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

It is recommended the City Council adopt Resolution No. 4320 and agreements for untreated water sales to Pleasant Valley Water Conveyance Partners and Gladstone California Water LP  (collectively referred to as “the Farmers”) during the 2026/27 water year.

The City has a long history of providing excess USBR water to the Farmers when it is available.  Canal water is better quality than ground water, use of canal water preserves groundwater reserves, and sales of excess water benefit the city’s ratepayers.

Staff and the Farmers have been actively negotiating to reach a mutually agreeable price for the sale of the City’s excess water this year.  To proceed, City Council must approve a proposed water price at the City Council meeting.

The volume of excess water projected to be available this year is 1,960 acre feet (AF).

 The benchmark for the market value of the City’s excess water is the “Exchange Contractors Transfers Agreement Price Schedule,” which is available through San Luis and Delta Mendota Water Authority (SLDMWA).  Based on the current Central Valley Project South of Delta (CVP SOD) agriculture allocation of 20 percent, the exchange price is $650 per AF.  It is according to this schedule that Westlands Water District has stated to the City that it will purchase the City’s excess water at this price.  Pursuant to Westlands April Monthly notice, it will then sell “supplemental” water to its own customers for a rate of $775 to $800 per AF. Westlands marks up the price from $650 to cover its operational and maintenance costs.

 From the City’s perspective, the value of water is greater delivered within Coalinga’s district, than  delivered out-of-district to Westlands.  When Coalinga takes delivery of water it must pay the SLDMWA fee of $75 per AF (rounded) and pay Westlands for conveyance a projected cost of $35 per AF.  Both these components increase the value to $760.  From a straight financial comparison, this means the City would be indifferent selling to Westlands at $650 per AF for selling to the Farmers at $760 per AF.

Through negotiations, the Farmers are not willing to purchase all the excess water at $760 because of the price being high this year.  Because it is beneficial to the City to support our local Farmers, a mutually agreeable price is indicated to be $685 per AF.

One other requested change from the Farmers that is incorporated in the agreements is that if the Exchange Contractors price is reduced because the CVP allocation is increased above 25 percent, the sales price to the Farmers will drop by the same amount.  Specifically, if the CVP agriculture allocation increases to the next tier of 26% to 50%, the Exchange Contractors prices will drop from $650 per AF to $425 per AF.  Westlands would similarly reduce its purchase price from the City, if the City were selling to Westlands.

The sale of excess USBR water is beneficial to the City, and specifically to water ratepayers primarily because the water is sold at a significant margin above the city’s total costs to help offset the cost of capital improvements to the City’s water system, but also to support the local Farmers.

The effort required by the City for sale of excess water is administrative and financial only.  Agreements must be prepared, approved by City Council and executed.  Westlands personnel read the meters each month, then city staff prepare and issue the billing statements, and collect the amounts due.

The projected net benefit to water enterprise rate payers is expected to be between $900,000 and $1,000,000.  This assumes the CVP SOD allocation does not exceed 25 percent.