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REQUEST FOR <br />COUNCIL ACTION <br />CITY COUNCIL MEETING DATE: <br />AUGUST 1, 2017 <br />TITLE: <br />APPROVE AN AGREEMENT WITH ORANGE <br />COUNTY WATER DISTRICT FOR SALES <br />AND DISTRIBUTION OF RECYCLED <br />WATER <br />(STRATEGIC PLAN NO. 4, 1 &J5, 2) <br />RECOMMENDED ACTION <br />CLERK OF COUNCIL USE ONLY: <br />APPROVED <br />❑ <br />As Recommended <br />❑ <br />As Amended <br />❑ <br />Ordinance on 1s' Reading <br />❑ <br />Ordinance on 2nd Reading <br />❑ <br />Implementing Resolution <br />❑ <br />Set Public Hearing For <br />CONTINUED TO <br />FILE NUMBER <br />Approve an agreement with Orange County Water District for sale and distribution of recycled <br />water in the City of Santa Ana for a period of thirty years ending June 30, 2047. <br />DISCUSSION <br />On September 21, 1988, the City of Santa Ana entered into an agreement (Exhibit 1) with Orange <br />County Water District (OCWD) to participate in the Green Acres Project for distribution and sale <br />of recycled water within the City of Santa Ana. This agreement has served the City and OCWD <br />well. Several Santa Ana water customers in the southwest portion of the city currently use <br />recycled water for irrigation, saving them money and preserving the City's potable water supply <br />for higher uses. <br />The existing agreement mandates a maximum retail rate for recycled water not to exceed 80% of <br />the City's potable water rate. That is to say, if the City charged $1.00 per hundred cubic feet (ccf) <br />of potable water, the agreement caps the City's recycled water rate at $0.80/ccf; i.e., a discount of <br />$0.20/ccf. This mandatory discount was originally intended to entice potential recycled water <br />users and to promote program development and system expansion. The policy established <br />reasonable means to achieve legitimate policy ends. <br />There are two reasons why this policy is no longer feasible. First, since its inception, the Green <br />Acres Project has received subsidies for recycling from the Metropolitan Water District of <br />Southern California (MET). That arrangement is now ending, and program rates need to adjust <br />based on new costs. <br />Second, in May of 2015, in the matter of Capistrano Taxpayers Association, Inc. v. City of San <br />Juan Capistrano (Case No. G048969), the California 4th District Court of Appeal, Division Three, <br />ruled that water rates set by water utilities must reflect the cost of service, and therefore may not <br />be indexed or tiered in an arbitrary fashion strictly to advance other policy goals. This decision <br />interprets amendments to the California Constitution that occurred after the original agreement <br />2513-1 <br />