 Good afternoon. I'd like to call the meeting of the Board of Public Utilities for the City of Santa Rosa. Hold on just one second. Let's see if that's better. All right, we'll start over. Good afternoon. I'd like to call the meeting of the Board of Public Utilities for the City of Santa Rosa to order. If we may have a roll call, please. Chair Galvin. Here. Vice Chair Arnone. Here. Board Member Badenfort. Board Member Grable. Here. Board Member Walsh. Board Member Walsh. Here. Board Member Watts. Here. Board Member Wright. Here. Good afternoon everyone. We'll move through the agenda. Any statements of abstention by Board Members? There are none. We have no study session. Next item is item number 4.1, which are the minutes from the meeting of March 3rd. So we'll now take public comments on the approval of the minutes. If you wish to make a comment via Zoom, please raise your hand. If you're dialing in via telephone, please dial star 9 to raise your hand. Senator Aitha, do we have anyone? We have no public comments. Okay, the minutes will be approved and entered. We'll now move to the staff briefing. Item 5.1, Director Burke. Thank you, Chair Galvin and Members of the Board. Our first staff briefing is on the Santa Rosa Plain Groundwater Sustainability Agency update and Peter Martin, Deputy Director of Water Resources, will be making this presentation. Great. Good afternoon, Chair Galvin and Members of the Board. I'm happy to be here today with you with an update on the Groundwater Sustainability Agency for the Santa Rosa Plain. If we can go ahead and go to the next slide, please. Just to sort of reorient you all, I just wanted to kind of start with this slide that talks about the makeup of the Santa Rosa Plain Groundwater Sustainability Agency. It's a joint powers authority comprised of the cities of Toddy, Runner Park, Santa Rosa, Sevastopol, Town of Windsor, and County of Sonoma, Sonoma Water, and then the two resource conservation districts in the basin, as well as a representative from the independently owned water systems that utilize groundwater in the basin. There's also an advisory committee comprised of representatives from those same members in the joint powers authority. Board, but also has community members that sort of represent a diverse perspective on beneficial groundwater use, including agriculture, the environmental community, the business community, and rural residential well owners, as well as, you know, just public water districts. So the GSA itself has staff consultants that administer various activities of the Groundwater Sustainability Agency. You know, over the past several years, it's primarily been focused on developing the Groundwater Sustainability Plan, but over the long term, this configuration will continue to carry out the activities for the implementation of that plan. Next slide. So we'll start with some really good news and take a moment to celebrate and pause the fact that a Groundwater Sustainability Plan was adopted and submitted to the state of California. The final Groundwater Sustainability Plan was adopted by the board on December 9th. It was subsequently submitted to the California Department of Water Resources on January 26th of this year, the deadline being January 31st. So on time and timely submittal of a plan that is complete. However, DWR does have two years to review and assess the plan for compliance with the Sustainable Groundwater Management Act. Let's go to the next slide. So yeah, we just finished the plan, but there's immediately some work to do. So there is an annual report that is due on April 1st. It is covering the water year of September 2020 through October 2021. The real purpose of this annual report is, of course, to report on monitoring data, any changes to conditions in the basin, and really update on the implementation of the progress to date. There is, I can just kind of summarize quickly, there's a draft report that is being reviewed by staff of the Groundwater Sustainability Agency and other partners. At this time, there are no reportable actionable exceedances of minimum thresholds in the plan. However, notably it has been very dry, so there were some instances where some of the monitoring points did exceed other requirements, but they didn't meet the criteria or thresholds to kick in any actions this year. Next slide. So again, there are six Stainless Management criteria in the plan that will be reported on seawater intrusion for obvious reasons has been eliminated because the basin is not under the influence of the ocean. However, there will be reporting on the five indicators you see here related to, of course, the lowering of groundwater levels, chronic growing groundwater levels, any potential reduction in groundwater storage, degraded water quality, land subsidence, or depletion of interconnected surface waters. Of course, these are criteria and indicators that you don't want, and so these are important and were required by law under the Stainable Groundwater Management Act to be addressed in the plan and whatever we implement in the future. Next slide. So I just kind of thought this was an interesting graphic, which will be part of that annual report. This water year was classified as very dry and extreme drought according to the classification of the Groundwater Sustainability Plan. This data set right here shows on the bottom with the par chart rainfall, and that's actually measured here in Santa Rosa, and then above that the line plots are kind of our flows in terms of discharge through various creeks and streams across the basin. So a very dry year, very low flows in the river, really kind of get in that stress test on the basin early. So we can see that this is an interesting time in terms of a lot of data gathering on how the basin will respond to drought. Next slide. So that report two will include several updates on things that we accomplished this last year and things we'll be tackling in the upcoming year. Of course, we finalize and submit a Groundwater Sustainability Plan and are preparing an annual report, and then there is a Rural Engagement Project that was funded by Proposition 68. That project will be complete very shortly. And then there's a Grant Scope for another Prop 68 grant. That grant includes things such as modifications to the well permitting process for the county and a database for data included in that well permitting process, additional improvements to groundwater monitoring, and coordinating that with the Groundwater Sustainability Agency. And then I think we talked perhaps about a year ago about the Groundwater User Interface where well owners can input data and it can be received by the Groundwater Sustainability Agency about their wells and information from their wells. Continue to improve the interface for that so that we continue to collect correct data on folks, individual wells. And then there will be a grant solicitation for future implementation. So very important that we pursue additional funding that may become available, that funding could support the Groundwater Sustainability Agency's administration long term over the next year or beyond. And then the completion of a multi-level monitoring well project, which is also grant funded, we'll finalize later this year. And then there'll be some additional monitoring improvements planned, modeling improvements planned. There's a holistic basin wide hydrogeologic model. Some of the plan included additional improvements that were necessary, and so those will be carried out this year. And then of course several studies and activities to address data gaps. Those include initial evaluation of aerial, electric magnetic survey data. The California Department of Water Resources flew aerial, they kind of hung this device from a helicopter and flew around the basins throughout California. They kind of liken it to the taking of an MRI of the ground subservice. So if you saw any helicopters flying overhead, that was probably related. And so they'll take that data and incorporate it into some of the modeling that they do for the basin as well. And then of course the there was an interconnected surface water group that was created as part of the planning process. And some studies were identified, they'll continue to scope those. And then planning for initial outreach and voluntary ground water level monitoring, so additional improvements there. So both can volunteer to supply data to the Groundwater Sustainability Agency. I'm going to go to the next slide. So that sort of sums up the updates on what the agency has been doing. And we'll move on to what's right before you right now. And the board is a fee and rate study update. Next slide. So just some contextual background. There is an existing groundwater sustainability fee of $19 and $90 per acre foot. It was developed mainly at the time to support the immediate need of groundwater sustainability plan being developed over the past few years. There was a fee that was charged to be charged to rural well users and agricultural users. The county and Sonoma Water did cover those for the last few years. However, this fee was charged to municipal pumpers like ourselves over that time frame. And we have been paying to support the Groundwater Sustainability Agency. This funding level was developed to kind of support, as I said, the development of the Groundwater Sustainability Plan through the end of this last fiscal year, which is ending well the one fiscal year we're currently in, which is ending this June. And so therefore, the three Sonoma County Groundwater Sustainability Agencies are concurrently conducting a rate and fee study to look at what is necessary for implementation of the plan beginning in July 1st, 2022. That work is being done by SCI Consulting Group and Larry Walker Associates. Next slide. So, SCI and Larry Walker are looking at potential funding sources holistically throughout the three basins. And those funding sources could be the member agencies of the Groundwater Sustainability Agencies, and then grants, as well as groundwater users, i.e. private well owners, public water systems, or other water users, and beneficiaries of groundwater, or any combination of these as well. Next slide. This proposed budget was provided to the advisory committee last week. It is sort of an outlay of what is necessary over the next five years to accomplish many of the things that are identified in the plan to be done over the next first five years. And that includes quite a bit of administration and operations budget, but focusing on the improvements that I identified earlier in the work plan, including groundwater modeling updates, various projects, and fulfilling the necessary studies to meet the data gaps needs. Next slide. So, the consultant is being asked to look at any and all options for assessing fees. So, they did take a look at the typical fee, the regulatory fee, which you see at the top, is similar to what is being charged right now. And to support that preliminary budget would be about $35 to $50 per acre foot and would be charged, of course, on all groundwater users based upon how much water they use. And then wellhead fees are also being possibly reviewed, and those would go to all groundwater pumpers based on, you know, having a well on your property or your ownership. And it would just be a flat fee on all wellheads. And then just to kind of put it all into context, at the bottom there, it does talk about if the state were to intervene and take over the basin, both a wellhead and a quantity fee would be charged to each well user. Next slide. Option B also is looked at. These are tax assessments on all 80,000 parcels in the basin. A parcel tax would have to meet quite a, you know, a large threshold to get approval by the voters. And so, but it would be a lower range. They also looked at a benefit assessment on all parcels as well, $15, $25 per acre foot. And but however, that would be fortunate to the size of the parcel. So there would be kind of weighted towards larger parcels. It's a little bit hard to envision that being equitable, as you can imagine. And then a prop 218 fee on all water consumers. Again, I think this board is very familiar with prop 218. And it's sort of unclear on how that would be carried out. And whether or not, again, that would be equitable. So these are the proposed fee options that are being looked at fee and assessments. It's very likely that not all of these will make it to be presented to the board eventually. Next slide. And then I just want to highlight that next week, there will be a quite a bit of public outreach beginning on this again. There's a virtual meeting on the 22nd from 5.30 to 7.30 p.m. And folks in our VP at santa rosaplanegroundwater.org. And then there will be an in-person meeting occurring on Wednesday, April 27th with a location yet to be determined. So stay tuned for additional public outreach on this particular work as well. Next slide. So just lay out a schedule very much in the thick of the development of a fee study and making community outreach. And this is being brought to the advisory committee and other liaisons to the board as well. So in April, the board will have an opportunity to see many of these options, provide input and kind of move towards looking at potentially a hearing notice. And then of course the process could go on to public hearing in June and potentially have something in place before the next fiscal year. I do want to point out that the fee that exists today does not expire. So that is also an option that I did not present here. But something too that has been presented by staff of the various agencies is an option. Because this is a very accelerated schedule. So I guess we can move on to the last slide. With that, I'll take any questions. Thank you, Deputy Director Martin. I'll open it up now for any board member questions or comments. Board member Watts. I just had a clarification question. I know on, it might have been a couple of slides back, you mentioned something about the fee on 80,000 parcels and that would be hard to get past probably from a voter perspective. So that would have to go on a ballot, I would assume. And I'm not sure how that played in the timeline, the next steps if that was one of the options selected. That's a great observation. Board member Watts, if that was to go to the ballot, it would not be in place before the beginning of this fiscal year. And further to actually get it on to the tax rolls. There's timing of that. So likelihood of that, well, the threshold is high too for that to pass. And also the likelihood of it being in place anytime soon is not good. So probably another year out before that could be put in the place if the board decided to go to that direction. Thank you for the clarification. Other board member questions or comments? All right. We'll open it up for public comments on item 5.1. If you wish to make a comment, please raise your hand. Otherwise, please dial the star nine. Do we have anyone? We have no public comments. Okay. Thank you, Deputy Director Martin. That'll take care of item 5.1. We'll move to item 5.2. Director Burke. Thank you, Chair Galvin and members of the board. Item 5.2 is our water supply update. And Deputy Director Peter Martin will be making the presentation. All right. Thanks, Director Burke. Yeah, lucky to get to go back to back on these. I always like that. So I have a great real brief water supply update today. It, you know, it continues not much has changed in terms of the water supply outlook since last time I spoke with the board. We can go ahead and go to the next slide. In terms of storage in Lake Minasino, storage is about 58% of the target water supply curve or 43,000 acre feet. In terms of the weekly change, storage has gained about 255 acre feet. Reservoir outflows are currently at about 30 cubic feet per second. At the recent technical advisory committee, snowmobile water staff did inform us that storage in Lake Pillsbury is currently declining. And as a result, it's very likely that PG&E will file a variance with the Federal Energy Regulatory Commission in the next couple months. As you can imagine, this would have impacts on inflows to Lake Minasino and storage throughout the summer, much like the past couple of years. Next slide. In terms of our storage, snowmobile water did notify us that storage continues to be below historical records for this time of year. There's currently about 147,000 acre feet of storage in Lake Sonoma or about 60% of the water supply capacity for Lake Sonoma. In terms of storage over the last week or so has reduced about 800 acre feet. Outflows currently at 77 cubic feet per second per the requirements of their temporary change order. Next slide. In terms of how Santa Rosa has been doing with reductions, cumulatively, we continue to meet the set target for Santa Rosa, which is of 20% from July 2021 through February 2022. Water use has been reduced by 21% compared to 2020 levels. But in February, residents only reduced water by about 6% in comparison to 2020. It has been very dry and we know that there's currently a irrigation deficit as a result. So we've seen people starting to turn their irrigation back on back beginning in February. So something to consider, but it is very hard for us to achieve quite a bit of savings during winter months. But all the more important that we continue to hammer home message that it's critical that folks continue to save water through the spring and into summer. Next slide. So I just wanted to remind everyone that some water continues to be under a temporary change order, which was dated December 10th, 2021. That order lasts 180 days. So under that order in terms of their flow requirements, the water year type in the upper and lower watershed is now deemed classified as critical. That means that minimum in-stream flows in the upper watershed are 25 CFS. The minimum in-stream flows in the lower watershed through the end of this month are required to be 75 cubic feet per second from Drag Creek to the confluence of the Russian River and 35 cubic feet per second for the lower Russian River. We did hear at the technical advisory committee given that this existing order lasts for 180 days and will expire on June 7th. Summer water is anticipating filing another temporary change petition for the Russian River in late April, early May. And the goal is ultimately to keep that critical water year classification and reduced in-stream flows. Next slide. In terms of just some brief water use efficiency updates, in terms of the key message still, we're getting out to customers as drought is still with us and it will likely be with us through the remainder of this summer into next winter. And we're asking folks to get out, find and fix leaks. It is fixed leak week this week. And then just notifying folks that irrigation, they should be irrigating only if necessary and not all plants need water right now. And then in terms of just some quick water use efficiency program updates, we're doing some targeted outreach with landscape contractors, obviously talking to them about with their contracts and customers focusing on finding and fixing leaks, priming up their irrigation systems for summer, making sure they're in good shape. And then, of course, telling them about all the programs that we offer for outdoor water use efficiency measures. And then we are out again attending events and handing out many of the drought kits that we still have in supply and stock. And we'll continue to do so through the remainder of this summer. And then some exciting news is that staff have returned to in-person indoor water smart inspections of homes and businesses. That program was paused briefly during the Omnicron surge, but very happy to be out again and in-person with folks in the public and having that one-on-one interaction. I do want to highlight, though, that virtual options do remain and we are continuing to offer those as well. And then since we are on stage three of the drought response, we're working hard to replenish a lot of the materials that were given out last year, including table tents, notifying people about filling water upon request only, lending cards for hotels. Imagine that much of their materials is starting to look a little beat up. So get in some fresh ones, get in a fresh supply, and staff are working on that through this month as well. Next slide. So with that, I'm happy to take any questions and folks can go to these two web pages for any further information. Thank you again, Deputy Director Martin. I'll open it up for any Board member questions or comments. Seeing none, we'll now open it up for public comment on item 5.2. If you wish to make a comment via Zoom, please raise your hand. If you're dialing in via telephone, please dial star 9 to raise your hand. Secretary Aitha. We have no public comments. Thank you. We have no consent items. We have a couple of three report items, so we'll start with item 7.1. Director Burke. Thank you, Chair Galvin and members of the Board. Item 7.1 is a report item on the Sonoma Water 2022-23 water transmission budget and rate increase, and making the presentation will be Kimberly Zanino, our Deputy Director of Administration, and Lynn Razzelli, the Administration Division Manager with Sonoma Water. All right. Good afternoon, Chairman Galvin and members of the Board. I am here to introduce Ms. Razzelli from Sonoma Water who will present the proposed Sonoma Water Transmission System budget for fiscal year 2022-23. Before she begins, I will just give you a brief overview of the process of approval of this budget and rates. The first step after developing the budget and rate increase for the rate increase to go to the subcommittee of the Technical Advisory Committee, they review the budget with Sonoma Water, and this step concluded on March 1st with the recommendation from that budget subcommittee to the Technical Advisory Committee. The next step is for each contractor to work with their representative to the Water Advisory Committee or the WACC to recommend on the vote or the way that the member will vote at the WACC when it comes to them for recommendation to the Sonoma Waters Board of Directors. For Santa Rosa Waters specifically, the process for that recommendation is to first review with you, then request a recommendation to City Council who will then determine if they will recommend Santa Rosa Waters Advisory Committee member to vote for the recommendation to the Sonoma Water Board. The actual approval and adoption of the budget and the rate increase is at the discretion of their Board, so all of these steps leading up to that are just recommendations to that Board. And before Ms. Razzelli begins, I will just add that the tax subcommittee very much appreciated the efforts Sonoma Water made to reduce the original proposed increase with costs increasing for all of us and a fully volumetric rate for them. They had to spend a significant amount of time looking for solutions to make reductions in the rate. And I will now hand it over to Ms. Razzelli to provide you with detail on the budget and then at the end I will come back to give you a couple more pieces of information and be here and available for you to answer questions. Thank you very much. Lynn Razzelli, Administrative Services Division Manager, good afternoon Board members. Next slide, please. So we're here today to talk about the proposed water transmission budget for fiscal year 2022-23. You may very well be familiar that we have a number of enterprises and provide services in all of these areas, but today we will only be talking about the water transmission system. You can click on that now. If you click it will advance the slide. There you go. So we're only talking about the water transmission system. We do not commingle funds with any of the other funds. Next slide, please. Santa Rosa City of Santa Rosa is a customer of the Santa Rosa aqueduct. That is the aqueduct shown in the top of the screen there and I think it's a color purple. And so City of Santa Rosa pays the budget and rates associated with that aqueduct. Next slide, please. As Kimberly Zundino very well stated, we engage in a collaborative process. I want to thank Kimberly Zundino and Jennifer Burke for their participation in the committee for providing valuable input and for making it a collaborative process and making it possible for us to get to a rate increase that we believe meets our needs and hopefully works well for the water contractors. This is the schedule that we are under right now. Next slide, please. So for the purpose of the budget, the budget is broken down into these categories, operations and maintenance. There are four sub funds, five capital funds, four debt service funds, and then the state revolving loan fund which paid for the construction of the collector six, which is one of the major production wells on the system. So we will go through these categories through the next couple of slides very briefly. Next slide, please. So we're going to start off with the capital projects. This list shows the hazard mitigation projects. We have a local hazard mitigation plan. We also had a 2019 grand jury report and these reports are used, plans and reports are used to help identify vulnerabilities in the system and make sure that we address them. We have three of these projects in construction next year. All of them have offsetting grant revenue. Most of these are seismic hazard mitigation projects with the exception of the Eli booster pump station flood mitigation project. And the budget for these hazard mitigation projects for next fiscal year is 3.2 million. Next slide, please. And in terms of other projects, I just want to highlight primarily the Sebastable Occidental Well and the Todd Roadwell projects. We're doing rehab and aquifer storage and recovery and making other improvements to the Todd Roadwell site. These are production wells that are intended to help address the serious drought that we are in and provide greater water supply reliability. We have a significant amount of grant funds that are offsetting these costs that we got through the Department of Water Resources, and that helps offset costs to our water contractors. Capital projects, the total budget including hazard mitigation is 13.3 million. Next slide, please. So on the operations and maintenance side, you can see here that there are a number of projects. We deferred maintenance during COVID. Our rate increase for this year was 3.47 percent on the Santa Rosa Aqueduct. We kept rates low in large part because of the pandemic and the financial hardships that were being faced by our community and our customers. Because of that, though, our operations and maintenance coordinators and our engineering staff feel as though these particular operations and maintenance projects are critical to move forward on to maintain and protect our infrastructure, in particular the robotic protection project and the tank recodes and tank maintenance program. We have 18 storage tanks that store 128 million gallons of water in the system, and it is much cheaper to recode them to replace the tanks themselves. We also have a regional water supply resiliency study. Water contractors participated collaboratively with us in this study, and there was a very significant drought aspect or component to this study. So a very important portion of that study, and the study is ongoing, and water supply resiliency is another key focus of our budget for 2022-23. Next slide, please. Under the sub funds, we have the Dry Creek Habitat Enhancement Phase 4 construction. The Army Corps of Engineers anticipates they will go to construction in the summer of 2022. They provide a 65% cost share, so the water contractors are paying a 35% cost share. That's a significant savings to the water contractors, but that will be occurring this summer. And then the other key component of the sub fund budgets this year is the Water Conservation Program. We will be doing a significant amount of outreach and education around the drought. We have some grant funding as well that will help, and there will be a lot of drought-related work that will be done in next fiscal year. Next slide, please. And so here is the budget overall for these are the different components of the budget. It adds up to a total of $71.83 million. It has $15.31 million in offsetting grants, use of fund balance, and bond proceeds. And again, the main focus of this budget is to offset deferred maintenance for tank recodes and cathodic protection to make sure we make progress on those projects, to implement hazard mitigation projects, to shore up our vulnerabilities for seismic and flood related hazards, to address drought-related projects to ensure that we have more water supply reliability, to construct dry creek habitat enhancement mile four that's required under the biological opinion to do a lot of outreach and education under water conservation. And we're also going to be issuing $15 million in debt in revenue bonds, and that is accounting for the increase in the debt service there. Next slide, please. So here is a slide that just shows you the allocation of the budget. The operations and maintenance makes up the majority of our budget. It is funded 100% by rates. And it is because the restructured agreement for water supply does not allow us to seek loans or bond funding for operations and maintenance projects. However, on the capital project side, we are using grants, fund balance, and the bond proceeds from the 15 million in bonds that we'll be issuing to fully fund the capital projects program for next fiscal year. As I mentioned, the Army Corps is providing a 65% cost share on the biological opinion. We have grant funding for the water conservation fund, and then we have debt service related to the new bonds that we'll be issuing in addition to the bonds that we already have that we're paying debt service on. So we have $15.3 million in offsetting bonds, grant, and fund balance. Next slide, please. And so we now go from where the budget is at at $71.83 million, and we need to be able to set the rate based on that budget. And this is the rate setting example or calculation that is prescribed by the restructured agreement for water supply. It takes the revenue requirement to the cost of operations and maintenance devised by the quantity of water sold to get us the cost of water per acre foot. Please click on the slide now for so we are required to take the lower of the three year annual average water deliveries of the last 12 months. You can click again. And you can see that these two numbers are very similar, but we take the lower of those two and you can click again. And as you do the math, go ahead and keep clicking till we get to the cost per acre foot. One more. Yep, one more. There you go. So that is the rate calculation. And the primary purpose of this slide is to show you that this is a fully volumetric calculation. As water deliveries are low, rates are going to be higher. Our average water deliveries over the past five years have been 43,000 acre feet. But this is the deliveries that is required by the restructured agreement for water supply. However, we have done stress tests on our budget and the model to ensure that we have sufficient fund balance to carry us through in the event that deliveries come in lower than that 45,748 acre feet. Next slide, please. So here is the proposed rates for fiscal year 2022-23. Santa Rosa Aqueduct, the rate increase is 6.06%. These are all the elements of the rate. You will notice that two-thirds of the way down there, there are discretionary charges, the capital charges. They help build fund balance for future projects. They also act as a rate stabilization tool. In years when we have higher deliveries, we're able to have higher discretionary charge for the capital fund and build even more fund balance. In years when there's a drought, it is significantly harder because deliveries are lower and the aqueduct doesn't earn as much revenue from that charge. In order to keep, and I'll go into more detail about that in a second, but the rate was $20 for this fiscal year and the Santa Rosa Aqueduct customers elected to drop that charge to $11 per acre foot this year to bring the rate increase down. Next slide, please. And so we, as Kimberly Zuzino mentioned, we went through a process of making sure we can make some budget and rate reduction measures to accommodate not only the needs of the water transmission system, but also the water contractors requests. We reduced the rate increase initially from 9.99% to 6.84%. The contractors on the Santa Rosa Aqueduct elected to drop the Aqueduct capital charge from $20 to $11. That brought the rate increase down to 6.06%. We were able to spread O&M costs over two fiscal years because the cathodic protection and the tank recodes were all hitting in one year. We were able to spread those costs over two fiscal years and reduce the burden on the O&M rate by $1.47 million. We used significantly more fund balance to bring down the rate even further. We're issuing revenue bonds to fully fund the capital program and we're able to keep our costs to the water contractors to a rate of .003 dollars per gallon. And then next slide, please. So this is a comparison of wholesale water contractors in the Bay Area. Sonoma water is on the far left in the darker blue. We continue to have the lowest rates. All of these water contractors are experiencing the same thing as everyone, both retailers and wholesalers, that drought results in low deliveries and higher rates. Their rate increases are north of 7%. We've been able to keep ours at 6%. And we believe that while this is a very tight budget and water deliveries are very uncertain coming up, since we haven't been getting a lot of rain, we have worked closely with the water contractors to meet their needs and to be able to maintain, operate, and build capital projects for the water transmission system. Next slide. As Kimberley Zunino mentioned, we're making presentations. The Water Advisory Committee will make a vote on April 4th and our board will adopt this on April 19th. And then next slide, please. Back to you, Kimberley. Thank you. So we wanted to just make sure that you were aware. Typically, we would have shown you a slide that showed how it affected actually our customers because we used to have a wholesale pass-through rate. Because with the new rate schedule, we did not include a pass-through wholesale rate to our customers. We wanted to make sure that you were aware and assure you that the long-range financial model that Santa Rosa built several years ago did include an annual 6% wholesale rate increase when we developed that and determined what rates should be. So while we may see less revenue this year just because we're selling less water, we have planned for a higher rate increase. And so there will be no effect to our customers and there should be no long-term negative effects either to our rate schedule. Next slide, please. So with that, Santa Rosa Water recommends that the Board of Public Utilities consider the Sonoma Waters budget and proposed rate increase and by motion make a recommendation to City Council regarding Council's direction to its Water Advisory Committee or WAC representative for the WAC vote on April 4th, 2022. Next slide, please. And Lynn and I are both here to answer questions if you have any. Thank you both of you. We'll open it up now for any Board Member questions or comments. A Board Member Wright. Yes, thank you. Lynn, just one question. Could you explain the criteria between how you determine what is an ONM project and what is a capital project? How do they fall in different categories that seem similar? So the capital projects for the purposes of this budget, the definition of capital projects is prescribed by our accounting requirements and the accounting requirements indicate that capital projects are projects that are longer-term, will last longer than a year, cost more than $100,000 and makes improvements to the system and upgrades to the system. ONM projects, on the other hand, are shorter-term projects that do not increase the useful life of the product but allow the infrastructure to maintain its useful life. So for the purposes of many of our projects, pumps that are used in a larger production well, the pumps are considered operations and maintenance, the production well is considered the asset or the capital asset, the storage tank is considered the capital asset, the tank recode is like painting in your house, for example, it maintains the wood on the house so the recode maintains the integrity of the steel so that the tank is allowed to function for its useful life. Does that answer your question? No, that's fine. Thank you. Member Walsh, you need to unmute yourself. Thank you. I just wanted to thank Santa Rosa Waters, Deputy Director Zanino and Sonoma Waters, Administrative Services Division Manager, Lynn Roselli for making a great presentation. The Enterprise Fund accounting is very complicated in itself and more we integrate with other agencies that makes it complex and I just wanted to acknowledge that they did a great job and it's a not easy one. So thank you. Thank you, Board Member Walsh. Any other board member questions or comments? If not, I'll entertain a motion. I'll make a motion that the Board of Public Utilities recommend to the City Council that it give direction to its Water Advisory Committee representative for the vote on April 4, 2020 to approve the Sonoma Water 2022-2023 water transmission budget and rate. I will second that motion. Thank you. We have a motion by Vice Chair Arnone seconded by Board Member Walsh. At this time, we will open it up for public comments on item 7.1. If you wish to make a comment via Zoom, please raise your hand. If you're dialing in via telephone, please dial star 9 to raise your hand. Secretary Aitha. We have no public comments. And we have no one in the chambers. We know we have a roll call vote please. Chair Galvan. Aye. Vice Chair Arnone. Aye. Board Member Grable. Aye. Board Member Walsh. Aye. Board Member Watts. Aye. Board Member Wright. Aye. Passes with six ayes. Thank you. That'll take care of item 7.1. We'll move now to item 7.2. Director Burke. Thank you, Chair Galvan and members of the Board. Item 7.2 is a report item. The water demand offset policy fee study and fees. And call in close. Our senior water resources planner will be presenting. We also have additional staff and consultants that are available for any questions. I did just want to take a moment if the Chair will indulge me to let the Board know that we originally brought this item in front of the Board last year. And then we brought this to City Council on November 30th. The Council had a number of questions and additional information that they wanted. And so we're bringing this back in front of the Board with that additional information that was requested by Council and still recommending that the Board reaffirm the previous decision that they made. And with that I'm going to turn it over to calling close. Thank you so much, Director Burke. I just wanted to make sure this microphone is good. Great. Thank you so much. So thank you so much for that introduction. We can go to the next slide. This is just a reminder that there's been quite a bit of public outreach and education. And our webpage with public information has been available for five months. Next slide please. For those who may not be familiar, I know this Board is very familiar with this, but the State does require that water suppliers prepare a water shortage contingency plan. Santa Rosa has had a plan since 1992 and it's been updated and revised at least every five years. I want to draw attention to the final bullet point on this slide. The purpose is to maintain sufficient supplies, particularly with regard to human consumption, sanitation, and fire protection throughout the duration of a water shortage emergency with particular focus on existing customers. And as you'll see, that's reflected in water code as well. Next slide. So California Water Code states that a water shortage emergency must be declared when the ordinary demand of customers can't be satisfied without depleting water supply to the point that there wouldn't be sufficient water for human consumption, sanitation, and fire protection. So we have to plan ahead. We have to be looking to the long term as we're managing water day to day. During a shortage emergency, a water supplier must adopt regulations and restrictions on water delivery and consumption to make sure that water is conserved for the greatest benefit. And again, the focus is on domestic use, sanitation, and fire protection with particular emphasis on existing customers. Next slide. The regulations and restrictions according to California Code can include denying applications for new or additional services, so that means a moratorium, and can include discontinuing service for customers who violate regulations and restrictions. So if somebody is not complying, we can shut their water off. And then finally, the Water Code does state that the restrictions in a shortage emergency prevail over the rights of any individual to receive water. So again, we can have moratoriums, we can disconnect or shut off a customer's water, that sort of thing, that when we're in a water shortage emergency, the law supports the actions that need to be taken to preserve that water supply Next slide, please. The Water Code has been tested in case law, and I just want to point out I am not an attorney, so I just want to let you know that this information has been provided to us from our legal counsel, but I am wanting to make sure that it's included, but I just wanted to remind you I'm not an attorney. So if you have questions about the law, we'll need to turn to our attorney. But with case law, the water supplier is empowered to anticipate water shortages and impose regulations and restrictions, where without those controls, the water supply could become depleted and not be sufficient for existing customers. Landowners that don't have a water connection don't have a constitutional right to be treated the same as an existing water customer. They don't have a constitutional right to a connection. And water suppliers have great discretion in taking the steps they need to make sure there's enough water for human consumption, safety, sanitation, etc. And water suppliers can impose rationing on existing customers and can ban new connections. So these elements of the Water Code have been tested, and case law supports the California Code. Next slide, please. This is just a reminder that we have eight water shortages in our shortage plan, but we wanted to point out something that isn't always intuitively clear to the public. The first four stages are a collective effort to achieve our target. So we ask our community to do the best they can as individuals in their homes and businesses to help us achieve whatever that target is. So we are in a stage three, and as Deputy Director Martin mentioned, since July, our community has reduced by 21% over that period of time. More in some months, less in others, but the cumulative impact has been a 21% reduction. So we monitor that water savings community-wide. We're not examining the use on a meter by meter basis. We're relying on the community to work together as a whole. If we were to get into a severe water shortage, we've not had a water shortage of 30% or greater, but if we did, we changed from that collective target to individual mandates. We are rationing water and each individual customer has to comply. Next slide, please. So this points out a reminder that when we are in such a water shortage, we have the ability to increase water rates temporarily as one of four strategies that we have to make sure that we have enough revenue to stay solvent and to continue providing healthy, clean water to our customers. So water shortage charges can range from 5% in stage two to 45% in stage eight. We can also do things like tighten our own budget, reduce our own expenditures. We can delay capital projects and we can use catastrophic reserves. So we have four strategies to make sure that we have enough revenue to run our operation and to make sure that drought doesn't cause us to raise rates permanently to address a drought. Instead, we have a temporary rate that can be used to bridge us through that period of time. Next slide, please. Our customers also have to adhere to quite a list of restrictions and prohibitions during shortages. These are additive. So when we're in a stage four, everything prior to stage four still applies during a stage four. So the one I wanted to again point out is we can institute water shortage charges starting in stage two anywhere from 5% to 45% depending on the stage. Next slide, please. Stages five, six, seven, eight. Again, everything we saw on the previous slide would still apply plus these new prohibitions and restrictions. And stage five again is when we would institute water rationing or water allocations. Next slide, please. The good news is that during normal water years, when we get average rainfall or even slightly below average rainfall, we have more than sufficient water supply. This has been because of working so closely with our agency partners and with Sonoma Water and with our customers and with you, our board over the years to ensure that we have adequate water supply. We've been looking at projecting our demands and our needs and considering what we need to do and implementing water conservation programs to make sure that our water supply portfolio is adequate. So here's the great news is during normal and even below normal rainfall years, we have more than enough water to meet the ordinary demand of our customers. I'll just say that in that 2045 projected demand of 25,000 acre feet, that is taking into account population growth, additional housing, more dense development, new businesses, new parks, schools, anything that you can imagine in terms of growth, all of that has been included. And we're very, very conservative. In other words, we estimate higher than lower. So if there's a data point where we have to choose, we estimate more need for water rather than less because we want to make sure we have sufficient supply for the future. So this is the good news. Next slide, please. The difficulty, of course, is if we were in a severe shortage, we do not have enough water for ordinary supply. And we've been trying to figure out a way to communicate that as clearly as possible. And this is a fairly technical topic. But if you see on the left, the normal supply is 31,540 acre feet. That's available to us during average rainfall years. You can see our demand in 2020. Our ordinary demand was 19,277 acre feet. So the normal supply was more than enough in 2020. But if we were in a stage five, what that would mean is that we have 30% less than our ordinary demand. I'll also point out if you compared stage five supply to normal supply, that is almost 60% less than normal supply. So when we're talking about a stage five, six, seven, or eight, we're talking about severe shortages, rationing water, making sure we have enough water for human consumption, sanitation, and safety throughout the duration of the emergency with a focus on our existing customers. And there isn't water for new demand when we're in such a severe emergency. Next slide, please. Of course, I think you're familiar with the variations of these kinds of graphs. What this one shows is that the orange bar is a 30-year average storage in Lake Sonoma each month. So we took 30-year average for each of those months. And so you can see that orange bar kind of repeats itself, because that is the standing 30-year average. The blue line shows the actual storage in Lake Sonoma. And as you know, Sonoma water manages Lake Sonoma, but is a significant portion, in fact, about 94-95% of our water supply. So the blue line shows that as we had a dry winter followed by a dry winter followed by a dry winter, we end up with coming very close to that red dashed line. That red dashed line indicates 100,000 acre feet of storage in Lake Sonoma. If storage goes below that line, the water agency can be subject to mandatory cutbacks of 30% in their deliveries. This is because of the way that the state has, it requires that they manage the lake. So we got very, very close. We were lucky in October we had a great atmospheric river, and then in December we got some storms. But the curve is now, as you saw, when Deputy Director Martin showed a slide, it's actually starting, the blue line is actually starting to go down again, because we just have not had any more rain to speak of. So climate change is here, it's real, and the other thing I'm going to point out is that blue line, going back for 14 months, is below any other time in the last 30 years. So we're well below not only the average, but we're at the lowest point in the last 30 years for each of the last 14 months. Next slide, please. So with all of that in mind, staff was very concerned and started to look at this need for a water demand offset policy. In average years we're in great shape. If we have a water shortage emergency, that means we don't have enough for our existing customer's ordinary demand, and we're going to ration water. And again, the focus is on water for human consumption, sanitation and fire protection throughout the duration of an emergency, focused on our customers, and no water is available for new demand. Next slide, please. So if we are rationing water again, top priority, human consumption, sanitation and fire protection, and just a reminder, this is on a meter by meter basis. Each individual account is given a limit on how much water it is allowed to use, and that methodology for figuring out how much each account can receive is based on data we have about each account, and based on the amount of water that we would have on hand. Next slide, please. This is just another way of looking at the severity of severe shortages. So in stage five, we would be charging 15% more on the per unit cost for water during that emergency. You can see how much water normal demand would be on the left. You can compare that to the supply on the right, and that's a 30% shortage. So all of our customers have to cut back. Next slide, please. In a stage six, the additional charge per unit of water is 25%, and we have 40% less water available. Next slide, please. Stage seven, the charge is 35% per unit of water for that temporary water shortage charge over and above the existing rate, and we're at a 50% shortage. Next slide, please. Stage eight is anything over a 50% shortage. We used 60% to provide an illustration. We would be charging 45% more per unit of water over normal water rates during the stage eight. I also wanted you to be aware, of course, we're very sensitive to the impact of these water shortage charges on our customers. About 85% of our customers are single family and multifamily customers. So we want to make sure that we're really cognizant of that potential impact on them. So these water shortage charges are structured such that if they reduce by the amount that needs to be reduced, their water bill will be about the same as normal. Next slide, please. So there is a sense of urgency because without a policy in place, there's no water for new demand. So this is not simply a water department policy. This is a citywide policy. We're trying to balance the needs of not only the water department and its responsibility to ensure sufficient supply for human consumption and sanitation and fire protection, but also we want to balance that with the need for the city to continue supporting and pursuing its goals for housing. So we brought together an interdepartmental team last year. We worked together from May through October. We had managers and senior managers from planning, economic development, building, development services, city attorney's office, and of course water. And we also had assistance from the consulting from Woodard and Curran to help us with that policy and facilitating our meetings and helping to guide us about what has worked and what hasn't in other areas. And also Hildebrand Consulting did our fee study. And as I've mentioned already, the purpose of this study is not simply to be a water policy. It's a citywide policy so that we can manage water during severe water shortages and continue to support housing and development. Next slide, please. Just a reminder that the fee study includes methodologies for figuring out how much water, different major types of development would require, the water savings that we know we can achieve through known water conservation programs we've run in the past, the cost to implement those programs, the cost to apply those programs to water demand offsets, and then the fee schedule that results. Next slide, please. This is the fee schedule. One of the things that council requested is that we provide them with budgets. So if this were in place and we were in a stage five and we were collecting fees, what would the outcome be? How much money would be collected and how would it be spent? So we'll provide three sample budgets for you in just a moment to illustrate how this program would be implemented. Next slide, please. So in terms of the implementation, in terms of applicability, it pertains to buildings that need a new building permit and are subject to new or increased connection fees. So if a house or an apartment or a strip mall, something had burned down during a fire disaster, this policy does not apply. They've already paid their connection fees in the past and they just need to rebuild. If a housing complex, a new business park, a subdivision has already applied for a permit, so all of the housing permits that have already been applied for, this policy does not apply to them. It only applies to projects that would be getting a new permit and increasing their connection fees after this goes into effect. Developers apply for a building permit and at the same time, they would be submitting a water demand offset application. We wanted to bring to your attention that we've added an alternative to the policy and it is in red for you or members of the public that want to clearly see the addition to that water demand offset policy. It allows for an alternative to paying a water demand offset fee. So if a developer wanted to propose a different kind of project to achieve those offsets themselves through their own activities, that's now an alternative available in the policy. The agreement would be signed if there's difficulty coming to an agreement about it. There is an appellate process, but in the meantime, the building permit is issued and the project proceeds. Next slide please. The developer now has certainty. They know how much money is due or what type of project they've agreed to, when it's due, and it is based on when they're requesting a final inspection or occupancy of any time. So they do have some measure of control over when it would trigger when the fee or the project would be due. The only surprise would be good news. If they get to the end of their project, they need final inspection or occupancy of any time and we are not in a stage 5, 6, 7 or 8 water shortage, we're not rationing water among our existing customers, it's waived. So the only uncertainty is good news. Next slide please. So fees, if they were, if this policy were adopted and we went into a stage 5 and there were projects that this applied to, fees would be collected and deposited into a separate account at that time when they were doing final inspection or occupancy of any time. So the end of a project. Fees would be used exclusively to develop offsets for the project that paid the fee and the activities and costs are going to be tracked and we have budgets examples to show. Next slide please. We looked at senior housing, affordable housing and market rate housing. This first example is based on an actual project, 3575 Mendocino Avenue. But just as a reminder, they've already applied for a building permit. This is being done just for illustration purposes. They are not subject to this policy. In this case, there are 94 senior housing units and the estimated cost to build is 56.6 million that's provided to us by the developer that estimated cost to build. The fees would be just under $82,000 for the water demand offset. That is 0.14% of the estimated cost to build. That's less than one fifth of 1% of the cost to build and they would add about 2% to the city's fees. So let's look at how that would be spent. Next slide please. So what we would be doing is in this case, we'd looked at bathroom conversions. We could have done a similar budget for say turf rebates. The city labor is about 10% to manage the project. We have to make sure customers are eligible. We have to make sure the work is being done to standards. We need to do inspections. We need to do some analysis before and after on water use. We need to manage plumber's contracts and invoices. So the city's portion to administer it is about 10%. Plumber's are allowed to charge a service fee for the installation. They are allowed to charge for the toilets they purchase and for some materials and supplies. And if this project were to move forward, those are all contracted. Everybody, both parties know in advance what the allowable costs are and what amount can be charged. So this is predetermined. That's about 87% of the budget. And then we set aside a little bit to target our market because in this case to offset the water demand of 94 senior units, the water demand offset fee study tells us that we'd need 104 bathrooms converted at existing locations in Santa Rosa. So we need to target that market. Next slide please. Second example, 5173 Highway 12. Again, they've already applied for a building permit. This doesn't apply, but it does allow us to illustrate an affordable housing example. 99 units, 71 million to build just under $125,000 in water demand offset fees. Compared to the cost bill that is less than one-fifth of 1%, it would add about 3% to the city's fees. So how would this money be spent? Next slide please. We would need to convert 159 bathrooms at existing locations to offset the water demand for 99 new units. And as you can see again, city labor is 10%. The plumber's fees and materials 87% and then targeting our market is 3%. And this would be to achieve offsets for this specific project. Next slide please. When we look at a market rate example, the example that we used was 325 Yolanda Avenue. Again, the policy does not apply. They already have a building permit. This is for illustration purposes only. 248 market rate units, the estimated valuation that the developer reported was just under $39 million. Water demand offset fees, $312,000. And the estimated the fees are 0.8% I'm sorry, 0.8 of 1% of the estimated value of this project. And that would add about 5% to the city's fees. Next slide please. So how would that money be spent? Again, 10% for the city to ensure that customers are eligible, oversee contracts, do all the administration, inspections, et cetera. Plumbers get to charge a service fee. They need to purchase materials and supplies. That's 87% of the budget and then targeting our market to convert almost 400 bathrooms at existing sites. It's about 3%. Next slide please. For single family homes, the estimated value of a home in Santa Rosa in January was just under $700,000 according to three sites, Redfin, Zillow, and Realtor.com. If a house of that value were on a small lot, the water demand offset fee would be less than 1 third of 1% of the value. A large medium lot, it would be less than 1 half of 1% of the value. If we're on a large lot, it would be 3 quarters of 1%. So in all the cases we've seen so far in all of our examples, the water demand offset fee represents less than 1% of the project cost. Next slide please. Another concern that council and members of the public expressed was that this fee would drive up rents for the most vulnerable in our community, those who are in our affordable housing programs. So we spoke with the directors of our affordable housing program and section 8 program to learn more about them. What we learned is that the participants rent is based on their own income and in terms of affordable housing the household size also comes to bear. Affordable housing, their rent is capped at 30% of household income approximately. And in section 8, the rents that the participants pay is based on their income alone and is capped at 30 to 40% of their income. And any of the city's fees anything to do with the cost to build does not affect these affordable housing program rent calculations. So this would not impact our affordable housing program participants. We also did our best to try to better understand market rate rents for single family homes and for multifamily homes. It's a little bit more difficult because those those that are not in the affordable housing arena are at the at the whim of the market. So it's whatever the market will bear in terms of what actually drives the amount that is charged for rent. And when we look at the cost to build and it tends to be something that is mortgage or advertised over a long period of time say 30 years. A fixed cost of less than 1% it does have a potential to affect rent if it were directly passed on but it looks like it would be in the neighborhood of one or two dollars a month. But it's really very difficult to get at it more exactly than that. Next slide please. The council also wanted us to come up with some additional alternatives. So first we're going to remind the public and or what our alternatives are that we've discussed already introduce three new alternatives which we don't think are viable but we did council did say bring back all new alternatives even if they were not viable or weren't good ideas. And then we also just wanted to mention something you're very familiar with which is the prop 2018 prohibitions. Next slide please. We'll start with prop 2018. Voters approved a California constitutional limit 1996. They established requirements related to how local government can raise taxes and fees. It also restricts how those property related fees can be spent. Fees on water service and sewer service fall into the category of property related fees. What we've learned from our city attorney's office is that the property must be specially benefited by the improvement of service that they're paying. So if they're paying a fee it's got to specially benefit that property. The amount that can be charged to that property has to be proportional to the service or whatever the benefit is they're receiving at that parcel. So as you can imagine charging existing customers a water demand offset fee for new parcels that aren't yet even connected to the city system that are trying to become new customers. This would violate Proposition 218. Next slide please. Alternatives that previously have been discussed first is to take no action obviously staff does not recommend this. It is feasible but essentially it is a de facto moratorium in stages 5, 6, 7 and 8. We think that would have a very negative impact on housing and economic fatality. The second option that was discussed with council was they could in fact require a moratorium but same logic applies. We do not think that that is something that we would want to recommend. It is feasible but of course has negative impacts on development and economic fatality. So not recommended. Next slide please. The council could decide to subsidize the water demand offset fee with the general fund and I'll provide some more information about that momentarily. That is feasible but staff does not have a recommendation. We would leave that to councils per view to determine if that were what council wanted to do. Council could not subsidize with existing rate pair funds. This was another option we had talked about with council again if I like to proposition to 18. Property paying the fee has to especially benefit from the service or improvement being funded. Council could subsidize the water demand offset fee with wealth with sell tower revenue but as you know that helps our low income water customers and we don't recommend it but it is feasible. Next slide please. This alternative we have built into the policy again it is in red line so that it stands out and is easy to identify. We have revised the policy to allow developers to propose an alternative to achieve offsets instead of paying a water demand offset fee for the city to achieve those offsets. Developers might prefer that maybe there is a water conservation program they think they can do more cost effectively with an existing customer based in the city's jurisdiction. Perhaps they have a water supply that they can get permitted and can fully offset the new demand and they could hand that new water supply over to the city. We think it could be expensive and challenging but it is now an option that is being offered to in the policy. There would be a small service fee we would need to consider the proposal evaluated potentially read engineering reports to inspections water use analyses there's a number of things we might need to do so there are some service fees but those would be simply sort of an hourly employee rate fee to make sure that that project is meeting all the standards and achieving the offsets so it would be considerably less than a water demand offset fee. It would not be a unit by unit cost but a project wide cost just for staff time and this has been included in the revised policy in your packet. Next slide please. The seventh alternative that has been discussed with council previously is to subsidize a water demand offset fee with excess use penalties. When we ration water if customers don't stay within the rations they can be penalized with an actual fine. We don't expect that there's going to be substantial amount of money accumulated. We looked at single family homes and looked at the average home and said if they did not reduce their water use at all they ignored all drought messaging they ignored the rationing and they used as much as they would normally. The fee would be about $15 a month it depends on the month and whether it's high irrigation season or in the winter but somewhere in the neighborhood if anywhere from five to $40 penalty but average $15 a month but this is not something they can simply pay month after month it's progressive enforcement first we warn them and offer to help if they don't comply we find them if they don't comply we shut their water off so this is a really serious situation when we're in a severe shortage and there isn't enough water for folks to use more than their fair share so we're going to be really strict about that. So we just don't think that it's going to be generating a whole lot of revenue to subsidize the offset fee for one unit depending on whether it's a senior unit or a high density unit or it's a regular sized apartment unit it could require anywhere from 58 to 84 penalties be collected to subsidize a complex of about 250 units we'd need at least 14,500 to 21,000 penalties that's nearly half of our customer base would have to be in violation and fees would have to be collected and we're just not anticipating that's going to be the case when we're in a severe shortage so we just think it's not likely to be viable projects would be waiting for money to be accrued there's no knowing when that money would be accrued and there will be no alternative for them to achieve a net zero impact so this is not recommended by staff next slide please three new alternatives two are definitely not feasible and one we don't recommend one option is to subsidize by adding a new water demand offset fee to our water rates so we certainly can't use our existing water rates what if we added a new special water demand offset fee obviously this violates proposition 218 there's no way to do that we looked at whether we could charge a very small water demand offset fee on every building application for building permit application and then a crew funds over time for offsets but when we look closely at the mitigation fee act it does not stand up there has to be an essential nexus between the impact of a development and the required mitigation there is no required mitigation unless we're in a stage five six seven or eight and we're rationing water and a project is coming online for final inspection or occupancy so the vast majority of the time folks are just not there's nothing to mitigate and it just would not make sense we could not collect that fee otherwise council could direct staff to revise the shortage plan to remove the offset requirement altogether this would mean that we would have to reduce the amount of water being allotted to our existing customers and set some of that water aside for new development so for example if we were requiring a 30 percent reduction we would now require a 35 percent reduction and set five percent aside for new development we think that this would cause an uproar with our customers that there would be a sense of it not being fair and equitable to them they are subject to as we've said strict adherence to those rations subject to warnings penalties fines and shut off of their water also there's no way to know in advance how much water we would need for new demand in any given year so if there weren't sufficient water set aside projects would be waiting until the following year at least this could delay projects this is feasible but it is not recommended next slide please this summarizes what we've talked about the ones that are in bold with a kind of a grayish blue color we'll talk a little bit more about in a moment the sixth in red has been added to the policy next slide please we believe these are the feasible options although some are not recommended take no action it's a de facto moratorium if there isn't a policy in place to allow for net zero impact revise the policy and require a moratorium again same problem in terms of housing impacts and impacts to economic development subsidize the fee with the general fund we would leave that to council and we'll provide a little more information about some thoughts that we've gathered from the planning economic development folks about that council could adopt the policy and subsidize with the cell tower revenue which we don't recommend as you know or council could remove the water demand offset requirement altogether we'd need to revise our water shortage plan and restructure how we ration water in stages five, six, seven and eight but there are some risks associated with that effort finally F is what the staff recommends which is to simply adopt the policy and council could institute subsidies at any point in the future so for example if we were declaring a stage five seven years from now council could look at its current existing funds available to it council could consider its current housing priorities and it could target subsidies to support its resources and its goals at that time so adopting the policy without subsidies today does not preclude council from subsidizing this in the future next slide please so if council wish to subsidize fees with the general fund we spoke in great detail with planning economic development to learn more about what kinds of projects and how that might be structured so council could do that now or they could implement subsidies at any point later including when declaring a stage five six seven or eight they could limit subsidies by geography for example they could say all projects when within the city are eligible or they could say only projects within priority development areas within those two there are four subsets so if projects were anywhere in the city it could be only housing projects that receive subsidies or only housing projects that had a hundred percent affordable housing or only housing projects that had some affordable housing or only the affordable housing units within a housing project because again this fee is a unit by unit so they could do it that way that's the same options that are available to council if they limited it to priority development areas so we will be providing this so that if council does decide to consider the general fund subsidy they have a little bit more information about their options and what choices they might make staff from the water department does not have a recommendation and so if council is looking for a recommendation during their meeting on March 29th when they reconsidered this item we will have folks from planning to help step in and address that and and help to guide council in terms of what the planning department's recommendation might be next slide please so with that it is recommended by Santa Rosa water that the border utilities by motion reaffirm its recommendation that city council adopt the water demand offset policy adopt the water demand offset fee study adopt the water demand offset fees and authorize the water demand offset fees to be adjusted on an annual basis to account for inflation at the beginning of the calendar year January 1st starting in 2023 using the engineering news records 20 cities construction cost index next slide please at that we are happy to take any questions and as Director Burke mentioned we do have some folks here to help us if questions go beyond my level of expertise or information thank you Mr. Close I'll open it up now to board member questions and comments Vice Chair Anoni I guess I my comment is I just wanted to thank Mr. Close for his presentation and I must say that when I saw that there was an 18 page staff memo for this matter I had some doubted that I would make it all the way through but it was very well written and organized and I appreciate the thoroughness of the presentation made in that staff memo and in this presentation so thanks for the work thank you so much for your patience with the link that the staff report we really appreciate that I would echo those comments and then I want to also congratulate you for being flexible and and including some of the options that the city council was talking about in particular the ability of the developer to come up with an option as opposed to paying the fee or agreeing to pay the fee if we're in a shortage situation when their project is finaled other board member questions or comments board member Grable yeah thank you for exploring all those options I know that when I got to council they had a lot of the same concerns that I did at the beginning just about how it affect different different types of housing no problem with the fact that we need a WDO policy and that it has to be aggressive in the case of a stage fire above it was more about the multiplier the very specific multiplier for square footage on certain types of housing that that I had concerns about it sounds like there is some alternatives that are I apologize my baby boy maybe trying to interject here you know it sounds like there's some viable alternatives for developers that say have gotten very specific grants their unforeseen would have to be covered again from you know basically from a source that doesn't exist and that was what concerned me with affordable developments but it sounds like the council will be able to address that on a case-by-case basis and through the appellate process so you know that satisfies my concern on that and the responsibility really rests with the council anyway so I will honor your work on this and let's move forward thank you for your comments other board member comments or questions if not I'll entertain a motion all right yeah chair if I may it looks like board member watts has a question thank you sorry about that thank you for going back and doing all of the work that was asked of you and also integrating with other departments to try to find answers where your department might not have that expertise my you know I I think I echo what board member Grable said that this is kind of I think falling under council's decision as far as possibly subsidizing whether it's a geographical choice or housing affordable housing those types of options and I just want to kind of reiterate in my comments again especially with the affordable housing piece my concern has in the past has not actually come from that rent calculation for affordable housing or for section eight that would never be impacted by this fee my concern would be the very small margins in which affordable housing is even built to begin with so it's not so much impacting the current rent calculation but future rent calculations is what my bigger concern is so I hope that the council can find some sort of way to support those projects so that we could make sure to grow our housing stock we need housing of all all types of housing not just affordable housing so I hope that they can look at each case by case basis and and if it does not pencil out for for an affordable housing developer to build based on even just a three percent city permit fee I hope that they'll find a solution for that and thank you thank you board member Watts any other board member questions or comments all right we'll entertain if I if I could I'm so sorry to interrupt I just want to take one moment to just thank all of the staff all the staff from all the departments who have helped just thank you all of you and all of you who've been on this meeting in the background in case there were questions of where we would need to ask for your help thank you all I'm prepared to make a motion that the center of the water by motion of firm it's reaffirm its recommendation that the council adopt the water demand offset policy adopt the water demand offset fee study adopt the water demand offset fees and authorize the water demand offset fees to be adjusted on an annual basis to account for inflation at the beginning of the calendar year January 1 starting 2023 using the engineering news records 20 cities construction cost index I will second that motion thank you we have a motion by vice chair Arnone seconded by board member Walsh at this time we'll open it up for public comments on item 7.2 if you wish to make a comment via zoom please raise your hand if you're dialing in via telephone please dial star 9 to raise your hand so could you raise it I see no public comments may we have a roll call vote please chair galvin aye vice chair Arnone aye board member grable aye board member walsh aye board member watz aye board member rite aye and that passes with six ayes chair galvin yes and I apologize for jumping in this late when the when the board had this the last time the motion was amended to recommend that the city council also consider a subsidy for affordable housing and I want to ensure that if you're reaffirming the prior recommendation that there is some clarity on whether it's being sent over with that recommendation as well okay thank you I don't think that was part of the motion I stated but I mean I don't have a problem with it I just don't think that was part of what I stated as the motion yes and I'm sorry vice chair Arnone that's why I brought it up and I'm just trying to make a clear record for when it goes over to council when it went over to council before it did have that recommendation which was added in a friendly amendment to the motion that that amendment being now what that there be a that the city council consider a subsidy from the general fund for affordable housing it seems to me that the that the recommendation made by staff encompasses a broad selection of options for the city council to consider including subsidies from the general fund and wherever else it may be able to obtain money so I'm not sure we're in the same position we are now that we were then because I think that there's been a further examination of the issue by staff so and I don't see that as a necessary amendment but if it's your advice that we make that amendment I mean I I guess we could talk about it no and I understand your your position I'm not I'm not advising that it needs to be one way or the other I just wanted to make the record on that because the it's agendizes reaffirming the prior recommendation so I just wanted to be clear on what the prior recommendation is if I understand what you're saying you're saying that you feel the recommendation as it's being made now particularly with the with the way that staff will be presenting it does still include that option for council so I believe that would be sufficient that is my understanding yes I would I would concur okay great though I think that takes care of that item we have a 6-0 vote again thank you Mr. Close and all the other staff members for going back to the drawing board and bringing us something that hopefully will be acceptable to the city council we'll now move to item 7.3 director Burke thank you chair galvin and members of the board item 7.3 is a report item contingency increase north trunk sewer replacement Mendocino avenue to Terra Linda drive and making the presentation will be Greg Dwyer our associate civil engineer with capital improvement or capital projects team thank you director Burke I am trying to get my video on here let's see oh here we go thank you thank you director Burke good afternoon chair galvin members of the board I am Greg Dwyer associate engineer and project manager for the north trunk sewer replacement project also known as the shanae sewer project next slide please today we'll be talking about the project purpose description background and I thought we talk about a little progress as we're nearing the end of our construction following the analysis and the recommendation this graphic here shows the project area the green areas the highlighted green areas are areas where sewer has been replaced and the blue areas are where waters replaced so we have Mendocino avenue at the bottom shanae road going up the hill ending at Terra Linda where the bend is is Belvedere way where the proposed water line will be starting and ending at the top at Terra Linda drive next slide please the purpose of our project is to relocate and replace 3,300 feet of sewer main and install 1,900 feet of new water main we've been experiencing recent water line failures so we're looking at replacing approximately 1,400 feet of additional water main in conjunction with our existing project the image here shows a picture of a typical water main break next slide please water main breaks are very impactful we close the road loss of service loss of water we've heard a lot about water conservation this afternoon and damage to public infrastructures you can see what it does to our roadways when the water line breaks and we have to report out to the public and a press release and it's something very uncomfortable that we try to avoid luckily we have a very robust acid management program here that stays on top of the sort of things to avoid water mains that we water main breaks that we often see in the news next slide please so the project will replace 1,950 feet of sewer main adjacent to pollen creek 1,350 feet in Mendocino Avenue in the Midas Lane the water main will be replaced in Shenero the Midas Avenue and the Midas Lane again the 1,400 feet of a ductile iron main would be used to replace the existing asbestos cement pipe and then we would restore surface conditions over the years stream bank erosion along pollen creek as exposed parts of the sewer line due to the age and location of the north trunk sewer main alignment inspection and maintenance of the trunk main was challenging and costly therefore the project has relocated the sewer alignment away from pollen creek to the road right of way 14 foot diameter bore pits were required to install sewer main at depths of up to 40 feet deep allowing for only one way traffic a full westbound shenet road detour was implemented to facilitate this work the deep boring work required low groundwater conditions for both the safety of the crews and facilitation of the work public outreach efforts resulted in a list of concerns including that shenet road isn't established emergency evacuation route work was occurring during fire season potential psps events and the covid pandemic where we had more people working at home and remote learning next slide please so in in march 21st of 2019 the border public utilities approved the project in november of 2020 the project was awarded to team jladi the notice proceed issued on december 8th and started construction december 14th with an estimated completion date of december of 2022 we're currently tracking for july due to permit requirements we cannot go into the previous sewer main that goes along pollen creek to do the abandonment work outside of june 15th through october 15th so that work will occur a little later and here we are in december of 2021 the staff recommended to replace the water main due to the failures next slide please so progress that's something like talk about major milestone january 14th we finished all the deep boring we got we got a thousand feet installed of 18 inch sewer main via trenchless technology what we're looking at here is a typical bore pit being installed and crews working down in the bottom installing sewer main pipe it was challenging some challenges included you know drilling through a car size boulder there was unmarked utility cables that had to be coordinated and relocated there was some vandalism where somebody broke into the site turned off the generator the pit filled up with water equipment became damaged and caving there was caving around the current boring see and then of course the biggest thing probably according to public is the detour which we were happy to remove it about one week before christmas we have an innovative traffic control plan that was implemented by city traffic engineering and city fire department to minimize traffic disruptions passed by pipeline construction traffic could be quickly reversed for major fire emergencies whether that was to evacuate people out it could be reversed to bring resources in we implemented temporary traffic signals that were brought in to improve daily emergency response times and that was the fire department's biggest concern so these were installed on side streets they were programmed into existing traffic signals and activated by existing emergency vehicle equipment or manually by key 24-hour contact lists were were established keys were distributed city fire police contractor and city staff in the event of an emergency the sewer work is complete on Lemetus Avenue Lemetus Avenue private drive and plumb drive it's not complete on Lemetus lane that that's a typo and the original project work main is complete next slide please so the remaining work the sewer flows will soon be transferred into the new main in the next few weeks we talked about the sewer main abandonment along pollen creek probably sometime after June 15th and the water main replacement in Shinnate Road which is why we're here today then when the work is is completed the underground work we will begin with surface restoration and pedestrian ramp upgrades there's there's work still on strawberry drive for the sewer and Mendocino Avenue and the work on Mendocino Avenue will be performed at night due to the noise impacts on the Metis Lane which backs up to Mendocino Avenue um the work at 2600 Mendocino Avenue parking lot which is currently occupied by rinker arms and the Cavaliers Bakery near Pete's Coffee it will be performed on three consecutive Sundays during the day when those businesses are closed instead of with the night work on Mendocino this was a request from the Lemetus Lane residents that resulted from our public outreach efforts next slide please and our public out for outreach efforts were pretty substantial we've got a dedicated project website chanetsuroproject.com we meet every Thursday as a project team come up with a three-week look ahead schedule we publish that on a weekly email update on Friday afternoon we've held three public meetings on zoom this is an example of a brochure for a public meeting that you see here on the screen I did a town hall with council member Fleming to to talk to her constituents about their concerns we have brochures newsletters social media including facebook next door including communication with neighborhood group administrators digital ads and so forth next slide please analysis project awarded to team gelati contract total 10,736,570 dollars and four cents due to three water main breaks during the project water department recommended water main replacement on chanet from belvedere road to terra linda drive cost savings and expedited delivery by adding to existing contract utility impact fee to fund 450,000 for paving and pedestrian ramps so that's that's to address the addition of paving along the trench that is sort of compromised that will become even more damaged after construction traffic is finished all the impacts on that next slide please the recommendation is to approve a contingency increase in the amount of 1,650,000 dollars and zero cents for the north trunk sewer replacement mendicino avenue terra linda drive for total contract amount of 12,386,570 dollars and four cents next slide please so at this point I'd like to open it up to any questions that you may have thank you mr. Dwyer we will open it up now to questions by the board any questions or comments board member right thank you and thank you for the presentation you know what Greg didn't mention here was this project has actually been going on for over 20 years this is the second phase the first phase was also a very technical project and quite difficult to do and and this one when I retired eight years ago we had no idea how we were going to actually get this thing accomplished and I know operations was very concerned about a failure during the winter of that trunk main on pollen creek there so in my view the project has gone extremely well there hasn't been any overruns and this minor I mean there was a judgment that maybe the pipe would hold better than it did but this is the time we're going to replace it before we're done so I support replacing the water main and I will say that I'm very happy to see that we're using the UIF funds for additional surface work so anyway thank you very much for the presentation and your efforts thank you thank you board member Walsh yes I just wanted to thank engineer Dwyer for excellent staff report the good work and for hanging in there getting this thing done right it's a I think you're doing a great job but thank you for doing that thank you thank you any other board member questions or comments if not we have a resolution in our packet I would like to make a motion Mr. Chairman that the Board of I'd like to move the Board of Public Utilities approve the contingency amount increase of $1,650,000 through the North Front Sewer replacement Medicine Avenue to Terrell and the Drive for a total contract amount of $12,386,570 and four cents I'll second that thank you we have a motion by board member Walsh seconded by board member Wright at this time we will take public comments on item 7.3 if you wish to make a comment via Zoom please raise your hand if you're dialing in via telephone please dial star 9 to raise your hand Secretary Aitha we have no public comments may we have a roll call vote please Chair Galvin aye Vice Chair Anoni aye Board Member Gravel aye Board Member Walsh aye Board Member Watts aye Board Member Wright aye passes with six ayes thank you very much that'll take care of item 7.3 we'll now move to item 8 and we'll take public comments on non-agenda items if you wish to make a comment via Zoom please raise your hand if you're dialing in via telephone please dial star 9 to raise your hand Secretary Aitha we have no public comments very good that'll take care of that we have no referrals we have no written communications I believe we have at least one subcommittee report yeah I had the duty of taking over the budget subcommittee while Chair Watts was taking care of family business and I would like to report that the BPU subcommittee met on March 15th to the review the 2022-23 water wastewater and subregional budgets staff presented a comprehensive look at the O&M CIP and debt service budgets expenditures versus revenues and reserves while the committee was shown reductions in proposed revenue due to the drought and several increases to salaries and benefits and many other uncontrollable costs there is coverage for proposed 2022-23 budgets with rate payer changes fees and undesignated fund balances so the increases will not affect customer rates or create any long range negative impacts on the current rate schedule and that is my report no wait the committee voted to recommend the proposed budget to the full board I think our next meeting that's it thank you thank you board member right any board member questions or comments regarding the subcommittee report seeing none we'll now take public comments on item number 11 if you wish to make a comment via zoom please raise your hand if you're dialing in via telephone please dial star nine to raise your hand secretary atha we have no public comments thank you any board member reports just a comment mr chairman sure board member waltz go ahead few of us are are wearing green today but uh not as much as you are you're the winner and I appreciate that happy st. patrick's day thank you happy st. patrick's day to all of you as well we'll now move to item 13 the director's report thank you chair galvin and members of the board I do have a number of things to report on today first I wanted to let the board know that Santa Rosa water is working closely with Sonoma water on one of their projects to rehabilitate their groundwater well on sabastable road as was mentioned earlier in the presentation by Sonoma water on their budget Sonoma water has obtained some emergency drought funding to help move these projects along the sabastable road groundwater well is located right next to santa rosa's recycled water system and Sonoma water needs a place to discharge the reject water from the well this includes the water from the initial flushing of the well anytime they need to do a filter back wash and anytime they need to flush the chlorine contact system the city knows how important it is for Sonoma water to get their three groundwater wells back up and running and so we're working closely with them to help them have a solution to receive this reject water we are going to go ahead and have that water come into our reclamation system and then get it delivered to our trunk sewer line so that it can be sent back to the Laguna treatment plant and be treated for reuse so it will not stay in our reclamation system but it'll actually go back to the plant for treatment we're also working with the division of drinking water to get approval to reuse this well water without treatment as part of our recycled water system in the future we do anticipate that this approval could take up to a year so in the meantime this is what we are doing to help facilitate that project second I wanted to let the board know that the city is upgrading the equipment in the council chambers and that upgrade is tentatively scheduled to occur next month in april so the council chamber will be unavailable for approximately three weeks we are going to go ahead and follow the decision that has been made that the council will meet virtually in april during the month during the time that these upgrades are made so we will follow suit with the board of public utilities meetings and likely the two meetings in april will be virtual only we will provide more information as that schedule finalizes next I wanted to share some good news with the board the cwa redwood empire section will be presenting the laboratory person of the year award to one of santa rosa waters principal lab analysts kathy herman kathy is a principal analyst at the luguna environmental lab and she was selected due to her dedication and leadership in the wastewater industry and her commitment to continuing education so we're very happy and proud of kathy and she will be presented this award at their next meeting on april the eighth I also wanted to share a little bit of of sad news for us but good news for one of our employees karen lasada who is currently our development review coordinator for santa rosa water will be retiring in the first week of april karen started with the city in 1990 in the utility billing section as a customer service representative and meter reader she promoted to the utilities engineering division in 1991 as a utilities tech and in 1994 further promoted to a civil engineering tech in 2015 I had the honor and privilege of working closely with karen as she was selected to be the interim development review coordinator for the engineering services division and we selected her to be permanent in that position in 2017 karen's played a large role after the tubs fire creating pathways for the rebuild of properties or the rebuild properties to reestablish service to water and sewer she's always been a great champion of the water department ensuring standards are met and working closely with developers I do want to also acknowledge that karen has done a lot of work for the city as a whole she was the chair of the united way campaign for three years and also chaired the day of caring in the 1990s she also started the tradition of a utilities holiday party in the 90s which is now annual what we call the woohoo picnic so karen has been a great asset and great part of the water department team and I wish her well on a very well deserved retirement and then last I also wanted to acknowledge that this is the last meeting for karen donovan our assistant city attorney karen started with the water department a year ago and we are very grateful for all of her work and assistance sad that she will be leaving the city but she will be leaving the city a week from tomorrow in her place are we will be bringing back bob madow he is under contract with the city and he will be filling the interim assistant city attorney role providing support to the water department and to the board of public utilities and you will see bob at the next meeting of the bpu in april and that concludes my report and I did want to just give karen a moment if that's all right if she'd like to see anything thank you oh gosh I hadn't anticipated saying anything but I just want to thank you all it has really been a wonderful opportunity to work with this board and working with jennifer has just been incredible I'm very sad to be leaving the city I unfortunately just for personal reasons in part because I don't live here in santa rosa have to do this but it has really been a pleasure and I've just I've learned so much in working with all of you so thank you very much thank you karen we're going to certainly miss you you've been a real quick study over the last year and we've really relied heavily on your your sage advice so much good luck to you and good health any other board member questions or comments all right we will take public comments on item 13 if you wish to make a comment via zoom please raise your hand if you're dialing in via telephone please dial star nine to raise your hand secretary aether we have no public comments all right well at this time I will wish you all again happy st patrick's day and we will adjourn this meeting in honor of assistant city attorney karen donovan and wish her much good luck and good health in the future have a good afternoon thank you mr chairman karen have fun