HomeMy WebLinkAboutStaff Report 404-06TO:
FROM:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
CITY MANAGER
4
DEPARTMENT: PUBLIC WORKS
DATE:
SUBJECT:
NOVEMBER 6, 2006 CMR:404:06
ADOPTION OF A RESOLUTION AUTHORIZING THE CITY
MANAGER TO FILE AN APPLICATION FOR A STATE
REVOLVING FUND LOAN IN AN AMOUNT NOT TO EXCEED $19
MILLION FROM THE STATE WATER RESOURCES CONTROL
BOARD FOR THE CONSTRUCTION OF THE MOUNTAIN
VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT
RECOMMENDATION
Staffrecommends that Council adopt the attached resolution authorizing the City Manager or
designee to apply for a State Revolving Fund (SRF) loan in an amount not to exceed $19
million f~om the State Water Resources Control Board (SWRCB) on behalf of the Palo Alto
Regional Water Quality Control Plant (PARWQCP) for the construction of the Mountain
View/Moffett Area Reclaimed Water Pipeline ~ ~iect (Attachment A), and to negotiate an
agreement for that loan following Council decisioa~ ~ .~!~ng funding strategy sources and
approval of a construction contract.
BACKGROUND
The Mountain View/Moffett Area Reclaimed Water Pipeline Project (Project) is a joint
project between the Cities of Palo Alto and Mountain View. In July 2005, the SWRCB
awarded a $3.8 million grant for the project design and construction. The City of Palo Alto,
City of Mountain View, and the PARWQCP agreed to jointly fund the balance of the Project.
The terms and funding arrange~aents were documented in an agreement entitled "Institutional
and Operational Agreement bc~ ~~’een the Cities of Palo Alto and Mountain View - Mountain
View/Moffett Area Recycled Wz~.. Facility." Council of both Cities approved the agreement
in January 2005. The project was i ,’~ued for bid on June 6, 2006. On September 11, 2006,
staffprovided a progress report on the project, CMR:350:06 (Attachment B), describing the
rejection of bids because of insufficient funds. The progress report also discussed potential
outside funding sources including the SRF loan program. Since the progress report, the
SWRCB has granted a one-year extension for the sunset date of the grant and increased the
grant amount to $4 million for the project. In addition to the grant, the SWRCB also agreed
to process a SRF loan for the project if the Cities desire it. The City of Mountain View has
asked that staff requests that the PARWQCP apply for the SFR loan.
CMR:404:06 Page 1 of 3
DISCUSSION
The PARWQCP is listed on the SRF priority list as the sponsor of the project and is qualified
to apply for a zero interest SRF loan for the project. The SRF program has a fixed amount of
funds for each fiscal year and provides loans to agencies on a first-come-first-serve basis.
Based on the number of applicants and the current loan amounts, the SWRCB advised that
the available funds would be exhausted before the end of the year. There is sufficient
funding available in the SRF program at the present time to fund the project if the City
expedites the application. Council authorization is a required part of the loan application and
must be submitted to the SWRCB before the application can be processed. Once the
application is submitted, there are several steps in the loan process that need to be completed,
and Council will be making final decisions in these subsequent steps on the loan including
the actual amount of the loan, before final loan approval by the SWRCB. Staff will return to
Council as the loan process progresses.
Staffplans to prepare the necessary documents to pursue the zero interest SRF loan. Upon
submittal of the loan application, both cities will need to proceed with the following steps.
The loan application is simply the first step in this process. Both Councils will need to make
final decisions on each of these subsequent steps before a loan is secured:
Decision on project funding strategy, including each city’s share of cash contribution
and loan amount;
Amendment of the existing agreement with the City of Mountain View to include
each city’s obligations and repayments of the loan;
¯Decision on the project and the bids;
¯Decision on funding source(s)
The SWRCB will not execute any loan contract until the above steps are completed, and until
Council awards and executes a construction contract with a contractor for the project. Staff
is currently working with Mountain View staff on the funding strategy, revisions to the
operations and institutional agreement, and the re-structuring of the project for a re-bid in
January 2007. Staff will return to Council with the details and recommendations in the
subsequent steps for the loan within the next couple months.
RESOURCE IMPACT
Under the existing agreement, Palo Alto Water Utilities will contribute $1 million, and the
RWQCP will contribute $3 million to the project. Palo Alto and the RWQCP contributions
under the existing agreement have been appropriated in the Wastewater Treatment Enterprise
fund. Staffis working with Mountain View staff on the funding strategy and an amendment
to the existing agreement to include each city’s obligations and repayments of the loan, and
will return to Council with further recommendations.
POLICY IMPLICATIONS
The recommendation of this staff report is consistent with City policies.
CMR:404:06 Page 2 of 3
ENVIRONMENTAL REVIEW
Council adopted the mitigated negative declaration for the project in January 2004.
ATTACHMENTS
Attachment A: Resolution of Council for the State Water Resources Control Board
Attachment B: CMR:350:06
PREPARED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:~ ~rks
Azsista~City Manager
Daisy Stark, Senior Engineer RWQCP
William D. Miks, Manager RWQCP
GLENN S. ROBERTS
CMR:404:06 Page 3 of 3
***NOT YET APPROVED*~ ATTACHMENT A
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO AUTHORIZING THE CITY MANAGER TO SIGN AND
FILE A FINANCIAL ASSISTANCE APPLICATION AND
EXECUTE A LOAN AGREEMENT FOR A STATE REVOLVING
FUND LOAN IN AN AMOUNT NOT TO EXCEED NINETEEN
MILLION DOLLARS FROM THE STATE WATER RESOURCES
CONTROL BOARD ON BEHALF OF THE PALO ALTO
REGIONAL WATER QUALITY CONTROL PLANT FOR THE
DESIGN AND CONSTRUCTION OF THE MOUNTAIN
VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE
PROJECT
WHEREAS, the- State Water Resources Control Board
provides low-interest loan funding through the State Water
Pollution Control Revolving Fund for construction of publicly-
owned wastewater treatment facilities, local sewers, sewer
interceptors, water reclamation facilities, as well as, expanded
use projects such as implementation of nonpoint source (NPS)
projects or programs, development and implementation of estuary
Comprehensive Conservation and. Management Plans, and storm water
treatment; and
WHEREAS, the Palo Alto Regional Water Quality Control
Plant (PARWQCP) staff has reviewed the application for loan
funding and other supporting information for the water recycling
project and has determined that the project complies with the
Water Resource Fund Guidelines; and
WHEREAS, the PARWQCP operates a reclaimed water facility
and delivers reclaimed water to various reuse sites. The
existing pipeline from the PARWQCP to Shoreline has deteriorated
and is scheduled for replacement. In anticipation of future
reuse opportunities in Mountain View, such as the future Moffett
facilities, the replacement pipe will be upsized; and
WHEREAS, the State Water Resources Control Board
presently has loan funding available in the state Water
Pollution Control Revolving Fund to provide low-interest loan
funding for construction to assist in funding the costs of the
reclaimed water facilities construction project.
NOW, THEREFORE, the Council of the City of Palo Alto
does RESOLVE as follows:
SECTION i. The Council hereby authorizes and directs the
City Manager to sign and file, for and on behalf of the City of
Palo Alto, a Financial Assistance Application for a loan from
061024 cjs 8260342 1
***NOT YET APPROVED***
the State Water Resources Control Board in an amount not to
exceed nineteen million dollars ($19,000,000.00) for the design
and construction of the Mountain View/Moffett Area ~Reclaimed
Water Pipeline Project (the ~’Project").
SECTION 2. The City of Palo Alto hereby agrees and
authorizes the City Manager or his designee to certify that the
City has and will comply with all applicable state and federal
statutory and regulatory requirements related to any federal and
state loans received.
SECTION 3. The City Manager or his designee is hereby
authorized to negotiate and, following Council approval of a
funding strategy and final construction contract for the
Project, execute a loan contract and any amendments or change
orders thereto, and to certify loan disbursement on behalf of
the PAWQCP.
~SECTION 4. That a mitigated negative declaration (MND)
was prepared in accordance with CEQA for the Project and adopted
by the City Council, Resolution Number 8391 on January 12, 2004.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
City Attorney City Manager
Director of Public Works
Director of Administrative
Services
061024 cjs 8260342 2
ATTACHMENT B
TO:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
FROM:
DATE:
SUBJECT:
CITY MANAGER DEPARTMENT: PUBLIC WORKS
SEPTEMBER 11, 2006 CMR: 350:06
PROGRESS REPORT ON MILESTONE ACTIVITIES OF THE
MOUNTAIN VIEW / MOFFETT AREA RECLAIMED WATER PIPELINE
CONSTRUCTION PROJECT - CAPITAL IMPROVEMENT PROGRAM
PROJECT WQ-04010
This is an informational report and no Council action is required. This report provides the
progress report on the Mountain ViewiMoffett Area Reclaimed Water Project (Attachment A) to
Council.
DISCUSSION
Staff has been working with the City of Mountain View on the design and implementation of the
Mountain View / Moffett Area Reclaimed Water Pipeline project, which is partially funded by a
State grant. The sunset date of the State grant is September 13, 2006¯ The project was issued for
bid in June 2006 so a contract could be secured before the State grant expires on its sunset date.
However, the rapidly escalating costs of goods and resources in recent years have created an
extremely wild and inflationary bidding atmosphere, resulting in very high bids for the project
($26+ million, $6 million over the final estimate). The unexpected high bids illustrate the
inflationary spiral of the construction market. Assuming the trend continues, the project will not
be affordable in the future. It is therefore critical to pursue all avenues to construct the project as
soon as possible so that future water, supply options are maximized.
Staff has consulted the State Water Resources Control Board staff and requested an extension of
the grant sunset date in order to strategize and seek additional fimding. The State project
manager clearly believes that theproject is a very good project and has proceeded to recommend
an extension, plus other accommodations, for the project. The State project manager’s
recommendations to the State Board are noted in his letter (Attachment B). Staff ~om the cities
of Mountain View and Palo Alto agreed to reject all bids. Palo Alto’s Purchasing Division
rejected all of the bids on August 17, 2006 in accordance with Palo Alto Municipal Code
2.30.470 (b) - excessive cost over City budget. The attached project report provides a detailed
discussion of the bidding process and the status of the State grant. The projeO( report also
examines the strategy to move forward with the project from two perspectives:
Possibility of restructuring the project to reduce construction cost and to re-bid at a more
favorable time of year,
Potential grants and funding options, including the State Revolving Fund and funding
from regional water retailers.
CMR:350:06 Page 1 of 2
City of Mountain View staff will forward the attached project report to its Cotineil on
September 12, 2006. Staff Mll continue to work with City of Mountain View to pursue funding
options and will return to Council With updates on the status of grants and ftmdi6g oppo~ties.
ATTAINT
Attachment A: Mountain View-Moffett Area Reclaimed Water Pipeline Project Report
Attachment B: State Water Resources Control. Board letter of recommendations
PREPARED BY:
DEPARTMENT HEAD:
Daisy Stark, Senior Engineer
William D: Miks, Manager R.WQCP
Director of Public Works
CITY MANAGER APPROVAL:
EMmV P tRaSO
Assistant City Manager
CMR:350:06 Page 2 of 2
ATTACHMENT A
Mountain View/Moffett Area Reclaimed Water Pipeline
Pro,[ect Report
August 2006
The Mountain View/Moffett Area Reclaimed Water Pipeline Project (Project) is a joint
project between the cities of Palo Alto and Mountain View. This report documents the
progress of the Project milestone activities to date, and the strategy to move forward.
Background
In July 2005, the State Water Resources Control Board (SWRCB) awarded a $3.8 million
grant under the Water Recycling Funding Program (Prop 50, Chapter 7) for the Project
design and construction. When the grant application was submitted in March 2004, the
cost of the Project was estimated at $16.1 million in 2006 dollars. The City of Palo Alto,
City of Mountain View, and the Palo Alto Regional Water Quality Control Plant
(RWQCP) agreed to jointly fund the balance of the Project. The terms and funding
arrangements were documented in an agreement entitled "Institutional and Operational
Agreement between the cities of Palo Alto and Mountain View - Mountain View/Moffett
Area Recycled Water Facility". Council of both cities approved the agreement in January
2005.
Design
Since the grant award, Palo Alto and Mountain View staff worked with RMC Water and
Environment to perform the Project design. The State grant requires that a construction
contract for the Project be awarded by the sunset date, otherwise the grant award will
expire. The original sunset date of the State grant was June 15, 2006, but was extended
Project Report - Progress of milestone activities
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to September 13, 2006 at Mountain View’s request. City staff utilized the additional time
to refine the cost estimate and review the funding options.
The Project cost estimate was originally prepared in 2003, and escalated at 4% per year to
$16.1 million in 2006 dollars. In view of the inflationary construction market
environment in recent years, the consultant and a third-party estimator were instructed to
update the cost estimate to account for the rapidly escalating costs of goods and to reflect
the final design. The revised estimates valued the Project at approximately $20 million.
Bid Process
The Project was issued for bid on June 6, 2006. The invitation for bid was posted at the
Palo Alto bid solicitation website and advertised in local newspapers. Plans and
specifications were sent to ten Builders’ Exchanges, and twenty-four companies
requested and received the bid documents. Potential bidders were encouraged to attend a
non-mandatory pre-bid meeting, which was attended by representatives from eight
companies. The bidding period was seven weeks and three bids, ranging from $20.8 to
$26.8 million, were received on July 25, 2006. The contractor who submitted the lowest
bid requested to withdraw it’s bid from consideration because of a multi-million dollar
error. The two remaining bids are both over $26 million, substantially over the cities’
budget. The unexpected high bids illustrated the inflationary spiral of the construction
market and significantly increased costs for pipe, concrete and material transportation
costs. If the trend continues, the Project will not be affordable in the future. It is
therefore critical to pursue all avenues to construct the Project as soon as possible so that
furore water supply options are maximized.
A meeting was held with SWRCB staff to discuss the bid result and to request an
additional extension of the grant sunset date in order to strategize and seek additional
funding. The State project manager affirmed the value of the Project as a drought-proof
Project Report- Progress of milestone activities 2
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water supply, and responded favorably to cities’ request. Palo Alto and Mountain View
staff agreed to reject, all bids, use the extension period to seek additional fun~ting, re-
structure the Project to reduce costs, and re-bid at a more favorable time of year. On
August 17, 2006, Palo Alto PurchasingDepartment rejected all bids in accordance with
Palo Alto city code 2.30.470 (b) - excessive cost over city budget.
State Grant Status
The State project manager determined that the Project team has made a good faith effort
to meet the deadline of the grant and recommended the following for the Project:
1. A 12 month extension for the grant sunset date
2. An increase of the grant amount from $3.8 million to the maximum-per-project
amount of $4 million
3. The option of reducing the scope of the Project
In addition, the SWRCB will accept City’s application for immediate consideration of a
State Revolving Fund loan (SRF) for the Project.
Strateg3z to Move Forward
The strategy to move forward will include pursuing all avenues for additional grants and
funding, and re-structuring the project to reduce cost.
1. Other Grants and Funding
Several other grant/funding sources are potentially available to the Project.
application for funding for the Project has already been submitted.
In two cases,
Project Report-Progress of milestone activities 3
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Program
Prop 50, Chapter 8
Title XVI
SRF
Summary of Other Grant/Funding
Application Type of
Submitted?Funding
Yes Grant
Yes Grant
No Loan (low. or
zero interest)
Anticipated
Amount
$1.9 million
$5 million
Up to $25
million
Anticipated
Award date
Dec ’06 / Jan ’07
Possibly 2008
funding cycle
4 -- 5 months
after application
Proposition 50, Chapter 8 Grant - The grant program is administered by the
SWRCB and the Department of water Resources. The Project was included in the
Bay Area Integrated Regional Water Management Plan and was submitted in the
summer of 2005 to compete for the FY 2006-2007 chapter 8 grant. Announcement of
the award is currently scheduled for December 2006 - January 2007. If the Project is
selected for the grant award, the Project will receive a maximum of approximately
$1.9 million, which will reduce Mountain View’s share of the balance of the Project
costs by approximately $1.27.million, and Palo Alto’s share by $0.63 million.
Title XVI - The US Bureau of Reclamation (USBR) administers this grant program.
The Project was included in the Bay Area Regional Water Recycling Program
(BARWRP) and was submitted to USBR for feasibility determination in the winter of
2004. USBR determined that the Project has met all criteria except NEPA1
compliance. Staff has submitted the required documents and executed an agreement
with USBR for NEPA compliance review, and NEPA review is presently underway.
Concurrent with the NEPA effort, staff is working with other BARWRP members to
1 NEPA - National Environmental Policy Act
Project Report-Progress of milestone activities 4
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pursue congressional authorization for funding through Title XVI. Congressman
Miller (D - 7t~ Congressional District) has agreed to introduce the Project along with
five other feasible BARWRP projects for congressional authorization. Congressman
Miller’s office is currently drafting legislation for the six BAWRP projects to be
presented when congress is back in Session during the first week of September. The
Project is submitted for a $5 million grant. Upon congress’ authorization,
appropriations will be requested in the following funding cycle. Funding is
retroactive so construction of projects could start after authorization and completion
of NEPA. Congresswoman Eshoo has been informed of the Project..
State Revolving Fund (SRF) - The SRF loan program is administered by the
SWRCB. The SRF provides a 20-year loan typically with an .interest rate set at half
of the State Bond General Obligation Rate (presently 2.5%), but the program also
provides zero interest loans to qualified projects. !n order to qualify to apply for a
SRF loan, the project sponsor must have applied for placement on the SRF priority
list. The RWQCP has submitted an application and it’s recycled water program,
including this Project, is on the current priority list. The SWRCB normally places
projects that address safety or .regulatory issues at a higher priority than recycled
water or infrastructure projects. The State project manager recognizes the value of
the Project to the water supply of the Bay area, and will accept a loan application for
immediate consideration of a loan up to $25 million for the Project. An application
package with required documents needs to be prepared for submission to the SWRCB
for the SRF loan. Because the SRF program is partially funded by the Federal
government, before approval of a loan, applicant must obtain environmental clearance
and approval from SHPO2 and Federal agencies on the project. Review by SHPO
and Federal agencies of the Project could be partly coordinated with the review that is
currently underway for Title XVI. It is anticipated that approval of the environmental
documents would not be an issue. The timeline for SHPO review could take four to
2 SHOO - State Historical Preservation Office
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five months and is the critical path for the Project if the cities decide to obtain SRF
loan for the Project. Under State guidelines, construction of a project that is funded
by the SRF cannot start until SHPO clearance, is obtained. Mountain View and Palo
Alto are reviewing this funding option.
2. Re-structure the Project
The bid document was prepared under an extremely tight schedule to meet the State grant
deadline. The design team completed the final design based on the scope of work that
was identified in the grant contract. Value engineering and refinements to the design had
not occurred due to the time constraint, and the SWRCB has agreed that certain non cost-
effective items could be removed from the Project. The grant extension period would
allow the following cost reduction efforts to take place:
Consultant to refine the design to minimize construction costs
Consultant to remove non cost-effective items per SWRCB allowance
Cities to evaluate possibilities of streamlining city requirements/restrictions to
reduce construction costs
Value engineering to ensure a cost effective project
The goal of the cost reduction efforts is to reduce construction costs by up to $5 million
reduction. The construction activities typically slows down during the winter months,
and it is anticipated that re-bidding the Project in December 2006 or January2007 could
produce bids at $21 million - $23 million.
The Next Step
In slmamary, staff of cities of Mountain View and Palo Alto agreed to use the grant
extension to: (1) pursue additional funds, (2)re-structure the Project to reduce costs, and
(3) prepare for re-bid (December 2006 - January 2007). The next step requires the
following tasks to be performed:
Project Report - Progress of milestone activities 6C:kDocuments and SettingskkdaviskLocal Settings\Temporary Internet Files\OLKl C4kProject Report - Sept 2006.doc
1. Initiate/obtain SHPO and NEPA clearances
2. Prepare and submit an application package for the SRF loan includin~ resolutions
fxom Council to apply for the loan
3. Brainstorm cost reductions and re-structure biddocument
4. Revise the Institutional and Operational Agreement between cities of Palo Alto and
Mountain View to incorporate new Project terms and needs
5. Prepare to re-bid in December 2006 - January 2007
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Linda S. Adams
Environmental
Protection
State Water Resources Control Board
Division of Financial Assistance
.1001 1 Street, Sacramento, California 95814 (916) 341-5700 Arnold Schwarzene[Mailing Address: P.O. Box 944212, Sacramento, California 94244-2120 GovernorFax (916) 341-5707 http://wxvw.waterboards.ca.gov
2006
Mr. William D. Miks, plant Manager
Palo Alto Regional Water Quality Control Plant
2501 Embarcadero Way
Palo Alto, CA 94303.
Dear Mr. Miks:
SUNSET DATE EXTENSION REQUEST; CITY OF PALO ALTO (CITY); MOUNTAIN
VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT (PROJECT); WATER
RECYLING FUNDING PROGRAM (WRFP) PROJECT NO~ 3212-030
Thank you for your August 3, 20061 request for a second extension of ~he "NoticeLto-Proceed" (NTP)
deadline sited in the grant agreement (No. 05-705-550-0) for the above Project. In accordance with"
the grant agreement, executed on March 13, 2006, which stated that the grant agreement shall
terminate if the District did not issue a "Notice-to-Proceed" (NTP) to construction by June 15, 2006,
unless the District requested a 90-day extension. On March 27, 2006, the City requested approval for
a 90-day extension to the NTP deadline due to delays during the design process. The Division of
Financial Assistance (Division) issued an approval for the extension on Apd! 6, 2006. The current
deadline is September 13, 2006 for issuance of NTP for the project.
The City is requesting a second extension toissue the NTPbecause of the following reasons:
1.The City received three bids for the project ranging from $20,6 to 26.3 million, which
exceeded the estimated project cost of $16.1 million;
2. To finance the increase in construction costs of the project the City intends to apply for a State
Revolving Fund (SRF) loan. The City requested additional time to allow processing of their
loan application, and;
3.Due to the high bids received the City intends to evaluate a redesign of the project for
potential reductions in construction costs.
The City
1.
2.
also requests the following project considerations:
The City requests a one-year extension to the current project schedule;
The option to eliminate approximately 31 acre-feet of recycled water deliveries which would
provide savings of up $1 million, and;
The City request that the sunset date be changed from issuance of NTP to submittal of Final
revised Plans and Specifications (P&S)for the project.
The City has provided a revised project cost estimate and has begun preparing the SRF loan
application package for submittal. Based on my review of the August 3, 2006 request and further
discussions with the City, I have made the following conclusions and recommendations:
1. The City advertised and received three bids for the Project. All the bids were over the
estimated project cost of $16.1 million. The increase in construction costs are outside the
L:ontrol of the City and the City has made a good faith effort to meet the current NTP
schedule. The one-year extension is reasonable and should be granted to allow processing of
the SRF loan application.
California Environmental Protection Agency
~Reo,cled Paper
Mr. William D. Miks - 2 -
o
A requirement of the SRF program is the completion of a Value Engineering Study for all
projects with construction costs above $10 million. Due to the high bids received, the City’s
request to evaluate a redesign of the project for potential reductions in construction costs is
recommended and a requirement of the SRF Loan funding process.
Recommend that the Deputy Director of the Division increase the City’s grant funding for the
project from $3,802,475 to $4,000,000, due to the increased eligible project construction
costs.
4. " In accordance with the WRFP guidelines, recommend that the new sunset date milestone be
changed from issuance of NTP to submittal of Final P&S.
If you have any questions regarding this letter, please contact me at (916) 341-5828 or by email at
rpontureri@waterboards.ca.gov:
Robert Pontureri, Project Manager
Project Development Unit 1B
Ms. Daisy Stark, P.E.
Senior Engineer
Palo Alto Regional WQCP
Ms. Yousra Tilden
Senior Project Manager
RMC Water and Environment
2290 North First Street, Suite 212
San Jose, CA 95131
California Environmental Protection Agency
Recycled Paper