DATE: December 1, 2015
TO: Mayor and City Council
FROM: Director of Utilities & Environmental Services
SUBJECT
Title
Recycled Water Project: Introduction of an Ordinance regarding Recycled Water Use
End
RECOMMENDATION
Recommendation
That the City Council introduces the attached Ordinance to add Article 6 to Chapter 11 of the Hayward Municipal Code regarding Recycled Water Use, as required by the State Water Resources Control Board (SWRCB) for the Recycled Water Project State Revolving Fund (SRF) construction loan.
Body
SUMMARY
On May 19, 2015, the City Council adopted Resolution 15-072, authorizing the City Manager to sign and file a SRF Loan application for an amount not to exceed $12 million for the design and construction of the Recycled Water Project. Since that time, staff has submitted four parts of the application that include General Information, Technical, Environmental, and Financial Security packages. In order to provide assurance to the SWRCB that there will be a sufficient market for recycled water, applicants are required to submit either user agreements between the City and users or an adopted ordinance that mandates recycled water use when the City determines that a property lies within the City’s recycled water service area and that such use is appropriate and technically feasible. Staff recommends adoption of an Ordinance at this time with the understanding that the City will work with individual affected customers to develop mutually satisfactory arrangements for delivery of recycled water, either through formal user agreements or some other appropriate mechanism.
BACKGROUND
The City prepared a Recycled Water Feasibility Study in 2007 that provided a conceptual overview of the potential for delivering highly treated wastewater for irrigation and other industrial uses. Based on the results of the Feasibility Study, a Recycled Water Facility Plan (Plan), partially funded by a grant from the SWRCB and the United States Bureau of Reclamation (USBR), was completed in 2009 and updated in September 2013.
The Plan identifies potential sites where recycled water may be used for irrigation or industrial purposes. The Plan also includes a conceptual treatment and distribution system, and estimates project costs based on an assessment of prevailing conditions. The original Plan envisioned the City receiving excess recycled water from the Russell City Energy Center (RCEC), operated by Calpine, which receives secondary treated wastewater from the City and utilizes its own facilities to treat the wastewater to tertiary level in its cooling process. Staff continues to have discussions with Calpine representatives to this end; however, a final determination in this regard is yet to be made. For the purposes of the SRF loan application, it is assumed that recycled water will be provided by the RCEC.
In March 2014, the SWRCB announced new low-interest financing terms for water recycling projects to help California produce an additional 150,000 acre-feet of recycled water annually, one of several actions Governor Brown called for in the Drought State of Emergency declaration. The SWRCB’s Division of Financial Assistance is offering $800 million in loans at one percent interest, which is less than half the current interest rate of traditional SRF financing, for water recycling projects that can be completed within three years of the Governor’s January 17, 2014 drought declaration. Applications for funding must be submitted by December 2, 2015.
The City Council adopted Resolution 14-167 on October 14, 2014, which was superseded by Resolution 15-072 on May 19, 2015 to increase the not-to-exceed amount of the loan and authorizing the City Manager to sign and file an application for a SRF loan for funding up to $12 million. The authorization to file an application was the first procedural step in beginning the technical, financial, and environmental review processes with the SWRCB. To date, staff has submitted four packages of the application including General Information, Technical, Environmental, and Financial Security packages, which are now under review by SWRCB staff.
The project currently consists of installing a new Recycled Water Facility (RWF) located at the City’s Water Pollution Control Facility (WPCF), with capacity to deliver an estimated 290 acre-feet per year of recycled water (equivalent to nearly ninety-four million gallons per year, or 260,000 gallons per day) to twenty-four locations within the City. The project would include approximately 1.5 miles of new eight-inch diameter distribution lines to the north and south of the WPCF, rehabilitation, repurposing, and connection to an existing and abandoned Shell Oil Pipeline, and over three miles of lateral pipelines with connections to customers. Upon completion, recycled water would be delivered to approximately twenty-four sites primarily for irrigation, with some industrial uses in cooling towers and boilers. The City is pursuing a long-stalled agreement with Shell Oil to purchase an existing abandoned eight-inch diameter pipeline that could form the backbone of the distribution system.
The City completed an environmental assessment in October 2014 and adopted an Initial Study/Mitigated Negative Declaration on December 16, 2014, in compliance with the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA). Staff is now planning to prepare a request for proposals for the design of the recycled water distribution system.
DISCUSSION
The City has recently been notified that it must provide the SWRCB with assurance that a viable recycled water market exists within the City to support construction of the project. This assurance may be provided in one of two ways: 1) executed recycled water user agreements with a majority of the customers identified in the Recycled Water Facilities Plan; or 2) an adopted Water Recycling Ordinance that includes mandatory use provisions to require existing and future customers to receive recycled water for appropriate irrigation and industrial use if it is determined that the site is located within the City’s recycled water service area and can accommodate recycled water. The market assurance must be provided to the SWRCB in early December in order to complete the City’s application.
The attached draft Ordinance includes all of the elements required in order to be deemed acceptable to the SWRCB, specifically:
• The types of use of water for which recycled water must be used;
• The conditions under which recycled water must be used or new development must be plumbed for future recycled water use;
• Procedures for determining the water users required to either convert to recycled water service or to be plumbed to accept recycled water upon new water service;
• Procedures for notifying potential users that they are subject to the ordinance, including information about the project, responsibilities of the users, the price of recycled water, and description of on-site retrofit requirements.
• Procedures for requesting waivers and penalties for non-compliance with the ordinance.
In terms of implementing the ordinance, the City will identify recycled water service areas, within which recycled water can feasibly be delivered in lieu of potable water, either as part of the first project or in the future. When facilities are constructed, the City would determine which existing users are required to utilize recycled water for permitted uses, unless there is a compelling reason why this is not feasible. New development would be plumbed to accept recycled water. Procedures for notifying users of their obligations and responsibilities are also included in the draft Ordinance.
Adoption of the Recycled Water Use Ordinance will mandate recycled water use in the City, where appropriate, and is a necessary action in order to secure State funding for construction. However, staff recognizes that customer acceptance of recycled water and their perception of recycled water as beneficial to their operation is critical to the program’s success. Customers within the initial recycled water service area were surveyed as part of development of the Facilities Plan, and were generally agreeable to the use of recycled water for irrigation and some industrial uses. Now that the City is further along in its planning, a meeting with potential users has been scheduled to review the scope of the project, schedule for completion, and necessary on-site facility retrofits. Staff will report back to Council on the outcome of the meeting, including any concerns raised by customers.
It may be that a small number of customers within the recycled water service area have legitimate reasons for continuing to use potable water. The Ordinance does include procedures for appealing the City’s decisions if customers object to the use of recycled water. Staff will also return to Council at a future date with an Ordinance to implement permitting processes and other related procedures necessary to ensure a smooth transition from the use of potable water to recycled water.
ECONOMIC IMPACT
The Project would provide recycled water for irrigation and cooling purposes to approximately twenty-four customers that includes twenty-two commercial customers near the WPCF, the Hayward Executive Airport and the Fire Training Center. This service will reduce those customers’ potable water use and can provide cost savings to the businesses that would receive recycled water. Staff will evaluate the cost of treating and delivering recycled water and recommend a rate structure that would provide an incentive for eligible customers to use recycled water. Given that recycled water should be priced below potable water, at this time, it is unknown if those rates would cover the entire costs of the project. The benefit this project will provide to non-eligible customers is that with the availability of recycled water delivery, and the subsequent reduction in potable water use, there would be increased water supply. Given the current drought conditions, this factor could be significant in allowing for greater flexibility in the City’s water supply.
FISCAL IMPACT
A Capital Improvement Project, titled “Recycled Water Treatment and Distribution Facility,” is included in the current Capital Improvement Program’s Sewer Improvement Fund. The project budget is $12 million, with an anticipated $11,594,760 SRF loan proposed to finance the entire project. The City also intends to pursue federal funding from the US Bureau of Reclamation under Title XVI, as well as other grant opportunities for the final design and construction of the RWF. If grant money becomes available from other sources, the amount of SRF loan required will be reduced, thus providing more flexibility to move forward with the project.
This project will not utilize any General Fund monies and the debt service incurred will be obligated to the Wastewater Enterprise Fund.
NEXT STEPS
Assuming City Council’s approval and introduction of the attached Ordinance, it will be brought back to the Council for adoption during its next meeting. Staff will proceed with completing the final part of the SRF loan application process, which includes submittal of the adopted Ordinance. An introductory meeting was held at City Hall on November 20 to discuss the ordinance with potential users. Staff discussed the ordinance and responded to questions. At the appropriate time, staff will also enter into formal discussions and outreach to recycled water customers, including Hayward Unified School District and Hayward Area Recreation District, to develop individual user agreements in keeping with the Ordinance provisions.
Prepared by: Suzan England, Senior Utilities Engineer
Staff contact
Recommended by: Alex Ameri, Director of Utilities & Environmental Services
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Approved by:
Fran David, City Manager
Attachments:
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Attachment I |
Draft Ordinance Regarding Recycled Water Use |