REPORT TO COUNCIL
SUBJECT
Title
Adopt a Resolution Authorizing the Bay Area Water Supply and Conservation Agency (BAWSCA) to Initiate, Defend, and Settle Arbitration Related to the Water Supply Agreement (WSA) with the City and County of San Francisco
Report
BACKGROUND
The City of Sunnyvale purchases approximately 50 percent of its potable water supply from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy System under the terms of the Water Supply Agreement (WSA). The WSA Between the City and County of San Francisco and Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County was signed in 2009, expires in 2034, and delineates the terms under which the City purchases water, including water supply (quantity) and water quality, and all aspects of the SFPUC rate-setting process.
The City is a member of the Bay Area Water Supply and Conservation Agency (BAWSCA), a special district that represents the interests of the 26 water agencies that purchase SFPUC water. In addition to the wholesale customers, the SFPUC provides retail water service to customers in the City and County of San Francisco (retail customers). A primary responsibility of BAWSCA is ensuring water rates accurately reflect the actual costs of providing water service. BAWSCA staff performs extensive rate reviews each year to: (1) verify the accuracy of the SFPUC's revenue requirement calculations (used to determine rates); (2) ensure the SFPUC's adherence to Generally Accepted Accounting Principles and compliance with annual audit findings; and (3) ensure SFPUC capital and operations costs are appropriately allocated between retail and wholesale customers. If BAWSCA identifies costs they believe are incorrectly allocated, BAWSCA and SFPUC staff attempt to resolve disputes through informal discussions. Per the terms of the Agreement, issues not resolved informally must be settled through arbitration, which has only been necessary one time since 1984. BAWSCA addresses numerous financial questions annually, and is continuing to address a pending issue from Fiscal Year 2011/12. Although no arbitration is anticipated, BAWSCA believes this to be an opportune time for the arbitration authorization.
EXISTING POLICY
City of Sunnyvale General Plan-Environmental Management, Chapter 7
GOAL EM-1 Adequate Water Supplies - Acquire and manage water supplies so that existing and future reasonable demands for water, as projected in the 20-year forecast, are reliably met.
Policy EM-1.1 Water Supply - Manage water supply to meet demands for potable water through the effective use of water supply agreements
ENVIRONMENTAL REVIEW
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect change in the physical environment.
DISCUSSION
The proposed action will designate BAWSCA as the City's representative to arbitrate disputes regarding rate issues, and does not extend to other legal concerns. Staff supports the recommended action because BAWSCA currently performs extensive analysis of SFPUC rate proposals and possesses the technical and historical background to effectively analyze detailed financial issues. Additionally, BAWSCA staff has an effective working relationship with the SFPUC staff, and allowing BAWSCA to represent all member agencies will be a much more efficient process if future arbitration is necessary.
If the attached resolution is adopted by 75 percent of the member agencies, BAWSCA will become our representative to arbitrate disputes regarding rate issues for the limited purposes set forth in the Agreement.
The City will have the opportunity to participate in the arbitration of any disputes through its representative on the BAWSCA Board of Directors, which is comprised of representatives of each of the 26 member agencies. Currently, Council Member Gustav Larsson is Sunnyvale's representative on BAWSCA'sBoard. Additionally, BAWSCA is forming a Wholesale Customer Committee which will advise BAWSCA on how to address financial and rate issues. BAWSCA has requested the City Manager appoint an individual who can represent the City's interest on complex financial issues through the Wholesale Customer Settlement Committee.
The attached resolution must be adopted by 75 percent of the member agencies to become effective.
FISCAL IMPACT
Arbitration costs will be initially funded from BAWSCA's General Reserves which currently has a balance of approximately $600,000 Should additional funding be required, BAWSCA will assess each of the 26 member agencies for the cost of the arbitration based on each individual agency's water usage. . It is cost-effective for the City to be represented by BAWSCA and participate in the arbitration of any such disputes. Arbitration expenditures and assessments to individual agencies are subject to a vote by the BAWSCA Board of Directors As a result of arbitration, the rate charged to the City for wholesale water could increase or decrease. Any such change would most likely be phased in over time rather than in a single year.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website.
RECOMMENDATION
Recommendation
Adopt the Resolution, presented as Attachment 1, Authorizing the Bay Area Water Supply and Conservation Agency to Initiate, Defend, and Settle Arbitration Related to the Water Supply Agreement with the City and County of San Francisco.
Staff
Prepared by: Mansour Nasser, Water & Sewer Division Manager
Reviewed by: John Stufflebean, Director, Environmental Services Department
Reviewed by: Robert A. Walker, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Resolution of the City Council Appointing BAWSCA as Authorized Representative of the City to Initiate, Defend, and Settle Arbitration Related to the Water Supply Agreement with the City and County if San Francisco