclaimed water throughout jts serviCl> area, Take Of Pay Conlrlcb Take Or pay provi&ions have boten inCluded in supply contfa=ts to assure the !lUp­ plier thl\t some o. all of its fill:ed e06ts will be: covered rtg'td~ess. of custom~r de­ mand. Take Or pay contracts ate common in situations where custcnn~rs havt! dis­ crehon to select froTi more than one supply option. which is mQ5t likely at the Wholesale. leveL T"ke or pay tontrllcts lire less common at the retail level but should not bE:' tuled out, particularly in those c:a~ where credit ratings for bond is.­ sue.nce can be enhanced and. thereby. where debt costs can ~ I'@(iuced, In ~rn fot receiying a taKe or pay rommitmeJ\t from custol1'ler.tj, suppliers may have to grant slight price reductions as an incerltiVt. ----~--~ .'LTON ,AkNKOM'& ."",()N e D-17 I i I \ I ~ '~ .-I.-k ~ 1 I tt {. -"", • .> • , t. 1. 2. 3. 4. Ct!APTEB IL PRQjEO BACJ(GROUNP. IW\lblt \loS Pol.ltll.l Provilio ... 01 Reclaimed Wat .. r UHf Contract8: Contract dur.tion: terms and conditions for terminlttion. Reclaimed Wat~r char'cteristics: source. quality, and p~sute, Quantity and flow v.riatlon. Reliability of supply; potential lapses in supply, interruptibility, and back-up potoble supplies. 5. Commencem.ent of uSe: wl-.en user can or will ~~gin use. 6. Spedfic lIIecvJc!' .reas and conditions for reuse. 7. 6. 9. 10. 1I. u. 13. 14. 15. Fi..nanctill arrangem@Ilt: pricing of reclaimed water, cost sharingf and pay- ment for faciHties, Ownership of facilities and rights-of-way, Responsibility for operation and maintenance. Permit acquisition. Definitions of viol.UioN. penalties, and remedies? Obligation of user to observe appropriate NPOE5 and other teg\\la\ory 1'e~ quirements and to notify reuse agency of violations . Liability; for ex.mple, the user contract should indemnify the reusE: a.gency from damages caused by use of reclaimed water due to no fault of the reuse agency. Requtre an operations platt (onceming: COIlttact compliance, uee control, testing program, management reporting, O&M control, and croSs conMcti.('\1\ prevention. lnspt?ctiofl of construction and operation of reuse facilities. This should in­ clude right of entry onto the u~r'li premises to inspect the reuse facilities' operation. Sourc"': Water Pollution Centrol Federation. 5M·3. )989. (As modified by HF&H) WQ~er Reuse Malll4al of Ptactice (jt (-':it r:j, r:.]\f [. J?Ii :. ( .J;)I, •• ( ]. ( ., ( -; ( .~ [ -. [ -i ( .:: [ .'~ .' [ .= [~ . . '.' [ ... ,.~ HILTON FAflNK(lPF" HOBSON _____________ r K •. --~'.~----_1. ,~ [ •... -·~e ,~ _ --.--n-18 ________ -'ot ..... 4 .. PIE><..LI'"'-.JI ... LPItOIECl'lIACKGIWtlND SUMMAIlY The rOiio""l. agencies have uaed to del1!tmIno RdIoimorl water .ate. has not been governed as Rluch by COM considerations at it hal by pricing policies. ThOr re­ claimed water rote. have typically been ablo Ii) recover o:1Iy a portion of the full Cott of producing ond diitrtbuting recWmed wah!r, with the dlffeN_ being made up by subsidies coming from potable water or waste water tates_ The need for pri('e 'u~ pott subsidies has been inescapable, but tn~ .mount of the subsidy varies widely from agency to .gency, Agencies h~v~ exercised consider.VIe judgment in d@velopitlg their pricing poiides. Issu@s relat~d to rat~ making and the conditions 9f BeTV1C@ have bPen carehtlly weighe(i in .,." attempt to balance two facts: (1) reclaimed water if;. usually more ex­ pene.ive to produce than potable water, and (2) reclaimed water qUlllity Is inierio[" to potable water. In the final analysis, pricing poUcieli (lfe largely infl\len~d by the optioru n.at ar~ available to water suppliers, wastt' water dis(hllrgers, and their respective potable and reclaimed w&.ter customers. Generally, the amount of the subsidy dimuushes in proportion to the num~r of supply or discharge options. In the future, as these Optil'lJl5 dwindl@, the need to subsidize reclaimed water may .00 dwindle. It can bp. E!l<pected, however, that for the fores£I'eable future reclaimed water will remai.n a 5ubfiidized commodity. lUL1O" "RNKO"" HOBWN e ~- 0-19 I I: ~; :'t'~ ti , ,. , , " ~~ I ;,I: ,\ "i ~ ~i , ~ 'l \ ~ ~ Brown '" C.ldweU. Coolral PlJInt. CHAP1'JIllL PROIHCTBACJ(CBOJlNp REI'I!RENCES Watn RtclA1fIIJlion Ma'i!!f' Plan for the Regiona.' Water QuQlity April 1992. California DepartmE!nt of Water Resources. WQt~r Action Plan; Ctntral flnd South San Froru:;«o &y A'M. Pecem"", 1982. Fa,nkopf. John W.. Testimony of John W, Farnkopf on 8thalf of Ih, San Francisco Bily AreQ Watn UStrS Association 5ubmdttd to the Stllte Water Resources Conlrol Boo,d. July 1992. Farnkopf. John. W" Pricing Reclaimed Wllter. Paper presented at the 1993 American Water Works ASlod.tion/W"ter Environment Foundation Joint Man.gement ConferE'nc~. March 1993. Mischel. Howard. Feasibility Studies Help Project I •• ue,'s Ability to Service Debt. Moody', Munici",,1 Iss.". Aprll 1992. Montgomery, James M,_ frporl. oj R.eclaimed W(jter from the .9"y A'td, April 1991. State Water Conservation Coalition, et at.. W"ter Recycling 2000, Septembt'r 1991. Water Pollution Control Federation. Water Reuse Manl-4tJ[ of Practice SM-3, 1989, {'~" C-' [-' .' [ • Jf~ t • Jilii [ . ltl> • [ .lJ" [ 1I1]f' [ 'I Ill! [ 11 Ill' [ '1' •• [ '1 • .1 [ '1 .' [ JI [. , • :I" ( 11·jh .' ._-e HILIDN FARN<"" .. ""BWN ----- n·20 [ 11111; ~---~----[ . ' ~ .ill! L_.J" ----------------------------------~ ............. , ..... _--_. QlAPJ'EB mt ''MBJPa AND lQ'lIiCNIC ANALlSl4 R~urce EvalU.3Ition Economic Evaluation Stamm.try Refenn·;es -------HILT"" fARN,"," ~ HOB .. '" I. I I I • /1 j .~ • ~ ~ Ie' !'J f I r I ~ I: i ~- ) t~:' r-o, coa , .' [ -.Jl*' r J"': arr [. n~ [ J/'­[-• .1 [ 'j Ill! [ !~ III .f [ -\ • ' [ -. • !\ [ 11 .J [ • JI·· [ • :1" ( 11" III' [ Illl;> .' [ . -lI- e .0 ---j~ QfAPTIB m. '!MIliCI ANI? prtwfWIC ANALYSIS CHAPTER III. RESOURCE AND ECONOMIC ANALYSIS This chapter describes the results of the resource and economic aJ\31ys.s that w,,~ performed to evaluate the proposed reclamation prol~cts compared with the other water supply and was,e water disposal options that are being consideud uy t:,e Partners, Assessing reclamation projects is complicated by the fact that both water supply arid waste water disposal can be invoived. Fr~quet\tly, ti'le ~d for additional sowces I)f water supply is th~ primary focus, However, waste water disposal can become a &i ~R niGeRnt factor when discha.rges into sensinve receiving waters must be reduced. .n the ca6e of the RWQCP, both water supply and waste water rusposal must be consi.d.­ ered. Indeed, because of the sell5itivity of the south San Francisco Bay, w~ste watl~r disposal may emerge as the governing factor . RESOURCE EVALUATION Five qualitative crih:!riil were established to evaluate the reasonableness of the watl't supply and waste water disposal options that tnerit considetatiQn, • Physiclll AtJallllbihty/Limitotions is concerned with the facilities that arl! associ~ ated with tl\e ai'emative and, in the ClIse of water supply alternatives, with tl\e availability of the water itself. • Regulatory ConsirlJints refers to <:lltrent and anticipated regulations that i.nfl~l~ ence the development of watet supply and waste wa.ter disposal projects, as promulgated .t the Federal, St.te and regional levels_ • £ntJirottmcntRI Issues indk.tes the e);tent to which environmental i:;.sues n,,,,y ----HILT\Jf'oI fAAJllKOPf" HO!I8ON m,l I i ~ ---j I .~ ~;" ;" r' ~. QfAma QJ RESOURCE AND I!CQ NOMI<: ANALYSIS .ffect the oukOme of an alternative based on currently available information; an environmental imp'ft report could be p~pared to study the impa~t of tl'1ese is~ sues in greater detail • Optf'tltion41 Fusibility (onsideI'5 any special operational benefiU or burdens that are Cl5SO<"iated with an alternative. • DrOught RtliabWly applies mainly to the water suppl)' alten)<tbvesi howE'vet, ~AoIIte water disposal alternatives that result in land, rather thaD rect'iving water/ discharges, drought reliability is a.lso a ('oru.idcQltton. "II Ovttull Assessment weighs the ratings in the .five preceding criteria and reduces them to a single ratjng. In some ot the resource options, one of the pre~eding criteria may dominate in the overall asseSSment. For example, an option thflt is physically unavallable 1s unrealistic to considt!f further, Otht.!( r~50urce options may not be as simply assessed and., instead, rereivc a composite aS5l'SSment WASTEWATER DISPOSAL OPTIONS The waste water disposal options avallable to the Partners a1e described below and summarizM in Exhibit III·1. Shallow Water Outfall The RWQCP ('urrenUy discharges into shaJlow water In south San FranClsC(l Bay. BecausC" of the inability to achieve suffkient mi:1(ing and dilution. the RWQCP's dis-­ charges at'" in vlolattOJl of the RWQCP'& NPDES pprmj~ with rf>5ppct to COncentra­ tion and mass em.i~siol"l limits. Although the Regional Board has indicated that It may .modify or ehminate the concentration limit. it will be n(lcessary for the RWQCP to reduce its mass emissions at its cu..rrel1t dischal'ge location if it is to CCUtl.­ ply with the Regional Board. BecaUSe the use of the RWQCP's shallow water out­ fall is non·complying, it i$ Clearly not a form of waste water disposal that will be ac­ cepted in the future. Oeep Water Outfall Agencies such. as EBMUD and ERDA, which at~ able to di6chargc eftluents iuto deeper wa.ter in the Bay, are able to comply with thE' regulatory requireru.@nts. A dHp wa.tet outfall has been studied by the south Bay dischargersj Palo Alto has stud­ ied this option from the standpoint of either extending its outfall or in conjunction with. the SuMyv.le llnd San ]o~ plants or by itself, While these may have been re­ a!istiC possibilities at one time. it now seems unlikely that a deep water outfall ~~-e HIlTO~FA'N"'''>' .. Ho''ON-~-~--------- ID·2 [--'J' [ .• •.. J' [ .Jif [ .J\'I' [ .J" [ .J [ .J"" r '" [ .: .J ( "., [ .~ .,J [": [ -; .~ [1 ( .: [ ::' [. i'" --[ .'~' [ .~. ,~ CHAms OL B£SOUBC!! AND FQ}NQYIC ANAWli would hi> tonBtrue.ed. The COSt 01 doing 110 comp .... d with lhe long-letm benefit< casts doubt on this optlon, and the likelihood of teC¥lving a pe-rmlt: lont.inues to diminish in light of the potenthll en-vlronmental impact HeRC@. 01"1 th~ basis of thp potentIa1 environmental impact. this option hat been ruled Out. aeglonal E.port In the early 198(M;, San Frands(,() conducted a conceptual engineeri"8 study of th ... teo::hnical feasibility of constructing an outfall that would intercept discharge!. fron wastE' water plants within the Bay Area and convey the now into the Central Valle r or Delta region. Thi~ study was «"cently updated and. recommends conveying J"f4 claim@d wlllter into th2 San Joaquin Valley for agricultural irrigation. "-tIlnurc. ~UfMI • Sl,aliow "".ter QUtfati • [)nip Wala-ouilall • Rtgtoilld export • Source ronttOl .lmpmvft) t ... atmenl • lAnd dillpoul (IKI .. \m~ WIIl*r) Ph,.I".1 Umlt.Uont; Impmding dllCh.lrge I"Htricljonl U t'tCOI\P&tnl(ted.; pote'1liPlUy adll'lJlWk' UrK'orutru\..1«I, pot.ol"ilily oIIdeqUlIl1! r'Mlllllly IItlcqual~ Un<:onltrucled: poltnh.lly adequate trnroflAtructnii polMlilIUy Jldequat" EJihlbhllM QUoIIlltltive RflOurc. Ev"",.tion w .... t. Wlie, Di.pon) OpUon. RegulalDry ta\frifOl'\ft\tll\ial OpentiDftaI DfflUS'" OVgtlii Con_It.lnll lu ... ~ • .,It.llity keUabilily An"'I"",,' -Major(~ .. Ad'lfl'foeioB.ly 1:.xcel\tnl N .... UttraL,lic Hh.INjon') (N'guiafiOMJ MlloOTtmllu PaIMlilllly E.rellcot N""" Un ... .lIII~tic ","julon.) nu", II!J1Vironlhl!"fllal iuuu\ 1'ol.olllll'y Mlljor Comrkl Nlldi"",' Um .. lIl"hc """8" (ult l<Yding) bm,fit (mvim'lInrn'"i l!I'I.I~~) Min,l( l'uftnnany ~ l'otmli.lly R".li1tk' (btl .. " If"lioor "'m. (pU\\a~ WO\\I\lon) dltposal} twrwfl' Minor 1>Olt'ntially C.ood N~ R".U,tk (tlnnl'., .. 'udgt mlliOr (partial fit! iuttOtl) diAP"UI) Minor Oen.f .... illll Cood s..~loc.\ RNli~.'lr bl'ndil ~pArlial"':'-IlIo") ~--------~--~--HILTON FARN"O"&. ''''8>ON e 111-3 l " " ii r,: , . ~ '··1 ) ~ I' I ( 0fAFl'ER /II, RESOlJRCI!ANDI!CONOMIC ANALysiS Th4!re are ~ert.inly many waite water di~posal and watp.F supply benefits to he g,jned if this project were reidized. At this timl!. however, there are a number of lactort that rem&in uncertaif\. For instance/ additional studies are required to de­ terrnine the exteJ\t to which existing water quality problemE\ in the San Joaquin Valley would be exacerbated by the introduction of reclaimed water, There ate cur" ren11y significant ptoblems with salt lOB-ding from igrJculturaJ drctinage wa.ter on the west .ide of the Valley. Until further studies. are tOJ\ducted to evaluate i.mpads sum ,s this, it would be pretnature to entertain regionjlJ export as a realistic waste water disposal option. SOurce Control The Regional Board has indicated that an expanded source control pro~ri\m in con-' junction with improved treatment, reclamation, or both, may play il sigmficilot wle in helping the RWQCP comply with its di&char&'i! regulatiol1.l'>. By itself. however, an expanded source control program may not be eS\~.)ugh to comply with thr Regional Board's regulations. Improvrd Treatment The Regional BOilrd has also indlCated that imprc."Ived treatment plant performance may help the RWQCP meet its dis.charge tegulations in conjunction with source control. reclamation. or both. Land Disposal (i. e., Reclaimed Waler) Disposing of ~ffl\.lel'\t on land in the fotm of reclaimed water is viewed by the Regional Board as the third means that the RWQCP has to me~t its dt~,hMg~ regu­ lations. The amount of reda:nahon required will depend on the succe5S (It (');­ pandf'd. soutce control and improved tre.ttment. WATER SlJl'l'LYOrnONS r ..... ~.,JI r.J" r .J~ r }'it • r J "; •• r l" • - t .= [ ~ r· 'j [ .: [ R. [ .::, .­[ .= [ ~ To undf:"tstand the wat~r suprly options that are available to the PMtnp.rs, it is nee· • essary to understand how the Partner& are supplied. Exhibit In.:! lists E'ach of the [ , • Partner's water supply agencies. In Palo Alto's, Mountai..n Vi@w's, and Stanford'!j • cases, the wholesale water supply agencies are either the San FrancIsco Water Department or the Santa Clara Vaney Water District. Water purchased from these [ ~ regional wholesalers, along with any locally prod\.\ced ground Or surface 'wat{!t, 15 • diStributed by these Partners to th~it retail custo~e(ti: E~st Palo Alto, Los Altos, and .• Los AHo~ Hills do not operate theu own water dl5trlbutJOn systems. Inf'teact, water [ customers wtthm theu serVLC~ area,~ are supphed bV ('ltneI private wa1er catnpa-rues • ~--e """)N .. RNKOPI &>10'"'' -~----~~~--, --------~-[ . -, .~ [~.; ... !D-4 mAma IlL BfiSOUBC§ AND !lffiNOMJC ANAL'iSI~ or public asencio., These 1"".1 purveyors either p,,,chase water from the whol .. ol., suppliers llt rely on local SOut~. 'fhe array in Exhibit IJJ-2 can be condensed to the following: • Some Partnets are directly &upplied by regional agencies (SFW'D .tnd SCV\'IfD\ which, in turn, rely on water imported ftom Sierra sources. • Some ]'artnern are indirectly supplied by imported SOurces via lo..:a~ retail pm. veyors (Purissimll. San Mateo County. Cal Water) . • Some Partners are also supplied from local ground or sl~rface wa:.!rs. • AU Partners teceiVl! at least s()m~ of thf'it water from imported sources. With the foregoitlg ali background. pote('\ti~l water supply options were identifit'd and SOtted by SOutCe. as shown ift EJ.hibit IU .. 3. Import~ Willet Supplies Within the last year legislative and regulatory d@velopmentli have occul'fed thu cou.Jd Mve a profound impact on the future availability of imports. • HR 429. This bHJ (also known as the Miller Billl modW.;s the operation of the, Central Valley Projec~, which is one of the major sources of importee water "0 the SCVWO. The g~nere.l effet't of the hill wHl be to reduce the CVP'5 firm ),lel.1. Although it is too early to know exactJy how much tm!) (t>duction will b~. it is deat that the effect will be significant, partkuJ,II,r1y in dry years. As ~he reCel'lt drough.t pro.ved, the CVP is vu\nerable to drought. The Miller Bill SE'rves [0 worsen the problem. • Bay-Delta Decision. Aftt'r :i.i'veraJ yeClrs of hearings. the Statf" Water Resoum~s COl1trol &lard released Its draft Decision 1630 for public comment. Among oth'!r requirements, the draft decision required all agenCies using watt>r from S0\1rCl~5 tr~butarj' to the Delta to release additional water to the environment. Makirlg these releases would reduce the yields of the CVP and the State Willer PrO)(!I:\, which would, in turn, reduce tht-SCVWD's ability to meet its customers' de· mands; the iltnOunt of this firm yield reduction was not quantified. In .lddition, thE' firm yield of the SPWD would also be It!du~d by an cstimO\wd 10"1~. In early April. 1993, the Governor withdrew the draft decision, which he f.i'lt would be pre--empted by Jederal agencies under tM Endangered Speci~ Act; In­ stead, at\ ElR i5 being prepared. 'fhe ext~J\t to whlch these federal agel1des could ______ HllNN OAONI<OI',.HOO",' ,~ .- !D-5 ~; ' .....• ~ ..• !'1. ~ ! ' {. , ~ ~ ~~, CHAJPrER III, RESOURCE AND ECOI'IQM.Il;:A~..lIl.iS aff@ct wlter suppliers thai rely on water tributnry ~o th@ Delta is pn~sentJy un .. known, Howeyer, water suppllers e'pod th.t Iheir fi.", ylold, wlU be r.,duced by the f~deral tgllmdes to improve water quaiity in the Della. '* NftIJ DOli Pedro R~lictnsing Proceefii"gs. The Modesto and Turlock Irrigation Districts operate hydroelectric: facilities at New lJon Pedro Reservoi( undt'r the terms of their Fed~ral Energy Regulatory Commission license, which has ..:ome up (or renewal, These districts have negotiah!d increased fish flow releases, that they beiieye ahould b. portiaUy met by San Frandsco, which owns .torag. righl' in thl" reservoir. The SFWD has el'timnted thAt these releases will reduc~ its firm yiold 10'1'., ll.hlblllll·2 Wit., SUprt,. "ft4tKttlll S.'f'I'''8 'h~ l\W1JC1' r_"ncn a, (tel flO< .,,,' u' " •• onl o ... ,t,,,, If It city '" 1>,10 JUiu 8f'W() R"8Io,"~1 wl1l)!ilMl"'lIIrl>lII!I ,{~'I'. lurrllPd) . SCVWU k'1',I" .... 1 wllUl'!l/Il~ Illrrilwr (OWtt/U5DII: "'IN,lIedl Cit, of Moul'ltlln VI.-5FWlJ ""","'1ml wlOQ~1c ItJrP11t( ( .. If- turrlltd) <;CVWO Rf1\ ........ 1 whCl,",," Wf1'\lfl row~/\JSBP. IUr",.II~) b.1 ra'lo Ahrt S.,,11Ir1 Dllltk:1 CoulllyorSd"M_11rQ N~"II ItK"'''''' (SPWD.urP'ltd) I'''lrk Mul"", W"Wf CO), t'tl'<fltt ,.II\""'i'AnNnd WII'''' nprl~) Q'CQf1fJlJI Trlld t.tUhllll Wllion-Cu. ,',lvlI" flllliler (1J1t"und WII., IvrrU,d) Stanfold 1Jn)V9f.n, Sl'WO R,lt1nnni wholHllllllllrr'ltr (I.". lIuf'pll>ntl I ~VWO P.rglnnnllljllCll ..... l .. 11Irrllft (DWR/USb~ lurr'lkd) " Clly~lotA.''''' ().lIIomHl W~l ... S.n'ltI' Cu. I',j""t~ '~IIIII., (BCVWI> "'rrl6td) l_trf t-Ahnt HilI. ("lllnn"" w .. m Sny~ C .. 1',1""'1 rlln''', (!lCYWD IUrrl~) PLlrIMInwo lilli, W""er DI,lrIc, HtPlIII' "8ft'I'r (SfW[) ,u""Utdl - 1II-6 r---.:. " r a " [" ]:-• [ ]~ • ( .Jw [ .J" ( .~ ( -: l I .: ( I ., - [ .: [ .~ l.: [ .~ L •• ~ ~ . •• l •.. ,,' ~---t •• " L~,,~ roAmB III. RESOURCE AND EOONOMIC ANALY5IZi With th@ foregoing in miud, the follow~'Og overall 115BeSIment!; were fotrnfli. San Frand,co Water DepartmenL The record.setting dryness of the recent droughl; has cauMd the SFWD \0 downgrade the estimated firm yield 01 its syshem frorr, 450,000 ally to 270,000 af/y, not including the Impact of "",nl IOlli,lation and rego' labon, which could r'!duc.e this number anoth~ 2O'Y ... to approximately 215.000 afty. The ability of SPWD imports to meet C1.lrrent d@mands has dearly been eroded. Th'~ need to augment the 1055 of SFWD water is apparent and, heru::~. it is unrealistic to view SPWD water as a preferred 50urce of blertding water for suppJem(':ntal re­ claimed water uses. . E..h1 .. U 111-) QuamaUn R,uau,c~ evaluation Wattt SVprl)· OpUon. t..,10W.U Op*o.n I-n,r!~~!. ~"',u~II"'Y Er!.I~ftlhtnlll orl'f~.II.~n'l _1J~a"hl Ann.bUlI} Can'lr.lntl I...... r""I~IUIJ JL,lllblilly ,~ .. ' Apn'_nl IMPO.'JItt"-"TO 1\)l"I'\.lU ·SPwD ~ .. ~lnR t.t .. jllf Advt'l'I\,.t" Cnnvt'nwnl rrriodit Unft'llli'l,1c .... M'-b\Uly ~w~~, ~ih' fltt fInTIl' ~ ..... ~ (unll .. I\ftIIf') '£RC, PfI"rwn .......... • &.:VWn OKJHIIh\~ IUIlin, ~tty"'~"'tn con" ........ 1 r"'rlodh: U"rnU.'1( IIrr,IPd) I ..... l"blllly (!;WRCD, "'., rm,","t' ~"II.-:1O'J, (vnllvlI,bdrtt) USOR) p"rt .. ,. "'"rtagt'l • O!h ... Non·IfIII","1 rnlf'nliIlly rdlfnW,lly rntf'flti!llly UrolUWlWn tJ"I'HU~Ik: pgnllkjlhl ,1g"!licNtI (l''''~I (UIUIVllilabld LOC~LW"TI. 'UPf1.IF.5~ • Surfta ..,rI'" NI!81iglttif Minor Minor Good .~, U ..... llhllk" lunllvlI:'.td"" • n.ullnlllQorl rott'nlllllly Drill" dllp:llil Ad .... ,.. In nilY rmfnl!tlUy EI(1'IIr", \1ntflltt.rk" llbund,nl d.{{1(v11 (.n"I~. M..,,"1 'kUfWI • Ground waitt Modt'I1I'.Iy Mlmrlln(l MlntJIlfnu Good rot",,",!'rllI,. Ilnliltir: "'"" wnlamlfta'kwI twt'rdrtl" ""'" • Co!1MrYlUon Olml,,;,hI"K "", "' ..... Iklill fai, Gnoo ~"all.11( !fo"allllbUllt Ma""gPrtlIMI rOO<! ... • Red .. lm.d Pot,,.,UII!!)' ",-tltMfl(iAI F.I, EII('t'It.m Re.llait. w,tiltr tb .. JHh.nl (OOHS) HilTON """KO ..... eoo.,», e - 111·7 , I I, ." j', , " ""t' \' iI" .\~ " I ", I j r t 1J, .. ; CHAI'11lR IlL RESOURCE AND ECONOMIC ANALYSIS The fact that the SPWO yi~ld has been historically over-rated is all the more signifi­ cant with respect to the vesting provision in the SFWO's suburban water ~upply agreement. Under this provisior\, the SFWD is obligated to provide an assured wa­ ter supply to its suburban wholesale customers. This supply assurance applies only in non~rought years; in yeus of water shortage, the SFWn has the authority to ra­ tion its water supply. The supply assurance. 184 mgd in the aggregate, is allocated among tM suburban customers ba5ed on an average of the prior three yl!ars' con­ sumption. Since the signing of the water supply agrt~m~nt in 1984, there was one vesting before the drought fotced the SPWO into rationing, Because of the reduca­ tion in the system's firm yield. rll-honing episodes will be more frequent Dnd in­te~, releaSing the SFWD from its obligation to meet the supply assurance more of­ ten. The SFWD supply assurance and associated vest;ng procedute pose a dilemma to the suburban customecs: the vesting procedure encourages customers to maximize their use of SFWD water so that thelr vesting increases, but the SFWD is not obli­ s"ted to supply vestings in all years regardless of hydrologic conditions. Some of the suburban. custOmers have chosen not to develop supplemental water supplies because that would reduce their demand fat SFWD water, and consequently, their vesting would not grow as fast. As i\ result, these suburban customers discovered during the recent drought that they had become overly dependent on the 5FWD. In any anatysis of supplem@nta1 water supplies, the question must be asked: Is it worth developing supplem@ntal supplies if, by doing so, the demand for SFWD wa­ ter does not increase as fast, or if that demand even df.'_creases? The PartMr::;' watet suppliers will have to answer that question individually. Some water suppliers feel that it is best to forego the development of supplemental supplies until the 184 mgd is fully vested so that, at least in non-drought yE~ars, their supply a.ssurance will have vested as high as possible. The weakness in this strategy is that the SFWD supply ha5 proven to be much less reliable than previously believed. Suburban customers that rely heavily on SFWO water will d rive their vesting up faster and farther and will be assured of more wa­ ter in years of plenty, but will find that they are morp vulnerable to rationing than lhose suburban customers that have other sources of supply at their disposal. With respect to the development of reclaimed water, the vesting dilemma reduces to the foHowing calculus: • ~veloping reclaimed water that replaces SF\AJD water will probably reduce the [---.. ["­.~- [ . l-~'" .' [ • ]>fo ( .l~' (. ] [. ] r.J [. ] [. ] C ] • (. J ( 'J ( ·1 { ., ~--e IULTO"ARN'O",~HO",ON --~~- :( ., { .~ .-------~ • ,.'------{ .. , I 'r,~' [ .... ,':" ill-S QfAPDlJ! III. RIlSOIJRCf AND fLX!NOMIC ANAL)'SIS vesting that would have otherwIse occurred.1 The decreased vl!!ting might mun that the suburban customer wGtlld not be eligible for as much SfVlD WJ.* te-r in non-drought yean.2 The dect@awd vesting would not m~tter in drought yeats when the SFWD cations water UJ11t5S the ~lVaiiable water supply is ra­ tioned in proportion to veitings,l • Dev@loping reclaimed water that f(!'pli1ce6 SFWD water will provid@ a fiyl'ltem­ wide buffer against rationing because it will prolong the SFWO's waif?! suppJy. Whenever SPWD water is rationed, however, pot:able water ~u6tomer5 will not be shielded from rationing unless other potable water supplies can be-u:led to offset the redu('tiCln in SPWO wa~r. In other words, the use of reclaimed water lessens the impact of drought on all of the SPV.lO's customers; reliability again.o;.t rationing is only att-dined by the users of reclaimed water. • Developing reclaimed water that dO@$ not reduce the demand for SFWD w;.ter has no bearing on the question of vestjngs. Santa Clara Valley Wal~r District. Because of the probable impacts of recent legisla­ tiv~ and regulatory developm~nts, the SCVWD'~ sourCes of imported waler (Le., the SWP and th~ CVP) wiU experience reductions in fjrm yield, similar to what i~ e>.:p@cted to happen to the SFWD. It iii also more desira.bJe to use SCVWD water for potable uM!s, rather than for blending water for supplemental reclaimed water uses. Oth('r Imported Water Supply Options. The question of whether there are other r(>o< alibtic liOurces of imported water reqUires l'ipeculatil)n as to both the SOur~e a.nd means of delivery. If water from another iJhpor~d SOurces wer~ available, it would probably be purchased from t~ State Water Bank by one of th€ Partners' two re­ gional suppliers, as occurred during the recent drought. This water would probably be pooled with the regiona1 suppliers' own supplips and distributed to their retail customers. The cost of the water would probably be melded into the whoJesilde cost b~se, If an individual retailer effected its Own purChase through the State Water Ba.nk, I.t would have to arrange to have its water wheeled through the regional sup­ pliers' facilities. which 1S an arrangempnt that has heretofore never been made. The conditions under which this wheeling would occur, the cost of the water, and 1 This iii not a c(>ttdinty because, as a ",Bull of long-term rt."$idual conservatIOn @Hort$ from thp rf'('enl drought, 6Omf!' of the suburban cll9tomprs deD"lilOds for SPW{) water rNly n("Vt':l retum to prP-drought levels. 2 It is nOI deill what tht> SPWD will do to regulate detrwnd& that el{c~ vt'9lings, e5r'f'cially attl"l the 184 "lid is iully V@I!ltetj, :l To date this hI'S not occurred a,ld Uw water supply contl'8ct specifies that .. ,.tions Will be c.lculati'd based on a pro raw allocation 01 pre-dtought con§u1t!prlOn or an}' od\er way de.-rned I't"l'IliOnabl ... by the SFWD. -----------HllIDNfAJ<NKOPf.,IOII8ON e ~-- rn-9 , i I I I I. ! : /: ,~ ,"-: ~:;~ 1 ;; '; " r ~ OfAFl'ERUL ,RESOURCE ANDK'ONOMIC ANALYSIS the wheeli.ng cNrges ar~ \l1\knowo, For the purposes of this study. imported water trom other SO~S has been ruled out because of the level of un.c(~rtainty, Local W.~r Suppll .. The~ are five potentialloc:al water supply alternatives that might be expanded Or implemented by the Partners' water suppliers. Surface Water. Major sourCes of Jocal surface water are controlled by the SFWD and there are no fk>tential sites for expansion that could reahstically be developed. There ate minor SOurces of sutface that ate controlled locally, such as at Stanford, In normal water years, water from Lake Lagunita is u~d to meet Stanford'6, non­ potable water demands; however, the firm yield of this source in bt"low normal years is essenbaUy zero. Desalination, Desalination of Bay or ocean waters has been investigated by various agencies, such as Alameda County Water District and Marin MuJ'li!."ipal Water District. Although tochnicaHy feasibl~, the comparatively high cost of desalinated water has stalled further devtlopment. Other major planning i~5ues such as Siting. permitting, and brine disposal must also be carefully considered. The combination of high cost coupled with major planning issu('s te-nders desaliniltion a marginal prospect at best. For purposes of this study, desalination is not viewed as it reali5.tk source of blending water. Ground Water, Prior to 1934, when deliveries foom the SFWD began, ground water was in great derrumd along the Peninsula. Indeed, over-pumping led to saline jn~ trusion in some areas. With the advent of SFWO df>liVeries, many of the peninsula communities reduced or completely curtaLLed tht'ir ground. water pumping. Ground water currently amounts to a small portion of the Partners' potable water supplies. In general, the aquifers are regarded as marginal for rnunk1pal water svp· ply purposE'S because of low yields and poor w.ter quality. Use of ground water has been compat'ati\'ely stable over the last dec~de. However, during the recent drought, ground water use among the Partnets collectively declined approximately 100/ ... Given the severity of rhe recent drought, with 25% rationil\g of imported WiI­ ter, ground water use might have been expected to increase, rather than deCl'P,ase, in order to replact': imported water. Palo Alto attempted during the early stagt>s of the drought to replace imported witter by re·activatmg its wells but decided that ra· tioning was. more desirable and de~activated the wells. The extent to which ground warer CQuld be further developed for potable or non­ rata.ble uses was recently studiej by Palo Alto, The study contained the-fOllowing t-Lf----­t,r! • 11 Quma t . '. -UL RESQt1R L J'..JI _CEANQ!!QlNQM! .r <AHAIXilO t .J'JII t .. J} t .}1! [ ] t a .. .J [ ] (­.J t ' '" • ..1 [ '" .J [ J [ --J l ... [.~ , / .. .. The costs to the community for watf!r softening and bottled water could be fig. nifica.nt if well water were uwd for potablp '.J&eS. • iron and manganese conomtrations exceed seconda.ry drinking water !iotaruiards, which does not pre.vent the use of the water fur drinkil'l.g but may po5@' a ptob­ l~m for consumers because ot disoolor.tion. • Additional treatment of ground water may become a regulatory requirement. • Further study is required to determine the feasibility of developing ground Wa­ let, In Mountain View, ct!rtain industrial customers .,re treatmg contaminated ground water lIli part of a ground water c1ean·up effort. This contaminated ground water is treated ill\d diSCharged into the sewers without being incorporated into Mountajl1 Vie-w's n004 potable water supphes. Such water might be an id~;tl source for blend­ ing Water. MountaIn View is currently studyiJlg this possibility, wruch will require pipelines to connect the treated contf'.minated ground water to the reclaimed water system, ]1\ Pato Alto's cast', however. the ground water TOS generally ra.nges ftom 500 to 800 ppm. In the St .. ruord Research PiJrk, where Pido Alto produces treated (,'ontaminated gtound water, the TDS conct>ntrations range from 600 to 3,000 ppm. Ground water at these concentrations is not usable for bl@t\ding water. As an ~Itetnative-potable sour('~ of supply, ground water may be realiStiC d,~pending. on the results of further ~tudies. Af. a nonapotable source, ground water may also be realistic, but, again, further study is required. C<tns~rvation. Conserva.tion practic~s r~\,Jlt in a mOre efficient use of water, which thereby reduce5 thE-use of water. AUhough ronsetvatiol\ does not create more Waa ter, it can be t~arded as a source of water supply. ~honing is an extrem~ form of conservation. During the r~Cent drought, the Partners' water sl.!ppliers were forced. to rabon imp<'lrted water by 25%_ Although t .... e PattllPrs' water supphers were gen­ eralJy able to achieve thFir tationing goals, tht>5e short-term eme[geflcy fahoning ef­ forts should not be confused with permanent conservation practices L •• ---~--t. ... ."~Il' findings: ---e ""TON' ARNOO", & HOD'ON ------- During the drought, (l volunteer consortium of wa.ter ag~ocies, public advocacy groups, and other interested parti~6 was formed called the Cllifomia Urban Water Conserva.hon Council; some of the Partners' water suppliers (i. e., Palo Alto, Mountain View, Purissima HiIl!S Watet District, and California Water Service Co.) became membel'5. Members (:ire obligated to implement a set of conservltion best management prJlldices (BMPs), which will result in significant water savings over ti.rne. EstiIl'Ultes of the amount of 'Water savings that may result from BMP imple----~-~ HILTON '''''''"''PO .. "'ftSON e m·lO L -- m·Il ~ ~'~ t· . ~': ~ ·,1 , ,"' l~ mAPTI!R III. RESOURCE AND ECONOMIC ANALYSIS mentation vary from Bbou\ 5% to 15%, Efforts to conserve water will rontinue to increasl' thtoughout the sertu-arid West, where the development of additional potable water sources has ceafied, Conservation saving5 will go toward ofisettJ..'!l' the pressure places on existing water supplies by growth. These 'avings will become more and mort' expensive to achieve 8S the e.,iest ways of trimming back OIl wasteful practices are exhausted. PaJo Alto has studied the cost of conservation and found that the unit cost of sav­ ings eventually reaches a point of diminishing returns. The point at which it no longer makes sense to spend money to Save water will be determined by the eco­ nomics of Palo Alto's other water supply options. BHsed on Palo Alto's currently available water supply options, it c~rtainly makes sense for Palo Alto to invest in conservation. Unfortunately, conservation may not supplant the need for reclamation. Although conservation reduces waste water flows, it does not significantly reduce mass emiSSions and therefore cannot be te~ garded that outweighs the need for reclamation. However, the savings from COn~ servation can be put to use as blending water. RecJaimli!d Water. Developing reclaimed water solely for th€ purpose of augmf'I'lt­ jng water supplies is not an unrealistic alternative, although the Partne:,s would probably want to optimlZt~ ground water development and cost-effectivE' rOrlSf"rva­ tion practices first. ECONOMIC EVALUATION Economic analysis is used to identify cost.-effective alternatives. A number of quan­ titative methods of analysis (e,g., net present vaJu~, benefit-cost ratio, life cyd€ rev­ enue impact, annual revenue impact, first-year impa.ct. levelized cost. discounted payback) can b{> used to m<!asure cost effectiveness, Depending On the altematives that are bemg evaluated, one or more of these methods may be appropnatf!o. For purposes of this study, water supply and waste water disposal altt.'rnatives are com­ pared on the baSIS of first-year unit costs, WASTE WATER DISPOSAL OPTIONS riJ• [ J' .J~j [ .", [ .J:;' [ .J [ .~ [ .: [ -: [ .~ r .~ [ .~ r ..: .~ L .: ~ J K. l.~ l ~ .. ~" K. -----{ ·IL'~ ~ .~ Exhibit 111<>4 shows the wastt> water disposal options, their unit or annual costs, the reduced discharge to the B.y, and whether or not thel·e 15 economic justification for the option. ---e HllTONtAMNKOPF&HO."'" ____ ·n._~ _______ . __ . m·12 QU·mR ID BpSQUllCJi AND ECONOMICANALXSIS BaSEd on the qualitative evaluation criteria used in the pr'eceding Re50urct:' Evaluation, tM shallow Wdt~ outfall, deep w.ter outfall" id\d regi~l export options We!'e eliminated because of either anticip.~d regulatory or envirorunental problems. Tho remaining three optjoru (expanded Soutce control. ilhproved ueatmE'nt, and land disposal) rell""t thE-results 01 the .tudies by Montgomery El1ftlneers (August, 1991) and B&C. The M071tgom~ty study was the ,ource for the yuH C05tS of e)(panded source control and improved treatment. The Montgomery study was prepared prior to tN> Regional Board's recent actions <and therefore does not correspond with the Current ~rce con­ trol a,nd jmproved treatment objectives of the Regional Board Non@theless, the Motltgom~y numbers give a sense of the cost of these programs. The B&tC cost estimat£'S for the reclaimed water facilities are also SUbject to modifica­ tion tt) account for revised cost estimates and the infJuenc{' of blending water. Th~ preparatiOn of the pre-desig:n EJR by CH2M-Hill refined co!.t estimates for the Stagt" 1 distribution linea. Blending water was not studied in deta.il in the Slate study. BecauSE: each acre foot of blending Water displaces an acre foot of RWQCP effluent, it would be adVisable to carefully account for the plant effluent that ;5 applied net of blending Water. Clearly, E'XpandM source control, improv'i!d treatment, and reclamation are IIOt inell.­ pensive waste water disposal options, BecausE' the unit Costs for expa .... ded source COn­ trol and improved treatment Wi;!'re derived prior to the Regional Board's recent ac­ tions, an updated cost analYSis would 1>£1' r~quired to estimate the costs that could bE' in­ curred if expended source control and itnproved tr~atil1.ent were coordlfl.ated with reclamation, WA TE~ SUJ>PL Y OI'TlO:-lS "fhe water supply op~ion5 are 5ummarized in Exhibit 111·5. Imported supplies were deemed unl"E'aJistic i.n the Resource EvaluatIon because of the 1055 of firm yield. local sources that might be developp.d ar~ ground water and conservation. ThP. ground wa­ ter options consist of refurbished or new wells whose water could either be lIsed di­ rectly for blending Ot to replace potable water, thereby freeing up pota-blt" WatN for other uses, In addition. trt'ated contaminated ground water is being studied by Mountain Vlew fot uSe as blending water. The costs of using ground Witter are sub;ec:t to further study, based on Palo Alto's analysis, and should only be regarded as prelim­ lnilry. Conservation will reduce demands on current potable sources, wruch could then be -~--------'HllTON'O"'KO,,"HOBSON e m·13 i I I I , ~ < t ~ ,< N , • ) f ~ ." r I ~ QiN'1JB U! RESOllBQi AND !!CONQMIC ANAl ),SlS .. Hd for blending or to supply the need. 01 growth. A. comp.,.d with ground wa­ ter, spending funds on tol'lM'rve:tion may be the best way to acquire blending water in the ~Ir tecta, The cost of using ground water can be site specifk because the lo­ cation of well site. may not <:ott@spond c1O&ely with the location of reclamation sitts. With respec-t to \Ising treated contaminated ground water, the Regional Board has indicated that it would like treated contamioat~d ground water reused wher­ ever possible. SUMMARY At the time this report was prepared, the RWQCP was nt'!goti~ting with the Regional Board regarding copper mass emissions. It is not known whether those negotiations wOlild ultimately mandate some amount of water reclamation, During t!le negotiations, the Regional Board indicated that some amount of water reclamation will be expected. However, Hilton Fiitnkopf & Hobson iii. nol aware of any specific mandate from the Regional Board other than a 720 Ib/y copper dlS~ chatg4:! limit. ¥INch may be a<:rue'Jcd through either water redamation, np2lndeo source control. improved treatment, or a combination thereof (which conCl~wably may not include reclamation). Hilton Fatttkopf &: Hobson concludes thllt it 15 too ~atly to say that the need for water redamation is being driven by waste water d,s· charge regvJations, Analyses will ha,,~ to be performed to determine the optimum comblOation of reclamation, soutce control, and treatment to reoolve that issue. The eoonomks of reclamation wi.th respect to wat@I supply options is wmewhat more certain, Based on studies provided by Palo Alto and Mountain View, CO(l~t· \'atlon and ground water development promise to improve water 5upply r ..... 1iability. Her@. ilgait'l. further analysis is required before it can be said that reclamation cur­ rently has no place in the PMtner's i'C\~tated water supply matriX. These analyuls need to determine. for example. the t'!cotlomic limlts on conservation and the ex~ tent to which treated contaminated ground water is compatible with dev('ioping re- claimed water. The most that can be said at this time is: (--.­[-J' r-:J;\I [ .J~fI!' [ .J::"l [ .J\' [ .. J [ ;= ~ .~ [ .: [ a; l K, -= [ ... -' [ .... . IlL [. • Wate, .upply shortage, will incr.a •• in frequency and •• verity if growth contin-.. \les Reliabihty CiU1 be hnptov@d by d~elopi!'\g conservahon, ground water and l ~-i~ • Waste water discharge regulations may fOfce the Partners to dfve~op reclama* tJo~ although further engineering analylils of all availablE': options is reqUired. reclamation, but further anlllysis IS also required to dt'!term\t\e the optimal mix, • e HILroN fARNKO""HO",ON -~----------------{ ri~ l-.-' W-14 CHAPJ'BIlIIL RBSOIJlI.CE AND ECON(lMlCANALY5IS • The justification for reclamation will eventually come from both waste water and water supply. In the soort-term, wastt: water discharge regUlations mtly be of greater concern; An the long-term. water supply will benefit Jhore find more. EdtihhUl." EcGttcmk Evaluation Watt W.'ay Diapoul Optlo ... - UN'C"" ;:::;;. RHQUrt' Ql.ltun ISIAPI 'AFNJ 6om.0IIunUT 11" ... 6.4 -Sh."llaw WMU auU.II $3&l 0 Unrnlittic ~rn" option • TJep Willer outfalll OUmbarton Brklgf! $2.400,0001 0 Unrt'aUstll; relOu~ option OHshcn oulfall 13.200,0001 0 Uf\,nt",tjc f'HOu~ option • llegionllli f_portl $'_',550 4,4811 UrnNHStiC ,nouKt option • Sou~ controt" S800 0 Yes (pending furthr.r t1OOY) -hnpmvf!d 1~ltmt'n(2 flull .... le ~n!llmfnt 12,700 0 IJn~alil\rc ~UICt option RKyctf!flow 51,100 0 'yf'J (pen(itoB funher study} -larId dlllpotaJ (J'KI,im.~ "-,,tu, Sllg!! 15 Sl,2321 57, Yn \Jl"!rod'tl.g furtMr Itudy) 5111g8 I And 16 $1,2001 I,fIOI Yel (potruii. ... ' furtMr study) St.gn 1, 2. and J6 $9,591 tiS8ll Vet lpenditlg jurthl!r study\ ....-, ""p WIlt." DlII"U com .,.. ...... "'.1 mItII. , M_pMI"y iIIsm-, A~' 1191 , Montpn-ry EnfrinwN, 1992. • Mmotp..,.. fIlII.-n, Au.,.., 1991. C.-I '" ~ 1fInd-. • Ro"otI.OUM-l-tWGphI"'~C1IIR""'" • arown.Cdd_U, r .... 6-:1. n. ..... '"'"dI.: .. ,..JIIII't ... apflR4....-,.~I~ __ ... ~_~ wc:1Mn.,-" ~. 1 I'int·y.r'lOdll"',...,..u~,.",.,......_ ..... ---~--.. -----~-. H>lroNf .. N""I'f~HO.>UN e nH5 J: .... ~ ~~. , ~) ~, 'll , ,:'i i r " ~ !: CHAPTI!R 111 .. BESOmCIl AND ECONOMIC ANALYSIS - Exhibit m-s Econosnh: Evaluation Wet., Supply OpHona UnHCoit ~d~!I!Onal Rnource Option AVllllability ElCOrtbmicall",u.tit1.d ($lAP) IAfiVl r--~ r-5; [-•... ~.'. -fl­r~l~j IMPORTED WATliR S\lrrtlES, [R .I~; r l~ [­· SPWO $25> 0 \)l'Itt .. Il~II( ~snut('1I! 0pllo., F .... 1. [=J ~ SCVWO (treatt:d) $310 0 Unre&\I!1tic ,"OUm! orUM • Other U",knowtt 0 Unl1"allslic r"90uI"C@oplion LOCAL WATER SUPPLIES; [II:, • Surface wi1lter None • Desalinai!oni 11~90 .. Croundwlltert Existing well. $333 New polable well, $346 Nt!w \uigMIol'o wen, 5100 • (onleN.tionl Non.hmdacftpe retrofit 1)00·5100 Landscape retrofit $2,..162 .. Reclaimed water SI.g1E'12 51,2.1" Stagf5 i and 2~ 51.703' St.ge! 1, 2, and 33 $9'9' U 5,lIJO 3.000 Unknown Unll'.ow'l'\ 4,M3 2 •. 'i93 5710; vms 7_1~ft,s Vnrealistic re~ourcl' optiol"l Unf4':6.Iit.tic. ",-w\.\lLe optioC\ Y •• Unc@l'illin Ul\\;@ft."lJ\ y", No Not fo: w<1ler supply alllr"lt' Not for water lupply alone Not {Ilr Wta\tT &upply e:loTle [~ [II:; \ r~ ..,.-\ [ -, IE r i ~.,,:.,.' ... -[~ [IB _.".,. ' Ei nFF. HOSSON _ l _ _._~ _I i", --.-----.. ~--[ ~ if>: t -" , City of P.1o Alln AdditlonllJ lv.il.biJlty .pp"" 10 Pain Al\o ooIy. 1 B .. ed on CHlM·Hill tap.al and. ope,.tlJtg (XlIiI "Iiml'ft, , Brown &-C.ld_tl. Yabl. 6-) .. dudlnl: hlftNtlng _t'lf and c."'II'l.~lttInK r~dllJltali!ln projectl. • Fi,,",·.,..r a.b-<III plod,\K1nJ Iftt.!inwd. wst1ll • ~llIlMad _ .. rd.! "pl,," poblbl. """r, lPUft'l1n810% bloofldillA _H, OY<fnIlt ~-e m-16 QJAPIJ!R IlL RE50!lBCf AND !lCDNOMICANALYS!S JUlFl!RENCJ!S California Department of Water Resources. Financial Anu/yses of Water Reclanwtion Intaim Guidtlints for Economic and Projects. February, 1979. California. Regional Water QUillity Control Board, San FrancisLo Bay Region. Tmtativt Cellse ,utd Desist Order. Corr~sponde(\ce (r\,.)m John D. Wolfenden to William Wk. ft al" JanuMY 22, 1993, CH2M-Hill et at.. San Francisco 8Q.y ATt'1l Regional Water Reu;;t' Sf~dy, December, 1981, City of Mountain View. PreitminflTY Analygis --Tl"tllt~d Contllmlr'ltlted Groundwater (TCGW) Rillst Plan. February, 1993, City of Palo Alto Utilities Department. PrelimiJlQry ./tS!;fSsment of Water Rf.SOIlTa Allernativl's. June, 1982. City of San Francisco, Draft Proposal to Address the Etas/-Milty oj the Buy Ar(R/San !aaquin Vall~ WAter ReJise Project. September, 1992. CeIlings, Clark W., Chamberlin, John H.. Dem.;md·Sidr Managemenf Planning. 1Y'l3. Montgomery, James M" Consulting Engineers. Water Quality Ba"d Effluent Limits for Quality Conlrol Plant. August, 1991. Analysis Qf Impacts to Achi~vl' tit! Palo Alto Rtgionlll Wafer Montgomery, James M., Consulting Engineers. UpdQtt:1 f.VUiUIlt"'rt -Draft, Export of Reclaimed Wilter from the Blly Art". April, 1991 Ritchie. Steve. Remarks presented at the M;lrd\ 26, 1'}q3, meeting of tl\i~ Bay Area Water Recycling Task P£Jrce . Separation Processes Il\c.. DtSi31ination for Ih, A!'UJf~dll County Water Distrtct November, 1992. Webster. O. A.. Map S/rowing Rang($ in Probablr Ml2xim14m We/I Yield .fram WQ.ttr-B~'ing Racks in th~ San F"mciscf.) BIlY Rtgion. California. USGS Miscellaneous Field Studie$, MAp MF-43L Circa 191>. ------~-.. -.-----.--'---' IlIL1UN """"0", ~ "".'ON e m-17 ,~ "" t~' M v: 1 i, ~~,' Ii , .. ,,' c~", " ~J l!; ;"'-j r-, r-, r-I ,-I I I ,-. r, rI '-I .-~-I • s" "~1 (----••••••••••••• ~ ~~----------------- ,--..c.~ ~-___ _ i ~ I I ~f I f , ~ i • , 1 ('----;:" (--jI 1"-" .J' lJ)iIi' • ( .J~ [ .:~w ( • J" ( i .~ (. ] ( , [ • ~ .-: [ ~ ( . ., ( .; ( . ~ ( .: [-\R" [ .', • _lliIIt (. j~ 0IAl'IEIUY. BN.tNf:IA.I.ANAl.VSIS CHAPTER IV . FINANCIAL ANALYSIS This ch.pter de8Cribe. the pot<!nlial ill'pam that Ihe propooed reclamation projectl will have on the Partnet'$. These impacts are dependent on a number 01 fattors, such as pre-1!xisting wa~te water and water revenue requirements, IIlId ISS\J.D\ptt.oru.. such ill3 the m.ethod of funding the reclamation operating and capUal costs. Th@5e fa.ctors and assumptions have been it1.C:ol'ptJrated into a detOiled financial model th.t calculates the amount by which the proposed reclamation ladhties increase w8~te water and water revenue reqUirements. This chapter will explain the rer;ults of the modeling and t~ underlying key assumptions. Prior to describing the resultsl however, it would be appropriate to ,t)OCI.1S& th@ Parttwr"s' funding options, because the source 01 funding can inlJuenc(" the po~ential impacts, (TIlls subject wo •• Iso partiolly addr •• ",d in the II&C Ma,t.,. PI.n,) Eacl1 source of fundlng is described Md the likelihood of funding is ass.essed. Tht> ton­ elusion from this assessment forms the basis for the type of funding that Was mod­ eled. POTENTIAL FUNDING OmaNS PayinJ; for the tonstruction of the proposed reclamation facilities is similar to pay­ ing for other capital improvements. A utility ordinarily obtains funds for the acqui~ sitinn of equipment or for the c:onstruction or reh!lbilitation of facilities @ither from earnings r~tained from prior or cutrent period!'i or from borrowing funds and obli­ gating ,t •• lf to rep'ying the fund. during the term 01 the debt. Funding from re· tained earnings is sometimes reffL>1:red to as the "pay-as~you ... go" method, whereas debt funding i& sometimes nferreci to as the "pay--as-you-use-method. Revenue, lor both debt and <quity flrumdng oome"om oit""r operoting (i.e,. roles) or non-operating (e,g" capacity <liarges or property taxes) sources, Under the p.y •••• you·u .. method. the pwCt'eds from tile sale of bond. are uaed to pay for capital pro- jecU\; rates are then set high enough to genetate sufficient revenues 10 make AMuaia • ______ ~. ______ • ______ HllTO\"l fAlU'iKOPF4 Ho6!iON .. IV·l Ii ~ ~ itf--, , '. i~ ,I ~ i· ,; If , _ _OIAPTElUV • .BNANOAL ANAI.YSlS principol and interest payments to the bond holders, Under the pay-as-you-go method. revenue. in exc"" of wo..t i. _ded to fund operalions (and debt .etvice) are used or accumulated to p.y for capital prDjects. The foUowing if a general de­ scription of the debl and equity funding options that mIght b. ronsldered. DEBT FUNDING OmONS The debt funding options in this discussion ate .segregated into type, of indebted­ ness that either (1) would be lsSUed at market rates by the RWQCP, the Partners jointly. Or a subset of the Partners or (2) would be acquired from StatE' or Federal loans. RWQCP/Partl1er Indebtedness Revenue BOnds. Revenue bonds are generally used to finance facilities for a rev~ eflue ptoducing entetprise, and are payable from the revenues of that enterprise. Utilities, under the Revenue Bond Law of 1941, cart use the proceeds from rt'venue bonds to finance public Witter and waste water systems, parking facilities, airports, refusE' collection and disposal facilities, power systems, and golf courses, The 1941 Act required revenue bonds to be approved by'a majority of registered voters at a special election calL@d for that purpose. Gen.ral Obligation Bonds. GeOE'ral obli.gatloC\ bonds are a fram of municipal fi­ nancing backed by the full faith and credit and taxing power of the tssuer_ The fund· ing to service the debt is obtained through ad valorem taxes on all property within the jurisdiction_ This from of debt funding is commonty used to finance capital ptow jects with no S01.lfCe of income other than appropriations from thE' general fund. While general obligation bonds aft' thE!oteHcaUy available to the Partners, tnt> pas­ sage of Proposition 13 in 1918 has made the issuance of these bonds more difficult because the approval of two~thircls of the electorate IS required. lease/lJurchase Fin.ndng. This fin,ndng technique provides long~tetm fmancing through a lease that does not I.;:onstitute indebted-ness under the state c01\Stitutional debt limit and does not require vQt@r ,pprova1. There af~ thre~ common lease/purchase financing methods. Ii:J:!I {.,J" [. J~ [ J" • ( J' • l.J [ • J { .: [.J { "'1 • [ .~ ( .~ { .J (i [ .,: ( -.: ( .~ HILTON FARNKOi'"& HOB~nN ~ _____ ~ __________ ,___ I Ill.; ---~ !"",'" L1!i1st' Ret'enue Bonds -A non-profit public benefit corporation is formed to ISSUE' lease· revenue. tax~xempt bonds equal to 100% of the financing requirements to ac· qUire, construct, and finance facilities for a public agency. ThE! non-profit corpora" tlon issues the l~ase revenue bonds. and with the procE:@cb. commences ~onlitruc­ tion of the improvements. (Because the public agency SeC\1res the rev~nue bonds with tevenueS other than ad valorem taxes, they can be issued without a popular votoe; hQwever, the ordinaace approving the lease is subject to ;.\ referendum.) The ---e IY-2 -= t .;(i\>, QlAmB IV FINANOAI .AfllALYSIS non-profit corporation I ..... the completed facWtiao to the pul>Uc agency ot • fi.ed annual "'"t thel would be .ulficient \0 cov .. principal and in""'st on the bonds is­ sued. The lessee agency mayor may not l:te a revenue genet.ting entity. Money for thE! annual tental payment. is seeured by the lea.e payments received from Ih~ l~ssee. After the term of tM let.se. the-non-profit corporation dissolves afteT trMS­ ferring all the ass.ets to the public agency free of encumbrances. Certificates of PQrhcipQtion ~ Fi.n&ncing with cettificilte& of p.1ilrticlpatioll is based Oil the same theory AS non-profit corpor,tIon financing (i.e., providing long~term fj. nanc:ing thrQugh a long-term lease Or installment ~ale arrangement). A public en~ tity engages in certificate of participation financing based on its authority to acquire or d;spose of prop~rty, rather than its authority to incur debt 1'he issuanc.e of cec. hficat~s does oot requ1te a public agency to publillh an ordinante and subject thf' project to l'efereruium, as required with lease revenue Oo:{\ds. The-lesfo(}r typicaUy purchases the project from and then leases it back to the lessee for an amount equal to th~ principal and interes-t payment of the loan The leliSOr finances the pun:hase, Of the construction of the capital project through the issuance of thf! certificate of patticlpation. and then assigns rights of the p,yments to a tTUstH. The repayment of principal and interest on th~ issue is secured b) lease payments budgeted by the it"ssp.e. Pooled Fimmcing ~ In order to spread debt issuance COSts of " bond issue. poo~E'd funds have been established by two or more-pub1k agencie&. Two or Jllore member agendes may form a non~profH financing corporation to finance their specific capi­ t;:,1 needs. Other associations of tnunicipal agencies have sponsored fi-nancing pools for use by its member agenCies without designating in advan~ which ag£lncies may participate and s.pedfy what capilal pIolectli will eventually be finaJ"lced (e.g., the WateReuse Financing Corporation). Other common types or pooled Hl\ancing in~ elude Mark-Roos Bonds and MellO-ROO!> Bonds. Infernal Debt. Under certain circumstances, it m.y be posSible for a utility to pro­ Vide itself internal financing from unrestricted funds eith~t within the enterprise, from other enterprises. or from the general fund. Loans of this typP hav£, the ad­ vantage of flexibility. but usually suffer from limited availability. Stat~ and Feder,.l LOiln Progt'ams St;tt~ Revolving Fund. Each year, the Stat€" Water Resources Control Doard pro. vides loans to qualified waste water treatmen.t and disposal pro)@t:ts via thi> StJte Revolving Fund (SRP). Since September 1990, water reclamation projects have 011so b~.--. eligible to receive SRF funds. The interest rate on these-loans is half the rlJltE' paio. by the State on its most recent sal~ or general obligation bonds and tN-N"pay. ment periods are not to exceed 20 years. The ruttent interest tate (April, 1993) on SRF loans is appl'Ol(imately 3% and the maximum amount of money avaihllble to -'~----~--~---------~.----Hlm .. tA"."o.,o "" .. "'" e IV-, I , \ I I j ~ iJ , \'. 'J . , '-~·t f ; t i. ~, CHAPTEIlIV. fiNANCIAL ANALYSIS any agency in any given year js $20 million. LoatIB can include money for construc~ tion and also for design, legal, and admtnisttptive services (no more than 15% of thP loan nlay be used for these latter, nonw<'onstruction purpo5t1I). The SRF is largely capitalIzed by Federal funds with 80% of any loan actually coming from lhe ~deral govetnment, The State provides 20% lIlf.tching funds and controls both the State and Fedetal portion of the loan. Projects are ranked on a priority system de· pending on the degree of urgency. and each yur the qualifying projects with the highest priorities may be funded. In recent years, projects at all priority levels have received loans. Gen@'rally, loans from the SRF are fot aMounts in excess of $5 mil· lion. To obtain funding from the program, the State Wat~r Resources Control Board's Division on Loans and Grants requires a detailed facilities plan and all the environmental documents required under the California Environment .. ! Quality Act. [.J­[. J~ • [ J't,.! • [ J " • I.J I.J ( 1 Water Reclamalion Loan Program. Funded by the Clean Water Bond law of 19~ • ..... and tM Water Reclamation Bond Law of 1988, this program provides up to $5 mll~ [ _ lion in low-interest loans to water tedamation projects. Administered by the State W dter Resources Control Board, loans Ate made for cost~ffuc:tive projects (as com· • pared with the cost of alternative new SOurces of water) at an interest rate of half thl' [ ] rate paid by the State on its latest sale of general obligation bonds. Loans need to b~ paid back in twenty years or less. Only pru}ects for whkh no Federal funds are • available via the Clean Water Act are eligible to receive WRlP loans; ho ...... ever, ( ""I 100% of the proJect's design, construction, and right-of-way costs can be funded. • _ Proceeds from these loans may not be used to purchase land for tt!cI.aimed w~t('r disposal. Originally, the two bond acts provided" total of $60 million for trus pro-[ ~ gram. Only $S miHl0n temain available; however, this figure will increase as E'al'-• lif:f loans are paid off. Materjals req'Jired with a loan applicahoJ'\ include (I, detailed facilities plan and all documents requirE"d by the California. Environmental Quality ( - Act. Nearly thirty agendes have recei\t@d funding from thiS source, of which East • Bay Municipal Utility Distr;ct is the only Bay ,Area agE'ocy, This district has received funding for thrl"e proj@cts totaling approximately 6,700 af/y. which ust> reclaimed ( ... water for landscape irrigation and industrial cooling. • W,ter Conservation Bond Law of 1988. The California Departnlent of Water ( - Resources makes loans to water agl"ncies and municipalities for water conservation • projects undet authority from the Water Conservatioil Bond law of 1988. This law _ appropriated $60 milIlon, of which $20 mUllan was earmarked strictly for conserva· [ tion proj@cts. Consequently, waste water treatment projects are not eligible for • fundi.1g; however, facilities built to transport reclaimed water that wiH displace .... potable water al'f! eligible. Approximately $10 million of the origin'll $20 millioo is ( I cutr~ntly committed to various projects. The interest rate on these loans is half the • tate paid by the State on its most recent issue of general Obligation bonds (or about [ .. 3%) With a repayment period not to exceed 20 yean.. The Itlaximum loan is about $5 mlilIon£ construction pr!!l)ect, Including $100,000 for a feasiblhty study. DWR : ... __ ... HILTONfA.RNI(OPf&'H08~ON---·---. ______ ~ __ ~_[ I ~~ . ( ' ... " lVo.4 CHAPTER IV FlNANQA' ANALYSUi wHl rank water COnsetvAtion projec.ts based On cost e/fe....'1iveneu, r\frt water savings. and enginoering and hydrol<>gic.1 feasibility, Thooe projects with the highost prior­ ity will receive funding from DWR if funding is aVailable, There is • two-'tep ap­ plication proces, in which a project'. funding eUgibility i. e.tablished in the first step; funding Is secured in the second step. Wate, reclamation projects admmlstered I by the Eo.t Bay Municipal Utility DIstrict .nd Moulton Niguel Woter District .r. ex-I ample! of reclamation pro;@'ct& thi'd hav~ received funding from this progr~lln, Small Reclamation Project. Act. The United 5tatH Bureau of Redamahon makes ! low~jnt@rest loans to multi9 purpose water redamation ptojects vta the Small ~. Reclamation Projects Act. How@ver, these loans ar,. restricted only to projects that ~~ prOVide Some percentage of their reclaimed watoff for agricultural irrigatk'll'\ uses '~\ The Bureau considets irrigating parks or golf COUi'SeS a mUnicipAl use of wdt~r, not ~~ an irrigation use, This policy of rO!strictlng funds only to agricultural irrigatIOn pro-~li jl"cts is currently under review a.nd may be changed in the next six t(l twelve ~ months. The Bureau also makes grants to water reclamation projects; how,,"ver, . these are made in conjunction with loans. Eastern Murucipal Water District is an example of an agency that has received Bureau funding for reclamation, ~d EQUITY FlINDlNG OPTIONS Itt simplest term" equity funding Sources arl" any sources of funding ot~r than in-1· debtedness. The more COmmon types of equity funding Are d('5cribed below, Rate Rt'venues. Rates mU6ct be set to generatE! ~nough r~venue to pay for opera:tions and debt ser­ vice, which represent th~ primary o!)1igations of a utility. Rates must also be Sct hIgh enough to pay tot any annual capital outlays that ate not funded thtough in­ debtedness. Such annual capltal outlayt usually oonsist of relatively small projects such as; main replacl"tnentl\, which ate funded on a continuing, steady basisj equipment aSsets; consttucted aS5l"~. the nlagnltude of Which does not justify fi­ nancing, The magnitude of the proposed redatnation facilities is such that debt fi- nancing is much more likely than pay~lls-you-go equity financing. In thP case of the . ! present study, rate revenue is derived from thl:! Partners' waste water rate payers ' .. ; and from water rate payers that use reclaimed water to replace potable wat'er. Contributions Conttibutions are a source of 1101,-operating revenue that Can be used to defray thp capital costs of specific facilities. HlllON "RNKO" " "00"'" e -- IV-S ~, :. CHbl'TJjll IV F1NANObL ANALYSIS Capacity ch0ts... Capact\)' dlarS", llto knmvn a' COtltlettion fee. 0' develope' leeR, Ire ont~time paymenu. m ... de at the time of initial conntttion to the i.dUties. Capaci.ty chalges Jel'Ve to t:ollect reVE!nve to cover the MSt of sy:attm CClpacity re­ quired by oew C<l5tomerl, which would otherwise be paid lot by •• i.ting <""om.,. ",d would no. be reimbur .. d. The amounl of the cIl"clty <harg. I. b.sed on the fl· cilit\~s that benefit the connector. Rev@I\ue from capacity charges can be quite sig­ nificant in \:I'l@' early stages of service area build out Contributions In Aid of eoOltNctlon IClAC). CIAC <oOliot eitller of wnttibutioJlll of money or faciUtiesl which are typic.Uy made by developer& whose <!evtlopment& requite dedicated {"inwtract") facihtie~. Mone~llry CIAC ctre ulied by the utility to construct tbe required facilities. Mot@ commonly. however, develope1tl construc:t the facilities, which are theIl. contributed to and maintained by the utility Customer Advilnces for Conslna.ctian (CAe). CAe are u&uaHy made in cash for use by t~ utility to construct facilities that benefit the developm.(\t. Uruike, CIAC, CAe ar~ eventually repaid by future connectors. Regional Co.-Funding/Grants Elsewhere in California. regional water suppliers &uch a6 Metropolitan Water 01strict contribute funding to ~tny of their wholesale putcnasers that develop 1e~ placement teclaimed water. The SFWD and SC"1-VD are the two r@gional agen.Cles that serve the PartnE'rs' watet tt..1Stomers. San Francisco Water Department. The SFPUC, which regulates the SFWO, tt>cently adopted a rcwlubon endorsing the developtnent of reclaimed water, In reJevant part. the resolution directs th.E: SFWO to watk with its ~\lbutban customers to de· velop reclaimed water within the service .rea and to ex.plore the oppottuniti~s for fE'gional reclamation. It is envisioned that part of this work n.ay result in an amendment to the current suburban rate .. setting agte@rrtent so that add~tional re-v­ enu~ could be collected to fund rec}amatiotl: projects, To date, no substa(\tiv~ progress hilS been mad~ in nerotiaung such an amendment. Santa Cia,. Valley Water OIOlrlcl, In 199Z, tII< SCVWD promulgated a draft rocl.· mahan policy Whereby the District indicated an interest in participating in funding reclamation project') within its Sl'tvil.:e area, The-poliq is stilt a working docum~nt. however. and has not yet bei'n finalized, ]t is expected that the policy wlU provide for some form of C()-ventur~ Of i:n.dependent fundjng. li:J- [ .• ~J. [.Jtr [ J¥ (-] (a .J { .J [. : ( • J [ [. -[. -(. - [ • i ( -. { . "\ ( •. ·~ .. ·-e H"rO'.""'Q" .. "".""'-------~-~-~.-__t ."":. IV-6 •• ~ CHA.ma'" FlNaND'" ANAPSIS ASSESSMENT OF FUNDING OI'TIONS T~ fi .... "d.l model is fairly complle'Ied It """'els tI\o impact on each ParIlIer'. Waste water and water revenue requitementa given numerous • .,umptians reg.rd­ ins. for example, reclaimed w.l8r d.monda, blending wa ... _d" tI\o projectod coot of wholesale potablt water. not to mention soutcelJ of funding, The-mcdel 3.5 1.I-n­ avoidably complex because it was also designed. for future \lW, At sud! time, the model (',an be US«i, if r1e'Ctistfy. to compare combinations of lin.anci.tig p<.166ibilitiet., wht-reby. for ill6tance. somE' Partners might jointly debt finance their share of t"te redam.lltion facilities and some Would contribute their tihates in advanCl' from eG~ uity, Tlw ramifications of fina-"cing artangements such a6 these can be e),?lor~d lif­ ter the decision is made to pt()l:@E'd tlJ.f'tl'w>r with the proposed reclamation PfojKt. It is recom.m~l\de:d that the dlfCis1Q'A to proceed should not hinge on .. c'Jmpli')( h. nandng package. but, instead, should be ba5ed on a Str41ight .. forward. simple hnanc.­ Lng pltm. Toward this end, the funding options were eve.luated to identify a leasol'l­ &bly consetvative approach to funding, which was then used in modeling. the 1")0- te-ntial financial impacts. The evaluation that follow5 is also swnrnarized ira Exhibi.t IV-l. DEBT FUNDING Given the finanCial magnitude of the three stages of the proposed reclama 'lOl'\ fa<:il~ ibes, SOme form of debt financing will probably bfe unavoidable. The most likely types of debt financing ate revenue-bonds or c@rtifkates of particip3.tion. whi('~ would pmeably be ISsued by u.. i(WQCP, For purposes 01 the present ,wlly, it Wi.5 assumed that revenve bonds wouLd be issued in three series at thl(' current markut rate that might bf' attained by the RWQCP (about 6% 8\:'cotding to Stone ,It Youngberg). State (1t Fed@ral Loan programs are judged to prOVide an uncertain pro~pect for funding. For e~ampJe. the adVa(\tAgE' of a lower interest f4lte is erod@(l by the shorter repaymel'\t J"'e'Tiod. The additiOltal tiMe required for submitting an application ani) receivi'l\g funding is another uncertaiflty, particularly given true fact that there ma.~1 not be sufficient fUJ1.d1i 6-vaLlable to fund whatever part of the project that qualifies. Eventual fuU or parHal hmding from State or. Federal 5Ource6 sht'llld not be ruled out. If it ('1\1'\ be obtained, there may be significant savings. Howevi!:r, the uncer .. ta~nty surrounding these SOUtC~ (s such that they wen not used in the mooeJing. , ~.' ,. ~~ (1 ~ If" < ;l ~ .. ~ ~ 1 \ , , H1LWS,,..NmPf& ",'.'ON je~- IV·7 r I' gums IY. FINANCJAL ANALYSIS Edalbtt IV-l "'Deb ..... E""''''. ~ ... •• 0 U!<.IlI\O<N\.f FuNll"" o.~ RWQCP IPJrtnet lndebtednl!ll!l: Revenue Bond" Vrry likely. Can be designed. t')CActly to fundirlg MOd, GeMf.1 Obligation Bond. UnIlk(ol~' Requires voler llI'f'proval. Lea!N!/Putdwe Financing Ulely. Particularly COr!l. Internal Debt Unlikely. F....,..d5 probably unavailable. Stllte or Federal Progr"fIlI; State Revolving Fund (5WRCS) Uncertain. lower interet;t rate, but ,-omple}! applica. tion pn.lCf!as. WAter Jte,::lamattM loan Program Unce\: ;in. Lower interest ratE, but comple)!; ilpplica. (SWRCB) tion pf0C@9S, Umited funding available. W.ter Con&el'Vation Bond Law (DYVR) Uncera:.in. Lower lrlternt ratt. but complex applica- tion procesr;. Umiled funding available. whl.ch can only M \lIVId fo~ &orne repla~~1'I1 reciarNItion COlt •. Small Reclamation Bond Act (USBR) Not ponlble. Currentty restrklM only to ta:lamation for agrkultvt.1 irrigation. E(luity Rate ~enuel Unlik.ely (other that\ f(w dt:bt M'Nlcll). ContTioutlons: Capacity Charges U~likt'ly for Partn@f!i,butpc!u.iblefof(\CK\.fll('tf\ers. COrttribVti0n8 in Aid of Construction ~Jnllkel)' fOr Partners, but po55ible for "",,-Partners. Cystomef Ad .... ~('$. fOt Con&truction llolli..ely fM Partnt1' or non·Partnen. RtgJoncd CO-funding/Grants: SFWD No funding currently flfopoied. SCVWD No lundmg cul'l't'l'ltJy propotled. I r---rJl?~ .J'f: t J., ..... ... " [ ·a]j,;· t J ~, .-­t ' ... ..J t Ia~ Il-~! t - [ .:: .J [- t K: .-' t .. t 1[: t K~ .... J [ .... tIlL ~,~.--KOPF&HOH~ON---~ [ ..... ~_ .. ___ ._~__ 1[ • -t '"." .. ----8 IV·S IL (->~, OUpU!llV l'lNANCI4L ,vJ.U.l'.u:l EQUITY FUNDING Again, CONideting the magnitude 0/ the teclam.tio~ project, It ooerru wilil;.\y thai the facilities would be financed out of ~uity, either a$ a lump Aum frOll: the tp'" .erves or on a plotemeaL p.y· ... you·go bas .. from ,alb. nu. possibility ,!>,uld nol be ruled out for particular Partners, perhaps. but additionAl fiNr.ctod analysi', whicj, is beyond tN! scopo 01 the p ... ent study, would be required to determine It", e.len!· to which equity could be used to fund all or a part of the facilitlo$. 5our':"5 of equity from contributions may be f •• slble at both the wholes.1e <with re .. 5pect to non-P4lrtners such as Menlo Park.) and utaH leveL Howe-ver. contJibutioro; Wert! not considered for modeling purposes. Regional sour~s of funding at(-currently nebulous prospects, but have gre,lt poten­ hal. Predicting when regimlaJ cOAfUJ'\ding might bEcome available i.s irnp<:'6~Hb)e a.\ present. although it is ptobable that s.uch fundi.ng arrangements would nct be for­ roalited before funding 'Wa.s needed for the Stage 1 fClciliries. HNANCIAL IMP AC!'S The potential finanCial imp.cts that the proposed reclamation f .. ~ilities cO',11d httw on the Partners' waste water ~l\d wa.tt'r I@V@1\ue requirements were <:alculau~ci usjng specially designed microcomputer spreadshePt models, copies of which are i.nduded in the appendices. It i6 important to note that the financial analysis does not consti­ tut@ l!I tillte study; t."1e financial mode) did not attempt to determinE' the dirt"ct impact on rates, Instead, the model me_IiUfes finantif.l impact in tetms of how much thtt cost of the reclamation facilities are prc;uted to incr@asE' existing revenue require­ ments. Determining the iJnpa.ct on ra~!t ~quires a rate study, which wouid *,vctlu .. ate how much of each of the availabl~ sources of operating and non-operating rno .. enues could be used to fund the redarnation project; such a rate study is beyond tru~ scope of the pr()s@ntstudy. The-general structure of the modeL, the key modeling a~sumptions, and the rps\l}N of the modeling are described below. STRUCTURE OF nlE FINANCIAL MODEL The financial model was designed to provide inforru~tion that policy makers caf WE'igh 10 considering whether to prOC«d further with the d~Y~lopment of the pro. posed reclamation facilities, TO\~£Ird tltis end, the model calculates how much theSl H!LTONf""''''''',. """>UN e - IV-\> I f ~, ~ '. to ',. ~ 5i' t , CHAms IY FINANQALANALySIS flc:illties will lnctn.H wa\fi' and waite! water revenue requirement. given certain UlwnpitOns. Thete calculations were projected over twenty ye"o,l An outline of the sttucture of the model is shown ill hhlbU IV .. l, The strUdure consists of • series of tables within the model. which serve to provide .aW1'II5 where basic data And assumptions are Input and where intermedi.te and final calculations are di.played. The model firo! projeclA operating and caplt.1 coots of the rartne,,' water and wute water systems not iru:luding the roet. of tedamation. The model then at1o<:atea the coata of the reclamation fadlltltl!!l among the Partners. Finally, the model olculates how much the COBta of each Partners' water ~md waste water tev~ enue requirements are iorreased by their share'S of the propoRed reclamation f.dU­ ties. KEY MODELING ASSUMPTIONS A variety of a8.5umptioN were reqUited in order to develop the financial model. This section describes the major aseumptions that have broad impacts on shaping the results, 5uch as the primary sources of basic d.1tB, the allocation of coats, and the wholesale-pricing of reclaimed water. Building these r.omponentg into the I'node) required either input from others. reasonable assumptions made by HF&:H (coupled with outside verification by the RWQCP or the Partners), or both, An understand­ ing of these assumptions is a prerE!qwsilll': to understan.ding the results of the mode-l­ ing. C@rtain other minor assumptionu (e.g., secondary sources of data) tire docu­ mentffi in the model or are explained during the explanation of the modeling re­ suits in the next section, Souras 01 Data AU of the basic data related to operating and (apital (OOt6 were d~rfved either from the RWQCP. the Partners, or from !ltner .ppropria,te sources Buth as the 'B&tC Mllsttr Plan. This was also the case with waste water dillcharges and potable-water and reclaimed water demands, The specific sources may be referred to in the body of the model. [--JtI [a ' .J'; [ J ." • --;;f! [ :J" [ .J [ '1 ( .~ [ .: .­[ .J ( .= ( .= [ .: [ '~ r .:\ [ .: ( .~ 1 TI'W' rrojf'Ctions weft' ek.Uap:'lIMed (Of tw¥nty yean In tw'oo ten-year I~tnt': oft 8hort-term P, rojtcUon [ •• 6NI oft IlIr'Ig-term prujedfon. Copies of tM ,hort-Ierm pro,teCUUOK are p~tKlll'I thl! app@fIdlcf"S. -... S·" The annua' rosts of thl! reclamtltion facilities Were derived by combining th~ O&:M expense wHh the debt service expense (calcuJateC by HF&H), The O&'M and capital costs for Stage 1 were based on CH2M-HIlJ's cosj' estimates; the cost!! for Stag'!! 2 and 3 relied on 8&C's coet estimates. Cc.pies of the debt service calculations are shown in the appe-ndice9. 'rhese calculations document all of the aS8umptions regarding interest rates. amortiz8Ition periods. etc.. For thE: purpos@/f of this !ltudy, it was as" -.--"--V Hln(JN MRNKOPFI>t HOH!lllN -.------,-,.--~-.------------.--~-----.. ' . ~,., IV·I0 • f • ;I. , ~lf,':t' CHAmII.IY. l'lNANaALANALYSl§ ,umed thIIt the Partnen would illue tht!Ir OWIt debt, rothon' than opply lor funding from Stale or Feder.l loan progrOJlUl. Exhlblt IV·' Outline of Financial Model Slru<lure I. Revenue Requirements Excluding Reclaimed Water A, Waste Water L RWQCP Revenue Requirenlent& 2. Collection System Revenue Requirenli!nts S. Potable Water 1. Potable Water Revenue Requiremlt:"ts 2. Water Supply Demands and Wholesale Unit Costs II. Reclaimed Water Revenue Requirements A. Recla!med Wilter Demands 1. Reclaimed Wate:T ne.mai"lds (Unadjusted tor ~lendillg Water) 2. Blending Water and Net Iteclaimed Water Th!mands 5, Reclaimed Water Revenue ~quiremeot C. Reclaimed Water Subsidy lll. lmpact of Reclaimed WAter on WastE! Water aM Water Revenue Requirements A. lrnpact on RWQCP and Collection System R£venue Requirements 8, lmpatt Gl\ Potable Water Revenue Requirements 1. Potable Water Costs AdjlJsted for Bepla<:em@nt Reclaimed Water 2. Impact on Revenue Requirements C. Impa(t on Comb\Jled Wa5te Water/Water Revenu@ ReqUirements 1. CombiI\ed Waste Watt:'t/Potable Water Revenue Requirements (Excluding f~dalmed water) 2, Impact on Revenue Requirements IV. Summary Notes In projecting ba5~ data across the twenty~year planning horizon, other assumphotUi weft:' requ.ited concerning. for example. inflattion and (:on5truclion tost escalation rat~s. In some cases. existing projectioJU, were used. Usually. however, there were no existing projectio.ii.\li, ilnd in these (~ase5 the model was used to generate these pro-.-.------~ ~-----___ """",'AltNku"&"OI!SON t~-· IV··1 ... I r t~ ;,:'4 .1;~"\ :! ;':~ i' ~, , ,I. ~ , ~ t I, e.' ~.' CHAPTE.R IV. FINANCIAL ANALYSIS i-eII_, The.e ... umptions we,., typically comparatively minor In natul'<!, whleh is to My that the result& wert: not 8ignifi~antly leNitive to variadoM in the assump­ tion. AllOC'ltion of Reelamlltlon COSI. Reclalnation prefects can comprll@' facilities thllt provIde the last increm@l'Il of Wf.Ilt4e water tre.tment that iii required for reuse and faciHties th.t dilftribut@~ pump. and &to~e reclaimed water tor on'"8ite use. Taken alii a whole, along with the waste water rolJection and the water distribution systems, r«lamation facilities form an intt'~ grated cycle, 85 depicted in Exhlbh IV-3. As part of thl& cyd@, ~lamatio1\ proj&ts perform the dual functions of Wllste water discharge Ilnd water supply facilities. BeCause of the c.iuaJ-purpose nbture of redamation, the que5Uon !irises. as to now much of the cost of reclamation should be funded by waste water and water cul!­ tomers, ThIS topiC was discus~ed with the Partners in the context of other institu­ tional issut's. It was recognized that the redl'lmahon fadHtie~ would provide an ina' herent benefit to waste water customers by reducing thi:! mass emis~ion5 inlo the &y. It was also recogrtized that the reclamation facilities would pruvide 8 benefit to water customers if at le~5t sOme of the fE!claimed water repla('ed current or propo!'ied uSes of potable water, Hence. the reclamation fadllties. were viewed l\S having value to both waste W,uer and water ClIstomE'rs. The Partners agreed that the RWQCP would be the logical agen(,y for funding the redamation facilities, tht'> cost of which would be passed on to the Partners Wling the aUtXaHon factors that ate used to allocate other RWQCP O&:M ftnd capita! costs. TM RWQCP would become a whol@sale water supplier to th(l~ Partnertj that pur­ (,hase reclaimed water to replace potable water usel'i. Revenue from the sale of this "rtplllamtnt ftcl(Jimed watu" would be used to off8Pt the COst of the reclamation facilities. The Wholesale rale for reclaimed water is describeu below2, Rtdah",d Water Wholesale Pprchast Price R~dalmed watet that does not r@piac:e potable water wa!'l regard~ as a form of land disposal of effluent, which provides no water supply hf.Ildit. A~ best, land disposal constitute!> a form of sl1pplemental water supply, which would 1\ot otherwise-have occurred except to reduce disposal of waste water into receivjng water" As such, this "supplemenfal ttduimtd Wdftr" would be providf<d to Partners at no direct 2 F"r ttw lake 01 datlty. It )5 worth dhltinguishing b~lwel'n whol@slllie and I'f!'tail H'Cblmed w.l~r C-f! [.-~- •.. J r J"lIf ,1£ [ .. J" [ .J [ l [ .~ t .': ••• [ .J [ .­ [ - [ ... -.. [. : £.-1 l ... [ ... ratep.. Th@ wh(t1e,ijll" fat~ I. thl:.' prlcf' that It P.rtner would p~y tht' RWQCf> far replat:etm!'nt • ft'clalmed waler. Thl' ret,..U fille h t!'ttl' p,lce th'l the Partner's ,retail redfllmed ""atf!r cu8lomers would pay the t'lIIftM'f fOf repla('Hnt'n' nt:\aim~ w.ter. 'That retail raw II II .tpanlte IQbfect thAt " l· '"' ---8 ~nd the lrope of the p~Rnt Iludy. HILTON ~·AR:oJKOI'F 60 HObsON ··--·-·---------··--------·--··-----l • '"'& IV-12 ' •. , . CHAI'llllI.IV~F1NANa.u. ANALYSIS whol ••• le to.t.> Therefore, It I. only the whol ... I. !'rei" fnr repilleemenl=lalm£d water that is at issue. IMPOlt11Ch WATEIt 8UPPJ.,JBB LOCAl. WA'rER /+--PlIRVEYOR8 .... .... ...... "'M RUI, I I llxhlbltlV., Water Supply. W .. 1e Water OIlposal, and RecJallded. Water Cydlt ,---'aiatONAl. LOCAL WA_ WA ..... Q"ALIT1 01 .......... corn'ROL ---......... ~ .. AN< -' I D1111'01IAL I IID~I' I TO 4--I DAY I I 1,-, __ I OWP .... I MENI' ~ HCLAlMEl) I TO WATER "AftR I OIJPPLY L _ _ -J 1 1 boO Il~"hri (!IIonlo Pato ......, ..... I I ~ IW'U\CI:. f---MENrO' P<YrABU' WATEk ~=-I 1 1 i 1 ......... p-"'.w AI .. I I .'I 1" the early alages 018"', !ltudy. a"proJ(lmat~ly 4.!'''''' or thll! tobl1 ~lljfl"led water wa. cI.slifiNI .a su"ple~nt.al. (lolli'ing the coune of die study. the demand 10' rectal.m.d. "" .. m-at StMf(lfd was fHlle'8ed. At pl'l'sent. n[!lrly "II of th. rvdalmed "",.Ier protect'. production Is d.",;fied .. l I < I ~rlilcenwnt ~"'iI'nPd water. • , _______ HILTON f""f'iKOPf&.t!l)8~N ~. IV-13 , ~ i1 ,. ~ . ~ ,.; .: r 1 'f:~ .~:, £HAnIl& IV. FlNANClAL ANALYSIS Pricing ",claimed wat., is frequently <ontroversial. Attempts to balance ",claimed water's advantages Against its disadvant.ges are sometimes helpful in establishing a ptldng policy. The adv.nt.g~ of redAim~d w,ter over potable water are two-fold: (1) the d'p"ndence on and COBt of potable wal1!t i. reduced; (2) the reliability 01 r.· claimed water is greater beCA\de wnte water di&eharges are relatively unaffected by droughts_ The disadvantages aN (l) the q\1Jlity of reclaimed water is towE'r, which restricts how it can be Ul!H!d; (2) using reclaimed water requires on·going monitoring and Ctoss-connection devices; (3) landscapes may need to bt' retrofitwd to salHQler­ ant vegetation. W.:~ighing these advantages and disadvantages Can suggest several potential whole­ sale rates. In this study. four different wholesale rates were modeled. ThE, follow­ ing four cases are ,rranged in oider, where waste water is impacted gre'h,lIl~t under Ca.se 1 and least under Case 4. Cases 2 and 3 are intermediate position!l. Case 1 .. Reclaimed w~ter provided at no cost to water utilities. The wash::! water utilities would pay the entire cost of reclarr:.ation and deliver It at no coot to the Partners' water utilities. This rationale leads to the largest increas.? in w.aste wa­ ter rf'venUe requirements and would result in a slight decrease in water revenue requirements because of the reduced cost of potable water purChases. • Case 2 w Reclaimed water rate equals the wholesale potable water rate. RI~claimed water would be purchased by the Pilrtners' water utilities at the wholesa/It' cost of the replaced potable water, At this price, the water utilities' revenue require· ments are noi incr~ased because they are paying the same for replacement re· claimed water that they were paying for potable water. Wa.~te water utilities' revenue requirements must cover the difference between the cost of d.elivering reclaimed water and the Wholesale potable water rate. Case 3 • Reclaimed water rate equalizes impacts on ffyenue requiremelus. The reclaimed water rate would be set BO that water and waste water rev'!'nue re­ quirements would increase by the eame percentage amount. • Case 4 -ReclaimecJ water purch"ed ilt cost. RE.>claimed water would be pur­ chased by the water utilities at the cost of delivery. Tlus would cause the greatest increase in wilter revenue requirements; waste water r("venue requirements would not increase at aiL [ ~. [--. [··-I~ .' [ .J'; ~ [ .. [-= [K: [II: .. -=: L [II: rL [II: [II: [~ r-; MODELING RESULTS [ ~ Exhibit IV-4 summarizes the percentage impacts on waste water, w4lter, and ('om-I[:. bioed waste water/willer revenue requirements for each case. Thl! pt"rcentages rep-[ J resent hlJW much the proposed reclamation project is projected to incI'ease thE' W_ --e HILTON FARNKO", & HO'"'' --.-( _:---1__ :"'IA Iv·a ----------------------~ CHAmB IV f1NANQAl. ANI.um. Partners' collective NVenUf' requ1rementll in the first year of Stage 3 operation. This exhibit demorutrRM' the ,,'Howing points: • The percent.ge impacts on w81.l"e water r("venue requirements de<:reAse from C.se 1 through Case 4 as th? wholesale I'ate for rec1ann.d. w.ter increases. • ConverselYI the impacts on water revenue req!.l.iteJnenbi increase from Ca~ 1 through Ca .. 4. • Under Case 1, water revenue requiremEtl.ts would decrease ~cauH' the amount of purchased or produced potable wate.: decreases without an ofitietting cost to purt.has~ reclaimed watE!r. • Unde" Case 2, water revenue requi~Dler;t' do not t'hange becauIW redaimed wa­ ter is purchased at the same cost as the ?CItable water that is replac~d. • Under Case 3, the wholesale reclaimed W.Uer fllte is set; to equalize the waste ..... a­ ter and water revenue requirement percl!ntage increases for the Partnen; 1" the aggn!gate. • Under Case 4, the waste wet~r revenue rEquirements remain unchang~d b(lcau5e the wholesllie redamation rate provide!. full reimbursement from the water utilities, Ekhibit JV-5 is a graphical representation of i::dtibit IV--4. It shows the pailS of Pf!'r~ cent.ages for each of the four wholesale rates. Thf" point at which the water revenue requite.rlumt Hne cro:.ses the x·axis repf(!sent~ the wholesale reclaimed water rate that is equIvalent to the wholedale ~)otable water rate (Case 2). The point at which the water and waste water lines int~rsect 15 the wholp.sale rate tha.t results in the same p~rcenlagE" increase in rE"Venue requirf"ments for the water and waste water utilities (Case 3). Of COurse, the cases that are plotted are just four pairs of points correspo~,ding tn four wholesale reclaimed water rates ranging from SO to $959 per acre·foot. Any other rate within this range has a unique pair of points represenhng the aSSOCiated revenue requirement impacts, Exhibit IV.06 itemizes the percentage impacts on each Partner's revenue l'Pquire~ ments, The percenta8~s labeled "Average" are the same percentages shown in Exhibits IV-4 and IV·5. Exhibit IV-6 higtJights the fact that reclamation would in. creaSe thE" combined. waste water and water I'E'venue requirements by 2.8%, regard.. less of case, --------------HIlTON'IIJ\"OPf~HOBSON ft IV-I5 ;'§ ~', ~ ,., . !4 ff· (;~~ ., " ~, <~ ~; ~ , t i , " CHAmS IY. flNANOAI..ANAI.XSIS Exhibit N-t Revettue Rl!!quirement Impactl and Whales.I. Ralo by Cu. Un the fint year of full operation of Stage 3) Impact on Revenue Wholesale Requiremertts Reclaimed Water Rate C .... Waste Water Water ($/ AF) (1) Reclaimed water provided at no cost to water utilities +9.8% -2.4% $0 (2) Reclaimed water rate equals wholesale potable wilter rate +6,S'Yo 0.0% $321 (3) RecJaim~d water rate bahtnces impacts on revenue r£quirem<!nts ... 2.8% +2.8% $665 (4) Reclaimed water purchased. at cost 0.0% +4,8"'1(' $959 SUMMARY The approach taken in this financial analysis ..... as intended to produce aI\ estimate of the potential impacts of the reclamation facilities using a financial mctdel that in­ cotporates numerous assumptions regardlng demands, projected revenue ft"'quite* ments, blending water needs, funding sources, etc" The results of the modelIng in­ dicate \he estimated lmpacts on waste water and water revenue requirements, givel1 the assumptions that were modeled. The :X-lcentage Impacts vary Partner by Partner principally becau~ of the fact that each Partner's share of the l~eclan,ation costs compared with its existing waste water and water revenut requirements is dif­ rerent. Determimng whether or not to proceed further with the development of th(> pro­ p05ed reclamation facilitIes may not be pom.ible based on these modeling results, which, after aU, only indicate the potential impacts on revenue requirements for a given set of as-5umptions. With the financial model, other sets of assumptions can be explored, but, again. the modeling results do not directly indkate th.e potential impacts on rate payers. A tate study of the Partnets' waste wat!:!r and Wc.ter utiliti4!s [-~ [ .. ~_/.:' .~­[~ ... .. ~ ["""" Ir! [~.\ K: [ a:: [II: [II: [ ...:: C-= [ .:: [ .::= [-.:. [ .:~ r L ---e HotTO"""Kt,,,&H"8,0" ---- IV-16 ka::. r lL -----{ ...... ;\j? l---)~ OlAfI'!!!! D'-FJNANOAL 6bV1USIi would be advis.ble at 8uc/llime 85 the dedsion II made to pro<eed furthoo< v.!th de­ velop.og the proposed redam.tion project. These modeling results abo do not determine the wholesale ~laimed wattrT r.U!' . The modQI determines the out~r limits and examines two intttmed'-te ralel~. The amount that the wilter utilities should pay the wae.te water utilities is a policy ded­ sion and is therefore beyond the scope of this report Finally, it should be noted that the impact of the proposed reclart\ll.tion projects may not be the full story of how much waste wilter l'evenu~ reqUirements and rates cou.ld increase to (.omply with the Regional Board. The complete impact WO'LlJd in· dude not only the cost of the proposed reclamatiol'l. fitciliti~, but also the cnsts of expanded source control and upgraded treatment. IULnlN F.,., .. "' .. "........". e IV-I' I ~'. " ". '~ f fh '. CHAPTER IV. FINANCIAL ANALYSIS B.hibiIIV·5 Percentase ChanBe In Reven~. Roqul",ments ., Full Development (Flnt Y •• , 01 Stase 3 Op.ratlon) 10.00 .. ~...". 8m" 7.00'1. 6.1m> .. ti j 5.00" • ! 4.00'JI. ~ • ! )00'1. .5 g ~.OO" 1.00'1. O.OO'JI. ~1.00~ -2.00" r.r .).OO'JI. 1 ~ CM.1 CM.' // ..0 em3// ~atitC 1 I I+-I // . 'j I·~ 1 -+-+-+-+-+-1 ~-I iii 8 ~ 0; 0; ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ WhoJe..It! Rtdailtltd Watet R.tt tSlAf) _--W.ste W.t1:l' \.'lill~ ~-a------W"w;r U\i\i\\e\ ~-~ .... , • .IF r-]tic, ..... ... -, [ .••. ,J\., [ . • }?ffi [ • J",Y' [ .J [ .J' [ ] (-.J [ ] [-) ( -] ( -J [-.J ( J" [­_J, ---e H'LlO"o'''O'''''", HOO"," ------------'--~---------·~----·--~-~t IV·1S ----______ ~OH~~A~PTIR~~ly.~CIALANALY~1 Exhibl' IV •• Sonnmory"'ReYm .......... _Impo«s •• PuIl ~ (n'" Vu,oISUp3 Open ..... , , c-l Co .. , c.... c..i W.,ko Water Utilities P.loAho 7.9'" 53" 2.2 .. O./J'I Mountafn View 13.DI.l 8.'" 3.'" O./J'I Stanford 9-4''' 6.2" 2.711. 0.'" LOIAltoe 11.8.., 7.8'J1. :l.3"Jio 0_0'1, ltalt ,.10 AI to 7.0'Jf. 4 .. .,. 2.0'Jf. 0.0'1 1.01 Ala Hills 12.~~ 8.3'" 3.5'1. 0.0'1 Aver.~ 9.S'JI. 6$" 2,8'1. 0."" Water Utilities PlliloAlto (2.0'Jf.) n.'" 2.3'J. 4.(" Mountain View (25'J1.) 0.'" 2.'1~ 5.1' Sianford (U'JI.) 0.'" 4JJ,. 8." Los Altos E.1t P"o Aho Los Al105 HIII!I AWl'8ge (2.4,,) 0.011 2.8'" '.8' p,mbh1t"d w.,te W~Il!r1 Water r.loAlto 2.0'Jf. 2.1'1. 2.3'" 2." Mounlaln VSI!W 3.1'S 3.J'Ir 3.1.,. 1." Stan/otd 11 .. ,.) 1.3,. of.l' ... , Loo A.IOo &ott r.!o Alto Loa Altos Hlllr Aw ... gp 2.g", 2.8" 2.8~ 2~. Case 1; Redllmed wat~ provided al no cost to water utijltin jeese 2; Wholetilir. m-Jaimed water r4t.te eqUIIls wholeslll! poUble w.ller rate ic-te 3, Reclaimed. watrr rate lI!'qualiZ('lIlh'lpactt on waste watR and water rrvenUI! rtquiretnen~ !Cue 4; Rf'Claltntd water purchagOO II ('09t "OL""'fAl""'O""HOI<ION _ IV·19 , I ~~J ~~,~ '. ~ ::'" ~'" :: ~ : s-J, I ~ ~, OIArnR Iy f1NANCL~~ REFERENCES, Fatnkopf, John W.. Allocating the COBts of Rec1amQtion to Watrr and WQst~ Wattr RQte Payers. Invited paper presented at the 68th Annual Conference of the Western Economic Association InterNltional. 1993; publication pending, San FrancIsco Public Utilities CorrunisAion. Resolution 93-0085, CO'ISerOiJUon, Reclamation Imd Ground W~tt" March 23. 1993. Santa Clara Valley Water District. AgendQ Memorandum: Policy Stat ... ment orl Water Reclamation, FebruAty 25, 1992. [ l l l l l l, ~--e HII.lllN FARNKOPf 60 HOBSON -- L -.------~~{ IV"20 l ~ ;; 7. '8 ii • :lO 0 " ~ • ~ ~ ~ • ~ z .: • ~ .c ~ ¥ • ' .' • ;. r • ;', : : '.. .- !5~ • • mWI BSZlU • Hnn; 15~ mmi n!~nl unn! " mmf nnU! ~ ~~! H~lm I • I I HI WH!I U!IW lUlU! • !H WHil H9 1111 nUHi I , J I U~ mml U~ill! nUll! • I I IS! !WHI U!ill! nUHI • JH mml U5 U '! nUUI I • 151 !Hml H:lIi§ HUHI • J ! l l .t. .~ '-.-.-1. I' ••••••••••••••• - ----i1t>..-,,-'.;. " u"!"! HI15"! • a n'"'"~ U""!"i UH~~~ H g W 1 5"3 W"~·D !~""I'~ W"~'l ==H~t~ H ~ § U"5"! 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