LAFCO
Mendocino County Waterworks District No. 2, 2024
Read the report at Local Agency Formation Commissions ↗
I
Mendocino County Waterworks Photo Credit: Mike Nelson
District No. 2 (Anchor Bay)
Municipal Service Review and
Sphere of Influence Update
Prepared By: Workshop: March 4, 2024
Mendocino LAFCo Public Hearing: July 1, 2024
Adopted: July 1, 2024
200 South School Street
LAFCo Resolution No: 2024-25-01
Ukiah, California 95482
http://www.mendolafco.org/
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Mendocino County Waterworks District No. 2 - Anchor Bay Mendocino County Waterworks No 2 Highways
Sphere of Influence Roads o
Source: This map was prepared by the Mendocino County Division of Information Services GIS Program, June 26, 2024. 0 75 150 300
Note: This map is not a survey product. Parcels Streams Feet
TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................................................... 1
List of Tables ............................................................................................................................................ 2
List of Figures .......................................................................................................................................... 2
ACRONYMS ............................................................................................................................................. 4
1 INTRODUCTION ............................................................................................................................ 1-1
1.1 Local Agency Formation Commission ..................................................................................... 1-1
1.2 Mendocino LAFCo ................................................................................................................. 1-1
1.3 Municipal Service Review ...................................................................................................... 1-2
1.4 Sphere of Influence ............................................................................................................... 1-3
1.5 Senate Bill 215 ...................................................................................................................... 1-3
2 AGENCY OVERVIEW ...................................................................................................................... 2-7
2.1 History .................................................................................................................................. 2-7
2.1.1 Formation...................................................................................................................... 2-7
2.1.2 Boundary ....................................................................................................................... 2-7
2.1.3 Services ......................................................................................................................... 2-7
2.2 Government Structure .......................................................................................................... 2-8
2.2.1 Governing Body ............................................................................................................. 2-8
2.2.2 Public Meetings ............................................................................................................. 2-9
2.2.3 Standing Committees .................................................................................................. 2-10
2.2.4 Public Outreach ........................................................................................................... 2-10
2.2.5 Complaints .................................................................................................................. 2-10
2.2.6 Transparency and Accountability ................................................................................. 2-11
2.3 Operational Efficiency ......................................................................................................... 2-12
2.3.1 Management and Staffing ........................................................................................... 2-12
2.3.2 Agency Performance.................................................................................................... 2-12
2.3.3 Regional and Service-Specific Collaboration ................................................................. 2-13
2.3.4 Shared Services and Facilities....................................................................................... 2-14
2.3.5 Governmental Structure and Community Needs .......................................................... 2-17
2.4 Finances .............................................................................................................................. 2-18
2.4.2 Long Term Financial Considerations ............................................................................. 2-26
2.4.3 Current Fiscal Health ................................................................................................... 2-27
2.5 Growth ................................................................................................................................ 2-28
2.5.1 Present and Planned Land Use and Development ........................................................ 2-28
2.5.2 Existing Population ...................................................................................................... 2-31
2.5.3 Projected Growth ........................................................................................................ 2-31
2.5.4 California Housing Goals .............................................................................................. 2-31
2.6 Disadvantaged Unincorporated Communities ...................................................................... 2-32
3 MUNICIPAL SERVICES ................................................................................................................... 3-1
3.1 Service Overview ................................................................................................................... 3-1
3.1.1 Services ......................................................................................................................... 3-1
3.1.2 Outside Agency Services ................................................................................................ 3-1
3.2 Wastewater Services ............................................................................................................. 3-1
3.2.1 Service Overview ........................................................................................................... 3-1
3.2.2 System History ............................................................................................................... 3-2
3.2.3 Facilities and Infrastructure ........................................................................................... 3-3
3.2.4 Service Adequacy .......................................................................................................... 3-6
3.3 Determinations ................................................................................................................... 3-11
3.3.1 MSR Review Factors ..................................................................................................... 3-11
4 SPHERE OF INFLUENCE ................................................................................................................. 4-1
4.1 Mendocino LAFCo Policies ..................................................................................................... 4-1
4.2 Existing Sphere of Influence .................................................................................................. 4-3
4.2.1 Study Areas ................................................................................................................... 4-3
4.2.2 Area of Interest Designation .......................................................................................... 4-4
4.3 Proposed Sphere of Influence................................................................................................ 4-4
4.4 Consistency with LAFCo Policies ............................................................................................ 4-4
4.5 Determinations ..................................................................................................................... 4-4
4.5.1 Present and planned land uses ...................................................................................... 4-5
4.5.2 Present and probable need for facilities and services in the area ................................... 4-5
4.5.3 The present capacity of public facilities and adequacy of public services that the agency
provides or is authorized to provide ............................................................................................. 4-5
4.5.4 The existence of any social or economic communities of interest in the area if the
Commission determines that they are relevant to the agency ...................................................... 4-6
4.5.5 The present and probable need for public facilities and services of any disadvantaged
unincorporated communities ....................................................................................................... 4-6
4.6 Recommendation .................................................................................................................. 4-6
5 Bibliography ................................................................................................................................. 5-1
6 ACKNOWLEDGEMENTS ................................................................................................................ 6-1
6.1 Report Preparation ................................................................................................................ 6-1
6.2 Assistance and Support ......................................................................................................... 6-1
7 APPENDICES ................................................................................................................................. 7-1
7.1 Appendix A – Open Government Resources........................................................................... 7-1
7.2 Appendix B – Housing Legislation Trends and Results ............................................................ 7-2
7.3 Appendix C – District Financial Audits .................................................................................... 7-5
List of Tables
Table 1-1: Current Mendocino LAFCO Commissioners, 2024 ................................................................. 1-1
Table 2-1: MCWD2 Profile .................................................................................................................... 2-7
Table 2-2: Current District Directors ..................................................................................................... 2-8
Table 2-3: MCWD2 Financial Summary ............................................................................................... 2-18
Table 2-4: Cash Accounts .................................................................................................................... 2-19
Table 3-1: Wastewater Flow Data 2019-2023 ....................................................................................... 3-2
Table 3-2: SWRCB – MCWD2 Regulatory Measures............................................................................... 3-6
Table 3-3: SWRCB – MCWD2 Spill Incidents .......................................................................................... 3-7
Table 3-4: SWRCB – MCWD2 Violations ................................................................................................ 3-9
Table 7-1: Mendocino County RHNA Allocations ................................................................................... 7-3
List of Figures
Figure 1-1: Regional Map ...................................................................................................................... 1-5
Figure 1-2: Mendocino County Waterworks District No. 2 Boundary ..................................................... 1-6
Figure 2-1: Mendocino County Water and Sanitation Districts and Companies ................................... 2-16
Figure 2-2: District Revenues and Expenses ........................................................................................ 2-22
Figure 2-3: Revenues Over/Under Expenses ....................................................................................... 2-23
Figure 2-4: District Assets ................................................................................................................... 2-23
Figure 2-5: District Liabilities ............................................................................................................... 2-24
Figure 2-6: District Net Position .......................................................................................................... 2-24
Figure 2-7: District Cash Accounts ....................................................................................................... 2-25
Figure 2-8: Mendocino County General Plan Land Use Mapping ......................................................... 2-29
Figure 2-9: Mendocino County Zoning Map ........................................................................................ 2-30
Figure 3-1: District’s Ocean Discharge Location ..................................................................................... 3-2
Figure 3-2: Aerial View of Wastewater Treatment Plant........................................................................ 3-3
Figure 3-3: District Facilities Map .......................................................................................................... 3-4
Figure 4-1 MCWD 2 Sphere of Influence................................................................................ 4-7
ACRONYMS
ACS American Census Survey
ADU Accessory Dwelling Unit
AMI Area Median Income
AOI Area of Interest
APR Annual Progress Report
BOS Mendocino County Board of Supervisors
CALAFCO California Association of Local Agency Formation Commissions
CalPERS California Public Employees Retirement System
CDP Census Designated Place
CEQA California Environmental Quality Act
CKH Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000
CPUC California Public Utilities Commission
CRP Capital Replacement Plan
CSDA California Special Districts Association
DOF Department of Finance
DUC Disadvantaged Unincorporated Community
DWR Department of Water Resources
EDU Equivalent Dwelling Unit
FY Fiscal Year
GC California Government Code
GCSD Gualala Community Services District
GPD Gallons per day
GPD Gallons per minute
HCD Department of Housing and Community Development
HOA Homeowners Association
I&I Infiltration and inflow
IRWM Integrated Regional Water Management
JADU Junior Accessory Dwelling Unit
JPA Joint Powers Authority
LAFCo Local Agency Formation Commission
MCOG Mendocino Council of Governments
MCWD2 Mendocino County Waterworks District No. 2
MGD Million gallons per day
MHI Median Household Income
MPO Metropolitan Planning Organization
MSR Municipal Service Review
MWCP Mandatory Water Conservation Program
NGWC North Gualala Water Company
NPDES National Pollutant Discharge Elimination System
RCAC Rural Community Assistance Corporation
RHNA Regional Housing Needs Allocation
RTP Regional Transportation Plan
RWQCB Regional Water Quality Control Board
SB Senate Bill
SDLF Special District Leadership Foundation
SDRMA Special District Risk Management Association
SDUC Severely Disadvantaged Unincorporated Community
SOI Sphere of Influence
SSO Sanitary Sewer Overflows
SWRCB State Water Resources Control Board
USDA United States Department of Agriculture
WAT California Water Code
WQO Water Quality Order
WWTP Wastewater Treatment Plant
INTRODUCTION 1-1
1 INTRODUCTION
1.1 Local Agency Formation Commission
The Local Agency Formation Commission (LAFCo) is a quasi-legislative, independent local agency
established by State legislation in 1963 to oversee the logical and orderly formation and development of
local government agencies including cities and special districts. There is one LAFCo for each county in
California.
LAFCo is responsible for implementing the Cortese-Knox-Hertzberg Local Government Reorganization Act
of 2000 (CKH) under California Government Code (GC) Section (§) 56000 et. seq. with goals to promote
orderly growth, prevent urban sprawl, preserve agricultural and open space lands, and oversee efficient
provision of municipal services.
LAFCo has the authority to establish and reorganize cities and special districts, change their boundaries
and authorized services, allow the extension of public services, perform municipal service reviews, and
establish spheres of influence. Some of LAFCo’s duties include regulating boundary changes through
annexations or detachments and forming, consolidating, or dissolving local agencies.
1.2 Mendocino LAFCo
The CKH Act provides for flexibility in addressing State regulations to allow for adaptation to local needs.
Each LAFCo works to implement the CKH Act to meet local needs through the flexibility allowed in how
state regulations are implemented through establishment of local policies to address the unique
conditions of the county. As part of this process, Mendocino LAFCo has adopted policies, procedures and
principles that guide its operations. These policies and procedures can be found on Mendocino LAFCo’s
website1.
Mendocino LAFCo has a public Commission with seven regular Commissioners and four alternate
Commissioners. The Commission is composed of two members of the Mendocino County Board of
Supervisors, two City Council members, two Special District Board of Directors members, and one Public
Member-At-Large. The Commission also includes one alternate member for each represented category.
Table 1-1 below lists the current Commissioners, the organization they represent, if they are an alternate,
and the date their term expires.
Table 1-1: Current Mendocino LAFCO Commissioners, 2024
Commissioner Name Position Representative Agency Term Expires
Gerardo Gonzalez Commissioner City 2026
Candace Horsley Commissioner Special Districts 2026
Glenn McGourty Commissioner County 2024
Maureen Mulheren Chair County 2026
Mari Rodin Commissioner City 2025
Gerald Ward Vice-Chair/Treasurer Public 2026
Vacant Commissioner Special Districts 2024
Francois Christen Alternate Special District 2026
Douglas Crane Alternate City 2025
John Haschak Alternate County 2027
1 Mendocino LAFCo Policies and Procedures Manual: http://www.mendolafco.org/policies.html.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
INTRODUCTION 1-2
Commissioner Name Position Representative Agency Term Expires
Vacant Alternate Public 2027
Source: Mendocino LAFCo
1.3 Municipal Service Review
The CKH Act requires each LAFCo to prepare a Municipal Service Review (MSR) for its cities and special
districts (GC §56430)2. MSRs are required prior to and in conjunction with the update of a Sphere of
Influence (SOI)3. This review is intended to provide Mendocino LAFCo with the necessary and relevant
information related to the services provided by Mendocino County Waterworks District No. 2
(MCWD2/District).
An MSR is a comprehensive analysis of the services provided by a local government agency to evaluate
the capabilities of that agency to meet the public service needs of their current and future service area.
An MSR must address the following seven factors:
1. Growth and population projections for the affected area.
2. The location and characteristics of any disadvantaged unincorporated communities within or
contiguous to the sphere of influence.
3. Present and planned capacity of public facilities, adequacy of public services, and infrastructure
needs or deficiencies including needs or deficiencies related to sewers, municipal and industrial
water, and structural fire protection in any disadvantaged unincorporated communities within or
contiguous to the sphere of influence.
4. Financial ability of agencies to provide services.
5. Status of, and opportunities for, shared facilities.
6. Accountability for community service needs, including governmental structure and operational
efficiencies.
7. Any other matter related to effective or efficient service delivery, as required by commission
policy.
Municipal Service Reviews include written statements or determinations with respect to each of the seven
mandated areas of evaluation outlined above. These determinations provide the basis for LAFCo to
consider the appropriateness of a service provider’s existing and future service area boundary. This MSR
Update studies the wastewater services provided by MCWD2. This review also provides technical and
administrative information to support Mendocino LAFCo’s evaluation of the existing boundary for the
District.
With this MSR, Mendocino LAFCo can make informed decisions based on the best available data for the
service provider and area. Written determinations (similar to ‘findings’), as required by law, are presented
in Chapter 3.3. LAFCo is the sole authority regarding approval or modification of any determinations,
2 GC §56430 text can be found here: https://law.justia.com/codes/california/2022/code-gov/title-5/division-3/part-2/chapter-
4/section-56430/
3 Assembly Committee on Local Government, “Guide to the Cortese-Knox-Hertzberg Local Government Reorganization Act of
2020.” December 2023.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
INTRODUCTION 1-3
policies, boundaries, spheres of influence, reorganizations, and provision of services. This MSR/SOI study
makes determinations in each of the seven mandated areas of evaluation for MSRs.
Ideally, an MSR will support LAFCo and will also provide the following benefits to the subject agencies:
• Provide a broad overview of agency operations including type and extent of services provided;
• Serve as a prerequisite for a SOI Update;
• Evaluate governance options and financial information;
• Demonstrate accountability and transparency to LAFCo and to the public; and
• Allow agencies to compare their operations and services with other similar agencies.
1.4 Sphere of Influence
The CKH Act requires LAFCo to adopt a Sphere of Influence (SOI) for all local agencies within its jurisdiction.
An SOI is “a plan for the probable physical boundary and service area of a local agency or municipality as
determined by the Commission” (GC §56076)4.
When reviewing an SOI for a municipal service provider, under GC §56425(e)5, LAFCo will consider the
following five factors:
1. The present and planned land uses in the area, including agricultural and open space lands.
2. The present and probable need for public facilities and services in the area.
3. The present capacity of public facilities and adequacy of public services that the agency provides
or is authorized to provide.
4. The existence of any social or economic communities of interest in the area if the commission
determines that they are relevant to the agency.
5. For an update of a sphere of influence of a city or special district that provides public facilities or
services related to sewers, municipal and industrial water, or structural fire protection, that occurs
pursuant to GC §56425(g) on or after July 1, 2012, the present and probable need for those public
facilities and services of any disadvantaged unincorporated communities within the existing
sphere of influence.
Sphere of Influence studies include written statements or determinations with respect to each of the five
mandated areas of evaluation outlined above. These determinations provide the basis for LAFCo to
consider the appropriateness of establishing or modifying a service provider’s SOI or probable future
boundary.
1.5 Senate Bill 215
Senate Bill (SB) 215 (Wiggins) requires LAFCo to consider regional transportation plans and sustainable
community strategies developed pursuant to SB 375 before making boundary decisions. SB 375
(Sustainable Communities and Climate Protection Act) requires each Metropolitan Planning Organization
(MPO) to address regional greenhouse gas emission reduction targets for passenger vehicles in their
4 GC §56076 text can be found here: https://law.justia.com/codes/california/2022/code-gov/title-5/division-3/part-1/chapter-
2/section-56076/.
5 GC § 56425-56434 text can be found here: https://law.justia.com/codes/california/2010/gov/56425-56434.html.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
INTRODUCTION 1-4
Regional Transportation Plan (RTP) by integrating planning for transportation, land use, and housing in a
sustainable communities strategy.
Mendocino County is not located within an MPO boundary and therefore is not subject to the provisions
of SB 375. However, the Mendocino Council of Governments (MCOG) supports and coordinates the local
planning efforts of Mendocino County and the cities of Fort Bragg, Point Arena, Ukiah, and Willits to
address regional housing and transportation needs and helps provide a framework for sustainable
regional growth patterns through the 2018 Mendocino County Regional Housing Needs Allocation (RNHA)
Plan and Vision Mendocino 2030 Blueprint Plan. MCOG is also responsible for allocating regional
transportation funding to transportation improvement projects consistent with the 2017 RTP for
Mendocino County.
Mendocino County and the cities of Fort Bragg, Point Arena, Ukiah, and Willits are the local agencies
primarily responsible for planning regional growth patterns through adoption and implementation of
general plan and zoning regulations. While Mendocino County is not subject to the provisions of SB 375,
LAFCo will review applicable regional transportation and growth plans when considering a change of
organization or reorganization application.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
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AGENCY OVERVIEW 2-7
2 AGENCY OVERVIEW
Table 2-1: MCWD2 Profile
Agency Name: Mendocino County Waterworks District No. 2
General Manager: Chris Troyan, contracted with Gualala Community Services District
Board President: Linda-Marie Koza
Office Location: GCSD Office 39150 S Highway 1, Suite 3, Gualala CA 95445
Mailing Address: PO Box 104, Gualala CA 95445
Phone Number: Office: (707) 884-1715
GM: (559) 679-3604 Chris Troyan
Board President: (415) 717-3568
Website: None; interim webpage on GCSD’s website for District Board
agendas and minutes at https://gualalacsd.org/mcwd2
Email: Ms. Koza: linda@lmkoza.com; GCSD GM: ctroyan@gualalacsd.org
Date of Formation: 1958
Agency Type: Independent Special District, Single-Service Provider
Services Provided: Sewer collection and treatment
Enabling Legislation California Water Code Division 16
Board Meeting Schedule: Every 3rd Thursday of the month, at Coast Life Support District,
38901 Ocean Drive, Gualala 95445
(RFI, 2023)
2.1 History
2.1.1 Formation
The Mendocino County Waterworks District No. 2 (MCWD2/District) was formed on April 8, 1958, under
California Water Code (WAT) Section (§) 55100, by Mendocino County Board of Supervisors Resolution
No. 3110 for the sole purpose of providing wastewater service to the Anchor Bay community. The District
was governed by the Board of Supervisors (BOS) until July 1, 1996 when an elected MCWD2 Board of
Directors was granted all the powers previously conferred upon the Board of Supervisors (WAT
§55310.2)6.
2.1.2 Boundary
The District is in an unincorporated area of southwestern Mendocino County just north of the community
of Gualala. The District serves the community of Anchor Bay, which is a Census Designated Place (CDP)
(see Figure 1-2).
There have been no documented changes to the District boundaries since its original formation.
2.1.3 Services
The MCWD2 is empowered to provide wastewater services to the coastal, unincorporated community of
Anchor Bay. Services include the collection, treatment, and disposal of wastewater generated by
residential and commercial connections within the service area, and maintenance of related facilities and
equipment. For information regarding the District’s services and facilities, refer to Section 3.2.
6 WAT §55310.2 text can be viewed here: https://law.justia.com/codes/california/2022/code-wat/division-16/part-3/chapter-
1/section-55310-2/.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
AGENCY OVERVIEW 2-8
2.1.3.1 LATENT POWERS
Latent powers are those services, functions, or powers authorized by the principal act under which the
District is formed, but that are not being exercised or authorized by the Local Agency Formation
Commission (LAFCo). Under Division 16 of the California Water Code (WAT §55330), latent powers
available to County Waterworks Districts include water services, reclamation of saline water, and
operation of recreational facilities in connection with water bodies owned or controlled by the District.
The MCWD2 is a single-service provider delivering wastewater services only.
Any expansion of services would necessitate prior approval from LAFCo through an application for
activation of latent powers, which generally follows the normal Commission proceedings for a change of
organization or reorganization (GC §56650 et seq.). Water service for the service area of the District is
currently provided by the North Gualala Water Company (NCWC), a private entity. There are no
recreational opportunities for the District in connection with existing facilities.
2.2 Government Structure
2.2.1 Governing Body
The Board of Directors is the legislative body for the District and is responsible for establishing policy,
adopting and amending the annual budget, enacting ordinances, adopting resolutions, and appointing
committees.
The Board had only two serving members until the beginning of 2023, primarily due to limited numbers
of residents meeting the eligibility requirements. According to WAT §55310.2, the Board of Directors of
the MCWD2 shall consist of five members, elected at large. Board members must be residents of the
District and registered to vote in Mendocino County at the time of election and throughout their four-
year terms. The District has only recently achieved a full board.
The District is currently governed by a five-member Board of Directors elected at-large to serve staggered
four-year terms (see Table 2-2). Of the current five board members, two were appointed by the County
BOS (Wieneke and Lemmon) and two were appointed by the MCWD2 Board (McDonnell and Koza). It is
unknown how Board Member Shelby was appointed.
Table 2-2: Current District Directors
First Year of Term Serving
Name Office/Position Service Expiration Consecutive Terms
Alex McDonnell Vice President 02/15/24 6/30/26 No
Jens Grant Shelby Board Member Unknown 6/30/26 Yes
Linda-Marie Koza President 7/20/23 6/30/28 Yes
Lisa Wieneke Secretary 10/19/23 6/30/26 No
Donna Lemon Board Member 10/19/23 6/30/28 No
Source: RFI7
7 Request for Information responses provided by District Board President Linda-Marie Koza in December 2023.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
AGENCY OVERVIEW 2-9
California Water Code §55310.2 governs the process for appointment of Board of Director seats vacated
prior to the scheduled term expiration date8. Any vacancy on the Board, other than upon the expiration
of a term, shall be filled by a majority vote of the directors. However, no vacancy shall be filled by less
than three member votes. If the Board fails to fill a vacancy within 60 days of the vacancy, or if the
membership of the board is less than four, the BOS may appoint members to fill the vacancies. Appointed
members shall serve until the next District election at which time the remainder of the unexpired term
shall be filled by election in the manner provided in the code.
The Board of Directors elects officer positions annually at the first regular meeting of the calendar year.
Officer positions include President, Vice President, and Secretary. The Board may create additional offices
and elect Board members to fill those offices, provided that no Board member holds more than one office.
District Board members do not receive compensation for their public service or a stipend for attending
meetings; WAT §55305 sets allowable compensation for the Board of Directors.
The Board currently has no vacancies, but as a small district generally has difficulty filling vacancies due
to the eligibility requirement that Board members be, and remain, residents of the District and registered
voters in the County throughout their terms. As discussed in Section 2.5, much of the District is comprised
of vacation homes or short-term rentals with a small number of full-time residents who would qualify to
sit on the District Board. This is a widespread problem for other small service providers within the region
and throughout rural areas of California. Prior to January 2023, the Board had been unable to meet its full
Board requirements for years and was operating with only two to three members.
Only one of the Board members has served the District for multiple consecutive terms, which can indicate
difficulty with retaining eligible residents that meet the requirements to serve on the Board. Members
who serve multiple terms could offer some benefit to the District through the establishment of long-
standing working relationships in the community, historical knowledge of the organization, and
maintaining institutional knowledge of the District. The inability of the District to fill vacancies in the
recent past could signify future difficulties with filling Board seats and maintaining adequate services.
Without a full Board, the conduct of regular District business is difficult and important planning and
implementation of services may suffer.
2.2.2 Public Meetings
In accordance with the Brown Act, all District Board meetings are open to the public and are publicly
posted a minimum of 72 hours prior to regular meetings, or a minimum of 24 hours prior to special
meetings.
Public notices and meeting agendas are posted on a public board in front of the Anchor Bay Market and
meeting dates/times and location are listed in the Independent Coast Observer. The District encourages
the public to communicate with the District via email for information. In addition to timely public posting,
agendas are emailed to all customers. The Board meets at the Coast Life Support office in Gualala, which
is wheelchair-accessible, and all regular meetings are open to the public via Zoom. Almost all of the
District’s residential customers are members of a Homeowners Association (HOA). Agendas are also sent
to HOA members and District business is reported at quarterly HOA meetings. For District customers who
8 See water code text here: https://law.justia.com/codes/california/2022/code-wat/division-16/part-3/chapter-1/section-55310-
2/.
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are not members of an HOA, the District communicates individually by email to encourage their
attendance at Board meetings in person or on Zoom. Additionally, the District has recruited community
members to serve on the three Citizens Advisory Committees described below (see Section 2.2.3).
Public meeting information, including past agendas, and approved meeting minutes are available on the
Gualala Community Services District website for the year 2023 (https://gualalacsd.org/mcwd2). Minutes
are kept for all District Board of Directors meetings by the Board Secretary or President and are adopted
at a subsequent meeting.
2.2.3 Standing Committees
Committees assist in carrying out various functions of local government. The District appointed a Budget
Committee in March 2024 consisting of two board members and contract staff.
However, the Board has established three Citizens Advisory Committees, formed with a combination of
Board and community members, to assist the District in creating necessary governance documents as
follows: 1) Policy Guidelines, 2) Personnel Manual, and 3) Conditions of Use Ordinance.
2.2.4 Public Outreach
With the passage of Senate Bill (SB) 929 in 2018, all special districts are required to establish and maintain
a website with specific information and accessibility requirements by January 2020. A grant was offered
to the District by the California Special Districts Association (CSDA) to develop and maintain a website, but
the District Board decided that the resources required to set up and maintain a fully compliant website
exceeded the capacity of both contract staff and Board volunteers. SB 929 does allow for special districts
to exempt themselves from the website requirements upon adoption of a resolution declaring that a
hardship exists that prevents the district from establishing or maintaining a website. The District adopted
such a resolution at its January 18, 2024, meeting, and will review the decision every January so long as
the hardship exists9.
However, with the recent contractual relationship with the Gualala Community Services District (GCSD)
for management, operations and administrative support, the GCSD added a landing page to their website
to host MCWD2’s 2023 and 2024 meeting agendas and minutes for public reference. Eventually the
District intends to post financial reports and Prop 218 rate information as well.
2.2.5 Complaints
Complaints may be directed to the District Board President or contracted General Manager. No
complaints have been received since current District management and board leadership have been in
place, e.g., calendar year 2023. It is not known if there were any complaints made prior to this time.
The Board is currently developing Policy Guidelines to be adopted sometime this year, which contains the
following draft comprehensive complaint procedure:
1) An individual with a complaint should first discuss the matter with the General Manager to resolve
the matter informally, if possible.
2) If an individual registering a complaint is not satisfied with the disposition of the complaint by the
General Manager, it shall be forwarded to the Board President. At the option of the General
9 Senate Bill No. 929 Section 53087.8 text can be found here:
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB929
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Manager, he/she may conduct conferences and take testimony or written documentation in the
resolution of the complaint. The General Manager shall memorialize his/her decision in writing,
providing the individual registering the complaint with a copy.
3) If an individual filing a complaint is not satisfied with the disposition of the matter by the General
Manager, he/she may request consideration by the Board of Directors by filing said request in
writing within ten (10) days of receiving the General Manager’s decision. The Board may consider
the matter at its next regular meeting, call a special meeting, or decline to consider the matter
further. In deciding, the Board may conduct conferences, hear testimony, and review the
materials provided to the General Manager. The Board’s final decision shall be memorialized in
writing, copied to the individual registering the complaint. The action of the Board, including an
action to decline to consider a complaint, is the last action of the District, not subject to further
internal appeal. (RFI, 2023)
In part because the District serves such a small community, the District Board is often the first contact for
customer complaints/inquiries.
2.2.6 Transparency and Accountability
The District adopted newly established Policy Manual and Bylaws in April 2024, which were provided to
LAFCo. Bylaws serve as the legal guidelines of an organization by providing written rules that control
internal affairs. They define the group's official name, purpose, requirements for membership, officers’
titles, and responsibilities, how offices are to be assigned, the conduct of meetings, and the frequency of
meetings. LAFCo staff queried the District for all policies related to operations, personnel, conflicts of
interest, and financial matters; however, no documents were provided.
LAFCo staff recommends that the Commission review District policies related to operations, personnel,
conflicts of interest, and financial matters at the next MSR Update or within three years of the completion
of this MSR, whichever comes first.
The Political Reform Act requires all state and local government agencies to adopt and promulgate a
Conflict-of-Interest Code pursuant to GC §87300 et seq. The District complied with this requirement with
adoption of a Conflict-of-Interest Code on August 17, 2023.
The Political Reform Act also requires persons who hold office to disclose their investments, interests in
real property, and incomes by filing a Statement of Economic Interests (Fair Political Practices Commission
Form 700) each year according to GC §87200. There is no record for previous years, but the District Board
has completed their Form 700 filings for 2023.
According to Assembly Bill 1234, if a local agency provides compensation or reimbursement of expenses
to its governing body, then all members are required to receive two hours of training on public service
ethics laws and principles at least once every two years and establish a written policy on reimbursements
under GC §53235. While the District does not currently compensate its Board members, all Board
members are encouraged to complete an online class and provide a certificate of completion to the
District’s legal counsel. Although the District does not have management staff subject to the
requirements, the contract General Manager completes ethics training every two years.
Additionally, the District’s attorney attends all District meetings to advise on procedures as needed.
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The District does not maintain a website per SB 929. However, in compliance with the exemption
procedures provided in SB 929, the District reviews annually and adopts resolutions with findings of
financial hardship of establishing and maintaining a website.
Refer to Appendix A – Open Government Resources for a brief list of educational resources regarding
open government laws and for information on website compliance requirements.
2.3 Operational Efficiency
2.3.1 Management and Staffing
The MCWD2’s contract with the GCSD includes staffing support from GCSD’s General Manager and
Administrative Assistant/Bookkeeper who work directly with the MCWD2 Board of Directors to lead and
support operations of the District. The contract General Manager supervises the District’s only employee
and oversees the management of the District, including customer service, customer billings, customer
complaints, and connection enforcement duties. As a result of the very limited District staffing, the Board
of Directors assumes responsibility for annual budget preparation, expenditure monitoring, preparation
of agendas, coordinating contract negotiations and all legal matters.
The District’s paid staff is comprised of one part-time operator who works 20-hours a week and is
managed by the contract General Manager (RFI, 2023).
2.3.1.1 CONTRACT STAFFING AND SERVICES
In addition to its contract with GCSD for operations and administration, the District utilizes outside legal
counsel and engineering contractors on an as-needed basis. Recently, the District contracted with MC
Engineering to prepare and implement a Proposition (Prop) 218 Rate Study and process.
2.3.2 Agency Performance
A component of monitoring agency performance is routinely evaluating staff productivity. The District’s
contract General Manager and one operator are managed by GCSD; therefore, the District Board does not
track employee workload and productivity. Performance evaluations are also managed by GCSD.
The District Board members monitor and evaluate agency operations through regularly monitoring
financial reports and the monthly management reports and other communications provided by the
District’s contract General Manager.
2.3.2.1 CHALLENGES
The District, until very recently, experienced significant challenges with governance and service provision,
including an only recently established full Board. Additionally, in 2023 the District established a contract
with GCSD for management, operations, and maintenance staff. The District is to be commended on
proactively obtaining a full Board and contracting for experienced management, staffing, and legal
counsel to identify and work towards compliance with the myriads of permit requirements, organizational
duties, and system operations.
Additionally, the State Water Resources Control Board (SWRCB) has documented that the District received
22 violations in the last five years, all of which are still active in need of corrective action, albeit they
appear to be common and relatively minor violations that pose no immediate threat to the District (refer
to the following Sections for more information).
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Further, the District reports that a complete rehabilitation of the collection system, lift stations, and the
wastewater treatment plant (WWTP) is necessary to continue to provide services. While the District does
not have a Capital Improvement Plan (CIP), a Prop 218 rate study was recently adopted, which included a
skeletal CIP produced in collaboration with the Rural Community Assistance Corporation (RCAC). The
District is also currently working with a contracted engineering firm to seek planning grants from the
United States Department of Agriculture (USDA) and SWRCB to fund a comprehensive system analysis
that would include a full CIP and summary of the necessary engineering for critical system upgrades.
It is apparent that the District is working diligently to improve on these items and LAFCo staff recognizes
the significant efforts of the current Board to achieve compliance. However, the District is facing many
organizational and financial challenges typical of very small, rural district.
LAFCo staff recommend the Commission review the District’s efforts to achieve compliance with the
requirements of district governance, reporting, operations and maintenance, and financial matters at the
next MSR Update or within three years of the completion of this MSR, whichever comes first.
2.3.2.2 DISTINGUISHED SERVICE
The current District Board President was awarded the Certificate in Special District Governance by the
Special District Leadership Foundation (SDLF) in 2023.
2.3.2.3 STRATEGIC OR SUCCESSION PLAN
The District does not currently have an established strategic plan, mission statement, or official goals.
While the District is not legally obligated to develop these types of documents and/or plans, doing so
could help the District develop identify and improve upon planning efforts, accountability, and
transparency. In lieu of these documents, the Board has been reviewing progress and setbacks over the
prior year during the annual budget development process.
However, the Board stated as part of the MSR process that a retreat is planned for the second half of 2024
that will be devoted to establishing a mission statement and official goals. The timing of the proposed
retreat is dependent on completion of the rate study, the subsequent Prop 218 hearing with District
customers, and the adoption of this MSR. The District stated that the information developed by these
projects will help the Board understand the realities that need to be considered before establishing a
mission statement and official goals within the next fiscal year.
2.3.3 Regional and Service-Specific Collaboration
The District participates in a Joint Powers Authority (JPA) with the Special Risk Management Authority
(SDRMA) for insurance purposes. The SDRMA is a JPA formed under GC§ 6500 et. seq. and is comprised
of California special districts and agencies including such districts. The relationship between the District
and JPA is such that the JPA is not a component of the District for financial reporting issues. The SDRMA’s
purpose Is to jointly fund and develop programs to provide stable, efficient, and long-term risk financing
for special districts. These programs are provided through collective self-insurance, the purchase of
insurance coverage, or a combination thereof (Calentano, 2023). The District purchases insurance through
SDRMA but does not currently have any debt with SDRMA or any other lender.
The MCWD2 is an active member of the California Special District Association (CSDA). The Board President
recently attended CSDA’s annual leadership conference. Further, the contract General Manager will
attend the 2024 CSDA conference. New Board members are encouraged to participate in these events as
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well, to build and strengthen the Board’s knowledge and skill base. The Board also actively uses the CSDA
Forum for peer-sharing of information and resources, including for example, utilizing a CSDA template for
the Hardship Resolution to avoid the legal expense associated with drafting the document.
LAFCo staff recommends that the District consider future group participation efforts by attending regional
and service-specific meetings and communicating with colleagues regarding industry standards, best
management practices, changing regulations, and service delivery models implemented by other local
agencies and organizations.
2.3.4 Shared Services and Facilities
The District does not jointly own or share any capital facilities or services with other agencies, apart from
the management and staffing contract with GCSD. The contract provides for utilizing GCSD’s General
Manager and Administrative Assistant/Bookkeeper, as well as GCSD’s operators on an as-needed basis.
The GCSD’s General Manager and Administrative Manager/Bookkeeper work directly with the MCWD2
Board of Directors and staff, providing administrative and operational support to help with budget
preparation, expenditure monitoring, Discharge Permits compliance, and Regional Water Quality Control
Board (RWQCB) reporting. The GCSD’s General Manager supervises the District’s part-time Operator and
oversees the management of the District, including customer service and connection enforcement duties.
In addition, by default, GCSD manages all issues that arise beyond what is anticipated in the contract. For
example, GCSD managed the District’s response to a recent emergency construction project to bypass a
compromised sewer hole, thereby avoiding a catastrophic failure and environmental disaster.
2.3.4.1 ADJACENT PROVIDERS
Due to its geographical isolation, there are only two nearby public providers of wastewater services within
the nearby vicinity: the GCSD and the City of Point Arena.
The GCSD is the closest of the two providers and, given the current relationship between the two districts,
there is significant potential for future expanded collaboration or consolidation. Such an endeavor would
require the support of both boards, the residents within the District, and authorization from LAFCo.
The NGWC is a privately-owned, public utility that has been serving the coastal communities around
Anchor Bay and Gualala since 1953. The Company provides drinking water services to approximately 1,100
customers throughout the small coastal region. The boundaries of the MCWD2, as well as GCSD, are
contained entirely within the NGWC’s boundaries and have customers in common. Private water
companies are not under the jurisdiction of LAFCo; however, given the overlap in service boundaries,
there may be opportunity for coordinated services in the future.
Service providers in the region are listed below:
Wastewater Services:
• Gualala Community Services District
• City of Point Arena Sewer System & Wastewater Treatment Plant
• Sea Ranch Sanitation Zone (Sonoma County)
Water Services:
• North Gualala Water Company
• Sea Ranch Water Company
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• Point Arena Water Works
• Stewarts Point Water System
For a regional map of Mendocino County’s water and sanitation districts and companies see Figure 2-1.
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2.3.4.2 DUPLICATION OF SERVICES
Continuing the established relationship with GCSD may support opportunities for the two districts to
reorganize or consolidate, creating efficiencies of governance, operations, and infrastructure.
Additionally, the NGWC is a private water service provider that currently provides residential drinking
water services to the Anchor Bay and Gualala areas, and which overlaps customers of both the MCWD2
and GCSD. Although the Company does not provide wastewater services, there is potential for
consolidation of services under a single service-provider serving this region. Expansion of special district
area and services require appropriate LAFCo process and approval.
2.3.4.3 INTERAGENCY COLLABORATION
The District does not participate in any interagency collaborative arrangements or mutual aid agreements
and does not participate in the Integrated Regional Water Management (IRWM) Program for the region
(North Coast Resource Partnership)10. Participation in these types of regional planning programs often
provides opportunity to pursue joint grant applications and to leverage other community resources; it
may be beneficial to the District to consider participation in future IRWM efforts.
2.3.5 Governmental Structure and Community Needs
2.3.5.1 ENHANCED SERVICE DELIVERY OPTIONS
Despite the contract support from GCSD, and because the administrative burden currently exceeds GCSD
staff’s capacity, the District Board is still more involved in administrative tasks than is typical or desired by
the existing board members.
LAFCo staff recommends the District consider expanding the services provided by GCSD where possible.
Additionally, to reduce the strain on GCSD’s staff, the District should consider hiring support staff to
supplement GCSD ‘s team and relieve the District Board of the hands-on administrative work.
2.3.5.2 GOVERNMENT RESTRUCTURE OPTIONS
Government restructuring options should be pursued if there are potential benefits in terms of reduced
costs, greater efficiency, better accountability or representation, or other advantages to the public. The
District has indicated a willingness to explore consolidation with GCSD, or alternatively some type of
regionalization.
Given that GCSD already provides operations and maintenance activities for the District, consolidation
could create efficiencies related to staffing and economies of scale benefitting both districts and their
customers. GCSD staff have become intimately aware of the issues facing the District as they continue to
identify and address long-deferred infrastructure and management issues.
LAFCo staff recommends that the MCWD2 and GCSD consider expanding the support provided by GCSD
and explore consolidation of the agencies when resources and local support allow for it.
10 The North Coast Resource Partnership implements the region’s Integrated Regional Water Management Program; more
information can be found here: https://northcoastresourcepartnership.org/.
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2.4 Finances
LAFCo is required to make determinations regarding the financial ability of the MCWD2 to provide public
services. This section provides an overview of the financial health of the District and a context for LAFCo’s
financial determinations. This MSR utilizes audited financial statements for Fiscal Years (FYs) 2018-2019,
2019-2020, 2020-2021 and 2021-2022, and the budget for FY 2022-2023 as the primary sources of
information for this section. The District has not presented Management’s discussion and analysis from
its most recent audit (FY 2021-2022) that generally accepted accounting principles have determined
necessary to supplement, although not required, to be part of the basic financial statements.
In California, special districts are classified as either enterprise or non-enterprise, based on their source
of revenue. MCWD2 operates as an enterprise District, meaning that charges for wastewater services are
intended to pay for the costs of providing such services.
The primary funding source for the District is fees for services, which is generally a reliable and reoccurring
revenue source, provided that adopted rates are sufficient to cover the actual cost of services. The District
operates out of a single enterprise fund for operational and maintenance purposes (Refer to Figure 2-2:
District Revenue and Figure 2-3: Revenues Over/Under Expenses).
The District’s sole fund is a proprietary fund. Proprietary funds are accounted for using the “economic
resources” measurement focus and the accrual basis of accounting. Under the accrual basis of accounting,
revenues are recognized in the period in which the liability is incurred. Operating revenues in the
proprietary fund are those revenues that are generated from the primary operations of the fund. All other
revenues are reported as non-operating revenues. Operating expenses are those expenses essential to
the primary operations of the fund and all other expenses are reported as non-operating expenses.
Table 2-3: MCWD2 Financial Summary
FY 18-19 FY 19-20 FY 20-21 FY 21-22
Operating Revenues
Service charges 135,000 135,000 135,000 137,116
Total Operating Revenues 135,000 135,000 135,000 137,116
Operating Expenses
Personnel and Related Benefits 78,163 77,978 73,063 59,067
Insurance 4,194 4,553 5,915 6,213
Operating Supplies 3,336 2,832 3,691 1,728
Chemicals 1,403 2,460 2,600 3,810
Repairs and Maintenance 18,183 28,428 6,077 486
Utilities 9,585 9,040 8,176 8,350
Permits 10,080 10,528 12,494 12,949
Research and Monitoring 6,004 18,792 5,108 6,199
Office Expense 811 1,650 1,148 830
Legal and Other Professional Services 5,666 6,179 5,816 6,121
Rent 1,440 1,440 1,440 1,440
Dues and Subscriptions 1,580 2,530 1,282 2,207
Depreciation 34,474 35,288 34,047 34,903
Total Operating Expenses 174,847 201,698 160,857 144,303
Operating Income/(Loss) (39,847) (66,698) 25,857 (7,187)
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Non-Operating Revenues (Expenses)
Interest Income 1,820 1,944 1,475 1,223
Assessments – Repair and Replacement 20,070 21,185 20,070 22,200
Reserve
Miscellaneous Income 3,000 - - 1,067
Total Non-Operating Revenue (Expenses) 24,890 23,129 21,545 20,450
Net Income (Loss) (14,957) (42,569) (4,312) 13,263
Beginning Net Position 911,575 896,618 853,049 848,737
Ending Net Position 896,618 853,049 848,737 862,000
Source: (Celentano, 2019-2022)
The District’s cash accounts are summarized below:
Table 2-4: Cash Accounts
Type FY 18-19 FY 19-20 FY 20-21 FY 21-22
Cash and Cash Equivalents –
$344,968 $341,536 $344,849 $364,705
Beginning of Year
Cash and Cash Equivalents –
$341,536 $344,849 $364,705 $352,353
Ending of Year
Source: RFI
2.4.1.1 REVENUES AND EXPENDITURES
The District’s revenues and expenditures for FYs 2018-2019 through 2021-2022 are summarized in Table
2-3 and displayed in Figure 2-2: District Revenues and Expenses. District service charge revenues remained
steady at $135,000 for FY 2018-2019 through FY 2020-2021 and increased by $2,116 in FY 2021-2022.
Although the District’s current management and Board leadership were not involved in the budget or
operation of the District in FY 2020-2021, it is believed the then-administrator estimated expenditures
and proposed rate increases to the Board as it was then constituted. There was no Prop 218 process
documented at the time.
The current management and Board transitioned into management of the District over the course of 2023
and at that time no changes were made to the rates for FY 2023-2024 as there was insufficient time to
conduct a proper rate study and Prop 218 process. Notwithstanding, the District adopted a FY 2023-2024
budget, based on known and anticipated costs at mid-year, which exceeded the revenues for the FY under
the old rates. Additional revenue for the District includes interest income, assessments for the repair and
replacement reserve, and miscellaneous income.
The Board adopted a rate study and new rates in May 2024, which reflect annual rate increases over a
five-year period. As recommended in the rate study, the first years’ rate increases will be eight percent
for both residential and commercial users, with five percent increases in each of the subsequent four
years. Additionally, the capital replacement program (CRP) fee will increase by 20 percent in the first year
and five percent in each of the subsequent four years.
Expenditures increased 15.4 percent from FY 2018-19 to FY 2019-20, and then decreased a total of 28.5
percent over the next three years (Table 2-3). The top expenditures included maintenance/repairs,
insurance, permits/fees, utilities, administration, and depreciation. Budgets for years prior to FY 2023-
2024 did not include legal, engineering, project management, operating reserves, grant writing, and
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administrative expenses related to bringing the District into compliance with applicable rules and
regulations.
As shown in Table 2-4and Figure 2-7, the District’s cash accounts indicate two different trends. The first is
that the District’s cash flows from operating activities are steadily decreasing each year while the District’s
savings account has been consistently increasing, as shown in each of the last five years. The District
confirmed that the savings account that holds the funds collected on property tax bills as “Capital Reserve
Assessment” is not currently invested in any capital improvements and the District’s checking account is
experiencing consistent decreases because the District regularly must rely on other means of funds of
cover expenses.
As shown in Figure 2-3: Revenues Over/Under Expenses, the second trend is that the District had
expenditures exceeding revenues for each of the last four fiscal years at an average of $40,000 each year.
Because existing revenues cannot cover expenses, the District has relied on its reserves to cover
expenditures and is projected to do so again in 2024. The result is a continual drawdown on reserves,
suggesting that the District is not in a stable financial position.
Due primarily to an outdated rate structure, expenditures have exceeded revenues for the past five years,
which has required the District to draw down reserves to cover operational costs. While this indicates the
District is not, and has not been, in a stable financial position, the new rate structure adopted in May 2024
will help to stabilize the District’s finances and support the rebuilding of operational and capital
replacement reserves.
It is worth noting that the District is actively pursuing grants to help with the necessary costs associated
with infrastructure needs (see Section 2.4.2.4).
2.4.1.2 ASSETS AND LIABILITIES
As demonstrated in Figure 2-4, the largest asset for the District is infrastructure for which depreciation
costs have been accounted for in the expense section. As shown in Figure 2-5, the District does not
currently carry debt and its liabilities are limited to payroll taxes and accounts payable. Many special
districts in California participate in the California Public Employees Retirement System (CalPERs)
program and are struggling to cover unfunded liabilities because of costly employee retirements and
pensions. Because the District does not participate in CalPERs, it is not subject to the increasing
payments. This leaves the District in a better position for consolidation or reorganization discussions as
any agencies interested in these efforts would not need to consider that particular debt.
The District indicated the need to replace most, if not all, of the existing infrastructure, including the
WWTP. Because the District does not have a needs assessment or a CIP, it is not clear what the costs
associated with these replacements would be. As they would likely be substantial, and the District is
currently operating at a net loss, it is anticipated that the District would need to take on significant debt
in the near future to pay for infrastructure needs.
2.4.1.3 NET POSITION
The District is currently operating at a net loss because of substantial necessary investments into the
District infrastructure (see Figure 2-6). The FY 2022-23 budget shows that this trend will continue in 2024,
with a projected net income loss of $44,908.
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The District is investing significant resources in legal services in FY 2023-2024 to bring the District into
compliance with the Brown Act, developing ordinances and policies that were lacking, and preparing the
rate study and Prop 218 process. Legal costs are expected to be lower in FY 2024-25 and beyond once the
District has established the necessary administrative framework.
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Figure 2-2: District Revenues and Expenses
$200,000.00
$ 159,890 $ 161,606
$ 158,129 $ 156,545
$150,000.00
$100,000.00
$50,000.00
$-
FY 18-19 FY 19-20 FY 20-21 FY 21-22
$(50,000.00)
$(100,000.00)
$(150,000.00)
$ (144,313)
$ (160,857)
$ (174,919)
$(200,000.00)
$ (154,478)
$(250,000.00)
Service Charges Interest Income Assessments - Repair and Replacement Reserve
Miscellaneous Income Personnel and Related Benefits Insurance
Operating Supplies Chemicals Repairs and Maintenance
Utilities Permits Research and Monitoring
Office Expense Legal and Other Professional Services Rent
Dues and Subscriptions Depreciation
AGENCY OVERVIEW 2-23
Figure 2-3: Revenues Over/Under Expenses
Figure 2-4: District Assets
AGENCY OVERVIEW 2-24
Figure 2-5: District Liabilities
Figure 2-6: District Net Position
AGENCY OVERVIEW 2-25
Figure 2-7: District Cash Accounts
AGENCY OVERVIEW 2-26
2.4.2 Long Term Financial Considerations
2.4.2.1 RESERVES
Reserve policies provides a basis for an agency to accommodate unanticipated reductions in revenues,
offset fluctuations in costs of providing services, and respond to fiscal emergencies such as revenue
shortfalls, asset failure, and natural disaster. It also provides guidelines for sound financial management
with an overall long-range perspective to maintain financial solvency and to mitigate financial risks
associated with revenue instability, volatile capital costs, and emergencies. Further, a policy can set funds
aside for replacement of capital assets as they age and for new capital projects. Additionally, adopting
and adhering to a sustainable reserve policy enhances financial management transparency and helps
achieve or maintain a certain credit rating for future debt issues.
In November of 2023, the Board adopted a reserves policy (District Resolution 23-24-10) requiring that
the District maintain three months of operating expenses. The target amount for Operating Reserves is
approximately $53,000 based on the approved FY 2023-2024 budget of $211,758. It is likely that the rate
study will result in a larger annual operating budget because it will include items that hadn’t been
considered in previous budgets; therefore, the three-months’ reserve amount may increase
proportionally. It is expected that proposed rate increases for FY 2024-2025 will include allocation of funds
to operating reserves.
At the end of FY 2023-2024, the District’s capital replacement reserve account totals approximately
$235,000 (includes a $34,000 insurance settlement claim that has not yet been deposited). The District
has not needed to use capital reserves to pay operational expenses because most of the annual revenues
from fees was received from the County at year-end.
The reserves policy also includes language regarding emergency reserves, equipment replacement
reserves, and excess funds. The District will be working towards funding these reserves upon
establishment of the new fee structure.
2.4.2.2 OUTSTANDING DEBTS/COST AVOIDANCE
The District currently has no debt. Although no information regarding cost-reduction measures was
provided by the District, generally speaking, as a small district there are limited opportunities available to
reduce costs while maintaining the expected service levels.
The contract amount with GCSD exceeds the amount the District had been paying to its previous
administrator. However, the costs associated with the GCSD contract are invaluable as the arrangement
has enabled the District to address long-deferred infrastructure and management issues that would have
otherwise threatened the District’s ability to provide adequate wastewater services. In addition, GCSD
been able to provide engineering and grant expertise that the District did not previously have access to.
2.4.2.3 RATE RESTRUCTURING
In 2023, the District initiated a Prop 218 rate study and process, which successfully culminated in the
adoption of new service rates in May 2024. The previous rate structure was adopted in 1989 and was
subsequently amended in 1991 and 1992 and did not adhere to applicable laws such as Proposition 218.
The rate study recommends the District adopt a five-year budget (FYs 2024-2025 through 2028-2029) with
annual service rate increases to comply with Prop 218 requirements, enhance revenue stability, meet
budget predictions, and anticipate future inflationary costs.
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The study proposed a change to the existing rate structure by redefining the customer classification of
Equivalent Dwelling Unit (EDU), which specified the calculated average daily wastewater flow from a
single-family residence. The study also recommended changing the definition of an EDU from 150 gallons
per day (gpd)/residential customer to 100 gpd/residential customer to reflect the typical water usage
range for residential customers (50 to 150 gpd/residential customer). This proposed calculation uses the
average daily water usage over the last three full years for all residential users and divides it by the current
total number of single-family residential users. For commercial customers, the study calculated the EDU
equivalent based on the 100 gpd/residential customer calculation, or a charge at a minimum of 0.5 EDU
per occupied rental space.
Wastewater sewer charges for residential and commercial customers with developed lots include a
minimum flat rate sewer fee and Capital Replacement Plan (CRP) fee per EDU. The recommended rate
increases the sewer fee and CRP fee. Undeveloped lots that are not creating wastewater flows will
continue to be charged $110/EDU based on past agreements with the District and will be defined as
“standby fees”.
Prop 218 requires local governments to ensure that property-related fees comply with the measure's
calculation requirements. Specifically, local governments must make sure that no property owner's fee is
greater than the proportionate cost to provide the subject service to his or her parcel. Like assessments,
this requirement may result in local governments setting property-related fee rates on a block-by-block,
or parcel-by-parcel basis (LAO, 1996).
2.4.2.4 CAPITAL IMPROVEMENT PLAN
The District does not maintain a CIP; however, the new rate includes a skeletal CIP. Additionally, the
District is working with an engineering firm to assist with obtaining planning grants from the USDA and
SWRCB to help fund a comprehensive analysis that would include a full CIP and summary of the necessary
engineering of system upgrades.
The District is waiting for final approval of a USDA grant application to reimburse the District
approximately $135,000 that was spent on resolving an emergency cliff edge manhole replacement in
2023.
In addition, the District has applied for a technical grant from the State Water Board to address remaining
infrastructure needs. Further, the GCSD has applied for a technical grant to analyze options for
regionalizing services with MCWD2. After the State announces its funding priorities in July, the District
intends to apply for a Planning Grant from the State Water Board which would enable MCWD2 to upgrade
more of its system and to further investigate options for regionalization from the MCWD2’s perspective.
2.4.3 Current Fiscal Health
The District is operating at a net loss based on the information provided in the financial audits (see
Figure 2-6: District Net Position). Further, the District does not have sufficient reserves to create the
standard documents and studies necessary to ensure adequate funding for future services. In addition to
the new rate study, the District will require a needs assessment and a CIP for which the District has not
yet allocated funding. Further, the District indicated that it needs a complete rehabilitation of the
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collection system, lift stations, and ultimately the wastewater treatment plant. The Board of Directors and
contract General Manager have been exploring funding options to fund replacement of these systems.
2.5 Growth
2.5.1 Present and Planned Land Use and Development
The MCWD2 boundaries are entirely located within the unincorporated area of Mendocino County.
Mendocino County has land use authority over privately-owned lands within the District boundary and
makes land use decisions based on the County’s General Plan and Zoning Regulations. The MCWD2 is also
located in the Coastal Zone and is subject to the regulations of the Coastal Element, a part of Mendocino
County’s Local Coastal Plan as approved by the Coastal Commission. Any proposed changes to the land
use or development patterns of the District area must be approved by the Coastal Commission (County of
Mendocino General Plan, 2009).
2.5.1.1 LAND USE
The specific land use General Plan designations within the District are Rural Residential (RR5 and RR10),
Coastal Commercial (C), and Public and Semi-Public Facilities (PF). The principally permitted use in RR5 is
residential and requires a minimum parcel size of five acres (RR10 = 10-acre minimum), though most of
the residential parcels within District boundaries are only a fraction of an acre with two outlier residential
parcels each approximately five-acres in size. The Rural Residential land use is not intended to be a growth
area and residences should create minimal impact on agricultural viability. Included in the RR5 designation
is the Anchor Bay Campground, which is currently a customer of the District for part, but not all, of its
sewer needs.
The Coastal Commercial (CC) parcels are located along Highway 1 and serve the Anchor Bay community.
Lastly, the Public and Semi-Public Facilities (PF) designation applies to one parcel in the center of the
District that is occupied by the Fish Rock Cemetery. See Figure 2-8 for General Plan designations within
the District boundary.
Parcels just south of the District are designated RR10, a residential land use that requires a minimum
parcel size of 10-acres (County of Mendocino, 2023).
2.5.1.2 DEVELOPMENT
Future growth and development of the District is subject to Mendocino County land use regulations. The
County has adopted plans and policies to regulate growth, including a General Plan and a Zoning
Ordinance. The County’s Zoning Ordinance contains three major geographical zones (Inland, Coastal, and
Mendocino Town) and the Anchor Bay area is included in the Coastal Zone (County of Mendocino Coastal
Element, 2021). As shown in Figure 2-9: Mendocino County Zoning Map, the County’s Zoning Map
designates most of the Anchor Bay subdivision and surrounding parcels as single-family residential and
coastal commercial.
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Figure 2-8: Mendocino County General Plan Land Use Mapping
Source: Mendocino County Zoning Web Map
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Figure 2-9: Mendocino County Zoning Map
Source: Mendocino County Zoning Web Map
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2.5.2 Existing Population
The District serves an area limited to the unincorporated community of Anchor Bay, which is a Census
Designated Place (CDP) with a population of approximately 473 residents and approximately 372
households (US Census, 2022C). The Anchor Bay CDP encompasses approximately 3.5 square miles and
includes primarily rural residential properties and commercial development along Highway 1. Anchor Bay
is located within Census Tract 111.02 in Mendocino County, which includes the area between Gualala to
the south to areas just north of Manchester and has an estimated population of 4,305.
While MCWD2 serves a small number of commercial customers along Highway 1, the District consists
primarily of second homes and short-term vacation rental properties. The number of wastewater
connections that the District serves (approximately 100) does not change throughout the year, but
demand for service increases during tourist seasons. It is also notable that the population within the
District has increased because of refugees seeking shelter from numerous fires throughout the state and
the COVID-19 pandemic; second homes are becoming primary homes.
2.5.3 Projected Growth
The District’s population is projected based on development of approximately 103 parcels (13 parcels
designated commercial, one parcel designated as public facility, and approximately 89 parcels designated
as residential) (County of Mendocino, 2023). The State Department of Finance (DOF) projects that the
population of Mendocino County will decline by a little more than 2.7 percent in the next 10 years, from
91,601 in 2023 to 89,091 in 2033 and 89,139 in 2043. (DOF, 2023)
The District anticipates little growth in resident population within the near-term (five years) and long-
term (20 years) planning horizons. The projected decline of 2.7 percent throughout the County suggests
that buildout of the residential parcels will not occur until well beyond the planning horizon of this
document (DOF, 2023). Given that the MCWD2 is limited to a small number of developed commercial
properties and residential properties in the Anchor Bay community with only a handful of undeveloped
lots, the District will likely not need to accommodate much future development and is near buildout.
While there are a couple of large parcels that could theoretically be developed as a hotel or bed and
breakfast, there are currently no development plans in place. This is likely in part because of water
conservation efforts mandated by the California Public Utilities Commission (CPUC) since September of
2014. For their part, the NGWC, which provides potable water services to all MCWD2 customers (except
those on wells), imposes its Mandatory Water Conservation Program (MWCP) when stream flows in the
North Fork of the Gualala River are at or below specific levels11. During these times water use restrictions
prohibit the use of water for construction purposes. Given the ebbs and flows of current drought trends,
it is unlikely that any new construction will take place in the area.
However, changes to California housing laws could result in a slight increase in development and density
within the District, as discussed below.
2.5.4 California Housing Goals
In 2017, the State of California passed SB 299 and SB 1069 to address the increasingly desperate need for
affordable housing in the State. The legislation allowed local ordinances for Accessory Dwelling Unit (ADU)
11 For more information on NGWC’s water conservation efforts see their website: https://ngwco.com/conservation/mandatory-
conservation/.
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construction in districts zoned for single and multifamily residential uses. An ADU is a secondary dwelling
unit for one or more persons on the same parcel as a larger, primary dwelling. An ADU can either be
attached or detached to the primary residential structure on the property but must include complete
independent living facilities (including permanent provisions for entry, living, sleeping, eating, cooking and
sanitation, and adequate water service and sewage disposal systems).
As codified by GC §65852.150, the California Legislature found and declared that, among other things,
allowing ADUs in zones that allow single-family and multifamily uses provides additional rental housing
and is an essential component in addressing California’s housing needs. In the years since, state ADU law
has been revised to improve its effectiveness in creating more housing units.
New laws have since been passed which address barriers to their implementation at scale; for example,
setting development criteria for ADUs, streamlined permit processing, and limiting impact fees.
Implementation of state law requires updating local ordinances, estimating ADU capacity when used to
address regional housing needs allocation (RHNA) in housing element updates, and a housing element
program to incentivize and promote ADUs that can be offered at affordable rents.
As the state continues to pass legislation to help tackle the ongoing housing crisis, the inevitable impacts
to service providers as a result of development will continue to mount. It is imperative that small districts
such as MCWD2 stay up to date on legislative changes.
For additional information and data on housing legislation see Appendix B – Housing Legislation Trends
and Results.
2.6 Disadvantaged Unincorporated Communities
Senate Bill 244, which became effective in January 2012, requires LAFCo to evaluate any Disadvantaged
Unincorporated Communities (DUCs), including the location and characteristics of any such communities,
when preparing an MSR that addresses agencies that provide water, wastewater, or structural fire
protection services12. A DUC is an unincorporated geographic area with 12 or more registered voters with
a Median Household Income (MHI) that is less than 80 percent of the State MHI. According to the
American Census Survey (ACS) 2022 1-Year estimates, the statewide median household income for
California was $91,551 (US Census, 2022A). Thus, the MHI DUC threshold is $73,240 and the threshold for
Severely Disadvantaged Unincorporated Communities (SDUC) (less than 60 percent of the State MHI) is
$54,930.
DUCs are identified to address a myriad of issues from environmental justice to land-use planning. Linking
these disparate issues together, the sole statutory criterion for determination of a DUC is the MHI. The
smallest geographic units for which MHI data is publicly available are census block groups. Outside of
heavily urbanized areas, however, census block groups are geographically expansive. They often include
both incorporated and unincorporated territory and do not necessarily coincide with typically understood
community boundaries. Although a block group might be identified as having a MHI of less than 80
percent, various portions of that block group could be significantly wealthier in rural areas, or the block
group could split into an otherwise contiguous community.
12 Technical advisory on SB 244 can be found here: https://opr.ca.gov/docs/SB244_Technical_Advisory.pdf.
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As a result, within rural areas, such as Mendocino County, assembling income data for specific
unincorporated communities is not always straightforward. In Mendocino County, identifying and
mapping DUC locations is a complex process because the delineation of DUC boundaries often differs from
those common to the local agency and the public. Some entities, such as Sonoma County LAFCo and
Stanislaus County, utilize CDP communities to help provide usable geographies for DUC boundaries, but
even then, mapping and data challenges persist. MHI ratios are subject to adjustment overtime and can
result in a change to a community's disadvantaged status. Similarly, the number of registered voters can
fluctuate during election years causing further variability. SB 244 describes the general characteristics of
DUCs, but it does not provide specific guidance or methodology for how to identify them, other than
providing the following criteria:
• Contains 10 or more dwelling units in close proximity to one another;
• Is either within a city SOI, is an island within a city boundary, or is geographically isolated and has
existed for more than 50 years; and
• Has a median household income that is 80 percent or less than the statewide MHI
• For this analysis, per California Association of Local Agency Formation Commissions (CALAFCO)
recommendation, calculated the “MHI Threshold” i.e., 80 percent of the statewide MHI as
$73,240, per the ACS MHI data (The MHI for the State of California is $91,551) (US Census, 2022A)
• Income data was sourced from the ACS 5-year Estimates dataset for 2018-2022 and the 2022 ACS
1-Year Estimates.
This State legislation is intended to ensure that the needs of these communities are met when considering
service extensions and/or annexations in unincorporated areas.
Mendocino County has an MHI of $65,520 with a majority of the County considered DUCs including both
the census tract and block group that the District is located within. (US Census, 2022B).
The community of Anchor Bay is a CDP covering 3.5 square miles that has a population of 473 (252
households and 372 total housing units) and a MHI of $68,452 (US Census , 2022C). Because the District
is located wholly within the Anchor Bay CDP, which has an MHI which is less than the Statewide MHI
threshold of $73,240, the District is considered to be located within a DUC.
It is also worth noting that the census block group in which the District is located (Block Group 3, 20 square
miles) has a population of 1,866 (843 households) and a MHI of $79,596 (Census Reporter, 2022A). The
census tract the District is located within (Census Tract 111.02, 320 square miles) has a population of 4,827
(1,968 households) and a MHI of $83,135 (Census Reporter, 2022B). By both measures, the District would
not be considered to be located within DUC territory.
The residents within Anchor Bay receive adequate services with respect to fire, which is provided by South
Coast Fire Protection 13. Water services are provided by North Gualala Water Company, though it should
be noted that there are properties within the District boundaries and adjacent properties that rely on well
water. According to data sourced from the State Department of Water Resources (DWR), the District is
13 Source is the 2018 Mendocino LAFCo Multi-District Fire Protection Services SOI found here:
https://www.mendolafco.org/files/01d2409c9/Multi-District+Fire+SOI+Update+Adopted+FINAL.pdf.
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located within Public Land Survey Section M11N15W1, which is documented as having 23 domestic
wells14.
Some residents within the District boundary and adjacent properties continue to utilize septic tanks for
their wastewater needs. Although the exact number of properties is unknown, the District estimates that
there are approximately 10 properties within the District boundary using septic tanks, including at least
one residence located on Getchell Gulch Road next to the District’s wastewater treatment plant, a portion
of homes located on Sunset Drive, and approximately two homes located on the upper-most parts of
Ocean View Drive and Ocean View Avenue. Included in these estimates is also the Anchor Bay
Campground, which is currently a customer of the District for part, but not all, of its wastewater needs.
According to the District President the campground may need their septic/sewer system to be upgraded
to comply with MCWD2’s Conditions of Use Policy and public health concerns. The District reported that
the campground has a septic system that was reportedly determined to have failed in October 2022, which
at the time was being used by the campground owners’ permanent RVs, not by vacationing RVs that
discharge to the District’s sewer system. The campground’s septic system is located at sea level,
immediately adjacent to a stream that flows to the ocean across from a popular beach. The campground
regularly sustains damage during major storms but there is evidence that the septic system has continued
to be used.
While the residents of Anchor Bay are receiving the essential municipal services of fire, water, and
wastewater, only fire services have proven to be adequate in the area. Both water and wastewater
services could be improved in the areas that are utilizing septic and well operations. While these areas
currently do not lack public services these properties could consider upgrading their systems. Particularly
those utilizing septic as public health concerns have been identified.
14Well Completion Report Map Application data can be found here:
https://dwr.maps.arcgis.com/apps/webappviewer/index.html?id=181078580a214c0986e2da28f8623b37.
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3 MUNICIPAL SERVICES
A Municipal Service Review (MSR) is a comprehensive analysis of the services provided by a local
government agency to evaluate the capabilities of that agency to meet the public service needs of the
current and future service area. The MSR determinations inform the Sphere of Influence (SOI) Update
process and assist the Local Agency Formation Commission (LAFCo) in considering the appropriateness of
a public service provider’s existing and future service area boundary. The information and analysis
presented in Chapter 2 and 31 of this document form the basis for the MSR determinations provided
under Section 3.3
3.1 Service Overview
This is the first MSR prepared for the District by Mendocino LAFCo.
3.1.1 Services
Mendocino County Waterworks District No. 2 (District) provides sewer collection and treatment services
to approximately 100 customers (residential, commercial and campground) along the costal corridor
within the town of Anchor Bay. No other services are provided by the District.
3.1.1.1 SERVICE AREA
The District service approximately 100 customers. This service area includes the Anchor Bay community
of approximately 68 residences, the Anchor Bay Campground, and a small commercial area along State
Highway 1. There are several customers who own more than one Equivalent Dwelling Unit (EDU);
therefore, the actual number of treatment connections is closer to 100 (RFI, 2023).
3.1.2 Outside Agency Services
The District does not provide any services outside of its jurisdictional boundaries.
3.2 Wastewater Services
3.2.1 Service Overview
The District owns and operates a collection system and a wastewater treatment plant (WWTP) with a
permitted outfall into the Pacific Ocean. Wastewater from the District’s service area gravity flows first to
Pump Station No. 1 then to Pump Station No. 2. Effluent reaches the WWTP by force main from Pump
Station No. 1 located on Highway 1 downhill of the WWTP15. Secondary treated wastewater from the
District’s WWTP is discharged into the Pacific Ocean (see Figure 3-1). The Plant has an average dry weather
design treatment capacity of 0.0240 million gallons per day (mgd).
Ocean discharges occur intermittently, approximately 120 days per year, primarily from October through
April with an average duration of three hours and an average flow rate of 0.0120 mgd. The maximum daily
flow rate during the 2016 permit period was 0.0615 mgd. Under Order No. R1-2016-0006, discharges
occurred 105 days during the 2016-2017 discharge season, 78 days during the 2017-2018 discharge
season, 113 days during the 2018-2019 discharge season, and 79 days during the 2019-2020 discharge
season.
15 More information on the watershed can be found here:
https://www.waterboards.ca.gov/northcoast/water_issues/programs/watershed_info/mendocino_coast/gualala/.
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During the summer and other periods of dry weather, treated wastewater is irrigated through Discharge
Point 002 onto 3.3 acres of forest land. The primary irrigation area is in the northwest side of the facility,
and a second small irrigation area is located between the aeration pond and Getchell Gulch Road.
Figure 3-1: District’s Ocean Discharge Location
Source: State Water Resource Control Board
Operations and ma intenance are performed by the District’s part-time operator, who is managed by the
contract General Manager for the Gualala Community Services District (GCSD); GCSD’s operators assist as
needed.
Table 3-1 shows that the average flow rates for the District have been steadily decreasing over the last
five years.
Table 3-1: Wastewater Flow Data 2019-2023
Parameter Unit 2019 2020 2021 2022 2023 Average
Average Daily Flow MGD .007227 .005753 .005753 .004690 N/A .005856
Average Dry Weather Flow MG .005616 .005575 .005575 .006968 N/A .005934
Average Wet Weather N/A
MG .014764 .009084 .009084 .004645 .009334
Flow
Maximum Daily Flow MGD .011180 .008994 .008994 .007488 N/A .009164
Maximum Monthly Flow MG .398736 .023088 0.23088 0.22464 N/A .167388
(RFI, 2023)
Little growth is likely to occur within the District and, based on current customer use and facilities, the
District’s wastewater facilities have the capacity to serve anticipated buildout.
3.2.2 System History
The MCWD2 was formed in 1958 and operated under the Mendocino County Board of Supervisors (BOS)
until July 1, 1996. While there is no available information that can be sourced, it is known that the District
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was originally formed by a small number of property owners who slowly added more connections over
time. No further history of services was provided to LAFCo staff.
According to the District President, the collection system was put into service in 1960 and the WWTP was
went online in 1990. The District has implemented multiple repairs over the years, but no specific
historical details were provided.
3.2.3 Facilities and Infrastructure
The District owns and operates a collection system and WWTP that is located off Highway 1 adjacent to
the Anchor Bay subdivision the District serves (see Figure 3-3). The District’s wastewater collection system
consists of approximately 6,800 linear feet of gravity pipelines, 1,370 linear feet of pressurized force
mains, 26 manholes, and two wastewater pump stations.
The WWTP consists of a headworks with bar screen, a 320,000-gallon mechanically aerated primary
treatment pond, a 300,000-gallon aerated settling pond, a serpentine chlorine contact chamber for
disinfection of treated wastewater, and dichlorination facilities.
Treated, disinfected effluent may be discharged to either the Pacific Ocean at Discharge Point 001 (after
dichlorination) or to the forest irrigation system at Discharge Point 002. Aerators in the ponds run
intermittently based on the dissolved oxygen levels, and pond retention times range from 15 to 20 days.
Solids are retained in the pond (see Figure 3-2).
The ocean outfall (Discharge Point 001; see Figure 3-1) falls into a sea cave within the bluff, southeast of
the WWTP. The outfall cave measures approximately 31.6 feet deep by 10.6 feet wide by seven to nine
feet high. The outfall pipe is located near the back of the cave, extends through the roof of the cave, and
is designed to provide a 35:1 initial dilution at a maximum discharge rate of 60 gallons per minute (gpm)
(RFI, 2023).
Figure 3-2: Aerial View of Wastewater Treatment Plant
Source: Google Maps
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The District indicates that a complete rehabilitation of the collection system, lift stations, and the WWTP
is needed to maintain adequate services. Much of the collection system consists of material changes
including the use of Orangeburg pipe, which only has a useful life of approximately 50 years. Infiltration
and inflow issues have also been identified and are a result of aging infrastructure.
The newly adopted rates will allow the District to begin replacement of the Orangeburg pipes. A contract
for planning and design of the first section of collection system replacement has been approved by the
Board; construction is anticipated to begin in FY 2025-2026. Additionally, the Board of Directors and
contract General Manager have been exploring funding options that could help cover the costs of any
other infrastructure needs.
Figure 3-3: District Facilities Map
Source: North Coast RWQCB WDR R1-2021-0005, April 15/16, 2021.
3.2.3.1 SYSTEM IMPROVEMENTS
The District’s most recent system improvements took place after rainstorm damage in the early part of
2023. The District was notified by a customer that a manhole in their backyard was dangerously close to
the cliff edge due to a landslide that occurred as a result of the storms. The District installed an emergency
bypass to isolate the manhole and abandoned it in place. Completion of the project is scheduled for
summer of 2024.
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The District’s rate study identified a number of short-term, high priority projects totaling approximately
$270,000 over the next five years:
• Collection System Improvements – The primary consideration is the replacement of the existing
Orangeburg pipe, which is over 60 years old and has not been used as a pipeline material since
the early 1960s. Orangeburg pipe is tar and cardboard, and is no longer an acceptable material.
• Large Lift Stations 1 and 2 – both lift stations are large, old and deteriorated with premature
corrosion.
• Wastewater Treatment and Outfall Facilities – the facilities are old, deteriorated and lack
monitoring capabilities.
Funding to implement these projects will require the District to generate additional CRP revenue through
the new rate structure, along with funding assistance from the USDA Rural Development, State Water
Resources Control Board SRF DFA Program, Community Development Block Grants, and others.
3.2.3.2 ENGINEERING REPORTS
No engineering reports were provided to LAFCo staff.
3.2.4 Service Adequacy
Based on information provided by the District regarding facilities, management practices, accountability,
and financing, MCWD2’s service is deficient. The District is not able to fund basic studies in order to
determine adequate rates, does not have a website, has one part-time employee, and has a history of
being unable to fill board vacancies. The District is not meeting some transparency and reporting
requirements and has very little reserves. LAFCo staff acknowledge that the District is making strides to
meet some of these requirements; however, inadequate funding is a major barrier to effective
management and provision of services for the District. Though little growth within the District is
anticipated, current facilities are not sufficient to serve any further development beyond what is currently
provided. The District’s infrastructure suffers from extensive deferred maintenance and is in need of a
complete rehabilitation of the collection system, lift stations, and ultimately the wastewater treatment
plant.
3.2.4.1 REGULATORY PERMITS AND COMPLIANCE HISTORY
The District is currently regulated by Order No. R1-2021-0005 and National Pollutant Discharge
Elimination System (NPDES) Permit No. CA0024040, adopted on April 15, 2021, with an expiration date
May 31, 2026 (RFI, 2023). A summary of the District’s regulatory measures as identified by the State
Water Resources Control Board (SWRCB) is shown below in
Table 3-2. The District has held an active permit with the SWRCB since 1986.
Table 3-2: SWRCB – MCWD2 Regulatory Measure
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In November 2022, the SWRCB prepared a Treatment Facility Compliance Evaluation Inspection Report
for the District as part of regular compliance and in response to an odor complaint received in September
2022. The results of the report indicated that the Facility was operating properly, and no odors were
present at the time of the inspection; however, concern was noted about deferred maintenance identified
during the inspection. Additionally, the SWRCB has documented that the District received 22 non-priority
violations in the last five years, all of which remain active (SWRCB, 2023). A summary of the violations in
the previous five years can be found in Table 3-4. It should be noted that almost all the violations
documented by the SWRCB are minor offenses that are common for such facilities.
3.2.4.2 SANITARY SEWER SPILLS
A sanitary sewer spill is a discharge of sewage from any portion of a sanitary sewer system due to a
sanitary sewer system overflow, operational failure, and/or infrastructure failure. The SWRCB’s Sanitary
Sewer Spill Incident Map shows spill reports for individual locations where sewage was discharged from a
sanitary sewer system enrolled under the Statewide General Waste Discharge Requirements for Sanitary
Sewer Systems Order, Water Quality Order (WQO) No. 2022-0103-DWQ (the Statewide Sanitary Sewer
Systems Order).
When searching the SWRCB’s sanitary sewer overflow (SSO) incident data for MCWD2, six spill incidents
were identified; all of which were Category 3 Spill Events16.
Category 3 Spill Events are defined as:
• A spill of equal to or greater than 50 gallons and less than 1,000 gallons, from or caused by a
sanitary sewer system regulated under the General Order that does not discharge to a surface
water; and
• A spill of equal to or greater than 50 gallons and less than 1,000 gallons, that spills out of a lateral
but is caused by a failure or blockage in the main lines of the sanitary sewer system.
All the noted spill incidents from the SWRCB data can be found summarized below in Table 3-3.
Table 3-3: SWRCB – MCWD2 Spill Incidents
Spill Event ID Spill Date Category Volume Reason
763097 10/16/2007 3 150 gallons spilled Debris-General
763099 2/4/2008 3 500 gallons spilled Pipe structural problem/failure
752083 4/28/2010 3 20 gallons spilled Debris-General
785639 8/28/2012 3 5 gallons spilled Other
790877 1/28/2013 3 300 gallons spilled Root intrusion
792924 3/24/2013 3 100 gallons spilled Root intrusion
Source: SWRCB
Table 3-4: SWRCB – MCWD2 Violations summarizes MCWD2’s violations for the last five years (spill
incidents are not included in this list). The table includes the date the violation occurred, the violation
type, a description of the violation, what corrective action has been taken (if any), and the status of the
violation.
16 Data for Spill Events can be found here: https://www.waterboards.ca.gov/water_issues/programs/sso/.
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A total of eight violations were noted for 2023, most of which were responded to with “training related
to proper sampling technique” as the corrective action.
3.2.4.3 CAPACITY
The design capacity of the WWTP is 24,000 gallons per day (gpd), but the permit capacity is only 19,000
gpd. The District has significant infiltration and inflow (I&I) issues within the collection system, heavily
impacted by the result of strong storms which result in downed trees and power outages. There are
numerous areas of root intrusion and areas where there is a change of material in the system, all of which
create potential infiltration spots for groundwater to enter the collection system. In 2023, two of the
violations involved issues that required the District to find the points of infiltration and inflow. The District
does not appear to have the capacity to address emergencies adequately (RFI, 2023).
LAFCo staff recommends that the Commission review the District Board’s efforts to define the I&I issues,
incorporate into a CIP, and schedule for maintenance at the next MSR Update or within three years of the
completion of this MSR, whichever comes first.
3.2.4.4 NEEDS AND DEFICIENCIES
The District is in need of a complete rehabilitation of the collection system, lift stations, and ultimately
the wastewater treatment plant. The Board of Directors and contract General Manager have been
exploring funding options to help cover the costs of upgrading these systems.
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Table 3-4: SWRCB – MCWD2 Violations
Violation ID Date Type Description Corrective Action Status Classification Source
Once Only One Time (MONRPT) (Evaluation of Sea Level Rise Impact on
1117904 06/02/2023 LREP Sea Cave Discharge Outfall Work Plan) report for 2021/06/01 (2473157) was Violation B Report
due on 01-JUN-23
Biochemical Oxygen Demand (BOD) (5-day @ 20 Deg. C) Percent Reduction Smoke test to locate
1115497 03/31/2023 CAT1 Violation B eSMR
limit is 85 % and reported value was 80 % at EFF-001. the I&I locations.
Need to conduct a
Total Suspended Solids (TSS), Percent Removal Percent Reduction limit is
1115498 03/31/2023 CAT1 smoke test to locate Violation B eSMR
85.0 % and reported value was 51.0 % at EFF-001.
the I&I locations.
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value Training on proper
1115496 03/07/2023 OEV Violation B eSMR
was 1600 MPN/100 mL at EFF-001. sampling techniques.
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value Training on proper
1115495 02/28/2023 OEV Violation B eSMR
was 1600 MPN/100 mL at EFF-001. sample techniques.
Watch training videos
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value
1115493 02/21/2023 OEV on proper sampling Violation B eSMR
was 240 MPN/100 mL at EFF-001.
techniques.
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value Training on proper
1115494 02/14/2023 OEV Violation B eSMR
was 1600 MPN/100 mL at EFF-001. sample techniques.
None taken. The
No Ammonia sample was taken during the month of January. This was
sample was missed
1115499 01/31/2023 DMON caused by the regular operator being injured in a car accident and the Violation B eSMR
due to events beyond
transition of finding a replacement.
our control.
Have sampled for
1112540 11/30/2022 DMON The monthly ammonia sample was forgotten. ammonia in Violation B eSMR
December
The sample result of 2
coliform result on 8/4 was 41 MPN which exceeded the median value of 23 MPN put us in
1109514 08/11/2022 DMON MPN. We are required to resample within 7 days. I did not get sample results compliance with a Violation B eSMR
until 8/22 and resampled on 8/24 with a result of 2 MPN. median value of
21MPN.
Once Only OneTime ( SUMRPT ) (Biological Survey Work Plan) report for
1107108 08/02/2022 LREP Violation B Report
2021/06/01 (2473159) was due on 01-AUG-22
The chlorine contact
Total Coliform Monthly Median limit is 23 MPN/100 mL and reported value
1095491 09/22/2021 OEV chamber was drained Violation B eSMR
was 36 MPN/100 mL at LND-001.
and cleaned
cleaned chlorine
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value contact chamber and
1092303 05/20/2021 OEV Violation U eSMR
was 240 MPN/100 mL at LND-001. increased chlorine
dose
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value increased chlorine
1092302 04/28/2021 OEV Violation U eSMR
was 540 MPN/100 mL at EFF-001. dose
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Violation ID Date Type Description Corrective Action Status Classification Source
lab was closed due to Covid outbreak missed weekly coliform and BOD/TSS
1089198 03/06/2021 DMON lab is now open Violation B eSMR
samples
missed weekly BOD/TSS and coliform samples due to lab closure for Covid
1089197 02/20/2021 DMON lab is now open Violation B eSMR
outbreak
We will clean the
chlorine contact
Total Coliform 30-Day Median limit is 23 MPN/100 mL and reported value
1077521 06/24/2020 OEV chamber and if Violation U eSMR
was 49 MPN/100 mL at LND-001.
necessary increase
the chlorine.
Total Coliform 30-Day Median limit is 23 MPN/100 mL and reported value
coliform count is back
1069965 10/23/2019 OEV was 1600 MPN/100 mL at LND-001. *** MMP Exempt Reason:Discharge was Violation B eSMR
within limits
to land, not to surface water.
Total Coliform Daily Maximum limit is 230 MPN/100 mL and reported value increased chlorine
1071422 10/23/2019 OEV was 1600 MPN/100 mL at LND-001. *** MMP Exempt Reason: Discharge to and cleaned contact Violation B eSMR
land, not surface water. chamber
Total Coliform 30-Day Median limit is 23 MPN/100 mL and reported value
1071421 09/25/2019 OEV increase chlorine Violation U eSMR
was 30 MPN/100 mL at LND-001.
Total Coliform 30-Day Median limit is 23 MPN/100 mL and reported value
1071424 07/24/2019 OEV increased chlorine Violation U eSMR
was 30 MPN/100 mL at LND-001.
Increased the chlorine
Total Coliform 30-Day Median limit is 23 MPN/100 mL and reported value dose rate. Samples
1065579 07/24/2019 OEV Violation U eSMR
was 70 MPN/100 mL at LND-001. done since have been
fine.
Source: State Water Resources Control Board
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3.3 Determinations
This section presents the required MSR determinations pursuant to Government Code (GC) Section (§)
56430(a) for the MCWD2. This is the first MSR for the District.
3.3.1 MSR Review Factors
3.3.1.1 GROWTH
Growth and population projections for the affected area
1. The estimated population of the District is 473 and is comprised of a small number of commercial
property owners along Highway 1 and rural residences, many of which are second homes and short-
term vacation rental properties.
2. With the commercial areas already built out, the District is limited in growth to buildout of any
remaining undeveloped rural residential lots. Based on population projections for the County, it is
unlikely buildout of the residential parcels will occur until well beyond the planning horizon of this
document
3. The North Gualala Water Company (NGWC), which provides potable water services to MCWD2
customers (except those on wells), is currently imposing a moratorium on water services within its
service area, which includes customers and boundaries of both the MCWD2 and the GCSD.
Consequently, growth is anticipated to be negligible within the planning horizon of this study.
3.3.1.2 DISADVANTAGED UNINCORPORATED COMMUNITIES
The location and characteristics of any disadvantaged unincorporated communities within or contiguous
to the sphere of influence
4. The District is located within the Census Designated Place (CDP) of Anchor Bay which has a Median
Household Income (MHI) of $68,452. This is less than the MHI Disadvantaged Unincorporated
Community (DUC) Threshold of $73,240, therefore the District is considered to be in a DUC. While the
residents of Anchor Bay are receiving the essential municipal services of fire, water, and wastewater,
only fire services have proven to be adequate in the area. Both water and wastewater services could
be improved in the areas that are utilizing private septic systems and wells. While these areas
currently do not lack public services, unsewered properties may benefit from future connection to
the District’s system should their private septic systems fail.
3.3.1.3 CAPACITY OF FACILITIES AND ADEQUACY OF SERVICES
Present and planned capacity of public facilities, adequacy of public services, and infrastructure needs or
deficiencies including needs or deficiencies related to sewers, municipal and industrial water, and
structural fire protection in any disadvantaged unincorporated communities within or contiguous to the
sphere of influence
5. The District provides wastewater collection and treatment services to approximately 100 customers.
Although the number of customers in the District does not fluctuate throughout the year, service
demand increases during tourist seasons.
6. The District’s wastewater collection system consists of approximately 6,800 linear feet of gravity
pipelines, 1,370 linear feet of pressurized force mains, 26 manholes, and two wastewater pump
stations.
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7. The District conveys wastewater flows through its collection system from the Anchor Bay community,
the commercial district, and Anchor Bay Campground to Pump Station No. 1 then to Pump Station No.
2. Effluent reaches the treatment plant by force main from Pump Station No. 1, located on Highway
1, downhill of the WWTP. The Plant has an average dry weather design treatment capacity of 0.0240
mgd.
8. The District’s entire infrastructure system is in need of extensive repairs and rehabilitation in order to
continue providing adequate service to its existing customers and protect public health.
9. The SWRCB issued a total of eight violations for the year 2023, and a total of 22 violations since July
2019.
10. Operations and maintenance are performed by the District’s part-time operator, who is managed by
the contract General Manager of the Gualala Community Services District (GCSD).
11. No boundary changes are pending or proposed.
3.3.1.4 FINANCIAL ABILITY OF AGENCY
Financial ability of agencies to provide services.
12. The District recently approved a new rate study, which includes a priority list of infrastructure
improvement/replacement needs.
13. The District is attempting to obtain planning grants from the United States Department of Agriculture
(USDA) and the SWRCB in order to help fund a comprehensive analysis that would include a full CIP
and summary of the necessary engineering of system upgrades.
14. Due primarily to an outdated rate structure, expenditures have exceeded revenues for the past five
years, which has required the District to draw down reserves to cover operational costs. While this
indicates the District is not, and has not been, in a stable financial position, the new rate structure
adopted in May 2024 will help to stabilize the District’s finances and support the rebuilding of
operational and capital replacement reserves.
15. The Board adopted a Proposition 218 rate study and new rates in May 2024, which reflect annual rate
increases over a five-year period. As recommended in the rate study, the first years’ rate increases
will be eight percent for both residential and commercial users, with five percent increases in each of
the subsequent four years. Additionally, the capital replacement program (CRP) fee will increase by
20 percent in the first year and five percent in each of the subsequent four years. The new rate
structure reflects service operations and maintenance and plans for capital replacement needs.
16. Funding to implement the capital replacement program will require the District to generate additional
CRP revenue through the new rate structure, along with funding assistance from the USDA Rural
Development, State Water Resources Control Board SRF DFA Program, Community Development
Block Grants, and others.
17. The District adopted a reserves policy under Resolution 23-024-10 in November 2023, which requires
the District to reserve at least three months of operating expenses. The District’s current target for
Operating Reserves is approximately $53,000 based on the approved FY 2023-2024 budget of
$211,758. The District has not yet allocated actual funds to the reserve account because such funds
were not anticipated in the current rates.
18. At the end of FY 2023-2024, the District’s capital replacement reserve account totals approximately
$235,000.
19. The District is currently operating at a net loss because of substantial necessary investments into the
District.
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20. No cost avoidance measures have been identified.
3.3.1.5 SHARED SERVICES AND FACILITIES
Status of, and opportunities for, shared facilities
21. The District operates with minimal staffing and facilities. However, since 2023 the District has
maintained an agreement with GCSD to provide administrative services as well as General Manager
responsibilities and facility operations on a part-time basis. The District does not own or lease any
administrative facilities and currently shares office space with the GCSD and meeting space with Coast
Life Support District.
22. The MCWD2 and GCSD are applying for planning grants to study options for regionalization or
consolidation of services.
23. No other opportunities for shared facilities have been identified at this time.
3.3.1.6 ACCOUNTABILITY, STRUCTURE AND OPERATIONAL EFFICIENCIES
Accountability for community service needs, including governmental structure and operational
efficiencies
24. The District has difficulty filling Board vacancies, primarily due to the limited number of eligible and
interested residents available to serve on the Board.
25. The District demonstrated accountability and transparency by disclosing financial and service-related
information in response to LAFCo requests. However, some information requested from the District
was not provided as past record keeping has been lacking and information was not available.
26. The District demonstrates accountability to its constituents through holding regular monthly board
meetings and distribution of agendas, notices, and meeting records by email. The District does not
maintain a website; however, the District adopted a Hardship Resolution in November of 2023, thus
making the District compliant with Senate Bill (SB) 929. The GCSD hosts a land page for the MCWD2
on GCSD’s website, which contains their meeting agendas and minutes for 2022 and 2023. It is
recommended that the District Board review the decision to maintain its own website every January
so long as the hardship exists.
27. Until recently, the District had struggled to meet transparency and reporting requirements, primarily
due to an insufficient number of Board members and lack of staffing to manage and administer the
District. Since FY 2022-2023, the District has made great strides towards improving governance and
transparency, having established a full Board and contracted with GCSD for management, operations
and administration services. While there has been substantial improvement, District board members
have identified the difficulty in filling Board vacancies and a lack of funding as major barriers to
effective governance of the District.
28. The District does not have a written mission statement or established goals and objectives. The
District is planning a retreat in the second half of 2024 that will be dedicated to adopting a mission
statement and associated goals.
29. The District relies heavily on the agreement with GCSD to maintain operations and provide adequate
wastewater service. Given the District’s overall position, consolidation or regionalization with GCSD
should be considered. Towards that end, both the District and the GCSD are pursuing planning grants
to explore options.
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3.3.1.7 OTHER SERVICE DELIVERY MATTERS
Any other matter related to effective or efficient service delivery, as required by commission policy
30. There are no other matters related to service delivery required by Mendocino LAFCo Policy.
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4 SPHERE OF INFLUENCE
The Local Agency Formation Commission (LAFCo) prepares a Municipal Service Review (MSR) prior to or
in conjunction with the Sphere of Influence (SOI) review process. An SOI study considers whether a change
to the SOI, or probable future boundary, of a local government agency is warranted to plan for the logical
and orderly development of that agency in a manner that supports the Cortese-Knox-Hertzberg (CKH) Law
and the policies of the Commission. The MSR and required determinations are presented in Chapters 2
and 3 of this document and form the basis of information and analysis for this SOI review. This chapter
presents the SOI study and required determinations pursuant to California Government Code (GC) §
(Section) 5642(e).
4.1 Mendocino LAFCo Policies
Is addition to making the necessary determinations for establishing or modifying an SOI consistent with
the CKH Act, the appropriateness of an agency’s SOI is also based on an evaluation of consistency with
local LAFCo policies. SOI policies can be found in the Mendocino LAFCo Policies and Procedures Manual
adopted November 5, 201817.
10.1.1 Legislative Authority and Intent
An SOI is the probable 20-year growth boundary for a jurisdiction’s physical development. The
Commission shall use spheres of influence to:
a) promote orderly growth and development within and adjacent to communities;
b) promote cooperative planning efforts among cities, the County, and special districts to address
concerns regarding land use and development standards, premature conversion of agriculture
and open space lands, and efficient provision of public services;
c) guide future local government reorganization that encourages efficiency, economy, and orderly
changes in local government; and
d) assist property owners in anticipating the availability of public services in planning for the use of
their property.
10.1.4 Reduced Spheres
The Commission shall endeavor to maintain and expand, as needed, spheres of influence to accommodate
planned and orderly urban development. The Commission shall, however, consider removal of land from
an agency’s sphere of influence if either of the following two conditions apply:
a) the land is outside the affected agency’s jurisdictional boundary but has been within the sphere of
influence for 10 or more years; or
b) the land is inside the affected agency’s jurisdictional boundary but is not expected to be developed
for urban uses or require urban-type services within the next 10 years.
17 Mendocino LAFCo Policies and Procedures Manual can be found here:
https://www.mendolafco.org/files/8e5477867/FINAL+Adopted+Mendo+LAFCo+PP+Manual+2018+upd+12-15-23.pdf.
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10.1.5 Zero Spheres
LAFCo may adopt a “zero” sphere of influence encompassing no territory for an agency. This occurs if
LAFCo determines that the public service functions of the agency are either nonexistent, no longer
needed, or should be reallocated to some other agency (e.g., mergers, consolidations). The local agency
which has been assigned a zero sphere should ultimately be dissolved.
10.1.6 Service Specific Spheres
If territory within the proposed sphere boundary of a local agency does not need all the services of the
agency, a “service specific” sphere of influence may be designated.
10.1.7 Agriculture and Open Space Lands
Territory not in need of urban services, including open space, agriculture, recreational, rural lands, or
residential rural areas shall not be assigned to an agency’s sphere of influence unless the area’s exclusion
would impede the planned, orderly, and efficient development of the area. In addition, LAFCo may adopt
an SOI that excludes territory currently within that agency’s boundaries. This may occur when LAFCo
determines that the territory consists of agricultural lands, open space lands, or agricultural preserves
whose preservation would be jeopardized by inclusion within an agency’s sphere. Exclusion of these areas
from an agency’s sphere of influence indicates that detachment is appropriate.
10.1.8 Annexations Are Not Mandatory
Before territory can be annexed to a city or district, it must be within the agency’s SOI (GC. §56375.5).
However, territory within an agency’s sphere will not necessarily be annexed. A sphere is only one of
several factors that are considered by LAFCo when evaluating changes of organization or reorganization.
10.1.9 Islands or Corridors
Sphere of influence boundaries shall not create islands or corridors unless it can be demonstrated that
the irregular boundaries represent the most logical and orderly service area of an agency.
10.1.10 Overlapping Spheres
LAFCo encourages the reduction of overlapping spheres of influence to avoid unnecessary and inefficient
duplication of services or facilities. In deciding which of two or more equally capable agencies shall include
an area within its sphere of influence, LAFCo shall consider the agencies’ service and financial capabilities,
social and economic interdependencies, topographic factors, and the effect that eventual service
extension will have on adjacent agencies. Where an area could be assigned to the sphere of influence of
more than one agency, the following hierarchy typically applies:
a) Inclusion within a city’s sphere
b) Inclusion within a multi-purpose district’s sphere
c) Inclusion within a single-purpose district’s sphere
Territory placed within a city’s sphere indicates that the city is the most logical provider of urban services.
LAFCo encourages annexation of developing territory (i.e., area not currently receiving services) that is
currently within a city’s sphere to that city rather than to one or more single-purpose special districts.
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LAFCo discourages the formation of special districts within a city’s sphere. To promote efficient and
coordinated planning among the county’s various agencies, districts that provide the same type of service
shall not have overlapping spheres.
10.1.11 Memorandum of Agreements (For City Sphere Amendments and Updates)
Prior to submitting an application to LAFCo for a new city sphere of influence or a city sphere of influence
update, the city shall meet with the County to discuss the proposed new boundaries of the sphere and
explore methods to reach agreement on development standards and planning and zoning requirements
as contained in GC §56425. If an agreement is reached between the city and County the agreement shall
be forwarded to LAFCo. The Commission shall consider and adopt a sphere of influence for the city
consistent with the policies adopted by LAFCo and the County, and LAFCo shall give great weight to the
agreement to the extent that it is consistent with LAFCo policies in its final determination of the city
sphere.
10.1.12 Areas of Interest
LAFCo may, at its discretion, designate a geographic area beyond the sphere of influence as an Area of
Interest to any local agency.
a) An Area of Interest (AOI) is a geographic area beyond the sphere of influence in which land use
decisions or other governmental actions of one local agency (the "Acting Agency") impact directly or
indirectly upon another local agency (the "Interested Agency"). For example, approval of a housing
project developed to urban densities on septic tanks outside the city limits of a city and its sphere of
influence may result in the city being forced subsequently to extend sewer services to the area to deal
with septic failures and improve city roads that provide access to the development. The city in such a
situation would be the Interested Agency with appropriate reason to request special consideration
from the Acting Agency in considering projects adjacent to the city.
b) When LAFCo receives notice of a proposal from another agency relating to the Area of Concern, LAFCo
will notify the Interested Agency and will consider its comments.
c) LAFCo will encourage Acting and Interested Agencies to establish Joint Powers Agreements or other
commitments as appropriate.
4.2 Existing Sphere of Influence
The existing SOI for the District is coterminous with the District’s boundary. The SOI was established with
the 1984 Zion Study and has not been reviewed by LAFCo since. The District has confirmed the adequacy
of their existing boundary and SOI. The coterminous SOI is appropriate given the District’s current
operating level. There are no proposed SOI changes for MCWD2.
4.2.1 Study Areas
Study areas are unique to a specific agency and are used to define the extent of one or more locations for
SOI analysis purposes. Study areas may be created at different levels of scope and/or specificity based on
the circumstances involved. The following descriptions demonstrate the array of scenarios that may be
captured by a SOI study area.
• An area with clear geographic boundaries and scope of service needs based on years of interagency
collaboration or public engagement and a project ready for grant funding or implementation.
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• An area involving broader community regions or existing residential subdivisions with a large or long-
term vision in need of fostering and/or establishing interagency partnerships.
• An area in early stages of conception that is not currently geographically well-defined and generally
involves one or more ideas identified by agency or community leaders needing further definition.
• An area geographically defined by a gap between the boundaries of existing public service providers.
• An area adjacent to an existing agency’s boundary slated for development needing urban services.
Study areas can result in a proposed SOI or sphere expansion area, or the designation of an Area of Interest
to earmark areas for enhanced interagency coordination or for future SOI consideration.
The only study area in this SOI is the community of Anchor Bay. Due to its geographic isolation and
financial standing, there are no other nearby areas that should be considered as a study area.
4.2.2 Area of Interest Designation
LAFCo’s Area of Interest Policy, per Section 10.1.12, provides for the designation or identification of
unincorporated areas located near to, but outside the jurisdictional boundary and established SOI of a city
or district, in which land use decisions or other governmental actions of another local agency directly or
indirectly impact the subject local agency.
An AOI designation serves as a compromise approach that recognizes situations involving challenging
boundary or municipal service delivery considerations, or for which urbanization may be anticipated in
the intermediate or long-range planning horizons. It is a tool intended to enhance communication and
coordination between local agencies.
An AOI designation is most helpful when the county and city or district can reach agreement that
development plans related to LAFCo designated AOI will be treated the same as if these areas were within
the city or district SOI boundary, particularly regarding notification to and consideration of input from the
city or district.
No AOIs have been identified for MCWD2.
4.3 Proposed Sphere of Influence
There are no proposed changes to the SOI at the time. The District and LAFCo staff recommend the
Commission affirm the existing coterminous sphere.
4.4 Consistency with LAFCo Policies
Mendocino LAFCo has established local policies to implement its duties and mandates under the Cortese-
Knox-Hertzberg Act. This section identifies potential inconsistencies between the proposed SOI and local
LAFCo policies.
The proposed District SOI is consistent with Mendocino LAFCo Policies (refer to Section 1.5 for the specific
SOI policies).
4.5 Determinations
In determining the Sphere of Influence (SOI) for an agency, LAFCo must consider and prepare written
determinations with respect to five factors as outlined in Government Code §56425(e). These factors
are as follows:
1. The present and planned land uses in the area, including agricultural and open space lands;
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2. The present and probable need for public facilities and services in the area;
3. The present capacity of public facilities and adequacy of public services that the agency provides
or is authorized to provide;
4. The existence of any social or economic communities of interest in the area if the Commission
determines that they are relevant to the agency; and
5. The present and probable need for public facilities and services (including sewers, municipal and
industrial water, or structural fire protection) of any disadvantaged unincorporated communities
within the existing Sphere of Influence.
LAFCo staff propose no change to the existing SOI for the District and recommend the Commission
approve the SOI determinations as presented below.
4.5.1 Present and planned land uses
The primary land uses within the District service area are described in Section 2.5.1.1. The entirety of the
District is located within the Anchor Bay Census Designated Place (CDP) in coastal unincorporated
Mendocino County. The primary uses of the coastal zone are rural residential uses and small commercial
zones, agricultural uses also exist within the area. Future development in the District is limited in growth
to buildout of any remaining undeveloped rural residential lots as the commercial district is already built
out. Furthermore, based on population projections for the County, it is likely buildout of the residential
parcels will not occur until well beyond the planning horizon of this document. Based on the District’s
location in the coastal zone, the area is subject to additional development regulations, and land use
changes in the area must be approved by both the County and Coastal Commission.
4.5.2 Present and probable need for facilities and services in the area
The District provides wastewater treatment services to approximately 100 customers. This service area
includes the Anchor Bay community of approximately 68 residences, the Anchor Bay Campground, and a
small commercial strip that straddles State Highway 1. There are several customers who own more than
one equivalent dwelling unit (EDU); therefore, the actual number of connections is closer to 100. The
District anticipates little growth in resident population within the near term (five years) and long-term
planning horizon (20 years). Given that the MCWD2 is limited to a small number of commercial properties
that are developed, and the residential properties in the Anchor Bay community with only a handful of
undeveloped lots, the District will likely not need to accommodate much future development and is near
buildout. While there are some large parcels that in theory could be developed as a hotel/bed and
breakfast, there are no current development plans in plans and more notably, the North Gualala Water
Company (NGWC) currently has a water moratorium in place that does not allow for any new connections
for potable water. Until that moratorium is lifted, no new building permits will be issued. The projected
decline of 2.7 percent throughout the County suggests that buildout of the residential parcels will likely
not occur until well beyond the planning horizon of this document.
4.5.3 The present capacity of public facilities and adequacy of public services that the agency
provides or is authorized to provide
The District provides wastewater conveyance services to approximately 100 wastewater connections. The
District’s wastewater collection system consists of approximately 6,800 linear feet of gravity pipelines,
1,370 linear feet of pressurized force mains, 26 manholes, and two wastewater pump stations. The District
has experienced multiple violations; 22 since July 2019 and 8 within the last year (2023). Some of the
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
SPHERE OF INFLUENCE 4-6
violation events are described as ‘beyond District control’ though many of these violations appear to have
received corrective action in the form of training. The design capacity of the wastewater treatment plant
(WWTP) is 24,000gallons per day (gpd), but the permit capacity is only 19,000 gpd. The District’s
infrastructure is in need of extensive repairs in order to continue providing adequate service to its existing
customers and does not appear to have the capacity to address emergencies despite its current efforts.
4.5.4 The existence of any social or economic communities of interest in the area if the
Commission determines that they are relevant to the agency
The District is located within the unincorporated coastal zone of Mendocino County and is wholly located
within the Anchor Bay CDP. Most of the coastal zone is made up of rural uses and is geographically isolated
from other communities. Given its isolated location and financial standing, no additional communities of
interest have been identified for the District.
4.5.5 The present and probable need for public facilities and services of any disadvantaged
unincorporated communities
The District is located within the Anchor Bay CDP which has a Median Household Income (MHI) of $68,452.
With an MHI that is less than the Statewide MHI Threshold of $73,240, the District is considered to be a
Disadvantaged Unincorporated Community (DUC). While the residents of Anchor Bay are currently
receiving the essential municipal services of fire, water, and wastewater, only fire services have proven to
be adequate in the area. Both water and wastewater services could be improved in the areas that are
utilizing private septic systems and wells. While these areas currently do not lack public services these
properties could consider upgrading their system; particularly those utilizing septic as public health
concerns.
4.6 Recommendation
Pursuant to California Water Code (WAT) §55100, the Commission does hereby establish the functions
and classes of services provided by the MCWD2 as limited to wastewater collection and treatment. Based
upon the information contained in this report, it is recommended that the District Service Area Boundary
and SOI for all services remain unchanged and coterminous (Figure 4-1).
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
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Mendocino County Waterworks District No. 2 - Anchor Bay Mendocino County Waterworks No 2 Highways
Sphere of Influence Roads o
Source: This map was prepared by the Mendocino County Division of Information Services GIS Program, June 26, 2024. 0 75 150 300
Note: This map is not a survey product. Parcels Streams Feet
Bibliography 5-1
5 Bibliography
Assembly Committee on Local Government. (2023, December ). Guide to the Cortese–Knox–Hertzberg
Local Government Reorganization Act of 2000. Retrieved from
https://calafco.org/sites/default/files/resources/CKH-Guides/CKH%20GUIDE%20-%202023%20-
%20linked.pdf
Celentano, Michael. (2019). Audited Financial Statements June 30, 2019 and 2018
-----. (2020). Audited Financial Statements June 30, 2020 and 2019
-----. (2021). Audited Financial Statements June 30, 2021 and 2020
-----. (2022). Audited Financial Statements June 30, 2022 and 2021.
Census Reporter. (2022A). Block Group 3 Statistics Based on ACS 2022. Retrieved from
https://censusreporter.org/profiles/15000US060450111023-bg-3-tract-11102-mendocino-ca/
Census Reporter. (2022B). Census Tract 111.02 Statistics Based on 2022 ACS. Retrieved from
https://censusreporter.org/profiles/14000US06045011102-census-tract-11102-mendocino-ca/
County of Mendocino. (2023). Zoning Web Map. Retrieved from
https://www.mendocinocounty.org/government/planning-building-services/zoning-web-map
County of Mendocino Coastal Element. (2021, November). County of Mendocino Coastal Element.
Retrieved from
https://www.mendocinocounty.org/home/showpublisheddocument/56978/638181067153900
000
County of Mendocino General Plan. (2009, August). County of Mendocino General Plan. Retrieved from
https://www.mendocinocounty.org/government/planning-building-services/plans/mendocino-
county-general-plan
DOF. (2023, December ). Department of Finance. Retrieved from County Population Projections:
https://dof.ca.gov/forecasting/demographics/projections/
Justia US Law. (2023A). CA Govt Code § 56076 (2022). Retrieved from
https://law.justia.com/codes/california/2022/code-gov/title-5/division-3/part-1/chapter-
2/section-56076/
Justia US Law. (2023B). Government Code Section 56425-56434 . Retrieved from
https://law.justia.com/codes/california/2010/gov/56425-56434.html
Justia US Law. (2023C). CA Water Code § 55310.2 (2022). Retrieved from
https://law.justia.com/codes/california/2022/code-wat/division-16/part-3/chapter-1/section-
55310-2/
LAO. (1996). Understanding Proposition 218. Retrieved from Legislative Analyst Office:
https://lao.ca.gov/1996/120196_prop_218/understanding_prop218_1296.html#:~:text=Proposi
tion%20218%20specifies%20that%20no,to%20the%20property%2Drelated%20service.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
Bibliography 5-2
LegInfo. (2018). Senate Bill No. 929. Retrieved from Senate Bill No. 929
Mendocino LAFCo. (2018, November ). Policies and Procedures Manual. Retrieved from
http://www.mendolafco.org/policies.html.
MC Engineering. (2024). "Asset Evaluation, Rate Study, and Revenue Strategies for the Mendocino
County Water District No. 2 (Representing the Community of Anchor Bay, California)."
OPR. (2013). Senate Bill 244. Retrieved from Office of Planning and Research:
https://opr.ca.gov/docs/SB244_Technical_Advisory.pdf
RFI, L.-M. K. (2023, December). President. (RFI, Interviewer)
SWRCB. (2023, January ). State Water Resources Control Board. Retrieved from Facility at a Glance
Report:
https://ciwqs.waterboards.ca.gov/ciwqs/readOnly/CiwqsReportServlet?inCommand=drilldown
&reportName=facilityAtAGlance&placeID=240318&reportID=7468273
US Census . (2022C). 2022 ACS MHI Anchor Bay. Retrieved from
https://data.census.gov/profile/Anchor_Bay_CDP,_California?g=160XX00US0602028
US Census. (2022A). 2022 ACS Survey MHI California. Retrieved from
https://data.census.gov/profile/California?g=040XX00US06
US Census. (2022B). 2022 ACS MHI Mendocino County. Retrieved from
https://data.census.gov/profile/Mendocino_County,_California?g=050XX00US06045
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
ACKNOWLEDGEMENTS 6-1
6 ACKNOWLEDGEMENTS
6.1 Report Preparation
This Municipal Service Review and Sphere of Influence Update was prepared by Hinman & Associates
Consulting, Inc., contracted staff for Mendocino LAFCo.
Uma Hinman, Executive Officer
Spencer Richard, Analyst
Jen Crump, Analyst
6.2 Assistance and Support
This Municipal Service Review and Sphere of Influence Update could not have been completed without
the assistance and support from the following organizations and individuals.
Linda-Marie Koza, Board President
Mendocino County Waterworks District No. 2
Chris Troyan, contract General Manager (GCSD)
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
APPENDICES 7-1
7 APPENDICES
7.1 Appendix A – Open Government Resources
The purpose of this appendix is to provide a brief list of some educational resources for local agencies
interested in learning more about the broad scope of public interest laws geared towards government
transparency and accountability. This appendix is not intended to be a comprehensive reference list or to
substitute legal advice from a qualified attorney. Feel free to contact the Mendocino LAFCo office at (707)
463-4470 to make suggestions of additional resources that could be added to this appendix.
The websites listed below provide information regarding the following open government laws: (1) Public
Records Act (Government Code §6250 et seq.), (2) Political Reform Act – Conflict-of-Interest regulations
(Government Code §81000 et seq.), (3) Ethics Principles and Training (AB 1234 and Government Code
§53235), (4) Brown Act – Open Meeting regulations (Government Code §54950 et seq.), and (5) Online
Compliance regulations (Section 508 of the US Rehabilitation Act and Government Code §11135).
o Refer to the State of California Attorney General website for information regarding public access
to governmental information and processes at the following link: https://oag.ca.gov/government.
o Refer to the State of California Attorney General website for information regarding Ethics Training
Courses required pursuant to AB 1234 at the following link: https://oag.ca.gov/ethics.
o The Fair Political Practices Commission (FPPC) is primarily responsible for administering and
enforcing the Political Reform Act. The website for the Fair Political Practices Commission is
available at the following link: http://www.fppc.ca.gov/.
o Refer to the California Department of Rehabilitation website for information regarding Section
508 of the US Rehabilitation Act and other laws that address digital accessibility at the following
link: http://www.dor.ca.gov/DisabilityAccessInfo/What-are-the-Laws-that-Cover-Digital-
Accessibility.html.
o Refer to the Institute for Local Government (ILG) website to download the Good Governance
Checklist form at the following link: www.ca-ilg.org/post/good-governance-checklist-good-and-
better-practices.
o Refer to the Institute for Local Government (ILG) website to download the Ethics Law Principles
for Public Servants pamphlet at the following link: www.ca-ilg.org/node/3369.
o Refer to the Institute for Local Government (ILG) website for information regarding Ethics Training
Courses required pursuant to AB 1234 at the following link: http://www.ca-ilg.org/ethics-
education-ab-1234-training.
o Refer to the California Special Districts Association (CSDA) website for information regarding
online and website compliance webinars at the following link:
http://www.csda.net/tag/webinars/.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
APPENDICES 7-2
7.2 Appendix B – Housing Legislation Trends and Results
Mendocino County and ADUs
In response, the County of Mendocino has taken a number of steps to facilitate Accessory Dwelling Unit
(ADU) construction and operation in an attempt to address the local housing crisis. This includes adopting
an ADU ordinance which outlines specific development standards. Another General Plan update was
adopted on 11/9/2021 which amended the Coastal Zoning Code component of the Local Coastal Plan to
establish and revise standards for ADUs in the Coastal Zone.
Because Anchor Bay is located in the Coastal Zone of the County it is subject to coastal specific ADU
regulations. The number of permitted ADUs within the Coastal Zone of Mendocino County (excluding the
Gualala Town Plan area) is limited to 500 units. Junior Accessory Dwelling Units (JADU), which are
accessory structures typically limited to 500 square feet in an existing space, are exempted from this cap.
Any change to the cap on the number of ADUs shall require a Local Coastal Program amendment.
Per Section 20.458.040 - Public Health and Safety Requirements, of the County’s Municipal Code, both an
adequate water supply and sewage capacity must be available to serve the proposed new residence as
well as existing residences on the property. Most notably, if the property is located in a service district
(such as Pacific Reefs), the property owner must provide written approval from the service district
specifically authorizing the connection of the ADU.
With respect to coastal resource protections, ADUs and JADUs are subject to additional requirements that
impact the viability of their development. Some of the most pertinent requirements can be found in
Section 20.458.045 of the County’s Municipal Code.
The Larger Picture
As for how ADUs fit into the larger picture of the Mendocino County population trends, the housing data
provided in the County’s General Plan Annual Progress Report (APR) provides a reliable snapshot.
Required by the Governor’s Office of Planning and Research (OPR) and the State’s Department of Housing
and Community Development (HCD), every jurisdiction is required to provide an annual report detailing
the progress made towards implementing their housing element and meeting their regional housing
needs allocations (RHNA).
The data provided in the most recent APR for Unincorporated Mendocino County (adopted June 6TH, 2023
by the Board of Supervisors) suggests that despite strict development regulations in some places, ADUs
are certainly a factor in local housing development trends. Out of the 143 housing development
applications received in the 2022 reporting year, 38 were for ADUs; in 2021 a total of 102 housing
development applications were received, of which 35 were for ADUs. This small number of ADUs
compared to single-family home applications suggests that there could continue to be some limited
development of ADUs throughout the unincorporated areas of the County. This kind of development
could very slightly increase demand for wastewater services provided by the Mendocino County
Waterworks District No. 2 (MCWD2) in Anchor Bay. However, any new development requires written
approval from the service provider to authorize services.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
APPENDICES 7-3
Regional Housing Needs Allocation (RHNA)
It is worth noting that in response to statutory requirements, policy direction from the State HCD, and
mandated deadlines for delivery of housing need allocation numbers to local jurisdictions within
Mendocino County, the Mendocino Council of Governments (MCOG) adopted a Regional Housing Needs
Plan in 2018.
Although MCOG does not typically deal with housing issues, they have been designated by HCD as the
appropriate regional agency to coordinate the housing need allocation process. The political jurisdictions
that comprise the region consist of the Mendocino County unincorporated area and the Cities of Ukiah,
Fort Bragg, Willits and Point Arena.
The Regional Housing Needs Plan went through numerous iterations prior to being adopted which took
into account different allocation factors for the methodology. Throughout the process, each member
jurisdiction provided statements of constraints to HCD which detailed the land-constraints that challenge
residential development in unincorporated Mendocino County. Water resources and availability was
cited by multiple MCOG member jurisdictions as a constraint and contributed to the adjustments made
by the state on the region’s required housing allocations.
The RHNA allocations for Unincorporated Mendocino County are projected for a planning period between
8/15/2019 and 8/17/2027. Since adopting the Regional Housing Needs Plan in 2018 the County has made
progress across all income levels; the number of housing units developed and how many remain with
respect towards its RHNA allocation are detailed below broken down by income level and deed restricted
versus non-deed restricted.
Table 7-1: Mendocino County RHNA Allocations
Projection Total
Total
RHNA Period - Units to
Income Level 2019 2020 2021 2022 Remaining
Allocation 01/01/2019- Date (All
RHNA
08/14/2019 Years)
Deed
-- -- 39 -- 21
Restricted
Very Low 291 125 166
Non-Deed
-- -- -- 65 --
Restricted
Deed
-- -- -- -- --
Restricted
Low 179 21 158
Non-Deed
-- - -- 21
Restricted
Deed
-- -- -- -- --
Restricted
Moderate 177 156 21
Non-Deed
4 -- -- -- --
Restricted
Above
702 46 40 67 51 58 262 440
Moderate
Total RHNA 1,349
Total Units 50 60 149 186 119 564 785
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
APPENDICES 7-4
*Progress toward extremely low-income housing need, as determined pursuant to Government
Code 65583(a)(1).
Extremely
Low-
145 15 26 21 62 83
Income
Units*
(HCD, 2023)
With respect to how RHNA requirements may affect Anchor Bay, the State continues to push for more
housing across the state including in communities located on the coast such as Anchor Bay. While these
coastal communities are subject to additional regulation and governing bodies (i.e., the Coastal
Commission), housing mandates can affect these areas just the same as more inland communities. While
there is not currently much left to develop under current regulations in Anchor Bay, evolving legislation
could allow for increased development potential that supports the State’s housing goals.
Additional Recent State Housing Legislation
While the state legislator has made a concerted effort to progress ADU development throughout the
state, there have been numerous other housing bills passed in recent years aimed at addressing the
housing affordability crisis.
• Senate Bill (SB) 9 - Authorizes a property owner to split a single-family lot into two lots and place
up to two units on each new lot. Therefore, the bill permits up to four units on properties
currently limited to single-family houses. SB 9 also mandates that local agencies approve
development projects that meet specified size and design standards.
• SB 10 - Establishes a process for local governments to increase the density of parcels in transit-
rich areas or on urban infill sites to up to 10 residential units per parcel. Such an ordinance must
be adopted between Jan. 1, 2021, and Jan. 1, 2029, and is exempt from the California
Environmental Quality Act (CEQA).
• SB 35 - Applies in cities that are not meeting their Regional Housing Need Allocation (RHNA) goal
for construction of above-moderate income housing and/or housing for households below 80
percent area median income (AMI). SB-35 amends Government Code (GC) Section (§) 65913.4
to require local entities to streamline the approval of certain housing projects by providing a
ministerial approval process.
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update
APPENDICES 7-5
7.3 Appendix C – District Financial Audits
Mendocino County Waterworks District No. 2 | 2024 Municipal Service Review and Sphere of
Influence Update