STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

Prorate Drought Charge 50 percent for first billing cycle.  City Council is recommended to amend Resolution No. 4037 to cause issuance of Drought Charges for the July/August meter-read period to be prorated to 50 percent of the calculated total because of customer notification letters being received halfway through the metering cycle.

The drought charge provides a “numbers” approach above the traditional code enforcement approach.  Whereas, the code enforcement approach relies on city staff (and neighbors) observing noncompliance, drought charge-approach measures compliance by comparing water usage in the current billing cycle to the same billing cycle last year.  The intent of the numbers approach is to allow customers flexibility how they conserve water to meet the specified requirement.  However, water production data from the June/July billing cycle indicates only minor water conservation.

Pursuant to the proposed resolution, the specified restrictions and drought charges apply for three billing cycles only: July/August, August/September, and September/October.  City Council will need to act again prior to October 1st, to continue special restrictions beyond Stage II.  The time is limited because, according to USBR, conservation is most critical in the summer months and USBR may have additional water available in the fall season.  

Conservation for single-family residential is focused primarily on above-average water users.  For example, single-family customers using below the summer median volume of 15 thousand gallons per month are penalized at all.  However, single-family customers using above 30 thousand gallons per month (two times the median), pay for all volumes above 30 thousand gallons at the drought rate.  Customized letters were sent to all water customers showing their water consumption for the same billing cycles last summer.  The letters arrived by July 20th.

The drought rate for non-compliance volumes is $7.50 per thousand gallons.  This cost of water is based on indicated current market values for wholesale water at $2,000 per acre foot, compared to the City’s long-term, contracted total cost for wholesale water delivered of approximately $300 per acre foot.  Compared to the standard residential rate of $2.28, the drought rate is 3.3 times higher.  For implementation, customers will be billed for all volumes at the regular rates.  To the extent a portion of the volumes billed are non-compliant, an additional line item will be added called “Drought Charge” that will be based on ($7.50 - $2.28, single-family rate) times the volume out of compliance.  This way application of the drought charges can work with the existing billing rates.

Non-residential customers are required to conserve between 20 and 30 percent, as specified in the resolution.  Drought charges apply to all volumes not in compliance with the specified conservation goals.

Staff recommends application of the drought charge for the first billing cycle be prorated to 50 percent for all customers.  Customer letters were delayed and did not arrive to all customers until July 20th, halfway through the July/August meter read cycle.  Additionally, water plant production during that period indicates limited conservation, the consequence of which will be many significant drought charges for gross noncompliance.  Limiting the first application of drought charges will help good customer relations.

Implementation of the drought charge alone appears insufficient to cause meaningful water conservation.  Customers are choosing to simply pay the charge to keep their landscape green.  The next steps are to increase code enforcement activity regarding two day per week watering, and potentially increase associated penalties for noncompliance.  Some individual single-family water bills reach $1,000 per month for home outside the city limit.  Code enforcement does not apply to residential customers outside the city limits; therefore, it is important the drought charge apply to those residential customers, especially because many of them are the highest residential water users on the system.

Dan Bergmann of IGS, on behalf of the city, has been in dialogue with representatives of USBR, Westlands Water District and San Joaquin River Exchange Contractors Water Authority.  There is a slight possibility of available water to purchase this fall, as additional water is released from Lake Shasta.  This water would be valued at market prices estimated up to $2,000 per acre foot.  The next steps would be to move toward asking board approval from each agency to sell to Coalinga in the event water is even available, not wanted by members of those agencies.  The city has also formally requested from USBR additional contract water based on the increased actual usage through July and based on conservation at only 10 percent for the duration of the water year through February 2022.

Other Potential Actions

Increase Code Enforcement Activity.  Resolution No. 4037 explicitly upholds Stage 2 prohibitions and restrictions; however, staff has not conducted active code enforcement.  City council may emphasize increased code enforcement along with application of the Drought Rate.  Most significant in Stage 2 is limiting irrigation activity to two days per week, although the municipal code does not limit the amount of time for watering during the two days.

Increase Code Violation Penalties.  Violations of water conservation prohibitions and restrictions in the municipal code are punishable by first a warning, then by increasing penalties.  The second violation is $50.00, the third is $100, and the fourth is $250.  The city may also charge a misdemeanor, place a flow restricting device, or even remove a meter.  City council may consider increasing the penalties for violations to $100 for the second violation, followed by $500, and $1,000, or increased in a manner acceptable to city council.  The existing penalties are relatively low considering a residential customer water bill for 30 thousand gallons is almost $100 at current water rates.

Attempt Water Purchase Agreements.  Per the direction of USBR, staff is actively seeking water that may become available for purchase in the fall season, either through or from Westlands Water District or San Joaquin River Exchange Contractors Water Authority. These are sources that can sell water to Coalinga without environmental approval.  The cost range is from $1,200 to $2,000 per acre foot.  City council may direct staff to proceed with these potential sources to attempt to set up purchase agreements.  These potential transactions will likely require board approval within each agency.  Both agencies have indicated unlikely probability of excess water for sale.