09-19-2014 BPU RPT 08 - Laserfiche WebLink

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W A T E R E N E R G Y 1 l, RIVERSIDE PUBLIC UTILITIES kidwd Board Memorandum PUBLIC UTILITIES BOARD OF PUBLIC UTILITIES DATE: SEPTEMBER 19, 2014 ITEM NO: 8 SUBJECT: TERMINATION OF FUNDING AGREEMENT NO. 501241302 WITH CALIFORNIA DEPARTMENT OF PUBLIC HEALTH FOR THE UPPER GAGE EXCHANGE PROJECT ISSUE: The item for Board of Public Utilities consideration is a recommendation that the City Council authorize termination of Funding Agreement No. 50124602 with the California Department of Public Health. RECOMMENDATION: That the Board of Public Utilities recommend that the City Council authorize termination of Funding Agreement No. 50124602 with the California Department of Public Health for the Upper Gage Exchange Project in the amount of $4,609,500. BACKGROUND: The Riverside Canal and Gage Canal Exchange Project (Project) was originally planned to augment the potable water supply available to the Riverside Public Utilities Department (RPU) by increasing the amount of non - potable irrigation water available for exchange with the Gage Canal Company (Gage). On September 18, 2008, the City received a Letter of Commitment from the California Department of Public Heath (CDPH) for a Proposition 50 Grant in the amount of $4,284,000, (with RPU providing the balance of funds for the $8,568,000 project budget). In December 2008, due to the State of California's financial situation, General Obligation bond projects were frozen and the Project was placed on hold for over two years. In early 2011, the Project was restarted and staff began the process of preparing construction plans and specifications for the project. The total project cost was amended from $8,568,000 to $9,219,000 (fifty - percent to be funded by grant funds and the remainder to be funded by City matching funds) due to the two -year delay associated with the freezing of the State's Prop 50 program. On January 26, 2013, the Funding Agreement between the City and CDPH was executed. An amendment to the Funding Agreement was executed on July 15, 2013 to extend the project completion deadline, due to construction of the Project being delayed over concerns with potential cumulative traffic impacts on Iowa Avenue as a result of the Public Works Department's Iowa Avenue Grade Separation Project. Changes to the direction of RPU's water basin management strategy and shifts in priorities on other alternative water supply projects have made the Project less attractive. Specifically, declining water levels in our non - potable wells, and increasing concerns from the agricultural community over shifts in delivered water quality significantly reduce the economic benefits of expanding the potable /non - potable exchange. As a result, staff recommends not advancing the project to the construction phase and that the Board recommend that the City Council authorize termination of the Funding Agreement No. 50124602 in the amount of $4,609,500 with CDPH. Staff has contacted CDPH, and they have also agreed to terminate the agreement without penalty.