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HomeMy WebLinkAbout2000-03-20 City Council (15)City City of Palo Alto Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE:MARCH 20, 2000 CMR:170:00 SUBJECT:REPORT TO MEMBERS OF THE BAY AREA WATER USERS ASSOCIATION: THE FUTURE OF OUR WATER SUPPLIES This is an informational report and no Council action is required. BACKGROUND Since 1962, Palo Alto has purchased all of its water from the City and County of San Francisco (CCSF) except for a small amount from its wells during the 1976-77 and 1987-92 water shortages. The current relationship with CCSF is contractual, governed bY the Settlement Agreement and Master Water Sales Contract (Agreement) which was signed in 1984 and will expire in 2009. All twenty-nine agencies that purchase water on a wholesale basis from CCSF have substantially similar contracts. These twenty-nine agencies formed the San Francisco Bay Area Water Users Association (BAWUA) in 1958 to pursue their common interests in their relationship with CCSF. The agency at the CCSF that administers the Agreement and controls the water system is the San Francisco Public Utilities Commission (SFPUC). The Agreement deals primarily with cost allocation issues. BAWUA agencies pay for about 2/3 of the SFPUC system costs since they use about 2/3 of the water produced by the system. However, the BAWUA agencies have no political representation at the SFPUC and no mechanism to contribute in a meaningful way to decisions made with regard to system operations, maintenance, or capital improvements. This lack of representation has become a problem. The State Auditor has confirmed BAWUA’s concerns that the SFPUC is slow to respond to vulnerabilities in its system. Attached to this report is the summary of the CMR:170:00 Page 1 of 3 February 17, 2000 report by the California State Auditor which concludes that since SFPUC has been slow to upgrade its system, the agencies who rely on the SFPUC for water are at "greater risk of disruptions and water shortages if an emergency or drought occurs." The highly critical report also notes that the SFPUC has proposed a capital improvement program of more than $3 billion to address many of the concerns raised, but has been stymied in its implementation by institutional and organization constraints. These planned capital improvements, if ever completed will more than double SFPUC’s rates. However, a bigger problem may be that the projects are not completed in a timely fashion. In its own studies, the SFPUC has admitted that its system is vulnerable to natural disasters such as earthquakes. In fact, the SFPUC’s Facility Reliability Study (released on January 21, 2000) showed that Palo Alto could be without water from San Francisco for periods up to 60 days. It has also been clear since 1986 that the systemcannot provide adequate supplies of water to its customers. However, the SFPUC has not yet increased the system’s reliability from a water supply perspective and has not been able to complete the capital projects it says are necessary to upgrade the system. DISCUSSION Palo Alto, along with the other BAWUA agencies, has a duty to its constituents to ensure that their water supplies are safe, reliable and operated in a cost-efficient manner. Since the SFPUC cannot provide assurance of such service, BAWUA agencies have been forced to develop alternative approaches..As its first effort in this area, BAWUA has developed a set of"expectations", or performance standards, for its relationship with the SFPUC. In order to communicate theseexpectations, BAWUA has prepared the attached report titled "The Future of Our Water Supplies": This document is intended to raise issues of concern to BAWUA agencies to the level of local elected officials. In addition, BAWUA plans to host a symposium in April or May to which City Councilmembers will be invited. After the symposium, a resolution supporting the future direction of BAWUA’s advocacy efforts will be introduced to the City Council. Part One of the report provides a background and context of SFPUC’s water system and its relationship to the BAWUA agencies. The report describes,what SFPUC has done and what remains to be done. It concludes that BAWUA agencies will need to examine other options than relying on SFPUC if their needs cannot be met through the existing relationship. Part Two lists BAWUA’s expectations of SFPUC. These seven expectations can be thought of as criteria to be used in evaluating the options available to BAWUA. No options can be pursued without the assistance and support of the political representatives of the BAWUA CMR:170:00 Page 2 of 3 agencies. RESOURCE IMPACT This report is informational only; therefore there are no resource impacts. POLICY IMPLICATIONS This report is informational only; therefore there are no policy implications. ATTACHMENT Attachment 1: Report to Our Members from the Bay Area Water Users Association: The Future of Our Water Supplies Attachment 2:Summary from the February 17, 2000 State Auditor’s report: San Francisco Public Utilities Commission, Its Slow Pace for Assessing Weaknesses in its Water Delivery System and for Completing Capital Projects Increases the Risk of Service Disruptions and Water Shortages PREPARED BY:Jane Ratchye, Utilities Senior Resource Planner Girish Balachandran, Supply Resource Group Manger DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: aorN Director Manager CMR:XXX:99 Page 3 of 3 CALIFORNIA STATE AUDITOR MARY R NOBLE ACTING STATE AUDITOR STEVEN M. HENDRICKSON CHIEF DEPUTY STATE AUDITOR February 17, 2000 99124 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: As requested by the Joint Legislative Audit Committee, the Bureau of State Audits presents its audit report concerning our evaluation of the methods employed by the San Francisco Public Utilities Commission (commission) to assure an adequate, long-term, and reliable water supply for its Bay Area customers. This~ report concludes that the commission has been slow to assess and upgrade its water delivery system to enable it to survive catastrophic events such as earthquakes, fires, or floods. The commission has .also been slow to estimate the amount of water it will need to meet demand in the future and to seek additional sources of water. As a result, the nearly 2.4 milliffn customers in the City and County of San Francisco, and in Alameda, San Mateo, and Santa Clara counties who rely on the commission for their drinldng water are at greater risk of disruptions and water shortages in the event of a catastrophe or a drought. The commission’s capital improvement plan currently lists about 200 capital projects requiring more than $3 billion to complete. The commission plans to complete most of these projects over the next 15 years. In the past 10 years, however, the commission completed 54 capital projects at a cost of about $270 million. Several factors contributed to the commission’s inability to complete capital projects more quickly. For instance, the commissionbelieves that insufficient staffing to manage the projects is a major factor. Other deficiencies that contribute to the slowness are inefficient contracting procedures, outdated project operations manuals, weak project monitoring, and inadequate project management training. The commission acknowledges that it lacks the tools to streamline project development or to control such a large capital improvement program. Therefore, it has taken several measures to address the deficiencies. However, its ability to ensure a sufficient, long-term and reliable water system remains uncertain since most of these measures are still in development or were recently finalized. Respectfully submitted, MARY P. NOBLE Acting State Auditor BUREAU OF STATE AUDITS 555 Capitol Mall, Suite 300, Sacramento, California 95814 Telephone: (916) 445-0255 Fax: (916) 327-0019 SUMMARY Audit Highlights... Our review of the San Francisco Public Utilities Commission (commission) disclosed: The commission has been slow to assess its water delivery system and has made little progress in completing capital projects aimed at improving system reliability. Since 1994, the commission has known that it needs to identify additional sources of water, yet it did not begin to develop a water supply plan until 1996; completion of the plan is not expected until March 2000. Several factors contribute to the commbsion’s slow pace for completing capital projects, including shortages of project managers; out-of-date procedures for planning, designing, and constructing capital projects; inadequate systems to track progress; and the absence of formal training for project managers. The success of its capital improvement program is uncertain because it is still developing some plans while it has only recently implemented others. RESULTS IN BRIEF Tdhe San Francisco Public Utilities Commission (commis- sion) has been slow to assess and upgrade its water elivery system so it can survive catastrophes such as earthquakes, floods, and fires. It also has been slow to estimate the amount of water it will need to meet future demand and to seek additional sources of water. As a result, the nearly 2.4 million customers in four Bay Area counties who rely on the commission for their drinking water are at greater risk of disruptions and water shortages if an emergency or a drought occurs. The commission is part of the City and County of San Francisco. Among other responsibilities, it provides drinking water to retail customers in San Francisco and to 28 wholesale suppliers serving parts of San Mateo, Santa Clara, and Alameda counties. Using h complex system of dams, reservoirs, treatment plants, pump stations, tunnels, pipelines, and valves, the commission trans- ports much of its water to the Bay Area from Hetch Hetchy Reservoir in Yosemite National Park, almost 150 miles away. Some parts of the commission’s water delivery system, such as critical pipelines, are nearly 75 years old and are in dire need of repair or replacement. In addition, parts of the water delivery system do not meet modern seismic standards. However, the commission did not begin to study the system’s overall reliabil- ity until 1994 and has completed only two of the study’s three planned phases, with a delay of nearly three years between the completion of the first phase and the start of the second. This delay was due to the commission"s failure to appoint promptly a staff member to manage the proiect and to problems with the contracting process. The commission also has been s!ow to develop its water supply master plan, which will estimate the amount of water needed in the future and recommend ways of acquiring more water. Although the commission has known since 1994 that it even~ally will need to find additional sources of water, it did not actively begin to develop the water supply master plan Until 1996, and the results are not expected until March 2000. Further, some customers have expressed concern regarding the commission’s slow pace in completing capital projects aimed at upgrading its aging water delivery infrastructure. Information provided by the commission shows that it completed 54 capital projects at a cost of about $270 million in the last 10 years, resulting in an average of five capital projects at a cost of $27 million annually. Given the size, complexity, age, and declining condition of the commission’s water delivery system, this project completion rate appears low. There are many reasons for the apparent slow pace in complet- ing capital projects, ranging from a shortage of project managers on staff to operational deficiencies such as a lack of up-to-date procedures for awarding contracts and for planning, designing, and constructing capital projects. UntiI recently, project manag- ers also lacked an adequate system to track the progress of capital projects and preventive maintenance. Finally, although ongoing development is crucial to ensuring that staff members stay abreast of industry changes and that they improve their technical expertise, the commission is not providing any formal project management training to staff members who manage capital projects. Although the commission is addressing the concerns with its more than $3 billion capital improvement program, its success is uncertain because it is still developing some plans while it has implemented others only recently. For instance, the commission seeks to hire a program management consultant to provide the management services, specialized technical expertise, and staff development assistance it needs to undertake its huge capital improvement program. However, San Francisco’s budget analyst is reviewing the proposed contract, and approval of this consult- ant by the .commissioners and the board of supervisors is by no means certain. For each of its three drinking water-related divisions, the commission is developing capital improvement plans .to evaluate and prioritize the projects necessary to improve the reliability of the water delivery system. The plan for the Hetch Hetchy Water and Power Division, however, does not yet contain cost or schedule estimates for all identified capital projects. In addition, the commissioners have not yet adopted the three plans. The commission also is working on a long-range financing plan for its Water Supply and Treatment and City Distribution divisions. This plan intends to show how the commission will finance the capital projects for these two divisions. However, a January 2000 report from the commission’s consultant relies heavily on using voter-approved revenue bonds to finance the projects and does not sufficiently describe contingencies should San Francisco’s voters reject the bond measures. A similar report covering the Hetch Hetchy Water and Power Division is not yet complete. Executive-level turnover at the commission and the time it will take to fill these positions also contribute to the uncertainties. The absence of strong, consistent leadership greatly diminishes the commission’s chances of success in meeting the significant challenges it faces in the near future, including the need to implement a large-scale capital improvement program and to obtain additional water supplies. On the other hand, turnover among the commission’s executives also presents a unique opportunity to build a management team that will provide the leadership and expertise necessary to implement a cohesive capital improvement program. RECOMMENDATIONS To ensure that the commission follows through on its plans, it should submit reports annually to the Legislature and its subur- ban customers for the next five years. These reports should describe the progress the commission has made in implement- ing each of its plans and the accomplishments it has achieved. To improve the reliability of its water delivery system, the commission should continue to finalize, adopt, implement, monitor, and as necessary revise the plans and actions it has in progress. In particular, it should: Complete its facilities reliability study and its water supply master plan. Continue to address its operational deficiencies, including its contracting procedures, project operations procedures, tracking of capital projects, and tracking of preventive maintenance. 3