Agenda Item 10 CITY OF YUBA CITY STAFF REPORT Date: October 1, 2013 To: Honorable Mayor & Members of the City Council From: Department of Public Works Presentation by: Diana Langley, Deputy Public Works Director - Engineering Summary Subject: Settlement Agreement and Water Contract Amendment – Area of Origin (Solano County Water Agency, et al. v. Department of Water Resources Case No. 34-2008-00016338 CU-BCGDS) Recommendation: a. Review Negative Declaration adopted by Department of Water Resources (lead agency) and adopt Negative Declaration as a responsible agency under the California Environmental Quality Act (CEQA). b. Authorize the City Manager to execute Settlement Agreement and Release regarding City of Yuba City. c. Authorize City Manager to execute Amendment No. 9 to the Water Supply Contract between the State of California Department of Water Resources and the City of Yuba City. Fiscal Impact: Immediate fiscal impacts are negligible; however, long term savings to the City will be measured in millions of dollars each year through the increased reliability/delivery of State Water Project water to the City and the City not needing to purchase additional water rights. Purpose: Increase the City’s water supply reliability through settlement of the City’s Area of Origin lawsuit against the Department of Water Resources (DWR). Background: The City of Yuba City obtains water for its water system through four different permits/contracts from the Feather River. The City also has access to one groundwater well located at the Water Treatment Plant for use in drought or emergency conditions. The anticipated annual demand for the City at buildout is anticipated to be about 29,400 acre-feet. All of the City’s existing permits/contracts are very reliable except for the State Water Project contract (SWP). The average allocation of SWP water is about 60% each year and can be as low as 5-10%. It is critical for the City to secure reliable water rights during the summer months to be able to meet future water needs. According to the adopted 2010 Urban Water Management Plan, on an annual basis, the City has sufficient water rights during an average year to meet its demands though buildout; however, in a dry year (drought) scenario, the City could face shortages during the summer months when evaluating the monthly supplies available to the City. Agenda Item 10 In 2006 the City filed a lawsuit against DWR along with Solano County Water Agency, Napa County Flood Control and Water Conservation District, and the County of Butte (Plaintiffs) claiming a breach of contract by DWR. The lawsuit seeks that the plaintiffs receive their full allocation of SWP water before any SWP water is allocated to be exported to south of Delta SWP contractors. The City participated in numerous mediation sessions with all of the other parties involved in the litigation in an effort to reach a settlement agreement that would be acceptable to all involved. The Agreement in Principle (AIP) was brought to Council in closed session on May 15, 2012 for approval. All of the other negotiating representatives for all parties recommended the AIP to their respective governing boards for approval and all parties signed the AIP as of 8/31/12. With the AIP approved, next steps were to prepare a Settlement Agreement and Release, amendments to the SWP contracts, and an environmental document. Analysis: With all parties agreeing to the provisions of the AIP, the attorneys and representatives from each party have prepared a Settlement Agreement and Release and a contract amendment to the City’s SWP contract. The Settlement Agreement and Release is Attachment 1 to the staff report and the contract amendment is Exhibit A to the Agreement. The Settlement Agreement includes the following aspects: • North of Delta Allocation o Increased water supply reliability of 5-25% each year. (Above current allocations.) • Advanced Table A Program o A bank of 20,000 acre-feet of additional water available for the City’s use • Limitations on Additional Water Supplies o The City will not file for a new water right before 2027 and will not have a preference or priority, above the North of Delta Allocation, in SWP water. • Interpretation of Article 45(i) of Existing Contract o Increased amount of water diversion allowed in summer months (more flexibility). The Settlement Agreement has significant impacts on the City’s water supply. Without this settlement, the City would need to obtain additional water rights around 2030 to meet its water needs during drought conditions. Through judicious use of the City’s current water supplies and the increased supply and reliability of this proposed settlement, the City should have sufficient water supplies to meet all of its water needs through buildout of the City. In addition, DWR prepared and circulated a Negative Declaration for the settlement and adopted it in September. The Final Initial Study/Negative Declaration are Attachment 2 to the staff report. Staff is recommending adoption of the Negative Declaration as a responsible agency under the California Environmental Quality Act, execution of the Settlement Agreement and Release, and execution of Amendment No. 9 to the City’s Water Supply Contract with DWR. Fiscal Impact: Immediate fiscal impacts are negligible; however, long term savings to the City will be measured in millions of dollars through the increased reliability/delivery of State Water Project water to the City and the City not having to purchase additional water rights to meet buildout demands. Alternatives: Do not accept the terms contained in the Settlement Agreement and Release. Recommendation: a. Review Negative Declaration adopted by Department of Water Resources (lead agency) and adopt Negative Declaration as a responsible agency under the California Environmental Quality Act (CEQA). b. Authorize the City Manager to execute Settlement Agreement and Release regarding City of Yuba City. c. Authorize City Manager to execute Amendment No. 9 to the Water Supply Contract between the State of California Department of Water Resources and the City of Yuba City. Prepared by: Submitted by: /s/ Diana Langley /s/ Steven R. Jepsen Diana Langley Steven R. Jepsen Deputy Public Works Director - Engineering City Manager Reviewed by: Department Head SJ Finance RB City Attorney TH Other SETTLEMENT AGREEMENT AND RELEASE REGARDING THE CITY OF YUBA CITY THIS SETTLEMENT AGREEMENT AND RELEASE (“Agreement”) is entered into by and between City of Yuba City (“Plaintiff” or "Yuba"); the California Department of Water Resources (“DWR”); and Alameda County Flood Control and Water Conservation District, Zone 7, Alameda County Water District, Antelope Valley- East Kern Water Agency, Castaic Lake Water Agency, Central Coast Water Authority, Coachella Valley Water District, Kern County Water Agency, Metropolitan Water District of Southern California, Mojave Water Agency, Palmdale Water District, San Gorgonio Pass Water Agency, Santa Clara Valley Water District, and Tulare Basin Water Storage District (the “Intervenors”) as of the last date executed below, referred to herein collectively as the “Parties” and each individually as a “Party.” RECITALS A. WHEREAS, on or about July 17, 2008, Plaintiff filed a civil action against DWR in the Superior Court of California for the County of Sacramento (the “Court”), Case No. 34-2008-00016338 CU-BC-GDS, and on or about March 2, 2009 the Court granted Intervenors’ Motion to Intervene in the action (the complaint and the complaint in intervention are collectively referred to as the “Action”); B. WHEREAS, Plaintiff and each of the Intervenors has a contract with DWR for a supply of water from the State Water Project (“SWP”) which existing contracts are referred to as the “SWP Contracts” or “Water Supply Contracts”. C. WHEREAS, the Parties’ claims in the Action relate to disputes over the meaning of the Water Supply Contracts regarding Plaintiffs’ claimed rights to water under their Contracts pursuant to Water Code section 11460, et seq., and section 10505, commonly referred to as the “area of origin statutes”; D. WHEREAS, each Party disputes the interpretation of the SWP Contracts advanced by the other Parties, and DWR and Intervenors dispute whether any of the Plaintiffs have established area of origin rights and each Party denies that any other Party is entitled to any relief based on the claims alleged in the Action; E. WHEREAS, the Parties wish to compromise, resolve, settle, and terminate any and all of the disputes or claims in the Action on terms and conditions set forth herein (the “Settled Disputes and Claims”). The Settled Disputes and Claims include any and all disputes or claims related to whether any Plaintiff is entitled to a preference in water deliveries from the SWP under the terms of the existing SWP Contracts; F. WHEREAS, the Parties represent that they understand they are waiving significant legal rights by signing this Agreement, and each Party in no way admits responsibility for debts, liability, and/or obligations owed to any other Party or third parties, and this Agreement is made in a spirit of compromise for the sole purpose of 1 avoiding the uncertainties and expenses of litigation with respect to the Settled Disputes and Claims. G. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the Parties agree as follows: AGREEMENT 1. Recitals Incorporated. The recitals set forth above, including all definitions therein, are expressly incorporated as terms of this Agreement. 2. Terms of Settlement. 2.1 Contract Amendment. Subject to the Conditions Precedent set forth in Section 3 of this Agreement, Yuba and DWR shall enter into an amendment to Yuba’s SWP Contract, in the form attached hereto as Exhibit A, that incorporates provisions of this Settlement Agreement. 2.1.1 North of Delta Allocation: a. General: DWR determines SWP Table A Allocations using existing SWP facility availability and capacities, storage conditions, contractor requests, other demands for Project water, operational and regulatory restrictions, available hydrologic forecast data, as well as other factors that may affect the available supply and the ability to deliver Project water.