HomeMy WebLinkAboutStaff Report 6.E 06/20/2005CITY OF PFTALUMA, CALIFORNIA
AGENDA BILL
Aeenda Title: Discussion and Possible Action Regarding Marin Meetine Date: June 20, 2005
Municipal Water District's Request to the Sonoma County Water
Agency to Extend the Deadline for Exercising its Option to
Purchase an Additional 5,000 Acre -Feet of Firm Supply from The Meeting Time: ® 3:00 PM
Warm Springs Dam Pursuant to Section 8(b) of the Amended ❑ 7:00 PM
Agreement for the Sale of Water between the Agency and MMWD.
Cateeory (check one): ❑ Consent Calendar ❑ Public Hearing ® New Business
❑ Unfinished Business ❑ Presentation
Department: Director: Contact Person: Phone Number:
Water Resources & Michael Ban, P.E. Michael Ban, P.E. 778-4487
Conservation Y' ~
Cost of Proposal: $0 Account Number:
N/A
Amount Budgeted: N/A Name of Fund:
N/A
Attachments to Agenda Packet Item:
Agenda Report
Attachment A — Correspondence from SCWA to MMWD
Attachment B — Correspondence from MMWD to SCWA
Summary Statement: Since 1996, MMWD has had an option in its agreement with SCWA to purchase an
additional 5,000 acre-feet per year of firm water supply. This deadline expires on June 301h. SCWA has
offered to compensate MMWD for not exercising its option. MMWD has not responded formally to this
offer, but has verbally indicated it is not interested. MMWD has proposed to compensate SCWA in the
amount of $400,000 in consideration for extending the deadline for two more years. At the June 6h WAC
meeting, the SCWA requested the WAC provide a recommendation on this proposal.
Recommended Citv Council Action/Sueeested Motion: City Management recommends the City Council
consider the proposal from MMWD and provide direction to the City's Water Advisory Committee
representatives. The Water Advisory Committee will consider this item at a special meeting on June 27th
Reviewed by Admin. Svcs. Dir: Reviewed by City Attornev: Approved by City Manaeer:
ate• (,(13 Date:/�/�//% Date:
P � 1 P l; y�t,�.�lu.!�
Todav's Date: Revision # and Date Revised: File Code:
# S:\water resources &
June 13, 2005 conservation\Water\6110 Source of
Supply\20 water agency contractors\mmwd
opflon\agenda bill.6-20-05.doc
CITY OF PETALUMA, CALIFORNIA
June 20, 2005
AGENDA REPORT
FOR
DISCUSSION AND POSSIBLE ACTION REGARDING MARIN MUNICIPAL WATER
DISTRICT'S REQUEST TO THE SONOMA COUNTY WATER AGENCY TO EXTEND
THE DEADLINE FOR EXERCISING ITS OPTION TO PURCHASE AN ADDITIONAL
5,000 ACRE-FEET OF FIRM SUPPLY FROM THE WARM SPRINGS DAM PURSUANT
TO SECTION 8(B) OF THE AMENDED AGREEMENT FOR THE SALE OF WATER
BETWEEN THE AGENCY AND MMWD.
1. EXECUTIVE SUMMARY:
Since 1996, MMWD has had an option in its agreement with SCWA to purchase an additional
5,000 acre-feet per year of firm water supply. This deadline expires on June 30`x'. SCWA has
offered to compensate MMWD for not exercising its option. MMWD has not responded
formally to this offer, but has verbally indicated it is not interested. MMWD has proposed to
compensate SCWA in the amount of $400,000 in consideration for extending the deadline for
two more years. At the June 6t" WAC meeting, the SCWA requested the WAC provide a
recommendation on this proposal.
City Management recommends the City Council consider the proposal from MMWD and
provide direction to the City's Water Advisory Committee representatives. The Water Advisory
Committee will consider this item at a special meeting on June 27`h
2. BACKGROUND:
Water Contractors
The Sonoma County Water Agency (SCWA) has been wholesaling potable water to Cotati,
Petaluma, Rohnert Park, Santa Rosa, Sonoma, Forestville Water District, North Marin Water
District, and Valley of the Moon Water District, collectively known as the "Water Contractors,"
since October 25, 1974, when the Agreement For Water Supply and Construction of Russian
River-Cotati Intertie Project (tblasterAgreement) was executed. Since that time the Master
Agreement has been amended eleven times. These agencies currently purchase potable water
from SCWA through the Eleventh Amended Agreement For Water Supply.
The SCWA also wholesales supplemental potable water to the Marin Municipal Water District
(MMWD) through a separate series of agreements. MMWD receives approximately 20 to 25%
of its water supply from SCWA as a supplement to its own local water supply. MMWD has
been purchasing potable water from SCWA since 1975, when the Off Peak Water Supply
Agreement between MMWD and SCWA was first executed. That agreement authorized
MMWD to purchase up to 4,300 acre-feet per year of surplus water available primarily during
the fall, winter and spring months when demands of the SCWA's regular customers are lower
and there is available capacity in the SCWA water transmission system. In 1988 MMWD and
SCWA executed the Second Amended Offpeak Water Supply Agreement, and in 1991 the same
parties executed the Amended Agreement for the Sale of Water Betiveen the Sonoma County
Water Agency and -Harin Municipal Water District.
Eleventh Amended Agreement For Water Supply
In January 2001, the Water Contractors executed the Eleventh Amended Agreement For Water
Supply with the SCWA. This agreement provided for the financing, design, construction,
operation and maintenance of water supply and expanded transmission system facilities
necessary for SCWA to meet peak month deliveries at an average flowrate of 148.9 mgd, plus 20
mgd of standby capacity, plus emergency well capacity as determined to be necessary by the
Water Advisory Committee.
Under this agreement, the Water Contractors have fixed water delivery entitlements, which
collectively total 133.4 mgd. Another 2.7 mgd is set aside for "Other Agency Customers."
Furthermore, MMWD can receive up to 12.8 mgd during the peak summer months, provided this
delivery does not interfere with deliveries of entitlements to any Water Contractor. The resulting
sum of these delivery entitlements to the Water Contractors, Other Agency Customers and
MMWD is 148.9 mgd. Even though this agreement recognizes MMWD as a customer of the
SCWA, it is not signatory to this agreement.
Memorandum of Understanding Regarding Water Transmission System Capacity
Allocation During Temporary Impairment (Impairment MOU)
In December 1999, the SCWA announced that production capacity in its water transmission
system was limited to a maximum flowrate of 84 mgd, and that an impairment in the
transmission system existed with regard to meeting peak water demands in the summer. In
response, the SCWA, Water Contractors, MMWD and the Town of Windsor entered into a "best
efforts" agreement titled Memorandum of Understanding Regarding Water Transmission System
Capacity Allocation During Teniporary bnpainnent (Impairment MOU).
Agreements Between Marin Municipal Water District and Sonoma County Water Agency
Currently the SCWA and MMWD have three agreements:
Supplemental Water Supply Agreement
Third Amended Offpeak A'ater Supply Agreement
Amended Agreement for the Sale of Water
Sunnlemental Water SuuDly Agreement
This agreement is essentially an administrative instrument used to amend the 77drd Aniended
Offpeak Water Supply Agreenient and the Agreenient For Sale of Water Between Sonoma County
Water Agency and the Marin Municipal Water District.
Third Amended Offneak Water Sunolv Agreement
The 77drd Aniended Offpeak Water Supply Agreement, executed on January 25, 1996, makes
available to Marin Municipal Water District 4,300 acre-feet per fiscal year at a maximum
4
delivery rare of 3.8 mgd from May 1 through September 30. Delivery rates at other periods of
the year are at a maximum of 8 mgd. Payment for water under the Offpeak Agreement is at the
highest rate per acre-foot charged to the Water Contractors pursuant to the Eleventh Amended
Agreement. This rate is currently $422.80 per acre-foot. MMWD also pays a Russian River
Conservation Charge of $42.01 per acre -foots, and a Russian River Projects charge of $19.18 per
acre-foot', for a total charge under the Third Amended Offpeak Prater Supply Agreement of
$483.99 The agreement includes a "take or pay" provision, which requires MMWD to pay for
4,300 acre-feet each fiscal year. The agreement also includes language wherein MMWD
acknowledges that "priorities of use of delivery capacity in Agency's facilities have been
allocated to others who are not parties to this agreement, and that capacity to make deliveries of
water to Marin at the rates in Section 1 of this Agreement may not always be available to the
Agency."
Agreement For Sale
Under the Agreement For Sale of IJrater Between Sonoma County Mater Agency and the Marin
Municipal Mater District, last amended January 25, 1996, MMWD has the right to purchase two
blocks of water of 5,000 acre-feet each. The first is mandatory and complete. MMWD secured
the right to purchase the first 5,000 acre-feet per year upon execution of the Agreement For Sale
and payment of $2,837,344 in June 1996. This purchase increased the amount of water available
annually to MMWD to 9,300 acre-feet. The cost of water purchased under this agreement is
$497.03 per acre-foot.
The Agreement For Sale provides MMWD with an option to purchase the second block of 5,000
acre-feet per year of water prior to July 1, 2005. The estimated cost of the second block of 5,000
' This charge is levied against MMWD in lieu of the property taxes levied by the SCWA on property in Sonoma
County to pay the capital charges associated with the Warm Springs Dam Project (Lake Sonoma).
'- This charge is levied against MMWD in lieu of property taxes levied by the SCWA on property in Sonoma County
for: 1) SCWA's Coyote Valley Dam Project and Warm Springs Dam Project channel stabilization works, 2)
securing and defending appropriate water rights, 3) SCWA's share of the United States Government's investment,
cooperation and maintenance costs associated with the Coyote Valley Dam and Warm Springs Dam projects, 4) the
acquisition of all or part of the Potter Valley Project, or contributions made to the project owner to insure the
continued operation of all or part of the project, and 5) fishery mitigation and enhancement projects undertaken by
the Agency in the Russian River and Eel River and their tributaries.
acre-feet of water is $6 million. Section 7 of the Agreement For Sale obligates the Agency to
release water from storage or deliver water to MMWD only to the extent that the Transmission
System has capacity above that required by the SCWA to supply its regular customers and the
amount of water MMWD has contracted for under the OffpeakAgreement. However, Section 8
of the Agreement states "...Agency shall release water from storage in Lake Mendocino or Lake
Sonoma when necessary to make available in the Russian River sufficient water to make the
deliveries of the first 5,000 acre-feet per annum of water provided for by this Agreement..."
MMWD's Option To Purchase 5,000 Acre -Feet of Firm Supply
As noted above, MMWD's deadline for exercising this option is June 30, 2005 (the agreement
states "prior to July 1, 2005). Alternatives discussed by the Water Advisory Committee for
MMWD's option include:
1. Allow the MMWD option to expire.
2. MMWD exercises option.
3. SCWA compensates MMWD to allow option to expire.
4. Extend deadline for exercising option.
On March 31st the SCWA offered to pay MMWD $1.6 million as a contribution towards its
desalination project for not exercising its option. A copy of the SCWA letter is provided in
Attachment A. MMWD has not responded formally to this offer, but has verbally stated they are
not interested in being compensated for not exercising the option.
On April 6`h MMWD sent a letter to SCWA requesting SCWA "...provide us with assurance,
consistent with Section 25 of the Agreement, that the SCWA can provide the District with the
additional 5,000 afa on a firm basis. If the SCWA determines that it can provide the District
with the additional 5,000 afa of firm supply, we request a thorough explanation of how it intends
to do so." A copy of this letter is provided in Attachment B. SCWA has not responded to
MMWD's request. On June 6`h MMWD offered to pay the SCWA $400,000 in exchange for
til
adding a two-year extension to the deadline for exercising the option. This letter is also provided
in Attachment B.
The following are questions and answers regarding MMWD's option and MMWD's proposal to
extend the deadline.
Ql. This agreement is between MMWD and SCWA. Why is the Water Advisory
Committee involved?
Al. At the June 6a' WAC meeting, the SCWA requested that the Water Advisory
Committee provide a recommendation to the SCWA on MMWD's proposal to
extend the deadline. Extending the deadline would require an amendment to
SCWA's agreement with MMWD. It is the WAC's contention that SCWA
cannot amend this agreement without WAC approval.
Q2. If1bIrAMD were to exercise its option andpurchase the additional 5, 000 acre feet
of water, could it use the water?
A2. The transmission system that delivers SCWA water to MMWD is at capacity. It
is our understanding that a parallel aqueduct would need to be constructed from
North Marin to MMWD's facilities in order to accommodate the additional 5,000
acre-feet of water. MMWD has no plans to construct this pipeline.
Q3. The SCWA has permitted water rights to divert up to 75, 000 acre feet per year of
water from the Russian River. IfA&IWD exercises its option, would this 5,000
acre feet of water be inchrded in the 75, 000 acre feet of water rights?
A3. MMWD believes its agreement with SCWA stipulates that the 5,000 acre-feet of
water would be included in the 75,000 acre-feet of permitted water rights.
Q4. IfMMWD's transmission facilities are not capable of delivering the additional
5, 000 acre feet of water, what would the District do with this water since it could
not be delivered to their customers?
A4. It is unclear what the District would do with this water. The District has indicated
it would be interested in selling this water to other contractors, but it is unclear if
this would be a contractually sound arrangement.
05. How did AIIMWD amine at the offer amount of $400, 000 to extend the deadline?
A5. Though MMWD has not explained the basis for the offer, it is generally believed
to be equivalent to the interest on $6 million over a two year period.
06. W iy is MIYIWD reluctant to exercise the option?
A6. MMWD appears to be reluctant to exercise the option, and is therefore proposing
to extend the option, because: 1) MMWD is pursuing desalination as an option for
providing local supply, 2) MMWD understands it will not be able to deliver the
additional water to their customers until a parallel aqueduct is constructed, and 3)
MMWD has not received assurance from SCWA that the 5,000 acre-feet of firm
supply can be provided by SCWA.
07. What is the perspective of the other water contractors on MI [WD's proposal?
A7. This item will be considered by the other water contractors as follows:
Rohnert Park City Council: June 14
Santa Rosa Board of Public Utilities: June 16
Santa Rosa City Council: June 21
North Mann Water District Board: June 21
Cotati City Council: June 22
Valley of the Moon Water District Board: June 21
Sonoma City Council: not scheduled
3. ALTERNATIVES:
Alternatives available regarding MMWD's proposal to extend the deadline for exercising their
option to purchase and additional 5,000 acre-feet per year of firm supply and amend their
agreement with SCWA include:
1. Direct the City's Water Advisory Committee representatives to vote "No" on MMWD's
proposal to extend the deadline.
2. Direct the City's Water Advisory Committee representatives to vote "Yes" on MMWD's
proposal to extend the deadline.
3. Direct the City's Water Advisory Committee representatives to take other action as
directed by the City Council.
4. FINANCIAL IMPACTS:
There are two options for SCWA to receive funding from MMWD. If MMWD decides to
exercise the option on the 5,000 acre-feet of water, it will pay the SCWA $6 million. If the
SCWA decides to accept MMWD's offer to extend the deadline for exercising the option,
MMWD will pay SCWA $400,000. In either case, SCWA will deposit the funds in the Russian
River Projects Fund.
5. CONCLUSION:
Since 1996, MMWD has had an option in its agreement with SCWA to purchase an additional
5,000 acre-feet per year of firm water supply. This deadline expires on June 30`11. SCWA has
offered to compensate MMWD for not exercising its option. MMWD has not responded
formally to this offer, but has verbally indicated it is not interested. MMWD has proposed to
compensate SCWA in the amount of $400,000 in consideration for extending the deadline for
two more years. At the June 6th WAC meeting, the SCWA requested the WAC provide a
recommendation on this proposal.
6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR
COMPLETION:
N/A.
RECOMMENDATION:
City Management recommends the City Council consider the proposal from MMWD and
provide direction to the City's Water Advisory Committee representatives. The Water Advisory
Committee will consider this item at a special meeting on June 27`h
g:/forms/2005 agenda bill
10
� �' 1 11t. • :1 ° 1 1 1 11I ' 1 1 11 " ! t
11
March 31, 2005
Mr. Paul Helliker, General Manager
Marin Municipal Water District
220 Nellen Avenue
Corte Madera, CA 94925
FILE: WC/60-2-7 MMWD
SUBJECT: MMWD OPTION TO PURCHASE 5,000 AF OF RUSSIAN RIVER WATER SUPPLY
Dear Mr. Helliker:
At the February28, 2005 Water Advisory Committee meeting, the WAC requested the Sonoma County
WaterAgency (Agency) to make the following offerto Marin Municipal Water District (MMWD) as a good
faith effort to assist MMWD's resolution of its water supply issues.
The Agency, from funds to be collected by the water contractors, is willing to pay $1.6 million to MMWD as
a contribution toward your proposed desalination project, provided that MMWD does not exercise its
subject option to purchase an additional 5,000 acre-feet of "firm:' supply from the Warm Springs Dam
Project pursuant to Section 8(b) of the Amended Agreement for the Sale of Water between the Agency
and MMWD. By not exercising the option, MMWD would retain its current "firm" supply of Russian River
Project water of 9,300 acre-feet per year.
Should you have any questions, please give me a call.
Sincerely,
Ra d/oole
General Manager/Chief Engineer
Water Contractors
Town of Windsor
/u/admgganeg/rdp/0305helllker.doc
P.O. Box 11628 - Santa Rosa, CA 95406 - 404 Aviation Boulerfd - Santa Rosa, CA 95403 - (707) 526-5370 - Fax (707) 544-6123
Attachment i — Correspondence fr1 1L " to
13
MARIN MUNICIPAL
.:, • DISTRICT
220 Nellen Avenue Corte Madera CA 04025.1160
%viv;v.marimvaterxrg
Telephone: (415) 945-1460
Facsimile: (415) 945-1152
April 6, 2005
Randy Poole
General Manager
Sonoma County Water Agency
P.O. Box 11628
Santa Rosa, CA 95406
Be: Exercise of option contained in Exhibit B, Section 8 entitled "Firm Water Supply"
Supplemental Water Supply Agreement between the Marin Municipal
Water District and the Sonoma County Water Agency
As you know, pursuant to Section 8(e) of its contract with the Sonoma County Water
Agency ("SCWA" or "Agency"), Marin Municipal Water District (the District) has until
June 30, 2005 to exercise the option, described in subparagraph b. of the referenced
section of the subject Agreement, for "an additional 5,000 acre-feet per annum of the
75,000 acre-feet per annum net firm yield of the Warm Springs Dam Project." I met
with my Board last week to discuss the next steps they would like to pursue on this issue,
and they asked me to reiterate to you that they want to secure an additional firm water
supply for our customers. We are strongly considering exercising the option, but need
assurances from the Agency that the result of doing so will be a wise use of ratepayer
funds. To this end, I request that you provide us with an assurance, consistent with
Section 25 of the Agreement, that the SCWA can provide the District with the additional
5,000 afa on a firm basis. If the SCWA determines that it can provide the District with
the additional 5,000 afa of firm supply, we request a thorough explanation of how it
intends to do so.
Given the current context, in which: (1) SCWA has notified its contractors that, due to its
inability to deliver water at the level of contracted entitlement, contractors are requested
to develop their own local supplies; (2) a number of SCWA's contractors are taking water
above their 1997 entitlements, which directly affects the District's ability to take its water
entitlement from the Agency; and (3) the Impairment MOU is currently in effect, which
limits the amount of water both the Agency's contractors and the District can take from
SCWA; should the Board opt to exercise its option, we are uncertain of SCWA's ability
to actually deliver that additional 5,000 afa of firm water supply to the District.
14 recveled
recyclable
Randy Poole, General Manager
Request for Assurance
April 6, 2005
Page 2
In addition to these concerns, we also question whether the Agency could provide the
additional 5,000 afa of firm water supply for the following reasons:
The EIR prepared by the Agency to increase the reliability of its water supplies
has not been finalized following invalidation of the prior EIR by the court. The
Agency has been attempting to complete an EIR for 12 years, without success.
We have been told that the next EIR will also be challenged by concerned
environmental stakeholders. The lack of environmental authorization creates
tremendous uncertainty regarding the Agency's ability to provide the additional
5000afa of firm supply.
2. The constraints in the Agency's transmission system cannot be addressed until
there is a finalized EIR. Given the uncertainty surrounding the creation and
timing of an EIR capable of being implemented, system expansion is
unpredictable.
3. The growth in demand among the Agency's customers will soon exceed the
Agency's permitted water rights. Obtaining additional water from the Russian
River above the 75,000afa currently permitted is highly speculative in light of the
substantial decrease in flow diverted from the Eel River and the anticipated
actions by the State Water Resources Control Board to address ecosystem needs
in the Russian River watershed.
4. The Impairment MOU will expire in September, 2005. There is no assurance that
all of the current signatories will agree to extend the MOU for another term.
Further, local peak month production capacity project anticipated by the MOD
has not been constructed and conservation among other SCWA customers is not
depressing demand sufficiently to meet the needs of the continued growth in
population in the Agency's service area without reducing the water transmission
capacity that should be available to deliver water to the District.
As you know, the District's customers have approved building the conveyance facilities
necessary to secure additional water from the Russian River. The District has expended
substantial funds and made significant infrastructure improvements in preparation for the
installation of that facility and prepared environmental documentation relative thereto.
The District is capable of moving forward with construction of its pipeline. Yet, we do
not want to pursue a project that would cost approximately $20 million dollars in public
funds and may not meet the needs of the District's customers, should the Agency be
unable to actually deliver the additional 5,000 afa of water. Furthermore, the District
does not want to incur a cost of $6.5 million to exercise its option, should the Agency be
unable to perform.
15
Randy Poole, General Manager
Request for Assurance
April 6, 2005
Page 3
In addition to the request for assurance, I would like to meet with you within the next few
days to discuss the terms of the option and how the District and the Agency can cooperate
and collaborate regarding the same. We are anxious to work with the Agency in
providing assurance to our Board and our customers that their needs will be met.
Although we are willing to continue to participate in discussions with the Water Advisory
Committee, given that the District's contract is between the District and the SCWA and
any changes thereto are solely within the discretion of the Agency and the District, we
believe it is critical that our two agencies meet immediately to address the District's
exercise of the option and the District's concerns.
I will call you to set up a time for us to meet to discuss the issues set forth in this letter. I
would also appreciate a written response to this letter within the timeframe provided for
in Section 25 of the Agreement.
Very truly yours,
Paul Helliker
General Manager
cc. MMWD Board of Directors
16
n m_
S
U0, 0 V. a
NU¢-�nE
E` 990
I a a
=E WED
C E
C m L ?
N a _
Ea E,�E
nm�mam
��mvas
v m
Z G= 4 w a
O m- N h E
0 ^ = N m N
>n.ciG14
N
2g.63:
2`2 C-'
aOmO�C
T E = m E2
E�,cmcn
C
Fmr¢O'�
17
_ _ G G
?T Q N
G =
-
OL� Rb
nm m�-
O
m c��
;S m m*-
m�EL
N mj�O
m
n
O
E s,
77, _ a
�a"2',II3n
C O G
,-.M, O
=20 .—
Q m N m
N
HN � e m U
-mo�
a o G
V iC O pO
G
O -E
o m.G m G
Qmw-
w 9
6,2
== .O a C
amE�`N'
W
Six
IL
\
\
18