LAFCO

Countywide Water Service and Sphere Review: 9 agencies

Local Agency Formation Commissions · santa-cruz-msr-2022-countywide-water-msr-adopted-version · Msr · 2022-08-03

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Countywide Water Service and Sphere Review Central County Service Area 54 San Lorenzo Valley Water District (Summit West) Water District City of Santa Cruz Pajaro Valley Water Scotts Valley (Water Service Area) Management Agency Water District City of Watsonville Reclamation District Soquel Creek (Water Service Area) No. 2049 Water District Adopted Version (August 3, 2022) Local Agency Formation Commission of Santa Cruz County 701 Ocean Street, Room 318-D Santa Cruz, CA 95060 Website: www.santacruzlafco.org Phone: (831) 454-2055 TABLE OF CONTENT EXECUTIVE SUMMARY .............................................................................................................................. 7 Introduction................................................................................................................................................ 7 Structure of Report .................................................................................................................................... 8 Service Providers ...................................................................................................................................... 8 Principal Acts ............................................................................................................................................ 8 Sustainable Groundwater Management Act (SGMA) ............................................................................. 11 Services & Infrastructure ......................................................................................................................... 13 Financial Health ...................................................................................................................................... 14 Growth and Population ............................................................................................................................ 15 Transparency (Website Requirements) .................................................................................................. 15 Disadvantaged Unincorporated Communities ........................................................................................ 16 Private Water Systems ............................................................................................................................ 17 Spheres of Influence ............................................................................................................................... 17 Key Findings ........................................................................................................................................... 20 Recommended Actions ........................................................................................................................... 25 CENTRAL WATER DISTRICT ................................................................................................................... 26 OVERVIEW ............................................................................................................................................. 26 Services and Infrastructure ................................................................................................................. 26 Water Rates ........................................................................................................................................ 27 Population and Growth ........................................................................................................................ 31 FINANCES .............................................................................................................................................. 32 Revenues ............................................................................................................................................ 33 Expenditures ....................................................................................................................................... 34 Fund Balance / Net Position ................................................................................................................ 35 GOVERNANCE ....................................................................................................................................... 38 Local Accountability & Structure ......................................................................................................... 38 Opportunities and Challenges ............................................................................................................. 40 SPHERE OF INFLUENCE ...................................................................................................................... 45 Current Sphere Boundary ................................................................................................................... 45 Proposed Sphere Boundary ................................................................................................................ 45 DISTRICT SUMMARY ............................................................................................................................ 48 SERVICE AND SPHERE REVIEW DETERMINATIONS ....................................................................... 49 Service Provision Determinations ....................................................................................................... 49 Sphere of Influence Determinations .................................................................................................... 50 Countywide Water Service & Sphere Review Page 1 of 228 CITY OF SANTA CRUZ - WATER SERVICE AREA ................................................................................. 51 OVERVIEW ............................................................................................................................................. 51 Services and Infrastructure ................................................................................................................. 51 Water Rates ........................................................................................................................................ 52 Population and Growth ........................................................................................................................ 57 FINANCES .............................................................................................................................................. 58 Revenues ............................................................................................................................................ 59 Expenditures ....................................................................................................................................... 60 Fund Balance / Net Position ................................................................................................................ 61 GOVERNANCE ....................................................................................................................................... 64 Local Accountability & Structure ......................................................................................................... 64 Opportunities and Challenges ............................................................................................................. 66 SPHERE OF INFLUENCE ...................................................................................................................... 71 Current Sphere Boundary ................................................................................................................... 71 Proposed Sphere Boundary ................................................................................................................ 71 DISTRICT SUMMARY ............................................................................................................................ 74 SERVICE AND SPHERE REVIEW DETERMINATIONS ....................................................................... 75 Service Provision Determinations ....................................................................................................... 75 Sphere of Influence Determinations .................................................................................................... 76 CITY OF WATSONVILLE - WATER SERVICE AREA .............................................................................. 77 OVERVIEW ............................................................................................................................................. 77 Services and Infrastructure ................................................................................................................. 77 Water Rates ........................................................................................................................................ 78 Population and Growth ........................................................................................................................ 82 FINANCES .............................................................................................................................................. 83 Revenues ............................................................................................................................................ 84 Expenditures ....................................................................................................................................... 85 Fund Balance / Net Position ................................................................................................................ 86 GOVERNANCE ....................................................................................................................................... 89 Local Accountability & Structure ......................................................................................................... 89 Opportunities and Challenges ............................................................................................................. 91 SPHERE OF INFLUENCE ...................................................................................................................... 96 Current Sphere Boundary ................................................................................................................... 96 Proposed Sphere Boundary ................................................................................................................ 96 DISTRICT SUMMARY ............................................................................................................................ 99 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 100 Service Provision Determinations ..................................................................................................... 100 Sphere of Influence Determinations .................................................................................................. 101 Countywide Water Service & Sphere Review Page 2 of 228 COUNTY SERVICE AREA 54 (SUMMIT WEST) ..................................................................................... 102 OVERVIEW ........................................................................................................................................... 102 History ............................................................................................................................................... 102 CSA Inactivity .................................................................................................................................... 102 Population and Growth ...................................................................................................................... 104 FINANCES ............................................................................................................................................ 104 GOVERNANCE ..................................................................................................................................... 104 SPHERE OF INFLUENCE .................................................................................................................... 104 Proposed Sphere Boundary .............................................................................................................. 104 DISTRICT SUMMARY .......................................................................................................................... 106 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 107 Service Provision Determinations ..................................................................................................... 107 Sphere of Influence Determinations .................................................................................................. 108 PAJARO VALLEY WATER MANAGEMENT AGENCY .......................................................................... 109 OVERVIEW ........................................................................................................................................... 109 Services and Infrastructure ............................................................................................................... 109 Population and Growth ...................................................................................................................... 115 FINANCES ............................................................................................................................................ 116 Revenues .......................................................................................................................................... 117 Expenditures ..................................................................................................................................... 118 Fund Balance / Net Position .............................................................................................................. 119 GOVERNANCE ..................................................................................................................................... 122 Local Accountability & Structure ....................................................................................................... 122 Opportunities and Challenges ........................................................................................................... 125 SPHERE OF INFLUENCE .................................................................................................................... 132 Current Sphere Boundary ................................................................................................................. 132 Proposed Sphere Boundary .............................................................................................................. 132 DISTRICT SUMMARY .......................................................................................................................... 135 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 136 Service Provision Determinations ..................................................................................................... 136 Sphere of Influence Determinations .................................................................................................. 137 Countywide Water Service & Sphere Review Page 3 of 228 RECLAMATION DISTRICT NO. 2049 (COLLEGE LAKE) ...................................................................... 138 OVERVIEW ........................................................................................................................................... 138 Services and Infrastructure ............................................................................................................... 138 Population and Growth ...................................................................................................................... 141 FINANCES ............................................................................................................................................ 142 Revenues .......................................................................................................................................... 143 Expenditures ..................................................................................................................................... 144 Fund Balance / Net Position .............................................................................................................. 145 GOVERNANCE ..................................................................................................................................... 148 Local Accountability & Structure ....................................................................................................... 148 Opportunities and Challenges ........................................................................................................... 149 SPHERE OF INFLUENCE .................................................................................................................... 152 Current Sphere Boundary ................................................................................................................. 152 Proposed Sphere Boundary .............................................................................................................. 152 DISTRICT SUMMARY .......................................................................................................................... 155 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 156 Service Provision Determinations ..................................................................................................... 156 Sphere of Influence Determinations .................................................................................................. 157 SAN LORENZO VALLEY WATER DISTRICT ......................................................................................... 158 OVERVIEW ........................................................................................................................................... 158 Services and Infrastructure ............................................................................................................... 158 Water Rates ...................................................................................................................................... 159 Population and Growth ...................................................................................................................... 162 FINANCES ............................................................................................................................................ 163 Revenues .......................................................................................................................................... 164 Expenditures ..................................................................................................................................... 165 Fund Balance / Net Position .............................................................................................................. 166 GOVERNANCE ..................................................................................................................................... 169 Local Accountability & Structure ....................................................................................................... 169 Opportunities and Challenges ........................................................................................................... 172 SPHERE OF INFLUENCE .................................................................................................................... 176 Current Sphere Boundary ................................................................................................................. 176 DISTRICT SUMMARY .......................................................................................................................... 178 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 179 Service Provision Determinations ..................................................................................................... 179 Sphere of Influence Determinations .................................................................................................. 180 Countywide Water Service & Sphere Review Page 4 of 228 SCOTTS VALLEY WATER DISTRICT .................................................................................................... 181 OVERVIEW ........................................................................................................................................... 181 Services and Infrastructure ............................................................................................................... 181 Water Rates ...................................................................................................................................... 182 Population and Growth ...................................................................................................................... 185 FINANCES ............................................................................................................................................ 186 Revenues .......................................................................................................................................... 187 Expenditures ..................................................................................................................................... 188 Fund Balance / Net Position .............................................................................................................. 189 GOVERNANCE ..................................................................................................................................... 192 Local Accountability & Structure ....................................................................................................... 192 Opportunities and Challenges ........................................................................................................... 195 SPHERE OF INFLUENCE .................................................................................................................... 198 Current Sphere Boundary ................................................................................................................. 198 DISTRICT SUMMARY .......................................................................................................................... 200 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 201 Service Provision Determinations ..................................................................................................... 201 Sphere of Influence Determinations .................................................................................................. 202 SOQUEL CREEK WATER DISTRICT ..................................................................................................... 203 OVERVIEW ........................................................................................................................................... 203 Services and Infrastructure ............................................................................................................... 203 Water Rates ...................................................................................................................................... 204 Population and Growth ...................................................................................................................... 208 FINANCES ............................................................................................................................................ 209 Revenues .......................................................................................................................................... 210 Expenditures ..................................................................................................................................... 211 Fund Balance / Net Position .............................................................................................................. 212 GOVERNANCE ..................................................................................................................................... 215 Local Accountability & Structure ....................................................................................................... 215 Opportunities and Challenges ........................................................................................................... 217 SPHERE OF INFLUENCE .................................................................................................................... 222 Current Sphere Boundary ................................................................................................................. 222 Proposed Sphere Boundary .............................................................................................................. 222 DISTRICT SUMMARY .......................................................................................................................... 225 SERVICE AND SPHERE REVIEW DETERMINATIONS ..................................................................... 226 Service Provision Determinations ..................................................................................................... 226 Sphere of Influence Determinations .................................................................................................. 227 Countywide Water Service & Sphere Review Page 5 of 228 APPENDICES ........................................................................................................................................... 228 Appendix A: List of Private Water Systems (132 in total) ..................................................................... 228 Appendix B: Central Water District - Historical Boundary Changes ..................................................... 228 Appendix C: Central Water District – Capital Improvement Plan .......................................................... 228 Appendix D: City of Santa Cruz - Historical Boundary Changes .......................................................... 228 Appendix E: City of Santa Cruz – Long Range Financial Plan ............................................................. 228 Appendix F: City of Watsonville - Historical Boundary Changes .......................................................... 228 Appendix G: Reclamation District 2017 Audit (FY 2011 to 2015) ......................................................... 228 Appendix H: San Lorenzo Valley WD - Historical Boundary Changes ................................................. 228 Appendix I: Scotts Valley WD - Historical Boundary Changes ............................................................. 228 Appendix J: Soquel Creek WD – Historical Boundary Changes........................................................... 228 [This section intentionally left blank] Countywide Water Service & Sphere Review Page 6 of 228 EXECUTIVE SUMMARY Introduction This Service and Sphere of Influence Review provides information about the services and boundaries involving the nine water service providers in Santa Cruz County. The report will be used by the Local Agency Formation Commission (LAFCO) to conduct a statutorily required review and update process. The Cortese-Knox-Hertzberg Act requires that LAFCO conduct periodic reviews and updates of Spheres of Influence for all cities and special districts in Santa Cruz County (Government Code section 56425). It also requires LAFCO to conduct a review of municipal services before adopting sphere updates (Government Code Section 56430). Table 1 shows when the last service and sphere reviews were conducted for the nine water agencies. In order to analyze how water services are offered throughout Santa Cruz County, all water agencies will be evaluated in this comprehensive report. Table 1: Last Service & Sphere Review Cycle for Water Agencies Water Agencies Last Service & Sphere Review Central Water District August 2017 City of Santa Cruz December 2018 City of Watsonville April 2018 County Service Area 54 July 2017 Pajaro Valley Water Management Agency November 2017 Reclamation District No. 2049 November 2017 San Lorenzo Valley Water District November 2020 Scotts Valley Water District May 2021 Soquel Creek Water District May 2017 Footnote: This report will only analyze the water departments for the two cities. Findings and Determinations The service review process does not require LAFCO to initiate changes of organization based on service review conclusions or findings; it only requires that LAFCO make determinations regarding the delivery of public services in accordance with the provisions of Government Code Section 56430. However, LAFCO, local agencies, and the public may subsequently use the determinations and related analysis to consider whether to pursue changes in service delivery, government organization, or spheres of influence. CEQA Determination Service and sphere reviews are informational documents and are generally exempt from environmental review. LAFCO staff has conducted an environmental review of the Districts’ existing spheres of influence pursuant to the California Environmental Quality Act (CEQA) and determined that this report is exempt from CEQA. Such exemption is due to the fact that it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (Section 15061[b][3]). Countywide Water Service & Sphere Review Page 7 of 228 Structure of Report This Executive Summary presents a brief overview of the service review, key findings, and recommended actions. The Agency Profile chapters contain individual evaluations for each of the water service providers - highlighting specific characteristics, ongoing operations, current fiscal health, existing governance structure, ability to provide services, and its importance within its jurisdictional area. The profiles conclude with statutory determinations required for all service and sphere of influence reviews pursuant to the Cortese-Knox-Hertzberg Act. These chapters are followed by Appendices with sources used to conduct the service review. Service Providers Water services are provided by five independent special districts, two city departments, and one reclamation district as shown below. In accordance with the Commission’s Multi- Year Work Program, these nine water agencies will be analyzed in this report. Figure 1 on page 10 provides an overview map depicting the subject agencies. List of Subject Agencies: 1. Central Water District (“CWD” or “Central WD”) 2. City of Santa Cruz Water Service Area (“City” or “SCWSA”) 3. City of Watsonville Water Service Area (“City” or “WWSA”) 4. County Service Area 54 (“CSA 54” or “Summit West”) 5. Pajaro Valley Water Management Agency (“PVWMA” or “PV Water”) 6. Reclamation District No. 2049 (“RD No. 2049” or “Reclamation District”) 7. San Lorenzo Valley Water District (“SLVWD” or “SLV Water”) 8. Scotts Valley Water District (“SVWD” or “SV Water”) 9. Soquel Creek Water District (“SqCWD” or “Soquel Creek Water”) Other Organizations (Not Under LAFCO’s Purview) Santa Cruz County has a number of small water systems or privately-owned water companies that provide water services to residents. These entities are not subject to LAFCO’s jurisdiction, therefore, are not required to be analyzed in this report. LAFCO does have the right to analyze and request for information from small water systems and mutual water companies under Assembly Bill 54 which was enacted on January 1, 2012. Therefore, LAFCO will identify the small water systems and mutual water companies in Santa Cruz County and determine whether they are complying with the statutory requirements under AB 54. Principal Acts Special districts operate either under a principal or a special act. A principal act is a generic statute which applies to all special districts of that type. For example, the Fire Protection District Law of 1987 in the state Health and Safety Code governs all 386 fire districts in California. There are about 60 principal law statutes which can be used anywhere in the State to create a special district. Occasionally, local circumstances fail to fit the general conditions anticipated by a principal act. In those cases, the Legislature may create a special act district tailored to the unique needs of a specific area. Districts which are regional in nature, have specific governing board requirements, provide unique Countywide Water Service & Sphere Review Page 8 of 228 services, or need special financing, necessitate special laws for formation. There are about 120 special act districts statewide. All principal acts appear as laws in the California State codes, whereas most special acts are not codified. However, for convenience, many of the special acts for water districts appear in the Appendix to the California Water Code. Table 2 identifies the principal and special acts (with its corresponding code sections) that govern the water agencies in Santa Cruz County. Table 2: Principal/Special Acts for Santa Cruz County Water Agencies Water Agency Principal / Special Act Code Section Principal: CA Water Code Section Central Water District County Water District Law 30000 et seq. Principal: CA Constitution (Article City of Santa Cruz California Charter City Law XI Local Government) Principal: CA Constitution (Article City of Watsonville California Charter City Law XI Local Government) County Service Area 54 Principal: CA Government Code (Summit West) County Service Area Law Section 25000 et seq. Special: Pajaro Valley Water CA Water Code Section Pajaro Valley Water Management Agency 10000 et seq. Management Agency Act Reclamation District Principal: CA Water Code Section No. 2049 (College Lake) Reclamation District Law 50000 et seq. San Lorenzo Valley Principal: CA Water Code Section Water District County Water District Law 30000 et seq. Scotts Valley Principal: CA Water Code Section Water District County Water District Law 30000 et seq. Soquel Creek Principal: CA Water Code Section Water District County Water District Law 30000 et seq. It is important to note that this report will focus on the statutory factors required to be analyzed by LAFCO under Government Code Section 56425 and 56430. LAFCO encourages the reader to refer to the State Water Resources Control Board’s website which offers additional technical, managerial, and financial assessments on the water agencies:https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/TMF.html#TMF_Assessment Countywide Water Service & Sphere Review Page 9 of 228 Figure 1: Countywide Water District Map Countywide Water Service & Sphere Review Page 10 of 228 Sustainable Groundwater Management Act (SGMA) The Sustainable Groundwater Management Act (SMGA) was signed by Governor Jerry Brown on September 16, 2014, and went into effect on January 1, 2015. SGMA amended the Water Code and Government Code. SGMA provides a framework for sustainable management of groundwater supplies by local authorities, with a provision for possible state intervention and management if the groundwater resources are not being managed effectively by local agencies. SGMA required the formation of local Groundwater Sustainability Agencies (GSAs) in groundwater basins designated as high or medium priority by the Department of Water Resources (DWR). GSAs must assess conditions in their local groundwater basins and adopt and implement local Groundwater Sustainability Plans (GSPs). SGMA provides substantial latitude and time (20 years) for GSAs to implement plans and achieve long-term groundwater basin sustainability. Under this law, local agencies had until June 30, 2017 to form a GSA. Any local agency or combination of local agencies with water supply, management, or land use responsibilities overlying a groundwater basin had the option to become a GSA for that basin. Agencies that had been created by statute to manage groundwater were deemed the exclusive agencies to comply with the Act within their boundaries, unless the agency decided to opt out. DWR reviewed the completeness of the notice submitted by the proposed GSA. DWR also reviewed the notice to determine if there are overlapping jurisdictions in a basin. As a result, three groundwater agencies were formed in Santa Cruz County. Table 3 provides an overview of those groundwater agencies. Figure 2 on page 12 illustrates the location of each groundwater basin in Santa Cruz County. Table 3: Groundwater Agencies in Santa Cruz County Groundwater Associated Agency Basin Agency Basins Members Management Plan Corralitos Pajaro Valley Water Latest Plan adopted Pajaro Valley Groundwater Basin Management Agency in November 20211 Santa Cruz Mid- County of Santa Cruz; Santa Cruz Latest Plan adopted County CWD; SqCWD; Mid-County in November 20192 Groundwater Basin and the City of Santa Cruz County; San Lorenzo Santa Margarita Latest Plan adopted Santa Margarita Valley and Scotts Valley Groundwater Basin in November 20213 Water Districts For purposes of this report, LAFCO will focus its analysis on the water agencies under LAFCO’s purview. Groundwater agencies are not under LAFCO’s jurisdiction and therefore will not be analyzed in this service and sphere review. For more information about the groundwater agencies, please refer to their websites, respectively. 1 PVWMA BMP - https://www.pvwater.org/images/about-pvwma/assets/SGM/GSU22_20211229_MainBody-web.pdf 2 SCMCGA BMP - https://www.midcountygroundwater.org/sites/default/files/uploads/MGA_GSP_2019.pdf 3 SMGA BMP - https://www.smgwa.org/media/GroundwaterSustainabilityPlan/SMGB_GSP_Final_2021-11-11.pdf Countywide Water Service & Sphere Review Page 11 of 228 Figure 2: Groundwater Basins Map Countywide Water Service & Sphere Review Page 12 of 228 Services & Infrastructure The California Legislative Analyst’s Office indicates that the governing bodies of special districts in California are either dependent or independent special district4. A dependent governing body is one in which the governing body is directly controlled by either a city or county. For dependent districts, a city council or county board of supervisors acts as the district’s ruling body or they appoint individuals for that responsibility who serve at the pleasure of the city or county. Independent special districts have their governing body either directly elected by the voters or appointed for a fixed term of service (often by a board of supervisors). Pursuant to State law, water districts in California can provide a diverse range of services while using a variety of financing means and governance structures. Table 4 provides a summary of the services offered by each water agency in Santa Cruz County and how those services are delivered. Table 4: Overview of Water Agencies City City CSA RD CWD PVWMA SLVWD SVWD SqCWD of SC of W 54 2049 Services Agricultural Water ✓ ✓ ✓ ✓ ✓ Drainage ✓ Groundwater ✓ ✓ ✓ Replenishment Retail Potable Water ✓ ✓ ✓ ✓ ✓ ✓ Recycled Water ✓ ✓ ✓ ✓ Wastewater (Sewer) ✓ ✓ ✓ Water Treatment ✓ ✓ ✓ ✓ ✓ ✓ ✓ Water Conservation ✓ ✓ ✓ ✓ ✓ ✓ ✓ Infrastructure Distribution / Storage ✓ ✓ ✓ ✓ ✓ ✓ ✓ Tanks Pressure Zones ✓ ✓ ✓ ✓ ✓ ✓ Production Wells ✓ ✓ ✓ ✓ ✓ ✓ ✓ Pump Stations ✓ ✓ ✓ ✓ ✓ ✓ ✓ Recycled Water System ✓ ✓ ✓ ✓ Treatment Plants ✓ ✓ ✓ ✓ ✓ ✓ Water Diversions ✓ ✓ ✓ Water Pipeline (miles) 23.3 300 190 0 22 0 170 60 167 Total Connections 892 24,592 14,884 0 N/A 0 8,000 4,330 16,047 4 LAO Water Report - https://lao.ca.gov/2002/water_districts/special_water_districts.html#:~:text=Background%3A%20Water%20Special%20Districts%20i n,flood%20control%20and%20water%20conservation. Countywide Water Service & Sphere Review Page 13 of 228 Financial Health Water agencies are primarily funded through service charges. Table 5 highlights whether each district had enough revenue to cover annual expenses during FY 2020-21 and Table 6 illustrates the cost per capita for each water agency. A full review of all revenue funds for each district and the two cities during the past six years is discussed in the Agency Profile Chapters within this report. Table 5: Total Revenue vs. Total Expense (FY 2020-21: In Alphabetical Order) Total Revenue Total Expense Surplus/(Deficit) Central WD $1,484,617 $1,046,424 $438,193 City of Santa Cruz $42,898,416 $38,200,392 $4,698,024 City of Watsonville $19,935,279 $16,004,616 $3,930,663 County Service Area 54 $0 $0 $0 Pajaro Valley Water MA $30,073,336 $23,885,495 $6,187,841 Reclamation District $48,295 $69,704 ($21,409) San Lorenzo Valley WD $16,601,701 $12,404,321 $4,197,380 Scotts Valley WD $8,842,515 $7,590,511 $1,252,004 Soquel Creek WD $39,861,224 $19,367,081 $20,494,143 Table 6: Annual Cost Per Capita (FY 2020-21: Lowest to Highest) Total Expense 2020 Population Per Capita City of Watsonville $16,004,616 65,231 $245.35 Pajaro Valley Water MA $23,885,495 90,000 $265.39 Central WD $1,046,424 2,700 $387.56 City of Santa Cruz $38,200,392 96,186 $397.15 Soquel Creek WD $19,367,081 40,600 $477.02 San Lorenzo Valley WD $12,404,321 19,882 $623.90 Scotts Valley WD $7,590,511 11,776 $644.57 Reclamation District $69,704 16 $4,356.50 County Service Area 54* N/A N/A N/A Footnote: CSA 54 has been inactive since 2007. Countywide Water Service & Sphere Review Page 14 of 228 Growth and Population The Association of Monterey Bay Area Governments (AMBAG) produces population projections for cities and counties. However, projections for special districts are not included in their estimate. AMBAG’s reporting does indicate that the unincorporated areas within Santa Cruz County will experience a slow growth over the next fifteen years. The 2018 AMBAG Regional Growth Forecast Report states that the population in unincorporated territory will grow at a rate of less than 1% every five years. Based on this anticipated growth rate, LAFCO staff calculated the estimated population for each subject agency from 2025 to 2040, as shown in Table 7: Table 7: Population Estimates (Listed in Alphabetical Order) 2020 2025 2030 2035 2040 Change (%) Central WD 2,700 2,723 2,746 2,770 2,794 0.86% City of Santa Cruz 96,186 98,874 101,636 104,476 107,395 2.79% City of Watsonville 65,231 66,418 67,626 68,856 70,108 1.82% County Service Area 54 550 555 559 564 569 0.86% Pajaro Valley Water MA 90,000 92,347 94,756 97,227 99,762 2.61% Reclamation District 16 16 16 16 17 0.86% San Lorenzo Valley WD 19,882 20,052 20,224 20,398 20,572 0.86% Scotts Valley WD 11,776 11,859 11,943 12,027 12,112 0.71% Soquel Creek WD 40,600 40,948 41,299 41,653 42,010 0.86% Transparency (Website Requirements) Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 states that the Internet Web Site, maintained by the independent special district, shall conform with various laws in Government Code Sections 6270.5, 53893, 53908, 54954.2, and Section 32139 of the Health and Safety Code. In summary, a District’s Internet Website must contain the following: ➢ Access to past and current, agendas, staff reports, and minutes ➢ Adopted budgets; ➢ Contact information and list of current board members; ➢ Information regarding public meetings (Brown Act); ➢ Service Reviews adopted by LAFCO; ➢ Recipients of grant funding or assistance provided by the district, if any; ➢ Audits (pursuant to GCS 26909) and adopted annual policies; and ➢ Any other information the board deems relevant Countywide Water Service & Sphere Review Page 15 of 228 LAFCO also utilized the website criteria developed by the Special District Leadership Foundation (“SDLF”) to determine whether the agencies have a transparent website. SDLF is an independent, non-profit organization formed to promote good governance and best practices among California’s special districts through certification, accreditation and other recognition programs. The SDLF and its activities are supported by the California Special Districts Association and the Special District Risk Management Authority. The website recommendations are identified in SDLF’s District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. There are no fees for this certificate and is valid for three years. There are three main subject areas under this certificate: Basic Transparency Requirements; Website Requirements; and Outreach Requirements. LAFCO used the website requirement criteria to determine the transparency level of each agencies’ website. Table 8 provides an overview of each agencies’ website based on the criteria outlined by SB 929 and by SDLF. The agencies were ranked from highest to lowest based on their scores. Table 8: Website Transparency (Highest to Lowest) Total Score out of a Possible 20 Water Agency (by percentage) Pajaro Valley Water Management Agency 100% (20 out of 20) Soquel Creek Water District 95% (19 out of 20) City of Santa Cruz* 94% (17 out of 18) City of Watsonville* 94% (17 out of 18) Scotts Valley Water District 90% (18 out of 20) San Lorenzo Valley Water District 75% (15 out of 20) Central Water District 60% (12 out of 20) County Service Area 54 0% (0 out of 20) Reclamation District No. 2049 0% (0 out of 20) *Footnote: the Cities of Santa Cruz and Watsonville were not subject to two requirements because those two were specifically for special districts. Disadvantaged Unincorporated Communities In accordance with Senate Bill 244, which became effective on January 1, 2012, state law requires the identification and description of all “disadvantaged unincorporated communities” (DUCs) located within or contiguous to the existing spheres of influence of cities and special districts which provide fire protection, sewer, and/or water services (Government Code Section 56046). DUCs are defined as inhabited unincorporated areas with an annual median household income that is 80% or less than the statewide annual median household income. In 2020, the California statewide annual median household income was $78,672, and 80% of that was $62,938. LAFCO staff utilized the ArcGIS mapping program to locate potential DUCs in Santa Cruz County. Based on the criteria set forth by SB 244, in conjunction with further evaluation of these areas, staff determined that there is no disadvantaged unincorporated communities in Santa Cruz County at this time. Countywide Water Service & Sphere Review Page 16 of 228 Private Water Systems Mutual Water Companies (MWCs) and private water systems are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs and small water systems have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. As part of this report, LAFCO identified all the private water systems in Santa Cruz County (refer to Figure 3 on page 18). Additionally, LAFCO identified the location and system size of each private water system in relation to a nearby water agency. Appendix A provides an overview of the 132 private water systems found throughout the County. LAFCO staff is recommending that subsequent letters are distributed to the private water systems to ensure they are following the statutory requirements under AB 54. Spheres of Influence City and special district spheres of influence define the probable physical boundaries and service area of a local agency, as determined by the Commission (Government Code Section 56076). The law requires that spheres be updated at least once every five years, either concurrently or subsequently to the preparation of Municipal Service Reviews. Spheres are determined and amended solely at the discretion of the Commission. In determining the sphere of influence for each local agency, the Commission is required by Government Code Section 56425(e) to consider certain factors, including: • The present and planned uses in the area, including agricultural & open-space lands; • The present and probable need for public facilities and services in the area; • The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide; • 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 • An update on a sphere of influence for 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 subdivision (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 Determinations Most of the spheres of influence for each water agency were originally adopted between 1983 to 1988. Since then, only a few have been modified throughout the years. Table 9 on page 19 shows the past and proposed sphere determinations for each agency. Countywide Water Service & Sphere Review Page 17 of 228 Figure 3: Private Water Systems Map Countywide Water Service & Sphere Review Page 18 of 228 Table 9: Sphere Determinations (1983 to 2022) Water Agency Original & Current Status Proposed Sphere Original Adoption: November 12, 1986 Amend Sphere: Central Water District Increase size to reflect Current Sphere: current service delivery Smaller than Service Boundary Original Adoption: August 3, 1983 Amend Sphere: City of Santa Cruz Increase size to reflect Current Sphere: current service delivery Smaller than Service Area Original Adoption: January 12, 1983 Amend Sphere: City of Watsonville Increase size to reflect Current Sphere: current service delivery Smaller than Service Area Original Adoption: February 7, 1996 Zero Sphere: County Service Area 54 Remove sphere as a (Summit West) Current Sphere: precursor to dissolution Coterminous with Service Boundary Original Adoption: N/A Adopt Sphere: Pajaro Valley Water Coterminous with the Management Agency Current Sphere: Corralitos Basin No Sphere Boundary Original Adoption: November 2, 1988 Zero Sphere: Reclamation District Remove sphere as a No. 2049 (College Lake) Current Sphere: precursor to dissolution Coterminous with Service Boundary Original Adoption: October 16, 1985 San Lorenzo Valley Reaffirm Sphere: Water District No Change Current Sphere: Larger than Service Boundary Original Adoption: October 16, 1985 Scotts Valley Reaffirm Sphere: Water District No Change Current Sphere: Larger than Service Boundary Original Adoption: November 12, 1986 Amend Sphere: Soquel Creek Increase size to reflect Water District Current Sphere: current service delivery Smaller than Service Boundary Countywide Water Service & Sphere Review Page 19 of 228 Key Findings The following are key findings of the 2022 Countywide Water Service and Sphere of Influence Review: Central Water District 1. The District provides services to a small area. The Central Water District currently serves five square miles to approximately 3,200 people. The District offers five of the eight water services identified by LAFCO: Agriculture Water, Groundwater Replenishment, Retail Potable Water, Water Treatment, and Water Conservation. At present, it has 892 connections through 23.3 miles of pipeline. 2. The District is financially sound. The Central Water District has ended with an annual surplus in five of the last six years. As of June 30, 2021, the District is operating with a net position of approximately $2.5 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The District’s website needs improvements. The Central Water District is currently not meeting the statutory requirements under Senate Bill 929. Based on LAFCO’s analysis, the District met 12 out of the 20 transparency benchmarks evaluated in this service review. 4. The District needs a sphere update. The current sphere does not accurately reflect the District’s service area and should be updated. Staff is recommending that the sphere be increased to include areas already served by the District. City of Santa Cruz (Water Service Area) 1. The City provides services to a large area. Santa Cruz currently serves 27 square miles to approximately 96,000 people. The City offers five of the eight water services identified by LAFCO: Agriculture Water, Retail Potable Water, Wastewater (Sewer), Water Treatment, and Water Conservation. At present, it has 24,592 connections through 300 miles of pipeline. 2. The City is financially sound. Santa Cruz has ended with an annual surplus in five of the last six years. As of June 30, 2021, the City is operating with a net position of approximately $103 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the City faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The City’s website is transparent. While Santa Cruz is not subject to Senate Bill 929’s website requirements, the City’s website is extremely transparent and filled with useful information. Based on LAFCO’s assessment, the City covered 17 out of the 20 transparency benchmarks evaluated in this service review. Countywide Water Service & Sphere Review Page 20 of 228 4. The City needs a sphere update. The current sphere does not accurately reflect the City’s water service area and should be updated. Staff is recommending that the sphere be increased to include areas already served by the City of Santa Cruz. City of Watsonville (Water Service Area) 1. The City provides services to a large area. Watsonville currently serves 21 square miles to approximately 65,000 people. The City offers six of the eight water services identified by LAFCO: Agriculture Water, Retail Potable Water, Recycled Water, Wastewater (Sewer), Water Treatment, and Water Conservation. At present, it has 14,884 connections through 190 miles of pipeline. 2. The City is financially sound. Watsonville of has ended with an annual surplus in five of the last six years. As of June 30, 2021, the City is operating with a net position of approximately $62 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the City faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The City’s website is transparent. While Watsonville is not subject to Senate Bill 929’s website requirements, the City’s website is extremely transparent and filled with useful information. Based on LAFCO’s assessment, the City covered 17 out of the 20 transparency benchmarks evaluated in this service review. 4. The City needs a sphere update. The current sphere does not accurately reflect the City’s water service area and should be updated. Staff is recommending that the sphere be increased to include areas already served by the City of Watsonville. County Service Area 54 (Summit West) 1. The District provides no services. County Service Area 54 was originally formed in 1996 to provide water services to the Summit West community. Water services to the community was taken over by the Summit Mutual Water Company in 2007. Since then, CSA 54 has been inactive. 2. The District provides needs to be dissolved. As previously mentioned, the District does not provide any services and has been inactive for fifteen years. LAFCO staff is recommending that the Commission adopt a zero sphere as a precursor to dissolution. The dissolution process should be initiated as soon as possible. Countywide Water Service & Sphere Review Page 21 of 228 Pajaro Valley Water Management Agency 1. The District provides services to a large area. The Pajaro Valley Water Management Agency currently serves 124 square miles to approximately 90,000 people. The District offers five of the eight water services identified by LAFCO: Agriculture Water, Groundwater Replenishment, Recycled Water, Water Treatment, and Water Conservation. At present, it has 1,019 metered wells, 1,200 unmetered (domestic) wells, and 22 miles of pipeline. 2. The District is financially sound. The Pajaro Valley Water Management Agency has ended with an annual surplus in four of the last six years. As of June 30, 2021, the District is operating with a net position of approximately $20 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The District’s website is transparent. The Pajaro Valley Water Management Agency is currently meeting the statutory requirements under Senate Bill 929. Based on LAFCO’s analysis, the District covered all 20 transparency benchmarks evaluated in this service review. 4. The District needs a sphere boundary. State law requires all independent special districts to have a sphere of influence boundary. The Pajaro Valley Water Management Agency is the only independent special district in Santa Cruz County without an official sphere. Staff is recommending that the District’s sphere be coterminous with the Corralitos Basin, which the District is responsible for under the Sustainable Groundwater Management Act. Reclamation District No. 2049 (College Lake) 1. The District provides a single service to a limited area. The Reclamation District currently serves 0.78 square miles to 16 landowners within 20 separate parcels. The District only offers drainage services once a year for farming purposes. 2. The District is financially distressed. The Reclamation District has ended with an annual deficit in three of the last six years. As of June 30, 2021, the District is operating with a net position of only $63,000. LAFCO staff believes the positive balance will continue. This minimal amount may be completely depleted if any unintended expenses occurs. Additionally, the Board Chair informed LAFCO that the District may run out of money as early as November 2022. 3. The District is in violation of multiple statutes. The Reclamation District does not have a website. More unsettling is that the District has no General Manager or adequate staff, no physical office or contact information, no adopted policies in place, two vacancies on the five-member board, and the term limit for three remaining board members expired in December 2021. The last official board meeting was held in October 2021. LAFCO also determined that none of the recommended actions identified by the County’s 2017 audit were completely addressed or implemented. Countywide Water Service & Sphere Review Page 22 of 228 4. The District needs to be dissolved. As previously mentioned, the District is facing significant challenges. LAFCO staff has determined that dissolution would benefit the affected landowners. Therefore, staff is recommending that the Commission adopt a zero sphere as a precursor to dissolution. The District has recently adopted a resolution to initiate the dissolution process and LAFCO expects to receive an application soon. San Lorenzo Valley Water District 1. The District provides services to a large area. The San Lorenzo Valley Water District currently serves 60 square miles to approximately 20,000 people. The District offers four of the eight water services identified by LAFCO: Retail Potable Water, Wastewater (Sewer), Water Treatment, and Water Conservation. At present, it has 8,000 connections through 170 miles of pipeline. 2. The District is financially sound. The San Lorenzo Valley Water District has ended with an annual surplus consistently for the last six years. As of June 30, 2021, the District is operating with a net position of approximately $38 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The District’s website is in compliance with State law. The San Lorenzo Valley Water District is currently meeting the statutory requirements under Senate Bill 929. Based on LAFCO’s analysis, the District covered 15 out of the 20 transparency benchmarks evaluated in this service review. 4. The District’s sphere accurately reflects its future governance. The sphere was updated on November 4, 2020 as part of the District’s last service review cycle. The update was based on LAFCO’s analysis, which determined that a total of 24 unserved islands are substantially surrounded by the water district and should be annexed in the foreseeable future. LAFCO expanded the District’s sphere to include approximately 3,300 acres. Staff is recommending that the current sphere be reaffirmed. Scotts Valley Water District 1. The District provides services to a small area. The Scotts Valley Water District currently serves six square miles to approximately 12,000 people. The District offers four of the eight water services identified by LAFCO: Retail Potable Water, Recycled Water, Water Treatment, and Water Conservation. At present, it has 4,330 connections through 60 miles of pipeline. Countywide Water Service & Sphere Review Page 23 of 228 2. The District is financially sound. The Scotts Valley Water District has ended with an annual surplus in four of the last six years. As of June 30, 2021, the District is operating with a net position of approximately $21 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The District’s website is transparent. The Scotts Valley Water District is currently meeting the statutory requirements under Senate Bill 929. Based on LAFCO’s analysis, the District covered 18 out of the 20 transparency benchmarks evaluated in this service review. 4. The District’s sphere accurately reflects its future governance. The sphere was updated on March 3, 2021 as part of the District’s last service review cycle. The update was based on LAFCO’s analysis, which determined that a total of eight unserved islands are substantially surrounded by the water district and should be annexed in the foreseeable future. LAFCO expanded the District’s sphere to include approximately 300 acres. The District recently adopted a resolution to initiate annexation of areas within its sphere and areas already receiving services. Staff is recommending that the current sphere be reaffirmed. Soquel Creek Water District 1. The District provides services to a large area. The Soquel Creek Water District currently serves 17 square miles to approximately 41,000 people. The District offers six of the eight water services identified by LAFCO: Agricultural Water, Groundwater Replenishment, Retail Potable Water, Recycled Water, Water Treatment, and Water Conservation. At present, it has 16,047 connections through 167 miles of pipeline. 2. The District is financially sound. The Soquel Creek Water District has ended with an annual surplus consistently for the last six years. As of June 30, 2021, the District is operating with a net position of approximately $83 million. LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. 3. The District’s website is transparent. The Soquel Creek Water District is currently meeting the statutory requirements under Senate Bill 929. Based on LAFCO’s analysis, the District covered 19 out of the 20 transparency benchmarks evaluated in this service review. 4. The District needs a sphere update. The current sphere does not accurately reflect the District’s service area and should be updated. Staff is recommending that the sphere be increased to include areas already served by the District. Countywide Water Service & Sphere Review Page 24 of 228 Recommended Actions Based on the analysis and findings in the 2022 Countywide Water Service and Sphere of Influence Review, the Executive Officer recommends that the Commission: 1. Find that pursuant to Section 15061(b)(3) of the State CEQA Guidelines, LAFCO determined that the service and sphere of influence review is not subject to the environmental impact evaluation process because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment and the activity is not subject to CEQA; 2. Determine, pursuant to Government Code Section 56425, the Local Agency Formation Commission of Santa Cruz County is required to develop and determine a sphere of influence for the nine affected agencies, and review and update, as necessary; 3. Determine, pursuant to Government Code Section 56430, the Local Agency Formation Commission of Santa Cruz County is required to conduct a service review before, or in conjunction with an action to establish or update a sphere of influence; and 4. Adopt a Resolution (LAFCO No. 2022-11) approving the 2022 Countywide Water Service and Sphere Review with the following terms and conditions: a. Reaffirm the existing spheres of influence for Scotts Valley Water District and San Lorenzo Valley Water District; b. Amend the existing spheres of influence for Central Water District, City of Santa Cruz, City of Watsonville, and Soquel Creek Water District to accurately reflect the areas currently within the agencies’ jurisdiction and/or already being served; c. Adopt a sphere of influence for the Pajaro Valley Water Management Agency to be coterminous with the Corralitos Basin; d. Adopt a zero sphere of influence for County Service Area 54 and the Reclamation District No. 2049 as a precursor to dissolution; e. Direct the Executive Officer to distribute letters to the small water systems to ensure that they are fulfilling the statutory requirements under Assembly Bill 54; and f. Direct the Executive Officer to distribute a copy of the adopted service and sphere review to the nine water agencies, Monterey LAFCO, San Benito LAFCO, and any other interested or affected parties, including but not limited to the Civil Grand Jury of Santa Cruz County. Countywide Water Service & Sphere Review Page 25 of 228 CENTRAL WATER DISTRICT OVERVIEW The Central Water District was formed in November 1950 as the “Central Santa Cruz County Water District” under the County Water District Act with the purpose of providing water for domestic and commercial use. The formation boundary of the District was contiguous with the Oakdale and Pleasant Valley School Districts. In 1953, the District purchased the Valencia Water Works, a private water company. In 1978, CWD entered into an agreement with the Soquel Creek County Water District to provide an intertie connection on Huntington Drive in case of an emergency. The District officially changed its name to the Central Water District on December 10, 1980. Today, the District serves five square miles of unincorporated territory. There is a total of 1,113 parcels within the District (totaling approximately 3,200 acres). Figure 4, on page 29, is a vicinity map depicting CWD’s current jurisdictional boundary. Figure 5, on page 30, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the District is designated as Rural Residential. A total of 11 boundary changes have been approved by LAFCO, with an extraterritorial service agreement involving a single parcel being the last recorded action on April 2, 2008. Appendix B provides an overview of all the approved boundary changes since 1966. Services and Infrastructure CWD manages and operates a complex and integrated water supply infrastructure, including storage tanks, transmission system, wells, and booster pumps. The District currently has approximately 900 connections, which includes multiple connections consisting of 82 fire services, 15 irrigation services, 9 commercial services, and 4 public facility services. The District’s customer base is predominantly single-family residential with some multi-family and agricultural customers as well. Table 10 summarizes the District’s services and Table 11 on page 27 provides an overview of the District’s infrastructure. Table 10: List of Service Provisions Services Checkmark (Yes) Agricultural Water ✓ Drainage ✓ Groundwater Replenishment ✓ Retail Potable Water Recycled Water Wastewater (Sewer) ✓ Water Treatment ✓ Water Conservation Countywide Water Service & Sphere Review Page 26 of 228 Table 11: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity ✓ Distribution / Storage Tanks 7 storage tanks ✓ Pressure Zones 4 pressure reducing valve stations ✓ Production Wells 6 wells (3 inactive) ✓ Pump Stations 6 booster pump stations Recycled Water System - - Treatment Plants - - Water Diversions - - ✓ Water Pipeline 23.3 miles ✓ Total Connections 892 Water Rates CWD has a policy ensuring that all revenues from user charges and surcharges generated from District customers must support all District operations including capital project funding. Accordingly, water rates are reviewed periodically. Water rates are user charges imposed on customers for services and are the primary component of the District’s revenue. Water rates are composed of a commodity (usage) charge and a fixed (volumetric) charge. Table 12 highlights the past and upcoming water rates for CWD customers. As the table shows, the District has not increased its rates for the last five years. It is LAFCO’s understanding that a rate increase may occur in the upcoming year. Countywide Water Service & Sphere Review Page 27 of 228 Table 12: Water Rates 2017 2018 2019 2020 2021 1 unit = 748 gallons (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) SERVICE CHARGES Bi-Monthly Service Charge (Meter Size) 5/8” $40 $40 $40 $40 $40 3/4” $40 $40 $40 $40 $40 1” $40 $40 $40 $40 $40 Monthly Service Charges (Meter Size) 5/8” (Commercial & Ag) $40 $40 $40 $40 $40 3/4” (Commercial & Ag) $40 $40 $40 $40 $40 1” (Commercial & Ag) $40 $40 $40 $40 $40 2” (Commercial & Ag) $96 $96 $96 $96 $96 Multi-Residential $180 $180 $180 $180 $180 Bi-Monthly Fire Service Charge All Fire Service $29.28 $29.28 $29.28 $29.28 $29.28 Size (5/8” to 2”) All Fire Service $40 $40 $40 $40 $40 Size (over 2”) Bi-Monthly Fire Service Charge Hydrant Meter Service $200 $200 $200 $200 $200 VOLUMETRIC CHARGES Primary Zone Volumetric Charges Tier 1 (1-20 units) $4.00/unit $4.00/unit $4.00/unit $4.00/unit $4.00/unit Tier 2 (21-up units) $7.00/unit $7.00/unit $7.00/unit $7.00/unit $7.00/unit Day Zone Volumetric Charges Tier 1 (0-20 units) $4.40/unit $4.40/unit $4.40/unit $4.40/unit $4.40/unit Tier 2 (21-up units) $7.40/unit $7.40/unit $7.40/unit $7.40/unit $7.40/unit Redwood Heights/Maintenance District Volumetric Charges Tier 1 (0-20 units) $4.25/unit $4.25/unit $4.25/unit $4.25/unit $4.25/unit Tier 2 (21-up units) $7.25/unit $7.25/unit $7.25/unit $7.25/unit $7.25/unit Multi-Residential Accounts (Monthly) Tier 1 (0-420 units) $4.00/unit $4.00/unit $4.00/unit $4.00/unit $4.00/unit Tier 2 (421-up units) $7.00/unit $7.00/unit $7.00/unit $7.00/unit $7.00/unit Outside District / Temporary Meter / Hydrant Volumetric Charges Tier 1 (0-20 units) $4.00/unit $4.00/unit $4.00/unit $4.00/unit $4.00/unit Tier 2 (21-up units) $7.00/unit $7.00/unit $7.00/unit $7.00/unit $7.00/unit Agricultural / Commercial Accounts (Monthly) Tier 1 (0-250 units) $4.00/unit $4.00/unit $4.00/unit $4.00/unit $4.00/unit Tier 2 (251-up units) $7.00/unit $7.00/unit $7.00/unit $7.00/unit $7.00/unit Countywide Water Service & Sphere Review Page 28 of 228 Figure 4: CWD’s Vicinity Map Countywide Water Service & Sphere Review Page 29 of 228 Figure 5: CWD’s Land Use Map Countywide Water Service & Sphere Review Page 30 of 228 Population and Growth Based on staff’s analysis, the population of CWD was 2020 is estimated to be 2,700. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Table 13 shows the anticipated population within CWD. The average rate of change is 0.86%. Population Projection Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for CWD. LAFCO staff increased the District’s 2020 population amount by 0.86% each year. Under this assumption, our projections indicate that the entire population of CWD will be approximately 2,800 by 2040. Table 13: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) Central 2,700 2,723 2,746 2,770 2,794 0.86% Water District Source: AMBAG 2018 Regional Growth Forecast and FY 2020-21 CWD Audited Financial Statement CWD Tank Site Countywide Water Service & Sphere Review Page 31 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated CWD’s financial health from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 17 and 18 on pages 36-37. At the end of Fiscal Year 2020-21, total revenue collected was approximately $1.5 million, representing a 18% increase from the previous year ($1.3 million in FY 19-20). Total expenses for FY 2020-21 were approximately $1 million, which decreased by 9% from the previous year ($1.1 million in FY 19-20). Since 2015, the District ended each fiscal year with a surplus, with the exception of FY 16-17, as shown in Figure 6. LAFCO staff believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 6: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $1,600,000 $1,484,617 $1,400,000 $1,262,953 $1,200,254 $1,200,000 $1,164,863 $1,145,120 $1,097,258 $1,046,424 $1,000,000 $888,719 $838,898 $822,731 $800,000 $714,960 $710,035 $600,000 $400,000 $200,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 32 of 228 Revenues Operating Revenue The District’s primary source of revenue is from operating revenues, specifically water consumption sales. In FY 2020-21, Water Revenue (appx. $1.1 million) and Connection Fees (appx. $22,000) represent approximately 79% of CWD’s entire revenue stream. Non-operating Revenue The remaining 21% of total revenue derive from non-operating revenue sources. These funds include Property Taxes, Capital Contributions, Interest Income, and Other Revenue. Table 14 and Figure 7 provide a breakdown of the District’s revenue by category and source. Table 14: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Water Revenue $1,146,804 98% Connection Fees $21,645 2% Total Operating Revenue $1,168,449 100% Non-Operating Revenue Capital Contributions $170,000 54% Property Taxes $127,695 40% Interest Income $14,544 5% Other Revenue $3,929 1% Total Non-Operating Revenue $316,168 100% Total Revenue $1,484,617 Figure 7: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $316,168 (21%) Total Operating Revenue $1,168,449 (79%) Countywide Water Service & Sphere Review Page 33 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 88% of total expenditure during FY 2020-21. Operating expenses include: Administration & General, Pumping, Transmission & Distribution, Customer Accounts, Source of Supply, and Water Treatment. Non-operating Expense The remaining 12% of total expenses derive from non-operating expenses. These costs include Depreciation, and Investment in Joint-Powers Authority. Table 15 and Figure 8 provide a breakdown of the District’s costs by category and source. Table 15: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Administration and General $263,174 28.4% Pumping $203,651 22.0% Transmission and Distribution $186,951 20.2% Customer Accounts $142,710 15.4% Source of Supply $66,217 7.2% Water Treatment $62,794 6.8% Total Operating Expense $925,497 100% Non-Operating Expense Depreciation Expense $94,318 78.0% Investment in Joint-Powers Authority $26,609 22.0% Total Non-Operating Expense $120,927 100.0% Total Expenditure $1,046,424 Figure 8: Operating v Non-Operating Expenses (FY 2020-21) Total Non-Operating Expense $120,927 (12%) Total Operating Expense $925,497 (88%) Countywide Water Service & Sphere Review Page 34 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $2.5 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 16 and Figure 9, the District’s fund balance has increased over the years and has maintained an annual balance above $1.3 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 16: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $1,383,641 $1,553,397 $1,445,846 $1,757,381 $1,984,613 $2,102,446 Balance Ending $1,383,641 $1,440,701 $1,757,381 $1,824,986 $2,102,446 $2,540,639 Balance Change ($) $57,060 $316,680 $67,605 $277,460 $438,193 Figure 9: Net Position from 2015 to 2021 (Ending Balance) $3,000,000 $2,540,639 $2,500,000 $2,102,446 $2,000,000 $1,824,986 $1,757,381 $1,440,701 $1,500,000 $1,383,641 $1,000,000 $500,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 35 of 228 Table 17: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Water Revenue $ 575,696 $ 574,002 $ 1,052,792 $ 9 94,880 $ 1,110,345 $ 1,146,804 Connection Fees $ 3 4,962 $ - $ 6,000 $ 1 6,500 $ - $ 2 1,645 Total Operating Revenue $ 610,658 $ 574,002 $ 1,058,792 $ 1,011,380 $ 1,110,345 $ 1,168,449 Non-Operating Revenue Property Taxes $ 104,285 $ 110,002 $ 115,084 $ 1 19,979 $ 124,057 $ 127,695 Interest Income $ 6,087 $ 6,723 $ 1 2,462 $ 1 7,018 $ 1 5,320 $ 1 4,544 Capital Contributions $ - $ - $ - $ - $ - $ 170,000 Government Aid - State Prop Tax Relief $ 733 $ - $ - $ - $ - $ - Other Revenue, Net $ 1 17,135 $ 1 9,308 $ 13,916 $ 1 6,486 $ 1 3,231 $ 3,929 Total Non-Operating Revenue $ 228,240 $ 136,033 $ 141,462 $ 153,483 $ 152,608 $ 316,168 TOTAL REVENUE $ 8 38,898 $ 7 10,035 $ 1,200,254 $ 1,164,863 $ 1,262,953 $ 1,484,617 EXPENDITURE Operating Expense Source of Supply $ 3 7,741 $ 4 1,344 $ 5 7,568 $ 6 7,304 $ 7 9,925 $ 6 6,217 Pumping $ 107,493 $ 115,146 $ 137,492 $ 1 83,206 $ 150,813 $ 203,651 Water Treatment $ 3 5,320 $ 4 4,922 $ 5 2,958 $ 6 4,733 $ 7 5,712 $ 6 2,794 Administration and General $ 237,603 $ 317,344 $ 292,901 $ 3 85,437 $ 318,242 $ 263,174 Customer Accounts $ 8 1,340 $ 8 9,104 $ 124,069 $ 1 45,052 $ 172,253 $ 142,710 Transmission and Distribution $ 1 43,541 $ 1 40,558 $ 1 52,118 $ 1 63,526 $ 218,672 $ 1 86,951 Total Operating Expense $ 643,038 $ 748,418 $ 817,106 $ 1,009,258 $ 1,015,617 $ 925,497 Non-Operating Expense Depreciation Expense $ 7 1,922 $ 7 4,313 $ 7 1,613 $ 8 8,000 $ 101,539 $ 9 4,318 Investment in Joint-Powers Authority $ - $ - $ - $ - $ 2 7,964 $ 2 6,609 Total Non-Operating Expense $ 71,922 $ 74,313 $ 71,613 $ 88,000 $ 129,503 $ 120,927 $ 7 14,960 $ 8 22,731 $ 8 88,719 $ 1,097,258 $ 1,145,120 $ 1,046,424 TOTAL EXPENDITURE Surplus/(Deficit) $ 123,938 $ (112,696) $ 311,535 $ 67,605 $ 117,833 $ 438,193 NET POSITION Beginning Balance (as restated) $ 1,383,641 $ 1,553,397 $ 1,445,846 $ 1,757,381 $ 1,984,613 $ 2,102,446 $ 1,507,579 $ 1,440,701 $ 1,757,381 $ 1,824,986 $ 2,102,446 $ 2,540,639 Ending Balance Countywide Water Service & Sphere Review Page 36 of 228 Table 18: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Cash Equivalents $ 9 76,575 $ 6 88,671 $ 7 81,727 $ 8 15,382 $ 7 77,073 $ 1,225,215 Customer Receivables $ 6 6,775 $ - $ - $ - $ - $ - Accounts Receivable, Net $ - $ 1 05,211 $ 1 92,986 $ 1 70,582 $ 1 92,768 $ 2 09,690 Prepaid Expenses $ 6,950 $ 1 4,549 $ 1 6,749 $ 6,337 $ 1 6,276 $ 1 6,276 Total Current Assets $ 1,050,300 $ 8 08,431 $ 9 91,462 $ 9 92,301 $ 9 86,117 $ 1,451,181 Non-Current Assets Capital Assets - Not Being Depreciated $ 1 7,606 $ 1 66,473 $ 2 0,941 $ 1 81,752 $ 2 0,941 $ 2 0,941 Capital Assets - Being Depreciated $ 7 42,885 $ 7 11,678 $ 1,043,930 $ 9 65,261 $ 1,289,563 $ 1,251,658 Investment in Joint-Powers Authority $ - $ - $ - $ - $ 1 96,705 $ 1 70,096 Other Assets $ 5 8,055 $ - $ - $ - $ - $ - Total Non-Current Assets $ 8 18,546 $ 8 78,151 $ 1,064,871 $ 1,147,013 $ 1,507,209 $ 1,442,695 TOTAL ASSETS $ 1,868,846 $ 1,686,582 $ 2,056,333 $ 2,139,314 $ 2,493,326 $ 2,893,876 Deferred Outflows of Resources Differences between Expected & Actual Earnings $ 1,644 $ - $ - $ - $ - $ - Differences in Proportionate Share of Contributions $ 5,198 $ - $ - $ - $ - $ - Contributions to CalPERS Pension Plan in Current FY $ 4 3,774 $ 1 27,262 $ 1 30,702 $ 9 5,759 $ 9 9,837 $ 1 15,532 Total Deferred Outflows of Resources $ 50,616 $ 1 27,262 $ 1 30,702 $ 95,759 $ 99,837 $ 1 15,532 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 1,919,462 $ 1,813,844 $ 2,187,035 $ 2,235,073 $ 2,593,163 $ 3,009,408 LIABILITIES Current Liabilities Accounts Payable $ 1 23,971 $ 3 3,140 $ 5 3,934 $ 3 3,399 $ 6 6,219 $ 2 5,360 Accrued Vacation $ 1 6,164 $ - $ - $ - $ - $ - Accrued Payroll and Payroll Liabilities $ 9,628 $ 1 0,361 $ 1 2,014 $ 1 7,684 $ 1 7,032 $ 1 8,637 Customer Deposits and Unearned Revenue $ 1 7,606 $ 2 3,431 $ 1 6,731 $ 2 5,996 $ 2 8,608 $ 2 9,912 Other Payables $ - $ 1,718 $ 1,718 $ 3,297 $ 3,476 $ 6,426 Long-Term Liabilities - Due Within One Year Compensated Absences $ - $ 3,105 $ 9,273 $ 9,201 $ 1 5,243 $ 7,419 Total Current Liabilities $ 1 67,369 $ 71,755 $ 93,670 $ 89,577 $ 1 30,578 $ 87,754 Non-Current Liabilities Long-Term Liabilities - Due in More Than 1 Yr Compensated Absences $ - $ 1 2,419 $ 9,272 $ 9,201 $ 1 5,242 $ 7,419 Net Pension Liability $ 2 08,877 $ 2 73,688 $ 3 20,784 $ 3 11,309 $ 3 38,970 $ 3 70,950 Total Non-Current Liabilities $ 2 08,877 $ 2 86,107 $ 3 30,056 $ 3 20,510 $ 3 54,212 $ 3 78,369 TOTAL LIABILITIES $ 3 76,246 $ 3 57,862 $ 4 23,726 $ 4 10,087 $ 4 84,790 $ 4 66,123 Deferred Inflows of Resources Change in Proportions $ 1 2,281 $ - $ - $ - $ - $ - Change in Assumptions $ 1 5,557 $ - $ - $ - $ - $ - Net Difference Between Projected & Actual Earnings $ 7,799 $ 1 0,136 $ 5,928 $ - $ 5,927 $ 2,646 Total Deferred Inflows of Resources $ 35,637 $ 10,136 $ 5,928 $ - $ 5,927 $ 2,646 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 4 11,883 $ 3 67,998 $ 4 29,654 $ 4 10,087 $ 4 90,717 $ 4 68,769 NET POSITION Net Investment in Capital Assets $ 7 42,885 $ 8 78,151 $ 1,064,871 $ 1,147,013 $ 1,310,504 $ 1,272,599 Unrestricted Designated for Capital Improvements & Replacements $ 3 56,892 $ - $ - $ - $ - $ - Undesignated $ 4 07,802 $ 5 67,695 $ 6 92,510 $ 6 67,973 $ 7 91,942 $ 1,268,040 Total Net Position $ 1,507,579 $ 1,445,846 $ 1,757,381 $ 1,814,986 $ 2,102,446 $ 2,540,639 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 1,919,462 $ 1,813,844 $ 2,187,035 $ 2,225,073 $ 2,593,163 $ 3,009,408 & NET POSITION Countywide Water Service & Sphere Review Page 37 of 228 GOVERNANCE Local Accountability & Structure CWD is governed by a five-member Board of Directors, which are elected to four-year terms by the registered voters within the District’s boundaries. The General Manager administers the day-to-day operations of the District in accordance with policies and procedures established by the Board of Directors. The Central Water District employs a full-time staff of 5 employees. The Board of Directors are responsible for the establishment of policy relative to the District’s mission, goals, and operations. The current Board is as follows: Table 19: Board of Directors Board Member Term of Office Elected: September 2014 Frances Whitney, President Term Limit Ends: December 1, 2022 Elected: December 2014 Robert Marani, Vice-President Term Limit Ends: December 1, 2022 Elected: December 2012 Robert Postle, Board Secretary Term Limit Ends: December 1, 2024 Appointed: March 2012 John Benich, Director Term Limit Ends: December 1, 2024 Appointed: March 2017 Marco Romanini, Director Term Limit Ends: December 1, 2022 Board Meetings The District’s Board of Directors meet regularly and citizens are encouraged to attend. Board meetings are typically held on the third Monday of each month at 7:00 p.m. The District’s administrative office is located at 400 Cox Road in Aptos. Capital Improvement Plans CWD currently has a 10-year capital improvement plan in place, as shown in Appendix C. The purpose of this long-range plan is to identify and prioritize needs and project costs for planned repair and replacement to the infrastructure that will serve the affected ratepayers in an efficient and cost-effective manner throughout the next 10-years of growth and change. A total of 6 capital improvement projects are underway. Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the District’s website. Table 20 summarizes staff’s findings on whether the Countywide Water Service & Sphere Review Page 38 of 228 District’s website is meeting the statutory requirements. At present, the District does not meet all the statutory requirements under SB 929 or SDLF’s website transparency criteria. One of the main issues identified by LAFCO is the website platform, which runs on Google. Under this platform, there are several documents, such as audits, that are “restricted” to the public. They are also pages that are outdated or blank. It would be beneficial if the District review and update its entire website for more transparency. Table 20: Website Transparency Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines 6. Board Meeting Schedule* ✓ 7. Mission Statement 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported ✓ Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance 20. Link or Copies of LAFCO’s Service & Sphere Reviews Total Score (out of a possible 20) 12 (60%) Additional Items (SDLF’s Recommended Elements) 1. Board Member Ethics Training Certificates 2. Picture, Bio, and Email Addresses of Board Members 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy 5. Online/Downloadable Public Records Act Request Form 6. Audio or Video Recordings of Board Meetings 7. Map of District Boundaries/Service Area 8. Link to CSDA Mapping Program 9. General Description of Special Districts or Link to www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms Total Score (out of a possible 10) 1 (10%) *Footnote: Senate Bill 929 Statutory Requirements Countywide Water Service & Sphere Review Page 39 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. Every urban water supplier that either provides over 3,000 acre- feet of water annually, or serves more than 3,000 urban connections is required to submit an UWMP. Within UWMPs, urban water suppliers must: (1) Assess the reliability of water sources over a 20-year planning time frame, (2) Describe demand management measures and water shortage contingency plans, (3) Report progress toward meeting a targeted 20 percent reduction in per-capita (per-person) urban water consumption by the year 2020; and (4) Discuss the use and planned use of recycled water. At present, CWD does not have UWMP. While CWD only has 900 connections, it would be beneficial for the District to develop this type of long-range planning to ensure that it is prepared for future demand and other potential impacts to its water supply. LAFCO Staff Recommendation: CWD should consider developing an Urban Water Management Plan or a similar report to be consistent with the other water districts in Santa Cruz County. Areas Served Outside Jurisdictional Boundary Pursuant to Government Code Section 56133, a city or district may provide new or extended services by contract or agreement outside its jurisdictional boundaries only if it first requests and receives written approval from the Commission in the affected county. LAFCO may also authorize a city or district to provide new or extended services outside its jurisdictional boundaries but within its sphere of influence in anticipation of a later change of organization. In other words, except for the specific situations exempted by Government Code Section 56133, a city or district shall not provide new or extended services to any party outside its jurisdictional boundaries unless it has obtained written approval from LAFCO. Based on staff’s analysis, CWD is providing services outside its jurisdiction to 11 separate parcels. Ten of these parcels are receiving water services without LAFCO’s review and authorization. Only one parcel has gone through the LAFCO process and received LAFCO’s approval. Figure 10 on page 41 shows the subject parcels receiving services outside CWD’s jurisdiction. LAFCO Staff Recommendation: CWD should submit an application to annex these parcels to ensure that it is legally permitted to provide services under LAFCO law. If an application is submitted within a year (August 2023), LAFCO will consider waiving the annexation filing fee and provide assistance on completing the statutorily-required steps in the annexation process. Countywide Water Service & Sphere Review Page 40 of 228 Figure 10: Areas Served Outside CWD’s Jurisdiction Countywide Water Service & Sphere Review Page 41 of 228 Small Water Systems One area that LAFCO can provide assistance now is addressing any failing mutual water companies (MWCs) or private water systems near CWD. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 15 private water systems are located near the water district. Figure 11 on page 43 identifies the location of each water system in relation to CWD. Table 21 on page 44 also provide more information about the private water systems. While LAFCOs do not have full authority over mutual water companies when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these private water systems may lead to coordination with CWD and possible annexation, if desired. LAFCO Staff Recommendation: CWD should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: CWD should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Countywide Water Service & Sphere Review Page 42 of 228 Figure 11: Map of Private Water Systems Within and Outside CWD Countywide Water Service & Sphere Review Page 43 of 228 Table 21: List of Private Water Systems Within and Outside CWD Water Size # Type of Water System Population System Name (Square Miles) Private Water Systems OUTSIDE Central Water District’s Jurisdictional Boundary 1 Freedom MWC Small Water System (5 connections) 0.19 10 2 Larkin Ridge MWC Small Water System (5 connections) 0.02 10 3 Aptos High School Small Water System (6 connections) 0.09 1,925 4 Enos Lane Small Water System (6 connections) 0.08 22 5 Corralitos Springs Small Water System (6 connections) 0.25 11 6 Woodside Small Water System (8 connections) 0.02 16 7 Milky Way MWC Small Water System (9 connections) 0.03 20 8 Aptos Hills MWC Small Water System (12 connections) 0.13 17 9 Emerald City Small Water System (12 connections) 0.11 30 White Calabasas 10 Small Water System (14 connections) 0.05 31 MWC 11 Aptos Ridge MWC Medium Water System (16 connections) 0.09 52 12 Calabasas Road Medium Water System (15 to 199 connections) 0.01 17 Las Colinas Road 13 Medium Water System (24 connections) 0.07 70 And Water Assoc. 14 Rancho Corralitos Medium Water System (31 connections) 0.08 60 15 Trout Gulch Water Medium Water System (186 connections) 0.28 614 *Footnote: A portion of Aptos High School and Freedom MWC are located within the District. Countywide Water Service & Sphere Review Page 44 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted CWD’s first sphere of influence on November 12, 1986. The current sphere excludes areas within the District’s jurisdictional boundary. The last sphere update occurred in August 2017 following the last service review cycle. Figure 12 on page 46 shows the current sphere of influence boundary. Proposed Sphere Boundary Based on staff’s analysis, the District is providing services outside its jurisdiction to 11 different parcels (totaling 268 acres). The size of these parcels range from 0.64 to 56 acres. These parcels were previously shown in Figure 10 on page 41. LAFCO staff is recommending that the sphere boundary be expanded to include the 11 subject parcels as a precursor to annexation in the near future. Figure 13 on page 47 shows the proposed sphere boundary. Parcels Subject to Annexation As stated earlier in this report, except for the specific situations exempted by Government Code Section 56133, a city or district shall not provide new or extended services to any party outside its jurisdictional boundaries unless it has obtained written approval from LAFCO. Based on staff’s analysis, CWD is providing services outside its jurisdiction without LAFCO’s approval. Ten parcels are receiving water services without LAFCO’s review and authorization and only one parcel has received an approved extraterritorial service agreement (which occurred in 2008). LAFCO Staff Recommendation: CWD should submit an application to annex these parcels to ensure that it is legally permitted to provide services under LAFCO law. If an application is submitted within a year (August 2023), LAFCO will consider waiving the annexation filing fee and provide assistance on completing the statutorily-required steps in the annexation process. CWD Drought Tolerant Garden (Boy Scouts Troop 599 Eagle Scout Project) Countywide Water Service & Sphere Review Page 45 of 228 Figure 12: CWD’s Current Sphere Map Countywide Water Service & Sphere Review Page 46 of 228 Figure 13: CWD’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 47 of 228 DISTRICT SUMMARY Central Water District Formation California Water Code, section 30,000 et seq. Board of Directors Five members, elected at-large to four-year terms Contact Person Ralph Bracamonte, General Manager Employees 5 Full-Time Employees 892 connections; 23.3 miles of pipeline; 7 storage tanks; 6 wells (3 Facilities inactive); 6 pump stations; and 4 pressure zones. District Area 5 square miles (appx. 2,600 acres) Current Sphere: Smaller than the District (i.e., sphere boundary does not include the District’s existing jurisdictional boundary) Sphere of Influence Proposed Sphere: Larger than the District (i.e., sphere boundary includes areas outside the District’s jurisdictional boundary) Total Revenue = $1,484,617 FY 2020-21 Audit Total Expenditure = $1,046,424 Net Position (Ending Balance) = $2,540,639 Mailing Address: P.O. Box 1869 Aptos, CA 95001 Phone Number: (831) 688-2767 Contact Information Email Address: admin@centralwaterdistrict.us.com Website: https://sites.google.com/view/centralwaterdistrict/home?authuser=0 Public Meetings Meetings are held on the third Monday of each month at 7:00 p.m. Mission Statement N/A Countywide Water Service & Sphere Review Page 48 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of CWD in 2020 was estimated to be 2,700. Based on LAFCO’s analysis, the population within CWD will be approximately 2,800 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. CWD currently has a 10-year capital improvement plan in place. A total of 6 capital improvement projects are underway. 4. Financial ability of agencies to provide services. CWD is financially sound. The District ended with a surplus in five of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $2.5 million. LAFCO believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages CWD to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding the District. At present, there are 15 private water systems near CWD. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District does not meet all the statutory requirements under SB 929 or SDLF’s website transparency criteria. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that CWD initiate annexation to address the 11 parcels currently served by the District but outside its jurisdictional boundary. Countywide Water Service & Sphere Review Page 49 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Rural Residential. The District’s customer base is predominantly single-family residential with some multi-family and agricultural customers as well. 2. The present and probable need for public facilities and services in the area. CWD currently has a 10-year capital improvement plan in place. A total of 6 capital improvement projects are underway. The District does not have an Urban Water Management Plan. CWD should consider developing an Urban Water Management Plan to be consistent with the other water districts in Santa Cruz County. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. CWD manages and operates a complex and integrated water supply infrastructure, including storage tanks, transmission system, wells, and booster pumps. The District currently has approximately 900 connections, which includes multiple connections consisting of 82 fire services, 15 irrigation services, 9 commercial services, and 4 public facility services. The District’s customer base is predominantly single-family residential with some multi-family and agricultural customers as well. 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. At present, there are 15 private water systems near CWD. Additionally, there are 11 separate parcels that are receiving services from the District but not part of the District’s jurisdictional boundary. These residents do not have the ability to vote on District matters or express their opinions as their neighbors who are official constituents. These parcels should be annexed in the near future for adequate representation. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 50 of 228 CITY OF SANTA CRUZ - WATER SERVICE AREA OVERVIEW The City of Santa Cruz was incorporated in 1866 and now operates as a charter city. Santa Cruz provides a variety of municipal services, including water services under the City’s Water Department. The City’s water service area (“SCWSA”) encompasses nearly 27 square miles of territory including the entire City of Santa Cruz, adjoining unincorporated areas of Santa Cruz County, a small part of the City of Capitola, and coastal agricultural lands north of the City. There is approximately 28,000 parcels within the City’s WSA (totaling approximately 17,000 acres). Figure 15, on page 55, is a vicinity map depicting the City’s current jurisdictional boundary. Figure 16, on page 56, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the City’s water service area is designated as Urban Residential. A map showing the land use designations within the City of Santa Cruz was not produced since the City already has a map available on its website5. A total of 36 boundary changes have been approved by LAFCO, with an extraterritorial service agreement involving a single parcel being the last recorded action on August 8, 2013. Appendix D provides an overview of all the approved boundary changes since 1965. Services and Infrastructure SCWSA’s major water infrastructure facilities include three water treatment plants, including the Graham Hill Water Treatment Plant and two groundwater treatment plants related to the Beltz well system; four raw water pump stations; ten treated water pump stations; 15 distribution tanks with a total maximum capacity of 21.2 million gallons of treated water storage; seven surface water diversions; seven production wells; and approximately 300 miles of treated and raw water pipelines interconnecting the entire system. At present, the City has approximately 25,000 connections. Table 22 summarizes SCWSA’s services and Table 23 provides an overview of SCWSA’s infrastructure. Table 22: List of Service Provisions Services Checkmark (Yes) Agricultural Water ✓ Drainage Groundwater Replenishment ✓ Retail Potable Water Recycled Water Wastewater (Sewer)* ✓ ✓ Water Treatment ✓ Water Conservation Footnote: Sewer service is provided by the City of Santa Cruz Public Works Department 5 City of Santa Cruz Land Use Map - https://www.cityofsantacruz.com/Home/ShowDocument?id=33418 Countywide Water Service & Sphere Review Page 51 of 228 Table 23: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity ✓ Distribution / Storage Tanks 15 distribution tanks ✓ Pressure Zones 20 pressure zones 7 (4 groundwater wells and ✓ Production Wells 3 production wells) 14 (4 raw water pump stations and 10 ✓ Pump Stations treated water pump stations) Recycled Water System - - 3 (Graham Hill Water Treatment Plant and 2 ✓ Treatment Plants groundwater treatment plants) ✓ Water Diversions 7 surface water diversions ✓ Water Pipeline 300 miles Total Connections ✓ 24,592 Water Rates At present, the City charges different water rates for residents within and outside the City limits. Tables 24a-c, provide an overview of the monthly water rates within SCWSA. Based on LAFCO’s analysis, the City charges approximately 15% more to residents within SCWSA but outside the City’s jurisdictional boundary in 2021. Figure 14 compares the water rate for a 5/8 inch meter for residents within and outside the City of Santa Cruz. It is important to note that the inside-outside differential is no longer in place, as of July 1, 2022. Figure 14: Water Rates for a 5/8" Meter $14.00 $12.89 $12.26 $11.66 $12.00 $11.26 $10.91 $10.71 $10.05 $10.18 $9.53 $10.00 $8.78 $8.00 $6.00 $4.00 $2.00 $0.00 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Inside City Limits Outside City LImits Countywide Water Service & Sphere Review Page 52 of 228 Table 24a: Water Rates (Monthly Fees – Meter Size) Meter Size FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 (Availability Fee) (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Inside City Limits 5/8” $8.78 $9.53 $10.18 $10.71 $10.71 3/4” $9.01 $9.78 $10.45 $10.99 $10.99 1” $9.70 $10.53 $11.25 $11.83 $11.83 1 1/2” $10.61 $11.52 $12.31 $12.94 $12.94 2” $13.14 $14.26 $15.24 $16.02 $16.02 3” $31.74 $34.45 $36.82 $38.71 $38.71 4” $38.63 $41.93 $44.81 $47.11 $47.11 6” $54.70 $59.37 $63.45 $66.71 $66.71 8” $73.07 $79.31 $84.76 $89.11 $89.11 10” $93.74 $101.75 $108.73 $114.32 $114.32 Fire Service – All Sizes $1.00 $1.09 $1.15 $1.21 $1.21 Outside City Limits 5/8” $10.05 $10.91 $11.66 $12.26 $12.26 3/4” $10.32 $11.20 $11.97 $12.59 $12.59 1” $11.11 $12.06 $12.89 $13.55 $13.55 1 1/2” $12.16 $13.20 $14.10 $14.83 $14.83 2” $15.05 $16.34 $17.46 $18.35 $18.35 3” $36.36 $39.47 $42.17 $44.34 $44.34 4” $44.25 $48.03 $51.33 $53.96 $53.96 6” $62.66 $68.01 $72.68 $76.42 $76.42 8” $83.71 $90.86 $97.10 $102.09 $102.09 10” $107.38 $116.55 $124.55 $130.95 $130.95 Fire Service – All Sizes $1.15 $1.23 $1.30 $1.35 $1.35 Footnote: Tables 26a does not include the City’s infrastructure reinvestment, rate stabilization, or drought cost recovery fees. Table 24b: Water Rates (Monthly Fees - Water Consumption WITHIN City) Charge per Unit FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 (1 unit = 100 cubic ft of water) (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Residential and Multi-Residential (ccf = centum (hundred) cubic feet) Tier 1 (0-5 ccf) $5.75 $6.24 $6.66 $7.01 $7.01 Tier 2 (6-7 ccf) $6.42 $6.97 $7.45 $7.83 $7.83 Tier 3 (8-9 ccf) $7.41 $8.05 $8.60 $9.04 $9.04 Tier 4 (10 ccf and above) $8.79 $8.54 $10.20 $10.72 $10.72 Commercial: Business, Industrial, Restaurant, Hotel, Golf, Municipal, Bulk, Fire Service Uniform $6.57 $7.13 $7.62 $8.01 $8.01 UCSC Uniform $6.70 $7.27 $7.77 $8.17 $8.17 Landscape / Irrigation Tier 1 (< 100% of budget) $6.86 $7.44 $7.95 $8.36 $8.36 Tier 2 (101% - 150%) $9.15 $9.93 $10.62 $11.16 $11.16 Tier 3 (150% and above) $10.27 $11.14 $11.91 $12.52 $12.52 Elevation Surcharge As Applicable $0.42 $0.46 $0.49 $0.51 $0.51 Footnote: Tables 26b does not include the City’s infrastructure reinvestment, rate stabilization, or drought cost recovery fees. Countywide Water Service & Sphere Review Page 53 of 228 Table 24c: Water Rates (Monthly Fees - Water Consumption OUTSIDE City) Charge per Unit FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 (1 unit = 100 cubic ft of water) (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Residential and Multi-Residential (ccf = centum (hundred) cubic feet) Tier 1 (0-5 ccf) $6.59 $7.16 $7.65 $8.04 $8.04 Tier 2 (6-7 ccf) $7.37 $8.00 $8.55 $8.99 $8.99 Tier 3 (8-9 ccf) $8.54 $9.27 $9.90 $10.41 $10.41 Tier 4 (10 ccf and above) $10.15 $11.02 $11.78 $12.38 $12.38 Commercial: Business, Industrial, Restaurant, Hotel, Golf, Municipal, Bulk, Fire Service Uniform $7.53 $8.17 $8.73 $9.18 $9.18 North Coast AG Uniform $3.58 $3.88 $4.15 $4.36 $4.36 Landscape / Irrigation Tier 1 (< 100% of budget) $7.85 $8.53 $9.11 $9.58 $9.58 Tier 2 (101% - 150%) $10.48 $11.38 $12.16 $12.79 $12.79 Tier 3 (150% and above) $11.76 $12.77 $13.64 $14.34 $14.34 Elevation Surcharge As Applicable $0.48 $0.52 $0.56 $0.59 $0.59 Footnote: Tables 26c does not include the City’s infrastructure reinvestment, rate stabilization, or drought cost recovery fees. Countywide Water Service & Sphere Review Page 54 of 228 Figure 15: Water Service Area’s Vicinity Map Countywide Water Service & Sphere Review Page 55 of 228 Figure 16: Water Service Area’s Land Use Map (Unincorporated Territory) Countywide Water Service & Sphere Review Page 56 of 228 Population and Growth Based on staff’s analysis, the population of SCWSA in 2020 was approximately 96,000. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for water service areas. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Based on the information found in the City’s 2020 Urban Water Management Plan, the population within the City of Santa Cruz and its water service area are expected to increase by 5.18% and 4.09%, respectively. Table 25 shows the anticipated population within SCWSA. Population Projection Based on the projections within the City’s Urban Water Management Plan, LAFCO was able to develop a population forecast for SCWSA. Our projections indicate that the entire population of SCWSA will be approximately 113,000 by 2040. Table 25: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) City of Santa Cruz 64,424 68,845 72,218 75,257 78,828 5.18% City of Santa Cruz 96,168 101,964 106,072 109,193 112,853 4.09% (Water Service Area) Source: City’s 2020 Urban Water Management Plan [This section intentionally left blank] Countywide Water Service & Sphere Review Page 57 of 228 FINANCES This section will highlight the City’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated the financial health of the City’s Water Department from 2015 to 2021. A comprehensive analysis of the City’s financial performance during the past six years is shown in Tables 29 and 30 on pages 62-63. It is important to note that the City has adopted a long-range financial plan. This plan provides a more in-depth review of the City’s financial planning for the future, as shown in Appendix At the end of Fiscal Year 2020-21, total revenue collected was approximately $42.9 million, representing a slight decrease from the previous year ($43 million in FY 19-20). Total expenses for FY 2020-21 were approximately $38 million, which increased by 2% from the previous year ($37.6 million in FY 19-20). Since 2015, the City’s Water Department ended each fiscal year with a surplus, with the exception of FY 17-18, as shown in Figure 17. LAFCO staff believes that this positive trend will continue based upon the City’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 17: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $50,000,000 $47,452,865 $45,000,000 $43,009,746 $42,898,416 $41,922,347 $39,109,010 $40,000,000 $38,200,392 $37,608,137 $34,376,852 $35,000,000 $31,243,959 $30,000,000 $27,940,384 $28,601,003 $25,378,142 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Footnote: FY 2017-18 had an extraordinary expense totaling $13.7 million which resulted in a deficit at end of year. Countywide Water Service & Sphere Review Page 58 of 228 Revenues Operating Revenue The City Water Department’s primary source of revenue is from operating revenues, specifically Charges for Services. In FY 2020-21, Charges for Services (appx. $42 million), Rental Revenue ($6,000), and Other Revenue represent ($456,000) approximately 98% of the City Water Department’s entire revenue stream. Non-operating Revenue The remaining 2% of total revenue derive from non-operating revenue sources. These funds include Transfers In, Investment Earnings, and Gain on Sale of Capital Assets. Table 26 and Figure 18 provide a breakdown of the City’s revenue by category and source. Table 26: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Charges for Services $41,530,048 98.90% Other Revenue $456,441 0.01% Rental Revenue $6,050 1.09% Total Operating Revenue $41,992,539 100% Non-Operating Revenue Transfers In $683,714 75.48% Investment Earnings $220,329 24.32% Gain on Sale of Capital Assets $1,834 0.20% Total Non-Operating Revenue $905,877 100% Total Revenue $42,898,416 Figure 18: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $905,877 (2%) Total Operating Revenue $41,992,539 (98%) Countywide Water Service & Sphere Review Page 59 of 228 Expenditures Operating Expense The City Water Department’s operating expenses represented approximately 94% of total expenditure during FY 2020-21. Operating expenses include: Services, Supplies, & Other Charges, Personnel Services, and Depreciation & Amortization. Non-operating Expense The remaining 6% of total expenses derive from non-operating expenses. These costs include Interest Expense & Fiscal Charges, and Transfers Out. Table 27 and Figure 19 provide a breakdown of the City’s costs by category and source. Table 27: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Services, Supplies, & Other Charges $18,185,313 51% Personnel Services $14,089,315 39% Depreciation & Amortization $3,602,244 10% Total Operating Expense $35,876,872 100% Non-Operating Expense Interest Expense & Fiscal Charges $2,201843 95% Transfers Out $121,677 5% Total Non-Operating Expense $2,323,520 100.0% Total Expenditure $38,200,392 Figure 19: Operating v Non-Operating Expense (FY 2020-21) Total Operating Expense $35,876,872 (94%) Total Non-Operating Expense $2,323,520 (6%) Countywide Water Service & Sphere Review Page 60 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $103 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 28 and Figure 20, the City’s fund balance has increased over the years and has maintained an annual balance above $88 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the City faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 28: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $91,082,165 $93,644,407 $94,120,807 $88,590,289 $93,322,447 $98,724,056 Balance Ending $93,644,407 $96,287,363 $88,590,289 $93,322,447 $98,724,056 $103,422,080 Balance Change ($) $2,642,956 $(7,697,074) $4,732,158 $5,401,609 $4,698,024 Figure 20: Net Position from 2015 to 2021 (Ending Balance) $105,000,000 $103,422,080 $100,000,000 $98,724,056 $96,287,363 $95,000,000 $93,644,407 $93,322,447 $90,000,000 $88,590,289 $85,000,000 $80,000,000 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 61 of 228 Table 29: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Charges for Services $ 27,045,776 $ 30,439,168 $ 40,526,995 $ 39,981,282 $ 41,662,196 $ 4 1,530,048 Rental Revenues $ 6,600 $ 6,600 $ 6,600 $ 6,600 $ 7,151 $ 6 ,050 Other Revenues $ 7 46,341 $ 4 74,878 $ 5 28,360 $ 5 15,863 $ 313,379 $ 456,441 Total Operating Revenue $ 27,798,717 $ 30,920,646 $ 41,061,955 $ 40,503,745 $ 41,982,726 $ 4 1,992,539 Non-Operating Revenue Intergovernmental $ - $ 203,343 $ 5 68,600 $ 7 9,047 $ 309,800 $ - Investment Earnings $ 9 0,147 $ 118,502 $ 2 91,792 $ 771,694 $ 717,220 $ 220,329 Gain on Sale of Capital Assets $ 5 1,520 $ 1,468 $ - $ (2,245,476) $ - $ 1 ,834 Transfers In $ - $ - $ - $ - $ - $ 683,714 Total Non-Operating Revenue $ 141,667 $ 323,313 $ 860,392 $ ( 1,394,735) $ 1,027,020 $ 905,877 TOTAL REVENUE $ 27,940,384 $ 31,243,959 $ 41,922,347 $ 39,109,010 $ 43,009,746 $ 4 2,898,416 EXPENDITURE Operating Expense Personnel Services $ 9,121,385 $ 11,513,597 $ 13,397,306 $ 13,441,014 $ 15,586,543 $ 1 4,089,315 Services, Supplies, & Other Charges $ 12,533,005 $ 12,315,943 $ 15,306,937 $ 16,082,492 $ 16,337,779 $ 1 8,185,313 Depreciation & Amortization $ 3,295,830 $ 3,271,936 $ 3,391,359 $ 3,459,052 $ 3,536,666 $ 3 ,602,244 Total Operating Expense $ 24,950,220 $ 27,101,476 $ 32,095,602 $ 32,982,558 $ 35,460,988 $ 3 5,876,872 Non-Operating Expense Interest Expense & Fiscal Charges $ 369,580 $ 1,274,520 $ 1,188,930 $ 1,334,126 $ 1,944,176 $ 2,201,843 Special Items - Capital Assets Impairment $ - $ - $ 13,667,218 $ - $ - $ - Transfers Out $ 58,342 $ 225,007 $ 5 01,115 $ 6 0,168 $ 2 02,973 $ 121,677 Total Non-Operating Expense $ 427,922 $ 1,499,527 $ 15,357,263 $ 1,394,294 $ 2,147,149 $ 2,323,520 $ 25,378,142 $ 28,601,003 $ 47,452,865 $ 34,376,852 $ 37,608,137 $ 3 8,200,392 TOTAL EXPENDITURE Surplus/(Deficit) $ 2,562,242 $ 2,642,956 $ ( 5,530,518) $ 4,732,158 $ 5,401,609 $ 4,698,024 NET POSITION Beginning Balance $ 91,082,165 $ 93,644,407 $ 94,120,807 $ 88,590,289 $ 93,322,447 $ 9 8,724,056 $ 93,644,407 $ 96,287,363 $ 88,590,289 $ 93,322,447 $ 98,724,056 $ 103,422,080 Ending Balance Countywide Water Service & Sphere Review Page 62 of 228 Table 30: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Investments $ 6 ,762,132 $ 2 4,966,397 $ 2 9,598,076 $ 3 2,092,022 $ 3 4,003,768 $ 4 8,571,776 Restricted Cash & Investments $ 94,088 $ 93,265 $ 92,747 $ 93,539 $ 7 ,090,566 $ 94,007 Interest Receivable $ 13,254 $ 68,281 $ 120,496 $ 153,062 $ 21,832 $ 131,746 Accounts Receivable -Net $ 2 ,875,576 $ 3 ,883,876 $ 5 ,452,715 $ 5 ,334,346 $ 6 ,051,409 $ 6 ,403,663 Intergovernmental Receivables $ - $ 10,167 $ 75,000 $ - $ - $ - Prepaid Items $ - $ - $ 943,818 $ - $ - $ 4 ,207 Inventories $ - $ - $ - $ - $ - $ - Deposits $ - $ - $ - $ - $ - $ - Total Current Assets $ 9 ,745,050 $ 2 9,021,986 $ 3 6,282,852 $ 3 7,672,969 $ 4 7,167,575 $ 5 5,205,399 Non-Current Assets Restricted Cash & Investments $ 1 ,001,074 $ 1 ,180,644 $ 1 ,016,023 $ 1 ,037,322 $ 1 ,052,524 $ 2 ,036,320 Notes Receivable $ 401,058 $ 401,058 $ 401,058 $ 401,058 $ 401,058 $ 1 ,049,425 Capital Assets Land $ 941,687 $ 941,687 $ 941,687 $ 1 ,941,687 $ 1 ,941,687 $ 1 ,941,687 Land Improvements $ 572,807 $ 572,807 $ 572,807 $ 572,807 $ 572,807 $ 572,807 Infrastructure $ 113,342,845 $ 115,468,186 $ 121,862,161 $ 123,643,590 $ 133,699,322 $ 133,699,322 Buildings $ 1 6,789,844 $ 1 6,789,844 $ 1 6,789,845 $ 1 8,502,515 $ 1 8,732,299 $ 1 8,742,857 Machinery & Equipment $ 1 2,746,025 $ 1 3,039,495 $ 1 3,873,463 $ 1 4,048,349 $ 1 4,571,732 $ 1 4,741,216 Software $ 592,032 $ 592,032 $ 623,432 $ 623,432 $ 623,432 $ 623,432 Construction in Progress $ 2 3,786,096 $ 3 1,639,043 $ 2 1,769,561 $ 2 9,510,985 $ 4 5,714,527 $ 8 7,746,951 Less Accumulated Depreciation $ (57,587,500) $ (60,835,584) $ (64,100,479) $ (67,507,621) $ (71,044,289) $ (74,628,196) Total Non-Current Assets $ 112,585,968 $ 119,789,212 $ 113,749,558 $ 122,774,124 $ 146,265,099 $ 186,525,821 TOTAL ASSETS $ 122,331,018 $ 148,811,198 $ 150,032,410 $ 160,447,093 $ 193,432,674 $ 241,731,220 Deferred Outflows of Resources Deferred Charge on Refunding of Debt $ 366,452 $ 347,819 $ 329,186 $ 310,552 $ 291,919 $ 273,286 Deferred Outflows Related to OPEB $ - $ - $ 98,629 $ 98,264 $ 342,791 $ 418,380 Deferred Outflows Related to Pension $ 1 ,402,189 $ 4 ,283,550 $ 5 ,480,523 $ 3 ,689,582 $ 2 ,817,569 $ 7 ,735,111 Total Deferred Outflows of Resources $ 1 ,768,641 $ 4 ,631,369 $ 5 ,908,338 $ 4 ,098,398 $ 3 ,452,279 $ 8 ,426,777 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 124,099,659 $ 153,442,567 $ 155,940,748 $ 164,545,491 $ 196,884,953 $ 250,157,997 LIABILITIES Current Liabilities Accounts Payable & Other Current Liabilities $ 3 ,226,057 $ 1 ,861,247 $ 4 ,837,392 $ 4 ,753,990 $ 1 5,014,990 $ 1 0,467,465 Interest Payable $ 101,746 $ 436,579 $ 427,024 $ 417,247 $ 754,758 $ 895,876 Unearned Revenue $ - $ - $ - $ - $ 758,281 Deposits Payable $ 43,933 $ 42,918 $ 57,529 $ 65,001 $ 72,253 $ 55,887 Compensated Absences Payable $ 315,122 $ 398,922 $ 450,601 $ 449,528 $ 531,707 $ 664,393 Bonds, Notes, Loans, & Leases Payable Due in Less than 1 Yr $ 400,379 $ 915,746 $ 932,120 $ 1 1,459,018 $ 1 ,503,445 $ 1 ,521,464 Total Current Liabilities $ 4 ,087,237 $ 3 ,655,412 $ 6 ,704,666 $ 1 7,144,784 $ 1 7,877,153 $ 1 4,363,366 Non-Current Liabilities Compensated Absences Payable $ 157,561 $ 199,461 $ 225,301 $ 224,764 $ 265,853 $ 332,196 Bonds, Notes, Loans, & Leases Payable Due in More than 1 Yr $ 9 ,842,071 $ 3 3,926,325 $ 3 6,494,205 $ 3 2,035,187 $ 5 6,603,177 $ 103,680,002 Total Other OPEB Liability $ 1 ,048,053 $ 1 ,249,805 $ 3 ,691,988 $ 3 ,567,085 $ 4 ,133,679 $ 3 ,777,438 Net Pension Liability $ 1 3,782,729 $ 1 7,437,470 $ 1 9,716,316 $ 1 7,338,818 $ 1 8,455,329 $ 2 2,833,942 Total Non-Current Liabilities $ 2 4,830,414 $ 5 2,813,061 $ 6 0,127,810 $ 5 3,165,854 $ 7 9,458,038 $ 130,623,578 TOTAL LIABILITIES $ 2 8,917,651 $ 5 6,468,473 $ 6 6,832,476 $ 7 0,310,638 $ 9 7,335,191 $ 144,986,944 Deferred Inflows of Resources Deferred Inflows Related to Pensions $ 1 ,537,601 $ 686,731 $ 517,983 $ 569,181 $ 523,578 $ 1 ,178,241 Deferred Inflows Related to OPEB $ - $ - $ - $ 343,225 $ 289,128 $ 570,732 Total Deferred Inflows of Resources $ 1 ,537,601 $ 686,731 $ 517,983 $ 912,406 $ 812,706 $ 1 ,748,973 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 3 0,455,252 $ 5 7,155,204 $ 6 7,350,459 $ 7 1,223,044 $ 9 8,147,897 $ 146,735,917 NET POSITION Net Investment in Capital Assets $ 101,307,838 $ 8 3,713,258 $ 7 5,235,338 $ 7 8,152,091 $ 9 3,980,841 $ 101,642,223 Unrestricted $ ( 7,663,431) $ 1 2,574,105 $ 1 3,354,951 $ 1 5,170,356 $ 4 ,743,215 $ 1 ,779,857 Total Net Position $ 9 3,644,407 $ 9 6,287,363 $ 8 8,590,289 $ 9 3,322,447 $ 9 8,724,056 $ 103,422,080 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 124,099,659 $ 153,442,567 $ 155,940,748 $ 164,545,491 $ 196,871,953 $ 250,157,997 & NET POSITION Countywide Water Service & Sphere Review Page 63 of 228 GOVERNANCE Local Accountability & Structure The Santa Cruz Water Department is a municipal utility that is owned and operated by the City of Santa Cruz. It is led by a Director who is appointed by the City Manager and administers the day-to-day operations of the Water Department. The City Water Department employs a full-time staff of 119 employees. The governing body for the Water Department is the seven member City Council, as shown in the City’s website: https://cityofwatsonville.org/183/City-Council. A seven-member Water Commission also advises the Council on policy matters involving the operations and management of the water system. The Commission is composed of six members who reside within the City limits and one member who resides in the unincorporated portion of the water service area. The Water Commissioners have four-year terms and operate under the City’s adopted bylaws6. The current Water Commission Board is as follows: Table 31: Water Commission Board Member Term of Office Appointed: January 22, 2019 Sierra Ryan, Chair Term Limit Ends: January 31, 2023 Appointed: January 25, 2022 Diana Alfaro Term Limit Ends: January 31, 2026 Appointed: January 26, 2021 Justin Burks Term Limit Ends: January 31, 2025 Appointed: January 26, 2021 Tom Burns Term Limit Ends: January 31, 2025 Appointed: January 26, 2016 Doug Engfer Term Limit Ends: January 31, 2024 Appointed: January 28, 2020 Alejandro Paramo Term Limit Ends: January 31, 2024 Appointed: January 25, 2022 Garrett Roffe Term Limit Ends: January 31, 2026 Board Meetings The Water Commission meets regularly, meetings are publicly noticed, and citizens are encouraged to attend. Commission meetings are typically held on the first Monday of each month at 7:00 p.m. The meetings are held in the Santa Cruz City Council Chambers (809 Center Street, Santa Cruz, CA 95060). Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. The City adopted its UWMP in 2021,7 which provides an in-depth overview of the City’s current and future water demand and infrastructure. 6 Water Bylaws: https://www.cityofsantacruz.com/home/showpublisheddocument/87509/637768999998970000 7 2021 UWMP: https://www.cityofsantacruz.com/home/showpublisheddocument/87122/637739611535800000 Countywide Water Service & Sphere Review Page 64 of 228 Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the City’s website even though the law only applies to independent special districts. Tables 32 and 33 summarize staff’s findings on whether the website is meeting the statutory requirements. At present, the City does meet the statutory requirements under SB 929 and SDLF’s website transparency criteria. The only item that is not found in the City’s website is LAFCO’s adopted service reviews. Overall, the City has a transparent website filled with useful information and resources that are easily accessible. Table 32: Website Transparency (Required Items) Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines ✓ 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported N/A Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported N/A Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews Total Score (out of a possible 18 – 2 do not apply to cities) 17 (94%) *Footnote: Senate Bill 929 Statutory Requirements; Items 13 and 14 do not apply to cities Countywide Water Service & Sphere Review Page 65 of 228 Table 33: Website Transparency (Recommended Items) Website Components Status (Yes = X) Additional Items (SDLF's Recommended Elements) 1. Board Member Ethics Training Certificates 2. Picture, Bio, and Email Addresses of Board Members ✓ 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form ✓ 6. Audio or Video Recordings of Board Meetings ✓ 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program N/A 9. General Description of Special Districts or Link to N/A www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms ✓ Total Score (out of a possible 8 – 2 do not apply to cities) 7 (88%) Footnote: Items 8 and 9 do not apply to cities Opportunities and Challenges Water agencies, including city water departments, are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Areas Served Outside Jurisdictional Boundary Based on staff’s analysis, the City is providing services outside its jurisdiction to approximately 10,800 parcels. Service to these parcels is long-standing and was extended to most of these parcels when the areas began to develop during in the first half of the 20th century and prior to the creation of LAFCO in 1963. LAFCO actions in 2006 and 2017 establishing a designated water service area for the City of Santa Cruz included these parcels, and the City has no plan to pursue annexation of these parcels into the City nor is there any evidence that there is a demand from the water service customers residing outside the City’s municipal boundary to be annexed into the City. Further, effective July 1, 2022, the City no longer levies a surcharge on water service provided to water service customers residing outside of the City. This practice, which was in place for many years, was eliminated as part of the 2021 Water Rate Increase process, which was unanimously approved by the City Council on November 23, 2021. Figure 21 on page 67 shows the subject parcels receiving services outside the City’s jurisdiction. LAFCO Staff Recommendation: The City should develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). Countywide Water Service & Sphere Review Page 66 of 228 Figure 21: Areas Served Outside the City’s Jurisdiction Countywide Water Service & Sphere Review Page 67 of 228 Small Water Systems One area that LAFCO can provide assistance now is addressing any failing mutual water companies (MWCs) or private water systems near SCWSA. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 6 private water systems are located near the City’s water service area. Figure 22 on page 69 identifies the location of each water system in relation to SCWSA. Table 34 on page 70 also provide more information about the private water systems. While LAFCOs do not have full authority over mutual water companies when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these private water systems may lead to coordination with SCWSA and possible annexation, if desired. LAFCO Staff Recommendation: The City should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: The City should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Countywide Water Service & Sphere Review Page 68 of 228 Figure 22: Map of Private Water Systems Outside the City’s Water Service Area Countywide Water Service & Sphere Review Page 69 of 228 Table 34: List of Private Water Systems Outside the City of Santa Cruz Water Size # Type of Water System Population System Name (Square Miles) Private Water Systems OUTSIDE the City’s Jurisdictional Boundary La Madronna Swim 1 Small Water System (1 connection) 0.02 100 And Racquet Club 2 Mystery Spot Small Water System (2 connections) 0 500 Santa Cruz Waldorf 3 Small Water System (2 connections) 0.01 190 School 4 Sun & Shadow MWC Small Water System (5 connections) 0.03 11 5 Sunny Acres MWC Small Water System (8 connections) 0.05 30 6 Loma Alta MWC Small Water System (12 connections) 0.05 33 [This section intentionally left blank] Countywide Water Service & Sphere Review Page 70 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted the City’s first sphere of influence on August 3, 1983. The current sphere excludes areas within the City’s water service area. The last sphere update occurred in October 2021 as part of the Countywide Fire Protection Service and Sphere Review. Figure 23 on page 72 shows the current sphere of influence boundary. Proposed Sphere Boundary In January 2019, the Commission amended the City’s sphere to include three nautical miles offshore to reflect the city’s legal limits. In accordance with state law, the sphere boundary should focus on areas that may receive services from the City in the foreseeable future. Based on staff’s analysis, the City provides services outside its city limits, totaling 10,757 parcels (approximately 17,000 acres). These parcels were previously shown in Figure 21 on page 67. LAFCO staff is recommending that the sphere boundary be amended to remove the three nautical miles and include the City’s water service area, excluding the areas located within the City of Capitola’s jurisdictional and sphere boundaries. Figure 24 on page 73 shows the proposed sphere boundary. Further analysis would be required as part of any annexation application to determine whether the City is willing and capable of providing services to the annexation area(s), if annexation is pursued in the future based on the new sphere and submitted plan. LAFCO Staff Recommendation: The City should develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). Countywide Water Service & Sphere Review Page 71 of 228 Figure 23: City’s Current Sphere Map Countywide Water Service & Sphere Review Page 72 of 228 Figure 24: City’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 73 of 228 DISTRICT SUMMARY City of Santa Cruz Water Department California Charter City Law (Article XI, section 3(a) of the Formation California Constitution) City Council: 7 members (four-year terms) Board of Directors Water Commission: 7 members (four-year terms) Contact Person Matt Huffaker, City Manager / Rosemary Menard, Water Director Employees 119 Full-Time Employees 24,592 connections; 300 miles of pipeline; 15 distribution tanks; Facilities 14 pump stations; 7 surface water diversions; 7 production wells; 3 water treatment plants; and 2 groundwater treatment plants. WSA Area 27 square miles (appx. 17,000 acres) Current Sphere: Larger than the City (i.e., sphere boundary includes areas outside the City’s jurisdictional boundary) Sphere of Influence Proposed Sphere: Larger than the City (i.e., sphere boundary includes areas outside the City’s jurisdictional boundary) Total Revenue = $42,898,416 FY 2020-21 Audit Total Expenditure = $38,200,392 Net Position (Ending Balance) = $103,422,080 Mailing Address: 212 Locust Street, Suite A, Santa Cruz CA 95060 Phone Number: (831) 420-5200 Contact Information Email Address: kfitzgerald@cityofsantacruz.com Website: https://www.cityofsantacruz.com/government/city-departments/water The Water Commission meets in the Santa Cruz City Council Public Meetings Chambers, 809 Center Street, on the first Monday of each month, at 7:00 p.m. Mission: To assure public health and safety by providing a clean, adequate and reliable supply of water. Mission Statement Vision: To serve the community in a courteous, efficient, cost effective and environmentally sustainable manner. Countywide Water Service & Sphere Review Page 74 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of SCWSA in 2020 was estimated to be 96,000. Based on LAFCO’s analysis, the population within SCWSA will be approximately 113,000 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the City’s sphere boundary. 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. In accordance with the California Water Code, every urban water supplier with 3,000 or more service connections or supplying more than 3,000 acre-feet of water per year are required to prepare an Urban Water Management Plan every five years. With 24,592 active service connections, the City of Santa Cruz clearly meets the definition of “Urban Water Supplier” and prepared a plan in 2021. 4. Financial ability of agencies to provide services. SCWSA is financially sound. The District ended with a surplus in five of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $103 million. LAFCO believes that this positive trend will continue based upon the City’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages the City to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding SCWSA. At present, there are 6 private water systems near SCWSA. 6. Accountability for community service needs, including governmental structure and operational efficiencies. The City has a detailed and transparent website that provides in-depth information regarding the City’s various departments, including its water department. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that the City develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). Countywide Water Service & Sphere Review Page 75 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the City’s water service area is designated as Urban Residential. The remaining areas also include unincorporated territory designated for various land uses including agriculture under the County’s existing general plan. 2. The present and probable need for public facilities and services in the area. The City adopted an Urban Water Management Plan in 2021 which provides an in- depth overview of the City’s current and future water demand and infrastructure. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. SCWSA’s major water infrastructure facilities include three water treatment plants, including the Graham Hill Water Treatment Plant and two groundwater treatment plants related to the Beltz well system; four raw water pump stations; ten treated water pump stations; 15 distribution tanks with a total maximum capacity of 21.2 million gallons of treated water storage; seven surface water diversions; seven production wells; and approximately 300 miles of treated and raw water pipelines interconnecting the entire system. At present, the City has approximately 25,000 connections. 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. A total of 6 private water systems are located near SCWSA. The City should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the City’s sphere boundary. Countywide Water Service & Sphere Review Page 76 of 228 CITY OF WATSONVILLE - WATER SERVICE AREA OVERVIEW The City of Watsonville was incorporated in 1868 and now operates as a charter city. Watsonville provides a variety of municipal services, including water services under the City’s Water Department. The City’s water service area (“WWSA”) encompasses nearly 21 square miles of territory including the entire City of Watsonville and adjoining unincorporated areas of Santa Cruz County. There is approximately 15,000 parcels within the City’s WSA (totaling approximately 13,000 acres). Figure 26, on page 80, is a vicinity map depicting the City’s current jurisdictional boundary. Figure 27, on page 81, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the City’s water service area is designated as Agriculture and Rural Residential. A map showing the land use designations within the City of Watsonville was not produced since the City already has a map available on its website8. A total of 83 boundary changes have been approved by LAFCO, with an extraterritorial service agreement involving a single parcel being the last recorded action on March 3, 2021. Appendix F provides an overview of all the approved boundary changes since 1965. Services and Infrastructure The water system originated in 1877 when water was piped from the Corralitos area to a reservoir on Whiskey Hill (now Freedom Reservoir on Freedom Boulevard). The water system served the small community of Watsonville, under the name of the Watsonville Water and Light Company, until the City acquired it in 1927. In 1931, a slow sand filtration plant, the Corralitos Filter Plant (CFP), was constructed in Corralitos to filter the raw water coming from the Corralitos and Browns creeks. By 1979, the water system had grown to represent its current state. At present, the City has approximately 15,000 connections. Table 35 summarizes WWSA’s services and Table 36 provides an overview of WWSA’s infrastructure. Table 35: List of Service Provisions Services Checkmark (Yes) Agricultural Water ✓ Drainage Groundwater Replenishment ✓ Retail Potable Water ✓ Recycled Water Wastewater (Sewer)* ✓ ✓ Water Treatment ✓ Water Conservation Footnote: Sewer service is provided by the City of Watsonville Public Works Department 8 City of Watsonville Land Use Map - https://www.cityofwatsonville.org/DocumentCenter/View/106/2005- General-Plan-Land-Use-Diagram-. Countywide Water Service & Sphere Review Page 77 of 228 Table 36: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity ✓ Distribution / Storage Tanks 8 reservoirs and storage facilities ✓ Pressure Zones 9 pressure zones ✓ Production Wells 14 wells ✓ Pump Stations 9 booster stations ✓ Recycled Water System The City and PVWMA jointly developed the Watsonville Area Recycled Water Treatment Plants ✓ Treatment Facility (RWF) The surface water diversions flow to the ✓ Water Diversions Corralitos Filter Plant and are treated via slow sand filtration and disinfection. ✓ Water Pipeline 190 miles Total Connections ✓ 14,884 Water Rates At present, the City charges different water rates for residents within and outside the City limits. Tables 37a-b, provide an overview of the monthly water rates within WWSA for the last three years. Based on LAFCO’s analysis, the City charges approximately 22% more to residents within WWSA but outside the City’s jurisdictional boundary in 2021. Figure 25 compares the water rate for a 1 inch meter for residents within and outside the City of Watsonville. Figure 25: Water Rates for a 1" Meter $80.00 $69.65 $70.00 $60.00 $57.11 $53.38 $50.00 $46.82 $47.12 $41.33 $40.00 $30.00 $20.00 $10.00 $0.00 2019 2020 2021 Inside City Limits Inside City Limits Countywide Water Service & Sphere Review Page 78 of 228 Table 37a: Water Rates (Monthly Service Fees – Meter Size) Meter Size 2019 2020 2021 (Availability Fee) (Adopted) (Adopted) (Adopted) Inside City Limits 5/8” $29.42 $33.54 $28.76 3/4” $29.42 $33.54 $28.76 1” $41.33 $47.12 $57.11 1 1/2” $71.05 $81.00 $104.37 2” $106.70 $121.64 $161.07 3” $201.75 $230.00 $312.28 4” $308.73 $351.96 $482.39 6” $497.54 $567.20 $954.93 8” $1,118.48 $1,275.07 $1,521.98 10” $1,376.63 $1,569.36 - Additional Connections: Unit $4.76 $5.43 - Charge Outside City Limits 5/8” $33.13 $37.77 $33.78 3/4” $33.13 $37.77 $33.78 1” $46.82 $53.38 $69.65 1 1/2” $81.02 $92.37 $129.46 2” $122.04 $139.13 $201.22 3” $231.40 $263.80 $392.57 4” $354.49 $404.12 $607.84 6” $571.71 $651.75 $1,205.83 8” $1,286.12 $1,466.18 $1,923.42 10” $1,583 Additional Connections: Unit $4.76 $5.43 - Charge Table 37b: Water Rates (Monthly Service Fees – Water Consumption) Charge per Unit 2019 2020 2021 (1 unit = 100 cubic ft of water) (Adopted) (Adopted) (Adopted) Residential and Multi-Residential Tier 1 $3.39 $3.84 $3.95 (Old 1-5 units / New 0-6 units) Tier 2 $4.00 $4.53 $5.17 (Old 6-10 units / New 7-12 units) Tier 3 $5.42 $6.14 $8.00 (Old > 10 units / New > 12 units) Non-Residential (ccf = centum (hundred) cubic feet) Per ccf $4.26 $4.83 $4.72 Industrial (ccf = centum (hundred) cubic feet) Per ccf $3.34 $3.79 $3.76 Irrigation (ccf = centum (hundred) cubic feet) Per ccf $5.94 $6.73 $6.74 Countywide Water Service & Sphere Review Page 79 of 228 Figure 26: Water Service Area’s Vicinity Map Countywide Water Service & Sphere Review Page 80 of 228 Figure 27: Water Service Area’s Land Use Map (Unincorporated Territory) Countywide Water Service & Sphere Review Page 81 of 228 Population and Growth Based on staff’s analysis, the population of WWSA in 2020 was approximately 65,000. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for water service areas. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Based on this slow growth trend, the population for unincorporated lands and the City of Watsonville is expected to increase by 0.86% and 2.78%, respectively. Table 38 shows the anticipated population within WWSA. The average rate of change for WWSA is 1.82% based on the combined average rate of change for the County and City. Population Projection Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for WWSA. LAFCO staff increased the City’s water service area 2020 population amount by 1.82% each year. Under this assumption, our projections indicate that the entire population of WWSA will be approximately 70,000 by 2040. Table 38: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) City of Watsonville 53,536 55,187 56,829 58,332 59,743 2.78% City of Watsonville 65,231 66,418 67,626 68,856 70,108 1.82% (Water Service Area) Source: AMBAG 2018 Regional Growth Forecast and the City’s 2020 Urban Water Management Plan [This section intentionally left blank] Countywide Water Service & Sphere Review Page 82 of 228 FINANCES This section will highlight the City’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated the financial health of the City’s Water Department from 2015 to 2021. A comprehensive analysis of the City’s financial performance during the past six years is shown in Tables 42 and 43 on pages 87-88. At the end of Fiscal Year 2020-21, total revenue collected was approximately $20 million, representing a slight decrease from the previous year ($21 million in FY 19-20). Total expenses for FY 2020-21 were approximately $16 million, which decreased by 18% from the previous year ($19 million in FY 19-20). Since 2015, the City’s Water Department ended each fiscal year with a surplus, with the exception of FY 15-16, as shown in Figure 28. LAFCO staff believes that this positive trend will continue based upon the City’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 28: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $25,000,000 $20,896,412 $19,935,279 $20,000,000 $19,421,835 $17,751,643 $16,004,616 $15,561,929 $15,595,763 $15,605,560 $15,000,000 $13,948,107 $14,024,961 $13,102,348 $12,067,126 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 83 of 228 Revenues Operating Revenue The City Water Department’s primary source of revenue is from operating revenues, specifically Charges for Services. In FY 2020-21, Charges for Services (appx. $20 million represented approximately 99.7% of the City Water Department’s entire revenue stream. Non-operating Revenue The remaining 0.3% of total revenue derive from non-operating revenue sources. These funds include Capital Contributions, Interest, and Grant Revenue. Table 39 and Figure 29 provide a breakdown of the City’s revenue by category and source. Table 39: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Charges for Services $19,885,009 100% Total Operating Revenue $19,885,009 100% Non-Operating Revenue Capital Contributions – Connection Fees $26,310 52% Interest Revenue $16,082 32% Grant Revenue $7,878 16% Total Non-Operating Revenue $50,270 100% Total Revenue $19,935,279 Figure 29: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $50,270 (0.3%) Total Operating Revenue $19,885,009 (99.7%) Countywide Water Service & Sphere Review Page 84 of 228 Expenditures Operating Expense The City Water Department’s operating expenses represented approximately 99.7% of total expenditure during FY 2020-21. Operating expenses include: Cost of Sales & Services, and Depreciation. Non-operating Expense The remaining 0.3% of total expenses derive from non-operating expenses. These costs include Interest Expense and Transfers Out. Table 40 and Figure 30 provide a breakdown of the City’s costs by category and source. Table 40: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Cost of Sales & Services $14,327,111 90% Depreciation $1,633,033 10% Total Operating Expense $15,960,144 100% Non-Operating Expense Interest Expense & Fiscal Charges $27,725 62% Transfers Out $16,747 38% Total Non-Operating Expense $44,472 100.0% Total Expenditure $16,004,616 Figure 30: Operating v Non-Operating Expenditure (FY 2020-21) Total Non-Operating Expense $44,472 (0.3%) Total Operating Expense $15,960,144 (99.7%) Countywide Water Service & Sphere Review Page 85 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $62 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 41 and Figure 31, the City’s fund balance has increased over the years and has maintained an annual balance above $47 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the City faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 41: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $49,904,170 $47,475,354 $49,123,010 $52,661,444 $56,388,126 $57,862,703 Balance Ending $47,444,589 $49,123,010 $52,661,444 $56,388,126 $57,862,703 $61,793,366 Balance Change ($) $1,678,421 $3,538,434 $3,726,682 $1,474,577 $3,930,663 Figure 31: Net Position from 2015 to 2021 (Ending Balance) $70,000,000 $61,793,366 $60,000,000 $57,862,703 $56,388,126 $52,661,444 $49,123,010 $50,000,000 $47,444,589 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 86 of 228 Table 42: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Charges for Services $ 12,755,561 $ 14,617,036 $ 15,243,117 $ 17,357,169 $ 20,483,669 $ 1 9,885,009 Total Operating Revenue $ 12,755,561 $ 14,617,036 $ 15,243,117 $ 17,357,169 $ 20,483,669 $ 1 9,885,009 Non-Operating Revenue Grant Revenue $ - $ 600,660 $ 4 4,480 $ - $ - $ 7,878 Interest Revenue $ 5 2,706 $ 2 6,663 $ 1 05,390 $ 3 69,740 $ 3 57,867 $ 16,082 Capital Contributions - Connection Fees $ 294,081 $ 3 51,404 $ 2 12,573 $ 2 4,734 $ 5 4,876 $ 26,310 Total Non-Operating Revenue $ 346,787 $ 978,727 $ 362,443 $ 394,474 $ 412,743 $ 5 0,270 TOTAL REVENUE $ 13,102,348 $ 15,595,763 $ 15,605,560 $ 17,751,643 $ 20,896,412 $ 1 9,935,279 EXPENDITURE Operating Expense Costs of Sales & Services $ 12,989,380 $ 12,216,914 $ 10,416,612 $ 12,416,786 $ 17,776,770 $ 14,327,111 Depreciation $ 1,632,090 $ 1,633,985 $ 1,621,496 $ 1,579,006 $ 1,601,585 $ 1 ,633,033 Total Operating Expense $ 14,621,470 $ 13,850,899 $ 12,038,108 $ 13,995,792 $ 19,378,355 $ 1 5,960,144 Non-Operating Expense Interest Expense $ 9 15,295 $ - $ - $ - $ 16,361 $ 16,747 Transfers Out $ 25,164 $ 9 7,208 $ 29,018 $ 2 9,169 $ 2 7,119 $ 27,725 Total Non-Operating Expense $ 940,459 $ 97,208 $ 29,018 $ 29,169 $ 43,480 $ 4 4,472 TOTAL EXPENDITURE $ 15,561,929 $ 13,948,107 $ 12,067,126 $ 14,024,961 $ 19,421,835 $ 1 6,004,616 Surplus/(Deficit) $ ( 2,459,581) $ 1,647,656 $ 3,538,434 $ 3,726,682 $ 1,474,577 $ 3 ,930,663 NET POSITION Beginning Balance $ 49,904,170 $ 47,475,354 $ 49,123,010 $ 52,661,444 $ 56,388,126 $ 5 7,862,703 $ 47,444,589 $ 49,123,010 $ 52,661,444 $ 56,388,126 $ 57,862,703 $ 6 1,793,366 Ending Balance Countywide Water Service & Sphere Review Page 87 of 228 Table 43: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Investments $ 2 ,596,550 $ 4 ,869,022 $ 9 ,453,163 $ 1 4,872,208 $ 2 0,922,426 $ 2 3,823,748 Accounts Receivable $ 656,837 $ 645,206 $ 417,500 $ 758,691 $ 1 ,359,704 $ 1 ,489,762 Interest $ 2 ,512 $ - $ - $ - $ - $ - Intergovernmental Receivable $ - $ 9 ,137 $ 9 ,137 $ 9 ,137 $ - $ - Inventories $ 401,349 $ 434,268 $ 554,203 $ 722,132 $ 810,964 $ 253,010 Total Current Assets $ 3 ,657,248 $ 5 ,957,633 $ 1 0,434,003 $ 1 6,362,168 $ 2 3,093,094 $ 2 5,566,520 Non-Current Assets Advances Receivable $ 3 ,791,759 $ 3 ,911,654 $ 4 ,022,240 $ 3 ,613,159 $ 3 ,222,642 $ 2 ,557,460 Loans Receivable $ 357,793 $ - $ - $ - $ - $ - Capital Assets Land & Improvements $ 218,742 $ 218,742 $ 218,742 $ 218,742 $ 259,333 $ 259,333 Buildings $ 4 8,447,947 $ 4 8,457,209 $ 4 8,457,209 $ 4 8,457,208 $ 4 8,497,149 $ 4 8,498,822 Machinery & Equipment $ 5 ,865,828 $ 5 ,788,282 $ 5 ,874,939 $ 6 ,018,131 $ 6 ,704,067 $ 7 ,326,804 Infrastructure $ 1 2,938,624 $ 1 2,938,624 $ 1 3,110,752 $ 1 3,110,752 $ 1 3,476,134 $ 1 3,620,179 Contruction in Progress $ 2 ,063,021 $ 2 ,806,692 $ 3 ,250,375 $ 3 ,683,692 $ 1 ,283,805 $ 3 ,782,275 Accumulated Depreciation $ (24,873,234) $ (26,300,761) $ (27,894,420) $ (29,473,425) $ (31,036,651) $ (32,591,982) Total Non-Current Assets $ 4 8,810,480 $ 4 7,820,442 $ 4 7,039,837 $ 4 5,628,259 $ 4 2,406,479 $ 4 3,452,891 TOTAL ASSETS $ 5 2,467,728 $ 5 3,778,075 $ 5 7,473,840 $ 6 1,990,427 $ 6 5,499,573 $ 6 9,019,411 Deferred Outflows of Resources Deferred Outflows Related to Pension $ 753,567 $ 960,137 $ 1 ,293,472 $ 973,660 $ 1 ,062,888 $ 903,968 Total Deferred Outflows of Resources $ 753,567 $ 960,137 $ 1 ,293,472 $ 973,660 $ 1 ,062,888 $ 903,968 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 5 3,221,295 $ 5 4,738,212 $ 5 8,767,312 $ 6 2,964,087 $ 6 6,562,461 $ 6 9,923,379 LIABILITIES Current Liabilities Accounts Payable $ 856,786 $ 601,776 $ 556,218 $ 726,312 $ 1 ,306,341 $ 1 ,226,262 Accrued Personnel Costs $ 129,848 $ 150,132 $ - $ 178,644 $ 218,921 $ 239,978 Insurance Claims Payable $ - $ - $ - $ - $ 250,000 $ - Retentions Payable $ - $ - $ - $ - $ 2 ,783 $ 71,669 Customer Deposits $ 6 ,175 $ 24,152 $ 46,643 $ 63,666 $ 18,879 $ 9 ,931 Unearned Revenue $ - $ 2 ,372 $ - $ - $ - $ - Compensated Absences $ 10,051 $ 10,232 $ 10,453 $ 11,801 $ 11,428 $ 13,701 Notes Payable $ - $ - $ - $ 17,538 $ 14,511 $ 13,888 Total Current Liabilities $ 1 ,002,860 $ 788,664 $ 613,314 $ 997,961 $ 1 ,822,863 $ 1 ,575,429 Non-Current Liabilities Compensated Absences $ 157,463 $ 160,307 $ 163,759 $ 184,877 $ 179,043 $ 214,648 Net OPEB Liability $ 321,790 $ 319,812 $ 373,403 $ 373,403 $ 395,427 $ 395,427 Net Pension Liability $ 3 ,306,708 $ 4 ,097,680 $ 4 ,798,463 $ 4 ,835,532 $ 6 ,091,025 $ 5 ,881,983 Notes Payable $ - $ - $ - $ 36,890 $ 44,603 $ 30,716 Total Non-Current Liabilities $ 3 ,785,961 $ 4 ,577,799 $ 5 ,335,625 $ 5 ,430,702 $ 6 ,710,098 $ 6 ,522,774 TOTAL LIABILITIES $ 4 ,788,821 $ 5 ,366,463 $ 5 ,948,939 $ 6 ,428,663 $ 8 ,532,961 $ 8 ,098,203 Deferred Inflows of Resources Deferred Inflows Related to Pensions $ 863,620 $ 248,739 $ 156,929 $ 147,298 $ 166,797 $ 31,810 Total Deferred Inflows of Resources $ 863,620 $ 248,739 $ 156,929 $ 147,298 $ 166,797 $ 3 1,810 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 5 ,652,441 $ 5 ,615,202 $ 6 ,105,868 $ 6 ,575,961 $ 8 ,699,758 $ 8 ,130,013 NET POSITION Net Investment in Capital Assets $ 4 4,660,928 $ 4 3,908,788 $ 4 3,017,597 $ 4 1,960,672 $ 3 9,124,723 $ 4 0,850,827 Unrestricted $ 2 ,907,926 $ 5 ,214,222 $ 9 ,643,847 $ 1 4,427,454 $ 1 8,737,980 $ 2 0,942,539 Total Net Position $ 4 7,568,854 $ 4 9,123,010 $ 5 2,661,444 $ 5 6,388,126 $ 5 7,862,703 $ 6 1,793,366 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 5 3,221,295 $ 5 4,738,212 $ 5 8,767,312 $ 6 2,964,087 $ 6 6,562,461 $ 6 9,923,379 & NET POSITION Countywide Water Service & Sphere Review Page 88 of 228 GOVERNANCE Local Accountability & Structure The Watsonville Water Department is a municipal utility that is owned and operated by the City of Santa Cruz. It is led by a Director who is appointed by the City Manager and administers the day-to-day operations of the Water Department. The City Water Department employs a full-time staff of 44 employees. The governing body for the Water Department is the seven member City Council. The current board members are as follows: Table 44: Watsonville Council Members Board Member Term of Office First Elected: 2020 Jimmy Dutra Term Limit Ends: 2024 First Elected: 2018 Francisco Estrada Term Limit Ends: 2022 First Elected: 2014 Rebecca Garcia Term Limit Ends: 2022 First Elected: 2011 Lowell Hurst Term Limit Ends: 2022 First Elected: 2020 Eduardo Montesino Term Limit Ends: 2024 First Elected: 2018 Ari Parker Term Limit Ends: 2022 First Elected: 2022 Vanessa Quiroz-Carter Term Limit Ends: 2024 Board Meetings The City Council typically meets on the second and fourth Tuesday of each month. The meeting dates are posted at city hall and on the City’s Website. Public meetings are typically held at 4:00pm. Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. The City adopted its UWMP in 2020,9 which provides an in-depth overview of the City’s current and future water demand and infrastructure. 9 2020 UWMP: https://www.cityofwatsonville.org/DocumentCenter/View/16377/2020-Watsonville-Urban-Water-Management-Plan Countywide Water Service & Sphere Review Page 89 of 228 Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the City’s website even though the law only applies to independent special districts. Tables 46 and 46 summarize staff’s findings on whether the website is meeting the statutory requirements. At present, the City does meet the statutory requirements under SB 929 and SDLF’s website transparency criteria. The only item that is not found in the City’s website is LAFCO’s adopted service reviews. Overall, the City has a transparent website filled with useful information and resources that are easily accessible. Table 45: Website Transparency (Required Items) Website Components Status (Yes = X) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines ✓ 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported N/A Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported N/A Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews Total Score (out of a possible 18 – 2 do not apply to cities) 17 (94%) *Footnote: Senate Bill 929 Statutory Requirements; Items 13 and 14 do not apply to cities Countywide Water Service & Sphere Review Page 90 of 228 Table 46: Website Transparency (Recommended Items) Website Components Status (Yes = X) Additional Items (SDLF's Recommended Elements) 1. Board Member Ethics Training Certificates ✓ 2. Picture, Bio, and Email Addresses of Board Members ✓ 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form ✓ 6. Audio or Video Recordings of Board Meetings ✓ 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program N/A 9. General Description of Special Districts or Link to N/A www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms ✓ Total Score (out of a possible 8 – 2 do not apply to cities) 8 (100%) Footnote: Items 8 and 9 do not apply to cities Opportunities and Challenges Water agencies, including city water departments, are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Areas Served Outside Jurisdictional Boundary Pursuant to Government Code Section 56133, a city or district may provide new or extended services by contract or agreement outside its jurisdictional boundaries only if it first requests and receives written approval from the Commission in the affected county. LAFCO may also authorize a city or district to provide new or extended services outside its jurisdictional boundaries but within its sphere of influence in anticipation of a later change of organization. In other words, except for the specific situations exempted by Government Code Section 56133, a city or district shall not provide new or extended services to any party outside its jurisdictional boundaries unless it has obtained written approval from LAFCO. Based on staff’s analysis, the City is providing services outside its jurisdiction to approximately 4,700 parcels. The vast majority of these parcels are receiving water services without LAFCO’s review and authorization. This is primarily due to the fact that the City began providing water prior to the creation of LAFCO in 1963. Figure 32 on page 92 shows the subject parcels receiving services outside the City’s jurisdiction. LAFCO Staff Recommendation: The City should develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). Countywide Water Service & Sphere Review Page 91 of 228 Figure 32: Areas Served Outside the City’s Jurisdiction Countywide Water Service & Sphere Review Page 92 of 228 Small Water Systems One area that LAFCO can provide assistance now is addressing any failing mutual water companies (MWCs) or private water systems near WWSA. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 42 private water systems are located within and outside the City’s water service area. Figure 33 on page 94 identifies the location of each water system in relation to WWSA. Table 47 on page 95 also provide more information about the private water systems. While LAFCOs do not have full authority over mutual water companies when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these private water systems may lead to coordination with WWSA and possible annexation, if desired. LAFCO Staff Recommendation: The City should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: The City should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Countywide Water Service & Sphere Review Page 93 of 228 Figure 33: Map of Private Water Systems Outside the City’s Water Service Area Countywide Water Service & Sphere Review Page 94 of 228 Table 47: List of Private Water Systems Outside the City of Watsonville Size Water # Type of Water System (Square Population System Name Miles) Private Water Systems OUTSIDE City’s Jurisdictional Boundary 1 Renaissance High Small Water System (2 connections) 0.02 250 2 Kitayama Bros. Small Water System (3 connections) 0.35 50 3 Sheriff's Rehab Small Water System (5 connections) 0.17 235 4 R&A Farms Small Water System (5 connections) 0.02 48 5 Gizditch Ranch Small Water System (5 connections) 0.02 200 6 Larkin Ridge MWC Small Water System (5 connections) 0.02 10 7 Freedom MWC Small Water System (5 connections) 0.19 10 8 East Bel Mar Small Water System (5 connections) 0.04 12 9 Aptos High School Small Water System (6 connections) 0.09 1,925 10 Zelbar Small Water System (6 connections) 0.06 15 11 Enos Lane Small Water System (6 connections) 0.08 22 12 Corralitos Springs Small Water System (6 connections) 0.25 11 13 Lake View Apartments Small Water System (7 connections) 0.01 43 14 Whiting Road Small Water System (7 connections) 0.03 20 15 Spring Valley Water Assoc. Small Water System (7 connections) 0.01 16 16 Cassin Ranch Small Water System (8 connections) 0.02 30 17 Woodside Small Water System (8 connections) 0.02 16 18 Milky Way MWC Small Water System (9 connections) 0.03 20 19 Rancho San Andreas Small Water System (11 connections) 0.01 200 20 Vista Oaks Small Water System (11 connections) 0.13 30 21 Emerald City Small Water System (12 connections) 0.11 30 22 Aptos Hills MWC Small Water System (12 connections) 0.13 32 23 Hughes Road Small Water System (13 connections) 0.03 25 24 White Calabasas MWC Small Water System (14 connections) 0.05 31 25 Camp St. Francis Medium Water System (16 connections) 0.02 57 26 Aptos Ridge MWC Medium Water System (16 connections) 0.09 52 27 Allan Lane Water Assoc. Medium Water System (17 connections) 0.04 68 28 Meadowridge Medium Water System (18 connections) 0.22 42 29 Las Colinas Road & Wtr Assoc. Medium Water System (24 connections) 0.07 70 30 St. Francis Tract Water System Medium Water System (29 connections) 0.03 118 31 Rancho Corralitos* Medium Water System (31 connections) 0.08 60 32 Monte Vista Christian School Medium Water System (43 connections) 0.11 1,083 33 Crestwood Heights Water Co.* Medium Water System (45 connections) 0.01 126 34 Sunset Beach* Medium Water System (65 connections) 0.02 150 35 Monterey Bay Acad. Medium Water System (78 connections) 0.58 400 36 Santa Cruz KOA Medium Water System (235 connections) 0.04 110 37 San Andreas MWC Medium Water System (135 connections) 0.54 350 38 Buena Vista Migrant Center Medium Water System (140 connections) 0.08 455 39 Calabasas Road Medium Water System (15 to 199 connections) 0.01 17 40 County Fair Grounds Medium Water System (15 to 199 connections) 0.16 550 Elevate Addiction Services 41 Medium Water System (15 to 199 connections) 0.04 80 (previously Halcyon Horizons) Alianza Charter School 42 Medium Water System (15 to 199 connections) 0.02 967 (previously Salsipuedes Elementary) *Footnote: Crestwood Heights Water Company, Rancho Corralitos, and Sunset Beach are located within the City’s Water Service Area. Countywide Water Service & Sphere Review Page 95 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted the City’s first sphere of influence on January 12, 1983. The current sphere excludes areas within the City’s water service area. The last sphere update occurred in October 2021 as part of the Countywide Fire Protection Service and Sphere Review. Figure 34 on page 97 shows the current sphere of influence boundary. Proposed Sphere Boundary In accordance with state law, the sphere boundary should focus on areas that may receive additional services from the City in the foreseeable future. Based on staff’s analysis, the City provides services outside its city limits, totaling 4,628 parcels (approximately 9,400 acres). These parcels are shown in Figure 32 on page 92. LAFCO staff is recommending that the sphere boundary be expanded to include the City’s water service area. Figure 35 on page 98 shows the proposed sphere boundary. Further analysis would be required as part of any annexation application to determine whether the City is willing and capable of providing services to the annexation area(s), if annexation is pursued in the future based on the new sphere and submitted plan. LAFCO Staff Recommendation: The City should develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). [This section intentionally left blank] Countywide Water Service & Sphere Review Page 96 of 228 Figure 34: City’s Current Sphere Map Countywide Water Service & Sphere Review Page 97 of 228 Figure 35: City’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 98 of 228 DISTRICT SUMMARY City of Watsonville Water Department California Charter City Law (Article XI, section 3(a) of the Formation California Constitution) Board of Directors City Council: 7 members (four-year terms) Contact Person Rene Mendez, City Manager Employees 44 Full-Time Employees 14,884 connections; 190 miles of pipeline; 14 wells; 9 booster Facilities stations; 9 hydraulic pressure zones; and 8 reservoirs and water storage facilities. WSA Area 21 square miles (appx. 13,000 acres) Current Sphere: Larger than the City (i.e., sphere boundary includes areas outside the City’s jurisdictional boundary) Sphere of Influence Proposed Sphere: Larger than the City (i.e., sphere boundary includes areas outside the City’s jurisdictional boundary) Total Revenue = $19,935,279 FY 2020-21 Audit Total Expenditure = $16,004,616 Net Position (Ending Balance) = $61,793,366 Mailing Address: 250 Main Street, Watsonville CA 95076 (Water Department) Phone Number: (831) 831-768-3100 Contact Information Email Address: citymanager@cityofwatsonville.org Website: https://www.cityofwatsonville.org/ The City Council meets in the Watsonville City Council Public Meetings Chambers, 275 Main Street, on the second and fourth Tuesday of each month, at 4:00 p.m. The Water Division is responsible for one of life's most valuable resources: drinking water. The City provides service to residential, Mission Statement commercial, industrial, and institutional customers assuring delivery of the highest quality of potable water serving Watsonville and parts of unincorporated areas of Santa Cruz County. Countywide Water Service & Sphere Review Page 99 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of WWSA in 2020 was estimated to be 65,000. Based on LAFCO’s analysis, the population within WWSA will be approximately 70,000 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the City’s sphere boundary. 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. In accordance with the California Water Code, every urban water supplier with 3,000 or more service connections or supplying more than 3,000 acre-feet of water per year are required to prepare an Urban Water Management Plan every five years. With 14,884 active service connections, the City of Watsonville clearly meets the definition of “Urban Water Supplier” and prepared a plan in 2020. 4. Financial ability of agencies to provide services. WWSA is financially sound. The District ended with a surplus in five of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $62 million. LAFCO believes that this positive trend will continue based upon the City’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages the City to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding WWSA. At present, there are 42 private water systems near WWSA. 6. Accountability for community service needs, including governmental structure and operational efficiencies. The City has a detailed and transparent website that provides in-depth information regarding the City’s various departments, including its water department. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that the City develop a plan to determine when the areas within its water service area should be annexed. The plan should be developed and submitted to LAFCO prior to their next service review cycle (August 2027). Countywide Water Service & Sphere Review Page 100 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the City’s water service area is designated as Agriculture. The remaining areas also include unincorporated territory designated for various land uses including residential under the County’s existing general plan. 2. The present and probable need for public facilities and services in the area. The City adopted an Urban Water Management Plan in 2020 which provides an in- depth overview of the City’s current and future water demand and infrastructure. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. The City's regional water system consists of 190 miles of pipelines, 14 wells, 8 reservoirs and the Corralitos Filtration Plant treatment plant that delivers clean, safe water to our service population of 66,000 customers. 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. A total of 42 private water systems are located near WWSA. The City should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the City’s sphere boundary. Countywide Water Service & Sphere Review Page 101 of 228 COUNTY SERVICE AREA 54 (SUMMIT WEST) OVERVIEW The County Service Area 54 was formed on February 7, 1996 to provide water services to the Summit West community located in the Santa Cruz Mountains south of Summit Road and west of Highway 17. Figure 36, on page 103, is a vicinity map depicting the District’s current jurisdictional boundary. History For many years prior to 1987, the CSA 54 area received water service from the Mountain Charlie Water Works, a private water company, subject to State Public Utility Commission rate regulation, and State and County Health Department regulation of drinking water quality. In 1987, the water company had approximately 150 customers in a low-density, mountain residential area. The water system was damaged in the 1989 Loma Prieta earthquake. The water company was unable to meet quality or quantity standards. Customers were distraught with the water company and the ineffectiveness of the regulatory bodies. A 1995 decision of the State Public Utilities Commission found that the management of the Mt. Charlie Water Works had neither the financial or technical competence to meet water quality and quantity standards. In May 1995, the County of Santa Cruz petitioned the Superior Court to place the Mt. Charlie system under receivership. The Court granted the petition and appointed a receiver, John W. Richardson. Seeking a permanent solution, system customers also approached the County of Santa Cruz with the concept of using the County’s power of eminent domain to acquire and run the water system. On February 7, 1996, LAFCO approved the County’s application to form the county service area. CSA Inactivity The County then collected a levy from the property owners within CSA 54, and proceeded to file an eminent domain lawsuit to acquire the key water rights and operating facilities of the Mt. Charlie Water Works. The suit was settled with the rights and facilities being acquired in exchange for a cash amount. The County began operating the system and the customers organized a mutual benefit corporation which would ultimately take over operations of the water system. In May 2001, the Board of Supervisors authorized the transfer of the water system to the newly-formed mutual, the Summit West Mutual Water Company. For a period of time after the transfer was complete, CSA 54 continued to collect a levy in order to make payments on a State Department of Water Resources loan. The loan was eventually transferred to the Summit West Mutual Water Company, and they have since paid it off. In 2005, the Summit West Mutual Water Company served 139 connections, and was obligated to serve an additional 25 properties within the service area if connections were requested. The County stopped collecting CSA 54 levies, but maintained the balance in the CSA 54 account. On October 16, 2007, the Board of Supervisors used $25,000 of CSA 54’s fund balance to help fund storm damage repairs to a supply main slip out on Upper Oak Flat Road. Since then, CSA 54 has been inactive. Countywide Water Service & Sphere Review Page 102 of 228 Figure 36: CSA 54’s Vicinity Map Countywide Water Service & Sphere Review Page 103 of 228 Population and Growth Based on staff’s analysis, the population of CSA 54 in 2020 was estimated to be 550. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Table 48 shows the anticipated population within the CSA. The average rate of change is 0.86%. Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for the CSA. LAFCO staff increased CSA 54’s 2020 population amount by 0.86% each year. Under this assumption, our projections indicate that the entire population of the CSA will be approximately 570 by 2040. Table 48: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) CSA 54 550 555 559 564 569 0.86% Source: AMBAG 2018 Regional Growth Forecast and GIS Parcel Data FINANCES As previously mentioned, CSA 54 has been inactive since 2007. The County has not been providing services or collecting funds for over fifteen years. Therefore, LAFCO did not conduct a financial analysis for this agency. GOVERNANCE Senate Bill 448 was signed by the Governor on September 27, 2017 and went into effect the following year. This bill requires the State Controller, on or before November 1, 2018, and every year thereafter, to create a list of special districts that are inactive, based upon the financial reports received by the Controller. LAFCO anticipates the State to identify CSA 54 as an inactive district and require the completion of a mandatory dissolution. SPHERE OF INFLUENCE Proposed Sphere Boundary Due to the lack of operations and governance, LAFCO staff is recommending the adoption of a zero sphere, as shown as Figure 37 on page 105. LAFCO may adopt a “zero” sphere (encompassing no territory) for a public agency when the Commission has determined that the service functions of the affected agency are either: nonexistent, no longer needed, or should be reallocated to some other local government. Adoption of a zero sphere indicates that the CSA should ultimately be dissolved . LAFCO Staff Recommendation: Adopt a zero sphere as a precursor to dissolution. The County or LAFCO should initiate dissolution by December 2022. Countywide Water Service & Sphere Review Page 104 of 228 Figure 37: CSA 54’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 105 of 228 DISTRICT SUMMARY County Service Area 54 (Summit West) Formation California County Service Area Law, Section 25,000 et seq. Board of Directors County Board of Supervisors Contact Person No General Manager Employees 0 Full-Time Employees Facilities None District Area 2.14 square miles (appx. 1,400 acres) Current Sphere: Coterminous (i.e. sphere boundary the same as the District’s jurisdictional boundary) Sphere of Influence Proposed Sphere: Zero (i.e., precursor to dissolution) Total Revenue = $0 FY 2020-21 Audit Total Expenditure = $0 Net Position (Ending Balance) = $0 Mailing Address: None Phone Number: None Contact Information Email Address: None Website: None Public Meetings N/A Mission Statement None Countywide Water Service & Sphere Review Page 106 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of CSA 54 in 2020 was estimated to be 550. Based on LAFCO’s analysis, the population within the CSA will be approximately 570 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the CSA’s sphere boundary. 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. There is no present and planned capacity of public facilities or adequacy of public services. The CSA has no general manager, no office, no website, no capital improvement plan, and a significant lack of transparency. 4. Financial ability of agencies to provide services. The CSA has been inactive since 2007. The County has not collected any revenue or incurred any expenses in over fifteen years. 5. Status of, and opportunities for, shared facilities. LAFCO strongly encourages the County to support dissolution. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 448 was signed by the Governor on September 27, 2017 and went into effect the following year. This bill requires the State Controller, on or before November 1, 2018, and every year thereafter, to create a list of special districts that are inactive, based upon the financial reports received by the Controller. LAFCO anticipates the State to identify CSA 54 as an inactive district and require the completion of a mandatory dissolution. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO strongly encourages the County to support dissolution. Countywide Water Service & Sphere Review Page 107 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the CSA is designated mountain residential. 2. The present and probable need for public facilities and services in the area. The CSA has no long-term planning in place. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. There is no present and planned capacity of public facilities or adequacy of public services. The CSA has no general manager, no office, no website, no capital improvement plan, and a significant lack of transparency. 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. LAFCO staff is not aware of any social or economic communities of interest in the area besides the Summit West Mutual Water Company. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the CSA’s sphere boundary. Countywide Water Service & Sphere Review Page 108 of 228 PAJARO VALLEY WATER MANAGEMENT AGENCY OVERVIEW The Pajaro Valley Water Management Agency was formed in November 1984 through special legislation (Pajaro Valley Water Management Act10). The Act indicates that PVWMA is responsible for preventing further increase in and continuing reduction of long‐ term overdraft and to provide and insure sufficient water supplies for present and anticipated needs within its boundaries. Today, the District manages existing and supplemental water supplies within 124 square miles of territory that encompasses the City of Watsonville and unincorporated territory located in three counties (Monterey, San Benito, and Santa Cruz). There is a total of 21,414 parcels within the District (totaling approximately 79,000 acres) – 323 parcels in San Benito County, 3,547 parcels in Monterey County, and 17,563 parcels in Santa Cruz County. Based on the total size and assessed value of PVWMA’s service area within each county, Santa Cruz LAFCO is the “Principal LAFCO” and responsible for any future boundary changes regarding the District. Figure 38, on page 113, is a vicinity map depicting PVWMA’s current jurisdictional boundary. Figure 39, on page 114, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the District is designated as Agriculture. A map showing the land use designations within the City of Watsonville was not produced since the City already has a map available on its website11. Zero boundary changes have occurred since 1984. There was an attempt to detach the Aromas Water District (located in Monterey County) from PVWMA in 1990 but that application was denied by LAFCO. Since then, the District’s boundary has remained unchanged. Services and Infrastructure PVWMA is not a water purveyor of domestic (i.e. potable) water, such as a typical water district or municipal water department, but rather is a Groundwater Sustainability Agency (GSA) responsible for achieving sustainable groundwater resources within the Pajaro Valley Groundwater Basin. There are three main watersheds located inside PVWMA: (1) Corralitos Creek Watershed, (2) Watsonville Slough Complex (both of which are in Santa Cruz County and drain into the Pajaro River), and (3) the Carneros Creek Watershed in Monterey County, which drains into Elkhorn Slough. The Pajaro River Watershed extends east of PVWMA into San Benito County and is approximately 1,300 square miles in size. The area contributing to the flow in the Pajaro River is much larger than all of the local watersheds combined. PVWMA monitors surface water in the watersheds for electrical conductivity, calcium concentration, magnesium concentration, sodium concentration, chloride concentration, carbonate and bi-carbonate concentration, sulfate concentration, boron concentration, nitrate concentration, iron concentration, manganese concentration, potassium concentration, turbidity, and in select locations pesticides and fertilizers. 10 PVWMA Act: https://www.pvwater.org/images/about-pvwma/assets/agency_act_assets/Agency%20Act%20-%202009_Act%20760.PVWMA.pdf 11 City of Watsonville Land Use Map - https://www.cityofwatsonville.org/DocumentCenter/View/106/2005-General-Plan-Land-Use-Diagram-. Countywide Water Service & Sphere Review Page 109 of 228 While PVWMA has the authority to manage groundwater resources in the basin, PVWMA's activities typically focus on halting seawater intrusion by balancing the overdraft conditions in the basin. For example, the District’s charter specifically prevents supplying potable water, which is intended to remain the responsibility of local water purveyors. Therefore, all PVWMA projects considered and approved in its Basin Management Plan only supply non-potable (irrigation) water. PVWMA activities do not include flood control, stream restoration or habitat management (except as mitigations for PVWMA projects), which are the responsibility of state and/or county jurisdictions. Table 49 summarizes the District’s services and Table 50 provides an overview of the District’s infrastructure. Table 49: List of Service Provisions Services Checkmark (Yes) Agricultural Water ✓ Drainage ✓ Groundwater Replenishment Retail Potable Water ✓ Recycled Water Wastewater (Sewer) ✓ Water Treatment ✓ Water Conservation Table 50: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity 2.5 million gallons of recycled ✓ Distribution / Storage Tanks water storage Pressure Zones - - 2 production wells; Monitors groundwater levels ✓ Production Wells through 175 publicly and privately owned wells 6 pump stations ✓ Pump Stations (including 2 new distribution pumps) ✓ Recycled Water System Recycled Water Treatment Facility (partnership ✓ Treatment Plants with City of Watsonville) Harkins Slough Filter Plant ✓ Water Diversions (Water Right Permit to divert up to 2,000 acre- feet per year from Harkins Slough) 22 miles (Coastal Distribution System delivers ✓ Water Pipeline supplemental water supply) ✓ 1,109 metered wells; 1,200 unmetered Total Connections domestic wells; 110 turnouts (62 active) Countywide Water Service & Sphere Review Page 110 of 228 Water Services PVWMA’s investments in integrated water infrastructure and associated water management programs are intended to protect and enhance the quality of groundwater resources in the Pajaro Basin by increasing supplemental water supply and water conservation and reducing groundwater pumping. With the completion of several water projects and the planned addition of projects described in the Basin Management Plan Update, PVWMA provides two types of water: (1) supplemental water service, and (2) delivered water service. Supplemental water service is funded by the District’s augmentation charge while delivered water service is funded through the District’s delivered water charge. Table 51 on page 112 provides an overview of the water charges. In 2021, PVWMA conducted a cost study to increase its existing service charges12. Table 52 on page 112 also shows the new service charges based on the findings from the 2021 cost study. Supplemental Water Service PVWMA provides supplemental water service to groundwater users throughout the Pajaro Basin. Supplemental water service includes the purchase/acquisition, capture, storage, and distribution of supplemental water through existing facilities, as well as the implementation of projects identified in the Basin Management Plan Update to reduce groundwater overdraft and retard seawater intrusion. Existing facilities include the Watsonville Recycled Water Treatment Facility, supplemental wells for blending, the Harkins Slough Project, and the Coastal Distribution System. These facilities, and the projects identified in the BMP Update, are intended to advance the following PVWMA objectives for the benefit of all groundwater users in the Pajaro Basin: (a) Protect and maintain the ability of property owners basin‐wide to continue ongoing groundwater extraction; (b) Secure the basin water supply; (c) Retard seawater intrusion; (d) Reduce overdraft; (e) Promote water conservation; and (f) Avoid harsher and stricter groundwater pumping limits that could be imposed by the Agency, State Water Resources Control Board, or court adjudication and order, and thereby protect and preserve the ability of all groundwater pumpers throughout the groundwater basin to continue relying on groundwater resources without regulatory limits. The supplemental water service is funded primarily through an augmentation charge pursuant to the PVWMA Act. The augmentation charge is a charge levied on the extraction of groundwater from wells within PVWMA. In order to administer the charge, it is necessary for the Agency to know the actual or reasonable estimate of groundwater extraction from each well. PVWMA installs meters on all wells capable of extracting 10 or more acre feet per year. There are four well types in the Agency: (1) municipal wells operated by retail water providers; (2) agricultural wells; (3) industrial wells; and (4) small wells that serve rural residential parcels that are not connected to a public or community water system. The municipal, agricultural, and industrial wells are metered and they account for approximately 88% of the total groundwater basin water use. There are approximately 1,100 wells serving the rural residential parcels, which account for approximately 2% of the water use, and the remaining 10% of water use is by delivered water users. 12 PVWMA Cost Study: https://www.pvwater.org/images/2021-Cost-of-Service-Rate-Study-Final_Feb.2021_Final.pdf Countywide Water Service & Sphere Review Page 111 of 228 Delivered Water Service In addition to the supplemental water services provided basin‐wide, PVWMA supplies delivered water to property owners within the Delivered Water Zone (DWZ) through the Coastal Distribution System. Delivered water is produced by PVWMA facilities constructed and operated to protect the groundwater basin from overdraft and seawater intrusion. Delivered water service includes the design, construction, operation, maintenance, management, monitoring, repair and replacement of existing facilities, and other facilities identified in the Basin Management Plan Update that provide irrigation water to delivered water service customers. The DWZ delineates those water users able to receive delivered water directly from PVWMA. Delivery and use of delivered water in the DWZ helps to preserve the amount and quality of the groundwater underlying the properties in the DWZ. As a result, properties in the DWZ are subject to a higher augmentation charge, which reflects the higher level of services provided through the immediate availability of delivered water and the benefits to the underlying groundwater. PVWMA funds this service through a delivered water charge imposed on users of the delivered water service. The only property owners subject to the delivered water charge are those who apply for and receive delivered water from the PVWMA through the Coastal Distribution System. The charge is authorized by the PVWMA Act. Table 51: Previous Cost of Service Rate (Unit Cost Per Acre-Foot) 2017 2018 2019 2020 2021 Charges (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Augmentation Charge Metered Users $203 $217 $231 $246 $246 (Outside Delivered Water Zone) Metered Users $258 $282 $309 $338 $338 (Inside Delivered Water Zone) Unmetered Users $97 $103 $109 $115 $115 (Rural Residential) Delivered Water Charge Delivered Water Charge $359 $369 $381 $392 $392 Table 52: New Cost of Service Rate (Unit Cost Per Acre-Foot) 2022 2023 2024 2025 2026 Charges (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Augmentation Charge Metered Users $263 $282 $302 $323 $346 (Outside Delivered Water Zone) Metered Users $363 $391 $420 $452 $486 (Inside Delivered Water Zone) Unmetered Users (Rural Residential Per $123 $132 $142 $152 $163 Residence) Delivered Water Charge Delivered Water Charge $412 $432 $454 $477 $501 Countywide Water Service & Sphere Review Page 112 of 228 Figure 38: PVWMA’s Vicinity Map Countywide Water Service & Sphere Review Page 113 of 228 Figure 39: PVWMA’s Land Use Map Countywide Water Service & Sphere Review Page 114 of 228 Population and Growth Based on staff’s analysis, the population of PVWMA in 2020 was estimated to be 90,000. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Table 53 shows the anticipated population within PVWMA. The average rate of change for Monterey County is 0.25%, Santa Cruz County is 0.86%, City of Watsonville is 2.78%, and San Benito County is 6.54%. Population Projection Based on the projections for the areas within the Pajaro Valley, LAFCO was able to develop a population forecast for PVWMA. LAFCO staff increased the District’s 2020 population amount by 2.61% each year. Under this assumption, our projections indicate that the entire population of PVWMA will be approximately 100,000 by 2040. Table 53: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Monterey County 105,361 105,682 106,007 106,323 106,418 0.25% (unincorporated area) San Benito County 20,360 22,745 23,879 25,116 26,195 6.54% (unincorporated area) Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) City of Watsonville 53,536 55,187 56,829 58,332 59,743 2.78% Pajaro Valley Water 90,000 92,347 94,756 97,227 99,762 2.61% Management Agency Source: AMBAG 2018 Regional Growth Forecast and FY 2020-21 PVMWA Annual Reports Countywide Water Service & Sphere Review Page 115 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated PVWMA’s financial health from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 57 and 58 on pages 120-121. At the end of Fiscal Year 2020-21, total revenue collected was approximately $30 million, representing a 25% increase from the previous year ($24 million in FY 19-20). Total expenses for FY 2020-21 were approximately $24 million, which decreased by 7% from the previous year ($26 million in FY 19-20). Since 2015, the District ended each fiscal year with a surplus, with the exception of FYs 15-16 and 19-20, as shown in Figure 40. LAFCO staff believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements and the recent adoption of new service charges following their 2021 cost study. Figure 40: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $70,000,000 $60,000,000 $58,179,796 $55,885,424 $50,000,000 $40,000,000 $30,073,336 $30,000,000 $23,019,982 $25,711,549 $21,364,798 $18,910,564 $24,006,007 $23,885,495 $22,250,762 $20,000,000 $18,953,138 $17,295,502 $10,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Footnote: During FY 15-16, PVWMA received $23 million in grants and bonds and incurred $27 million in debt service expenses. This is the primary reason why the audited amount is significantly higher than the following years. Countywide Water Service & Sphere Review Page 116 of 228 Revenues Operating Revenue The District’s primary source of revenue is typically from operating revenues. In FY 2020- 21, operating revenue represented 49% of the District’s entire revenue stream. Funding from this category include Augmentation Charges, Water Sales, and Management Fees. Non-operating Revenue The remaining 51% of total revenue derive from non-operating revenue sources. These funds include Capital Grants, Proceeds from Notes, and Operating Transfers In. Table 54 and Figure 41 provide a breakdown of the District’s revenue by category and source. Table 54: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Augmentation Charges $12,102,376 82.90% Water Sales $2,109,806 14.45% Management Fees $387,333 2.65% Total Operating Revenue $14,599,515 100.00% Non-Operating Revenue Operating Transfers In $9,350,736 60.43% Capital Grants and Contributions $4,551,434 29.41% Proceeds from Notes $1,544,031 9.98% Other Revenue $19,870 0.13% Interest Income $7,750 0.05% Total Non-Operating Revenue $15,473,821 100.00% Total Revenue $30,073,336 Figure 41: Operating v Non-Operating Revenue (FY 2020-21) Total Operating Revenue $14,599,515 (49%) Total Non-Operating Revenue $15,473,821 (51%) Countywide Water Service & Sphere Review Page 117 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 6% of total expenditure during FY 2020-21. Operating expenses include: Office Administration, Board Support, Education & Outreach, and Grant Administration. Non-operating Expense The remaining 94% of total expenses derive from non-operating expenses. These costs include but are not limited to the following; College Lake Project, Recycled Water Facility, and the Coastal Distribution System. Table 55 and Figure 42 provide a breakdown of the District’s costs by category and source. Table 55: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Office Administration $1,067,991 78.62% Education and Outreach $135,294 9.96% Grant Administration $127,903 9.42% Board Support $27,261 2.01% Total Operating Expense $1,358,449 100.00% Non-Operating Expense Operating Transfers Out $9,350,736 41.51% Other Expenses $7,385,449 32.78% College Lake Project $2,712,835 12.04% Recycled Water Facility $2,071,730 9.20% Coastal Distribution System $1,006,296 4.47% Total Non-Operating Expense $22,527,046 100.00% Total Expenditure $23,885,495 Figure 42: Operating v Non-Operating Expense (FY 2020-21) Total Operating Expense $1,358,449 (6%) Total Non-Operating Expense $22,527,046 (94%) Countywide Water Service & Sphere Review Page 118 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $20 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 56 and Figure 43, the District’s fund balance has increased over the years and has maintained an annual balance above $10 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 56: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $13,172,911 $10,878,539 $11,709,044 $14,120,704 $15,735,766 $14,030,224 Balance Ending $10,878,539 $11,647,759 $14,120,704 $15,735,766 $14,030,224 $20,218,065 Balance Change ($) $769,220 $2,472,945 $1,615,062 $(1,705,542) $6,187,841 Figure 43: Net Position from 2015 to 2021 (Ending Balance) $25,000,000 $20,218,065 $20,000,000 $15,735,766 $15,000,000 $14,120,704 $14,030,224 $11,647,759 $10,878,539 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 119 of 228 Table 57: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Charge for Services Augmentation Charges $ 9,443,150 $ 9,080,219 $ 10,776,768 $ 10,261,547 $ 11,429,592 $ 12,102,376 Water Sales $ 1,528,990 $ 1,371,994 $ 1,768,135 $ 1,815,815 $ 2,293,841 $ 2,109,806 Management Fees $ 3 83,938 $ 3 83,998 $ 3 75,592 $ 3 86,986 $ 2 83,614 $ 3 87,333 Total Operating Revenue $ 11,356,078 $ 10,836,211 $ 12,920,495 $ 12,464,348 $ 14,007,047 $ 14,599,515 Non-Operating Revenue Capital Grants and Contributions $ 12,482,003 $ 3,237,582 $ 1,365,994 $ 8 5,070 $ 816,898 $ 4,551,434 Interest Income $ 9 9,391 $ 5 3,183 $ 8 7,079 $ 2 43,273 $ 294,545 $ 7,750 Other Revenue $ 6 7,652 $ 5 6,618 $ 3 0,573 $ 3 6,406 $ 2 9,121 $ 1 9,870 Proceeds from Note $ - $ - $ - $ - $ - $ 1,544,031 Issuance of Refunding Bonds $ 11,435,000 $ - $ - $ - $ - $ - Bond Premium on Refunding Bonds $ 1,013,542 $ - $ - $ - $ - $ - Operating Transfers In $ 19,431,758 $ 8,836,388 $ 6,960,657 $ 6,081,467 $ 8,858,396 $ 9,350,736 Total Non-Operating Revenue $ 44,529,346 $ 12,183,771 $ 8,444,303 $ 6,446,216 $ 9,998,960 $ 15,473,821 TOTAL REVENUE $ 55,885,424 $ 23,019,982 $ 21,364,798 $ 18,910,564 $ 24,006,007 $ 30,073,336 EXPENDITURE Operating Expense Office Administration $ 114,179 $ 908,674 $ 965,532 $ 1,089,204 $ 852,705 $ 1,067,991 Board Support $ - $ 4 2,496 $ 3 1,455 $ 2 6,958 $ 2 9,297 $ 2 7,261 Education and Outreach $ - $ 9 9,097 $ 107,245 $ 1 01,100 $ 9 6,893 $ 135,294 Personnel $ 1,754,183 $ - $ - $ - $ - $ - Operating $ 2,694,150 $ - $ - $ - $ - $ - Training and Travel $ 2 0,697 $ - $ - $ - $ - $ - Grant Administration $ - $ 168,356 $ 142,216 $ 1 00,307 $ 7 1,791 $ 127,903 Total Operating Expense $ 4,583,209 $ 1,218,623 $ 1,246,448 $ 1,317,569 $ 1,050,686 $ 1,358,449 Non-Operating Expense Conservation $ 5 9,351 $ 192,980 $ 415,875 $ 1 37,753 $ 307,134 $ 312,886 Monitoring Well $ 6 6,262 $ - $ - $ - $ - $ - Delivered Water $ 3 5,823 $ - $ - $ - $ - $ - Professional Services $ 5,069,368 $ - $ - $ - $ - $ - Bond Issuance Costs $ 307,593 $ - $ - $ - $ - $ - Harkins Slough Facility $ - $ 232,854 $ 188,642 $ 1 53,516 $ 232,890 $ 209,867 Coastal Distribution System $ - $ 909,914 $ 986,033 $ 9 80,688 $ 1,076,245 $ 1,006,296 Supplemental Water (In-Basin) $ - $ 138,611 $ 184,131 $ 3 68,599 $ 312,197 $ 392,480 BMP Network Improvements $ - $ 8,578 $ 187,589 $ 3 1,152 $ 2 5,242 $ - Blendwell Enhancements $ - $ 1,638 $ - $ - $ - $ - Recycled Water Storage $ - $ 4,006,948 $ 799,928 $ - $ - $ - K-1 Pipeline $ - $ 353,804 $ - $ - $ - $ - Recycled Water Facility $ - $ 1,513,526 $ 1,541,176 $ 1,814,657 $ 2,127,486 $ 2,071,730 Metering Program $ - $ 251,484 $ 229,614 $ 2 30,585 $ 425,352 $ 355,203 Basin Modeling $ - $ 102,218 $ 6 2,342 $ 2 28,849 $ 208,198 $ 147,637 Basin Monitoring $ - $ 207,256 $ 169,540 $ 1 54,900 $ 185,944 $ 186,554 In-Basin Management Plan $ - $ 7 8,920 $ 5 2,570 $ 4 0,833 $ 4 6,348 $ 434,144 Regional Water Management Plan $ - $ 3 7,563 $ 1 0,548 $ 1 0,182 $ 8,035 $ 6,817 Out-of-Basin Funding $ - $ 7,519 $ 2 3,302 $ 1 4,954 $ 1 3,385 $ 1 7,489 In-Basin Funding $ - $ 1 2,403 $ 1 1,865 $ 2 1,089 $ 9 7,621 $ 104,995 Harkins Slough Recharge Facilities $ - $ 181,203 $ 501,275 $ 4 08,864 $ 371,106 $ 170,610 College Lake Project $ - $ 429,129 $ 1,514,474 $ 1,136,357 $ 733,169 $ 2,712,835 Watsonville Slough & North Dunes $ - $ 166,263 $ 507,250 $ 2 81,544 $ 441,760 $ 300,264 Murphy Crossing Recharge $ - $ 7,326 $ - $ - $ - $ - Recycled Water Disk Filter Upgrade $ - $ - $ - $ 365,517 $ 3,055,198 $ 103,090 Recycled Water Storage Phase III $ - $ - $ - $ 5,438 $ 3,065 $ 3 1,210 F-Line Expansion $ - $ - $ - $ 155,459 $ 2,740,552 $ 1,141,705 Capital Outlay $ - $ - $ - $ - $ 3 3,062 $ 3 4,056 Debt Service Principal $ 27,142,574 $ 2,227,358 $ 2,156,877 $ 2,230,291 $ 2,316,408 $ 2,489,816 Interest $ 1,483,862 $ 1,128,256 $ 1,203,002 $ 1,125,239 $ 1,042,070 $ 946,626 Operating Transfers Out $ 19,431,754 $ 8,836,388 $ 6,960,657 $ 6,081,467 $ 8,858,396 $ 9,350,736 Total Non-Operating Expense $ 53,596,587 $ 21,032,139 $ 17,706,690 $ 15,977,933 $ 24,660,863 $ 22,527,046 TOTAL EXPENDITURE $ 58,179,796 $ 22,250,762 $ 18,953,138 $ 17,295,502 $ 25,711,549 $ 23,885,495 Surplus/(Deficit) $ ( 2,294,372) $ 769,220 $ 2,411,660 $ 1,615,062 $ ( 1,705,542) $ 6,187,841 NET POSITION Beginning Balance $ 13,172,911 $ 10,878,539 $ 11,709,044 $ 14,120,704 $ 15,735,766 $ 14,030,224 Ending Balance $ 10,878,539 $ 11,647,759 $ 14,120,704 $ 15,735,766 $ 14,030,224 $ 20,218,065 Countywide Water Service & Sphere Review Page 120 of 228 Table 58: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Cash Equivalents $ 9 ,298,364 $ 9,851,258 $ 11,566,594 $ 13,426,398 $ 12,675,111 $ 1 7,575,026 Cash & Cash Equivalents - Restricted $ 253,424 $ 2 53,553 $ 2 53,681 $ 2 53,809 $ 2 53,939 $ 254,139 Accounts Receivable, Net $ 2 ,771,458 $ 2,959,413 $ 3,584,419 $ 3,320,202 $ 3,727,674 $ 4 ,177,072 Grant Receivable $ 405,349 $ 4 66,620 $ 8 5,032 $ 3 7,961 $ 4 29,988 $ 67,604 Interest Receivable $ 1 ,448 $ 1 4,059 $ 2 9,310 $ 7 8,785 $ 4 1,493 $ 8 ,356 Notes Receivable $ 33,333 $ 3 3,333 $ - $ - $ - $ - Prepaid Expenses and Other Assets $ 46,508 $ 3 5,934 $ 8 0,042 $ 5 3,990 $ 5 9,815 $ 81,997 Total Current Assets $ 1 2,809,884 $ 13,614,170 $ 15,599,078 $ 17,171,145 $ 17,188,020 $ 2 2,164,194 Non-Current Assets Capital Assets - Not Being Depreciated $ 6 ,228,122 $ 8,017,427 $ 5,100,825 $ 7,485,156 $ 14,855,248 $ 1 1,630,943 Depreciable Capital Assets, Net $ 6 6,106,272 $ 66,916,840 $ 70,639,640 $ 68,073,681 $ 65,515,218 $ 7 0,256,945 Total Non-Current Assets $ 7 2,334,394 $ 74,934,267 $ 75,740,465 $ 75,558,837 $ 80,370,466 $ 8 1,887,888 TOTAL ASSETS $ 8 5,144,278 $ 88,548,437 $ 91,339,543 $ 92,729,982 $ 97,558,486 $ 104,052,082 Deferred Outflows of Resources Pensions $ 234,849 $ 4 31,674 $ 4 93,065 $ 3 78,657 $ 3 70,789 $ 353,818 Total Deferred Outflows of Resources $ 234,849 $ 4 31,674 $ 4 93,065 $ 3 78,657 $ 3 70,789 $ 353,818 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 8 5,379,127 $ 88,980,111 $ 91,832,608 $ 93,108,639 $ 97,929,275 $ 104,405,900 LIABILITIES Current Liabilities Accounts Payable $ 1 ,927,498 $ 1,672,764 $ 1,416,859 $ 1,394,831 $ 3,134,812 $ 1 ,900,290 Accrued Wages Payable $ - $ 7 9,509 $ 5 3,418 $ 3 6,563 $ 5 2,157 $ 75,335 Retention Payable $ - $ 2 14,138 $ - $ - $ - $ - Accrued Interest $ 279,745 $ 4 11,889 $ 3 58,038 $ 3 32,354 $ 3 05,232 $ 275,879 Unearned Revenue $ - $ - $ 8,097 $ 3,985 $ 4,160 $ 4 ,285 Long-Term Liabilities - Due Within One Year $ 2 ,227,356 $ - $ - $ - $ - $ - Compensated Absences $ - $ 6 6,143 $ 6 4,119 $ 6 2,405 $ 7 1,227 $ 79,023 Notes Payable $ - $ 1 96,877 $ 2 01,630 $ 2 06,408 $ 2 11,565 $ 216,589 Bonds Payable $ - $ 1,960,000 $ 2,030,000 $ 2,110,000 $ 2,210,000 $ 2 ,310,000 Total Current Liabilities $ 4 ,434,599 $ 4,601,320 $ 4,132,161 $ 4,146,546 $ 5,989,153 $ 4 ,861,401 Non-Current Liabilities Long-Term Liabilities -Due in More Than 1 Yr $ 3 4,207,486 $ - $ - $ - $ - $ - Compensated Absences $ - $ 1 98,429 $ 1 92,355 $ 1 87,216 $ 2 13,681 $ 237,068 Net Pension Liability $ - $ 1,044,568 $ 1,227,637 $ 1,173,363 $ 1,292,431 $ 1 ,414,845 Note Payable $ - $ 2,124,354 $ 1,922,724 $ 1,717,655 $ 1,907,990 $ 3 ,167,182 Bonds Payable $ - $ 28,624,369 $ 26,385,421 $ 24,066,473 $ 21,647,525 $ 1 9,128,577 Total Non-Current Liabilities $ 3 4,207,486 $ 31,991,720 $ 29,728,137 $ 27,144,707 $ 25,061,627 $ 2 3,947,672 TOTAL LIABILITIES $ 3 8,642,085 $ 36,593,040 $ 33,860,298 $ 31,291,253 $ 31,050,780 $ 2 8,809,073 Deferred Inflows of Resources Pensions $ 132,035 $ 5 2,335 $ 2 4,026 $ - $ 2 2,596 $ 10,092 Total Deferred Inflows of Resources $ 132,035 $ 52,335 $ 24,026 $ - $ 22,596 $ 1 0,092 TOTAL LIABILITIES & INFLOWS OF RESOURCES $ 3 8,774,120 $ 36,645,375 $ 33,884,324 $ 31,291,253 $ 31,073,376 $ 2 8,819,165 NET POSITION Net Investment in Capital Assets $ 3 5,899,554 $ 42,028,667 $ 45,200,690 $ 47,458,301 $ 54,393,386 $ 5 7,065,540 Restricted $ 253,424 $ 2 53,553 $ 2 53,681 $ 2 53,810 $ 2 53,939 $ 254,139 Unrestricted $ 1 0,452,029 $ 10,052,516 $ 12,493,913 $ 14,105,275 $ 12,241,907 $ 1 8,300,838 Total Net Position $ 4 6,605,007 $ 52,334,736 $ 57,948,284 $ 61,817,386 $ 66,889,232 $ 7 5,620,517 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 8 5,379,127 $ 88,980,111 $ 91,832,608 $ 93,108,639 $ 97,962,608 $ 104,439,682 & NET POSITION Countywide Water Service & Sphere Review Page 121 of 228 GOVERNANCE Local Accountability & Structure PVWMA is governed by a seven-member board of directors, who must live within the agency boundaries and be registered voters. Four directors are directly elected by voters within their division for overlapping terms of four years each. The remaining three directors are separately appointed by Monterey County, Santa Cruz County, and the City of Watsonville. Appointed directors serve two-year terms and must derive at least 51% of their net income from agriculture. PVWMA employs a full-time staff of 14 employees. The Board of Directors are responsible for the establishment of policy relative to the District’s mission, goals, and operations. The current Board is as follows: Table 59: Board of Directors Board Member Term of Office Elected: November 2018 Mary Bannister (Division A) Term Limit Ends: November 30, 2022 Elected: December 12, 2020 Stephen Rider (Division B) Term Limit Ends: November 30, 2024 Elected: February 2013 Amy Newell (Division C) Term Limit Ends: November 30, 2022 Elected: April 2017 Robert Culbertson III (Division D) Term Limit Ends: November 30, 2024 Appointed: December 2018 Javier Zamora (Monterey County) Term Limit Ends: November 30, 2022 Appointed: December 2018 Tom Broz (Santa Cruz County) Term Limit Ends: November 30, 2022 Appointed: July 2021 Abel Sanchez (City of Watsonville) Term Limit Ends: November 30, 2022 Board Meetings The District’s Board of Directors meet regularly and citizens are encouraged to attend. Board meetings are typically held on the third Wednesday of each month at 7:00 p.m. Meetings are held at the Watsonville City Council Chambers (275 Main Street, Fourth Floor, Watsonville, CA 95076). Annual Reports Pursuant to the PVWMA Act, the District prepares detailed reports on groundwater supplies and conditions, including groundwater management objectives and a plan of implements of those objectives. Additionally, PVWMA produces several annual reports, including one specifically regarding the Pajaro Valley Subbasin and another on the District’s overall annual performance. The annual performance report contains summary information about PVWMA’s major activities for the year, audited budget information, project operations, conservation efforts and a summary of the state of the groundwater basin. These reports cover three overlapping periods: activity information for the previous calendar year; financial information from the prior fiscal year; and water information from the prior water year (ending Sept. 30). Both reports are easily accessible on the PVWMA website. Countywide Water Service & Sphere Review Page 122 of 228 Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the District’s website. Table 60 on page 124 summarizes staff’s findings on whether the District’s website is meeting the statutory requirements. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. There are certain items that should be added to its website, specifically their adopted policies, information on how to request for records, and links to LAFCO’s adopted service reviews related to the District. Overall, PVWMA has a transparent website filled with useful information and resources that are easily accessible. Countywide Water Service & Sphere Review Page 123 of 228 Table 60: Website Transparency Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines ✓ 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported Board ✓ Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported ✓ Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews ✓ Total Score (out of a possible 20) 20 (100%) Additional Items (SDLF’s Recommended Elements) 1. Board Member Ethics Training Certificates ✓ 2. Picture, Bio, and Email Addresses of Board Members 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form 6. Audio or Video Recordings of Board Meetings 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program 9. General Description of Special Districts or Link to www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms Total Score (out of a possible 10) 4 (40%) *Footnote: Senate Bill 929 Statutory Requirements Countywide Water Service & Sphere Review Page 124 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Reclamation District No. 2049 Reorganization Santa Cruz County has one reclamation district (Reclamation District No. 2049), which has been in existence for over 100 years, and its sole purpose is to drain the College Lake each year so that the lake bottom can be farmed during the summer. Based on staff’s analysis, the reclamation district has obsolete infrastructure, limited staffing, depleting finances, zero transparency, lack of Brown Act compliance, and other statutory violations. Due to these significant issues, the Reclamation District Board of Directors adopted a resolution on July 27, 2022 to initiate the dissolution process. The Reclamation District is already in PVWMA’s jurisdictional boundary (refer to Figure 44 on page 126). It is also LAFCO’s understanding that PVWMA is in the process of completing a project directly tied with the College Lake. The primary purposes of the College Lake Integrated Resources Project are to help balance the groundwater basin, prevent further seawater intrusion, and meet water supply needs in PVWMA’s service area by developing College Lake as a water storage and supply source. Project components include a weir structure and intake pump station, a water treatment plant, and an approximately 6-mile-long pipeline to convey water from the water treatment plant to the Watsonville Area Recycled Water Treatment Facility and to the Coastal Distribution System. Construction is estimated to occur over approximately 18 months and may begin later this year, pending acquisition of necessary permits and property rights. LAFCO Staff Recommendation: PVWMA should coordinate with LAFCO and the Reclamation District to successfully transfer service responsibilities as part of the dissolution process. Groundwater Basin Management Plan PVWMA is not a water purveyor of domestic water, such as a typical water district or municipal water department. One of its major tasks has been the development of basin- wide groundwater management plan. A Revised Basin Management Plan was adopted by the PVWMA Board in 2014. The Plan identifies the specific the water conservation/water supply projects planned to be implemented in the near future. As such, it also guides capital facilities planning for PVWMA. The District’s primary focus is implementation of its Basin Management Plan towards elimination of groundwater overdraft and seawater intrusion. LAFCO Staff Recommendation: PVWMA should consider updating the Basin Management Plan since the last update was eight years ago. The update should include the assumption that the District will be the successor agency of the Reclamation District No. 2049, which is consistent with the scheduled completion of the College Lake Integrated Resources Management Project. Countywide Water Service & Sphere Review Page 125 of 228 Figure 44: Reclamation District within PVWMA’s Jurisdictional Boundary Countywide Water Service & Sphere Review Page 126 of 228 Groundwater Basins The Sustainable Groundwater Management Act (SGMA) was signed into law on September 16, 2014, approximately five months after the PVWMA Board of Directors approved its latest Basin Management Plan Update. It established a new structure for managing groundwater in California that aims to give local agencies the means to manage groundwater basins in a manner that is sustainable over the long-term. There are three groundwater basins in Santa Cruz County. PVWMA was named in SGMA as one of 15 existing agencies, created by statute, to manage groundwater that are deemed to be the exclusive local agencies within their respective statutory boundaries with the power to comply with the Act. At present, the Santa Cruz Mid-County Groundwater Agency oversees the Purisima Formation Basin, Soquel Valley Basin, and the West Santa Cruz Terrace Basin, the Santa Margarita Groundwater Agency oversees the Santa Margarita Basin, and PVWMA oversees the Pajaro Valley Basin (refer to Figure 45 on page 128). While PVWMA has adopted detailed annual reports and executed various projects related to the Pajaro Valley Basin, its jurisdictional boundary is not coterminous with the basin area. This discrepancy may lead to possible conflicts in the future. Additionally, PVWMA does not have an established sphere boundary. A sphere of influence should be adopted for the PVWMA as part of this service review and it should be coterminous with the boundaries of the Pajaro Valley Basin. This sphere, if approved, would indicate that PVWMA should annex certain areas in the future in order to accurately depict its legal authority over the Pajaro Valley Basin. LAFCO Staff Recommendation: PVWMA should support the adoption of a sphere of influence boundary that is coterminous with a combination of the Agency’s statutory boundary and the California Department of Water Resources defined Pajaro Valley Groundwater Basin boundary and should consider annexing areas outside its jurisdiction but within its new sphere in the foreseeable future. [This section intentionally left blank] Countywide Water Service & Sphere Review Page 127 of 228 Figure 45: Areas Served Outside PVWMA’s Jurisdiction Countywide Water Service & Sphere Review Page 128 of 228 Small Water Systems One area that LAFCO can provide assistance now is addressing any failing mutual water companies (MWCs) or private water systems. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 43 private water systems are located within PVWMA. Figure 46 on page 130 identifies the location of each water system in relation to PVWMA. Table 61 on page 131 also provide more information about the private water systems. While PVWMA does not deliver potable water, the map on the following page may be helpful for the District and LAFCO to know which small water systems are also using the Pajaro Valley Basin. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. Specifically, PVWMA and the City of Watsonville have collaborated to jointly construct and operate the Watsonville Area Recycled Water Treatment Facility. The facility has the capacity to produce about 4,000 AFY of tertiary treated disinfected recycled water, which will augment with water from the Harkins Slough Facility, Blend Wells, and the City’s potable water to increase supply and improve the quality for agricultural irrigation needs. This successful partnership shows valid proof that working together among local agencies would benefit the residents by maximizing economies of scale and utilizing the agencies’ existing resources. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: PVWMA should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Countywide Water Service & Sphere Review Page 129 of 228 Figure 46: Map of Private Water Systems Within PVWMA Countywide Water Service & Sphere Review Page 130 of 228 Table 61: List of Private Water Systems Within PVWMA Size Water # Type of Water System (Square Population System Name Miles) Private Water Systems WITHIN PVWMA’s Jurisdictional Boundary 1 Renaissance High Small Water System (2 connections) 0.02 250 2 Kitayama Bros. Small Water System (3 connections) 0.35 50 3 Sheriff's Rehab Small Water System (5 connections) 0.17 235 4 Gizditch Ranch Small Water System (5 connections) 0.02 200 5 Freedom MWC Small Water System (5 connections) 0.19 10 6 Larkin Ridge MWC Small Water System (5 connections) 0.02 10 7 East Bel Mar Small Water System (5 connections) 0.04 12 8 R&A Farms Small Water System (5 connections) 0.02 48 9 Enos Lane Small Water System (6 connections) 0.08 22 10 Zelbar Small Water System (6 connections) 0.06 15 11 Spring Valley Water Assoc. Small Water System (7 connections) 0.01 16 12 Lake View Apartments Small Water System (7 connections) 0.01 43 13 Whiting Road Small Water System (7 connections) 0.03 20 14 Jardines Del Valle Small Water System (7 connections) 0.01 150 15 Woodside Small Water System (8 connections) 0.02 16 16 Cassin Ranch Small Water System (8 connections) 0.02 30 17 Milky Way MWC Small Water System (9 connections) 0.03 20 18 Rancho San Andreas Small Water System (11 connections) 0.01 200 19 Smith Road Small Water System (11 connections) 0.06 28 20 Vista Oaks Small Water System (11 connections) 0.13 30 21 Aptos Hills MWC Small Water System (12 connections) 0.13 32 22 Emerald City Small Water System (12 connections) 0.11 30 23 Hughes Road Small Water System (13 connections) 0.03 25 24 White Calabasas MWC Small Water System (14 connections) 0.05 31 25 Aptos Ridge MWC Medium Water System (16 connections) 0.09 52 26 Camp St. Francis Medium Water System (16 connections) 0.02 57 27 Allan Lane Water Assoc. Medium Water System (17 connections) 0.04 68 28 Meadowridge Medium Water System (18 connections) 0.22 42 29 Las Colinas Road & Water Assoc. Medium Water System (24 connections) 0.07 70 30 St. Francis Tract Water System Medium Water System (29 connections) 0.03 118 31 Mt. Madonna Inn Restaurant Medium Water System (31 connections) 0.01 165 32 Rancho Corralitos Medium Water System (31 connections) 0.08 60 33 Monte Vista Christian School Medium Water System (43 connections) 0.11 1,083 34 Crestwood Heights Water Co. Medium Water System (45 connections) 0.01 126 35 Sunset Beach Medium Water System (65 connections) 0.02 150 36 Monterey Bay Acad. Medium Water System (78 connections) 0.58 400 37 San Andreas MWC Medium Water System (135 connections) 0.54 350 38 Buena Vista Migrant Center Medium Water System (140 connections) 0.08 455 39 Santa Cruz KOA Medium Water System (235 connections) 0.04 110 40 County Fair Grounds Medium Water System (15 to 199 connections) 0.16 550 41 Calabasas Road Medium Water System (15 to 199 connections) 0.01 17 Elevate Addiction Services 42 Medium Water System (15 to 199 connections) 0.04 80 (previously Halcyon Horizons) Alianza Charter School 43 Medium Water System (15 to 199 connections) 0.02 967 (previously Salsipuedes Elementary) Countywide Water Service & Sphere Review Page 131 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO has not adopted a sphere boundary for PVWMA as shown in Figure 47 on page 133. Monterey County LAFCO adopted a “status quo sphere of influence” on October 27, 1987 for the areas within Monterey County and San Benito County LAFCO has not adopted a sphere boundary for PVWMA. State law requires all independent special districts to have a sphere of influence boundary (Government Code Section 56425). Proposed Sphere Boundary Based on staff’s analysis, the sphere boundary should be coterminous with the Pajaro Valley Basin. Figure 48 on page 134 shows the proposed sphere boundary. Parcels Subject to Annexation As stated earlier in this report, PVWMA has legal authority over the Pajaro Valley Basin. The District should consider annexing the areas outside its jurisdictional boundary but within the Pajaro Valley Basin (as shown in Figure 45 on page 128) to accurately reflect its legal authority over the groundwater basin. Staff estimates that the subject area involves approximately 7,000 acres. LAFCO Staff Recommendation: PVWMA should consider annexing the areas currently outside its jurisdictional boundary but within the Pajaro Valley Basin to accurately reflect its authority over the groundwater basin. [This section intentionally left blank] Countywide Water Service & Sphere Review Page 132 of 228 Figure 47: PVWMA’s Current Sphere Map Countywide Water Service & Sphere Review Page 133 of 228 Figure 48: PVWMA’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 134 of 228 DISTRICT SUMMARY Pajaro Valley Water Management Agency Formation California Water Code, section 10,000 et seq. Seven members; Four elected by divisions (four-year terms), and Board of Directors Three are appointed (two-year terms) Contact Person Brian Lockwood, General Manager Employees 14 Full-Time Employees 1,019 metered wells; 1,200 unmetered, domestic wells; 22 miles of pipeline; 6 pump stations; 2 production wells; 1 storage tank; 1 Facilities Coastal Distribution System, and 1 Recycled Water Treatment Facility District Area 124 square miles (appx. 79,000 acres) Current Sphere: No Sphere Boundary Sphere of Influence Proposed Sphere: Larger than the District (i.e., sphere boundary includes areas outside the District’s jurisdictional boundary) Total Revenue = $30,073,336 FY 2020-21 Audit Total Expenditure = $23,885,495 Net Position (Ending Balance) = $20,218,065 Mailing Address: 36 Brennan Street, Watsonville CA 95076 Phone Number: (831) 722-9292 Contact Information Email Address: Info@PVWater.org Website: https://www.pvwater.org/ Meetings are held on the third Wednesday of each month Public Meetings at 7:00 p.m. The Pajaro Valley Water Management Agency is a state-chartered water management district formed to efficiently and economically manage existing and supplemental water supplies in order to Mission Statement prevent further increase in, and to accomplish continuing reduction of, long-term overdraft. PV Water also works to provide and ensure sufficient water supplies for present and future anticipated needs within its boundaries, generally the greater coastal Pajaro Valley. Countywide Water Service & Sphere Review Page 135 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of PVWMA in 2020 was estimated to be 90,000. Based on LAFCO’s analysis, the population within PVWMA will be approximately 100,000 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. PVWMA prepares annual reports on groundwater supplies and conditions, including groundwater management objectives and a plan of implements of those objectives. 4. Financial ability of agencies to provide services. PVWMA is financially sound. The District ended with a surplus in four of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $20 million. LAFCO believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages PVWMA to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies within the District. At present, there are 43 private water systems within PVWMA. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District meets most of the statutory requirements under SB 929 and SDLF’s website transparency criteria. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that PVWMA consider annexation in the near future to address areas outside its jurisdictional boundary but within the Pajaro Valley Basin. Countywide Water Service & Sphere Review Page 136 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Agriculture. The District’s customer base is predominantly farmers. 2. The present and probable need for public facilities and services in the area. PVWMA currently has a number of long-range plans including but not limited to its annual performance reports, the Basin Management Plan, and the Pajaro Valley Subbasin annual reports. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. PVWMA is not a water purveyor of domestic water, such as a typical water district or municipal water department. While PVWMA has the authority to manage groundwater resources in the basin, PVWMA's activities typically focus on halting seawater intrusion by balancing the overdraft conditions in the basin. For example, the District’s charter specifically prevents supplying potable water, which is intended to remain the responsibility of local water purveyors. Therefore, all PVWMA projects considered and approved in its Basin Management Plan only supply non-potable (irrigation) water. PVWMA activities do not include flood control, stream restoration or habitat management (except as mitigations for PVWMA projects), which are the responsibility of state and/or county jurisdictions. 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. At present, there are 43 private water systems within PVWMA. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 137 of 228 RECLAMATION DISTRICT NO. 2049 (COLLEGE LAKE) OVERVIEW The Reclamation District No. 2049 was formed on February 2, 1920 in conformity with Division 2200 of the Deering Act and now operates under Section 50000 et seq. of the California Water Code. The District provides drainage for approximately 500 acres in the College Lake area, north of the City of Watsonville. Figure 49, on page 139, is a vicinity map depicting the District’s current jurisdictional boundary. Figure 50, on page 140, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the District is designated as Agriculture. Zero boundary changes have occurred since inception. The only LAFCO action considered and approved was the District’s original sphere adoption in 1988. Services and Infrastructure The District’s sole purpose is to drain the College Lake once a year to allow for farming purposes during the summer season. The District currently uses one weir, a small water damn, to control the flow of water. The District does not provide any other services or has any other infrastructure or facility, as shown in Tables 62 and 63. While the District has been in existence for 102 years, its service operation and overall governance is in disarray. Table 62: List of Service Provisions Services Checkmark (Yes) Agricultural Water Drainage ✓ Groundwater Replenishment Retail Potable Water Recycled Water Wastewater (Sewer) Water Treatment Water Conservation Table 63: List of Infrastructure / Facilities Checkmark Infrastructure Quantity (Yes) Distribution / Storage Tanks - - Pressure Zones - - Production Wells - - Pump Stations - - Recycled Water System - - Treatment Plants - - Water Diversions - - Water Pipeline - - Total Connections - - Countywide Water Service & Sphere Review Page 138 of 228 Figure 49: Reclamation District’s Vicinity Map Countywide Water Service & Sphere Review Page 139 of 228 Figure 50: Reclamation District’s Land Use Map Countywide Water Service & Sphere Review Page 140 of 228 Population and Growth Based on staff’s analysis, the population of the Reclamation District in 2020 was estimated to be 16. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Table 64 shows the anticipated population within the District. The average rate of change is 0.86%. Population Projection Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for the Reclamation District. LAFCO staff increased the District’s 2020 population amount by 0.86% each year. Under this assumption, our projections indicate that the entire population of the District will be approximately 17 by 2040. Table 64: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) Reclamation District 16 16 16 16 17 0.86% No. 2049 Source: AMBAG 2018 Regional Growth Forecast and GIS Parcel Data [This section intentionally left blank] Countywide Water Service & Sphere Review Page 141 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. There are no recent audited financial statements available. The last audit occurred back in 2017 and analyzed the District during June 30, 2011 through June 30, 2015. As an alternative approach, LAFCO utilized the County’s financial database to determine the financial health of the District from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 68 and 69 on pages 146-147. At the end of Fiscal Year 2020-21, total revenue collected was approximately $48,000, representing a 32% decrease from the previous year ($71,000 in FY 19-20). Total expenses for FY 2020-21 were approximately $70,000, which increased by 79% from the previous year ($39,000 in FY 19-20). Since 2015, the District ended with a deficit in three of the last six fiscal years, as shown in Figure 51. LAFCO staff believes that this negative trend will continue based upon the District’s lack of staff, depleting reserves, and zero adopted policies to help the board with any financial guidance. Additionally, the Board Chair has indicated to LAFCO that it may run out of money by November 2022. Figure 51: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $80,000 $70,847 $69,704 $70,000 $60,000 $56,448 $50,000 $47,001 $47,606 $48,295 $43,066 $39,004 $40,000 $35,817 $35,210 $30,000 $24,535 $23,015 $20,000 $10,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 142 of 228 Revenues Operating Revenue The District’s primary source of revenue is from operating revenues, specifically from assessments. In FY 2020-21, Assessments represented approximately 98% of the District’s entire revenue stream. Non-operating Revenue The remaining 2% of total revenue derive from non-operating revenue sources. These funds include Interest Income and Penalties. Table 65 and Figure 52 provide a breakdown of the District’s revenue by category and source. Table 65: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Assessments $47,458 100% Total Operating Revenue $1,168,449 100% Non-Operating Revenue Interest Income $434 52% Penalties $403 48% Total Non-Operating Revenue $837 100% Total Revenue $48,295 Figure 52: Operating v Non-Operating Revenue (FY 2020-21) Total Operating Revenue $47,458 (98%) Total Non-Operating Revenue $837 (2%) Countywide Water Service & Sphere Review Page 143 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 100% of total expenditure during FY 2020-21. The only expenses identified were Services & Supplies, as shown in Table 66 and Figure 53. Non-operating Expense The District did not have any identified non-operating expenses during FY 2020-21. Table 66: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Services & Supplies $69,704 100% Total Operating Expense $69,704 100% Total Expenditure $69,704 Figure 53: Operating v Non-Operating Expense (FY 2020-21) Total Operating Expense $69,704 (100%) Countywide Water Service & Sphere Review Page 144 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $63,000. The following table highlights the net position balance from 2015 to 2021. As shown in Table 67 and Figure 54, the District’s fund balance has increased over the years and has maintained an annual balance above $25,000. However, the current balance of $63,000 does not cover the operating costs of $70,000 during FY 2020-21. Additionally, this minimal amount may be completely depleted if any unintended expenses, major capital improvements projects, or emergency repairs were needed at any given time. As previously mentioned, the Board Chair informed LAFCO that the District may run out of money as early as November 2022. Table 67: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Beginning $33,553 $25,697 $38,499 $29,052 $52,122 $83,966 Balance Ending $25,697 $38,499 $29,052 $52,122 $83,966 $62,556 Balance Change ($) $12,802 $(9,447) $23,070 $31,843 $(21,409) Figure 54: Net Position from 2015 to 2021 (Ending Balance) $90,000 $83,966 $80,000 $70,000 $62,556 $60,000 $52,122 $50,000 $38,499 $40,000 $29,052 $30,000 $25,697 $20,000 $10,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Countywide Water Service & Sphere Review Page 145 of 228 Table 68: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) REVENUE Operating Revenue Assessments $ 3 5,133 $ 3 5,539 $ 46,543 $ 4 6,785 $ 6 0,109 $ 4 7,458 Total Operating Revenue $ 35,133 $ 35,539 $ 46,543 $ 46,785 $ 60,109 $ 47,458 Non-Operating Revenue Interest Income $ 233 $ 277 $ 457 $ 821 $ 1,132 $ 434 Penalties $ (156) $ - $ - $ - $ 9,607 $ 403 Total Non-Operating Revenue $ 77 $ 277 $ 457 $ 821 $ 10,739 $ 837 TOTAL REVENUE $ 35,210 $ 35,817 $ 47,001 $ 47,606 $ 70,847 $ 48,295 EXPENDITURE Operating Expense Services & Supplies $ 4 3,066 $ 2 3,015 $ 56,448 $ 2 4,535 $ 3 9,004 $ 6 9,704 Total Operating Expense $ 43,066 $ 23,015 $ 56,448 $ 24,535 $ 39,004 $ 69,704 Non-Operating Expense None Disclosed $ - $ - $ - $ - $ - $ - Total Non-Operating Expense $ - $ - $ - $ - $ - $ - $ 43,066 $ 23,015 $ 56,448 $ 24,535 $ 39,004 $ 69,704 TOTAL EXPENDITURE Surplus/(Deficit) $ ( 7,856) $ 12,802 $ ( 9,447) $ 23,070 $ 31,843 $ ( 21,409) NET POSITION Beginning Balance (as restated) $ 3 3,553 $ 2 5,697 $ 38,499 $ 2 9,052 $ 5 2,122 $ 8 3,966 $ 25,697 $ 38,499 $ 29,052 $ 52,122 $ 83,966 $ 62,556 Ending Balance Countywide Water Service & Sphere Review Page 146 of 228 Table 69: Total Assets & Liabilities FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash $ 1 4,345 $ 7,829 $ 2 6,672 $ 3 9,526 $ 4 8,290 Assessments Receivable $ 1 2,124 $ 1 0,210 $ 3,449 $ 4,326 $ 5,892 Total Current Assets $ 26,469 $ 18,039 $ 30,121 $ 43,852 $ 54,182 Non-Current Assets Capital Assets $ 3,953 $ 2,603 $ 1,253 $ - $ - Total Non-Current Assets $ 3,953 $ 2,603 $ 1,253 $ - $ - TOTAL ASSETS $ 30,422 $ 20,642 $ 31,374 $ 43,852 $ 54,182 Deferred Outflows of Resources None Disclosed $ - $ - $ - $ - $ - Total Deferred Outflows of Resources $ - $ - $ - $ - $ - TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 30,422 $ 20,642 $ 31,374 $ 43,852 $ 54,182 LIABILITIES Current Liabilities Accounts Payable $ 1 1,380 $ - $ 1 0,226 $ 2 0,043 $ 1 4,737 Deferred Credits $ 1 2,124 $ 1 0,210 $ 3,449 $ 4,326 $ 5,892 Total Current Liabilities $ 23,504 $ 10,210 $ 13,675 $ 24,369 $ 20,629 Non-Current Liabilities None Disclosed $ - $ - $ - $ - $ - Total Non-Current Liabilities $ - $ - $ - $ - $ - TOTAL LIABILITIES $ 23,504 $ 10,210 $ 13,675 $ 24,369 $ 20,629 Deferred Inflows of Resources None Disclosed $ - $ - $ - $ - $ - Total Deferred Inflows of Resources $ - $ - $ - $ - $ - $ 23,504 $ 10,210 $ 13,675 $ 24,369 $ 20,629 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES NET POSITION Net Investment in Capital Assets $ 3,953 $ 2,603 $ 1,253 $ - $ - Unrestricted $ 2,965 $ 7,809 $ 1 6,446 $ 1 9,483 $ 3 3,553 Total Net Position $ 6,918 $ 10,412 $ 17,699 $ 19,483 $ 33,553 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 30,422 $ 20,622 $ 31,374 $ 43,852 $ 54,182 & NET POSITION Countywide Water Service & Sphere Review Page 147 of 228 GOVERNANCE Local Accountability & Structure The Reclamation District is governed by a five-member Board of Directors, which are elected to four-year terms by the registered voters within the District’s boundaries. Typically, a General Manager administers the day-to-day operations of the District, however, the Reclamation District does not have a General Manager or any additional administrative staff other than a board secretary. It is also LAFCO’s understanding that the District has two vacancies on its Board. The current board members are as follows: Table 70: Board of Directors Board Member Term of Office Appointed: November 14, 2017 John Diffenbaugh, Chair Term Limit Ends: December 1, 2019 Appointed: November 14, 2017 Tony Lazaro Term Limit Ends: December 1, 2021 Appointed: November 14, 2017 Frank Capurro Term Limit Ends: December 1, 2021 Vacant N/A Vacant N/A Footnote: The three “current” board members were appointed by the County Board of Supervisors in- lieu of an election. However, their term limits have since expired. Board Meetings LAFCO’s analysis shows that the last official board meeting was held in October 2021. LAFCO staff met with the Board Chair to discuss the issues of the District and was invited to attend their May 18, 2022 Board Meeting. There was no public notice posted at the venue or any indication that a board meeting was taking place. Additionally, only two board members present, which did not fulfill the quorum requirements under State law. Furthermore, it is LAFCO’s understanding that the terms of the current board members have expired. This conclusion was confirmed by the County Elections Department on June 16, 2022. Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. LAFCO was not able to conduct this assessment because the District does not have a website. In fact, the District does not have an official office, official phone number, or any other contact information. LAFCO staff is extremely concerned with the lack of transparency by the Reclamation District. Countywide Water Service & Sphere Review Page 148 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Statutory Violations The Reclamation District has been on notice since the last audited financial statement prepared by the County of Santa Cruz back on March 17, 2017. The audit, which analyzed the District from 2011 to 2015, identified a number of concerns as shown in Appendix G. Table 71 lists those concerns and whether the District addressed them. Table 71: List of Concerns from 2017 Audit Issue / Violation Description Current Status District not in compliance with state law which requires adoption of policies, including but not limited to Purchasing, Compensation, Depreciation, and No action taken; Still 1. Adopted Policies Conflict of Interest. not in compliance County Auditor Recommendation: Adopt board policies District does not have meeting minutes accessible to the public No action taken; Still 2. Board Minutes County Auditor Recommendation: not in compliance Taken meeting minutes and make them accessible to the public District not in compliance with GCS 53235 which requires board members to receive ethics training No action taken; Still 3. Ethics Training County Auditor Recommendation: not in compliance Complete ethics training and/or adopt resolution prohibiting board members from receiving reimbursements District showed no proof of solicitation for services that cost above $3,000 No action taken; No 4. Bids policy was adopted County Auditor Recommendation: Solicit bids for services over $3,000 District does not calculate assessments based on the Valuation Assessment Role of $30 per $1,000 assessed value as confirmed by the County Board of Supervisors in accordance with GCS 51326 5. Calculating No action taken; Still Assessments not in compliance County Auditor Recommendation: Comply with CA Water Code and calculate assessments according to the Valuation Assessment Role Countywide Water Service & Sphere Review Page 149 of 228 District did not prepare, or have control in place that would assure the preparation of internal financial statements No action taken; No 6. Financial Statement General Manager or Preparation County Auditor Recommendation: adequate staff Hire proper staff to address this “material weakness” and provide Board oversight District has an ongoing issue with Still not in compliance; board member retention All term limits have expired and no 7. Board Composition County Auditor Recommendation: appointments/elections Comply with statutory laws regarding election and have occurred since appointment of Board Members 2017 District does not comply with the Brown Act Still not in compliance; 8. Brown Act County Auditor Recommendation: meeting notices are Comply with the Brown Act by properly notifying the not advertised properly public about upcoming board meetings The Reclamation District has not complied with the recommendations identified in their last audit, but more troubling is that the District has violated a number of legal obligations as a special district. The lack of staffing and transparency are extremely concerning and the root cause of their improper governmental oversight. LAFCO staff has determined that the District has no general manager or adequate staff, no administrative office, no method of contact, no website, no adopted policies, and no valid board membership. Since LAFCO’s initial findings were shared with the District in May, the remaining board members have taken proactive steps to work with LAFCO and have agreed to initiate the dissolution process. In June, the District and LAFCO co-hosted a workshop to inform the 16 affected landowners about the current issues and the benefits of dissolution. Pending Dissolution Based on staff’s analysis, the Reclamation District has obsolete infrastructure, limited staffing, depleting finances, zero transparency, lack of Brown Act compliance, and other statutory violations. Due to these significant issues, the Reclamation District Board of Directors adopted a resolution to initiate dissolution on July 27, 2022. The Reclamation District is already in PVWMA’s jurisdictional boundary (refer to Figure 55 on page 151). It is also LAFCO’s understanding that PVWMA is in the process of completing a project directly tied with the College Lake. The primary purposes of the College Lake Integrated Resources Project are to help balance the groundwater basin, prevent further seawater intrusion, and meet water supply needs in PVWMA’s service area by developing College Lake as a water storage and supply source. Project components include a weir structure and intake pump station, a water treatment plant, and an approximately 6-mile-long pipeline to convey water from the water treatment plant to the Watsonville Area Recycled Water Treatment Facility and to the Coastal Distribution System. Construction is estimated to occur over approximately 18 months and may begin later this year, pending acquisition of necessary permits and property rights. LAFCO Staff Recommendation: The Reclamation District must coordinate with LAFCO and PVWMA to successfully transfer service responsibilities as part of the dissolution process. Countywide Water Service & Sphere Review Page 150 of 228 Figure 55: Reclamation District within PVWMA’s Jurisdictional Boundary Countywide Water Service & Sphere Review Page 151 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted the District’s first sphere of influence on November 2, 1988. The current sphere is coterminous with the District’s jurisdictional boundary. The last sphere update occurred in December 2017 following the last service review cycle. Figure 56 on page 153 shows the current sphere of influence boundary. Proposed Sphere Boundary Due to the ongoing deficiencies and financial constraints, in conjunction with the findings by LAFCO and the last audited financial statement, LAFCO staff is recommending the adoption of a zero sphere, as shown as Figure 57 on page 154. LAFCO may adopt a “zero” sphere (encompassing no territory) for a public agency when the Commission has determined that the service functions of the affected agency are either: nonexistent, no longer needed, or should be reallocated to some other local government. Adoption of a zero sphere indicates that the Reclamation District should ultimately be dissolved and service responsibilities be transferred to another local agency, specifically the Pajaro Valley Water Management Agency. LAFCO Staff Recommendation: Adopt a zero sphere as a precursor to dissolution. [This section intentionally left blank] Countywide Water Service & Sphere Review Page 152 of 228 Figure 56: Reclamation District’s Current Sphere Map Countywide Water Service & Sphere Review Page 153 of 228 Figure 57: Reclamation District’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 154 of 228 DISTRICT SUMMARY Reclamation District No. 2049 (College Lake) Formation California Water Code, section 50,000 et seq. Five members; all board member term limits have expired; no legal Board of Directors board members in place Contact Person No General Manager Employees 0 Full-Time Employees Facilities 1 Weir District Area 0.79 square miles (appx. 500 acres) Current Sphere: Coterminous (i.e. sphere boundary the same as the District’s jurisdictional boundary) Sphere of Influence Proposed Sphere: Zero (i.e., precursor to dissolution) Total Revenue = $48,295 FY 2020-21 Audit Total Expenditure = $69,704 Net Position (Ending Balance) = $62,556 Mailing Address: None Phone Number: None Contact Information Email Address: None Website: None Brown Act Violations (no adequate posting; no legal board Public Meetings members); Last official meeting occurred in October 2021 Mission Statement None Countywide Water Service & Sphere Review Page 155 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of the Reclamation District in 2020 was estimated to be 16. Based on LAFCO’s analysis, the population within the District will be approximately 17 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. There is no present and planned capacity of public facilities or adequacy of public services. The District has no general manager, no office, no website, no capital improvement plan, and a significant lack of transparency. 4. Financial ability of agencies to provide services. The Reclamation District is no financially stable. The District ended with a deficit in three of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $63,000. The District has informed LAFCO that it may run out of money by November 2022. 5. Status of, and opportunities for, shared facilities. LAFCO strongly encourages the District to support dissolution and transfer drainage responsibilities to another local agency, such as the Pajaro Valley Water Management Agency (PVWMA). 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District does not have a website. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO strongly encourages the District to support dissolution and transfer drainage responsibilities to another local agency, such as the PVWMA. Countywide Water Service & Sphere Review Page 156 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Agriculture. The District’s customer base is predominantly farmers. 2. The present and probable need for public facilities and services in the area. The District has no long-term planning in place. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. There is no present and planned capacity of public facilities or adequacy of public services. The District has no general manager, no office, no website, no capital improvement plan, and a significant lack of transparency. 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 has been in existence for 102 years and has not been able to adapt to the statutory requirements set forth on local governments, specifically independent special districts. It is LAFCO’s recommendation that the District dissolve as soon as possible. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 157 of 228 SAN LORENZO VALLEY WATER DISTRICT OVERVIEW The San Lorenzo Valley Water District was formed in 1941 and operates under the County Water District Law (Sections 30000 et seq. of the California Water Code) for the purpose of developing and providing water for domestic use, fire protection, and recreation in the San Lorenzo Valley. Today, the District serves 60 square miles of unincorporated territory. There is a total of 14,785 parcels within the District (totaling approximately 118,000 acres). Figure 58, on page 160, is a vicinity map depicting SVLWD’s current jurisdictional boundary. Figure 59, on page 161, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the District is designated as Mountain Residential. A total of 56 boundary changes have been approved by LAFCO, the Lompico Reorganization last approved in August 2016. Appendix H provides an overview of all the approved boundary changes since 1963. Services and Infrastructure SLVWD owns, operates, and maintains two water systems that supply separate service areas from separate water sources. The North/South Service Area includes the unincorporated communities of Boulder Creek, Brookdale, Ben Lomond, Zayante, Lompico, portions of the City of Scotts Valley and adjacent unincorporated neighborhoods. The Felton Service Area was acquired by the District from California American Water in September 2008 and includes the town of Felton and adjacent unincorporated areas. The District owns, operates, and maintains a wastewater system in Boulder Creek’s Bear Creek Estates, which serves approximately 56 homes. There are 170 miles of pipeline, 39 tank sites and 30 booster pump stations serving 36 pressure zones. The District currently provides service to approximately 8,000 residential, commercial, and institutional connections. The District relies on both surface water and groundwater resources, including nine currently active stream diversions, one groundwater spring, and eight active groundwater wells. These sources are derived solely from rainfall within the San Lorenzo River watershed. Table 72 summarizes the District’s services and Table 73 provides an overview of the District’s infrastructure. Table 72: List of Service Provisions Services Checkmark (Yes) Agricultural Water Drainage Groundwater Replenishment ✓ Retail Potable Water Recycled Water ✓ Wastewater (Sewer) ✓ Water Treatment ✓ Water Conservation Countywide Water Service & Sphere Review Page 158 of 228 Table 73: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity ✓ Distribution / Storage Tanks 39 tank sites ✓ Pressure Zones 36 pressure zones ✓ Production Wells 8 active groundwater wells ✓ Pump Stations 30 booster pump stations Recycled Water System - - ✓ Treatment Plants 1 wastewater system (Bear Creek Estates) ✓ Water Diversions 9 active stream diversions ✓ Water Pipeline 170 miles ✓ Total Connections 8,000 Water Rates SLVWD has a policy ensuring that all revenues from user charges and surcharges generated from District customers must support all District operations including capital project funding. Accordingly, water and sewer rates are reviewed periodically. Water rates are user charges imposed on customers for services and are the primary component of the District’s revenue. Water rates are composed of a commodity (usage) charge and a fixed (readiness-to-serve) charge. Table 74 highlights the past and upcoming water rates for SLVWD customers. Table 74: Water Rates FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 Fixed Service Charge by Meter Size 5/8" $34.00 $28.27 $30.24 $32.06 $33.66 $35.34 3/4" $34.00 $28.27 $30.24 $32.06 $33.66 $35.34 1" $56.50 $42.36 $45.33 $48.05 $50.45 $52.97 1.5" $114.00 $77.61 $83.04 $88.03 $92.43 $97.05 2" $181.50 $119.91 $128.30 $136.00 $142.80 $149.94 3" $341.00 $232.70 $248.98 $263.92 $277.12 $290.97 4" $567.00 $359.58 $384.75 $407.84 $428.23 $449.64 Rate of Change -32% 7% 6% 5% 5% following each FY Volumetric Charges for All Water Consumed Flat Rate $10.00 $10.12 $10.83 $11.48 $12.06 $12.66 (Uniform Rate) Rate of Change 1% 7% 6% 5% 5% following each FY Countywide Water Service & Sphere Review Page 159 of 228 Figure 58: SLVWD’s Vicinity Map Countywide Water Service & Sphere Review Page 160 of 228 Figure 59: SLVWD’s Land Use Map Countywide Water Service & Sphere Review Page 161 of 228 Population and Growth Based on staff’s analysis, the population of SLVWD in 2020 was estimated to be 20,000. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Table 75 shows the anticipated population within SLVWD. The average rate of change is 0.86%. Population Projection Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for SLVWD. LAFCO staff increased the District’s 2020 population amount by 0.86% each year. Under this assumption, our projections indicate that the entire population of SLVWD will be approximately 21,000 by 2040. Table 75: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) San Lorenzo Valley 19,882 20,052 20,224 20,398 20,572 0.86% Water District Source: AMBAG 2018 Regional Growth Forecast and FY 2020-21 SLVWD Audited Financial Statement [This section intetionally left blank] Countywide Water Service & Sphere Review Page 162 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated SLVWD’s financial health from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 79 and 80 on pages 167-168. At the end of Fiscal Year 2020-21, total revenue collected was approximately $17 million, representing a 28% increase from the previous year ($13 million in FY 19-20). Total expenses for FY 2020-21 were approximately $12 million, which increased by 16% from the previous year ($11 million in FY 19-20). Since 2015, the District ended each fiscal year with a surplus, as shown in Figure 60. LAFCO staff believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 60: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $18,000,000 $16,601,701 $16,000,000 $14,000,000 $12,958,048 $12,404,321 $12,000,000 $11,464,271 $10,826,493 $10,736,622 $9,689,020 $10,000,000 $8,659,374 $7,852,268 $7,938,249 $8,000,000 $7,275,662 $5,746,250 $6,000,000 $4,000,000 $2,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 163 of 228 Revenues Operating Revenue The District’s primary source of revenue is from operating revenues, specifically water consumption sales. In FY 2020-21, Water Consumption Sales totaled over $110 million which represents approximately 69% of SLVWD’s entire revenue stream. Other operating revenue sources include wastewater service, meter sales, charges & penalties, and other charges & services. These additional operating revenues represent around 2% of total revenue. During FY 2020-21, total operating revenue represents approximately 69% of the District’s entire revenue stream. Non-operating Revenue The remaining 31% of total revenue derive from non-operating revenue sources. These funds include Property Taxes, Operating Grants, Interest Income, and Other Revenue. Table 76 and Figure 61 provide a breakdown of the District’s revenue by category and source. Table 76: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Water Consumption Sales $11,139,017 97.18% Wastewater Service $61,007 1.40% Meter Sales, Charges, & Penalties $157,486 1.37% Other Charges & Services $5,119 0.04% Total Operating Revenue $11,462,629 100.00% Non-Operating Revenue Capital Grants $3,031,227 58.98% Property Taxes $847,676 16.49% Assessment Revenue $343,086 6.68% Other Revenue $917,083 17.85% Total Non-Operating Revenue $5,139,072 100.00% Total Revenue $16,601,701 Figure 61: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $5,139,072 (31%) Total Operating Revenue $11,462,629 (69%) Countywide Water Service & Sphere Review Page 164 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 78% of total expenditure during FY 2020-21. Operating expenses include: Salaries & Benefits, Professional Services, Operational, Maintenance, Facilities, and General & Administrative. Non-operating Expense The remaining 22% of total expenses derive from non-operating expenses. These costs include Interest Expense, Bond Issuance, Depreciation Expense, and Change in Investment in SMGA. Table 77 and Figure 62 provide a breakdown of the District’s costs by category and source. Table 77: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Salaries & Benefits $6,036,430 62% Professional Services $1,823,155 19% Facilities $698,229 7% Operational $509,163 5% General & Administrative $426,594 4% Maintenance $200,846 2% Total Operating Expense $9,694,417 100% Non-Operating Expense Depreciation Expense $1,728,054 64% Interest Expense $772,887 29% Change in Investment in SMGA $153,963 6% Bond Issuance Expense $55,000 2% Total Non-Operating Expense $2,709,904 100% Total Expenditure $12,404,321 Figure 62: Operating v Non-Operating Expense (FY 2020-21) Total Non-Operating Expense $2,709,904 (22%) Total Operating Expense $9,694,417 (78%) Countywide Water Service & Sphere Review Page 165 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $38 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 78 and Figure 63, the District’s fund balance has increased over the years and has maintained an annual balance above $28 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 78: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $25,578,166 $28,214,517 $27,551,325 $29,118,974 $31,227,512 $33,448,938 Balance Ending $28,214,517 $28,255,435 $29,088,944 $31,227,512 $33,448,938 $37,646,318 Balance Change ($) $40,918 $833,509 $2,138,568 $2,221,426 $4,197,380 Figure 63: Net Position from 2015 to 2021 (Ending Balance) $40,000,000 $37,646,318 $35,000,000 $33,448,938 $31,227,512 $30,000,000 $29,088,944 $28,214,517 $28,255,435 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 166 of 228 Table 79: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Water Consumption Sales $ 6,145,076 $ 7,157,650 $ 8,983,340 $ 9,917,657 $ 10,865,193 $ 11,139,017 Wastewater Service $ 9 8,262 $ 102,107 $ 100,138 $ 1 11,820 $ 134,148 $ 161,007 Meter Sales, Charges & Penalties $ 194,444 $ 178,632 $ 128,305 $ 9 9,464 $ 135,129 $ 157,486 Other Charges & Services $ 1 8,399 $ 7,741 $ 3,581 $ 1,858 $ 1,434 $ 5,119 Total Operating Revenue $ 6,456,181 $ 7,446,130 $ 9,215,364 $ 10,130,799 $ 11,135,904 $ 11,462,629 Non-Operating Revenue Property Tax Revenue $ 610,634 $ 1,129,838 $ 747,404 $ 7 80,378 $ 813,051 $ 847,676 Assessment Revenues $ - $ - $ 349,130 $ 3 50,694 $ 349,254 $ 343,086 Investment Earnings $ 1 1,502 $ 1 3,858 $ 2 3,040 $ 8 6,733 $ 333,478 $ 131,657 Rental Revenue $ 4 3,922 $ 5 9,548 $ 5 6,647 $ 4 4,042 $ 4 4,047 $ 5 0,558 Operating Grants $ - $ - $ - $ - $ - $ 334,681 Gain on Disposition of Capital Assets $ - $ - $ - $ - $ 1,786 $ 1 3,706 Settlement & Purchase Agreements $ - $ 1 0,000 $ - $ - $ 4,426 $ 6,942 Capital Grants - Other Governments $ 1,557,589 $ - $ 434,908 $ 7 1,625 $ 4 4,240 $ 3,031,227 Overhead Absoprtion $ - $ - $ - $ - $ 2 31,862 $ 379,539 Transfer in Due to Merger $ 1,009,192 $ - $ - $ - $ - $ - Total Non-Operating Revenue $ 3,232,839 $ 1,213,244 $ 1,611,129 $ 1,333,472 $ 1,822,144 $ 5,139,072 TOTAL REVENUE $ 9,689,020 $ 8,659,374 $ 10,826,493 $ 11,464,271 $ 12,958,048 $ 16,601,701 EXPENDITURE Operating Expense Salaries & Benefits $ 3,304,540 $ 4,498,595 $ 4,840,518 $ 4,865,859 $ 5,594,324 $ 6,036,430 Professional Services $ 868,218 $ 1,202,004 $ 1,419,279 $ 1,037,612 $ 777,556 $ 1,823,155 Operational $ 410,342 $ 464,236 $ 320,876 $ 3 75,948 $ 415,672 $ 509,163 Maintenance $ 183,215 $ 130,244 $ 143,714 $ 1 53,892 $ 200,153 $ 200,846 Facilities $ 442,014 $ 499,400 $ 554,547 $ 5 68,165 $ 569,129 $ 698,229 General & Administrative $ 352,510 $ 314,979 $ 382,857 $ 3 39,555 $ 367,720 $ 426,594 Total Operating Expense $ 5,560,839 $ 7,109,458 $ 7,661,791 $ 7,341,031 $ 7,924,554 $ 9,694,417 Non-Operating Expense Interest Expense $ 185,411 $ 166,204 $ 150,507 $ 1 53,662 $ 638,604 $ 772,887 Bond Issuance Expense $ - $ - $ - $ - $ 4 12,354 $ 5 5,000 Depreciation Expense $ - $ - $ - $ 1,582,370 $ 1,728,054 Change in Investment in SMGA $ - $ - $ 3 9,970 $ 1 23,148 $ 178,740 $ 153,963 Loss on Disposition of Capital Assets $ - $ - $ - $ 3 20,408 Total Non-Operating Expense $ 185,411 $ 166,204 $ 190,477 $ 597,218 $ 2,812,068 $ 2,709,904 $ 5,746,250 $ 7,275,662 $ 7,852,268 $ 7,938,249 $ 10,736,622 $ 12,404,321 TOTAL EXPENDITURE Surplus/(Deficit) $ 3,942,770 $ 1,383,712 $ 2,974,225 $ 3,526,022 $ 2,221,426 $ 4,197,380 NET POSITION Beginning Balance (as restated) $ 25,578,166 $ 28,214,517 $ 27,551,325 $ 29,118,974 $ 31,227,512 $ 33,448,938 $ 28,214,517 $ 28,255,435 $ 29,088,944 $ 31,227,512 $ 33,448,938 $ 37,646,318 Ending Balance Countywide Water Service & Sphere Review Page 167 of 228 Table 80: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Cash Equivalents $ 1,676,923 $ 4 17,323 $ 6 94,844 $ 1,043,351 $ 1,488,104 $ 8 48,935 Cash & Cash Equivalents - Restricted $ 4 03,624 $ 6 86,020 $ 6 37,205 $ 2,231,220 $ 14,304,537 $ 24,278,757 Accrued Interest Receivable $ 155 $ - $ - $ 5,487 $ 3,206 $ 6 9 Investments $ 9 30,412 $ 1,503,115 $ 2,062,184 $ 2,276,600 $ 3,969,393 $ 4,085,651 Accounts Receivable Water Sales & Services $ 9 93,952 $ 1,025,901 $ 1,411,630 $ 1,452,006 $ 1,737,057 $ 1,896,188 Property Taxes $ 1,296 $ 2,398 $ 2,477 $ 1,715 $ 1,324 $ 6 7 Settlement Agreement $ 3 6,392 $ 4 6,392 $ - $ - $ - $ - Grant & Loan Receivable $ 3 1,530 $ - $ - $ - $ - $ - Other $ 2 9,986 $ 1 3,508 $ 1 3,754 $ 3 5,448 $ 635 $ 1 3,416 Prepaid Expenses $ 4 1,526 $ 160 $ 5 4,052 $ 2 42,749 $ 1 4,105 $ 7 6,952 Materials & Supplies Inventory $ 2 25,327 $ 2 33,395 $ 2 53,996 $ 2 67,057 $ 2 83,136 $ 2 96,125 Total Current Assets $ 4,371,123 $ 3,928,212 $ 5,130,142 $ 7,555,633 $ 21,801,497 $ 31,496,160 Non-Current Assets Investments $ - $ - $ - $ 5 2,510 $ 2 1,681 $ 5 2,189 Capital Assets - Not Being Depreciated $ 14,972,454 $ 7,024,237 $ 8,010,150 $ 9,200,401 $ 9,129,138 $ 12,361,800 Capital Assets - Being Depreciated $ 20,233,772 $ 27,748,859 $ 26,518,581 $ 26,205,472 $ 29,439,764 $ 32,041,083 Total Non-Current Assets $ 35,206,226 $ 34,773,096 $ 34,528,731 $ 35,458,383 $ 38,590,583 $ 44,455,072 TOTAL ASSETS $ 39,577,349 $ 38,701,308 $ 39,658,873 $ 43,014,016 $ 60,392,080 $ 75,951,232 Deferred Outflows of Resources Deferred OPEB Outflows $ - $ - $ - $ 5,432 $ 7 36,559 $ 6 87,353 Deferred Pension Outflows $ 3 78,695 $ 1,007,189 $ 1,253,820 $ 9 29,466 $ 9 39,246 $ 1,019,694 Total Deferred Outflows of Resources $ 3 78,695 $ 1,007,189 $ 1,253,820 $ 9 34,898 $ 1,675,805 $ 1,707,047 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 39,956,044 $ 39,708,497 $ 40,912,693 $ 43,948,914 $ 62,067,885 $ 77,658,279 LIABILITIES Current Liabilities Accounts Payable & Accrued Expense $ 9 41,375 $ 3 29,603 $ 3 84,347 $ 3 63,590 $ 9 47,456 $ 9 20,780 Acrrued Wages & Related Payables $ 1 75,956 $ 2 16,305 $ 2 33,296 $ 2 43,215 $ 1 49,315 $ 1 14,408 Unearned Revenues - Customer Deposits $ 8 3,306 $ 5 4,992 $ 1 02,445 $ 1 41,871 $ 1 09,048 $ 1 05,952 Unearned Revenues - Construction Deposits $ 1 21,360 $ 9 5,622 $ 1 5,478 $ 1 3,945 $ 1 7,000 $ 8,579 Acrrued Interest Payable $ 2 8,940 $ 2 1,624 $ 1 5,999 $ 3 8,209 $ 2 06,656 $ 3 24,155 Long-Term Liabilities - Due in One Year Compensated Absences $ 1 64,577 $ 1 70,750 $ 1 85,103 $ 1 94,131 $ 2 05,304 $ 2 28,279 Loans Payable $ 1 75,775 $ 2 39,629 $ 2 45,920 $ 3 03,135 $ 3 30,959 $ 9 33,031 Bonds Payable $ 6 97,479 $ 7 10,030 $ 6 66,015 $ 5 82,031 $ 4 94,531 $ 1 03,247 Certificate of Participation $ 2 30,000 $ 2 45,000 Capital Lease Payable $ - $ 2 1,778 $ 2 2,505 $ 2 3,256 $ 2 4,031 $ 2 2,828 Total Current Liabilities $ 2,388,768 $ 1,860,333 $ 1,871,108 $ 1,903,383 $ 2,714,300 $ 3,006,259 Non-Current Liabilities Long-Term Liabilities - Due in More Than One Year Compensated Absences $ 2 92,582 $ 3 03,555 $ 3 29,071 $ 3 45,122 $ 3 64,985 $ 4 05,830 Other Post-Employment Benefits Payable $ 2 38,911 $ 2 62,939 $ 1,029,266 $ 4,760,158 $ 1,990,505 $ 2,128,882 Net Pension Liability $ 2,522,518 $ 3,511,169 $ 3,969,598 $ 5 97,778 $ 4,158,344 $ 4,530,116 Loans Payable $ 3,241,218 $ 3,311,614 $ 3,065,715 $ 4 6,763 $ 4,429,199 $ 18,496,599 Bonds Payable $ 2,555,853 $ 1,845,824 $ 1,179,808 $ 1,138,893 $ 1 03,247 $ - Certificate of Participation $ - $ - $ - $ - $ 14,657,705 $ 14,383,127 Capital Lease Payable $ - $ 9 2,524 $ 7 0,019 $ 3,805,659 $ 2 2,828 $ 105 Total Non-Current Liabilities $ 8,851,082 $ 9,327,625 $ 9,643,477 $ 10,694,373 $ 25,726,813 $ 39,944,659 TOTAL LIABILITIES $ 11,239,850 $ 11,187,958 $ 11,514,585 $ 12,597,756 $ 28,441,113 $ 42,950,918 Deferred Inflows of Resources Deferred Pension Inflows $ 5 01,677 $ 2 65,104 $ 2 76,001 $ 1 23,646 $ 1 54,013 $ 4 5,330 Deferred OPEB Inflows $ - $ - $ 3 3,163 $ - $ 2 3,821 $ 2 1,988 Total Deferred Inflows of Resources $ 5 01,677 $ 2 65,104 $ 3 09,164 $ 1 23,646 $ 1 77,834 $ 67,318 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 11,741,527 $ 11,453,062 $ 11,823,749 $ 12,721,402 $ 28,618,947 $ 43,018,236 NET POSITION Net Investment in Capital Assets $ 28,535,901 $ 28,551,697 $ 29,278,749 $ 29,092,752 $ 31,913,552 $ 33,871,628 Restricted for Debt Service $ 4 03,624 $ 6 86,020 $ 6 37,205 $ 2,231,220 $ 6 67,387 $ 6 26,075 Unrestricted (Deficit) $ (725,008) $ (982,282) $ (827,010) $ ( 96,460) $ 8 67,999 $ 3,148,615 Total Net Position $ 28,214,517 $ 28,255,435 $ 29,088,944 $ 31,227,512 $ 33,448,938 $ 37,646,318 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 39,956,044 $ 39,708,497 $ 40,912,693 $ 43,948,914 $ 62,067,885 $ 80,664,554 & NET POSITION Countywide Water Service & Sphere Review Page 168 of 228 GOVERNANCE Local Accountability & Structure SLVWD is governed by a five-member Board of Directors, which are elected to four-year terms by the registered voters within the District’s boundaries. The Board of Directors are responsible for the establishment of policy relative to the District’s mission, goals, and operations. The current Board is as follows: Table 81: Board of Directors Board Member Term of Office Elected: December 1, 2020 Gail Mahood, President Term Limit Ends: December 1, 2024 Appointed: December 16, 2020 Mark Smolley Term Limit Ends: December 1, 2022 Elected: December 1, 2018 Bob Fultz, Director Term Limit Ends: December 1, 2022 Appointed: May 6, 2021 Jayme Ackemann, Director Term Limit Ends: December 1, 2022 Appointed: April 21, 2022 Jeff Hill, Director Term Limit Ends: December 1, 2022 Board Meetings The District Manager administers the day-to-day operations of the District in accordance with policies and procedures established by the Board of Directors. The San Lorenzo Valley Water District employs a full-time staff of 34 employees. The District’s Board of Directors meets regularly, meetings are publicly noticed, and citizens are encouraged to attend. Board meetings are typically held on the first and third Thursday of each month at 6:30 p.m. The District’s administrative offices are located in the Town of Boulder Creek in Santa Cruz County. Capital Improvement Plans SLVWD adopted a long-range capital improvement plan on November 16, 2017. The purpose of this plan is to identify and prioritize needs and project costs for planned improvements to the infrastructure that will serve the affected ratepayers in an efficient and cost-effective manner throughout the next 10-years of growth and change. A total of 21 capital improvement projects are planned to be completed by 2022. Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. SLVWD adopted its UWMP in 2020,13 which provides an in- depth overview of the District’s current and future water demand and infrastructure. 13 2020 SLVWD UWMP: https://www.slvwd.com/conservation/pages/urban-water-management-plan Countywide Water Service & Sphere Review Page 169 of 228 Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the District’s website. Table 82 on page 171 summarizes staff’s findings on whether the District’s website is meeting the statutory requirements. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. There are certain items that should be added to its website, specifically their board limits, election process, additional compensation/transaction information, and links to LAFCO’s adopted service reviews related to the District. Overall, SLVWD has a transparent website filled with useful information and resources that are easily accessible. Countywide Water Service & Sphere Review Page 170 of 228 Table 82: Website Transparency Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews Total Score (out of a possible 20) 15 (75%) Additional Items (SDLF’s Recommended Elements) 1. Board Member Ethics Training Certificates 2. Picture, Bio, and Email Addresses of Board Members ✓ 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form ✓ 6. Audio or Video Recordings of Board Meetings 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program 9. General Description of Special Districts or Link to www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms ✓ Total Score (out of a possible 10) 6 (60%) *Footnote: Senate Bill 929 Statutory Requirements Countywide Water Service & Sphere Review Page 171 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: SLVWD should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Small Water Systems One area that LAFCO can provide assistance now is addressing the failing mutual water companies (MWCs) near SLVWD. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 41 private water systems are located within or adjacent to the water district. Figure 64 on page 174 identifies the location of each private water system in relation to SLVWD. Table 83 on page 175 also provide more information about the private water systems. While LAFCOs do not have full authority over mutual water companies when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these MWCs may lead to coordination with SLVWD and possible annexation, if desired. It is LAFCO’s understanding that two MWCs within the District’s jurisdictional boundary have expressed interest transferring water responsibilities to SLVWD. As a result of the recent fires, Forest Countywide Water Service & Sphere Review Page 172 of 228 Springs and Bracken Brae Country Club MWCs have been greatly impacted. These two MWCs are medium size water systems with approximately 15 to 199 connections. Big Basin Water, the privately-owned water company that operates these two water systems, has also expressed interest in transferring water responsibilities to SLVWD through a purchase agreement. If the two medium size systems are sold to SLVWD, the District will be able to provide water service to the community without LAFCO action since Forest Springs and Bracken Brae Country Club MWCs are already within the District’s jurisdictional boundary. If Big Basin Water is sold to SLVWD, that would require LAFCO action since the large size system is currently outside the District’s jurisdictional boundary. LAFCO Staff Recommendation: SLVWD should coordinate with LAFCO to analyze possible annexations and/or sphere amendments to include any mutual water companies or other nearby water systems affected by the recent fires or can no longer provide adequate level of service. [This section intentionally left blank] Countywide Water Service & Sphere Review Page 173 of 228 Figure 64: Map of Private Water Systems Within & Outside SLVWD Countywide Water Service & Sphere Review Page 174 of 228 Table 83: List of Private Water Systems Within SLVWD Size Water # Type of Water System (Square Population System Name Miles) Private Water Systems WITHIN and OUTSIDE SLVWD’s Jurisdictional Boundary 1 David Bruce Winery Small Water System (1 connection) 0.07 25 2 Agua Puerca Small Water System (5 connections) 0.04 17 3 El Agua Del Oso Small Water System (5 connections) 0.04 14 4 Los Altos Rod and Gun Club Small Water System (5 connections) 0.15 40 5 Moon Meadows Small Water System (5 connections) 0.01 10 6 Love Creek Heights MWC Small Water System (6 connections) 0.01 14 7 Bonnymede Small Water System (7 connections) 0.09 20 8 Mountain Top Small Water System (7 connections) 0.02 18 9 Quail Hollow Circle Small Water System (7 connections) 15 10 Sky Ranch Small Water System (7 connections) 0.01 20 11 Karl's Dell Small Water System (8 connections) 16 12 Zayante Acres Small Water System (8 connections) 0.01 25 13 Fernbrook Woods Water Co. Small Water System (10 connections) 0.01 25 14 Waterman Gap Small Water System (10 connections) 1.74 18 15 JB Ranch Small Water System (14 connections) 0.02 35 16 Hidden Meadow MWC Medium Water System (18 connections) 0.37 45 17 Ridgeview Estates, Inc. Medium Water System (18 connections) 0.06 45 18 Vista Robles Assoc. Medium Water System (19 connections) 0.05 50 19 Roaring Camp Medium Water System (22 connections) 0.26 193 20 Fern Grove Club Medium Water System (67 connections) 0.11 182 21 Mission Springs Medium Water System (141 connections) 0.02 1,310 22 Summit West Medium Water System (142 connections) 1.24 468 23 Aviza Technology Medium Water System (15 to 199 connections) 0.01 Not Available 24 Bonny Doon Union School District Medium Water System (15 to 199 connections) 0.01 Not Available 25 Bosch Baha'I School Medium Water System (15 to 199 connections) 0.10 Not Available 26 Boulder Creek Scout Reservation Medium Water System (15 to 199 connections) 0.10 Not Available 27 Brackenbrae Country Club Medium Water System (15 to 199 connections) 0.02 Not Available 28 Camp Hammer Medium Water System (15 to 199 connections) 0.16 Not Available 29 Camp Lindblad Medium Water System (15 to 199 connections) 0.21 Not Available 30 Forest Springs Medium Water System (15 to 199 connections) 0.05 Not Available 31 Las Cumbres MWC Medium Water System (15 to 199 connections) 0.17 Not Available 32 Lehi Park Medium Water System (15 to 199 connections) 1.46 Not Available 33 Lockheed Martin M&S Medium Water System (15 to 199 connections) 2.07 120 34 Pinecrest MWC Medium Water System (15 to 199 connections) 0.05 Not Available 35 Quaker Center Medium Water System (15 to 199 connections) 0.13 28 36 Ridge Medium Water System (15 to 199 connections) 0.25 Not Available 37 River Grove Mutual Water Assoc. Medium Water System (15 to 199 connections) 0.02 54 38 Sequoia Seminar Medium Water System (15 to 199 connections) 0.08 Not Available 39 Big Basin Water Company Large Water System (200+ connections) 20.00 1,120 40 Forest Lake MWC Large Water System (200+ connections) 0.50 1,067 41 Mount Hermon Association Large Water System (200+ connections) 0.16 Not Available Countywide Water Service & Sphere Review Page 175 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted SLVWD’s first sphere of influence on October 16, 1985. The sphere was updated on November 4, 2020 as part of the District’s last service review cycle. The update was based on LAFCO’s analysis, which determined that a total of 24 unserved islands are substantially surrounded by the water district and should be annexed in the foreseeable future. The size of these areas range from 0.18 to 2,390 acres. LAFCO expanded the District’s sphere to include approximately 3,300 acres. Figure 65 on page 177 shows the latest sphere boundary. Staff is recommending that the current sphere be reaffirmed. [This section intentionally left blank] Countywide Water Service & Sphere Review Page 176 of 228 Figure 65: SLVWD’s Current Sphere Map Countywide Water Service & Sphere Review Page 177 of 228 DISTRICT SUMMARY San Lorenzo Valley Water District Formation California Water Code, section 30,000 et seq. Board of Directors Five members, elected at-large to four-year terms Contact Person Rick Rogers, General Manager Employees 34 Full-Time Employees 170 miles of pipeline, 39 tank sites, and 30 booster pump stations serving 36 pressure zones. The District also owns, operates, and Facilities maintains a wastewater system in Boulder Creek’s Bear Creek Estates (approximately 56 homes). District Area 60 square miles Larger than the District (i.e. sphere boundary goes beyond the Sphere of Influence existing District’s jurisdiction) Total Revenue = $16,601,701 FY 2020-21 Audit Total Expenditure = $12,404,321 Net Position (Beginning Balance) = $37,646,318 Mailing Address: 13060 Highway 9 Boulder Creek CA 95006 Phone Number: (831) 430-4636 Contact Information Email Address: RRogers@slvwd.com Website: www.slvwd.com Meetings are typically held on the first and third Thursday of each Public Meetings month at 6:30 p.m. "Our mission is to provide our customers and all future generations with reliable, safe and high quality water at an equitable price; to create and maintain outstanding customer service; to manage and Mission Statement protect the environmental health of the aquifers and watersheds; and, to ensure the fiscal vitality of the San Lorenzo Valley Water District." Countywide Water Service & Sphere Review Page 178 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of SLVWD in 2020 was estimated to be 19,900. Based on LAFCO’s analysis, the population within SLVWD will be approximately 21,000 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. SLVWD currently has a capital improvement plan and an urban water management plan in place. 4. Financial ability of agencies to provide services. SLVWD is financially sound. The District ended with a surplus in all of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $38 million. LAFCO believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages SLVWD to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding the District. At present, there are 41 private water systems near SLVWD. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that SLVWD consider annexing the areas located outside its jurisdictional boundary but within its current sphere of influence. Countywide Water Service & Sphere Review Page 179 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Mountain Residential. The District’s customer base is predominantly single-family residential with some multi-family and agricultural customers as well. 2. The present and probable need for public facilities and services in the area. SLVWD currently has a 10-year capital improvement plan in place. A total of 21 capital improvement projects are underway. The District also has an Urban Water Management Plan, which was adopted in 2020. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. SLVWD owns, operates, and maintains two water systems that supply separate service areas from separate water sources. The District currently provides service to approximately 8,000 residential, commercial, and institutional connections. The District relies on both surface water and groundwater resources, including nine currently active stream diversions, one groundwater spring, and eight active groundwater wells. The District also owns, operates, and maintains a wastewater system in Boulder Creek’s Bear Creek Estates, which serves approximately 56 homes. 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. At present, there are 41 private water systems near SLVWD. LAFCO recommends that the District consider annexing the areas located outside its jurisdictional boundary but within its current sphere of influence. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 180 of 228 SCOTTS VALLEY WATER DISTRICT OVERVIEW The Scotts Valley Water District was formed in 1961 and operates under the County Water District Law (Sections 30000 et seq. of the California Water Code) for the purpose of developing and providing water for domestic use, fire protection, commercial/industrial use, and recreation in the Scotts Valley area. Today, the District serves six square miles of unincorporated territory. There is a total of 4,259 parcels within the District (totaling approximately 59,006 acres). Figure 66, on page 184, is a vicinity map depicting SVWD’s current jurisdictional boundary. At present, the majority of land within the District is located in the City of Scotts Valley14 and is primarily identified as Residential (Medium to Rural). A total of 42 boundary changes have been approved by LAFCO, with a 73-acre annexation being last recorded in July 2019. Appendix I provides an overview of all the approved boundary changes since 1965. Services and Infrastructure The District operates and maintains a potable water distribution system that includes groundwater wells, treatment facilities, storage tanks, pump stations, pressure regulating stations and distribution mains and services to meet the potable water demands of its customers. The District operates its system facilities primarily through a radio based Supervisory Control and Data Acquisition (SCADA) system. District operators continually assess system supply and demand conditions throughout each day using the SCADA system and make adjustments to system operations as needed. A primary operational objective is ensuring uninterrupted and safe water supply to its customers at all times. The District relies on its local groundwater basin for its entire potable water supply. As a result, water systems operations are driven by groundwater well and treatment plant production. Table 84 summarizes the District’s services and Table 85 provides an overview of the District’s infrastructure. Table 84: List of Service Provisions Services Checkmark (Yes) Agricultural Water Drainage Groundwater Replenishment ✓ Retail Potable Water ✓ Recycled Water Wastewater (Sewer) ✓ Water Treatment ✓ Water Conservation 14 City of Scotts Valley Land Use - https://www.scottsvalley.org/DocumentCenter/View/712/Zoning-Map-PDF Countywide Water Service & Sphere Review Page 181 of 228 Table 85: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity ✓ Distribution / Storage Tanks 8 potable water storage tanks ✓ Pressure Zones 13 pressure zones ✓ Production Wells 6 active groundwater wells ✓ Pump Stations 10 booster pump stations ✓ Recycled Water System 1 Water Reclamation Facility ✓ Treatment Plants 4 groundwater treatment plants Water Diversions - - ✓ Water Pipeline 60 miles ✓ Total Connections 4,330 Water Rates SVWD has established a goal of ensuring that the revenues generated from District customers are sufficient to support all District operations including capital project funding. Accordingly, water rates are reviewed periodically. Water rates are user charges imposed on customers for services and are the primary component of the District’s revenue. Water rates are composed of a commodity (usage) charge and a fixed (readiness-to-serve) charge. Tables 86a-b highlight the past and upcoming water rates for SVWD customers. SVWD also set appropriate charges for new connections. Based on staff’s analysis, water rates may increase by an average of 10% in the coming years. Table 86a: Recycled Water Rates (Monthly Rates) 2017 2018 2019 2020 2021* (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Basic Meter Charge (By Size) 5/8” $6.00 $13.79 $22.75 $33.37 $44.07 3/4” $9.43 $21.69 $35.79 $52.49 $61.61 1” $10.15 $23.33 $38.50 $56.47 $96.81 1 1/2” $23.84 $54.83 $90.48 $132.70 $192.74 2” $32.37 $74.45 $122.85 $180.17 $310.24 3” $57.71 $132.73 $219.01 $321.22 $643.91 4” $100.91 $232.08 $382.93 $561.64 $1,138.55 6” $215.55 $495.76 $818.00 $1,199.73 $2,269.80 Uniform Rates (Per 1,000 Gal) Landscape Recycled $11.77 $12.64 $13.19 $13.37 $1.41 *Footnote: SVWD has changed its billing from 1,000 gallons per unit to 100 gallon per unit in 2021. Countywide Water Service & Sphere Review Page 182 of 228 Table 86b: Water Rates (Monthly Rates) 2017 2018 2019 2020 2021* (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) Basic Meter Charge (By Size) 5/8” $59.93 $68.92 $75.82 $78.09 $44.07 5/8” Rate Assistance n/a n/a $53.07 $54.67 - (Residential) 5/8” Fire Service $16.30 $18.75 $20.63 $21.25 $11.66 (Residential/Commercial) 3/4” (Multi-Residential, $76.23 $87.67 $96.45 $99.34 $55.73 including Fire Service) 3/4” $94.29 $108.44 $119.29 $122.87 $61.61 1” $101.43 $116.65 $128.32 $132.17 $96.81 1 1/2” $238.39 $274.15 $301.57 $310.62 $192.74 2” $323.68 $372.24 $409.47 $421.75 $310.24 3” $577.08 $663.65 $730.02 $751.92 $643.91 4” $1,009.03 $1,160.39 $1,276.43 $1,314.72 $1,138.55 6” $2,155.44 $2,478.76 $2,726.64 $2,808.44 - Residential Tiered Rates (Per 1,000 Gal) Tiers for Residential Units with Individual Meters 0 to 6,000 $4.89 $5.63 $6.20 $6.39 - 6,001 to 12,000 $8.59 $9.82 $10.77 $11.09 - 12,001 to 16,000 $13.72 $15.72 $17.26 $17.78 - Over 16,000 $16.56 $18.99 $20.86 $21.49 - 0 to 3,000 - - - - $0.83 3,001 to 6,000 - - - - $1.33 6,001 to 7,000 - - - - $2.40 Over 7, 000 - - - - $2.88 Tiers for Multi-Residential Units with Master Meters 0 to 6,000 $4.89 $5.63 $6.20 $6.39 - 6,001 to 12,000 $8.59 $9.82 $10.77 $11.09 - 12,001 to 16,000 $13.72 $15.72 $17.26 $17.78 - Over 16,000 $16.56 $18.99 $20.86 $21.49 - 0 to 3,000 - - - - $0.83 3,001 to 3,200 - - - - $1.33 3,201 to 7,000 - - - - $2.40 Over 7, 000 - - - - $2.88 Uniform Rates (Per 1,000 Gal) Commercial, Industrial, $11.45 $13.14 $14.44 $14.87 $1.35 Institutional Landscape Potable $14.31 $16.43 $18.06 $18.60 $2.22 Other $12.75 $14.64 $16.09 $16.57 - Qualifying Medical Needs $8.59 $9.82 $10.77 $11.09 $1.33 Residential Rate Assistance n/a n/a $6.20 $6.39 $0.83 (Residential) *Footnote: SVWD has changed its billing from 1,000 gallons per unit to 100 gallon per unit in 2021. The District also changed its billing from bi-monthly to monthly billing in 2021. Countywide Water Service & Sphere Review Page 183 of 228 Figure 66: SVWD’s Vicinity Map Countywide Water Service & Sphere Review Page 184 of 228 Population and Growth Based on staff’s analysis, the population of SVWD in 2020 was approximately 11,800. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. In general, the Coastal Region is anticipated to have a slow growth over the next twenty years. Based on this slow growth trend, the population for unincorporated lands and the City of Scotts Valley is expected to increase by 0.86% and 0.56%, respectively. Table 87 shows the anticipated population within SVWD. The average rate of change for SVWD is 0.71% based on the combined average rate of change for the County and City. Population Projection Based on the projections for Santa Cruz County, LAFCO was able to develop a population forecast for SVWD. LAFCO staff increased the District’s 2020 population amount by 0.71% each year. Under this assumption, our projections indicate that the entire population of SVWD will be approximately 12,100 by 2040. Table 87: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) City of Scotts Valley 12,145 12,214 12,282 12,348 12,418 0.56% Scotts Valley 11,776 11,859 11,943 12,027 12,112 0.71% Water District Source: AMBAG 2018 Regional Growth Forecast SVWD Jurisdictional Boundary Countywide Water Service & Sphere Review Page 185 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated SVWD’s financial health from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 91 and 92 on pages 190-191. At the end of Fiscal Year 2020-21, total revenue collected was approximately $9 million, representing a 2% increase from the previous year ($8.7 million in FY 19-20). Total expenses for FY 2020-21 were approximately $7.6 million, which increased by 18% from the previous year ($6.4 million in FY 19-20). Since 2015, the District ended each fiscal year with a surplus, excluding FYs 15-16 and 16-17, as shown in Figure 67. LAFCO staff believes that the current positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 67: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $10,000,000 $8,842,515 $9,000,000 $8,674,537 $8,000,000 $7,770,045 $7,590,511 $7,388,042 $7,000,000 $6,316,168 $6,588,546 $6,437,655 $6,110,164 $6,225,739 $6,046,073 $6,000,000 $5,697,523 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 186 of 228 Revenues Operating Revenue The District’s primary source of revenue is from operating revenues, specifically water sales. In FY 2020-21, Water Consumption Sales totaled $4.7million which represents approximately 53% of SVWD’s entire revenue stream. Other operating revenue sources include service charges and other revenue. During FY 2020-21, total operating revenue represented approximately 79% of the District’s entire revenue stream. Non-operating Revenue The remaining 21% of total revenue derive from non-operating revenue sources. These funds include Property Taxes, Capital Grants, Interest, and Other Revenue. Table 88 and Figure 68 provide a breakdown of the District’s revenue by category and source. Table 88: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Water Sales (Portable & Recycled) $4,727,234 67.67% Water Service (Service Charges) $2,230,855 31.93% Other Revenue (Fees & Charges) $27,592 0.39% Total Operating Revenue $6,985,681 100.00% Non-Operating Revenue Property Taxes $1,057,540 56.95% Capacity Buy-in Fee (Capital Contribution) $703,635 37.89% Other Non-Operating Revenue $78,213 4.21% Capital Grants $10,510 0.57% Investment Earnings $6,936 0.37% Total Non-Operating Revenue $1,856,834 100.00% Total Revenue $8,842,515 Figure 68: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $1,856,834 (21%) Total Operating Revenue $6,985,681 (79%) Countywide Water Service & Sphere Review Page 187 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 78% of total expenditure during FY 2020-21. Operating expenses include: Transmission & Distribution, Finance, Water Treatment, and General & Administrative. Non-operating Expense The remaining 22% of total expenses derive from non-operating expenses. These costs include Interest Expense, Depreciation Expense, and Change in Investment in SMGA. Table 89 and Figure 69 provide a breakdown of the District’s costs by category and source. Table 89: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense Transmission & Distribution $2,213,808 38% General & Administrative $1,163,905 20% Finance, Customer Service, & Conservation $1,064,016 18% Recycled Water $590,898 10% Pumping $464,519 8% Water Treatment $284,701 5% Source of Supply $111,200 2% Total Operating Expense $5,893,047 100% Non-Operating Expense Depreciation Expense $1,119,609 66% Change in Investment in SMGA-JPA $357,480 21% Capacity Buy-Back (Capital Contribution) $144,541 9% Interest Expense $75,834 4% Total Non-Operating Expense $1,697,464 100% Total Expenditure $7,590,511 Figure 69: Operating v Non-Operating Expense (FY 2020-21) Total Non-Operating Expense $1,697,464 (22%) Total Operating Expense $5,893,047 (78%) Countywide Water Service & Sphere Review Page 188 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $21 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 90 and Figure 70, the District’s fund balance has increased over the years and has maintained an annual balance above $15 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 90: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $16,626,644 $16,214,003 $14,562,508 $15,366,587 $17,090,559 $19,327,441 Balance Ending $16,214,003 $16,123,574 $15,362,004 $17,090,559 $19,327,441 $20,579,445 Balance Change ($) $(90,429) $(761,570) $1,728,555 $2,236,882 $1,252,004 Figure 70: Net Position from 2015 to 2021 (Ending Balance) $25,000,000 $20,579,445 $20,000,000 $19,327,441 $17,090,559 $16,214,003 $16,123,574 $15,362,004 $15,000,000 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 189 of 228 Table 91: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Water Sales (Potable & Recycled) $ 2,625,008 $ 2,998,786 $ 3,959,771 $ 4,052,051 $ 4,566,923 $ 4,727,234 Water Service (Service Charges) $ 1,348,590 $ 1,497,782 $ 2,293,336 $ 1,927,303 $ 2,076,643 $ 2,230,855 New Connections $ - $ - $ - $ - $ - $ - Other Revenue (Fees and Charges ) $ 75,366 $ 5 3,170 $ 17,514 $ 4 6,311 $ 3 1,273 $ 2 7,592 Total Operating Revenue $ 4,048,964 $ 4,549,738 $ 6,270,621 $ 6,025,665 $ 6,674,839 $ 6,985,681 Non-Operating Revenue Capital Grants $ 246,704 $ 792,779 $ 720 $ 720 $ - $ 1 0,510 Capacity Buy-in Fee (Capital Contribution) $ 8 9,000 $ 1 0,500 $ - $ 669,772 $ 783,284 $ 703,635 Gain on Disposal of Capital/Fixed Assets, Net $ 487,735 $ - $ - $ - $ - $ - Property Taxes $ 775,679 $ 839,095 $ 923,894 $ 9 75,085 $ 1,030,321 $ 1,057,540 Investment Earnings $ 3 9,106 $ 2 5,159 $ 2 2,574 $ 3 5,893 $ 6 6,477 $ 6,936 Other Non-Operating Revenue $ 1 0,335 $ 8,468 $ 1 70,233 $ 6 2,910 $ 119,616 $ 7 8,213 Total Non-Operating Revenue $ 1,648,559 $ 1,676,001 $ 1,117,421 $ 1,744,380 $ 1,999,698 $ 1,856,834 TOTAL REVENUE $ 5,697,523 $ 6,225,739 $ 7,388,042 $ 7,770,045 $ 8,674,537 $ 8,842,515 EXPENDITURE Operating Expense Source of Supply $ 9 7,655 $ 150,614 $ 163,709 $ 9 9,307 $ 182,735 $ 111,200 Pumping $ 524,177 $ 536,653 $ 584,787 $ 4 66,512 $ 480,655 $ 464,519 Water Treatment $ 688,601 $ 660,704 $ 829,736 $ 2 93,069 $ 239,722 $ 284,701 Recycled Water $ 546,568 $ 472,105 $ 486,683 $ 4 34,404 $ 472,247 $ 590,898 Transmission and Distribution $ 776,096 $ 797,494 $ 835,658 $ 1,849,596 $ 1,990,814 $ 2,213,808 Conservation $ 241,892 $ 158,507 $ 163,778 $ - $ - $ - Customer Accounts $ 207,833 $ 192,925 $ 198,613 $ - $ - $ - Finance, Customer Service, and Conservation $ - $ - $ - $ 649,335 $ 659,450 $ 1,064,016 General and Administrative Expenses $ 1,695,591 $ 1,706,288 $ 1,871,927 $ 8 37,784 $ 993,681 $ 1,163,905 Total Operating Expense $ 4,778,413 $ 4,675,290 $ 5,134,891 $ 4,630,007 $ 5,019,304 $ 5,893,047 Non-Operating Expense Deprectiation Expense $ 913,955 $ 937,847 $ 998,094 $ 1,085,254 $ 1,069,751 $ 1,119,609 Capacity Buy-Back (Capital Contribution) $ - $ - $ - $ 235,856 $ 2 1,619 $ 144,541 Interest Expense $ 417,796 $ 703,031 $ 107,603 $ 9 4,956 $ 8 6,262 $ 7 5,834 Change in Investment in SMGA-JPA $ - $ - $ - $ - $ 2 40,719 $ 357,480 Loss on Disposal of Capital Assets $ - $ - $ 3 47,958 $ - $ - $ - Total Non-Operating Expense $ 1,331,751 $ 1,640,878 $ 1,453,655 $ 1,416,066 $ 1,418,351 $ 1,697,464 $ 6,110,164 $ 6,316,168 $ 6,588,546 $ 6,046,073 $ 6,437,655 $ 7,590,511 TOTAL EXPENDITURE Surplus/(Deficit) $ (412,641) $ (90,429) $ 799,496 $ 1,723,972 $ 2,236,882 $ 1,252,004 NET POSITION Beginning Balance (as restated) $ 16,626,644 $ 16,214,003 $ 14,562,508 $ 15,366,587 $ 17,090,559 $ 19,327,441 $ 16,214,003 $ 16,123,574 $ 15,362,004 $ 17,090,559 $ 19,327,441 $ 20,579,445 Ending Balance Countywide Water Service & Sphere Review Page 190 of 228 Table 92: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Cash Equivalents $ 2,924,816 $ 2,331,365 $ 1,494,191 $ 2,519,128 $ 3,791,756 $ 3,511,535 Accrued Interest Receivable $ 6,467 $ 6,649 $ 7,509 $ 7,098 $ 1 4,245 $ 4,548 Accounts Receivable, Net $ 8 48,798 $ 1,105,970 $ 1,314,663 $ 1,404,967 $ 1,645,176 $ 1,805,650 Property Taxes Receivable $ 4 2,991 $ 6 1,524 $ 5 4,828 $ 4 9,824 $ 8 4,758 $ 5 0,887 Other Receivables $ 5 3,734 $ 1 83,620 $ 5 9,259 $ 5 2,053 $ 1 5,291 $ 1 5,060 Notes Receivable $ 1 60,339 $ 1 61,784 $ 1 61,639 $ 1 73,019 $ 1 69,412 $ 1 5,000 Inventory - Materials & Supplies $ 2 01,758 $ 1 60,614 $ 2 11,827 $ 2 32,601 $ 2 71,380 $ 2 29,228 Prepaid Expenses $ 9 2,278 $ 9 3,345 $ 9 4,535 $ 6 8,430 $ 6 6,781 $ 6 8,243 Total Current Assets $ 4,331,181 $ 4,104,871 $ 3,398,451 $ 4,507,120 $ 6,058,799 $ 5,700,151 Non-Current Assets Restricted - Cash & Cash Equivalents $ 7 49,404 $ - $ 5 16,092 $ 6 10,477 $ - Notes Receivable $ 7 15,853 $ 5 54,070 $ 3 92,431 $ 2 67,745 $ 9 8,333 $ 8 3,333 Investment in SMGA - JPA $ - $ - $ - $ 4 0,754 $ 9 1,291 $ 2 9,632 Prepaid Contribution to SMGA - JPA $ - $ - $ - $ 2 91,256 $ 2 95,821 $ 3 68,940 Capital Assets - Not Being Depreciated $ 3,185,716 $ 8 51,170 $ 7 33,176 $ 1,078,608 $ 1,213,219 $ 1,327,578 Capital Assets - Being Depreciated $ 16,842,017 $ 19,948,767 $ 21,067,532 $ 20,563,817 $ 20,571,981 $ 23,164,658 Total Non-Current Assets $ 21,492,990 $ 21,354,007 $ 22,193,139 $ 22,758,272 $ 22,881,122 $ 24,974,141 TOTAL ASSETS $ 25,824,171 $ 25,458,878 $ 25,591,590 $ 27,265,392 $ 28,939,921 $ 30,674,292 Deferred Outflows of Resources Loss on Defeasance of Debt $ 4 60,564 $ 4 0,190 $ 3 6,171 $ - $ - $ - Net OPEB Obligation $ - $ - $ - $ 1 53,549 $ 1 42,970 $ 1 40,200 Net Pension Liability $ 2 09,294 $ 4 56,821 $ 6 56,179 $ 6 80,989 $ 6 94,399 $ 6 91,330 Total Deferred Outflows of Resources $ 6 69,858 $ 4 97,011 $ 6 92,350 $ 8 34,538 $ 8 37,369 $ 8 31,530 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 26,494,029 $ 25,955,889 $ 26,283,940 $ 28,099,930 $ 29,777,290 $ 31,505,822 LIABILITIES Current Liabilities Accounts Payable & Accrued Expenses $ 3 25,292 $ 2 65,933 $ 3 42,344 $ 4 94,579 $ 6 83,344 $ 1,296,516 Accrued Wages & Related Payables $ 5 3,896 $ 6 4,500 $ 8 0,885 $ - $ - $ - Customer Deposits for Services $ 3 3,893 $ 1 10,346 $ 1 12,436 $ 1 66,905 $ 1 26,332 $ 1 41,219 Accrued Interest Payable $ 1 25,557 $ 5 9,067 $ - $ 4 7,513 $ 4 3,179 $ 3 7,932 Long-Term Liabilities - Due Within One Year Notes Payable $ - $ - $ - $ - $ - $ - Compensated Asbences $ 2 2,051 $ 2 6,103 $ 2 5,862 $ 3 0,508 $ 4 0,998 $ 3 8,251 Certificates of Participation $ 1 65,000 $ - $ - $ - $ - $ - Bonds Payable $ - $ - $ - $ - $ - $ - Loan Payable $ 2 15,000 $ 4 52,927 $ - $ 4 68,579 $ 5 67,298 $ 6 62,832 Total Current Liabilities $ 9 40,689 $ 9 78,876 $ 5 61,527 $ 1,208,084 $ 1,461,151 $ 2,176,750 Non-Current Liabilities Unearned Revenue $ 1,770 $ 1 0,178 $ 8,142 $ - $ - $ - Long-Term Liabilities - Due in More Than 1 Yr Compensated Absences $ 6 6,154 $ 7 8,305 $ 7 7,585 $ 9 1,522 $ 1 22,992 $ 1 14,752 Loan Payable $ 4,110,000 $ 5,596,621 $ 5,136,591 $ 4,668,012 $ 4,100,714 $ 3,437,882 Net OPEB Obligation $ 1,184,517 $ 1,173,326 $ 2,848,438 $ 2,758,814 $ 2,245,495 $ 2,539,285 Net Pension Liability $ 1,233,015 $ 1,782,379 $ 2,106,130 $ 2,070,658 $ 2,304,037 $ 2,541,228 Notes Payable $ - $ - $ - $ - $ - $ - Bonds Payable $ - $ - $ - $ - $ - $ - Certificates of Participation $ 2,332,413 $ - $ - $ - $ - $ - Total Non-Current Liabilities $ 8,927,869 $ 8,640,809 $ 10,176,886 $ 9,589,006 $ 8,773,238 $ 8,633,147 TOTAL LIABILITIES $ 9,868,558 $ 9,619,685 $ 10,738,413 $ 10,797,090 $ 10,234,389 $ 10,809,897 Deferred Inflows of Resources Net Pension Liability $ 4 11,468 $ 2 12,630 $ 1 83,523 $ 2 12,281 $ 2 15,460 $ 1 16,480 Total Deferred Inflows of Resources $ 4 11,468 $ 2 12,630 $ 1 83,523 $ 2 12,281 $ 2 15,460 $ 1 16,480 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 10,280,026 $ 9,832,315 $ 10,921,936 $ 11,009,371 $ 10,449,849 $ 10,926,377 NET POSITION Net Investment in Capital Assets $ 13,665,884 $ 14,790,579 $ 16,700,288 $ 16,974,413 $ 17,684,486 $ 20,391,522 Restricted for Debt Service $ 7 49,404 $ - $ - $ - $ - $ - Unrestricted (Deficit) $ 1,798,715 $ 1,332,995 $ (1,338,284) $ 1 16,146 $ 1,642,955 $ 1 87,923 Total Net Position $ 16,214,003 $ 16,123,574 $ 15,362,004 $ 17,090,559 $ 19,327,441 $ 20,579,445 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 26,494,029 $ 25,955,889 $ 26,283,940 $ 28,099,930 $ 29,777,290 $ 31,505,822 & NET POSITION Countywide Water Service & Sphere Review Page 191 of 228 GOVERNANCE Local Accountability & Structure SVWD is governed by a five-member Board of Directors, which are elected to four-year terms by the registered voters within the District’s boundaries. The Board of Directors are responsible for the establishment of policy relative to the District’s mission, goals, and operations. The current Board is as follows: Table 93: Board of Directors Board Member Term of Office Elected: November 2018 William Ekwall, Director Term Ends: December 1, 2022 Appointed: January 2015 Ruth Stiles, President Term Ends: December 1, 2022 Appointed: July 17, 2017 Wade Leishman, Director Term Ends: December 1, 2022 Appointed: January 2007 Chris Perri, Vice-President Term Ends: December 1, 2024 Appointed: November 2012 Danny Reber, Director Term Limit Ends: December 1, 2024 Board Meetings The General Manager administers the day-to-day operations of the District in accordance with policies and procedures established by the Board of Directors. The Scotts Valley Water District employs a full-time staff of 19 employees. The District’s Board of Directors meet regularly, meetings are publicly noticed, and citizens are encouraged to attend. Board meetings are typically held on the second Thursday of each month at 6:00 p.m. The District’s administrative offices are located in the City of Scotts Valley. Capital Improvement Plans SVWD adopts a capital improvement plan every year as part of its annual budget. The District has also conducted a complete system condition assessment and developed a 10-year capital improvement plan. The purpose of this long-range plan is to identify and prioritize needs and project costs for planned repair and replacement to the infrastructure that will serve the affected ratepayers in an efficient and cost-effective manner throughout the next 10-years of growth and change. A total of 15 capital improvement projects are budgeted for FY 2020-21. Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. SVWD adopted a joint UWMP with SVLWD in 2020,15 which provides an in-depth overview of the District’s current and future water demand and infrastructure. 15 2020 SVWD UWMP: https://www.svwd.org/media/Reports/Water%20and%20Planning/GWYWY20.pdf Countywide Water Service & Sphere Review Page 192 of 228 Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly reviewed the District’s website. Table 94 on page 194 summarizes staff’s findings on whether the District’s website is meeting the statutory requirements. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. There are certain items that should be added to its website, specifically more information about the District Board Members such as compensation and ethics training. Overall, SVWD has a transparent website filled with useful information and resources that are easily accessible. SVWD Board of Directors & Staff Countywide Water Service & Sphere Review Page 193 of 228 Table 94: Website Transparency Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines ✓ 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews ✓ Total Score (out of a possible 20) 18 (90%) Additional Items (SDLF’s Recommended Elements) 1. Board Member Ethics Training Certificates 2. Picture, Bio, and Email Addresses of Board Members ✓ 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form ✓ 6. Audio or Video Recordings of Board Meetings 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program 9. General Description of Special Districts or Link to www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms ✓ Total Score (out of a possible 10) 6 (60%) *Footnote: Senate Bill 929 Statutory Requirements Countywide Water Service & Sphere Review Page 194 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: SVWD should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Small Water Systems One area that LAFCO can provide assistance now is addressing the failing mutual water companies (MWCs) near SVWD. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires MWCs to submit a map depicting its service area to LAFCO. A total of 10 private water systems are located within or adjacent to the water district. Figure 71 on page 196 identifies the location of each private system in relation to SVWD. Table 95 on page 197 also provide more information about the private water systems. While LAFCOs do not have full authority over private systems when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these MWCs may lead to coordination with SVWD and possible annexation, if desired. LAFCO Staff Recommendation: SVWD should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. Countywide Water Service & Sphere Review Page 195 of 228 Figure 71: Map of Private Water Systems Within & Outside SVWD Countywide Water Service & Sphere Review Page 196 of 228 Table 95: List of Private Water Systems Within & Outside SVWD Size Water # Type of Water System (Square Population System Name Miles) Private Water Systems WITHIN AND OUTSIDE SVWD’s Jurisdictional Boundary 1 Karl's Dell Small Water System (8 connections) 0.004 16 2 Fernbrook Woods Water Co. Small Water System (10 connections) 0.013 25 3 Purisima MWC Small Water System (13 connections) 0.103 34 4 Springbrook Park MWC Small Water System (13 connections) 0.021 26 5 Hidden Meadow MWC Medium Water System (18 connections) 0.369 45 6 Jarvis Mutual Water Co. Medium Water System (38 connections) 0.209 125 7 Fern Grove Club Medium Water System (67 connections) 0.107 182 8 Mission Springs Medium Water System (141 connections) 0.022 1,310 9 Cathedral Wood MWC Medium Water System (15 to 199 connections) 0.065 60 Not 10 Aviza Technology Medium Water System (15 to 199 connections) 0.009 Available Countywide Water Service & Sphere Review Page 197 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted SVWD’s first sphere of influence on October 16, 1985. The sphere was updated on March 3, 2021 as part of the District’s last service review cycle. The update was based on LAFCO’s analysis, which determined that a total of 8 unserved islands are substantially surrounded by the water district and should be annexed in the foreseeable future. The size of these areas range from 0.24 to 96 acres. LAFCO expanded the District’s sphere to include approximately 300 acres. Figure 72 on page 199 shows the latest sphere boundary. Staff is recommending that the current sphere be reaffirmed. Upcoming Annexation Application On May 12, 2022, the District Board of Directors unanimously adopted a resolution to initiate annexation of all the territory within its current sphere boundary. The annexation encompasses 177 parcels totaling approximately 1,400 acres. If approved, the residents would not be required to automatically connect into the District’s water system, however, they will no longer be subject to LAFCO’s approval if and when they decide to receive water from SVWD. This proactive approach stems directly from LAFCO’s recommendations in the District’s last service review, which was adopted by the Commission in May 2021. LAFCO staff anticipates that the proposed annexation will be presented to the Commission for consideration and approval in early-2023. SVWD Water Tank Countywide Water Service & Sphere Review Page 198 of 228 Figure 72: SVWD’s Current Sphere Map Countywide Water Service & Sphere Review Page 199 of 228 DISTRICT SUMMARY Scotts Valley Water District Formation California Water Code, section 30,000 et seq. Board of Directors Five members, elected at-large to four-year terms Contact Person Piret Harmon, General Manager Employees 19 Full-Time Employees 60 miles of pipeline, 4 groundwater treatment plants, 6 Facilities groundwater wells, 8 storage tanks, 10 pump stations, and 13 pressure zones. District Area 6 square miles (appx. 4,000 acres) Larger than the District (i.e. sphere boundary goes beyond the Sphere of Influence existing District’s jurisdiction) Total Revenue = $8,842,515 FY 2020-21 Audit Total Expenditure = $7,590,511 Net Position (Ending Balance) = $20,579,445 Mailing Address: 2 Civic Center Drive, Scotts Valley, CA 95066 Phone Number: (831) 438-2363 Contact Information Email Address: PHarmon@svwd.org Website: https://www.svwd.org/ Meetings are held on the second Thursday of each month at Public Meetings 6:00 p.m. "Scotts Valley Water District delivers a sustainable high quality Mission Statement water service in an environmentally responsible and financially sound manner.” Countywide Water Service & Sphere Review Page 200 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of SVWD in 2020 was estimated to be 11,800. Based on LAFCO’s analysis, the population within SVWD will be approximately 12,100 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. SVWD currently has a capital improvement plan and an urban water management plan in place. 4. Financial ability of agencies to provide services. SVWD is financially sound. The District ended with a surplus in four of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $21 million. LAFCO believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages SVWD to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding the District. At present, there are 10 private water systems near SVWD. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that SVWD consider annexing the areas located outside its jurisdictional boundary but within its current sphere of influence. Countywide Water Service & Sphere Review Page 201 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Residential. The District’s customer base is predominantly single-family residential with some multi- family and agricultural customers as well. 2. The present and probable need for public facilities and services in the area. SVWD currently has a 10-year capital improvement plan in place. A total of 15 capital improvement projects are underway. The District also has an Urban Water Management Plan, which was adopted in 2020. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. SVWD currently provides water service to a population of 11,800 through approximately 4,300 residential, commercial, and institutional connections. The District operates and maintains a potable water distribution system that includes groundwater wells, treatment facilities, storage tanks, pumping stations, pressure reducing stations and distribution mains and services to meet the potable water demands of its customers. 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. At present, there are 10 private water systems near SVWD. LAFCO recommends that the District consider annexing the areas located outside its jurisdictional boundary but within its current sphere of influence. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 202 of 228 SOQUEL CREEK WATER DISTRICT OVERVIEW The Soquel Creek Water District was formed in 1961 as the “Soquel Creek County Water District” under the County Water District Act with the purpose of providing water for domestic and commercial use. The District acquired the Monterey Bay Water Company in 1964 and discontinued flood control services. In 1983, "County" was dropped from the name, and the District became known as Soquel Creek Water District. Today, the District serves 17 square miles of unincorporated territory and a portion of the City of Capitola. There is a total of 18,514 parcels within the District (totaling approximately 50,000 acres). Figure 73, on page 206, is a vicinity map depicting SqCWD’s current jurisdictional boundary. Figure 74, on page 207, also shows the current land use designation under the County’s General Plan. At present, the majority of land within the District is designated as Urban Low Residential. A map showing the land use designations within the City of Capitola was not produced since the City already has a map available on its website16. A total of 41 boundary changes have been approved by LAFCO, with an extraterritorial service agreement involving a single parcel being the last recorded action on April 2, 2008. Appendix J provides an overview of all the approved boundary changes since 1966. Services and Infrastructure SqCWD manages and operates a complex and integrated water supply infrastructure, including storage tanks, groundwater wells, and booster pumps. The District currently has approximately 16,000 connections – 80% is used for residentials and 20% for non- residential (commercial, industrial, schools, governmental, and landscape irrigation). The District’s customer base is predominantly single-family residential. At present, there is approximately 21,000 housing units within SqCWD. Table 96 summarizes the District’s services and Table 97 provides an overview of the District’s infrastructure. Table 96: List of Service Provisions Services Checkmark (Yes) Agricultural Water ✓ Drainage Groundwater Replenishment ✓ (in construction) ✓ Retail Potable Water Recycled Water ✓ (in construction) Wastewater (Sewer) ✓ Water Treatment ✓ Water Conservation 16 City of Capitola Land Use Map - https://www.cityofcapitola.org/sites/default/files/fileattachments/community_development/page/1460/zoning_map.5x11_certified_06.09.2021_0.pdf Countywide Water Service & Sphere Review Page 203 of 228 Table 97: List of Infrastructure / Facilities Infrastructure Checkmark (Yes) Quantity Distribution / Storage Tanks - 18 storage tanks Pressure Zones - 31 pressure zones 16 active groundwater wells ✓ Production Wells (2 standby groundwater wells) Pump Stations - 1 pump station Recycled Water System - In Construction Treatment Plants - 9 treatment plants Water Diversions - - ✓ Water Pipeline 167 miles ✓ Total Connections 16,047 Water Rates The rate structure for the District’s water service charges has two components: a fixed monthly service charge component and a variable water quantity (commodity) charge component. The monthly service charge is determined based on customer class and the meter size serving a property; the charge increases with meter size. The volumetric component of a customer’s water bill is calculated based on the number of units of water delivered to a property, measured in one hundred cubic feet, multiplied by rates that vary by customer class and tier. The volumetric component is distributed as an inclining tier rate structure to incentivize conservation and water use efficiency for its customers. Table 98 on page 205 shows the adopted water rates from 2017 to 2021. Rates Advisory Committee Meeting Countywide Water Service & Sphere Review Page 204 of 228 Table 98: Water Rates 2017 2018 2019 2020 2021 (Adopted) (Adopted) (Adopted) (Adopted) (Adopted) SERVICE CHARGES Single Family / Multi-Family Residential / Commercial (Meter Size) 5/8 in restricted <640 sq ft. $9.94 $11.14 $21.54 $23.48 $25.60 5/8” $19.89 $22.27 $37.06 $40.40 $44.04 3/4” $29.83 $33.41 $37.06 $40.40 $44.04 1” $49.72 $55.68 $83.60 $91.13 $99.34 1.5” $89.49 $100.23 $161.17 $175.68 $191.50 2” $174.01 $194.89 $393.88 $429.33 $467.97 3” $328.13 $367.51 $781.72 852.08 $928.77 4” $437.51 $490.01 $1,557.42 $1,697.59 $1,850.38 6” $1,193.20 $1,336.39 $2,488.25 $2,712.20 $2,956.30 8” $1,590.94 $1,781.85 $4,349.92 $4,741.42 $5,168.15 Irrigation / Outdoor Use (Meter Size) 5/8 in restricted <640 sq ft. $26.87 $18.97 $27.87 $30.38 $33.12 5/8” $53.75 $37.94 $49.72 $54.20 $59.08 3/4” $80.62 $56.91 $49.72 $54.20 $59.08 1” $134.37 $94.85 $115.25 $125.63 $136.94 1.5” $241.86 $170.73 $224.48 $244.69 $266.72 2” $470.29 $331.98 $552.16 $601.86 $656.03 3” $886.83 $626.01 $1,098.28 $1,197.13 $1,304.88 4” $1,182.44 $834.68 $2,190.53 $2,387.68 $2,602.58 6” $3,224.85 $2,276.41 $3,501.23 $3,816.35 $4,159.83 8” $4,299.80 $3,035.22 $6,122.64 $6,673.68 $7,274.32 Private Fire Protection (Meter Size) 1” $9.51 $10.65 $1.20 $1.31 $1.43 1.5” - - $3.46 $3.78 $4.13 2” $16.91 $18.93 $7.37 $8.04 $8.77 2.5” - - $13.25 $14.45 $15.76 3” $36.98 $41.42 $21.40 $23.33 $25.43 4” $66.57 $74.55 $45.61 $49.72 $54.20 6” $147.92 $165.67 $132.47 $144.40 $157.40 8” $253.38 $284.01 $282.29 $307.70 $335.40 VOLUMETRIC CHARGES Residential 1 - 5.99 units - - $6.43 $7.01 $7.65 6+ units - - $29.19 $31.82 $34.69 Commercial Any unit(s) $9.28 $10.40 $10.79 $11.77 $12.83 Irrigation / Outdoor Use Any unit(s) $9.28 $10.40 $10.79 $11.77 $12.83 Countywide Water Service & Sphere Review Page 205 of 228 Figure 73: SqCWD’s Vicinity Map Countywide Water Service & Sphere Review Page 206 of 228 Figure 74: SqCWD’s Land Use Map Countywide Water Service & Sphere Review Page 207 of 228 Population and Growth Based on staff’s analysis, the population of SqCWD in 2020 was estimated to be 39,000. The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. Official growth projections are not available for special districts. However, SqCWD develops detailed service area population and housing estimates every 5 years for its’ Urban Water Management Plan (UWMP). For the 2020 UWMP, SqCWD worked with AMBAG and the County of Santa Cruz (County) to determine the best available data for use in the UWMP. The projections shown below in Table 99 utilize data from AMBAG’s 2018 Regional Growth Forecast (RGF) for 2020 population projections and data from the County’s Travel Model for 2040 population projections, with a straight-line interpolation applied between 2020 and 2040. It is estimated that SqCWD will serve an approximate population of 47,200 people in 2040. Table 99: Projected Population Average 2020 2025 2030 2035 2040 Rate of Change Santa Cruz County 136,891 137,896 139,105 140,356 141,645 0.86% (unincorporated area) Soquel Creek 38,706 40,666 42,726 44,890 47,163 5.06% Water District Source: 2020 SqCWD Urban Water Management Plan Water Demand Projections The District’s water demand projections for 2020 through 2040, with demand attributed to existing versus new customers, is shown in the image below. It should be noted that the next AMBAG RGF currently under development for 2024 through 2031 is expected to show a significant increase in housing units over the 2018 RGF. Thus, the housing unit, population and demand projections in the District’s 2020 UWMP may be underestimated. Countywide Water Service & Sphere Review Page 208 of 228 FINANCES This section will highlight the District’s financial performance during the most recent fiscal years. Fiscal Year 2020-21 is the latest audited financial statement available. LAFCO evaluated SqCWD’s financial health from 2015 to 2021. A comprehensive analysis of the District’s financial performance during the past six years is shown in Tables 103 and 104 on pages 213-214. At the end of Fiscal Year 2020-21, total revenue collected was approximately $40 million, representing a 52% increase from the previous year ($26 million in FY 19-20). Total expenses for FY 2020-21 were approximately $19 million, which increased by 7% from the previous year ($18 million in FY 19-20). Since 2015, the District ended each fiscal year with a surplus, as shown in Figure 75. LAFCO staff believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. Figure 75: Statement of Revenues & Expenditures (FY 2015-16 to FY 2020-21) $45,000,000 $39,861,224 $40,000,000 $35,000,000 $30,000,000 $26,182,817 $25,000,000 $20,760,193 $20,103,814 $20,000,000 $19,367,081 $17,809,107 $18,123,016 $17,270,199 $16,120,838 $16,139,596 $14,494,859 $15,000,000 $14,319,044 $10,000,000 $5,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) TOTAL REVENUE TOTAL EXPENDITURE Countywide Water Service & Sphere Review Page 209 of 228 Revenues Operating Revenue The District’s primary source of revenue is from operating revenues, specifically water consumption sales. In FY 2020-21, Water Consumption Sales, Water Service Charges, and Other Charges for Services represented approximately 66% of SqCWD’s entire revenue stream. Non-operating Revenue The remaining 34% of total revenue derive from non-operating revenue sources. These funds include State Capital Grants, Capacity Charges, and Other Revenue. Table 100 and Figure 76 provide a breakdown of the District’s revenue by category and source. Table 100: Revenue Breakdown (FY 2020-21) Revenue Amount Percentage Operating Revenue Water Consumption Sales $15,915,679 61% Water Service Charges $9,117,448 35% Other Charges for Services $1,265,670 5% Total Operating Revenue $26,298,797 100% Non-Operating Revenue State Capital Grants $9,735,395 72% Other Revenue $2,959,788 22% Capacity Charges $419,173 3% Capital Contributions $231,195 2% Interest Earnings $216,876 2% Total Non-Operating Revenue $13,562,427 100% Total Revenue $39,861,224 Figure 76: Operating v Non-Operating Revenue (FY 2020-21) Total Non-Operating Revenue $13,562,427 (34%) Total Operating Revenue $26,298,797 (66%) Countywide Water Service & Sphere Review Page 210 of 228 Expenditures Operating Expense The District’s operating expenses represented approximately 76% of total expenditure during FY 2020-21. Operating expenses include: General & Administrative, Source of Supply, and Customer Service & Meter Read. Non-operating Expense The remaining 24% of total expenses derive from non-operating expenses. These costs include Depreciation and Investment in Joint-Powers Authority. Table 101 and Figure 77 provide a breakdown of the District’s costs by category and source. Table 101: Expense Breakdown (FY 2020-21) Expenditure Amount Percentage Operating Expense General & Administrative $7,598,623 51% Source of Supply $2,845,560 19% Transmission & Distribution $1,331,237 9% Customer Service & Meter Read $1,294,653 9% Pumping $1,130,336 8% Water Treatment $576,670 4% Total Operating Expense $14,777,079 100% Non-Operating Expense Depreciation $2,949,625 64% Interest Expense $1,454,110 32% Change in Investment JPA $186,267 4% Total Non-Operating Expense $4,590,002 100% Total Expenditure $19,367,081 Figure 77: Operating v Non-Operating Expense (FY 2020-21) Total Non-Operating Expense $4,590,002 (24%) Total Operating Expense $14,777,079 (76%) Countywide Water Service & Sphere Review Page 211 of 228 Fund Balance / Net Position As of June 30, 2021, the total net position balance ended with approximately $83 million. The following table highlights the net position balance from 2015 to 2021. As shown in Table 102 and Figure 78, the District’s fund balance has increased over the years and has maintained an annual balance above $47 million. Based on this historical trend, LAFCO staff believes the positive balance will continue. This healthy amount will be critical in the event that the District faces any unintended expenses, major capital improvements projects, or emergency repairs. Table 102: Net Position (2015 to 2021) FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $49,244,126 $44,766,313 $47,893,724 $51,857,942 $54,809,028 $62,868,829 Balance Ending $51,045,920 $47,541,653 $51,857,942 $54,809,028 $62,868,829 $83,362,972 Balance Change ($) $(3,504,267) $4,316,289 $2,951,086 $8,059,801 $20,494,143 Figure 78: Net Position from 2015 to 2021 (Ending Balance) $90,000,000 $83,362,972 $80,000,000 $70,000,000 $62,868,829 $60,000,000 $54,809,028 $51,045,920 $51,857,942 $50,000,000 $47,541,653 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Countywide Water Service & Sphere Review Page 212 of 228 Table 103: Total Revenues & Expenditures FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) REVENUE Operating Revenue Water Consumption Sales $ 10,059,054 $ 9,953,612 $ 11,916,294 $ 11,366,972 $ 14,565,944 $ 15,915,679 Water Service Charges $ 5,182,724 $ 6,035,938 $ 6,693,811 $ 7,081,809 $ 8,530,082 $ 9,117,448 Water Conversation - Wtr Demand Offset Credit $ 369,691 $ - $ - $ - $ - $ - Other Charges For Services $ 6 6,945 $ 8 9,293 $ 8 1,759 $ 1 15,131 $ 1 24,638 $ 1,265,670 Total Operating Revenue $ 15,678,414 $ 16,078,843 $ 18,691,864 $ 18,563,912 $ 23,220,664 $ 26,298,797 Non-Operating Revenue Interest Earnings $ 121,374 $ 191,074 $ 370,577 $ 620,252 $ 541,525 $ 2 16,876 Rental Revenue $ - $ 1 1,200 $ 1,455 $ - $ - $ - State Capital Grants $ 1,455 $ 787,896 $ 3 8,113 $ 1,024,244 $ 1,204,256 $ 9,735,395 Capacity Charges $ 225,900 $ 8 4,320 $ 764,862 $ 360,352 $ 293,883 $ 4 19,173 Capital Contributions $ 9 3,695 $ 116,866 $ 236,943 $ 187,984 $ 401,772 $ 2 31,195 Change in Investment in JPA $ - $ - $ - $ - $ 520,717 $ - Other Non-Operating Revenue $ - $ - $ - $ 3,449 $ - $ 2,959,788 Total Non-Operating Revenue $ 442,424 $ 1,191,356 $ 1,411,950 $ 2,196,281 $ 2,962,153 $ 13,562,427 TOTAL REVENUE $ 16,120,838 $ 17,270,199 $ 20,103,814 $ 20,760,193 $ 26,182,817 $ 39,861,224 EXPENDITURE Operating Expense Source of Supply $ 1,616,988 $ 2,155,353 $ 2,344,975 $ 4,293,876 $ 2,798,714 $ 2,845,560 Pumping $ 842,926 $ 900,209 $ 944,174 $ 1,099,645 $ 1,051,350 $ 1,130,336 Water Treatment $ 554,640 $ 915,758 $ 770,566 $ 627,657 $ 633,003 $ 5 76,670 Transmission and Distribution $ 1,298,131 $ 1,328,707 $ 1,608,590 $ 1,441,931 $ 1,985,965 $ 1,331,237 Customer Service & Meter Reading $ 803,829 $ 810,623 $ 906,794 $ 1,053,216 $ 1,181,862 $ 1,294,653 General and Administrative $ 6,161,534 $ 5,002,163 $ 5,590,041 $ 5,421,217 $ 6,113,749 $ 7,598,623 Total Operating Expense $ 11,278,048 $ 11,112,813 $ 12,165,140 $ 13,937,542 $ 13,764,643 $ 14,777,079 Non-Operating Expense Interest Expense $ 666,906 $ 782,308 $ 759,151 $ 740,732 $ 1,384,938 $ 1,454,110 Rental Property Expanse $ - $ 5,270 $ - $ - $ - $ - Change in Investment in JPA $ 3 1,190 $ - $ 529,134 $ 660,317 $ - $ 1 86,267 Depreciation $ 2,342,900 $ 2,592,842 $ 2,679,579 $ 2,470,516 $ 2,949,887 $ 2,949,625 Other Non-Operating Expense $ - $ 1,626 $ 6,592 $ - $ 2 3,548 $ - Total Non-Operating Expense $ 3,040,996 $ 3,382,046 $ 3,974,456 $ 3,871,565 $ 4,358,373 $ 4,590,002 $ 14,319,044 $ 14,494,859 $ 16,139,596 $ 17,809,107 $ 18,123,016 $ 19,367,081 TOTAL EXPENDITURE Surplus/(Deficit) $ 1,801,794 $ 2,775,340 $ 3,964,218 $ 2,951,086 $ 8,059,801 $ 20,494,143 NET POSITION Beginning Balance (as restated) $ 49,244,126 $ 44,766,313 $ 47,893,724 $ 51,857,942 $ 54,809,028 $ 62,868,829 $ 51,045,920 $ 47,541,653 $ 51,857,942 $ 54,809,028 $ 62,868,829 $ 83,362,972 Ending Balance Countywide Water Service & Sphere Review Page 213 of 228 Table 104: Total Assets & Liabilities FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets Cash & Cash Equivalents $ 12,791,103 $ 10,380,975 $ 1 2,075,016 $ 1 1,417,729 $ 9 ,993,564 $ 1 4,931,143 Cash & Cash Equivalents - Restricted $ 12,648,516 $ 10,213,819 $ 9 ,511,348 $ 9 ,239,582 $ 8 ,588,673 $ 4 ,106,774 Investments $ 1,742,000 $ 4 97,000 $ 992,000 $ 1 ,192,000 $ 2 ,225,000 $ 1 ,023,230 Accrued Interest Receivable $ 1 7,714 $ 3 2,139 $ 83,644 $ 25,042 $ 22,113 $ 13,637 Accrued Interest Receivable - Restricted $ 1 5,711 $ 1 5,977 $ 21,897 $ 90,545 $ 44,933 $ 11,317 Accounts Receivable - Water Sales & Services, Net $ 1,819,550 $ 1,939,677 $ 2 ,311,626 $ 2 ,169,028 $ 3 ,100,968 $ 3 ,448,794 Other Receivables $ 2 17,427 $ 5 14,254 $ 205,474 $ 937,230 $ 496,947 $ 1 2,648,587 Materials & Supplies Inventory $ 2 70,341 $ 3 23,880 $ 377,286 $ 626,040 $ 549,308 $ 321,917 Prepaid Expenses & Other Deposits $ 1 43,033 $ 1 66,188 $ 173,755 $ 155,948 $ 185,240 $ 247,527 Total Current Assets $ 29,665,395 $ 24,083,909 $ 2 5,752,046 $ 2 5,853,144 $ 2 5,206,746 $ 3 6,752,926 Non-Current Assets Investments $ 2 48,000 $ 5,157,000 $ 5 ,884,000 $ 5 ,428,000 $ 3 ,203,000 $ 1 ,471,000 Investments - Restricted $ 1,554,560 $ 1,544,304 $ 1 ,548,032 $ 1 ,588,048 $ 1 ,629,614 $ 496,000 Other Post-Employment Benefits Asset $ 2 42,725 $ - $ - $ - $ - $ - Investments in Joint-Powers Authority $ - $ - $ 227,947 $ 400,924 $ 1 ,376,931 $ 1 ,190,663 Capital Assets - Not Being Depreciated $ 11,597,901 $ 12,265,496 $ 1 3,886,843 $ 1 0,969,105 $ 2 2,192,871 $ 3 9,942,941 Capital Assets - Being Depreciated $ 50,505,723 $ 50,667,548 $ 5 0,435,059 $ 5 5,526,084 $ 5 5,645,235 $ 5 8,050,892 Total Non-Current Assets $ 64,148,909 $ 69,634,348 $ 7 1,981,881 $ 7 3,912,161 $ 8 4,047,651 $ 101,151,496 TOTAL ASSETS $ 93,814,304 $ 93,718,257 $ 9 7,733,927 $ 9 9,765,305 $ 109,254,397 $ 137,904,422 Deferred Outflows of Resources Deferred Refunding Charges $ - $ - $ - $ - $ - $ 1 ,269,920 Deferred OPEB Outflows $ - $ - $ 703,806 $ 781,944 $ 1 ,452,244 $ 890,345 Deferred Pension Outflows $ 1,290,513 $ 2,318,110 $ 2 ,702,119 $ 2 ,181,919 $ 2 ,679,607 $ 2 ,539,596 Total Deferred Outflows of Resources $ 1,290,513 $ 2,318,110 $ 3 ,405,925 $ 2 ,963,863 $ 4 ,131,851 $ 4 ,699,861 TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 95,104,817 $ 96,036,367 $ 101,139,852 $ 102,729,168 $ 113,386,248 $ 142,604,283 LIABILITIES Current Liabilities Accounts Payable & Accrued Expenses $ 9 84,079 $ 9 80,220 $ 1 ,495,502 $ 1 ,930,548 $ 4 ,774,444 $ 7 ,493,428 Accrued Wages & Related Payables $ 1 50,106 $ 1 89,670 $ 194,327 $ 239,181 $ 283,194 $ 321,745 Unearned Revenue & Other Deposits $ 4 65,560 $ 6 99,253 $ 1 ,035,104 $ 1 ,400,342 $ 1 ,642,272 $ 380,556 Accrued Interest Payable $ 5 02,121 $ 4 95,799 $ 488,077 $ 475,011 $ 460,811 $ 301,747 Long-Term Liabilities - Due Within One Year Compensated Absences $ 9 9,309 $ 1 16,041 $ 135,912 $ 152,977 $ 161,133 $ 205,525 Certificates of Participation $ 3 70,000 $ 3 80,000 $ 980,000 $ 1 ,065,000 $ 1 ,130,893 $ - Revenue Bonds $ 6 15,566 $ 6 21,028 $ - $ - $ - $ 1 ,875,000 Total Current Liabilities $ 3,186,741 $ 3,482,011 $ 4 ,328,922 $ 5 ,263,059 $ 8 ,452,747 $ 1 0,578,001 Non-Current Liabilities Long-Term Liabilities - Due in More Than One Year Compensated Absences $ 2 97,925 $ 3 48,121 $ 407,737 $ 458,929 $ 483,396 $ 616,574 Certificates of Participation $ 33,552,482 $ 33,146,589 $ 3 2,140,696 $ 3 1,049,803 $ 2 9,893,017 $ - Revenue Bonds $ 6 17,875 $ - $ - $ - $ - $ 2 1,730,000 Other Long-Term Liabilities $ - $ - $ - $ - $ - $ 1 5,000,000 Net Pension Liability $ 5,956,316 $ 6,758,135 $ 7 ,831,149 $ 7 ,135,537 $ 7 ,309,987 $ 7 ,449,660 Net OPEB Obligation $ - $ 4,380,194 $ 4 ,022,184 $ 3 ,635,287 $ 3 ,675,003 $ 3 ,283,607 Total Non-Current Liabilities $ 40,424,598 $ 44,633,039 $ 4 4,401,766 $ 4 2,279,556 $ 4 1,361,403 $ 4 8,079,841 TOTAL LIABILITIES $ 43,611,339 $ 48,115,050 $ 4 8,730,688 $ 4 7,542,615 $ 4 9,814,150 $ 5 8,657,842 Deferred Inflows of Resources Deferred OPEB Inflows $ - $ - $ 78,555 $ 66,320 $ 27,710 $ 184,831 Deferred Pension Inflows $ 4 47,558 $ 3 79,664 $ 472,667 $ 311,205 $ 675,559 $ 398,638 Total Deferred Inflows of Resources $ 4 47,558 $ 3 79,664 $ 551,222 $ 377,525 $ 703,269 $ 583,469 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOURCES $ 44,058,897 $ 48,494,714 $ 4 9,281,910 $ 4 7,920,140 $ 5 0,517,419 $ 5 9,241,311 NET POSITION Net Investment in Capital Assets $ 26,977,479 $ 28,798,189 $ 3 1,201,206 $ 3 4,380,386 $ 5 4,346,033 $ 6 0,725,577 Restricted - Capital Assets $ 11,413,035 $ 8,901,493 $ 6 ,927,653 $ 6 ,489,633 $ 1 ,101,769 $ 4 ,051,267 Restricted - Debt Service $ 2,805,752 $ 2,872,607 $ 4 ,153,624 $ 4 ,396,223 $ - $ - Unrestricted $ 9,849,654 $ 6,969,364 $ 9 ,575,459 $ 9 ,542,786 $ 7 ,421,027 $ 1 8,586,128 Total Net Position $ 51,045,920 $ 47,541,653 $ 5 1,857,942 $ 5 4,809,028 $ 6 2,868,829 $ 8 3,362,972 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, $ 95,104,817 $ 96,036,367 $ 101,139,852 $ 102,729,168 $ 113,386,248 $ 142,604,283 & NET POSITION Countywide Water Service & Sphere Review Page 214 of 228 GOVERNANCE Local Accountability & Structure SqCWD is governed by a five-member Board of Directors, which are elected to four-year terms by the registered voters within the District’s boundaries. The General Manager administers the day-to-day operations of the District in accordance with policies and procedures established by the Board of Directors. SqCWD employs a full-time staff of 48 employees. The Board of Directors are responsible for the establishment of policy relative to the District’s mission, goals, and operations. The current Board is as follows: Table 105: Board of Directors Board Member Term of Office Appointed: February 2003 Tom LaHue, President Term Limit Ends: December 1, 2024 Elected: November 2014 Carla Christensen, Vice-President Term Limit Ends: December 1, 2022 Appointed: January 2016 Rachél Lather, Director Term Limit Ends: December 1, 2022 Elected: November 2000 Bruce Daniels, Director Term Limit Ends: December 1, 2024 Elected: November 2002 Bruce Jaffe, Director Term Limit Ends: December 1, 2022 Board Meetings The District’s Board of Directors meet regularly and citizens are encouraged to attend. Board meetings are typically held on the first and third Tuesday of each month at 6:00 p.m. Meetings are held at the Capitola City Council Chambers, unless otherwise noticed. Urban Water Management Plan The California Department of Water Resources indicates that Urban Water Management Plans (“UWMPs”) are prepared by urban water suppliers every five years (California Water Code Sections 10610-10656; 10608). These plans support the suppliers’ long-term resource planning to ensure that adequate water supplies are available to meet existing and future water needs. SqCWD adopted its UWMP in 2020,17 which provides an in- depth overview of the District’s current and future water demand and infrastructure. Website Requirements Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. Additionally, the Special District Leadership Foundation (SDLF), an independent, non-profit organization formed to promote good governance and best practices among California’s special districts, has also outlined recommended website elements as part of its District Transparency Certificate of Excellence. This program was created in an effort to promote transparency in the operations and governance of special districts to the public and to provide special districts with an opportunity to showcase their efforts in transparency. Based on SB 929’s criteria and the recommendations by SDLF, LAFCO thoroughly 17 2020 SqCWD UWMP: https://www.soquelcreekwater.org/DocumentCenter/View/1665/2020-Urban-Water-Management-Report-PDF?bidId= Countywide Water Service & Sphere Review Page 215 of 228 reviewed the District’s website. Table 106 summarizes staff’s findings on whether the District’s website is meeting the statutory requirements. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. There are certain items that should be added to its website, specifically access to LAFCO’s service reviews and more information about the District Board Members such as compensation and ethics training. Overall, SqCWD has a transparent website filled with useful information and resources that are easily accessible. Table 106: Website Transparency Website Components Checkmark (Yes) Required Items (SB 949 Criteria and SDLF Benchmarks) 1. Names and Contact Information of Board Members* ✓ 2. Board Member Term Limits ✓ 3. Names of Key Staff, including General Manager ✓ 4. Contact Information for Staff ✓ 5. Election/Appointment Procedure & Deadlines ✓ 6. Board Meeting Schedule* ✓ 7. Mission Statement ✓ 8. Description of District's Services/Functions and Service Area ✓ 9. Authorizing Statute/Enabling Act ✓ 10. Adopted District Budgets* ✓ 11. Financial Audits* ✓ 12. Archive of Board Meeting Agendas & Minutes* ✓ 13. Link to State Controller's Webpages for District's reported ✓ Board Member and Staff Compensation 14. Link to State Controller's Webpages for District's reported ✓ Financial Transaction Report 15. Reimbursement & Compensation Policy / Annual Policies ✓ 16. Home Page Link to Agendas/Board Packets ✓ 17. SB 272 - Compliance-Enterprise Catalogs ✓ 18. Machine Readable/Searchable Agendas ✓ 19. Recipients of Grant Funding or Assistance ✓ 20. Link or Copies of LAFCO’s Service & Sphere Reviews Total Score (out of a possible 20) 19 (95%) Additional Items (SDLF’s Recommended Elements) 1. Board Member Ethics Training Certificates ✓ 2. Picture, Bio, and Email Addresses of Board Members ✓ 3. Last Three Years of Audits ✓ 4. Financial Reserves Policy ✓ 5. Online/Downloadable Public Records Act Request Form ✓ 6. Audio or Video Recordings of Board Meetings ✓ 7. Map of District Boundaries/Service Area ✓ 8. Link to CSDA Mapping Program ✓ 9. General Description of Special Districts or Link to www.districtmakethedifference.org 10. Link to Most Recently Filed to FPPC Forms ✓ Total Score (out of a possible 10) 9 (90%) *Footnote: Senate Bill 929 Statutory Requirements Countywide Water Service & Sphere Review Page 216 of 228 Opportunities and Challenges Water agencies are significantly affected by various factors, including aging infrastructure, escalating operational costs, drought impacts, increase in customer demand, and changes to state laws and regulations that may introduce new requirements without additional funding. These issues are common not only in Santa Cruz County but throughout the State. The following section discusses these challenges and identifies possible opportunities to ensure that residents receive the best level of water services. Areas Served Outside Jurisdictional Boundary Pursuant to Government Code Section 56133, a city or district may provide new or extended services by contract or agreement outside its jurisdictional boundaries only if it first requests and receives written approval from the Commission in the affected county. LAFCO may also authorize a city or district to provide new or extended services outside its jurisdictional boundaries but within its sphere of influence in anticipation of a later change of organization. In other words, except for the specific situations exempted by Government Code Section 56133, a city or district shall not provide new or extended services to any party outside its jurisdictional boundaries unless it has obtained written approval from LAFCO. Based on staff’s analysis, SqCWD is providing services outside its jurisdiction to 290 parcels through five separate extraterritorial service agreements approved by LAFCO. Figure 79 on page 218 shows the subject parcels receiving services outside SqCWD’s jurisdiction. LAFCO Staff Recommendation: SqCWD should consider annexing these parcels if the District and the affected landowners determine it would improve the level of service and increase local representation. Countywide Water Service & Sphere Review Page 217 of 228 Figure 79: Areas Served Outside SqCWD’s Jurisdiction Countywide Water Service & Sphere Review Page 218 of 228 Small Water Systems One area that LAFCO can provide assistance now is addressing any failing mutual water companies (MWCs) or private water systems near CWD. MWCs are regulated by California’s Water Code, Health and Safety Code and must abide by open meeting and records disclosure laws similar to many public water utilities. In operating a public water system, mutual water companies are also subject to regulation by the California Department of Public Health and must comply with requirements imposed by the State Water Resources Control Board and our local Regional Water Quality Control Board. However, over the years, many MWCs have operated without much oversight from the State. That is why the Legislature enacted Assembly Bill 54 in 2012. This law imposes new requirements on mutual water companies that own and operate public water systems and requires greater coordination between them and LAFCO in each county. Corporations Code 14301.1 requires mutual water companies to submit a map depicting its service area to LAFCO. A total of 33 private water systems are located near the water district. Figure 80 on page 220 identifies the location of each water system in relation to SqCWD. Table 107 on page 221 also provide more information about the private water systems. While LAFCOs do not have full authority over mutual water companies when compared to with cities and special districts, AB 54 does allow LAFCO to analyze these water systems as part of a service review. Identifying these private water systems may lead to coordination with SqCWD and possible annexation, if desired. LAFCO Staff Recommendation: SqCWD should coordinate with LAFCO and the subject private water systems to analyze possible annexations and/or sphere amendments to include any mutual water company or other nearby water system that can no longer provide adequate level of service. Strategic Partnerships Several water agencies have expressed interest in exploring ways to further collaborate. Many water agencies have interties in the event of emergencies and all water agencies (including the two Cities) are members of groundwater-related joint powers authorities. This means that the public water providers are already working together in overseeing how water is delivered countywide. It may be beneficial for the water agencies to consider further strategic partnerships, including but not limited to sharing resources and staff, establishing a countywide memorandum of understanding for emergency-related interties, and joint procurements or professional service agreements (i.e. Audits). Such partnerships may also lay the foundation for future changes of organization, including but not limited to annexations, reorganizations, or consolidations. LAFCO Staff Recommendation: SqCWD should explore additional ways to share services and resources with neighboring agencies, including but not limited to nearby water districts. Countywide Water Service & Sphere Review Page 219 of 228 Figure 80: Map of Private Water Systems Within and Outside SqCWD Countywide Water Service & Sphere Review Page 220 of 228 Table 107: List of Private Water Systems Within and Outside SqCWD Size Water # Type of Water System (Square Population System Name Miles) Private Water Systems WITHIN AND OUTSIDE SqCWD’s Jurisdictional Boundary 1 Mountain Elementary School Small Water System (1 connection) 0.01 250 2 Cabrillo College Small Water System (1 connection) 0.25 5,500 3 Larkin Ridge MWC Small Water System (5 connections) 0.02 10 4 East Bel Mar Small Water System (5 connections) 0.04 12 5 Aptos High School Small Water System (6 connections) 0.09 1,925 6 Bluff Residents Small Water System (6 connections) 0.00 40 7 Lagunita MWC Small Water System (7 connections) 0.04 25 8 Rancho Soquel Water System Small Water System (7 connections) 0.01 10 9 Spring Valley Water Assoc. Small Water System (7 connections) 0.01 16 10 Laurel Glen MWC Small Water System (8 connections) 0.05 32 11 Milky Way MWC Small Water System (9 connections) 0.03 20 12 Aptos Hills MWC Small Water System (12 connections) 0.13 32 13 Loma Alta MWC Small Water System (12 connections) 0.05 33 14 Springbrook Park MWC Small Water System (13 connections) 0.02 26 15 Purisima MWC Small Water System (13 connections) 0.10 34 16 Redwood Lodge Small Water System (13 connections) 0.03 35 17 Renaissance High Medium Water System (2 connections) 0.02 250 18 Aptos Ridge MWC Medium Water System (16 connections) 0.09 52 19 Land Of Medicine Buddha Medium Water System (16 connections) 0.12 89 20 Camp St. Francis Medium Water System (16 connections) 0.02 57 21 Kennolyn Camp Medium Water System (25 connections) 0.42 213 22 Cathedral Hills MWC Medium Water System (25 connections) 0.20 60 23 Pine Tree Lane MWC Medium Water System (36 connections) 0.01 80 24 Jarvis Mutual Water Co. Medium Water System (38 connections) 0.21 125 25 Enchanted Valley Medium Water System (64 connections) 0.17 51 26 The Willows Medium Water System (69 connections) 0.01 54 27 PureSource Medium Water System (77 connections) 0.07 200 28 San Andreas MWC Medium Water System (135 connections) 0.54 350 29 Trout Gulch Water Medium Water System (186 connections) 0.28 614 30 Cathedral Wood MWC Medium Water System (15 to 199 connections) 0.07 60 31 Hidden Falls Girl Scout Camp Medium Water System (15 to 199 connections) 0.14 150 32 Seventh Day Adventist Large Water System (202 connections) 0.15 1,000 33 Santa Cruz KOA Large Water System (235 connections) 0.04 110 Countywide Water Service & Sphere Review Page 221 of 228 SPHERE OF INFLUENCE Current Sphere Boundary Santa Cruz LAFCO adopted SqCWD’s first sphere of influence on November 12, 1986. The current sphere excludes areas within the District’s jurisdictional boundary. The last sphere update occurred in June 2017 following the last service review cycle. Figure 81 on page 223 shows the current sphere of influence boundary. Proposed Sphere Boundary Based on staff’s analysis, the current sphere boundary is not consistent with the District’s current service area. SqCWD is currently providing services outside its jurisdiction to 290 parcels through five separate extraterritorial service agreements approved by LAFCO. Staff is recommending that the sphere boundary be expanded to include the 290 served parcels as a precursor to annexation in the near future. Further analysis will be required to address any restricted lands or other service provision issues if annexation is explored by the District. Figure 82 on page 224 shows the proposed sphere boundary. Parcels Subject to Annexation As stated earlier in this report, except for the specific situations exempted by Government Code Section 56133, a city or district shall not provide new or extended services to any party outside its jurisdictional boundaries unless it has obtained written approval from LAFCO. Based on staff’s analysis, SqCWD is providing services outside its jurisdiction through five separate extraterritorial service agreements. LAFCO Staff Recommendation: SqCWD should consider annexing these parcels if the District and the affected landowners determine it would improve the level of service and increase local representation. If an application is submitted within a year (August 2023), LAFCO will consider waiving the annexation filing fee and provide assistance on completing the statutorily-required steps in the annexation process. Add Photo Here Countywide Water Service & Sphere Review Page 222 of 228 Figure 81: SqCWD’s Current Sphere Map Countywide Water Service & Sphere Review Page 223 of 228 Figure 82: SqCWD’s Proposed Sphere Map Countywide Water Service & Sphere Review Page 224 of 228 DISTRICT SUMMARY Soquel Creek Water District Formation California Water Code, section 30,000 et seq. Board of Directors Five members, elected at-large to four-year terms Contact Person Ron Duncan, General Manager Employees 48 Full-Time Employees 16,047 connections; 167 miles of pipeline; 16 active groundwater Facilities wells; 2 standby groundwater wells; 18 storage tanks; 14 pump stations; and 7 interconnections. District Area 17 square miles (appx. 50,000 acres) Current Sphere: Smaller than the District (i.e., sphere boundary does not include the District’s existing jurisdictional boundary) Sphere of Influence Proposed Sphere: Larger than the District (i.e., sphere boundary includes areas outside the District’s jurisdictional boundary) Total Revenue = $39,861,224 FY 2020-21 Audit Total Expenditure = $19,367,081 Net Position (Ending Balance) = $83,362,972 Mailing Address: 5180 Soquel Drive, Soquel CA 95073 Phone Number: (831) 475-8500 Contact Information Email Address: RonD@soquelcreekwater.org Website: https://www.soquelcreekwater.org/ Meetings are typically held on the first and third Tuesday of each Public Meetings month at 6:00 p.m. We are a public agency dedicated to providing a safe, high quality, reliable, and sustainable water supply to meet our community’s Mission Statement present and future needs in an environmentally sensitive and economically responsible manner. Countywide Water Service & Sphere Review Page 225 of 228 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The population of SqCWD in 2020 was estimated to be 39,000. Based on LAFCO’s analysis, the population within SqCWD will be approximately 47,200 by 2040. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. 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. SqCWD currently has an urban water management plan in place. 4. Financial ability of agencies to provide services. SqCWD is financially sound. The District ended with a surplus in each of the last six fiscal years during 2015 to 2021. As of June 30, 2021, the total net position balance ended with approximately $83 million. LAFCO believes that this positive trend will continue based upon the District’s ongoing conservative budgetary practices reflected in their audited financial statements. 5. Status of, and opportunities for, shared facilities. LAFCO encourages SqCWD to explore additional methods to collaborate with neighboring water agencies, including the privately-owned water companies surrounding the District. At present, there are 33 private water systems near SqCWD. 6. Accountability for community service needs, including governmental structure and operational efficiencies. Senate Bill 929 was signed into law in September 2018 and requires all independent special districts to have and maintain a website by January 1, 2020. SB 929 identifies a number of components that must be found within an agency’s website. At present, the District almost meets all the statutory requirements under SB 929 and SDLF’s website transparency criteria. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. LAFCO recommends that SqCWD consider annexing the parcels currently served through five separate extraterritorial service agreements for residents to receive better local representation and fully utilize the District’s services. Countywide Water Service & Sphere Review Page 226 of 228 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. At present, the majority of land within the District is designated as Urban Low Residential. The District’s customer base is predominantly single-family residential. The District does not have any agricultural customers. 2. The present and probable need for public facilities and services in the area. SqCWD has an Urban Water Management Plan and a capital improvement plan, in addition to a Community Water Plan and the region’s Groundwater Sustainability Plan, which collectively help to ensure and plan for future capital improvement projects. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. SqCWD manages and operates a complex and integrated water supply infrastructure, including storage tanks, groundwater wells, and booster pumps. The District currently has approximately 16,000 connections – 80% is used for residentials and 20% for non-residential (commercial, schools, governmental, and landscape irrigation). 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. At present, there are 33 private water systems near SqCWD. Additionally, there are 290 parcels that are receiving services from the District but not part of the District’s jurisdictional boundary. These residents do not have the ability to vote on District matters or express their opinions as their neighbors who are official constituents. These parcels should be annexed in the near future for adequate representation. 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 subdivision (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. In 2020, the California statewide median household income was $78,672, and 80% of that was $62,938. Based on LAFCO’s analysis, there are no disadvantaged unincorporated communities within or contiguous to the District’ sphere boundary. Countywide Water Service & Sphere Review Page 227 of 228 APPENDICES Appendix A: List of Private Water Systems (132 in total) Appendix B: Central Water District - Historical Boundary Changes Appendix C: Central Water District – Capital Improvement Plan Appendix D: City of Santa Cruz - Historical Boundary Changes Appendix E: City of Santa Cruz – Long Range Financial Plan Appendix F: City of Watsonville - Historical Boundary Changes Appendix G: Reclamation District 2017 Audit (FY 2011 to 2015) Appendix H: San Lorenzo Valley WD - Historical Boundary Changes Appendix I: Scotts Valley WD - Historical Boundary Changes Appendix J: Soquel Creek WD – Historical Boundary Changes Countywide Water Service & Sphere Review Page 228 of 228 APPENDIX A: List of Private Water Systems (132 in total) # Private Water System System Size Square Miles 1 Aptos Hills MWC Small Water System (5 to 14 connections) 0.13 2 Fernbrook Woods Water Company Small Water System (5 to 14 connections) 0.01 3 Freedom MWC Small Water System (5 to 14 connections) 0.19 4 Hidden Meadow MWC Small Water System (5 to 14 connections) 0.37 5 Lagunita MWC Small Water System (5 to 14 connections) 0.04 6 Larkin Ridge MWC Small Water System (5 to 14 connections) 0.02 7 Laurel Glen MWC Small Water System (5 to 14 connections) 0.05 8 Loma Alta MWC Small Water System (5 to 14 connections) 0.05 9 Love Creek Heights Mutual Water Assoc. Small Water System (5 to 14 connections) 0.01 10 Milky Way MWC Small Water System (5 to 14 connections) 0.03 11 Purisima MWC Small Water System (5 to 14 connections) 0.10 12 Rancho Soquel Water System Small Water System (5 to 14 connections) 0.01 13 Spring Valley Water Assoc. Small Water System (5 to 14 connections) 0.01 14 Sun & Shadow MWC Small Water System (5 to 14 connections) 0.03 15 Sunny Acres MWC Small Water System (5 to 14 connections) 0.05 16 White Calabasas MWC Small Water System (5 to 14 connections) 0.05 17 Agua Puerca Small Water System (5 to 14 connections) 0.04 18 Bonnymede Small Water System (5 to 14 connections) 0.09 19 Corralitos Springs Small Water System (5 to 14 connections) 0.25 20 East Bel Mar Small Water System (5 to 14 connections) 0.04 21 El Agua Del Oso Small Water System (5 to 14 connections) 0.04 22 Emerald City Small Water System (5 to 14 connections) 0.11 23 Enos Lane Small Water System (5 to 14 connections) 0.08 24 Hughes Road Small Water System (5 to 14 connections) 0.03 25 JB Ranch Small Water System (5 to 14 connections) 0.02 26 Karl's Dell Small Water System (5 to 14 connections) 0.00 27 La Cima Small Water System (5 to 14 connections) 0.00 28 Moon Meadows Small Water System (5 to 14 connections) 0.01 29 Mountain Top Small Water System (5 to 14 connections) 0.02 30 Quail Hollow Circle Small Water System (5 to 14 connections) 0.00 31 Redwood Lodge Small Water System (5 to 14 connections) 0.03 32 Redwood Spring Small Water System (5 to 14 connections) 0.21 33 Sky Ranch Small Water System (5 to 14 connections) 0.01 34 Smith Road Small Water System (5 to 14 connections) 0.06 35 Stagecoach Small Water System (5 to 14 connections) 0.02 36 Villa Glen Small Water System (5 to 14 connections) 0.01 37 Vista Oaks Small Water System (5 to 14 connections) 0.13 38 Waterman Gap Small Water System (5 to 14 connections) 1.74 39 Whiting Road Small Water System (5 to 14 connections) 0.03 40 Woodside Small Water System (5 to 14 connections) 0.02 41 Zayante Acres Small Water System (5 to 14 connections) 0.01 42 Zelbar Small Water System (5 to 14 connections) 0.06 43 Bluff Residents Small Water System (5 to 14 connections) 0.00 44 Allan Lane Water Assoc. Medium Water System (15 to 199 connections) 0.04 45 Aptos High School Medium Water System (15 to 199 connections) 0.09 46 Aptos Ridge MWC Medium Water System (15 to 199 connections) 0.09 47 Big Creek Lumber Co. Medium Water System (15 to 199 connections) 0.30 # Private Water System System Size Square Miles 48 Big Redwood Park Medium Water System (15 to 199 connections) 0.03 49 Bonny Doon Union School District Medium Water System (15 to 199 connections) 0.01 50 Bosch Baha'I School Medium Water System (15 to 199 connections) 0.10 51 Boulder Creek Scout Reservation Medium Water System (15 to 199 connections) 0.10 52 Brackenbrae Country Club Medium Water System (15 to 199 connections) 0.02 53 Cabrillo College Medium Water System (15 to 199 connections) 0.25 54 Camp Hammer Medium Water System (15 to 199 connections) 0.16 55 Camp Lindblad Medium Water System (15 to 199 connections) 0.21 56 Cathedral Wood MWC Medium Water System (15 to 199 connections) 0.07 57 County Fair Grounds Medium Water System (15 to 199 connections) 0.16 58 Crestwood Heights Water Co. Medium Water System (15 to 199 connections) 0.01 59 Davenport County Sanitation Medium Water System (15 to 199 connections) 0.21 60 Fern Grove Club Medium Water System (15 to 199 connections) 0.11 61 Forest Springs Medium Water System (15 to 199 connections) 0.05 62 Jarvis Mutual Water Co. Medium Water System (15 to 199 connections) 0.21 63 Kennolyn Camp Medium Water System (15 to 199 connections) 0.42 64 Kim Son Monastery Medium Water System (15 to 199 connections) 0.03 65 Koinonia Conference Grounds Medium Water System (15 to 199 connections) 0.06 66 La Madronna Swim And Raquet Club Medium Water System (15 to 199 connections) 0.02 67 Lake View Apartments Medium Water System (15 to 199 connections) 0.01 68 Land Of Medicine Buddha Medium Water System (15 to 199 connections) 0.12 69 Las Colinas Road And Water Assoc. Medium Water System (15 to 199 connections) 0.07 70 Las Cumbres MWC Medium Water System (15 to 199 connections) 0.17 71 Laurel Community League Medium Water System (15 to 199 connections) 0.10 72 Lockheed Martin Missles and Space Medium Water System (15 to 199 connections) 2.07 73 Trout Gulch Water Medium Water System (15 to 199 connections) 0.28 74 Mission Springs Medium Water System (15 to 199 connections) 0.02 75 Monterey Bay Acad. Medium Water System (15 to 199 connections) 0.58 76 Mountain Elementary School Medium Water System (15 to 199 connections) 0.01 77 Summit West Medium Water System (15 to 199 connections) 1.24 78 Mt. Madonna Center Medium Water System (15 to 199 connections) 0.53 79 Mt. Madonna Inn Restaurant Medium Water System (15 to 199 connections) 0.01 80 Mtn Summit Water System Medium Water System (15 to 199 connections) 0.02 81 Pine Tree Lane MWC Medium Water System (15 to 199 connections) 0.01 82 Quaker Center Medium Water System (15 to 199 connections) 0.13 83 Rancho Corralitos Medium Water System (15 to 199 connections) 0.08 84 Rancho San Andreas Medium Water System (15 to 199 connections) 0.01 85 Renaissance High Medium Water System (15 to 199 connections) 0.02 86 River Grove Mutual Water Assoc. Medium Water System (15 to 199 connections) 0.02 87 Roaring Camp Medium Water System (15 to 199 connections) 0.26 88 San Andreas MWC Medium Water System (15 to 199 connections) 0.54 89 Santa Cruz KOA Medium Water System (15 to 199 connections) 0.04 90 Santa Cruz Mountain Pure Water Co. Medium Water System (15 to 199 connections) 0.00 91 Santa Cruz Waldorf School Medium Water System (15 to 199 connections) 0.01 92 Sequoia Seminar Medium Water System (15 to 199 connections) 0.08 93 Seventh Day Adventist Medium Water System (15 to 199 connections) 0.15 94 Skylark Ranch Girl Scout Camp Medium Water System (15 to 199 connections) 0.42 # Private Water System System Size Square Miles 95 Spring Hills Golf Course Medium Water System (15 to 199 connections) 0.00 96 Springbrook Park MWC Medium Water System (15 to 199 connections) 0.02 97 St. Francis Tract Water System Medium Water System (15 to 199 connections) 0.03 98 The Willows Medium Water System (15 to 199 connections) 0.01 99 Vajrayana Foundation Medium Water System (15 to 199 connections) 0.15 100 Villa Del Monte MWC Medium Water System (15 to 199 connections) 0.16 101 Vista Robles Assoc. Medium Water System (15 to 199 connections) 0.05 102 Aviza Technology Medium Water System (15 to 199 connections) 0.01 103 Summit Woods Mutual Water Co. Medium Water System (15 to 199 connections) 0.10 104 Ridgeview Estates, Inc. Medium Water System (15 to 199 connections) 0.06 105 Cathedral Hills MWC Medium Water System (15 to 199 connections) 0.20 106 PureSource Medium Water System (15 to 199 connections) 0.07 107 Ridge Medium Water System (15 to 199 connections) 0.25 108 Buena Vista Migrant Center Medium Water System (15 to 199 connections) 0.08 109 Enchanted Valley Medium Water System (15 to 199 connections) 0.17 110 Calabasas Road Medium Water System (15 to 199 connections) 0.01 111 Camp St. Francis Medium Water System (15 to 199 connections) 0.02 112 David Bruce Winery Medium Water System (15 to 199 connections) 0.07 113 Hidden Falls Girl Scout Camp Medium Water System (15 to 199 connections) 0.14 114 Jardines Del Valle Medium Water System (15 to 199 connections) 0.01 115 Meadowridge Medium Water System (15 to 199 connections) 0.22 116 Monte Vista Christian School Medium Water System (15 to 199 connections) 0.11 117 Halcyon Horizons Medium Water System (15 to 199 connections) 0.04 118 R&A Farms Medium Water System (15 to 199 connections) 0.02 119 Salsipuedes Elementary Medium Water System (15 to 199 connections) 0.02 120 Sheriff's Rehab Medium Water System (15 to 199 connections) 0.17 121 Sunset Beach Medium Water System (15 to 199 connections) 0.02 122 Camp Chesebrough Medium Water System (15 to 199 connections) 0.17 123 Lehi Park Medium Water System (15 to 199 connections) 1.46 124 Gizditch Ranch Medium Water System (15 to 199 connections) 0.02 125 Cassin Ranch Medium Water System (15 to 199 connections) 0.02 126 Kitayama Bros. Medium Water System (15 to 199 connections) 0.35 127 Mystery Spot Medium Water System (15 to 199 connections) 0.00 128 Los Altos Rod and Gun Club Medium Water System (15 to 199 connections) 0.15 129 Pinecrest MWC Medium Water System (15 to 199 connections) 0.05 130 Mount Hermon Association Large Water System (200+ connections) 0.16 131 Forest Lake Mutual Water Company Large Water System (200+ connections) 0.50 132 Big Basin Water Company Large Water System (200+ connections) 20.00 APPENDIX B: Central Water District (Historical Boundary Changes) Project Action Proposal Title Number Date 88 Brooktree Ranch Annexation 8/17/1966 109 Pleasant Valley Annexation 5/24/1967 287 Pleasant Valley Annexation (additional acreage) 8/18/1971 306 Rob Roy Annexation 1/19/1972 329 Freedom Boulevard Annexation 7/19/1972 453 Pleasant Valley Annexation (additional acreage) 3/3/1976 696 Original Sphere Adoption 11/12/1986 775 Sphere Amendment (Expansion) 3/6/1991 795 Pleasant Valley / Lester Sphere Amendment (Expansion) 11/3/1993 853 Hames Road / Pleasant Valley Annexation 9/2/1998 924 Storrs Extraterritorial Service Agreement 4/2/2008 APPENDIX C: Central Water District (Capital Improvement Plan) Capital Improvements Plan EXECUTIVE SUMMARY The District manages and operates a complex and integrated water supply infrastructure, including storage tanks, transmission system, wells and booster pumps. The majority of capital projects included in the 10-Year Capital Improvement Plan (CIP) support strategic asset management approach that focuses on replacing aging equipment and facilities, and ensures infrastructure reliability. The District’s water main replacement programs is a significant portion of the CIP. The water main system is a critical component of the infrastructure and is approaching forty to fifty years of age, maintaining and upgrading this asset is essential for will ensuring sustainable high quality water supply for future generation. The total estimate for the 10-year CIP is $3,500,000. This plan will be reviewed and revised if needed on a year to year basis. Major Capital Improvements Identified in CIP 3,456,200.00 $ Amount Priority Storage Facilities • 7 storage tanks with a total capacity of 1.2 million gallons Interior recoating and seismic upgrade of the Day Tank 2 $ 121,000.00 High Replacement of Day Valley Ridge Tank $ 15,000.00 Low Groundwater Wells • 6 wells located in two aquifers (3 Inactive) Construction of a New Well to Replace Well #14 $ 850,000.00 Medium Installation of SCADA at Well #10 $ 10,000.00 Medium Transmission Facilities • 23.3 miles of pipelines Replacement of 6” steel water main $2,205,200.00 High Upgrade of all meters $ 35,000.00 Medium Pressure Reducing Valve (PRV) Stations • 4 PRV stations that allow transferring water between pressure zones Replacement of a PRV station on Pleasant Valley and Hames Road $ 50,000.00 Medium Booster Pump Stations • 6 booster pump stations Upgrade of Redwood Height Booster Pump $ 25,000.00 High SCADA Upgrade to Valencia Pump station $ 20,000.00 Low Operations (Capital expenditures supporting general operations) Purchase of a New Vehicle $ 50,000.00 Low GIS Mapping Software $ 50,000.00 Low Standard Specifications Documentation update $ 25,000.00 High Capital Improvements Plan PRIORITY PROCESS AND FINANCIAL ANALYSIS A priority setting process was conducted to ensure that all proposed water supply projects for the Fiscal Year’s 2015-2021 align with District’s strategic goals. The priority criteria used to evaluate these projects is included in Appendix A. A financial analysis of the General Fund, the funding source for water supply capital improvements, was performed to determine the limitations to funding the projects proposed for the Fiscal Years 2015-2021. Results of the prioritization process and financial analysis are summarized in Appendix B. Based on the feedback from the FY 2015-21 CIP Committee and the Board, a concerted effort was made to develop a multi- year water charge structure that supports the CIP. Staff analyzed the immediate requirements and anticipated future needs to support operations and the continued appropriations for capital investment needed to maintain infrastructure and comply with water quality regulations. Each year staff reviews Board priorities, District annual budget, and current political and economic factors and updates the multi-year structure. Capital Improvements Plan The following table is a project funding schedule resulting from this year’s priority process and financial analysis. Detailed information for each project can be found in this document on the following pages in the order presented in this table. 10 Year Capital Improvement Projects (Table A) Priority Planned Funding Requests Total $ CIP Projects Priority FY15/16 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 Well 14 Medium x x 850,000.00 Day Tank Recoat High x 121,000.00 Valencia Water Main High x x x 770,000.00 Morrison Tank to Quail Run High x x 485,000.00 Day Valley Road- Quail Road to Cox High x X 332,500.00 Day Valley Ridge Tank Replacement Low x 15,000.00 Operations Projects Standard Specifications High x 25,000.00 REDWOOD HEIGHTS BOOSTER PUMP High x 25,000.00 Day Valley Road McDonald Isolation Valves Medium x 25,000.00 PRV Station Hames & Pleasant Valley Medium x 50,000.00 SCADA Well #10 & Valencia Pump Station Low x 20,000.00 Truck Replacement Low x 50,000.00 GIS Mapping Low x 25,000.00 Meter Replacement Low x x x 35,000.00 The following table shows funding requirements from each funding source for the following projects. Water Supply - Funding Source (Table B) General Fund as of 7/1/2015 771,074.34 CIP Fund Grants To Be Determined Other Fund Source Total 771,074.34 tegduB detamitsE & eludehcS PIC raeY 5 tcirtsiD retaW lartneC SDIB )timrep tnemhcuorcne ,stnemesae ,snalp sgniwarD DAC ,noitatnemucoD( ngiseD dnegeL noitcurtsnoC tnemeganaM tcejorP leveL ytiroirP WOL muideM HGIH 52/42 YF 42/32 YF 32/22 YF 22/12 YF 12/02 YF 02/91 YF 91/81 YF 81/71 YF 71/61 YF 61/51 YF noitpircseD tcejorP seitilicaF egarotS 00.000,01$ gnitaoC roiretnI sknaT yaD 00.000,69$ 00.000,51$ 00.000,2$ tnemecalpeR knaT egdiR yellaV yaD 00.000,31$ setiS lleW retaW dnuorG 00.000,5$ 4 lleW fo tnemecalpeR 41 lleW 00.000,004$ 00.000,003$ 00.000,5$ slleW dnelB niaM retaW noissimsnarT 00.000,041$ 21 lleW htiw 01 & 4 00.000,5$ seitilicaF noissimsnarT 00.000,5$ niaM retaW notgnitnuH-aicnelaV 00.000,053$ 00.000,053$ 00.000,03$ 00.000,03$ 00.000,5$ niaM retaW nuR lauQ ot knaT nosirroM 00.000,532$ 00.000,02$ 00.000,5$ niaM retaW daoR yellaV yaD 00.005,203$ 00.005,203$ tnemecalpeR 00.000,52$ 00.000,52$ 00.000,2$ niaM retaW dlanoDcM ot xoC/-dR yellaV yaD 00.000,58$ 00.000,8$ 00.000,01$ niaM retaW daoR dlanoDcM 00.000,574$ tnemecalpeR 00.000,64$ noitarepO 00.000,52$ etadpU cepS dradnatS 00.000,52$ pmuP retsooB sthgieH doowdeR 00.000,52$ sevlaV noitalosI dlanoDcM /dR yellaV yaD 00.000,05$ yellaV tnasaelP /semaH noitatS VRP 00.000,52$ aicnelaV dna 01# lleW ot edargpU adacS 00.000,52$ tnemecalpeR kcurT 00.000,05$ gnippaM SIG 00.000,5$ 00.000,01$ 00.000,01$ 00.000,01$ margorP tnemecalpeR reteM 00.0$ 00.0$ 00.0$ 00.0$ 00.0$ 00.0$ 00.0$ 00.0$ 00.000,55$ 00.0$ 00.000,52$ 00.000,01$ 00.000,52$ 00.000,05$ 00.000,01$ 00.000,52$ 00.0$ 00.000,53$ 00.0$ 00.000,52$ :ecnepxE snoitarepO 00.0$ 00.000,541$ 00.000,5$ 00.0$ 00.000,125$ 00.000,301$ 00.000,2$ 00.005,723$ 00.000,31$ 00.005,923$ 00.000,5$ 00.000,552$ 00.000,5$ 00.000,083$ 00.0$ 00.000,083$ 00.000,5$ 00.000,004$ 00.000,114$ 00.000,51$ esnepxE PIC 00.0$ 00.000,541$ 00.000,5$ 00.0$ 00.000,125$ 00.000,301$ 00.000,2$ 00.005,723$ 00.000,86$ 00.005,923$ 00.000,03$ 00.000,562$ 00.000,03$ 00.000,034$ 00.000,01$ 00.000,504$ 00.000,5$ 00.000,534$ 00.000,114$ 00.000,04$ latoT 00.000,541$ 00.000,5$ 00.000,426$ 00.005,923$ 00.005,793$ 00.000,592$ 00.000,064$ 00.000,514$ 00.000,044$ 00.000,154$ raeY tegduB Capital Improvements Plan Well #14 Groundwater Wells Site: Water Supply Replaces Well 4 Estimated Cost: $850,000 Priority Rating: MEDIUM PROJECT DESCRIPTION This project plans, designs, and constructs a new Well that will replace Well # 4. Improvements will accomplish the following objectives: Secure water for next generation. PROJECT LOCATION SCHEDULE & STATUS FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 85,000 850,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FY14/15 FY15/16 FY17/18 FY18/19 FY19/20 FY20 FY21 Future /21 /22 Well 14 0 100,000 750000 0 0 0 0 0 850,000 with inflation FUNDING SCHEDULE Budget Thru Adj. Est. Budget Unspent Planned Funding Requests Total Project FY15/16 FY16/17 FY17 FY18 FY19 FY20 FY21 Future Well 14 100000 FUNDING SOURCES General Fund 850,000 CIP Fund 0 Other Fund Source 0 Total 850,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. This Well replaces Well #4. USEFUL LIFE: 50+ Years Day Tanks Interior Recoat 300,000 gallons Seismic Upgrade Estimated Cost: $121,000 Storage: Interior Recoat Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and remove interior coating and recoats the interior: OPTION 1: 3-Coat Epoxy Coating OPTION 2: Zinc Primer and 2_Coat Epoxy Replace rigid connection with a Stainless Steel seismic flexible fitting. PROJECT LOCATION SCHEDULE & STATUS FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 15,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FY14/15 FY15/16 FY17 FY18 FY19 FY20 FY21 Future Day Tanks Interior Recoat 121,000 121,000 with inflation FUNDING SCHEDULE Budget Thru Adj. Est. Budget Unspent Planned Funding Requests Total Project FY15/16 FY16/FY17 FY17 FY18 FY19 FY20 FY21 Future Day Tanks Interior Recoat 121,000 121,000 FUNDING SOURCES General Fund 121,000 CIP Fund Other Funding Source 0 Total 121,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 15 Years for Epoxy Coating 30 Years Epoxy Coating with Cathodic Protection Valencia-Huntington Water Main Replacement Ln Feet 4,700 Estimated Cost: $770,000 Distribution: Replace 6” Water Main w/ 8” Priority Rating: High PROJECT DESCRIPTION This project plans, designs, and replacement of a 6” steel water main with an eight (8) inch C900 Pressure Class 235 that conforms to AWWA C900 specifications. PROJECT LOCATION SCHEDULE & STATUS FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22 65,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FY15/16 FY16/17 FY17 FY18 FY19 FY20 FY21 Future Valencia Road Water main Replacement FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project FY16 FY16/FY17 FY17 FY18 FY19 FY20 FY21 Future Valencia Road Water main Replacement FUNDING SOURCES General Fund CIP Fund Other Fund Source 0 Total OPERATING COST IMPACTS The completion of this project decrease annual operating costs due to the high number of repairs that exist at this time. This project does not significantly modify operations. USEFUL LIFE: 75 Years (Warranty 50 years) Day Valley Ridge Tank Replacement Estimated Cost: $15,000 Storage: Replace steel tank Priority Rating: LOW PROJECT DESCRIPTION This project will comprise of replacing the existing 5000 gallon steel tank. The new tank would be a plastic tank utilizing the existing concrete pad. PROJECT LOCATION SCHEDULE & STATUS EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Day Valley Ridge Tank Replacement with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Day Valley Ridge Tank Replacement FUNDING SOURCES General Fund 0 CIP Fund Other Funding Source 0 Total 15,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 50 Years Day Valley Road intersection @ McDonald Road Isolation Valve Gallery Estimated Cost: $15,000 Distribution: Valve Gallery Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and construct a valve isolation gallery on Day Valley Road. The 8” valve gallery will tie into existing 6” steel water main. PROJECT LOCATION SCHEDULE & STATUS 15,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Day Valley Road/ McDonald Isolation Valve Gallery with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Day Valley Road/ McDonald Isolation Valve Gallery FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 15,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. This will allow an easy transition to new mains installed in the area with minimum interruptions to service. USEFUL LIFE: 75 Years Pressure Reducing Vault Station Pleasant Valley / Hames Road Estimated Cost: $50,000 Distribution: PRV Priority Rating: LOW PROJECT DESCRIPTION This project plans, designs, and construct a valve isolation gallery on Day Valley Road. The 8” valve gallery will tie into existing 6” steel water main. PROJECT LOCATION SCHEDULE & STATUS 50,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Day Valley Road/ McDonald Isolation Valve Gallery with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Day Valley Road/ McDonald Isolation Valve Gallery FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 50,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 75 Years Day Valley Rd-Cox Rd to McDonald Road Water Main Replacement Ln Feet 528 Estimated Cost: $79,200 Distribution: Replace 6” steel main with 8” C900 Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and replacement of a 6” steel water main with an eight (8) inch C900 Pressure Class 235 that conforms to AWWA C900 specifications. PROJECT LOCATION SCHEDULE & STATUS 79,800 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Day Tanks Interior Recoat with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Day Tanks Interior Recoat Adjusted Budget includes adopted budget plus approved budget adjustments. FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 79,800 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 75 Years Morrison Tank to Quail Run Road Water Main Replacement Ln Feet 1,434 Estimated Cost: 250,000 Distribution: Replace 6” steel with 8” C900 Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and replacement of a 6” steel water main with an eight (8) inch C900 Pressure Class 235 that conforms to AWWA C900 specifications. PROJECT LOCATION SCHEDULE & STATUS EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Morrison Tank to Quail Run with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Morrison Tank to Quail Run FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 250,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 75 Years GIS District Mapping Software Estimated Cost: 50,000 Administration: Priority Rating: LOW PROJECT DESCRIPTION Geographic Information System or GIS is a computer system that allows you to map, model, query, and analyze large quantities of data within a single database according to their location. GIS gives you the power to: create maps. PROJECT LOCATION SCHEDULE & STATUS 50,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project GIS Mapping Software FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project GIS Mapping Software FUNDING SOURCES General Fund 00 CIP Fund Other Funding Source 0 Total 50,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 100 Years Day Valley Road Water Main Replacement Ln Feet: 3,644 Estimated Cost: 660,000 Distribution: Replace 6” steel with 8” C900 Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and replacement of a 6” steel water main with an eight (8) inch C900 Pressure Class 235 that conforms to AWWA C900 specifications. PROJECT LOCATION SCHEDULE & STATUS EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 660,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 75 Years McDonald Road Water main Replacement Ln Feet 2855 Estimated Cost: $ 531,000 Distribution: Replace 6” steel with 8” C900 Priority Rating: HIGH PROJECT DESCRIPTION This project plans, designs, and replacement of a 6” steel water main with an eight (8) inch C900 Pressure Class 235 that conforms to AWWA C900 specifications. Multiple street need to be connected. PROJECT LOCATION SCHEDULE & STATUS 531,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 531,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 75 Years Update Standard Specification Estimated Cost: 25,000 Administration: Document Control Priority Rating: HIGH PROJECT DESCRIPTION The Standard Specifications works in partnership to develop complete, accurate, current, and tested standard construction specifications and drawings for use by our consultants and contractors. The specifications will be useable as a "stand-alone" document for public agencies or private entities engaged in general civil construction, or as a base document to use as a foundation to "build" on. The specifications will be straightforward enough to be used with confidence by persons with limited construction background, but comprehensive enough to be a valuable tool for General Underground Contractors as well. PROJECT LOCATION SCHEDULE & STATUS FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 50,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FY15 FY16 FY17 FY18 FY19 FY20 FY21 Future GIS Mapping Software FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project FY15 FY16 FY17 FY18 FY19 FY20 FY21 Future GIS Mapping Software FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 50,000 COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 25 Years Meter Replacement Program Estimated Cost: 35,000 Distribution: Water Conservation Priority Rating: Low PROJECT DESCRIPTION Badger Meter system minimize the need for costly infrastructure with ORION Cellular endpoints, and cam minimize ongoing system maintenance. Will help understand and monitor water operations and improve customer service with the decision-making information provided by the BEACON AMA software. This technology will also give the customers real assess to their water usage. PROJECT LOCATION SCHEDULE & STATUS FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 35,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project FY15 FY16 FY17 FY18 FY19 FY20 FY21 Future Meter Replacement Program FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project FY15 FY16 FY17 FY18 FY19 FY20 FY21 Future Meter Replacement Program FUNDING SOURCES General Fund 00 CIP Fund Other Funding Source 0 Total 35,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 25 Years New Service Vehicle Estimated Cost: 50,000 Distribution: Operations Priority Rating: Low PROJECT DESCRIPTION New Service Truck for day to day operation, meter reading, etc. SCHEDULE & STATUS 50,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Service Truck FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Service Truck FUNDING SOURCES General Fund 00 CIP Fund Other Funding Source 0 Total 50,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 15 Years Redwood Heights Booster Pump Replacement Estimated Cost: $25,000 Distribution: Replace existing pump and controls to VFD control/ add SCADA Priority Rating: Medium PROJECT DESCRIPTION This project plans, designs, and replacement of existing booster pump that is currently controlled by ineffective mercury controller. PROJECT LOCATION SCHEDULE & STATUS 25,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project Booster Pump Replacement /controller with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project Booster Pump Replacement /controller Adjusted Budget includes adopted budget plus approved budget adjustments. FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 25,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 25 Years Well #10 / Valencia Pump Station Scada Upgrade Estimated Cost: $20,000 Distribution: Install Scada at Well #10 Priority Rating: Low PROJECT DESCRIPTION This project plans, designs, and install SCADA controller and connect to existing SCADA system. PROJECT LOCATION SCHEDULE & STATUS 20,000 EXPENDITURE SCHEDULE Actuals Thru Planned Expenditures Total Project SCADA with inflation FUNDING SCHEDULE Budget Adj. Est. Thru Budget Unspent Planned Funding Requests Total Project SCADA Adjusted Budget includes adopted budget plus approved budget adjustments. FUNDING SOURCES General Fund CIP Fund Other Funding Source 0 Total 20,000 OPERATING COST IMPACTS The completion of this project is not anticipated to increase or decrease annual operating costs, as the project does not significantly modify operations. USEFUL LIFE: 25 Years APPENDIX D: City of Santa Cruz (Historical Boundary Changes) Project Action Proposal Title Number Date 50 University Annexation No. 1 5/19/1965 63 Sky Park Airport, Parcels 2, 3 & 4, Annexation 12/15/1965 96 Carbonera Annexation No. 2 9/21/1966 192 North Coast Annexation 1/21/1970 239 Sky Park Annexation 10/21/1970 240 Disposal Site Annexation 10/21/1970 257 Port District Annexation 2/17/1971 264 Branciforte Creek Annexation 3/17/1971 283 Carbonera Annexation 7/21/1971 285 Walti-Schilling Annexation 7/21/1971 298 Isbel Dr. Annexation 10/20/1971 314 Branciforte Annexation 3/15/1972 396 Hinds Annexation 8/14/1974 420 Isbel Dr. Annexation 5/7/1975 440 Santa Cruz Reorganization 1975 11/5/1975 476 Harbor Properties Annexation 3/2/1977 490 Ocean St. Ext. Annexation 5/4/1977 495 Isbel Dr. Annexation 6/1/1977 503 Perry Annexation 8/17/1977 527 Hansmann Reorganization 11/1/1978 550 Hidden Bay No. 2 et al. Reorganization 4/4/1979 Project Action Proposal Title Number Date 559 Western Dr. Reorganization 8/8/1979 580 Crossing St. (Tait St.) Annexation to Santa Cruz City 12/3/1980 597 Sutphen St. Reorganization 4/1/1981 598 Younger Lagoon Reorganization 12/2/1981 621 City of Santa Cruz SOI 8/3/1983 735 Bartlett Way Reorganization 6/1/1988 740 Pogonip Reorganization 9/7/1988 740-A SOI Amendment 9/7/1988 785-A Meder St. / Van Deren Reorganization 12/9/1992 785-B Meder St. / Van Deren Reorganization SC City SOI 12/9/1992 791 Skypark Reorganization 3/10/1994 910 Arana Gulch Reorganization 4/4/2007 911 Santa Cruz City Water Service Area 11/1/2006 3939 Soquel Dr. Extraterritorial Water Service from Santa Cruz 946 4/3/2013 City Water 948 Extraterritorial Sewer Service to 240 Isbel from Santa Cruz City 8/7/2013 APPENDIX E: City of Santa Cruz (Long Range Financial Plan) Attachment 2 CITY OF SANTA CRUZ WATER DEPARTMENT LONG-RANGE FINANCIAL PLAN SEPTEMBER 2021 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 LONG-RANGE FINANCIAL PLAN TABLE OF CONTENTS Table of Contents ............................................................................................................................ 2 Executive Summary ......................................................................................................................... 4 1. Introduction ............................................................................................................................ 6 1.1 Purpose and Need ............................................................................................................ 6 1.2 Organizational Profile ....................................................................................................... 6 1.3 Financial Planning Conceptual Model .............................................................................. 8 1.4 Current Financial Profile ................................................................................................. 10 1.4.1 Financial Goals and Performance Indicators .......................................................... 10 1.4.2 Credit Rating ........................................................................................................... 12 1.4.3 Debt Financing ........................................................................................................ 13 1.4.4 Current Water Rate Structure................................................................................. 15 1.4.5 Revenue Stability .................................................................................................... 17 2. 2021 Long-Range Financial Plan Recommendations and Plan implementation .................. 18 2.1 Capital Financing Strategy .............................................................................................. 18 2.1.1 Debt Financing Assumptions .................................................................................. 19 2.2 Financial Policies and Reserve Goals .............................................................................. 20 2.3 Revenue Requirements ....................................................................................................... 21 2.3.1 Financial Plan Model Inputs .............................................................................. 21 2.3.2 Financial Plan Model Outputs: Revenue Requirements for FY 2023 – FY 2027 ..... 26 2.4 Water Rates .................................................................................................................... 27 2.4.1 Priority Water Pricing Policy Objectives ................................................................. 28 2.4.2 Rate Structure Options Considered ........................................................................ 28 September 2021 2 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.4.3 Water Rate Structure Recommendation ................................................................ 29 2.4.4 Specific Assumptions Used in Developing Proposed Water Rates ......................... 31 2.4.5 Rate Options for North Coast Agriculture Customers ............................................ 32 2.5 Risk Management – Mitigating the Potential Revenue Stability Risks of a Heavily Volume-Based Rate Structure ................................................................................................... 34 2.5.1 Drought Risks .......................................................................................................... 35 2.5.2 Non-Crought Related Risks ..................................................................................... 36 2.6 Allocations of Rate Stabilization Revenues That Are Higher Than Expected ................. 37 2.7 Plan Implementation ...................................................................................................... 38 2.7.1 Considerations in the Timing and Sizing of Debt .................................................... 38 2.7.2 Opportunities for Grant Funding ............................................................................ 39 2.8 Review and revision of the LRFP .................................................................................... 39 Glossary ......................................................................................................................................... 40 Appendix A – Primer on Utility Credit Ratings .............................................................................. 42 Appendix B – Financial Pro Forma ................................................................................................ 44 Appendix C – 15 Year CIP .............................................................................................................. 46 Appendix D – Excerpt of AWWA M1 Manual on Water Rates, Fees and Charges ....................... 47 Appendix E – Summary Table from 2021 Long-Range Demand Forecast .................................... 59 Appendix F – Proposed Water Rates and Fees for FY 2023- FY 2027 ........................................... 60 Appendix G – July 2021 Summary State and Federal Infrastructure Funding Initiatives and Opportunities ................................................................................................................................ 67 September 2021 3 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 EXECUTIVE SUMMARY The Santa Cruz Water Department (SCWD) operates as an enterprise, which means it is funded entirely by revenues from fees and charges paid by customers receiving its services. Since 2015, the Department has had an increased emphasis on reinvesting in water system facilities, infrastructure and supplies, with a goal of ensuring the water system’s reliability during normal and extreme weather conditions resulting from climate change. Like much infrastructure across the country, the majority of Santa Cruz’s water system was built in the 1960’s, with a useful life-expectancy of about 50 years. As that 50-year mark has come and gone, the Department has seen an uptick in infrastructure vulnerabilities. There has also been an uptick in extreme weather events caused by climate change, further impacting the water system’s fragility and reliability. As work has proceeded to plan and implement the water infrastructure and supply projects necessary to ensure reliable service for the health, safety, and economic viability of Santa Cruz County’s largest population center, long-term financial planning has also been done to ensure financial resources are available to support planned spending on these projects. The 2021 Long-Range Financial Plan revises and updates the Department’s 2016 Long-Range Financial Plan. It reports the work of the Water Department’s staff and Santa Cruz Water Commission to develop long-range projections for operating and capital costs, as well as financial policies and metrics. These annual revenue requirements, policies, and metrics are then used to develop recommended water rates for the five-year period of FY 2023 - 2027. The process of rate-making is further grounded in Cost-of-Service Analysis as well as consideration of the Water Commission and City Council’s highest priorities for water pricing, and a range of water rate structures. In preparing the 2021 Long-Range Financial Plan, a major goal is to transparently present the data inputs, outputs and analyses used in the Department’s financial planning process. The Long-Range Financial Plan is organized to present the details of each data source, and the inputs and outputs of the financial planning model that is used. A number of appendices have been included that provide additional detail, and various links and references have been provided to support accessing more information such as Water Commission or City Council presentations, staff and technical reports. A companion to this Long-Range Financial Plan, the Analysis report, will also be available prior to completion of the rate adoption process. Beyond the analyses described in the Long-Range Financial Plan, the key take-away is that the driver for the financial planning work the Department has completed is the increased revenue September 2021 4 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 requirements needed to renew water system infrastructure and facilities that have reached the end of their useful lives. Capital investments and reinvestments required to ensure ongoing functioning of the water system are costly. As part of the Cost-of-Service Analysis, a replacement value for the water system’s facilities, infrastructure, and resources was calculated at $900 million in current dollars. Replacing major elements of the water system’s facilities and infrastructure, including raw water pipelines and water treatment facilities, is expensive. Recognizing this reality, the Financial Plan includes long term financing as a major strategy for mitigating the cost to current rate-payers of planned investments. Most of the water system facilities being renewed were built around or before 1960. With the long useful life of water facilities, spreading out costs to refurbish them through long term financing ensures that future users of the system pay their fair share of these costly investments. Another strategy for mitigating the cost to rate-payers from these costly investments is active pursuit of low-interest loans and grants. State and federal infrastructure initiatives are providing excellent opportunities for accessing very low-interest borrowing and grants. Due to the groundwork done by SCWD to prepare projects so that they are competitive for these funding resources, Santa Cruz is well positioned to benefit from the state and federal initiatives that are available over the next several years. Finally, although Proposition 218 specifically prohibits using funds generated from one group of rate-payers to subsidize the Cost-of-Service to another group of rate-payers, Water Department staff is well aware of the need to maintain equitable access to water for those customers least able to pay. Department staff has been actively working with state and federal legislators to promote legislative action that would create an ongoing water rate assistance program for qualified customers. Staff completed an affordability assessment in 2020 for water and wastewater rates for customers in its service area1. This assessment can be used as a tool to communicate with policy-makers about both affordability issues in Santa Cruz’s water service area, as well as additional affordability challenges ahead given water rate increases necessary to support needed capital investments. Following Council action on the proposed water rates in 2021, the affordability analysis completed in 2020 will be updated in 2027 to look at water and wastewater service affordability. This information will be used to continue to advocate for resources and programs that ensure access to water and wastewater services for those least able to pay. 1 See https://www.cityofsantacruz.com/home/showpublisheddocument/84828/637594482625900000 September 2021 5 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 1. INTRODUCTION 1.1 PURPOSE AND NEED The development of the 2021 Updated Long-Range Financial Plan (LRFP) focuses on providing a ten-year capital financing strategy and water rates needed to implement the first five-year period for the plan. Overall, the LRFP is intended to support the City of Santa Cruz Water Department in achieving the following goals: • Address the repair and rehabilitation of critical infrastructure and the needed augmentation of the City’s available water supply; • Prepare the water system’s infrastructure and water supply to adapt to the impacts of climate change that are already being experienced; • Establish and maintain financial policies, reserve levels, and stable revenues needed to ensure financial sustainability and provide flexibility to adapt to unforeseen circumstances or challenges; • Maintain the credit rating needed to support the Department’s ability to debt finance the major capital investments and reinvestments needed to ensure supply and system reliability; • Achieve an equitable allocation of capital costs/charges between current and future system users; and • Manage rates in a predictable and reasonably stable manner. The LRFP is intended to be a living document that will provide a financial foundation for the Department to use in annual budget planning and management activities. 1.2 ORGANIZATIONAL PROFILE The Santa Cruz Water Department is an entirely self-funded operation. User rates, fees, and charges are the source of all revenues used to support the ongoing operation, maintenance, planning, management, and capital investments needed to deliver water to some 98,000 water users every day. Approximately 96% of Santa Cruz’s water is provided by local surface water supplies, with local groundwater resources making up the remaining supply. The customer base is stable, primarily residential and reasonably diverse with the top 10 customers accounting for 18% of total operating revenues. Notwithstanding the recent and assumed to be temporary impacts of the COVID 19 pandemic, the service area economy is also stable and with the University of California at Santa Cruz (UCSC) as an important contributor to the regional economy. September 2021 6 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Prior to 2012, the unrestricted fund balance of the Water Operating fund (Fund 711) was historically strong, but by the end of 2015 the fund balance had declined rapidly. The cause of the decline was the cash funding of large Capital Investment Program (CIP) projects such as the $26 million reconstruction of the Bay Street Reservoir. At the time of the preparation of the 2016 LRFP, the status of Fund 711 and the lack of adequate reserves were significant issues, and addressing these issues as well as preparing for an increase in capital spending to address necessary rehabilitation and replacement for major system facilities and implement water augmentation projects became the focus of that plan. As of the preparation of the 2021 LRFP, the Department’s strong performance with respect to its cash reserve and financial metrics has been reestablished. Achieving this substantial improvement in the Department’s financial position represents important progress and is a major accomplishment arising from the implementation of the policies and plans included in the 2016 LRFP. The Department’s current financial profile is discussed in more detail in Section 1.4 below. Among the various opportunities and challenges facing the Water Department in the coming years, climate change stands out as significant. In general, Santa Cruz is already experiencing the impacts of climate change and, more specifically, climate change is definitely affecting water supply and infrastructure reliability. As a result, climate change is a major driver of the Department’s capital spending. The pattern of extreme weather is particularly challenging because wetter wet years create significant opportunities for landslides that damage raw water transmission facilities, as well as impairing source water quality, making available water more difficult to treat. At the opposite end of the weather spectrum, drought conditions resulting from decreased precipitation during the region’s traditional “wet” season are being experienced more frequently, and with multiple year durations. Due to inadequate system storage, these conditions stress the water system and are particularly difficult to deal with in an environment where customer water use is already so efficient that there is little opportunity for further reductions using curtailment strategies. Climate adaptation and efforts to reinvest in major elements of the raw water system, including water supply, that have reached the ends of their useful life are, and will continue to be, the focus of the Water Department’s capital spending for the next decade and more. More specifically, capital projects will focus on rehabilitation of major elements of the water system, particularly raw water and treatment facilities, as well as on supply augmentation, to support adaptation to climate change and improve infrastructure and supply reliability. The water supply augmentation strategies being pursued are in alignment with the 2015 Council-accepted recommendations of the Water Supply Advisory Committee. September 2021 7 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 1.3 FINANCIAL PLANNING CONCEPTUAL MODEL Financial planning and rate making for today’s water utility is a multi-stepped process depicted in Figure 1 below. The figure shows the inputs and outputs of the utility financial planning and rate making processes. It also shows the feedback loop between proposed rates, the end product of the process, and the organization’s budget and CIP, which are key inputs to the beginning of the process. Figure 1 Conceptual Model of Utility Financial Planning and Rate Making This LRFP includes discussions of each key financial plan elements including: • Operating budgets for five years; • Capital investment requirements for 10 years with a focus on the first five years; • Financial policies and goals for debt service coverage, financial reserves and the portion of capital spending to be funded with ‘pay as you go’ versus debt financing; and • Water rates that are necessary to support the Department’s operations and capital investments for the coming five-year period. September 2021 8 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The first three bullets above are the key inputs that are used to produce annual revenue requirements that water rates will need to be designed to generate. The foundation of water rates is a Cost-of-Service Analysis. This analysis is designed to establish the specific costs associated with providing service to various classes of customers and must comply with the requirements of Proposition 218, a 1996 voter approved constitutional amendment that limits collection of property-related fees and charges such as utility rates to only those costs that are attributable to providing service to the property. The law does not require that costs for each individual property be calculated, but rather provides for treating similarly situated customers, for example, single family residential customers, in a consistent manner. Once a cost basis is established with a Cost-of-Service Analysis, policy makers can make choices among various ways to structure rates to recover allocated costs. One way to inform decision- making about how to structure rates is to prioritize water pricing objectives. Examples of water pricing objectives are shown in Table 1 below Table 1 Water Pricing Policy Objectives Enhances revenue sufficiency Enhances revenue stability Is simple to communicate and Promotes efficient water use understandable by customers Perceived to be fair by the public Provides transparency regarding CIP needs Supports affordable for essential use Enhances rate stability As an example of how prioritizing one water pricing objective over another might influence a decision on the rate structure, consider what the impact of choosing a structure that enhances revenue sufficiency over one that promotes efficient water use. A rate structure that enhances revenue sufficiency, for example, might collect all or a large majority of its revenues through fixed charges, which would ensure that the utility gets the funds it needs regardless of water use or weather variability. On the other hand, a rate structure that promotes efficient water use would set charges based on use levels - so customers who use more, pay more receiving a price signal that may motivate changes in use, but makes the utility service provider significantly more vulnerable to revenue instability from weather-driven or behavioral changes in use. September 2021 9 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The feedback loop between water rates and financial plan inputs is included to make the point that if the approved rate increases don’t produce the required revenue, adjustments must be made to the financial plan so that rate revenues will be adequate to support operating and capital improvement spending. 1.4 CURRENT FINANCIAL PROFILE The Department’s current financial position, in terms of reserves and the ability to meet realistic and appropriate financial metrics, is substantially better than it has been over the last decade. As will be discussed further in this section, the Department’s debt obligations, as anticipated, have increased since 2016 as it took steps to fund necessary capital improvements with debt financing. This section provides a brief status of the Department’s Financial Profile for each of the following key financial performance indicators: • Financial Performance Goals and Metrics • Credit Rating • Debt Management • Current Water Rates Structure • Revenue Stability 1.4.1 FINANCIAL GOALS AND PERFORMANCE INDICATORS Financial policies and financial indicators are a key input in the financial planning process. Having and meeting goals for key financial performance indicators is central to good financial management. An organization’s financial performance in meeting financial goals and metrics is also a key factor used in establishing its credit rating, which affects the interest rate that will be charged on borrowed funds. The 2016 LRFP was purposefully focused on defining and creating clear and achievable financial goals, and laying out strategies and methods to meet them. The 2021 LRFP builds on the success achieved, and maintains a strong focus on the organizational and financial planning and management activities that are necessary to continue to meet these targets. 1.4.1.1 FINANCIAL RESERVES Over the years, the City Council has established some financial performance metrics for the Water Utility, including a Rate Stabilization Reserve in 1993, and Operating and Emergency Reserves in 2014. At the end of FY 2015, the Rate Stabilization Reserve Fund balance was $2.4 September 2021 10 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 million and the Emergency Reserve Fund balance was $600,000. A 90 Day Cash Operating Reserve Fund was also created in September 2014, but was not funded until June 30, 2015. The Council’s intent in creating the Rate Stabilization Reserve2 in 1993 was to “shield the Water Fund from the financial effects of extraordinary circumstances.” As originally approved by the Council, the rate stabilization reserve was to be used to help the Department deal with one or a combination of the following conditions: 1 Increased CIP or capital outlay expenditures due to an extraordinary non-recurring need or circumstance; 2 A fluctuation in water consumption revenues creating an unanticipated shortfall (in supply due to drought, for example), or 3 Catastrophic losses as the result of a natural disaster. In the nearly 30 years since the City Council created the original Rate Stabilization Reserve with a target funding level of $2.3 million, infrastructure and operating costs have increased substantially, and in 2014 the Department staff recommended and the Council approved creating additional reserves. These additional reserves, one for 90 days of operating cash, and one to address natural disaster types of emergency conditions, effectively replaced the first and third purposes intended to be served by the original Rate Stabilization Reserve. Creating these more substantial reserves also began the process of moving the utility to a stronger financial position, which better prepared it to deal with future costs. The current established reserves and target funding levels include the following: • Rate Stabilization Reserve (Fund 713) of $10 million; • Water Emergency Reserve Fund (Fund 717) at minimum level of $3 million; and • An Operating Reserve equal to 180 days of operating expenses, with 90 days of operating cash in Water Operating Cash Reserve Fund (Fund 716), and the remaining 90 days of operating cash in the Water Operating Fund (Fund 711). The annual funding targets for these reserves are based on the Department’s annual operating budget and the metric is to have both Fund 716 and Fund 711 meet the annual 90 days operating cash criterion by the fiscal year’s June 30 closing date. 2 See http://www.cityofsantacruz.com/home/showdocument?id=3255 September 2021 11 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 1.4.1.2 DEBT SERVICE COVERAGE RATIO Another key financial performance metric is a target for debt service coverage ratio (DSCR). The DSCR is a measure of net operating revenues to annual debt payments. The Water Department has issued relatively little debt over the past 20 years so hadn’t formally established or used a debt service coverage ratio (DSCR) target in its financial planning until recently. The bond covenant for utility debt issued in 2006 included a 1.25 DSCR. The current minimum DSCR is 1.2, with this level being incorporated into the debt covenants for the Department’s low-interest loans with the State Drinking Water Revolving Loan Fund. A financial plan that only supports meeting the legal minimum figure can put the utility at risk of technical default on its bonds if revenues are reduced by, say, drought conditions when water use restrictions are put into place. Establishing a target that is above the minimum legal requirement is a good idea because it builds needed flexibility into the system that makes the utility more financially resilient in the face of uncertainty. The 2016 LRFP specifically included using a minimum debt service coverage ratio target of 1.5. The impact of this requirement is that annual revenues must be generated to produce at least 1.5 times the annual debt service payment requirement, with the calculation to verify compliance being made after all operating expenses have been paid. 1.4.1.3 MEETING FINANCIAL PERFORMANCE METRICS As noted in Section 1.1 above, implementing the 2016 LRFP has allowed the Water Department to continuously meet all LRFP financial performance metrics and fully fund all of its reserves at the target levels. 1.4.2 CREDIT RATING3 The Water Department maintains its own credit rating and has investment grade credit ratings from both Standard and Poors (now S&P Global) and Fitch Rating services. In 2019, in advance of the planned bond sale which took place in December 2019, Fitch provided an A+ rating with a stable outlook. In November 2020, Fitch downgraded The Department’s credit rating to A- with a negative outlook. This action is disappointing, of course, particularly so because the Department’s current financial condition is strong. Fitch’s explanation was that its ratings are 3 A brief primer on the factors credit rating agency considers in assigning credit ratings for utilities is provided in Appendix A. September 2021 12 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 “forward looking” and described the forward-looking challenges that drove the credit downgrade are as: • The additional debt the Department has taken on since 2019 – specifically the $149 million Drinking Water State Revolving Fund (DWSRF) loan for the Newell Creek Inlet/Outlet and Graham Hill Water Treatment Plant (GHWTP) Concrete Tanks Replacement projects; • The size of the capital program going forward; • A concern about affordability of water rates; and • Τhe fact that the Department was at the end of our scheduled rate increase cycle and had not yet finalized recommendations on the next cycle of rate increases, and had not completed the Prop 218 public review process and Council action. The Water Department’s current financial management performance is entirely in line with the 2016 Long-Range Financial Plan, which contemplated debt financing about 75% of the needed capital reinvestment in the water system. The latest pro forma model indicates an increase in debt to 85% of capital expenditures. With respect to affordability, Department staff shared with Fitch the Department’s recently completed analysis of the affordability of water rates which was based on a more detailed data analysis and a more refined metric of affordability than Fitch’s. Fitch’s analysis was based on coarser metrics and staff believed it likely significantly overstates the number of customers who find existing water rates unaffordable. Another measure of how the Water Department is viewed by the financial marketplace relates to how its water revenue bonds are being traded. Department bonds continue to trade at very favorable interest rates, with recent investors have bought the maturities ranging from 20 to 29 years for prices that yield 1.3% to 1.6%. 1.4.3 DEBT FINANCING The 2016 LRFP included a strategy for, on average, financing 75% of capital spending with long term loans, while funding the remaining 25% with annual rate revenues. The reasoning behind using debt financing to fund a major portion of the CIP is that it provides for inter-generational equity, letting future system users who will benefit from investments in facilities with very long useful lives pay their fair share of the cost of the needed improvements. In addition, spreading these costs over time helps to moderate and stabilize near-term adjustments to water rates. As planned, with the significant increase in capital spending, the Department is taking on quite a bit of additional long-term debt. As a result of a significant amount of careful work by staff, water rate-payers are benefitting from having the vast majority of the Department’s new debt September 2021 13 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 funded by DWSRF loan with a 1.4% interest rate over a 30-year term. As noted above, during FY 2020-2021, $149.3 million in DWSRF loan funds were obtained to support implementation of the Newell Creek Inlet/Outlet Pipeline Replacement and GHWTP Concrete Tank Replacement projects. Table 2 shows the status of the Water Department’s current debt. Interest and principal payments on the Department’s existing and anticipated future debt is incorporated into the financial model and is part of the current and future revenue requirements that are the basis for water rates and provide the financial resources necessary to make debt payments. Table 2 Water Department Debt Obligations Water Department Current Debt Debt Closing Principal Offering Maturity Date Amount Yield City of Santa Cruz 2014 Revenue 7/22/14 $ 11,260,000 0.25-3.8% 3/1/36 Refunding Bonds IBank 2016 8/1/16 $ 25,000,000 3.24% 8/1/46 City of Santa Cruz 2019 Revenue 12/12/19 $ 20,925,000 0.9-2.25% 3/1/49 Bonds (Green Bonds) DWSRF – Newell Creek Inlet/Outlet 9/23/20 $ 103,453,000 1.4% 10/1/52 Pipeline Replacement Project DWSRF – Graham Hill Water 4/19/21 $ 45,900,000 1.4% 4/30/54 Treatment Plant Concrete Tanks Revolving Line of Credit 2021 (BOA)4 6/15/21 $ 50,000,000 Variable5 6/14/2024 4 Note: Short-term borrowing through a revolving line of credit is being used to assist with cash-flow issues. DWRSF loans are disbursed from the state on a reimbursable basis that requires the Department to submit claims for costs after they have been incurred. The state’s turn-around time on paying claims often exceeds 60 days creating significant cash-flow issues for borrowers. 5 The rate is 1 Month LIBOR plus 50 basis pts for drawn funds and 22 basis pts for undrawn funds. A recent example: on September 10, 2021, the Revolving Line of Credit rate for borrowed funds was 0.6%. September 2021 14 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 One of the reasons for developing the LRFP was to be able to assess the Department’s capacity to use debt financing for major elements of its CIP. A measure of the Department’s financial capacity is what portion of its revenues would be used for debt service. For example, the amount of financial flexibility of an organization is substantially reduced as the percent of its revenue is dedicated to paying debt service rises. During the next five years, the Department anticipates issuing debt totaling $211 million. The annual average debt service is not expected to exceed 25% of annual rate revenue during the first five years, but it would continue to rise to a maximum of about 28% of annual revenues at the end of the ten-year period. These figures are obviously significantly greater than the Department’s current situation in which less than 10% of its revenues being currently dedicated to debt service. Nevertheless, the Department’s financial advisors are satisfied that the Department has the debt capacity needed to support implementation of the LRFP capital financing strategy, as long as the Department is able to increase rates and charges as outlined in the LRFP and able to meet key financial targets including maintaining financial reserves and meeting the 1.5 debt service coverage ratio. 1.4.4 CURRENT WATER RATE STRUCTURE As part of the development of the 2016 LRFP, the Department recommended and Council approved a significant change to the water rate structure. Since at least 2004, water rates produced about 35% of revenue through fixed charges based on meter size and 65% of total revenue was collected through volume or commodity charges. The rate structure adopted in 2016 collected substantially more of the total revenue through volume charges, a significant change to the historical practice. The 2016 rate structure collected the roughly 10% of operating costs associated with meter reading, meter maintenance, and billing and customer service functions through a fixed charge based on meter size, with the remainder being collected in the form of charges related to the amount of water used. The priority water pricing objectives that informed the change in rate structure were: 1. Revenue sufficiency; 2. Promotes efficiency; 3. Perceived to be fair by the public; and 4. Affordable for essential uses. Other changes from the rate structure adopted in 2004 were: reducing tiers for residential customers from five to four; changing multi-family rates to the same tiers as single family customers, and multiplying those tier levels by the number of units in the multi-family building; and adding the Infrastructure Reinvestment Fee (IRF) to collect revenues associated with pay as you go and capital spending. The IRF wasn’t exactly a new fee, as funds needed for capital September 2021 15 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 spending were always being collected as part of fixed and/or commodity charges. But with the planned expansion of the Department’s capital spending, the Department recommended creating the IRF to add transparency for customers related to what they were paying for. Revised 2016 tiered rates for single family residential customer were as follows: • 0 – 5 CCF = Tier 1 (average winter use) • 6 – 7 CCF = Tier 2 (average spring and fall use) • 8 – 9 CCF = Tier 3 (average summer use) • ≥ 10 CCF = Tier 4 As noted, multi-family residential rates were also tiered using the same tiers as for single family, but multiplying the tier allocations by the number of dwelling units in a master metered complex.6 The rate structure for landscape irrigation accounts was revised to be based on a simplified water budget system that established an allocation for each account. Usage up to that water budget allocation would be billed at tier 1 of the irrigation rates, consumption above the budgeted amount and up to 150% of the allocation would be billed at tier 2 of the irrigation rates, and all usage above 150% of the allocation would be billed at tier 3 of the landscape irrigation rates. The rate structures for the remaining customer classes were set using uniform rates established for each class based on the Cost-of-Service Analysis. Higher water use during the peak season is one factor that is used in the Cost-of-Service Analysis to allocate costs between customer classes. So, for example, this means that UCSC, whose water use includes some seasonal peaking, would pay a higher uniform rate than those customer classes that do not peak. The shift to generating a much larger portion of total water revenue based on water consumption introduced a number of revenue stability issues that were mitigated through a series of risk-management strategies. Section 1.4.5 below provides some information about how well the risk management approaches worked. Further information on and discussion about ongoing revenue stability-related risk management strategies for the FY 2023 – 2027 rate period is presented in section 2.5 later in this document. 6 Master metered systems may include irrigation or have irrigation on a separate meter. For water utility billing purposes, individually metered multi-family units are treated as single family residential properties. September 2021 16 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 1.4.5 REVENUE STABILITY In general, water rate revenues have been stable and the Department has been able to improve and sustain its financial position during the last five years. Water sales have consistently been below the 2.5 billion gallons per year conservative estimate used in water rate development in 2016 but the financial consequences of this shortfall have been mitigated due to a fairly consistent underspending of the annual operating and capital budgets. As several large capital projects transition from pre-construction activities (planning, design, environmental review, and permitting) to construction, capital spending is becoming more aligned with annual projections of capital expenditures. Additionally, Department leadership has taken steps in recent years to better align annual budgeting with annual expenditures and, as a result, expects to have less opportunity to mitigate lower than anticipated water sales through lower annual spending. Annual water rate increases necessary to support implementation of the 2016 LRFP were approved by City Council in August 2016 and implemented in October 2016, July 2017, July 2018, July 2019, and July 2021. The July 2021 increase was originally scheduled for July 2020 but was deferred due to the overall economic impact of the COVID 19 pandemic. The 2016 water rate increase included the implementation of a more volume-based rate structure with about 90% of revenues coming from charges based on the amount of water consumed, and only 10% of revenues coming from fixed charges based on meter size. The Council approved an increase in the Rate Stabilization Reserve (Fund 713) from $2.3 Million to $10 Million, which was specifically designed to provide a hedge against non-drought related variability. $3.8 million from the Rate Stabilization Reserve was, in fact, needed to mitigate revenue impacts due to business and UCSC pandemic-related closures during FY 2020, and additional funds may be transferred from Fund 713 to mitigate ongoing pandemic impacts in FY 2021, once year-end accounting is completed. The increasing costs of water, particularly in the higher-use tiers for residential customers and for irrigation uses did result in customers taking steps to reduce consumption where they could. Long-term demand forecasts now indicate that customer use can be expected to remain below 2.7 billion gallons per year in total system demand, a figure that hasn’t been typical in more than 45 years when the system was serving about one-half the current population. Rate increases for the FY 2023 through FY 2027 time period will reflect this water use trends, which result in higher per-unit prices for each unit of water sold because of the utility’s high degree of fixed to variable costs of producing and delivering water, and the increased revenue requirements associated with the capital program. September 2021 17 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2. 2021 LONG-RANGE FINANCIAL PLAN RECOMMENDATIONS AND PLAN IMPLEMENTATION This LRFP has been developed based on a specific five-year forecast within a ten-year planning horizon. The purpose of using the ten-year time frame is to ensure that steps taken during the first five years don’t unduly constrain future decision-making on the planned projects to augment water supply. The specific recommendations are limited to the first five years because that is as far ahead as the Department can establish rates under the limits set by California’s Proposition 218. As presented and discussed in this section, the LRFP integrates the key financial plan inputs that are used to produce multi-year revenue requirements. These revenue requirements reflect what is needed for operating the water utility, implementation of the capital financing strategy, maintaining financial reserves, and meeting a 1.5 debt service coverage target. Finally, the proposed water rates needed to support the planned operating and capital spending for FY 2023 – FY 2027 have been developed through a year-long process in collaboration with the Water Commission and the community, through community engagement that was unfortunately somewhat attenuated due to the COVID pandemic. Working with its consultant team, Department staff has created a Financial Plan that is realistic and implementable. Details of the assumptions, recommendations and approaches needed to implement the LRFP are presented in the following sections. 2.1 CAPITAL FINANCING STRATEGY The recommended capital financing strategy is consistent with that included in the 2016 LRFP. The major capital investments that will be made in the five-year FY 2023 – FY 2027 timeframe all have very long useful lives and will be in service and providing benefits to the community for decades to come. This means that it is entirely appropriate to finance the investments in these assets using long-term debt. This LRFP recommends lowering the goal for the amount of capital spending covered by annual operating revenues from a multi-year average of 25% to a multi-year average of 15%. This recommendation is in response to the already significant revenue increases that are necessary to support planned capital spending for some very large projects including the Graham Hill Water Treatment Plant concrete tanks replacement and the subsequent facilities improvement project at the same location. Implementing this capital facilities financing strategy results in increases in annual debt service, which is the major driver to the increased revenue requirements presented and discussed in September 2021 18 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 later in Section 2.3. As a result of increased debt service, in the near term, water rate revenues must increase to a much greater rate than annual inflation, and over time, customers are sure to notice the cumulative effect of these increases. To improve the City’s ability to maintain equitable access to water service for low-income rate payers, the Department, along with many other state and federal interests and decision-makers, is actively exploring and supporting state and federal action on low-income water rate assistance programs. 2.1.1 DEBT FINANCING ASSUMPTIONS In evaluating future financing needs, the LRFP includes assumptions on the initial and ongoing costs associated with issuing debt. Table 3 shows the projected current interest rate and terms for various debt issuance mechanisms that have been and would continue to be used in debt funding the planned CIP.7 Table 3 Debt Mechanism Estimated Rates & Terms Debt Mechanism Assumed Interest Rate Term (percent) (years) Tax-Exempt Financing (Bonds) 2.25 – 2.5 30 Drinking Water State Revolving Loan Fund 1.4 30 Water Infrastructure Financing and Innovation 2.5 35+ years Act Loan (WIFIA) For general and longer-range planning purposes, additional debt issuance is assumed to be tax- exempt bonds. This assumption is used because, even though the Department has had very good success applying for and receiving low-interest financing from state programs such as the California Infrastructure and Economic Development Bank and the Drinking Water State Revolving Loan Fund, only tax-exempt water bonds are a virtually guaranteed source of funding, assuming that the Department maintains its credit-worthiness.8 The Department will also pursue below market Drinking Water State Revolving Loan Fund and WIFIA loans for rehabilitation and replacement projects that would score well in meeting that program’s competitive criteria. 7 A discussion of potential grant funding options being explored and pursued is included in Section 2.7 on Plan Implementation. 8 See further discussion in Section 3.2 below and in Appendix A September 2021 19 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.2 FINANCIAL POLICIES AND RESERVE GOALS Reserve policies are a particularly important tool to help manage risks to an agency’s financial condition. In addition, they help an organization establish and maintain a good credit rating, thereby reducing the cost of borrowing. Beginning with Council direction in 1993, the Department has built and maintained a Rate Stabilization Reserve Fund (Fund 713). In 2014, the City Council approved two additional reserve funds: a 90-Day Operating Cash Reserve Fund (716) and an Emergency Reserve Fund (717). As discussed in section 1.4 above, a major accomplishment of adopting and implementing the 2016 LRFP was fully funding all reserves. This LRFP recommends retaining the existing goals and policies related to financial reserves and goals and debt service coverage ratio. Table 4 provides information on the recommended reserve fund goals, the financial status of each reserve at 6-30-2021 and the goal for each reserve that is indexed to operating costs at the end of the five-year rate schedule. Table 4 Fund Balance Reserve and Debt Service Coverage Ratio Status and Goals (unaudited) Fund Status on 6/30/2021 Target on 6/30/2027 711 Water Operations & 90 Days Operating Cash 90 Days Operating Cash Maintenance $8,069,637 $10,109,798 713 Water Rate Stabilization $11,044,296 $10,000,000 Reserve9 90 Days Operating Cash 90 Days Operating Cash 716 Water 90-Day Operating $8,069,637 $10,109,798 Cash Reserve 717 Water Emergency Reserve $3,328,320 $3,000,000 Debt Service Coverage Ratio = or > than 1.5x = or > than 1.5x 9 For a fuller discussion of the earlier status and funding history of these reserve funds and reserve goals, please see https://www.cityofsantacruz.com/home/showpublisheddocument/53794/636064174716000000 . September 2021 20 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.3 REVENUE REQUIREMENTS Working together with its consultants, Public Financial Management (PFM) and Raftelis Financial Consultants (Raftelis), a financial planning model was created in 2015-2016 to support the Department’s ongoing efforts to project operating and capital budgets and forecast annual revenue requirements. These projections include: • Assumption about how much utility operations will be for the coming 5-year period; • Assumptions about how much of the capital program will be cash (pay-as-you- go funding) financed versus debt financed; • Revenues needed to cover debt service payments for the financing expected to be used to fund capital investments; and • Funds required to meet financial reserve and debt service coverage ratio targets. This information is then used by the Department’s 2016 and 2021 rate consultant, Raftelis Consulting, to develop proposed water rates that are also based on a comprehensive Cost-of- Service Analysis also completed by Raftelis.10 2.3.1 FINANCIAL PLAN MODEL INPUTS The key financial planning tool being used by the Department in its financial planning work is a custom financial model created by the Department’s financial advisor, PFM. This model requires a number of inputs including: 1. The beginning fund balance for the Department’s Operating Fund (Fund 711), 2. Multi-year operating expenses, as modified by specific inflation factors, 3. Multi-year capital costs, including specific inflation factors and cost estimating provisions, and 4. Multi-year debt service costs, which are generated from debt financing assumptions. 10 The Cost-of-Service Analysis is completed and used as the basis of preparing water rates that comply with the requirements of Proposition 218 (give Constitutional cite reference). Proposition 218 requires that customer rates be based on the cost of serving similarly situated customers, for example, single family residential customers. September 2021 21 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The model then produces the following outputs: 1. Multi-year revenue requirement projections, 2. Financial performance metrics related to the debt service coverage ratio and financial reserve goals, 3. The sizing and timing of new debt issues, and 4. Information necessary to identify year-over-year increases in revenues that is then used in rate-making. The sections below describe the inputs being used in the 2021 LRFP. 2.3.1.1 PROJECTED OPERATING BUDGETS Table 5 shows anticipated operating and capital expenses for FYs 2023 through 2027. Appendix B includes the complete ten-year Pro Forma, and the financial model that produces the Pro Forma is the source of the information presented in Table 5. Table 5 Anticipated Expenses FY 2023 – 2027 Operating 2023 2024 2025 2026 2027 Expenses Personnel $18,295,095 $19,217,668 $20,201,621 $21,251,780 $22,373,372 Services, Supplies 16,428,430 17,249,852 18,112,344 19,017,982 19,968,860 & Other Capital Outlay 631,575 663,154 696,311 731,127 767,683 Total Operating $35,355,040 $37,130,674 $39,010,276 $41,000,849 $43,109,915 Operating costs have been developed based on very modest changes to staffing and departmental operations over time. The changes in Operating costs are based on the annual inflation factors shown in Table 6. These inflation factors are based on actual historical experience and long-term industry trends. September 2021 22 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table 611 Operating Budget Inflation Factors Expense Category 2023 - 2027 Salaries & Wages 3.0% Employee Benefits 9.0% Operating Supplies and Chemical 5.0% Energy 5.0% All Other Categories 3.0% 2.3.1.2 PLANNED CAPITAL INVESTMENTS There is no question but that the major driver of the Water Department’s financial planning is its need to invest and reinvest in water system infrastructure and water supply augmentation to improve the reliability of Santa Cruz’s water supply. The 2016 LRFP set the stage for these efforts, and ongoing infrastructure condition assessments and subsequent capital project planning and development activities since 2016 have significantly increased staff’s understanding of what work needs to be done and its likely cost. As work on water rate development for the FY 2023 to 2027 period began in 2020, staff wanted to engage with Water Commissioners in evaluating and providing feedback on possible capital planning scenarios and their outcomes in terms of system performance and reductions of vulnerability and their potential impacts on future revenue requirements and water rates. To do this staff recommended that the Water Commission form an Ad Hoc Subcommittee to work with staff on this effort. At the Water Commission’s July 7, 2020 meeting, an Ad Hoc Subcommittee was formed to forecast revenues and develop various financial scenarios to establish revenue requirements to inform the water rate making process. Three members of the Water Commission, Doug Engfer, Walt Wadlow and Alejandro Páramo, were selected to work with Water Department staff on this assignment. The Ad Hoc Subcommittee met with staff on five different occasions to: • Gain an understanding of the current financial model, including inputs and outputs, used by the Department; • Review four scenarios with four different 10-year Capital Investment Plan (CIP) expenditure plans; the scenarios were a low ($189 million), medium ($377 million) and high ($610 million) level of capital investment as well as a no CIP ($0) scenario; and 11 Inflation factors were developed using a combination of actual historical experience (Energy and Chemicals), City projections (salaries and benefits) and industry trends for everything else. September 2021 23 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 • Analyze a fifth scenario, as recommended by the Ad Hoc Subcommittee that rescheduled the projects in the high ($610 million) cost scenario over 15 years to smooth spending and equalize the collective impacts on water rates. Data reviewed by the Ad Hoc Subcommittee included CIP project priorities, projects included in each of the scenarios, a side-by-side comparison of all the scenarios, and the aggregate impact on future revenue requirements for each scenario, including projected year-over-year increases. The final financial scenario recommended by the Water Commission and reviewed with the City Council in its April 6, 2021 work session on water financial planning and rate-making topics was used to establish revenue requirements to fund daily operations and a capital program of $271 million for the FY 2023 – FY2027 rate period. These revenue requirements were provided to the Water Department’s rate consultant, Raftelis, to use, in combination with the Cost-of- Service study, for the development of rates for each customer class.12 Capital projects planned for the five-year period are shown in Table 7. 12 See Water Commission Ad Hoc Subcommittee presentation at https://ecm.cityofsantacruz.com/OnBaseAgendaOnline/Meetings/ViewMeeting?id=1608&doctype=2 September 2021 24 Updated City of SANTA CRUZ Water Department Long‐Range Financial Plan – September 2021 Table 7 CIP for FY 2023 ‐ 2027 CIP Budget Summary Project Costs (FY23 -FY27) Project Titles WATER SUPPLY RESILIENCY & CLIMATE ADAPTATION PROJECTS Water Supply Augmentation Strategy Beltz Wellfield Aquifer Storage and Recovery (ASR) 15,070,358 Santa Margarita ASR and In Lieu Water Transfers and Exchanges 6,503,376 Studies for Recycled Water, Climate Change, and ASR 230,000 Subtotal 21,803,734 INFRASTRUCTURE RESILIENCY AND CLIMATE ADAPTATION Raw Water Storage Projects NCD I/O Replacement Project 9,660,000 Raw Water Diversion and Groundwater System Projects Laguna Creek Diversion Retrofit 10,000 North Coast System Majors Diversion Rehab 966,927 Tait Diversion Rehab/Replacement 1,493,513 Felton Diversion Pump Station Improvements 1,043,986 Raw Water Transmission Newell Creek Pipeline Rehab/Replacement 10,000 Newell Creek Pipeline Felton/GHWTP 26,590,000 Brackney Landslide Area Pipeline Risk Reduction 4,980,000 Surface Water Treatment GHWTP Concrete Tanks Replacement 23,090,000 GHWTP Facilities Improvement Project 108,017,427 River Bank Filtration Study 5,877,851 Distribution System Storage, Water Main and Pressure Regulation, and Metering Projects University Tank No. 4 Rehab/Replacement 5,280,000 Meter Replacement Project 1,940,000 Engineering and Distribution Main Replacement Projects 9,631,099 Facility & Infrastructure Improvements 2,306,028 Subtotal 200,896,831 OTHER RISK MANAGEMENT AND RISK REDUCTION PROJECTS Staff Augmentation Water Program Administration 13,660,140 Contingency Management Reserve 34,531,189 Subtotal 48,191,329 GRAND TOTAL 270,891,894 September 2021 25 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The projected size and timing of planned and necessary debt issues to finance these capital projects are summarized in the Table 8 below. These figures do not include the potential benefits of additional DWSRF, WIFIA, or grant funding for projects that may defer or replace projected borrowing shown in the table. The anticipated debt issues total $211 million over the next five years. These debt issues assume borrowing rates of 2.25% to 2.5% for 30-year debt. Table 8 Size and Timing of Revenue Bond Issues Needed to Fund Capital Program 2023 2024 2025 2026 2027 $36,887,583 $27,536,633 $42,763,648 $49,662,981 $54,144,163 Appendix C provides the details of the fifteen-year Capital Investment Plan, including both brief project descriptions and a fifteen-year plan of spending. 2.3.2 FINANCIAL PLAN MODEL OUTPUTS: REVENUE REQUIREMENTS FOR FY 2023 – FY 2027 As shown in Figure 1, a significant output of financial planning is the revenue requirements that inform the rate making process. Based on the recommendations and assumptions described elsewhere in this section, the Department calculated revenue requirements. Table 9 presents these results and the year-over-year increases from the “revenue neutral” figure developed through the Cost-of-Service Analysis. The figures shown are the revenue requirements needed to meet operating and capital costs, pay debt service, and comply with reserve and debt service coverage policies in the five years of the financial plan period FY 2023 – FY 2027. September 2021 26 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table 9 FY 2023 – FY 2027 Projected Revenue Requirements Annual FY 2021 Revenue FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 COS13 Requirements $39,334,191 $42,044,299 $48,586,908 $57,465,304 $59,494,385 $65,207,147 Unsmoothed Year over Year 6.9% 15.6% 18.3% 3.5% 9.6% Increase Proposed Smoothed 6.9% 16.2% 16.2% 6.9% 6.9% Year over Year Increase Rates are being developed for the revenue requirements where year-over-year increases are smoothed for rate schedule years two and three and four and five. Smoothing is used to minimize, to the degree feasible, significant changes in annual rate increases. Due to the significant amount of capital spending in years two and three, it is not really feasible to implement the more ideal approach of smoothing rates over the entire rate period because doing so would result in inadequate resources to meet expenditures during years two and three. The year one rate increase is being left at the projected 6.9% level due to impacts to in- city rate-payers of the Council-approved elimination of the surcharge on water charges for outside city rate-payers. This change results in higher rates in the initial year for inside-city rate-payers due to no longer collecting the 14.5% surcharge on outside-city rate-payers. A complete version of this table which provides the Department’s detailed Financial Pro Forma can be found in Appendix B. 2.4 WATER RATES Water rates are the element of the LRFP that most directly impact customers. The water rate development process is heavily regulated by legal provisions in California as well as by water service industry best practices. An example of the latter is the American Water Works Association’s (AWWA) M1 Manual on Water Rates, Fees and Charges.14 13 The FY 2021 figure is revenue neutral (collects same amount of revenue as current rates), utilizes the FY 2021 budget and cost data, and is based on customer consumption data from FY 2019. It serves as the baseline for year over year calculations of the percent revenue increase for FY 2023, the first year of the projected 5-year rate schedule. 14 See Appendix D for an excerpt of the AWWA M1 Manual on Water Rates, Fees and Charges. This appendix provides a table of contents for the 2017 edition along with chapter 1. September 2021 27 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.4.1 PRIORITY WATER PRICING POLICY OBJECTIVES Policy-maker engagement in the rate-making process typically begins early in the effort with a water pricing policy objectives exercise. Table 1 in section 1.3 on the Financial Planning Conceptual Model gives a list of some water pricing policy objectives that could be considered in developing customer water rates. Both the Water Commission and the City Council worked through an exercise to prioritize water pricing policy objectives for use in designing water rates for the next five years. The selected priority objectives are: 1. Ensures water for essential use is affordable to all customers; 2. Maintains transparency and equity for capital and water reliability needs; and 3. Provides sufficient revenues to meet operating, capital, and customer service level needs. 2.4.2 RATE STRUCTURE OPTIONS CONSIDERED In its deliberations about potential changes to the structure of water rates and in consideration of both the priority water pricing policy objectives and the community input received through customer engagement, the Water Commission considered four different rate structure options: 1. Maintaining the existing volume-based rate structure in which both the consumption charge and the Infrastructure Reinvestment Fee (IRF) are based on amounts of water used, and are based on tiered consumption. 2. Maintaining the volume-based rate structure for the consumption charge, and shifting the IRF to a fixed charge based on meter size. 3. Maintaining the volume-based rate structure for the consumption charge, and converting the IRF to a uniform charge for each unit of water consumed. 4. Maintaining the volume-based rate structure for the consumption charge and shifting the IRF to a fixed fee billed on the property tax based on meter size. At its July 12, 2021 meeting, the Water Commission considered actual rates for Alternatives 1, 2, and 3, and provided direction to the consulting team about which alternative to further develop for recommendation to the City Council, as well as to present as proposed rates in the Proposition 218 notice and public process. As anticipated, the Water Commission’s discussion on the options centered on the key issue of how to fund the IRF, or perhaps more simply, how to fund the Department’s capital investment program, which is basically all about reliability. As has been demonstrated multiple times over the last decade, neither the Department’s critical backbone infrastructure nor its water supply is sufficiently reliable, particularly with respect to the current and expected impacts of climate change. The Department’s capital program over the next 15 years is almost entirely focused on increasing infrastructure reliability September 2021 28 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 and resilience, and improving the reliability of Santa Cruz’s water supply. Regardless of how much water is used by individual customers, it is clear that all customers benefit from these improvements. This reality drives the main question related to rate structure alternatives: “What is the best way to collect the costs allocated to each customer class for these improvements?” The following choices were considered by the Water Commission: 1. Funding the IRF using the same tiered or uniform rate commodity structure used to collect the consumption-based costs that fund the Department’s operating budget; 2. Funding the IRF using a uniform rate in which every unit of consumption is charged a fixed amount; or 3. Funding the IRF using a fixed charge based on meter size.15 Each of the options the Commission reviewed collects the projected IRF cost allocated to each customer class, they just do it in different ways. Focusing on single-family residential customers, as both the largest customer class and the group contributing the largest part of the Water Department’s funding: • Alternative 1 would collect the IRF funding from those using greater amounts of water in the rates with tiers in place for residential users, i.e., those using water in tier 3; • Alternative 2 would collect the IRF as a uniform charge for every unit used, without increasing the cost per unit for higher users; and • Alternative 3 would collect the IRF by spreading the cost allocated to residential customers with 5/8th inch meters equally among all 21,719 property owners in this situation. Preliminary rates for the FY 2023 – FY 2027 rate period were presented to the Water Commission on July 12, 2021 for discussion. This information shows that in the first two options, those customers using less water will have a smaller financial impact to their future bill than would be the case if the IRF were allocated by meter size. Between the first two options, low water users would pay less under Alternative 1 than the same low water using customer would pay under Alternative 2. 2.4.3 WATER RATE STRUCTURE RECOMMENDATION Following its July 12 and August 23, 2021 discussions, the Water Commission acted to unanimously approve a recommendation to the Council to retain its current volume-based rate structure largely because this approach does the best job of maintaining affordable access to water for essential use for all customers. In this approach, about 90% of the Department’s total 15 See July 12, 2021 Water Commission Meeting Materials at https://ecm.cityofsantacruz.com/OnBaseAgendaOnline/Meetings/Search?dropid=4&mtids=124 . September 2021 29 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 revenue comes from charges associated with the amount of water used. The remaining 10% comes from fixed charges based on meter size and is intended to recover the costs of meter reading, meter maintenance, producing and delivering bills and providing customer service. Under the volume-based rate structure, accurate meter readings are critical for maintaining both revenue sufficiency and customer equity, and is one more reason the meter replacement program approved by Council in August 2020 is included in the Capital Investment Program. Continued residential customer demand reductions in the peak season have resulted in a flattening of peak season demand over many years. Continued movement toward flattening the peak has been observed in consumption patterns since 2014, and he 2016 rate change likely contributed to this outcome because tiered, volume-based pricing implemented in 2016 effectively incentivizing additional water use reductions in the peak season, resulting in lower and more stable consumption patterns throughout the year by many customers. The recommendation is for tiered rates for single and multi-family residential customers to continue because they are well aligned with the costs of the systems and facilities that ensure reliable water supply during the annual dry season when water use will tend to increase, even if less dramatically than in the past. But, the changing consumption pattern does support revising the number of tiers from four to three.16 Recommended revised tiers for single and multi- family residential customers are as follows: • 0 – 5 CCF = Tier 1 (average winter use) • 6 – 9 CCF = Tier 2 (average summer use) • 10 and above CCF = Tier 3 Multi-family residential rates would also recommended to continue to be tiered using the same tiers as for single family but multiplying the tier allocations by the number of dwelling units in a master metered complex.17 No changes are recommended for landscape irrigation accounts. They are recommended continue to be billed based on a simplified water budget system that would establish an allocation for each account. Usage up to that water budget allocation would be billed at tier 1 of the irrigation rates, up to 150% of the allocation would be billed at tier 2 of the irrigation 16 The change in the number of tiers was the result of the analysis done by Raftelis Financial Consultants as part of the Cost-of-Service Study and was based on evolving water use patterns for residential customers. 17 Master metered systems may include irrigation or have irrigation on a separate meter. For water utility billing purposes, individually metered multi-family units are treated as single family residential properties. September 2021 30 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 rates, and all usage above 150% of the allocation would be billed at tier 3 of the landscape irrigation rates. The remaining customer classes are recommended to be billed using uniform rates established for each class, based on the Cost-of-Service Analysis. For example, this means that the University of California at Santa Cruz, whose water use includes some seasonal peaking, would pay a higher uniform rate than those customer classes that do not. 2.4.4 SPECIFIC ASSUMPTIONS USED IN DEVELOPING PROPOSED WATER RATES Once a proposed water rate structure is identified, and revenue requirements are determined, the result of the Cost-of-Service Analysis is used to allocate the proportionate share of projected costs to each customer class. The water demand forecast identifies the number of units of water (in hundreds of cubic feet or CCF) expected to be sold to each customer class for each year of the proposed rate schedule. Specific rates are then designed to recover the required amount in each of the years covered in the rate schedule. So, specifically, the inputs to the water rates being proposed for the FY 2023 – FY 2027 rate schedule period include the following assumptions: 1. Rate Structure: • Collect revenues sufficient to recover the revenue necessary to cover the cost of meter reading, meter maintenance, billing preparation and distribution, and customer service through a fixed fee based on meter size. • Collect all other revenues based on volume-based user rates generally split between revenues needed to recover operating costs through the commodity fee and revenues needed to cover pay-as-you-go capital spending and debt service on borrowing needed to support the capital program in the IRF. 2. Revenue Collection Split: • Revenue collection is split between the amounts to be collected through fixed charges (about 10%) and use-based charges consumption and IRF. Table 10 presents these results. September 2021 31 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table 1018 FY 2023 – FY 2027 Projected Revenue Requirements as Used in Rate Design Financial Plan COS FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 O&M $30,197,959 $32,696,061 $34,069,032 $36,018,421 $37,980,397 $40,168,470 IRF $9,136,232 $9,348,238 $14,517,877 $21,446,883 $21,513,987 $25,038,677 Total Rev. $39,334,191 $42,044,299 $48,586,908 $57,465,304 $59,494,385 $65,207,147 Req. % Change in Total Revenue 6.9% 15.6% 18.3% 3.5% 9.6% Requirement Unsmoothed % Change in Total Revenue 6.9 16.2 16.2 6.9 6.9 Requirement Smoothed 3. Projected Water Sales • For the purposes of rate development, assume that the amount of water to be sold during the five years covered by the proposed rates is 2.26 billion gallons per year growing to 2.46 billion gallons per year by 2027.19 Additional details about the recommended rate structure and water rates can be found in Appendix F. 2.4.5 RATE OPTIONS FOR NORTH COAST AGRICULTURE CUSTOMERS As part of the development of a rate schedule for the FY 2023 – FY 2027 rate period, the City worked with Raftelis to develop reliability-based rate options for the North Coast Agriculture 18 See Table 9 for the total revenue requirements being used for the rate increase. 19 Water sales demand assumptions come from the 2020 updated demand forecast developed for the 2020 update of the Urban Water Management Plan. The summary table of that forecast is provided in Appendix E. Projected sales figures do not include system losses but do include North Coast Agricultural use. Use levels for FY 2023 and FY 2027 are interpolated between projections for FY 2020, FY 2025 and FY 2030. September 2021 32 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 customer class (North Coast), which includes a subset of customers that purchase raw water for agricultural irrigation. Compared to all other City customers, North Coast currently has the same level of service but requires a different type of service. A customer’s level of service is defined by the reliability of water delivery, whereas the type of service differs for North Coast due to the class’s use of raw water instead of treated water. All other City customers use treated water. Current North Coast’s water rates include a monthly fixed readiness-to-serve charge based on meter size, with their charges being exactly the same for this portion of the bill due as all other customers. In addition, North Coast Ag customers pay a uniform commodity charge based on water usage (to recover operating costs), a uniform IRF based on water usage (to recover capital costs), and a uniform rate stabilization fee. The cost basis for their commodity and IRF charges is the water system’s raw water assets and capacities, for instance, Newell Creek Dam and Loch Lomond Reservoir, the North Coast sources and both the North Coast and Newell Creek Pipelines. No costs associated with the operation, maintenance, rehabilitation or replacement of water treatment facilities or the treated water storage and distribution are allocated or North Coast users. The two rate options developed for consideration by North Coast Ag customers involve differing levels of reliability: “maintain reliability” or “decreased reliability.” Under the “maintain reliability” option, North Coast Ag customers would keep their current level of service, which is subject to curtailment when all other City customers are also curtailed. Under the “decreased reliability” option, water service for North Coast would be seasonally interruptible based on water supply conditions in Santa Cruz. North Coast rates for the “decreased reliability” option will be less than the “maintain reliability” option because the cost-allocation methodology used for the two options differs. In the “maintain reliability” option, both North Coast and San Lorenzo River water and infrastructure assets are needed to provide the level of reliability that North Coast Ag (and all other customers) receive. Without the San Lorenzo river’s supply and raw water storage assets Santa Cruz water service customers, including North Coast Ag customers, cannot be assured that they will have water during the six month long annual dry season, as these facilities are a critical component of the system’s ability to provide water during those months. In the “decreased reliability” option, the cost basis used in developing rates excludes the San Lorenzo River supply and raw water storage assets. This is possible because when water supply conditions warrant, North Coast Ag customers choosing this level of service will be completely cut off from service, so the San Lorenzo storage and water system assets will not be either available or needed to serve them. September 2021 33 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table 11 below shows the preliminary operating commodity charges and IRF based on the two reliability options. North Coast rates are decreasing from current rates due to a change in usage characteristics for the class; compared to the last rate study, North Coast water usage and peaking have decreased. Additionally, the methodology used to determine the IRF in the previous rate study was based on capacity; the proposed methodology in this study is based on asset benefit. The proposed methodology to allocate capital costs changed from the last study due to the availability of better asset data. Table 11 Example Water Rates for North Coast Ag Customers under Two Reliability Options Reliability Options Current Proposed Difference ($) FY 2022 Charge FY 2023 Charge Commodity + IRF Maintain Reliability $8.98 $6.45 ($2.53) Decreased Reliability $8.98 $2.88 ($6.10) The prior study used the best available data at the time the study was conducted. However, detailed asset data, particularly replacement cost information, were not available during the prior water rate study. City staff provided Raftelis with detailed asset information during the current rate study process, which was used as the framework for allocating capital costs based on asset benefit. The proposed five-year rate schedule for North Coast Ag customers is included with other rate details in Appendix F. 2.5 RISK MANAGEMENT – MITIGATING THE POTENTIAL REVENUE STABILITY RISKS OF A HEAVILY VOLUME BASED RATE STRUCTURE A more volume-based rate structure creates inherent revenue stability risks for a utility. In making a decision to move in this direction, Water Department staff carefully considered how this risk might influence revenues by evaluating the character and water use consumption patterns in the City’s service area. Even before the recent drought, Santa Cruz water customers were among the lowest water users in the state on both system-wide and residential gallons-per-capita-per-day metrics. During the drought, that pattern continued. Anecdotally, staff is observing some continuing shifts in water use that may reflect some long-term changes in use patterns that will ultimately be attributed to the drought becoming permanent. One very likely candidate for this kind of change is residential landscape irrigation. September 2021 34 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Revenue streams that depend on the volume of water sold are particularly susceptible to weather driven changes in consumption, and changes in consumption due to price effects. The Department’s recent experiences make it keenly aware of this dynamic. The challenges of managing ongoing operations and management of the water utility while simultaneously planning for and implementing major capital improvements aren’t insurmountable with a more volume-based rate structure, but certainly introduce an element of uncertainty that should be carefully considered before proceeding. This is what Department staff has done. Rather than avoid recommending a rate structure that seems well-suited to the community’s and policy maker’s values and priorities, Department staff recommends planning for and implementing, as part of the rate structure, the mechanisms needed to mitigate these potential risks. These risks come in two basic forms: drought risks, and non-drought risks. The risk mitigation approaches being recommended to address each is discussed in more detail below. 2.5.1 DROUGHT RISKS In 2014, the Water Department instituted a drought cost recovery fee mechanism that is put in place as a fixed charge. Table 12 shows an example of the Drought Cost Recovery Fee revenue recovery target for each stage of the City’s Water Shortage Contingency Plan and provides the amount charged for a typical single family residential customer using a 5/8- or 3/4-inch meter. Table 12 Drought Cost Recovery Fee for Water Shortage Contingency Plan Stage 2 Example Fixed Charge for 5/8- and 3/4-inch Meters Meter Size Proposed Proposed Proposed Proposed Proposed FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Charge Charge Charge Charge Charge 5/8 inch $21.05 $24.46 $28.42 $30.38 $32.48 3/4 inch $31.58 $36.70 $42.64 $45.58 $48.73 Additional Details on the Drought Cost Recovery Fees for other meter sizes and Drought Stages can be found in Appendix F A Drought Cost Recovery Fee was levied in Santa Cruz from October 1, 2014 through June 30, 2016. Levying the fee is explicitly linked to action taken by the Santa Cruz City Council to declare a drought and establish a curtailment stage in advance of each drought year’s dry season (May through October). September 2021 35 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The Department’s 2014 and 2016 Proposition 218 notice included the Drought Cost Recovery Fee Schedule. The planned 2021 Proposition 218 notice will also include publication of this proposed fee. 2.5.2 NON-DROUGHT RELATED RISKS A heavily volume-based revenue generating approach presents a variety of risks that should be mitigated in order to protect the Water utility’s financial position. The COVID 19 pandemic is a particularly relevant example of an unforeseeable event that resulted in changes in customer consumption. One example is the very dramatic reduction of water use by UCSC as a result of shutting down all (or most) in-person learning between spring of 2020 and fall of 2021. The mitigation strategy for non-drought related risks adopted in 2016 are recommended to continue to be applied in the FY 2023 – FY 2027 rate period. Two approaches focused on acknowledging and mitigating the risks to revenue stability associated with moving to a more volume-based rate are involved: 1. Using a conservative assumption of water volumes to be sold at 2.26 billion gallons in FY 2023 growing to 2.46 billion gallons per year by FY 2027; and 2. Applying a $1.00 surcharge per unit of water consumption (a hundred cubic feet or CCF) to maintain the Rate Stabilization Reserve at a minimum of $10 million. In any normal water year20 where water sales don’t meet projections, the revenue shortfall associated with this situation would be covered by resources from this fund.21 Water Department staff recommend continuing to use these strategies for the next five years and then revisiting them when the LRFP is updated as part of the next water rate development process. Section 2.6 discusses terms and conditions of use of the Rate Stabilization Reserve should it grow to a level above $10 million. 20 Meaning any year where a drought emergency has not been declared and/or Drought Cost Recovery Fees have not been collected, even though they were authorized to be levied as a result of a drought emergency declaration by Council. 21 The Rate Stabilization Reserve Fund would be used to augment revenues during “normal” water years if the amount of water sold falls below 2.5 billion gallons. In water years where water restrictions are required due to inadequate supply, a Drought Cost Recovery charge would be used to ensure revenues are adequate to meet system costs and debt service obligations. September 2021 36 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.6 ALLOCATIONS OF RATE STABILIZATION REVENUES THAT ARE HIGHER THAN EXPECTED A reasonable question is what to do if revenue stability does not turn out to be an issue because consumption is either stable at the projections being used in the LRFP or is greater than projected. The Department proposes the following conditional approach to addressing this situation if it occurs: If…. • the minimum debt service coverage ratio target of 1.5 is being consistently met, and • reserves are fully funded, and • “pay-as-you-go” capital is being funded at an average over the previous 3 years of at least 15%, and • there is no unpaid outstanding balance of short-term borrowing22 to address needs other than the cash-flow issues associated with delayed reimbursements of construction cost claims from state or federal low-interest loans reimbursement. Then either… • additional planned rate increases will be adjusted to the level needed to produce required revenues without any excess,23 or • direct additional funds to “pay-as-you-go” capital expenditures, reducing the need to issue debt, or • At Council’s direction, adjust the amount of funding in the Emergency Reserve and the Rate Stabilization Reserve to an established percent of the Operating budget, rather than using a fixed dollar amount for these reserves. Because the Rate Stabilization Reserve produces annual revenues, the amount of annual revenue produced, but not the total Rate Stabilization Reserve fund balance, can be used in calculating the Department’s annual Debt Service Coverage Ratio. 22 Sources of short-term borrowing include a revolving line of credit such as the Department’s June 2021 $50M Line of Credit with Bank of America, or borrowing from other available sources. 23 The public notices required under Proposition 218 are required to identify (and justify based on the Cost-of- Service) the maximum amount that will be charged for a service. A utility has the option of charging less than the maximum amount published in the required notices. The obverse, however, is not true, which is the major reason for building into a more heavily volumetric rate structure a mechanism to mitigate for lower than anticipated revenues due to lower than forecasted water sales. September 2021 37 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 2.7 PLAN IMPLEMENTATION Much of the policy direction and financial performance targets of the LRFP are integrated in to the Department’s ongoing operations, for example a five-year rate schedule, once it has been through the required public process and the Council has taken action on it. This means that there are relatively few items that require further direction once the plan is approved. Just two items are included here to make explicit policies or strategies that are related to the LRFP and its implementation. These two items are described below. 2.7.1 CONSIDERATIONS IN THE TIMING AND SIZING OF DEBT In order to effectively use a debt financing approach to minimize interest costs associated with borrowing, it is necessary to actively manage the timing and sizing of debt issued to avoid paying interest on cash sitting idle in a bank account. Given this concern, when issuing debt, it makes sense to take into account the following: • Set a minimum debt financing amount of $15 million;24 • Consider the spending rate on current and near-term capital projects;25 • Consider market conditions or interest rate changes that might be more or less favorable in the future; • Explore the potential to use one or more bridge funding mechanisms such as a bank line of credit or internal borrowing (from City reserve funds, for example) that would allow for debt issuance at a later date. The PFM model includes a debt sizing function that is used to forecast capital expenditures and anticipate when additional borrowing is needed. The model uses both built-in parameters, such as the minimum $15 million in borrowing, and supports the process of consciously consider the sizing and timing of debt. City staff will be actively using this model in ongoing 24 The purpose for establishing a minimum issuance amount for a debt issue is based on reasoning that is similar to the advice of travel gurus regarding going to the ATM when you’re on vacation in a foreign country. There are certain transaction costs associated with taking money out of the ATM that don’t vary (or don’t vary very much) with the size of the withdrawal. Therefore, it is more cost effective to go to the ATM fewer times and take out more money rather than doing the opposite. Issuing debt also has certain borrowing costs that accrue, and borrowing in bigger chunks helps manage and minimize the impact of some of these costs. 25 The Department’s CIP shows spending patterns that reflect the staff’s best estimate of how the project will play out. The environmental review, right-of-way, and regulatory climate in California is complex and project spending can be greatly influenced by this reality. In sizing and timing debt issues, it will be important to use the most up- to-date information about progress on projects. September 2021 38 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 financial analyses and management activities, and the timing and sizing of each debt issue may be revised based on market conditions at the time. 2.7.2 OPPORTUNITIES FOR GRANT FUNDING In addition to borrowing, the Department will work to acquire grant funding for capital investments if and as available. Grant funds may most likely be an option to defray some of the costs of the projects included in the Water Supply Augmentation Strategy. Appendix G includes a July 2021 summary of federal and state infrastructure funding opportunities that was developed for and provided to the Water Commission. This summary provides an overview of the many programs being considered or already approved that will provide new opportunities for infrastructure funding, including potential grants for drought response and climate resilience investments, both of which are entirely aligned with Santa Cruz Water’s initiatives and needs. 2.8 REVIEW AND REVISION OF THE LRFP The LRFP is designed to be used as an ongoing guide for the Water Department financial planning and management activities over the upcoming five- to ten-year period. The financial planning and rate models that form the analytical basis of the LRFP are effective tools to support the Department’s financial decision-making, and will be used and updated as new information is available. In 2027, the Department would expect to prepare an update to the LRFP and complete a new Cost-of-Service Analysis to use in setting rates of FY 2028 through FY 2032. Using these results as well as updated information on revenue requirements, the Department will comprehensively review and revise the LFRP to guide the next five year’s activities. September 2021 39 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Glossary • Bond covenant – A legally binding term for an agreement between a bond issuer and a bond holder. Bond covenants are designed to protect the interests of both parties. Bond covenants are commitments that the City makes to the bondholders to ensure timely payment of principal and interest. • Capital Investment Plan – A multi-year plan that lists the rehabilitation, replacement, major maintenance, and new water system facilities and systems that are needed to maintain reliable and high-quality water service or meet regulatory requirements; • CCF (One Hundred cubic feet of water) – 748 gallons of water. A CCF is the unit used by the Santa Cruz Water Department as the basis for charges to customers based on water use. • Debt service coverage ratio – The ratio of net operating revenue to annual debt payments. • Emergency reserve fund – A reserve fund specifically designed to provide resources to address the consequences of natural disasters on water system facilities or resources or a catastrophic failure of a water system facility; • Pro forma (financial statement) - A pro forma financial statement is a forecast of the utility’s revenues and expenditures based on certain assumptions and projections; • Ninety-day operating cash reserve fund – A reserve created to help ensure the utility’s ability to meet operating expenses, provide financial stability, and resilience and support establishing and maintaining a good credit rating. • Operating budget – The portion of the Department’s overall budget that pays for ongoing operations of the utility, including the costs related to personnel, materials and services such as water treatment chemicals, energy resources, and non-capital improvement project professional and technical services; • Pay-as-you-go capital funding – paying for capital improvement projects using current year or accumulated rate revenues rather than the use of short or long term debt; • Proposition 218 – a 1996 California Constitutional Amendment that established the “cost- of-service” requirements for utility rates as well as certain noticing and public review process requirements related to water rate increases;26 • Rate structure design – Characteristics of water rates that provides for the amount of revenue produced by fixed and variable charges, the use of different tiers for different amounts of water use, etc.; • Rate stabilization reserve – a financial reserve specifically intended to provide a hedge against revenue variability resulting from weather conditions, such as a cool wet spring that results in less water than projected being used for outdoor irrigation. 26 Proposition 218 also includes other provisions that aren’t relevant to water rates and finances. September 2021 40 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 • Reimbursement resolution – A Council action that authorizes the Department to reimburse itself for funds expended on capital projects using proceeds from future debt issues. • Water Supply Augmentation Strategy – This is the plan developed by the Council appointed Water Supply Advisory Committee and accepted by the City Council for implementation in November 2015. September 2021 41 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX A – PRIMER ON UTILITY CREDIT RATINGS One typical measure of a Utility’s financial performance is its credit rating. Table A-1 below describes the factors considered by Credit Rating Agencies in assigning credit ratings. Table A-1 Rating Agency Factors Used in Assigning an Agency Credit Rating Rating Factor Rating Sub-Factors & Description System Characteristics • asset condition • service area wealth (median family income) • gross county product • unemployment rate • annual utility bill as a % of median family income • system size (O&M) Financial Strength • annual debt service coverage • days cash on hand • debt to operating revenues • debt to capitalization ratio Management • rate management • regulatory compliance • capital planning • financial planning (debt & investment policies) • operational risk (water supply adequacy) Legal Provisions • rate covenant • debt service reserve requirement Credit rating agencies consider a variety of factors in assigning a credit rating, and utilities that have the best credit ratings typically will include policies that specifically address the financial strength metrics listed in Table A-1. Establishing the 90-Day Operating Cash Reserve Fund was an important step, however for bond rating purposes a 180-day reserve is preferable. To that end, the financial plan also envisions keeping a 90-day reserve in the operating fund (711) in addition to the 90-Day Operating Cash Reserve Fund (716). Providing a reserve equal to 180 days of operating expenses (between balances in Fund 711 and 716) is considered to be the minimum reserve to maintain a strong bond rating (AA category) and access to capital markets. Increasing these reserves above 180- days operating cash may be pursued if and when resources become available. September 2021 42 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 At 6-30-2015, this fund had increased to $2.4 million. As noted above, the $1/CCF surcharge will be used to help increase this fund to $10 million, as part of the mitigation for a more volume-based rate structure. September 2021 43 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX B – FINANCIAL PRO FORMA This Appendix provides a 10 year Pro Forma from the Department’s financial Model. The key financial planning tool being used by the Department in its financial planning work is a financial model created by the Department’s financial advisor, PFM. This model requires a number of inputs including beginning fund balances for the Department’s Operating Funds, forecasted operating and capital costs, and debt service. To pay for the projected costs, the model projects sufficient revenues, debt issues and financially prudent fund balances. The following Financial Pro Forma spreadsheet from the financial model is used in the 2021 LRFP. September 2021 44 City of Santa Cruz Water Department FY 2022 – FY 2031 Financial Pro-Forma APPENDIX C – 15 YEAR CIP This Appendix includes a spreadsheet listing projects, and the project descriptions. Water Department FY 2023 – FY 2037 Capital Investment Program September 2021 46 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX D – EXCERPT OF AWWA M1 MANUAL ON WATER RATES, FEES AND CHARGES September 2021 47 M1 Water Rates, Fees, and Charges Seventh Edition Ideal crop marks 48 Ideal crop marks Contents List of Figures, ix List of Tables, xi Preface, xv Acknowledgments, xvii Introduction, xix Section I Introduction, 1 Chapter I.1 Overview of Cost-Based Water Utility Rate-Making ...............................3 Objectives of Cost-Based Rate-Making, 4 Generally Accepted Rate-Setting Methodology, 4 Key Technical Analyses of Cost-Based Rate-Making, 5 Other Water Rate Issues and Considerations, 6 References, 6 Section II Revenue Requirements, 7 Chapter II.1 General Concepts for Establishing Revenue Requirements ...................9 Adequacy of Revenues, 9 Approaches to Projecting Revenue Requirements, 10 Test Year, 11 Reference, 18 Chapter II.2 Revenues ...........................................................................................................19 Sources of Revenue, 19 Cash Versus Accrual Revenues, 21 Unbilled Revenues, 21 Projecting Revenue, 22 Example, 24 Chapter II.3 Operation and Maintenance Expenses ......................................................27 Classifying O&M Expenses, 28 Identifying Non-Recurring O&M Expenses, 28 Identifying Capitalized O&M Expenses, 29 Identifying Special Considerations for Government-Owned Utilities, 29 Estimating O&M Expenses, 30 Example, 30 Chapter II.4 Taxes ..................................................................................................................33 Local Taxes, 33 State Taxes, 34 Federal Taxes, 34 Tax Issues in Rate Cases, 35 Chapter II.5 Capital-Related Costs.....................................................................................39 Cash-Needs Approach, 39 Utility-Basis Approach, 42 49 AWWA Manual M1 iii iv WATER RATES, FEES, AND CHARGES Rate of Return, 46 Capital Structure, 47 Chapter II.6 Examples of Revenue Requirements .................................................51 Government-Owned Utilities, 51 Investor-Owned Utilities, 54 Section III Cost Allocation, 57 Chapter III.1 Allocating Revenue Requirements to Cost Components ..............59 Assigning Revenue Requirements to Functional Costs, 60 Allocating Functionalized Costs to Cost Components, 61 Special Considerations, 71 Chapter III.2 Distributing Costs to Customer Classes ...........................................73 Customer Classes, 73 Units of Service, 75 Distributing Cost Components to Customer Classes, 77 Unit Costs, 78 Distributing Costs by Base-Extra Capacity Method, 81 Distributing Costs by Commodity-Demand Method, 83 Chapter III.3 Emerging Trends in Water Rate-Making..........................................87 Revenues, 89 Reserves, 90 Revenue Requirements, 90 Cost Allocation, 92 Rate Design, 95 Summary and Conclusions, 99 References, 100 Section IV Rate Design, 101 Chapter IV.1 Selecting Rate Structures ..................................................................103 Planning the Rate Structure Study, 103 Rate Structure Variables and Considerations, 106 Summary, 108 References, 108 Chapter IV.2 Uniform Rates .....................................................................................109 General Considerations, 109 Historical Perspectives, 110 Advantages and Disadvantages, 111 Determining a Uniform Rate, 112 Example, 112 Summary, 113 Chapter IV.3 Decreasing Block Rates ......................................................................115 General Considerations, 115 Historical Perspectives, 116 Advantages and Disadvantages, 117 Determining Decreasing Block Rates, 119 Example, 119 Summary, 121 AWWA Manual M1 50 CONTENTS v Chapter IV.4 Increasing Block Rates .......................................................................123 General Considerations, 123 Historical Perspectives, 124 Advantages and Disadvantages, 125 Setting Block Size and Pricing, 126 Examples, 127 Summary, 128 Chapter IV.5 Seasonal Rates .....................................................................................129 General Considerations, 129 Historical Perspectives, 131 Advantages and Disadvantages, 132 Determining Seasonal Rates, 133 Examples, 135 Summary, 137 Chapter IV.6 Water-Budget Rates ............................................................................139 General Considerations, 140 Historical Perspectives, 141 Advantages and Disadvantages, 141 Implementing Water-Budget Rates, 143 Example, 147 Summary, 148 References, 148 Chapter IV.7 Revenue Stability—Fixed Charges and Other Considerations ....149 General Considerations, 149 Fixed Charges, 151 Other Considerations, 153 Summary, 154 References, 155 Chapter IV.8 Rates for Fire Protection Service ......................................................157 General Considerations, 157 Historical Perspectives, 158 Public Versus Private Fire Protection, 161 Determining Fire Protection Costs, 162 Rate Design, 165 Emerging Issues, 169 References, 171 Section V Other Rate Issues, 173 Chapter V.1 Water Reuse Rates and Other Considerations ...............................175 Background and Terminology, 176 Water Reuse Considerations, 176 Financial Analysis Versus Economic Analysis, 178 Types of Water Reuse Customers, 178 Financial Planning for Reuse, 180 Cost Allocation of Water Reuse Rates, 182 Pricing Reuse Water, 188 References, 189 Chapter V.2 Standby Rates .......................................................................................191 General Considerations, 191 Historical Perspectives, 192 51 AWWA Manual M1 vi WATER RATES, FEES, AND CHARGES Advantages and Disadvantages, 192 Example, 194 Summary, 194 Chapter V.3 Drought and Surcharge Rates ..........................................................195 General Considerations, 195 Historical Perspectives, 197 Advantages and Disadvantages, 197 Determining Rate Surcharges, 198 Determining Drought Surcharges, 199 Drought Surcharge Considerations, 199 Drought Surcharge Example, 203 Summary, 205 Chapter V.4 Low-Income Affordability Programs .............................................207 Defining Affordability, 209 Affordability Programs, 212 Business Case for Creating Affordability Programs, 217 Funding for Affordability Program Assistance, 218 Summary and Future Direction, 219 References, 220 Chapter V.5 Negotiated Contract and Economic Development Rates ............223 General Considerations, 224 Historical Perspectives, 227 Advantages and Disadvantages, 228 Negotiated Contract Rate Example, 230 Economic Development Rate Example, 231 Summary, 233 Chapter V.6 Indexed Rates .......................................................................................235 General Considerations, 235 Advantages and Disadvantages, 236 Example, 237 Summary, 237 Chapter V.7 Price Elasticity .....................................................................................239 General Considerations, 240 Historical Perspectives, 240 Examples, 242 Summary, 243 Chapter V.8 Marginal Cost Pricing .......................................................................245 General Considerations, 245 Practical Considerations, 246 Advantages, 248 Disadvantages, 249 Summary, 250 Reference, 251 Chapter V.9 Miscellaneous and Special Charges ...............................................253 Definition of Service Charges, 254 Example, 255 Legal Authority for Service Charges, 255 Selecting and Implementing Service Charges, 255 AWWA Manual M1 52 CONTENTS vii Cost Basis and Rationale, 257 Determining the Cost of Providing Service, 258 Example Service Charges, 261 Summary, 272 Reference, 272 Section VI Outside Customer Rates, 273 Chapter VI.1 Overview of Outside Customer Rates ............................................275 Benefits of Providing Outside Customer Service, 276 Nature of the Relationship, 276 Outside-Customer Rate Methodologies, 278 Implementation and Administration Considerations, 287 Stakeholder Involvement and Public Communications, 289 Summary, 290 Chapter VI.2 Outside Retail Rates ...........................................................................291 Benefits of Providing Outside Retail Service, 291 Outside Retail Rate Methodologies, 292 Chapter VI.3 Outside Wholesale Rates ...................................................................297 Definition of Wholesale Service, 297 Types of Wholesale Service, 298 Benefits of Providing Outside Wholesale Service, 299 Wholesale Service Relationship and Financial Considerations, 299 Determining Wholesale Revenue Requirements, 301 Rate Design for Wholesale Customers, 305 Implementation and Administration Considerations, 305 Stakeholder Involvement and Public Communications, 309 Summary, 309 Reference, 310 Section VII Capacity and Development Charges, 311 Chapter VII.1 Connection and Customer Facility Charges ..................................313 Allocating Costs, 315 Capital Cost Component, 316 Calculating Connection and Customer Facility Charges, 317 Examples, 319 Chapter VII.2 System Development Charges ..........................................................321 Financial Goals and Objectives, 322 Methodology and Legal Considerations, 323 Information and Documentation for Calculations, 326 New Customer Demands (Level of Service), 327 Approaches to Calculating SDCs, 328 Examples of SDC Methodologies, 330 Other SDC Technical and Administrative Issues, 340 Administrative and Accounting Policies and Procedures, 343 Best Management Practices, 345 Updates of the SDC Analysis, 346 References, 347 Chapter VII.3 Availability Charges ..........................................................................349 AWWA Manual M1 53 viii WATER RATES, FEES, AND CHARGES Section VIII Implementation Issues, 351 Chapter VIII.1 Public Involvement in Rate-Making ..............................................353 General Considerations and Policy Issues, 353 Historical Perspectives, 354 Public Involvement Planning, 355 Communication Tools, 359 Evaluating Communications, 360 Summary, 361 Reference, 361 Chapter VIII.2 Data Requirements .............................................................................363 Customer Records, 363 Plant Investment, 366 Operation and Maintenance Expenses, 367 Periodic Cash Flow for the Utility, 368 Customer Survey Information, 368 Summary, 368 Reference, 368 Appendixes, 371 Appendix A Development of Peaking Factors by Customer Class ..................373 Appendix B Equivalent Meter Ratios ....................................................................383 Appendix C Bill Tabulation Methods ...................................................................389 Appendix D Example of Citizens Advisory Committee Guidelines ..............397 Glossary, 399 Index, 409 List of AWWA Manuals, 417 AWWA Manual M1 54 AWWA MANUAL M1 I.1 Chapter Overview of Cost-Based Water Utility Rate-Making Establishing cost-based rates, fees, and charges is an important component in a well- managed and operated water utility. Cost-based rates provide sufficient funding to allow communities to build, operate, maintain, and reinvest in the water system that provides the community with safe and reliable drinking water and fire protection. Properly and adequately funded water systems also allow for the economic development and sustain- ability of the local community. The purpose of this manual is to discuss standard practices in financial planning and rate-making that a utility can use to establish cost-based rates, fees, and charges to recover the full costs associated with its water system. The methods and analyses used to establish cost-based rates, fees, and charges have a long history within the water utility industry. Operators of some of the earliest water systems recognized the need for sufficient funding and rates to properly operate, main- tain, and expand their water systems. AWWA appointed the Committee on Water Rates in 1949. As time passed, the utility industry recognized the need for a manual of standard practice. Through the work of this committee, the first AWWA M1 manual, Water Rates Manual, was published in 1954. (For a more complete history, see Woodcock 2013.) Many of the same concepts, methodologies, and analyses used in 1954 remain relevant today. As time has passed, AWWA Manual M1 has been updated and expanded to reflect the chang- ing industry and its current financial and rate issues. The development of this seventh edition continues the efforts of many dedicated rate professionals to provide a manual of standard practice for the development and establishment of cost-based water rates, fees, and charges. As a manual of standard practice, AWWA advocates the use of the generally accepted cost-based principles and methodologies for establishing rates, charges, and fees contained and discussed within this manual. Establishing cost-based and equitable rates is techni- cally challenging and requires, at some level, knowledge and understanding of finance, accounting, budgeting, engineering, system design and operations, customer service, 3 55 4 WATER RATES, FEES, AND CHARGES public outreach and communication, and the legal environment as it may relate to setting rates, fees, and charges. OBJECTIVES OF COST-BASED RATE-MAKING Water rates developed using the methodologies discussed in this manual, when appropri- ately applied, are generally considered to be fair and equitable because these rate-setting methodologies result in cost-based rates that generate revenue from each class of customer in proportion to the cost to serve each class of customer. Water rates are considered fair and equitable when each customer class pays the costs allocated to the class and, conse- quently, cross-class subsidies are avoided. While recovery of the full revenue requirement in a fair and equitable manner is a key objective of a utility using a cost-of-service rate-making process, it is often not the only objective. The following list contains the typical objectives in establishing cost-based rates (Bonbright, Danielsen, and Kamerschen 1988): • Effectiveness in yielding total revenue requirements (full cost recovery) • Revenue stability and predictability • Stability and predictability of the rates themselves from unexpected or adverse changes • Promotion of efficient resource use (conservation and efficient use) • Fairness in the apportionment of total costs of service among the different ratepayers • Avoidance of undue discrimination (subsidies) within the rates • Dynamic efficiency in responding to changing supply-and-demand patterns • Freedom from controversies as to proper interpretation of the rates • Simple and easy to understand • Simple to administer • Legal and defendable GENERALLY ACCEPTED RATE-SETTING METHODOLOGY This manual outlines the methodologies and analyses that are used to establish cost-based rates. As displayed in Figure I.1-1, the generally accepted rate-setting methodology includes three categories of technical analysis. The first is the revenue requirement analysis. This analysis examines the utility’s operating and capital costs to determine the total revenue requirements and the adequacy of the utility’s existing rates. Next, a cost-of-service analy- sis is used to functionalize, allocate, and equitably distribute the revenue requirements to the various customer classes of service (e.g., residential, commercial) served by the utility. The final technical analysis is the rate-design analysis. It uses the results from the revenue- requirement and cost-of-service analyses to establish cost-based water rates that meet the overall rate-design goals and objectives of the utility. Sections of this manual have been dedicated to providing detailed discussions of the three types of analysis. Section II of this manual discusses the various technical com- ponents of establishing a utility’s revenue requirements. Section III discusses the various methodologies that may be used to conduct a cost-of-service analysis. Finally, section IV reviews the various issues and technical considerations in designing water rates. AWWA Manual M1 56 OVERVIEW OF COST-BASED WATER UTILITY RATE-MAKING 5 Compares the revenues of the utility to its Revenue Requirement Analysis operating and capital costs to determine the adequacy of the existing rates to recover the utility’s costs Allocates the revenue requirements to the Cost-of-Service Analysis various customer classes of service in a fair and equitable manner Considers both the level and structure of the Rate-Design Analysis rate design to collect the distributed revenue requirements from each class of service Figure I.1-1 Analytical steps of cost-based rate-making KEY TECHNICAL ANALYSES OF COST-BASED RATE-MAKING In establishing cost-based water rates, it is important to understand that a cost-of-service methodology does not prescribe a single approach. Rather, as the first edition of AWWA’s Manual M1 noted, “the [M1 manual] is aimed at outlining the basic elements involved in water rates and suggesting alternative rules of procedure for formulating rates, thus permitting the exercise of judgment and preference to meet local conditions and require- ments” (AWWA 1954). This manual, like those before it, provides the reader with an under- standing of the options that make up the generally accepted methodologies and principles used to establish cost-based rates. From the application of these options within the princi- ples and methodologies, a utility may create cost-based rates that reflect the distinct and unique characteristics of that utility and the values of the community. Revenue Requirement Analysis The purpose of the revenue requirement analysis is to determine the adequate and appropri- ate funding of the utility. Revenue requirements are the summation of the operation, main- tenance, and capital costs that a utility must recover during the time period for which the rates will be in place. Two generally accepted approaches for establishing a utility’s revenue requirements are discussed in this manual: the cash-needs approach and the utility-basis approach. Section II of the manual provides a detailed discussion and numerical examples about how to establish a utility’s revenue requirements using these two approaches, and this section provides a framework for determining how to select between the two approaches. Cost-of-Service Analysis The purpose of the cost-of-service analysis is to equitably distribute the revenue require- ments between the various customer classes of service served by the utility. The cost- of-service analysis determines what cost differences, if any, exist between serving the various customer classes. The two generally accepted methodologies for conducting the cost-of-service analysis are called the base-extra capacity method and the commodity- demand method. The functionalization, allocation, and distribution process of the base-extra capacity and commodity-demand methodologies are generally considered fair and equitable because both approaches result in the revenue requirements being distrib- uted to each class in proportion to each class’s contribution to the system cost compo- nents. Discussions of both cost-of-service methodologies, along with numerical examples to illustrate their differences, are provided in section III of this manual. AWWA Manual M1 57 6 WATER RATES, FEES, AND CHARGES Rate-Design Analysis The final technical analysis is the rate-design analysis. This analysis determines how to recover the appropriate level of costs from each customer class of service. There are differ- ent rate structures that may be used to collect the appropriate level of revenues from each customer class of service. Section IV of this manual covers the selection and development of rate designs in detail. OTHER WATER RATE ISSUES AND CONSIDERATIONS In addition to the topics previously discussed, this manual also contains guidance on a vari- ety of other water rate and cost recovery issues, capacity and development charges, and water rate implementation issues. These topics are discussed in sections V through VIII. Section V provides an overview of many distinct situations and pricing consider- ations that utilities may need to address. It is not unusual for a utility to face situations where a customer or group of customers has unique characteristics and circumstances. These situations include reuse rates and charges, standby rates, drought and surcharge rates, low-income affordability rates, negotiated contract and economic development rates, indexed rates, price elasticity, marginal cost pricing, and miscellaneous and special charges. Regardless of the distinctive situation and pricing considerations, the cost-based principles and methodologies as discussed within this manual should be adapted for the cost analysis to provide proper support for the rates. Section VI is devoted to the development of rates for customers outside a municipal- ity that owns the system. It has been expanded to include an overview of setting rates for outside customers, with chapters on wholesale (or bulk) charges and retail sales. In recent years, the cost of system expansion and customer growth has had a signif- icant financial impact on utilities. The development of cost-based connection fees, system development charges, or dedicated capacity charges are the topics reviewed in section VII. Finally, while cost-of-service principles for rate-making and related fees and charges rely on significant amounts of financial analysis, engineering analysis, and policy deci- sions, it is necessary to engage the public. These topics, along with the data needs for developing cost-based rates, are discussed in section VIII of the manual. REFERENCES AWWA. 1954. Manual M1. Water Rates Manual, 1st ed. Denver, Colo.: AWWA. p. 1. Bonbright, J.C., A.L. Danielsen, and D.R. Kamerschen. 1988. Principles of Public Utility Rates, 2nd ed. Arlington, Va.: Public Utilities Reports. pp. 383–384. Woodcock, C.P.N. 2013. A Brief History of Water Rates Manuals and Publications. Journal of the New England Water Works Association, December. AWWA Manual M1 58 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX E – SUMMARY TABLE FROM 2021 LONG-RANGE DEMAND FORECAST September 2021 59 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX F – PROPOSED WATER RATES AND FEES FOR FY 2023- FY 2027 The tables below are the complete set of rate tables for the 5-year rate period for FY 2023 through FY 2027. These are the rate tables that are used in the Proposition 218 Notice. Table F-1 Ready-to-Serve Charge Ready-to-Serve ($/meter) Meter Size Current As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $11.26 $12.38 $14.39 $16.73 $17.89 $19.13 3/4 inch $11.56 $12.61 $14.66 $17.04 $18.22 $19.48 1 inch $12.44 $13.27 $15.42 $17.92 $19.16 $20.49 1-1/2 inch $13.61 $14.15 $16.45 $19.12 $20.44 $21.86 2 inch $16.85 $16.55 $19.24 $22.36 $23.91 $25.56 3 inch $40.71 $34.33 $39.90 $46.37 $49.57 $53.00 4 inch $49.55 $40.91 $47.54 $55.25 $59.07 $63.15 6 inch $70.16 $56.26 $65.38 $75.98 $81.23 $86.84 8 inch $93.73 $73.81 $85.77 $99.67 $106.55 $113.91 10 inch $120.24 $93.57 $108.73 $126.35 $135.07 $144.39 Table F-2 Ready-to-Service Charge for Fire Services Fire Ready-to-Serve ($/meter) Meter Size Current As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 3/4 inch $1.26 $2.36 $2.75 $3.20 $3.43 $3.67 1 inch $1.26 $2.53 $2.94 $3.42 $3.66 $3.92 1-1/2 inch $1.26 $3.14 $3.65 $4.25 $4.55 $4.87 2 inch $1.26 $4.21 $4.90 $5.70 $6.10 $6.53 2-1/2 inch $1.26 $5.80 $6.74 $7.84 $8.39 $8.97 4 inch $1.26 $14.56 $16.92 $19.67 $21.03 $22.49 6 inch $1.26 $38.11 $44.29 $51.47 $55.03 $58.83 8 inch $1.26 $78.72 $91.48 $106.30 $113.64 $121.49 10 inch $1.26 $139.81 $162.46 $188.78 $201.81 $215.74 September 2021 60 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table F-3 Current Consumption Charge and Infrastructure Reinvestment Fees Consumption Charge and Infrastructure Reinvestment Fee ($/ccf) Customer Class Current Current Quantity Charge IRF Residential Tier 1 (0 to 5 ccf) $7.37 $2.23 Tier 2 (6 to 7 ccf) $8.24 $3.34 Tier 3 (8 to 9 ccf) $9.51 $4.13 Tier 4 (10 ccf and above) $11.28 $5.55 Commercial Uniform $8.43 $3.27 UCSC Uniform $8.60 $3.46 Landscape Irrigation Tier 1 (up to 100% of budget) $8.80 $4.06 Tier 2 (101% to 150% of budget) $11.74 $6.08 Tier 3 (151% of budget and above) $13.17 $6.16 North Coast Agriculture Uniform $4.59 $4.39 September 2021 61 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table F-4 Consumption Charge Consumption Charge ($/ccf) Customer Class As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 Residential* • Tier 1 (0 to 5 ccf) $7.68 $8.93 $10.38 $11.10 $11.87 • Tier 2 (5 to 9 ccf) $10.37 $12.05 $14.01 $14.98 $16.02 • Tier 3 (10 ccf and above) $12.60 $14.65 $17.03 $18.21 $19.47 Commercial ** (Uniform) $8.53 $9.92 $11.53 $12.33 $13.19 UCSC (Uniform) $8.78 $10.21 $11.87 $12.69 $13.57 Landscape Irrigation*** • Tier 1 (up to 100% of budget) $11.50 $13.37 $15.54 $16.62 $17.77 • Tier 2 (101% to 150% of budget) $16.86 $19.60 $22.78 $24.36 $26.05 • Tier 3 (more than 151% of $22.11 $25.70 $29.87 $31.94 $34.15 budget) North Coast Agriculture (Uniform) • Maintain Reliability $5.07 $5.90 $6.86 $7.34 $7.85 • Decrease Reliability $2.24 $2.61 $3.04 $3.25 $3.48 *Includes Single Family and Multi-Family, tier width is per dwelling unit **Includes Business, Industrial, Restaurant, Hotel, Golf, Municipal, Bulk, Fire Service Leaks, and Temporary ***Tiers based on percent of water budget for each customer September 2021 62 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table F-5 Infrastructure Reinvestment Fee Infrastructure Reinvestment Fee ($/ccf) Customer Class As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 Residential* • Tier 1 (0 to 5 ccf) $2.06 $2.40 $2.79 $2.99 $3.20 • Tier 2 (5 to 9 ccf) $3.86 $4.49 $5.22 $5.59 $5.98 • Tier 3 (10 ccf and above) $6.15 $7.15 $8.31 $8.89 $9.51 Commercial** (Uniform) $2.84 $3.31 $3.85 $4.12 $4.41 UCSC (Uniform) $3.29 $3.83 $4.46 $4.77 $5.10 Landscape Irrigation*** • Tier 1 (up to 100% of budget) $9.03 $10.50 $12.21 $13.06 $13.97 • Tier 2 (101% to 150% of budget) $11.73 $13.64 $15.85 $16.95 $18.12 • Tier 3 (151% of budget and $14.21 $16.52 $19.20 $20.53 $21.95 above) North Coast Agriculture Uniform • Maintain Reliability $1.38 $1.61 $1.88 $2.01 $2.15 • Decrease Reliability $0.64 $0.75 $0.88 $0.95 $1.02 *Includes Single Family and Multi-Family, tier width is per dwelling unit **Includes Business, Industrial, Restaurant, Hotel, Golf, Municipal, Bulk, Fire Service Leaks, and Temporary ***Tiers based on percent of water budget for each customer Table F-6 Elevation Surcharge Elevation Surcharge ($/ccf) Elevation Zone* Current As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 • Lift Zone 1 $0.54 $0.19 $0.23 $0.27 $0.29 $0.32 • Lift Zone 2 $0.54 $0.38 $0.45 $0.53 $0.57 $0.61 • Lift Zone 3 $0.54 $0.69 $0.81 $0.95 $1.02 $1.10 *Elevation surcharges are charged to applicable customers only Table F-7 Rate Stabilization Fee Rate Stabilization Fee ($/ccf) All Customers Current As of 7/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 All Accounts $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 September 2021 63 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 The following tables are for the Drought Cost Recovery Fee to be applied if the Council declares a water shortage and a table is provided for each stage of the Water Shortage Contingency Plan. Due to ongoing dry conditions, the new fee schedule presented in these tables would become effective upon the Council’s action to adopt revised water rates for the next rate schedule period. Table F-8 Drought Cost Recovery Fee – Water Shortage Response Plan Stage 1 Drought Cost Recovery Fee ($/meter) - Stage 1 Meter Size Current As of 1/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $2.45 $11.90 $13.83 $16.07 $17.18 $18.37 3/4 inch $2.45 $17.85 $20.75 $24.11 $25.77 $27.55 1 inch $6.13 $29.75 $34.57 $40.17 $42.95 $45.91 1-1/2 inch $12.25 $59.50 $69.14 $80.34 $85.89 $91.81 2 inch $19.60 $95.19 $110.62 $128.53 $137.40 $146.88 3 inch $36.75 $208.23 $241.97 $281.17 $300.57 $321.31 4 inch $61.25 $374.81 $435.53 $506.09 $541.01 $578.34 6 inch $122.50 $773.40 $898.70 $1,044.28 $1,116.34 $1,193.37 8 inch $281.75 $1,665.79 $1,935.65 $2,249.23 $2,404.42 $2,570.33 10 inch $347.90 $2,498.68 $2,903.47 $3,373.83 $3,606.63 $3,855.48 Table F-9 Drought Cost Recovery Fee – Water Shortage Response Plan Stage 2 Drought Cost Recovery Fee ($/meter) - Stage 2 Meter Size Current As of 1/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $6.12 $21.05 $24.47 $28.43 $30.39 $32.49 3/4 inch $6.12 $31.58 $36.70 $42.65 $45.59 $48.73 1 inch $15.30 $52.63 $61.16 $71.07 $75.97 $81.21 1-1/2 inch $30.60 $105.25 $122.31 $142.12 $151.92 $162.41 2 inch $48.96 $168.40 $195.69 $227.39 $243.08 $259.85 3 inch $91.80 $368.37 $428.05 $497.39 $531.71 $568.40 4 inch $153.00 $663.06 $770.48 $895.30 $957.07 $1,023.11 6 inch $306.00 $1,368.21 $1,589.87 $1,847.42 $1,974.89 $2,111.16 8 inch $703.80 $2,946.91 $3,424.31 $3,979.05 $4,253.61 $4,547.11 10 inch $869.04 $4,420.37 $5,136.47 $5,968.58 $6,380.41 $6,820.66 September 2021 64 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table F-10 Drought Cost Recovery Fee – Water Shortage Response Plan Stage 3 Drought Cost Recovery Fee ($/meter) - Stage 3 Meter Size Current As of 1/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $9.79 $30.20 $35.10 $40.78 $43.60 $46.60 3/4 inch $9.79 $45.30 $52.64 $61.17 $65.39 $69.90 1 inch $24.48 $75.49 $87.72 $101.93 $108.97 $116.49 1-1/2 inch $48.95 $150.98 $175.44 $203.86 $217.93 $232.97 2 inch $78.32 $241.56 $280.70 $326.17 $348.68 $372.73 3 inch $146.85 $528.40 $614.01 $713.47 $762.70 $815.33 4 inch $244.75 $951.12 $1,105.21 $1,284.25 $1,372.86 $1,467.59 6 inch $489.50 $1,962.62 $2,280.57 $2,650.02 $2,832.87 $3,028.34 8 inch $1,125.85 $4,227.17 $4,911.98 $5,707.72 $6,101.55 $6,522.55 10 inch $1,390.18 $6,340.76 $7,367.97 $8,561.58 $9,152.33 $9,783.84 Table F-11 Drought Cost Recovery Fee – Water Shortage Response Plan Stage 4 Drought Cost Recovery Fee ($/meter) - Stage 4 Meter Size Current As of 1/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $13.46 $38.20 $44.39 $51.58 $55.14 $58.95 3/4 inch $13.46 $57.30 $66.59 $77.37 $82.71 $88.42 1 inch $33.65 $95.49 $110.96 $128.94 $137.84 $147.35 1-1/2 inch $67.30 $190.98 $221.92 $257.87 $275.67 $294.69 2 inch $107.68 $305.57 $355.08 $412.60 $441.07 $471.50 3 inch $201.90 $668.43 $776.72 $902.55 $964.82 $1,031.40 4 inch $336.50 $1,203.17 $1,398.09 $1,624.58 $1,736.67 $1,856.50 6 inch $673.00 $2,482.72 $2,884.93 $3,352.28 $3,583.59 $3,830.86 8 inch $1,547.90 $5,347.40 $6,213.68 $7,220.30 $7,718.50 $8,251.08 10 inch $1,911.32 $8,021.10 $9,320.52 $10,830.45 $11,577.75 $12,376.61 September 2021 65 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Table F-12 Drought Cost Recovery Fee – Water Shortage Response Plan Stage 5 Drought Cost Recovery Fee ($/meter) - Stage 5 Meter Size Current As of 1/1/22 As of 7/1/23 As of 7/1/24 As of 7/1/25 As of 7/1/26 5/8 inch $18.35 $46.07 $53.54 $62.21 $66.50 $71.09 3/4 inch $18.35 $69.10 $80.30 $93.31 $99.74 $106.63 1 inch $45.88 $115.17 $133.83 $155.51 $166.24 $177.71 1-1/2 inch $91.75 $230.33 $267.65 $311.01 $332.47 $355.41 2 inch $146.80 $368.52 $428.23 $497.60 $531.93 $568.63 3 inch $275.25 $806.13 $936.73 $1,088.48 $1,163.58 $1,243.87 4 inch $458.75 $1,451.03 $1,686.10 $1,959.25 $2,094.44 $2,238.95 6 inch $917.50 $2,994.18 $3,479.24 $4,042.88 $4,321.84 $4,620.04 8 inch $2,110.25 $6,449.00 $7,493.74 $8,707.73 $9,308.56 $9,950.85 10 inch $2,605.70 $9,673.50 $11,240.61 $13,061.59 $13,962.84 $14,926.28 September 2021 66 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 APPENDIX G – JULY 2021 SUMMARY STATE AND FEDERAL INFRASTRUCTURE FUNDING INITIATIVES AND OPPORTUNITIES Working with the Water Commission over the last year, Water Department staff has been heavily focused on financial planning and water rate development work. Together with ongoing development of the Department’s Capital Investment Program (CIP) the financial planning work paints a vivid picture of the financial challenges ahead for Santa Cruz water service rate payers. During the 2014 – 2015 Water Supply Advisory Committee (WSAC) process, the cost of water supply augmentation was certainly a focus of the Committee’s discussion, but those discussions lacked the context of the system’s larger need for capital investment and reinvestment. Although the April 2015 State of the Water System report introduced WSAC to the larger system’s needs and infrastructure challenges , it wasn’t until the June 2016 Long Term Financial Plan laid out the implications of and strategy for meeting the system’s infrastructure and water supply needs that the implications for water service customer rates began to come into focus. Weather conditions since 2014 have further and consistently demonstrated the vulnerabilities and challenges the system faces on both the infrastructure and supply reliability fronts. The current drought, the prospects of another La Nina winter coming up, as well as the sobering analysis of current customer water use characteristics and customer water use curtailment strategies developed in the process of updating the Water Shortage Contingency Plan, have further underscored the critical need to begin moving forward on supply augmentation projects as soon as we possibly can. This means funding becomes an even more critical element to supply planning, and that consideration and active pursuit of funding options is a high priority. It also means that being opportunistic is both desirable and necessary if the City is to take advantage of some of the funding resources that are or could become available through state or federal infrastructure legislation. City Priorities for Capital Funding: As ongoing water rate development work is clearly showing, funding for capital projects is driving water rate increases. The good news is that state and federal infrastructure initiatives are much more likely to be the source of one-time funding than ongoing funding for operations. Santa Cruz is well lined up to compete for grant or low- interest loan funding for capital projects such as the Graham Hill Water Treatment Plant Facility Improvement Project, Newell Creek Pipeline Replacement, and water supply augmentation project(s). These projects represent about $300 M in additional capital expenditures and are the Department’s highest priorities for funding. They are also projects that are highly aligned with funding opportunities by state and September 2021 67 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 federal infrastructure initiatives that focus on climate adaptation and infrastructure resiliency to extreme weather scenarios, which Santa Cruz experiences. These projects are the City’s priorities for capital funding. State and Federal Infrastructure Funding Initiatives: Given this, Department staff has been carefully following infrastructure funding initiatives at both the state and federal level. The main purpose of this summary is to highlight those funding opportunities that could be a significant source of money to help move system improvement work for either infrastructure improvements or supply augmentation. Following are some details: AB/SB 129 – California Legislature Status – Passed by both the Assembly and the State Senate, based on agreement with Governor Newsom. Provisions – Includes both 2021 as well as future year funding for drought relief, funding for COVID 19 utility bill arrearages, and other water supply reliability related work. • $663 million to the Department of Water Resources for the following projects and programs $200 million for small community drought relief o $100 million for urban community drought relief o $200 million for multi-benefit projects o $60 million for SGMA implementation o $100 million for conveyance projects o $3 million for immediate drought support o • $1.385 billion to the State Water Resources Control Board for the following projects and programs. • $650 million for drinking water projects with priority given to disadvantaged communities • $650 million for wastewater projects with priority given to septic-to-sewer conversions with local investment for wastewater projects • $85 million for groundwater cleanup and recycled water projects • $985 million to the State Water Board for water arrearages due to COVID-19 AB 129 also includes a section that proposes additional funding that is contingent upon the enactment of future legislation. This contingent proposal would appropriate $2.5 billion from the General Fund for the following purposes: • $730.7 million for a water and drought resilience package September 2021 68 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 • $440 million for a climate resilience package • $200 million for an agricultural package • $65 million for a circular economy package • $200 million for local parks grants • $258 million for a wildfire prevention and forest resilience package • $500 million for supporting affordable student housing projects for the University of California, the California State University, and the California Community Colleges, as well as for support of campus expansions for the University of California and the California State University • $4.68 million for a climate-related service program • $67.5 million for the California Access to Justice program Although details of many of these initiatives are still somewhat fluid, from the details that are available, several of these programs and funding opportunities are of specific interest to the City. Whether the topic is wildfire prevention, Sustainable Groundwater Management Act implementation, water and drought resilience or climate resilience, the Water Department’s CIP and Operating budgets have projects or programs that are likely eligible for funding, and more importantly, are likely more ready for implementation than many projects that may serve the purposes identified in this legislation. Santa Cruz’s investment in project development and analytical work such as pilot testing ASR in the Mid-County Groundwater Basin, positions it well to move projects further along their pathway to completion. On the federal side, the Biden administration has played an active role in development of infrastructure legislation up to this point, starting with its release of the American Jobs Plan in late March 2021. In the Senate, negotiations on an infrastructure package are ongoing. Levels of funding for water and other infrastructure investments have been reduced from those included in American Jobs Plan, and water and wastewater elements of the legislation currently under discussion are pegged at $55 billion. The July 26th edition of the Association of Metropolitan Water Agencies’ Monday Morning Briefing includes the following report of progress: The situation (with respect to the federal infrastructure bill) has remained fluid as negotiations (in the Senate) have continued, but congressional staff has recently said that the $55 billion for drinking water and wastewater priorities in the bill would include, at a minimum, $35 billion for programs approved by the Senate in April as part of the Drinking Water and Wastewater Infrastructure Act (S 914), as well as additional funds for lead service line replacement and PFAS remediation. What has remained unclear was what portion of the funding would come in the form of new above-baseline spending, as opposed to program reauthorizations that would require a subsequent appropriation to receive funding. September 2021 69 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Excerpts of the water and wastewater focus areas and funding amounts from S 914 are appended here, and much of what is presented in these details is highly aligned with the work Santa Cruz is seeking funding for. However, clearly the $55 billion funding level, the amount that will be available under the federal infrastructure initiative currently under discussion will be less than anticipated in either S 914 or the American Jobs Plan. In addition to action in the Senate, the House of Representatives has also taken action on infrastructure legislation. HR 3684, Investing in a New Vision for the Environment and Surface Transportation in America Act” or the “INVEST in America Act,” was approved in the House of Representatives on July 1, 2021 by a 221 to 201 vote. Details of HR 3684 are also appended following the material on the Senate approved infrastructure Act. September 2021 70 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 U.S. Senate Passes $1.2 Trillion Infrastructure Bill: On Tuesday, August 10, the U.S. Senate voted 69 to 30 to pass the Infrastructure Investment & Jobs Act (H.R. 3684). This bill provides nearly $1.2 trillion in funding for the nation’s infrastructure and includes almost $55 billion in water infrastructure funding and several policy provisions that will benefit the nation’s water infrastructure. The bill includes almost $55 billion in water infrastructure funding and several policy provisions that will benefit the nation’s water infrastructure. The water infrastructure section in the Senate package is fairly similar to what was passed by the Senate in April in the Drinking Water & Wastewater Infrastructure Act (S. 914). Key Water Provisions Below is a list of the key water provisions in the infrastructure package. 27 • Clean Water State Revolving Fund (SRF) and Drinking Water SRF each receive $11.7 billion over five years ($2.4B/FY22; $2.7B; $3.0B; $3.2B; $3.2B)* • $1 billion will be provided in grants through the Clean Water SRF to address emerging contaminants.* • $4 billion will be provided in grants through the Drinking Water SRF to address PFAS in drinking water. • $15 billion in loans and grants will be provided through the Drinking Water SRF for lead service line replacement. • The Water Infrastructure Finance and Innovation Act (WIFIA) will receive $250 million over the next five years and facilities applying will be required to have only one ratings agency opinion letter (instead of two).* • The U.S. Environmental Protection Agency Sewer Overflow & Stormwater Reuse Municipal Grant Program will receive $1.4 billion over the next five years. Not less than 25% of the fund will to go to rural and financially disadvantaged communities.* • The Alternative Source Water Pilot Program will get $125 million over the next five years.* • The Rural and Low-Income Water Assistance Pilot Program will establish a new U.S. Environmental Protection Agency program to provide 40 grants per year to utilities to assist low-income ratepayers.* • The Wastewater Energy Efficiency Grant Pilot Program will get $100 million over the next five years.* • The Clean Water Infrastructure Resiliency and Sustainability Grant Program will get $125 million over the next five years.* • The Small Publicly Owned Treatment Works Efficiency Grant Program will be established with funding levels to be determined.* • The connection of homes and communities to Publicly Owned Treatment Works Grant Program will get $200 million over the next five years.* 27 * = Water Environment Foundation supported provision September 2021 71 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 • The Water Infrastructure and Workforce Investment Grant Program will get $25 million over the next five years. * • The Stormwater Infrastructure Technology Program will get $25 million to create five Stormwater Centers of Excellence and $50 million for stormwater infrastructure planning/development and implementation grants.* • Buy America requirements will expand in SRF and WIFIA to include “manufactured goods,” in addition to the existing iron and steel Buy America requirements. Next Steps After the Senate passes the bill, it is unclear how the package will proceed. President Joe Biden has indicated that he might be willing to sign it without it being negotiated with the House- passed INVEST Act. House Transportation & Infrastructure Committee Chair Peter Defazio (D-Ore.) has expressed a desire for a conference committee to reconcile the differences between the Senate bill and the INVEST Act, which calls for nearly double the amount of funding for water infrastructure. Speaker Pelosi will need to decide if she wants to delay the process for several months by calling for a conference committee or to move forward to get the infrastructure package done. INVEST in America Act Provisions related to Drinking Water Infrastructure & Assistance: $117 billion • Authorizes $53 billion for the Drinking Water State Revolving Fund, the primary source of federal funding for safe drinking water infrastructure. • Authorizes $45 billion to fully replace lead service lines throughout the nation. As many as 10 million lead service lines are currently in use, including an estimated 400,000 schools and child facilities with lead components. • Strengthens drinking water standards and improves the Environmental Protection Agency’s ability to set those standards. It directs EPA to set health-protective national standards for PFAS, 1,4-dioxane, and microcystin toxin within two years. • Provides assistance to low-income Americans with their water bills by creating two permanent assistance programs and authorizing them at $8 billion. • Promotes near-term customer debt relief by authorizing $4 billion to reduce or eliminate debt incurred since March 2020 and prohibiting water systems receiving this funding from disconnecting the service of eligible residential customers as a result of non-payment for a five-year period. • Wastewater Infrastructure: $51.25 billion • Authorizes $40 billion for the Clean Water State Revolving Fund, the primary source of federal funding for clean water infrastructure. September 2021 72 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 • Includes $2 billion for projects to capture, treat, or reuse sewer overflows or stormwater—helping keep pollution out of local rivers and lakes—and $2.5 billion for state water pollution control programs. • Permanently codifies the clean water “green reserve” to prioritize investments in green infrastructure, water- and energy-efficiency, and other efforts to make utilities more resilient to climate change. Also dedicates $1 billion toward alternative water source and water recycling projects to augment existing water supplies. • Provides critical technical assistance to small, rural, and Tribal communities that often struggle to afford the costs of planning new infrastructure projects and to address local water quality challenges. • Establishes a new clean water grant program to invest in communities with failing septic systems and prioritizes funding to those communities that lack access to adequate sewage treatment systems. This bill addresses provisions related to federal-aid highway, transit, highway safety, motor carrier, research, hazardous materials, and rail programs of the Department of Transportation (DOT), and includes in separate Divisions H and I water quality and water infrastructure by incorporating the Water Quality Protection and Job Creation Act of 2020 (Division H) and the Assistance, Quality and Affordability Act of 2021 (Division I). The sub-titles of Divisions H and I are appended to this summary for your information. While not providing the kind of detail that is available from the details of S 914, the information provided on HR 3684 provides links to many of the sections of the legislation that may ultimately become sources of funding for Water Department projects. When the final Senate infrastructure bill is adopted and it is time for a House/Senate Conference Committee, HR 3684 will be the House legislation involved in the development of an agreed upon piece of final legislation that will be considered by both houses and then sent to the President for action. September 2021 73 Updated City of SANTA CRUZ Water Department Long-Range Financial Plan – September 2021 Back Cover September 2021 74 APPENDIX F: City of Watsonville (Historical Boundary Changes) Project Action Proposal Title Number Date 4 Wells Fargo Property (Area 19) Annexation 1/21/1964 27 Beach Rd. (Area No. 16) Annexation 10/20/1964 28 Rodgers Addition (Area No. 21) Annexation 10/20/1964 29 Crestview (Area No. 20) Annexation 10/20/1964 57 East Lake Village (Area 22) 9/15/1965 66 All Saints Parish Church (Area 23) Annexation 2/16/1966 92 West Side Annexation (Area 24) 9/21/1966 93 East Lake Ave. Annexation (Area 25) 9/21/1966 113 Highway Annexation (Area No. 27) 8/16/1967 114 Roach Annexation (Area No. 28) 11/15/1967 115 Alta Annexation (Area No. 29) 11/15/1967 116 United Annexation (Area No. 30) 11/15/1967 120 Pinto Annexation (Area No. 31) 1/17/1968 129 Levee Annexation (Area No. 32) 4/17/1968 167 Airport (Area No. 33) Annexation 5/21/1969 168 Pacific Extrusions (Area No. 34) Annexation 5/21/1969 170 United Foods Annexation (Area No. 35) 6/18/1969 185 Pinto Lake Annexation # 2 11/19/1969 203 Holm Rd. Annexation 3/18/1970 215 Alden (Area 38) Annexation 6/17/1970 255 Airport No. 3 (Area 39) Annexation 1/20/1971 Project Action Proposal Title Number Date 272 Airport No. 4 (Area No. 40) Annexation 4/21/1971 279 Airport Blvd. Detachment 5/19/1971 313 Levee Two Annexation 3/15/1972 365 Riverside Annexation 7/18/1973 383 Freedom Blvd. Annexation 7/10/1974 383-A Freedom Blvd. Annexation 8/14/1974 Freedom Blvd. Annexation Resolution Changing Terms & 383-C 10/9/1974 Conditions Imposed in Res. No. 383-A 389 La Bella Vista Annexation 6/12/1974 408 Industrial Annexation 3/5/1975 423 Beach Rd. Annexation 9/3/1975 425 Airport Blvd Annexation 8/6/1975 434 KOMY Radio Annexation 9/3/1975 439 Watsonville Reorganization 1975 11/5/1975 498 Crestview Dr. Annexation 7/6/1977 499 Westside Annexation 9/7/1977 506 Interim SOI Adoption for Westside Watsonville 9/7/1977 517 Crestview Dr. Reorganization 4/5/1978 521 Sanitary Landfill Annexation 4/5/1978 529 Erta et al. Reorganization 7/12/1978 542 Westside Reorganization 2/7/1979 543 Interim SOI Adoption for Westside Watsonville 4/4/1979 Project Action Proposal Title Number Date 544 Westside 2 Reorganization 4/4/1979 556 Green Valley Rd. / Pennsylvania Dr. Reorganization 9/5/1979 556-B Green Valley Rd. / Pennsylvania Dr. Reorganization 9/5/1979 568 Crestview Reorganization 11/7/1979 585 Graybeal Reorganization 12/3/1980 601 Panabaker Lane Reorganization 4/1/1981 610 Watsonville SOI 1/12/1983 624 East Lake Ave./Franich Reorganization 4/14/1994 741 Airport Blvd. / Graybeal Reorganization 11/6/1991 794 Freedom Blvd. / Foster's Freeze Reorganization 6/9/1993 805 Zivanovich / Corralitos Rd. Extraterritorial Water 1/4/1995 806 Paulsen Rd. / Diamond Estates Extraterritorial Water 1/4/1995 809 Green Valley Rd. / Carnation Reorganization 6/7/1995 815 Freedom School / Green Valley Reorganization 2/7/1996 816 Simmons / Perndergast Ln. Extraterritorial Water 9/6/1995 817 Monument Lumber / Burchell Ave. Annexation 2/7/1996 820 Gateway / Green Valley Rd. Extraterritorial Water 1/12/1996 821 Clifford / Arthur Reorganization 6/5/1996 828 Gera Subdivision Extraterritorial Water 4/3/1996 837 Hospital Reorganization 1/8/1997 838 Watsonville Sphere Amendment 10/29/1997 Project Action Proposal Title Number Date 838-A Amending SOI for Watsonville City 10/29/1997 840 Hames Rd. / Olso Extraterritorial Water 4/2/1997 841 Green Valley / Mello Extraterritorial Water 4/2/1997 855 Freedom / Carey Reorganization 3/1/2000 860 Compton Terrace Extraterritorial Water 3/3/1999 862 Orchard View Extraterritorial Water 6/2/1999 863 Sunset Beach Extraterritorial Water 9/3/1999 883 Village Associates / Delta Way Reorganization 3/6/2002 884 Linden Rd. / Gonzales Extraterritorial Water 9/3/2003 895 Manabe / Burgstrom Annexation 10/19/2005 897 Cities Annexation to CSA # 53 Mosquito Abatement 5/4/2005 932 Minto Place Apts. Extraterritorial Water 1/6/2010 940 Hames Rd. / Wilson Extraterritorial Water 10/5/2011 944 Mountain View / Artau Extraterritorial Water 5/2/2012 945 Poultry / Read Extraterritorial Water 6/6/2012 Pippin Apartments: 56 Atkinson Lane / Mid-Pen Housing 952 5/7/2014 Extraterritorial Water & Sewer Service 959 Extraterritorial Water Service to 525 Blakeridge Lane 3/2/2016 963 Atkinson Lane / Pippin Reorganization 8/1/2018 ESA "Blakeridge Lane/Blake Avenue Extraterritorial Service Agreement" 2/3/2021 20-33 with City of Watsonville ESA "Atkinson Lane/Brewington Avenue Extraterritorial Service 3/3/2021 21-04 Agreement" with the City of Watsonville APPENDIX G: Reclamation District No. 2049 (2017 Audit: FY 2011 to 2015) APPENDIX H: San Lorenzo Valley Water District (Historical Boundary Changes) Project Action Proposal Title Number Date 3 Storm & Hooper Property / W. Zayante Rd. Annexation to SLVWD 12/17/1963 8 Stewart / Hihn Rd. Annexation to SLVWD 3/17/1964 32 King's Creek Annexation to SLVWD 11/17/1964 35 Belardi & Mitchell / Graham Hill Annexation to SLVWD 12/15/1964 42 Brown & Bracesco / W. Zayante Annexation to SLVWD 2/16/1965 44 Bahr / W. Zayante Rd. Annexation to SLVWD 4/20/1965 University Village Subdivision Tank Site / Hihn Rd. Annexation to 100 1/18/1967 SLVWD 165 East Zayante Annexation to SLVWD 6/18/1969 166 East Zayante Annexation to SLVWD 5/21/1969 169 East Zayante Annexation to SLVWD 6/18/1969 177 East Zayante Annexation to SLVWD 8/20/1969 190 Camp Wastahi / Lompico Rd. Annexation to SLVWD 1/21/1970 237 Quail Hollow Annexation to SLVWD 9/16/1970 304 Graham / Scotts Valley Dr. Detachment from SLVWD 4/19/1972 334 East Zayante Annexation to SLVWD 7/19/1972 361 Graham Reorganization to SLVWD 6/20/1973 366 East Zayante Annexation to SLVWD 7/18/1973 374 Hidden Glen / Graham Hill Rd. Detachment from SLVWD 2/20/1974 407 Big Basin Water Co. Detachment from SLVWD 2/4/1976 415 Greene / Hihn Rd. Annexation to SLVWD 4/2/1975 451 Juvenile Hall Annexation to SLVWD 2/4/1976 486 University Village et al. Annexation to SLVWD 7/6/1977 504 San Lorenzo Valley Annexation to SLVWD 8/17/1977 510 Ferrari / E. Zayante Annexation to SLVWD 1/4/1978 600 Harvard Dr. Annexation to SLVWD 3/5/1981 617 Crow's Nest Dr. / Sykes Detachment from SLVWD 1/3/1982 579-A Galleon Hts. Detachment from SLVWD 8/5/1981 643 East-West Zayante Rd./Myer Annexation to SLVWD 6/1/1983 Project Action Proposal Title Number Date 650 East Zayante Rd./Olympia Station Rd. Annexation to SLVWD 6/1/1983 647-B SLVWD SOI 10/16/1985 705 Hihn Rd. / Kim Way Annexation to SLVWD 3/5/1986 717 Whispering Pines Dr. Reorganization 4/2/1986 739 East Zayante Rd. Annexation to SLVWD 6/6/1990 792 Valley Gardens Golf Course Reorganization 5/5/1993 792-A SOI Amendment to SLVWD 5/5/1993 793 West Zayante Rd. Annexation to SLVWD 5/5/1993 798 West Zayante / El Alamein Annexation to the SLVWD 4/14/1994 804 East Zayante Rd. Annexation to SLVWD 3/23/1995 814 East Creek Rd. Annexation to SLVWD 8/2/1995 814-A Amending the SOI for SLVWD 8/2/1995 835 Crow / East Zayante Exterritorial Water Services SLVWD 10/2/1996 861 West Zayante / Broberg Annexation 4/7/1999 867 Amending SOI to SLV Water District 12/1/1999 875 Trout Farm Annexation to SLV Water District 11/1/2000 887 El Alamein Annexation to SLVWD 8/7/2002 890 Felton Amendment to SLVWD 9/3/2003 891 Morrison West Zayante Annexation to SLVWD 4/7/2004 896 Hippert/Locatelli Annexation to SLVWD 2/2/2005 901 Manana Woods Annexation to SLVWD 2/1/2006 906 Amendment to SLVWD SOI 6/26/2006 927 Eggleson / Amos Annexation to SLVWD 12/8/2008 936 Olympia Mutual Water Company Annexation to SLVWD 8/1/2012 936 Olympia Mutual Water Company Annexation to SLVWD 8/1/2012 954 West Zayante / Reason Annexation to SLVWD 11/5/2014 955 West Zayante / Butler Annexation to SLVWD 1/7/2015 953 Lompico Reorganization 8/6/2016 APPENDIX I: Scotts Valley Water District (Historical Boundary Changes) Project Action Proposal Title Number Date 60 Jud Annexation to SVWD 11/17/1965 67 Molina Annexation to SVWD 2/16/1966 68 Gregson Annexation to SVWD 2/16/1966 95 Stevens, Seuss, Martin, Gordon, PG & E Annexation to SVWD 9/21/1966 108 Sandhill Annexation No. 1 to SVWD 5/24/1967 132 Green Valley Annexation to SVWD 8/21/1968 145 Ow Annexation to SVWD 11/20/1968 146 Gordon Annexation to SVWD 11/20/1968 219 Glenwood Acres Annexation to SVWD 6/17/1970 248 Montevalle Annexation to SVWD 10/21/1971 249 Steinberg Annexation to SVWD 12/16/1970 304 Graham Annexation to SVWD 4/19/1972 305 Monteith / Church Annexation 3/15/1972 325 Mt. Hermon Rd. Annexation to SVWD 9/20/1972 330 Watkins-Johnson Annexation to SVWD 7/19/1972 341 Fox Annexation to SVWD 10/18/1972 348 Baker Annexation to SVWD 11/15/1972 361 Graham Reorganization from SLVWD to SVWD 6/20/1973 380 Bean Creek Detachment from SVWD 5/8/1974 398 Scottsborough Annexation to SVWD 9/11/1974 404 Lakin Annexation to SVWD 11/13/1974 Project Action Proposal Title Number Date 416 Rodriguez Annexation to SVWD 4/2/1975 431 Koon Annexation to SVWD 9/3/1975 445 Fontenay Annexation to SVWD 11/5/1975 516 Casa Way / Highgate Rd. Annexation to SVWD 2/1/1978 520 Kirkorian Annexation to SVWD 4/5/1978 537 Buse Annexation to SVWD 12/6/1978 560 Hatten Annexation to SVWD 7/11/1979 573 Crescent Court (B) Reorganization 7/2/1980 634 Granite Creek Annexation 12/19/1983 647 Interim SOI 10/16/1985 652 Hacienda Dr. / Mills No. 652 Reorganization 12/19/1983 717 Whispering Pines Dr. Reorganization 4/2/1986 743 Granite Creek / Wright Annexation 3/1/1989 Making Determinations & Authorizing Proceedings to Reorganize 782 2/5/1992 Territory Designated as Green Hills Reorganization 791 Skypark Reorganization 3/10/1994 792 Valley Gardens Golf Course Reorganization 5/5/1993 792 SOI Amendment to SVWD 5/5/1993 831 Latos Reorganization & Subsequent Sphere Amendment 12/4/1996 923 3132 Glen Canyon Road Extraterritorial Water Service from SVWD 1/9/2008 965 Cumbre Lane Reorganization 3/6/2019 966 Heritage Parks Annexation to SVWD 1/9/2019 APPENDIX J: Soquel Creek Water District (Historical Boundary Changes) Project Action Proposal Title Number Date 24 Aptos Seascape Annexation 8/18/1964 33 Soquel Highlands Subdivision (aka Hilltop) Annexation 11/17/1964 47 Hilltop Rd. No. 2 Annexation 4/20/1965 55 Aptos Beach Pines Annexation 7/21/1965 65 Aptos Valley, Tract No. 461, Annexation 2/16/1966 119 Tract 400 Country Club Park No. 12 Annexation 11/15/1967 149 Aptos Seascape Annexation 1/15/1969 Resolution Authorizing & Directing Soquel Creek Water District to 149-A 3/19/1969 Proceed with Annexation of Aptos Seascape No. 2 294 Park-Wilshire / Vienna Woods Annexation 10/20/1971 294-A Amendment to Res. No. 294 6/20/1973 303 La Selva Beach Annexation 1/19/1972 312 Seacliff Annexation 4/19/1972 333 Glenwood Annexation 9/20/1972 335-A Canon del Sol Annexation 8/16/1972 377 Alta Verdi Annexation 2/2/1974 Freedom Blvd. / Carol Way Reorganization within Central & Soquel 469 10/6/1976 Creek Water Districts 616 Old San Jose Rd. / Cornwall Annexation 1/13/1982 682 Country Estates Annexation 10/17/1984 696-A SOI for Soquel Creek Water District 11/12/1986 696-B SOI for Central Water District 11/12/1984 771 Bonita / San Andreas Annexation 12/5/1990 Project Action Proposal Title Number Date 789 Sand Dollar Beach Annexation 1/6/1993 790 Place de Mer Annexation 1/6/1990 810-A SOI Amendment 10/4/1995 810-B Capitola / Soquel / Cornwell / Cathedral Annexation 10/4/1995 839 Sumrall / Burns Annexation 1/8/1997 842 San Andreas / Denny Annexation 6/4/1997 844 SOI Amendment 2/4/1998 Sand Dollar / Price Request for Extraterritorial Water from SC 846 10/1/1997 Water District 848 SOI Amendment 2/4/1998 854 San Andreas / Silldorf Request for Extraterritorial Water 6/3/1998 866 Anna Jeans Cummings Park Annexation 1/5/2000 880 Amending SOI for Soquel Creek Water District 3/6/2002 880-A Hilltop Rd. / Thomas Annexation 3/6/2002 898 Sand Dollar/Linda Vista Annexation 8/3/2005 919 41st Ave. Clares Detachment 9/5/2007 922 PureSource Extraterritorial Water 8/1/2007 926 Trout Gulch Extraterritorial Water 10/1/2008 934 San Andreas Road / Tut SOI Amendment 5/5/2010 934-A San Andreas Road / Tut Annexation 5/5/2010 961 Wharf Road / Wright Annexation 6/7/2017