COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

September 24, 2002

BOARD MEETING DATE:

October 8, 2002

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Application for Federal Assistance for Construction of a New Potable Water Well to Serve County Service Area No. 11 - Pescadero Area

Recommendation

Adopt a resolution authorizing the Director of Public Works to submit an application to the United States Department of Agriculture (USDA) for a combination grant and loan to fund the construction of a new potable water well for County Service Area No. 11 (CSA11).

Previous Board Action

1.

Created CSA11 in 1988 as the entity to provide water for the Rural Service Center area in Pescadero.

2.

Approved the construction of water system improvements in 1991-1992 to serve CSA11.

Key Facts

1.

An evaluation of the long term reliability of the current water source for CSA11 was conducted in April 2001 and concluded that:

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the existing well could fail due to lack of water in 8 to 15 years based on current consumption rates; and

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a new deeper well could extend the life of CSA11's water supply to at least 38 years.

2.

There is an opportunity to obtain financial assistance for constructing a new well from the USDA under the Federal Water and Waste Disposal Loan and Grant Program.

Background

The sources of drinking water for the Community of Pescadero before 1993 were small domestic wells, water from surface impoundments and locally derived groundwater from wells installed in the alluvial aquifer of Pescadero and Butano Creeks. These sources, in the 1970's and 1980's, were found to contain relatively high concentrations of nitrate and other naturally occurring salts. This prompted the development of the well that is the current source of drinking water for the Pescadero Community.

The current well and distribution system was constructed in the early 1990's at a cost of approximately $1,359,000. The project was initially financed by a $400,000 grant from the State Department of Water Resources (DWR), a $282,000 loan from DWR and $647,000 in loans from the County. An assessment district comprised of the properties within CSA11 was formed and assessments on these properties together with the rates charged for water are being used to pay off the loans. The County loans have been paid off and the DWR twenty-year loan will be paid off in 2012. The assessments were for ten years and will end after FY 2003-04.

Reliability of the Water Source

It was estimated in 1992 that the well could provide water to the community for 25 years. The long-term reliability evaluation last year concluded that the well would last for another 8 years but that it could fail with 8 to 15 years. The consultant also concluded that a deeper well into the aquifer that is being used, could extend the life of CSA11's water supply for an additional 38 years.

Proposed Funding

Jack Olsen, Executive Administrator of the San Mateo County Farm Bureau, arranged a meeting between Public Works staff and officials of the USDA to explore possible financial assistance for the development of a new well for CSA11. We submitted a preliminary application and the USDA has now invited us to submit a full application, as they believe the area may be eligible under the Federal Water and Waste Disposal Loan and Grant Program for up to 48% grant funding based on median household income data for the Pescadero area.

The consultant estimates the project cost to be $250,000 with $120,000 (48%) in grant funds, assuming the maximum grant from the USDA. The remaining $130,000 would be financed by a loan from either the USDA or the County General Fund. We would recommend the USDA loan unless the loan fees make the USDA loan unattractive. CSA 11 would then repay the loan through an increase in water rates. The present water rate consists of a flat fee of $20 per month plus $1.25 per unit (748 gallons) of water used, and was set in July 1992. There have been no increases in rates since that time. Water rates would have to increase by about 30% in order to raise the revenue necessary to amortize a $130,000 loan at 5% over a 20-year period. An increase of 30% in the CSA11's water rates would bring the rates into parity with water rates of most Bayside water purveyors.

We are requesting your Board's approval to submit the application for federal grants and loans. We have discussed the reliability of the current well at a meeting of the Pescadero Municipal Advisory Council (PMAC). We have not discussed the proposed application with the PMAC or rate payers as the USDA believes the application is time critical if the area is to qualify for the level of assistance that they have estimated. We have sent a copy of our staff report to the PMAC and have sent a notice to the rate payers informing them that we are recommending that you approve our applying for the grant/loan and that the staff report can be accessed on the Internet.

Vision Statement

We believe our recommendation is consistent with Shared Commitment to "responsive, effective and collaborative government", and goal Number 20, "government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain" as developing a new well will ensure the Pescadero community of a long term safe supply of potable water.

Fiscal Impact

There is no impact to the General Fund by authorizing the filing of an application for the loan and grant. The project, as envisioned, will be funded in part by a grant from the Federal Government and a loan from the Federal Government or County General Fund. There is no net long term impact to the General Fund as we also recommend that the General Fund be reimbursed by CSA11 for any funds loaned together with interest on the outstanding loan balance based on the rate of interest received on General Fund Reserves.

A form of resolution has been approved by County Counsel.