HomeMy WebLinkAboutStaff Report 2505-4641CITY OF PALO ALTO
CITY COUNCIL
Monday, May 19, 2025
Council Chambers & Hybrid
4:30 PM
Agenda Item
10.Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering
Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water
Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount
Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and
Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View;
CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled
Water Project (SCH 2011062037) Item Reordered to be Heard Under Consent Calendar,
Supplemental Report added
Item No. 10. Page 1 of 1
City Council
Supplemental Report
From: Brad Eggleston, Director Public Works/City Engineer
Meeting Date: May 19, 2025
Item Number: 10
*Item Reordered to be Heard Under Consent Calendar
Report #:2505-4641
TITLE
Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering
Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water
Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount
Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and
Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View;
CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled
Water Project (SCH 2011062037)
BACKGROUND
This report transmits Amendment No. 2 to the Recycled Water Supply Agreement, which was
approved by the Mountain View City Council on May 13, 2025, as a late packet supplemental
report to Staff Report #2503-4327 (Agenda Item 10).
ATTACHMENTS
Attachment A: Amendment No. 2 to the First Amended and Restated Contract No. C059999
Between the City of Palo Alto and the City of Mountain View.
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
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AMENDMENT NO. 2 TO
THE FIRST AMENDED AND RESTATED CONTRACT NO. C059999 BETWEEN
THE CITY OF PALO ALTO AND THE CITY OF MOUNTAIN VIEW
This Amendment No. 2 to the FIRST AMENDED AND RESTATED CONTRACT NO. C059999
BETWEEN THE CITY OF PALO ALTO AND THE CITY OF MOUNTAINVIEW, is entered into
_____________________, by and between the CITY OF PALO ALTO, a chartered city and a
municipal corporation of the State of California (“PALO ALTO”), and the CITY OF
MOUNTAIN VIEW, a chartered city and a municipal corporation of the State of California
(“MOUNTAIN VIEW”).
RECITALS
A. On January 11, 2005, PALO ALTO and MOUNTAIN VIEW entered into an agreement
(AGREEMENT) defining the cost sharing of the Mountain View- Moffett Area Recycled Water
Facility Project, including the Project’s design and related construction expenses, the allocation
of related grant revenues, and the repayment of loans.
B. On June 18, 2007, PALO ALTO and MOUNTAIN VIEW amended and restated the entire
AGREEMENT.
C. On August 28, 2017, PALO ALTO and MOUNTAIN VIEW amended the AGREEMENT to
extend the term of the AGREEMENT and add language defining each Party’s responsibility for
the costs of operating and maintaining the recycled water portion of the Joint System.
D. In 2015, PALO ALTO adopted and filed with the Santa Clara County Clerk and State
Clearinghouse an Environmental Impact Report (EIR) which identified several options to
reduce salt levels in the recycled water.
E. In 2017, PALO ALTO in collaboration with MOUNTAIN VIEW and the Santa Clara Valley
Water District, a Special District created by the California Legislature (VALLEY WATER)
prepared an Advanced Water Purification System (AWPS) Feasibility Study and AWPS
Preliminary/Conceptual Design Report (MNS Engineers) assessing the potential for an AWPS
at the Regional Water Quality Control Plant (RWQCP).
F. In 2019, PALO ALTO in collaboration with VALLEY WATER prepared a Northwest County
Strategic Recycled Water Plan (Woodard & Curran, 2019) to assess recycled water opportunities
through the RWQCP service area.
G. In 2019, PALO ALTO approved and filed with the Santa Clara County Clerk and State
Clearinghouse an addendum to the 2015 EIR to clarify plans for reduction of salt levels in the
recycled water though implementation of the AWPS.
H. On December 10, 2019, PALO ALTO, MOUNTAIN VIEW and VALLEY WATER, entered
into a partnership agreement to develop Phase I of a local AWPS also known as the Local Salt
Removal Facility. This partnership agreement includes a contribution from VALLEY WATER of
$16 million, escalated annually by the investment returns, with an estimated current balance of
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$17 million. The partnership agreement also addresses reductions to PALO ALTO and
MOUNTAIN VIEW’s minimum Enhanced Recycled Water supplies during water supply
shortages.
I. PALO ALTO has obtained a State Revolving Fund (SRF) loan for implementation of the
AWPS in an amount not to exceed $57 million with an annual interest rate of 1.7%, repayable
over a 30-year period.
J. PALO ALTO has obtained a United States Bureau of Reclamation (USBR) grant for
implementation of the AWPS in the amount of $12,867,875.
K. PALO ALTO and MOUNTAIN VIEW have agreed that the Phase I of the AWPS project cost
shall not exceed $60 million.
L. PALO ALTO and MOUNTAIN VIEW have determined that cash payments of $22 million
made by MOUNTAIN VIEW towards construction of the Phase I of the AWPS is mutually
beneficial to reduce the loaned amount and impacts to the overall RWQCP budget.
M. With the operation and maintenance of the AWPS, PALO ALTO anticipates the need of
additional funding for staff at the RWQCP.
N. PALO ALTO and MOUNTAIN VIEW anticipate transitioning coverage of their recycled
water programs from the California Regional Water Quality Control Board Order #93-160 to the
California State Water Resources Control Board Order WQ 2016-0068-DDW (Statewide
Recycled Water General Order).
O. MOUNTAIN VIEW anticipates adding a new recycled water service connection at Moffett
Field and to enroll NASA as the Administrator and/or Distributor for this site per the Statewide
Recycled Water General Order and future service agreement between MOUNTAIN VIEW and
NASA.
P. PALO ALTO and MOUNTAIN VIEW wish to amend the AGREEMENT to expand the scope
of the agreement, add language defining Party’s responsibility for the costs of implementing the
Phase I of the AWPS, incorporate reference to the Statewide Recycled Water General Order,
restate reductions due to reduced flows, and address potential early termination of the USBR
grant or SRF loan.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals and mutual promises of the Parties
contained herein, PALO ALTO and MOUNTAIN VIEW agree to the below-referenced
amendments to the AGREEMENT as follows:
SECTION 1: The following sections of the AGREEMENT are replaced in their entirety:
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1.1 Project Narrative
(a) The PROJECT shall be as described in the Facilities Plan that corresponds to the State
Water Resources Control Board Water Recycling Project No. 3212-010. Pursuant to
the California Environmental Quality Act, a mitigated negative declaration for the
PROJECT (SCH# 2003102161) was completed and adopted by the PALO ALTO City
Council in January 2004 (Resolution No. 8391, attached as Exhibit D).
(b) The AWPS shall be as described in the Project Report that corresponds to the State
Water Resources Control Board Clean Water State Revolving Fund Project No. 8417-
110. Pursuant to the California Environmental Quality Act, an Environmental Impact
Report (EIR) was completed and adopted by the Palo Alto City Council in October
2015 (Resolution No. 9548) and an addendum for the AWPS (SCH# 2011062037) was
subsequently prepared and approved by the PALO ALTO City Council November
2019. Notices of Determinations were filed with the Santa Clara County Clerk and
State Clearinghouse.
1.2 Scope of Agreement
(a) This AGREEMENT is intended to set forth the general terms and conditions for
implementation and operation of the PROJECT and AWPS described in Section 1.1
of this AGREEMENT, as well as the financial obligations of each Party with respect
to design, construction, construction management, State and Federal grants, and
repayment of SRF loan.
(b) This AGREEMENT, including Amendment No 1 and this Amendment No 2, covers
beneficial, nonpotable recycled water uses such as landscape irrigation using
disinfected tertiary recycled water treated pursuant to Cal. Code Regs, Title 22,
§60301.230. This AGREEMENT does not cover activities by PALO ALTO,
MOUNTAIN VIEW, or any other party to replenish groundwater resources,
including spreading basins, percolation ponds, or injection through groundwater
wells. Furthermore, this AGREEMENT does not cover direct potable reuse (Water
Code, §13561(b)), indirect potable reuse for groundwater recharge (Water Code
13561 (c)), or surface water augmentation (Water Code, §13561(d)).
(c) As allowed under the AGREEMENT, Mountain View is currently working with
NASA to convey recycled water to federal property at Moffett Field.
SECTION 2: The following sections are added to the AGREEMENT:
3.5 Allocation of Costs for AWPS
Monetary contributions and allocations from each party for the design, construction,
construction management, State and Federal grants and SRF loan repayments for the
AWPS shall be in accordance with the percentages and allocations set forth herein.
PALO ALTO and MOUNTAIN VIEW estimate the AWPS Phase I capital cost will be
approximately $60 million, which includes, design, construction management
services, construction costs, program management and a 10% construction
contingency.
Construction of the AWPS project shall include membrane filtration units, reverse
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osmosis units, chemical dosing equipment, permeate storage tank and ancillary
systems. AWPS Project construction costs shall include the costs for the equipment
and associated structures, yard piping, utility relocations, relocation of existing
biofilter, site grading and drainage, landscaping and irrigation, and the
proportionate costs for mobilization, insurance, and bonds.
MOUNTAIN VIEW agrees to pay for 100% of the difference between the sum of
Federal and local funds outlined in sections 3.6 and 3.7 below and the total AWPS
Phase I project capital costs, based on the current understanding of costs and
funding availability.
MOUNTAIN VIEW reserves the right to assign any or all of its obligations, in whole
or in part, under this Amendment No. 2 to the Shoreline Regional Park Community,
a special government district administered by MOUTAIN VIEW.
3.6 Allocation of Valley Water Funding for AWPS
Costs for the design of the AWPS have been funded by a portion of VALLEY WATER’s
contribution towards the local AWPS.
The remainder of VALLEY WATER’s contribution calculated as $14.5M will be applied
to construction and construction management of the AWPS.
3.7 Allocation of Grants for AWPS
State and Federal grant funding will be applied to design, construction and construction
management of the AWPS in accordance with the terms of the grant agreements. PALO
ALTO estimates receiving up to $12.9 million of Federal grant funding through
WaterSmart: Title XVI WIIN Water Reclamation and Reuse Program Funding.
3.8 AWPS SRF Loan
(a) SRF Loan Amount
The maximum loan amount from the SWRCB will be $57 million, based on the design
engineer’s estimate and SRF program limitations. PALO ALTO and MOUNTAIN VIEW
will mutually agree on the exact loan amount to be requested. PALO ALTO will submit
disbursement requests based on the mutually agreed loan amount upon PALO ALTO’s
execution of a construction contract for the AWPS. The interest rate established by the
State for the AWPS SRF loan is 1.7%.
(b) SRF Loan Repayment Process for AWPS
The SRF loan will have a thirty-year repayment term. The first annual loan repayment
will be due to the SWRCB one year after construction is complete. Repayments of the SRF
loan shall be allocated in the same proportionate shares as determined in Section 3.5. The
Parties further agree that, if necessary, each Party shall secure the funding necessary for
repayment of the SRF loan, operations, and/or maintenance of the Projects,
following any appropriate process executed under California Constitution article XIII
C and D (Proposition 218).
MOUNTAIN VIEW shall pay its respective shares of any AWPS costs within thirty (30)
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days of receipt of a billing statement sent by PALO ALTO. PALO ALTO will include
this billing in an additional separate statement separate from the quarterly Partners Billing
statement. If a Party disputes the correctness of an invoice, both Parties should
resolve the dispute as quickly as possible, in accordance with Section 19 of the
Basic Agreement.
In the event that the initial Federal grant funding from the WaterSmart: Title XVI WIIN
Water Reclamation and Reuse Program is less than $12.9 million and the shortage is
covered by the SRF loan, any additional amount from the Federal grant received later
(which was originally covered by the SRF loan) will be reimbursed to MOUNTAIN VIEW.
3.9 Mountain View Cash Payments
MOUNTAIN VIEW shall provide a cash contribution of $22 million to cover total project
costs. An initial payment will be billed in the next following quarterly Partner Billing
period in a separate billing statement after PALO ALTO issues the construction contract
Notice to Proceed and will be in the amount of $7 million. A second payment of $10
million will be made to PALO ALTO once the total project costs reach $30 million and
an additional $5 million will be made to PALO ALTO after the total project costs reach
$48 million.
PALO ALTO will provide MOUNTAIN VIEW with quarterly records of expenses and
payments during construction.
If PALO ALTO receives additional external revenue for this project, such as additional
state or federal grants, or donations not mentioned in this agreement, the extra revenue
should be reimbursed to Mountain View in the same proportionate shares as determined
in Section 3.5 to offset MOUNTAIN VIEW cash payments.
4.1 (e) AWPS O&M Costs
The AWPS facility will require new operating and maintenance expenditures, such as
replacement of membranes and ancillary equipment, chemicals, energy consumption,
and additional staffing. The additional staffing necessary for Phase 1 of the AWPS is
estimated at 1.0 FTE Operator II, 0.5 FTE Maintenance (combination of Plant Mechanic,
Electrician and Technologist) and 0.5 FTE Laboratory Technician.
The AWPS O&M costs (including staffing) will be charged to each Partner agency in proportion
to their enhanced recycled water usage from the previous fiscal year. The initial calculation of
these costs is included as Exhibit “A”. The RWQCP Administrator will periodically evaluate
and adjust the costs as needed to operate and maintain the facility for at least 30 years.
7.4 Statewide Recycled Water General Order
Unless directed otherwise by the SWRCB or the Regional Water Quality Control Board,
the Parties are anticipated to have the following roles upon transition to the Statewide
Recycled Water General Order. PALO ALTO will continue to serve as the administrator
of the recycled water permit and producer of recycled water. PALO ALTO and
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MOUNTAIN VIEW will continue to serve as distributors and will be responsible for the
recycled water system within their respective jurisdictional limits. MOUNTAIN VIEW
will also serve as a program administrator.
8.5 ADD “(a)” TO THE FIRST EXISTING PARAGRAPH
(b) PALO ALTO, as the RWQCP Administrator, shall install a meter at the MOUNTAIN
VIEW boundary (“City-Line Meter”) for the purpose of accurately measuring recycled
water flows into MOUNTAIN VIEW. Prior to installation, the parties shall meet to
discuss and agree upon the most appropriate meter type and location. PALO ALTO, as
the RWQCP Administrator, shall be responsible for installation, inspection, testing,
servicing, and calibration of the City-Line Meter and shall repair and replace it as
necessary. MOUNTAIN VIEW shall pay for all costs associated with the City-Line
Meter, and PALO ALTO shall pay for all costs associated with meters serving properties
within its jurisdiction.
8.6(e) The Phase I AWPS is designed to provide 1.125 MGD of permeate to be blended
with tertiary-treated recycled water to produce a monthly average of 2.6 MGD enhanced
recycled water with a TDS concentration of 450 milligrams per liter (mg/L) ± 50 mg/L.
The parties recognize that in order to meet the delivery schedule set forth in Section 8.2,
the expansion of the AWPS beyond Phase I will be needed to achieve the optimal TDS
concentration of 500 mg/L.
8.7 Restatement of Proportional Reduction of Effluent Due to Reduced Flows
If insufficient effluent is available to meet PALO ALTO’s and MOUNTAIN VIEW’s
minimum enhanced recycled water supplies and VALLEY WATER’s Minimum Flow
Delivery as set forth in the 2019 partnership agreement with VALLEY WATER, all three
volumes shall be reduced proportionally based on the volumes of effluent required to
produce them. In no case shall Mountain View’s or Palo Alto’s Enhanced Recycled
Water reduction exceed 30% below 2.5 MGD and 1.0 MGD, respectively, unless
otherwise agreed to by MOUNTAIN VIEW, PALO ALTO, and VALLEY WATER.
8.8 Meet and Confer for Increase in Flows
The parties must meet and confer for the purposes of identifying delivery schedules, re-
evaluating capital cost obligations, or evaluating the need for AWPS Phase II expansion if any
of the following occur:
(a) Either party’s annual usage increases by 10% or more above the anticipated New
Baseline Capacity during any consecutive twenty-four (24) month period the
parties must meet and confer in order to determine a new capital cost recovery
allocation that is in proportion to the amount of actual use or reasonably
forecasted use for the remaining service of life capital assets acquired pursuant to
this Amendment No. 2. It is the express intent of the parties that neither party
bears any additional cost if its usage remains at or below the New Baseline
Capacity, and no meet and confer shall be required unless a party must make a
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financial contribution to the other party. At the time of the execution of this
Amendment No. 2 the New Baseline Capacity is calculated to be 1.95 MGD for
MOUNTAIN VIEW and 0.65 MGD for PALO ALTO at a measured concentration
of 500 mg/L TDS. At the time of the execution of this Amendment No. 2, the New
Baseline Capacity is a reasonable estimation of the parties’ respective capital
contributions towards anticipated capital costs.
(b) PALO ALTO and MOUNTAIN VIEW's combined enhanced recycled water use
exceeds 2.6 MGD at a measured concentration of 500 mg/L TDS for two
consecutive months.
(c) The average monthly enhanced recycled water TDS concentration exceeds 500
mg/L for two consecutive months.
(d) Other PARTNERS are interested in using enhanced recycled water.
9.3 Early Termination
(f) If the SWRCB or Federal government terminates its loan or grant commitments
unexpectedly following execution of the construction contract for the AWPS,
PALO ALTO shall notify MOUNTAIN VIEW promptly. Following notification of
the termination of either the SRF loan or WaterSmart: Title XVI WIIN Water
Reclamation and Reuse Program Funding commitment, the Parties shall meet in a
timely manner to discuss alternative funding sources and strategies for
completion of the AWPS. If the Parties are unable to agree on new funding
sources in a timely manner, then PALO ALTO and MOUNTAIN VIEW may agree
to terminate construction of the AWPS. Any constructed and delivered materials
for the AWPS that are salvageable should be transferred by PALO ALTO to
MOUNTAIN VIEW to be sold and the proceeds should be returned to MOUNTAIN
VIEW.
9.16 Bankruptcy, Dissolution, Merger
(a) If any party to this Agreement seeks bankruptcy protection under Chapter 9 of the
United States Bankruptcy Code, or any successor provision of federal or state law
governing the reorganization of state political subdivisions, the parties agree that
all provisions of this Agreement shall remain in full force and effect and they shall
fully cooperate to transfer assets and liabilities into a bankruptcy-remote
instrument if required to sustain ongoing operations of the facilities.
(b) If any party to this Agreement is dissolved by an act of the California State
Legislature or by referendum, the parties agree that all provisions of this
Agreement shall remain in full force and effect until the parties can meet and confer
to effectuate the transfer of assets and liabilities to a successor body or bodies as
may be required by law.
(c) If any parties to this Agreement are merged into a successor political subdivision
of the State of California, the parties agree that all provisions of this Agreement
shall remain in full force and effect until the parties can meet and confer to
effectuate any necessary amendments that may be required by law.
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SECTION 3. Except as modified herein, the FIRST AMENDED AND RESTATED CONTRACT
NO. C059999 BETWEEN THE CITY OF PALO ALTO AND THE CITY OF MOUNTAINVIEW
shall remain unchanged, and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the have by their duly authorized representatives executed this
Amendment as of the date first written above.
“CITY OF PALO ALTO”:
a chartered city and a municipal
corporation of the State of California
By:
City Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
Chief Assistant City Attorney
APPROVED AS TO CONTENT:
Public Works Director
“CITY OF MOUNTAIN VIEW”:
a chartered city and a municipal
corporation of the State of California
By:
City Manager
ATTEST:
________________________________
City Clerk
APPROVED AS TO FORM:
City Attorney
FINANCIAL APPROVAL:
Administrative Services Director
Recycled Water Agreement PA‐MV Amendment #2
Section 4.1 (e) ‐ Recycled Water Operation and Maintenance Cost Determination Process
Last updated 5/15/25
Item Estimated Annual
Cost
Maintenance and Repair 425,429.00$
Energy 213,025.00$
Employee Role Group Salary (Step 5
June 2024)
% Working
With AWPS Benefits AWPS Apportioned
Salary & Benefits
Operator II SEIU 114,192$ 100%84,160$ 198,353$
Maintenance (combination of
Mechanic, Electrician and SCADA)SEIU 119,600$ 50%88,145$ 103,873$
Laboratory technician SEIU 114,192$ 50%84,160$ 99,176$
Table 3. Summary of Costs for FY 202 Palo Alto Mountain View
Previous Fiscal Year usage 31.5%68.5%
Local AWPS Staffing 126,441$ 274,960$ 401,401$
Local AWPS Energy 67,103$ 145,922$ 213,025$
Local AWPS Repairs and Replacement 134,010$ 291,419$ 425,429$
Total AWPS 392,352$ 781,783$ 1,039,855$
Table 2. RWQCP Staffing to operate Local AWPS (Source B&V OPEX , 2022)
Table 1. Local AWPS O&M Cost for FY 2027 ‐ (Source
Finance Plan 2023 )
Exhibit A - Initial Calculation of O&M Costs for Local AWPS