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HomeMy WebLinkAboutStaff Report 3.J 08/07/2017Agenda Item #3.J � F DATE: August 7, 2017 TO: Honoralegr and Members of the City Council through City Manager FROM: Dan S� J E — Director, Public Works & Utilities Leah G W er, P.E. — Environmental Services Manager SUBJECT: Resolution Authorizing the Submittal of a Financial Assistance Application to the Bureau of Reclamation for the Design and Construction of the Expansion of the Recycled Water Tertiary Treatment System; Authorizing the City Manager to Execute All Necessary Application Documents; and Authorizing the Mayor to Vote to Support the Inclusion of the Project in the North Bay Water Reuse Authority Grant Application RECOMMENDATION It is recommended that the City Council adopt the attached Resolution authorizing the submittal of a financial assistance application to the Bureau of Reclamation for the design and construction of the expansion of the Recycled Water Tertiary Treatment System; authorizing the City Manager to execute all necessary application documents; and authorizing the Mayor to vote to support the inclusion of the project in the North Bay Water Reuse Authority grant application. BACKGROUND Following the adoption by the City of Petaluma of the Recycled Water Master Plan in 2004, the General Plan in 2008, and the certification of the Recycled Water Environmental Impact Report in 2008, the Public Works and Utilities Department staff and consultants have pursued studies, engineering, and funding for the next phases of the recycled water expansion program. On November 16, 2015, Council held a workshop on Recycled Water program plans. The Recycled Water Master Plan and subsequent studies have projected recycled water demands for urban and agriculture uses that exceed the production capacity of the Ellis Creek Water Recycling Facility and the existing "purple pipe" distribution system. In order to take advantage of reuse opportunities, reduce potable water demands, and expand the City's wastewater disposal options, the recycled water expansion program includes increasing tertiary treatment capacity and expanding the urban and agricultural "purple pipe" distribution system. The tertiary filtration and ultraviolet (UV) disinfection system would increase from 4.68 to 6.8 million gallons per day (mgd). The City constructed one portion of the urban recycled water system expansion last year (to serve Kaiser Medical Center and portions of the Oakmead Business Park) using a contribution from Kaiser and Wastewater Enterprise Funds. Another portion of the urban system is in construction (Sonoma Mountain pipeline) funded with a state Proposition 1 grant and Wastewater Enterprise Funds. To assist in funding the recycled water expansion, the City became a member of the North Bay Water Reuse Authority (NBWRA) to pursue federal funding from the U.S. Bureau of Reclamation (USBR) Title XVI program along with other regional funding opportunities. The Title XVI program could provide up to 25% grant funding for construction and related costs. The City has participated in NBWRA since 2013 and the City's recycled water system expansion projects are included in Phase 2 of the NBWRA program. The City has contributed $13M to NBWRA for a scoping study, a feasibility study, environmental review, and program fees. DISCUSSION USBR recently released a Funding Opportunity Announcement for $ l OM in grants for this federal fiscal year. Additional funding opportunities are expected in future years. USBR funding provides an ideal opportunity for the City to finance part of the expansion of the recycled water facilities by leveraging local and state funds. USBR grants can be used to fund up to 25% of eligible project costs, including construction allowances. At least 75% local cost share match must be provided. Funding limitations and program requirements will affect the financing and phasing of the recycled water expansion program. USBR intends to fund 4 -8 projects this year, and NBWRA is competing against 37 other projects for these funds. Projects funded in this funding cycle must complete construction by September 30, 2019. In order to qualify for USBR funding, the Environmental Impact Report/Environmental Impact Statement Record of Decision (ROD) must be completed. The NBWRA Phase 2 ROD is expected to be completed in fall 2018, so this is the first opportunity for the City to apply for USBR funds. No other NBWRA members are submitting funding requests this year. The highest priority project was identified as the expansion of the Tertiary Treatment System consisting of the addition. of five filter cells in. the mirror image (i.e., same size and type) as the currently existing filters and the installation of ultraviolet lights into the existing unused third channel. The estimated construction cost is $5.4M. The estimated cost of this project, using USBR calculations for overhead and other costs is $9M. The requested USBR grant would be $2.25M (25% of total project costs). The design of the tertiary treatment expansion is underway and is expected to be ready to bid in mid -2018. If the City is not awarded the entire requested grant amount in this funding cycle, the remainder can be requested in future cycles. (For example, Napa Sanitation District's full project in NBWRA Phase.1 was funded over four cycles). Future USBR Title XVI funding could include any remaining unfinished elements of the urban distribution system, and the agricultural distribution system. 2 In order to expedite the Proposition 1 funding process, Council is asked to authorize the City Manager to sign all required application materials. FINANCIAL IMPACTS The current action authorizes submittal of the application and supporting documents. If successful, the grant amount will be up to $2,250,000 in support to the current CIP project, C66401416. The current CIP anticipated USBR grants of $4,138,000 for the tertiary treatment and recycled water pipeline expansions through FY 21/22 with the project funding match paid from Wastewater Enterprise Funds. The proposed action is consistent with the current CIP budget. The 5 -year financial forecast model was used to evaluate the impact of the CIP project on future year fund balance reserves. Based on recent savings with other water recycling facility CIP projects and projected revenues, the wastewater enterprise fund balance would dip to a projected low of $12.5 million in FY 20/21 before stabilizing in the $17.5 million range for the next several years. These are considered healthy fund balance levels for a similarly sized utility. ATTACHMENTS 1. Resolution Attachment 1 RESOLUTION AUTHORIZING THE SUBMITTAL OF A FINANCIAL ASSISTANCE APPLICATION TO THE BUREAU OF RECLAMATION FOR THE DESIGN AND CONSTRUCTION OF THE EXPANSION OF THE RECYCLED WATER TERTIARY TREATMENT SYSTEM; AUTHORIZING THE CITY MANAGER TO EXECUTE ALL NECESSARY APPLICATION DOCUMENTS; AND AUTHORIZING THE MAYOR TO VOTE TO SUPPORT THE INCLUSION OF THE PROJECT IN THE NORTH BAY WATER REUSE AUTHORITY GRANT APPLICATION WHEREAS, the City of Petaluma desires to expand its recycled water system to serve additional urban properties to offset potable water use; and WHEREAS, the City of Petaluma desires to expand tertiary treatment capacity to reduce wastewater discharges and provide additional 'recycled water for urban and agricultural uses; and WHEREAS, the expansion of the recycled water treatment and distribution system project (the Project) includes the expansion of the tertiary treatment facilities at the Ellis Creek Water Recycling Facility and the extension of the urban distribution system for delivery of recycled water; and WHEREAS, the City of Petaluma General Plan 2025 recognizes the use of recycled water as a potable water offset and to meet regulatory requirements for wastewater discharge; and WHEREAS, the U.S. Bureau of Reclamation (USBR) has announced the availability of funds for water reuse and recycling projects through Title XVI under the Water Infrastructure Improvements for the Nation Act; and WHEREAS, said funding is intended to provide a more resilient and sustainably managed water infrastructure; and WHEREAS, said funding is available for water recycling projects, including, but not limited to, treatment, storage, conveyance, and distribution facilities for potable and non - potable recycling projects; and WHEREAS, said funding includes grants at reasonable terms; and WHEREAS, the City of Petaluma will comply with all applicable laws and regulations relating to the project, including the California Environmental Quality Act prior to implementation of the Project; and WHEREAS, various documents are required to be filed with the USBR related to the Title XVI funding associated with the Project. NOW, THEREFORE, BE IT RESOLVED: 1. That the City Council authorizes the submittal of a financial assistance application with the USBR for the design and construction of the expansion of the recycled water treatment system Project. 2. That the City Manager is authorized to sign all necessary Project application documents. 3. That the Mayor is authorized to vote to support the inclusion of the project in the North Bay Water Reuse Authority grant application.