Operating and CIP Budget Fiscal Year 2015-16

Water Operations [650-5710]

ACTIVITY DESCRIPTION

 CITY OF MORGAN HILL  FY 15-16  OPERATING AND CIP BUDGET  CITY OF MORGAN HILL  FY 15-16  OPERATING AND CIP BUDGET  CITY OF MORGAN HILL  FY 15-16  OPERATING AND CIP BUDGET  CITY OF MORGAN HILL  FY 15-16 OPERATING AND CIP CITY OF MORGAN HILL  FY 15-16  OPERATING AND CIP BUDGET  CITY OF MORGAN HILL  FY 15-16  OPERATING AND CIP BUDGET  CITY OF MORGAN HILL  FY15-16  OPERATING AND CIP BUDGET  The City of Morgan Hill supplies water to approximately 13,300 residential, commercial, and industrial customers. Wa- ter Operations ensures that the City’s water supply needs are continually met and that water quality meets or exceeds all public health and environmental standards. The water system includes 17 groundwater wells, 9 pumping stations, 10 reservoir sites, 23 pressure zones and 165 miles of distribution pipeline. Water Operations delivers quality service to its customers through formalized maintenance programs and long range planning activities that improve the reli- ability of the water system. The Water Operations Fund receives the majority of its revenue from fixed meter and water consumption charges and thus is heavily influenced by two primary drivers: climate and economic development. FY 14-15 witnessed a fourth year of dry weather prompting officials from local, county, and State agencies to take measures directing communi- ties to reduce water consumption. Morgan Hill residents responded to the 20 percent call for reduction as outlined in the Level 1 declaration by the City Council. Water production for FY 14-15 is projected to reach 6,750 acre feet (AF) of water – below the forecasted amount of 7,020 AF. California is in its fourth year of drought. As a result the Santa Clara Valley Water District (SCVWD) has asked that all water retailers they serve to reduce water consumption by 30 percent. In April 2015, the City Council adopted a resolu- tion declaring a -Level 2 water supply shortage, and thus water conservation measures have been implemented to reduce the amount of water consumed during the foreseeable future. As a result, water production in FY 15-16 is fore- casted to be less than 6,000 AF which is far lower than the historical average of 7,800 AF established as the ongoing consumption baseline during the 2011 Water Rate Update Study. FY 15-16 will be a challenging year for statewide water producers and the City of Morgan Hill is not exempt from these challenges. The Water Division team is taking steps to address the community’s water demand by enlisting groundwa- ter experts to analyze locations, evaluate groundwater levels, and help construct new water wells. If groundwater levels follow historic trends, additional capacity may be needed to compensate for reduced water production from existing wells supplying the City's water system. The Water Division will reduce distribution system flushing to “as- needed”, and water used for large meter testing will be captured and repurposed. These activities contribute to an efficient water system, but drought conditions call for the Water Division to evaluate and suspend activities that are not critical to health and safety. During the drought the Water Division team will work even closer with the SCVWD on water conservation and the status of the groundwater basin. The FY 15-16 estimated groundwater charges paid to our water supplier, the SCVWD, equals approximately 23 percent of the Water Operations budget. At $2.1 million, this is the single highest cost in the budget. The SCVWD Board ap- proved an increase in the groundwater recharge rates for FY 15-16 by 11.6 percent, from $319 AF to $356 AF beginning July 1, 2015, and increases of 5.3 percent annually, on average, over the next four years. The state-wide water short- age is driving the unusually higher rate increase. Historically, the Water District has asked retailers to assume in- creases of 3.5 percent annually.

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