Title
Approval of a Resolution Authorizing an Agreement with the City of Lacey for Short-Term Use of Wholesale Water
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Move to approve a Resolution authorizing an Interlocal Agreement with the City of Lacey for short-term use of wholesale water.
Report
Issue:
Whether to approve an Interlocal Agreement with the City of Lacey for short-term use of wholesale water.
Staff Contact:
Susan Clark, Engineering and Planning Supervisor, Public Works, 360.753.8321
Presenter:
None - Consent Calendar Item.
Background and Analysis:
Until June 30, 2016, the City of Olympia’s Drinking Water Utility (Drinking Water Utility) provided wholesale water service to the City of Lacey (Lacey) through an existing intertie. Under the expired wholesale water agreement, the Drinking Water Utility was obligated to guarantee water service to Lacey.
On June 8, 2018, an Interlocal Agreement was executed for the use of emergency water which allows, but does not guarantee, the use of water by Lacey. Under the emergency use Interlocal Agreement, the Drinking Water Utility agrees to provide Lacey with potable water to address a water supply emergency. The agreement defines a water supply emergency as an emergency resulting from a major water line break, contamination to the water supply system, mechanical equipment failure, electrical equipment failure or any other mutually agreed upon emergency affecting Lacey’s water supply system.
Under the 2018 Interlocal Agreement, Lacey has requested the use of wholesale water supply as it completes capital projects, including addition of corrosion control at its College Steet and Madrona wellfields. However, since a guarantee of water is required by Lacey for its planned upgrades, it was determined that a new wholesale water supply agreement would be required to address Lacey’s non-emergency short-term water supply need.
Under the proposed Interlocal Agreement, the Drinking Water Utility will provide up to two million gallons of water per day year-round through December 31, 2028 and Lacey will be charged both a fixed monthly rate and a volume charge.
Prior to agreeing to provide up to two million gallons of water per day year-round to Lacey, the Drinking Water Utility updated its recently completed water demand forecast, source capacity analysis, storage capacity analysis and hydraulic analysis to include Lacey’s requested water use. This analysis indicates that the Drinking Water Utility has sufficient water supply and system capacity to serve wholesale water to Lacey as requested in the new Interlocal Agreement.
Climate Analysis:
The short-term use of wholesale water by the City of Lacey is not expected to impact green house gas emissions since the Drinking Water Utility currently purchases Green Power to operate its pumps. Additionally, the Drinking Water Utility contributes to the City’s overall climate goals through its water conservation goals and messaging, the use of electric vehicles where possible and the use of energy efficient pumps. The Interlocal Agreement with the City of Lacey requires the City of Lacey to implement conservation measures which are, at a minimum, equal to measures implemented by Olympia in the event a drought is declared.
Equity Analysis:
Throughout the duration of the Interlocal Agreement with the City of Lacey for short-term use of wholesale water, the Drinking Water Utility will receive fixed monthly revenue plus a volume charge when water is used. The rates were established to incorporate allocated capacity expenses and capital recovery costs and will help off-set rate increases thereby benefiting all Drinking Water Utility customers during the years the agreement is in place.
Neighborhood/Community Interests (if known):
There are no known community concerns regarding this agreement. Since the agreement will raise revenue for the Drinking Water Utility and the Drinking Water Utility has adequate supplies to provide short-term use of wholesale water, community concerns should be minimal.
Financial Impact:
During its first year, the City of Olympia will receive $153,429.84 in fixed revenue. The Interlocal Agreement also includes a volume charge of $1.22 per hundred cubic feet consumed. Both the fixed and volume charges increase annually by the Seattle consumer price index.
Options:
1. Approve a Resolution authorizing an Interlocal Agreement with the City of Lacey for short-term use of wholesale water and authorize the City Manager to sign the agreement. This will allow the City of Lacey to use excess water supplies while the City of Lacey completes required capital projects and will allow the Drinking Water Utility to receive wholesale revenue to help off-set water rate increases.
2. Do not approve a Resolution authorizing an Interlocal Agreement with the City of Lacey for short-term use of wholesale water. The City of Lacey will not have access to excess water supplies from the Drinking Water Utility and wholesale revenue will not be received. This could negatively impact the Drinking Water Utility’s relationship with its neighboring water system.
3. Take other action.
Attachments:
Resolution
Agreement