SANTA CLARITA VALLEY SANITATION DISTRICT

NEED FOR WASTEWATER SERVICE CHARGE RATE INCREASE

OVERVIEW The Santa Clarita Valley Sanitation District (Sanitation District) provides Santa Clarita Valley residents and businesses high quality wastewater management services while protecting water quality, public health and the environment. To continue this service and to comply with state regulations regarding the discharge of chlorides to the Santa Clara River, the Sanitation District must upgrade its wastewater treatment system at the Saugus and Valencia Water Reclamation Plants (WRPs), and build new facilities to help protect the beneficial uses of the river. This investment in the environment and quality of life of the Santa Clarita Valley will require a rate increase for those in the Sanitation District’s service area.

  The Santa Clara River

As originally proposed, the chloride standards established to meet the river water quality objectives would have required the construction of large scale advanced treatment and brine disposal facilities costing $500 to $600 million. Because of this enormous cost, the District funded and, in collaboration with multiple interested parties, began a series of studies to evaluate the impact of chlorides in the river valley. These studies were recently completed and conclusively demonstrate that an alternative approach (the Alternative Compliance Program) could be used to meet the objectives at a much lower cost to the District. In December 2008, the Regional Water Quality Control Board (RWQCB) - without changing the overall objectives for the Santa Clara River - adopted revised standards based on the results of those collaborative studies.

While these studies were being conducted, staff evaluated the impact of automatic water softeners in the District and concluded approximately one third of the overall chloride loading on the WRPs could be eliminated through the removal of these units. As the single largest controllable source of chloride (salt) pollution to the Santa Clara River,

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removal of automatic water softeners is a key to minimizing rate increases tied to the upgraded wastewater treatment. It was hoped that the elimination of automatic water softeners would altogether eliminate the need for advanced treatment. Unfortunately, some advanced treatment upgrades and new facilities will still be required. Discontinuing the use of automatic water softeners, however, was an important component in achieving the lower cost Alternative Compliance Program and will save the District up to $74 million in the cost of required advanced treatment facilities, resulting in an overall project cost of approximately $250 million. Santa Clarita Valley residents must therefore be applauded for their role in helping to keep rates low by taking part in the automatic water softener removal program. In order to minimize the impact to ratepayers, the Sanitation District is proposing a gradual rate increase over time, beginning with the first three years.

SANTA CLARITA VALLEY WASTEWATER SYSTEM

The Saugus and Valencia Water Reclamation Plants produce high quality recycled water, which flows into the Santa Clara River.

   Saugus Water Reclamation Plant Valencia Water Reclamation Plant

The Sanitation District provides wastewater management service for approximately 230,000 Santa Clarita Valley residents. The Sanitation District collects wastewater generated within its service area, operates the Saugus and Valencia WRPs to produce a high quality filtered, disinfected recycled water, and manages the recycled water through beneficial reuse. The Sanitation District strives to achieve both high value and a high level of environmental and public health protection in the delivery of its services.

The Santa Clarita Valley Wastewater System

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Recycled water from the Sanitation District’s WRPs is put into to the Santa Clara River and later used downstream for agricultural purposes. The river is the largest river system in Southern California that remains in a relatively natural state.

SANTA CLARA RIVER AND CHLORIDE

The Santa Clara River is an important resource to the area, providing aquatic life habitat, agricultural water supply and groundwater recharge. For the river to continue to provide these critical functions and for the Sanitation District to meet federal and state environmental regulations, salt in the river must be reduced. The Sanitation District must help protect the river by removing chloride (salt) from the recycled water it supplies to the river.

 Agriculture along The Santa Clara River

In compliance with the Federal Clean Water Act, the Los Angeles Regional Water Quality Control Board (Regional Board), a state regulatory agency, has established water quality standards to protect the beneficial uses of the Santa Clara River. High levels of chloride in the river can be harmful to aquatic life and salt-sensitive agricultural crops such as avocados and strawberries.

Currently, the river does not meet the water quality standard for chloride. As a result, the Regional Board adopted the Upper Santa Clara River Chloride Total Maximum Daily Load (TMDL), a State Order that describes the state’s plan to meet the chloride water quality standard, and fully protect groundwater, aquatic life and agriculture. The TMDL requires that the level of chloride in recycled water discharged to the Santa Clara River be reduced.

The major sources of chloride in the Sanitation District’s recycled water include water imported from Northern California, residential automatic water softener use, commercial, industrial and other residential sources, and the disinfection process at the WRPs.

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Chloride in the Sanitation District’s Recycled Water – 2005

TAKING CHLORIDE OUT OF RECYCLED WATER

Automatic water softeners produce a salty waste and are the single largest controllable sources of chloride in recycled water and the river. The most cost-effective component of any chloride reduction plan is the removal of salt-based automatic water softeners.

AUTOMATIC WATER SOFTENERS

The program to reduce chloride pollution created by automatic water softeners was first initiated in the 1960s.

Automatic Water Softeners Removed By The Sanitation District

• In 1961, the Sanitation District enacted ordinances that prohibited the installation of new automatic water softeners within its service area.

• In 1997, several lawsuits resulted in these ordinances being overturned statewide.

• In 1999, the Sanitation District worked with local elected officials to pass Senate Bill 1006, giving the Sanitation District the authority to enact new ordinances banning the installation of new automatic water softeners. These ordinances were passed and became effective in March 2003. At the time, chloride from automatic water softeners comprised up to 35% of the chloride in the recycled water.

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• In 2004, the Sanitation District began a public outreach and voluntary automatic water softener removal program designed to encourage residences to remove their existing automatic water softeners. As a result of the Sanitation District’s efforts, chloride was reduced to approximately 30% of the total chloride in the recycled water by 2005.

• Then in 2006, the Sanitation District worked with local elected officials to pass Senate Bill 475, giving the Sanitation District the authority to enact an ordinance requiring the removal of existing automatic water softeners. A water softener rebate pilot program was also implemented.

• In 2007, the Sanitation District expanded the automatic water softener rebate program to provide 100% reasonable value of each unit to residents for removal of the automatic water softeners in accordance with the requirements of SB 475. As a result of these efforts, chloride was reduced to approximately 20% of the total chloride in recycled water by mid 2008.

• Then in 2008, the Sanitation District’s Board of Directors adopted the Santa Clara River Chloride Reduction Ordinance of 2008 (Ordinance).

 Measure S

Before becoming effective in January 2009, the Ordinance had to be approved by voters in the Sanitation District’s service area. Ballot Measure S on the November 2008 General Election ballot was approved by nearly two-thirds of Santa Clarita Valley voters.

All softeners must be removed by June 30, 2009 and residents can still apply for rebates worth 75% of a unit’s reasonable value through June 30, 2009. For more information, please visit www.lacsd.org/chloride.

While removal of automatic water softeners is the most cost effective way to remove chloride from the recycled water produced at the Sanitation District’s WRPs—saving residents up to $74 million in additional treatment costs—their removal alone is not enough to meet chloride limits for the river.

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OTHER ALTERNATIVES TO REMOVE CHLORIDE

The Sanitation District explored additional alternatives to further reduce chloride levels and comply with the State Order.

Large Scale Desalination Facility

Since removal of automatic water softeners alone would not allow the Sanitation District to meet the requirements of the State Order, the Sanitation District evaluated all other options to meet compliance. In order to meet the original chloride water quality standard, the Sanitation District would have been required to construct expensive large-scale desalination and brine disposal facilities.

Because of the high cost and high energy requirements of this alternative, the Sanitation District worked with the Regional Board to revise the State Order to allow the Sanitation District to conduct scientific studies to determine the appropriate level of chloride to protect the Santa Clara River and to develop lower cost, lower carbon footprint options, which would provide greater overall benefit to Santa Clara River stakeholders. The Sanitation District funded these studies to be conducted collaboratively with the regulatory agencies and Santa Clara River stakeholders, including cities within the Santa Clarita Valley, local water agencies, agricultural interests, and environmental groups:

• City of Santa Clarita • City of Fillmore • City of Santa Paula • City of Piru • United Water Conservation District • Ventura County Agricultural Water Quality Coalition • Ventura County Board of Supervisors • Castaic Lake Water Agency • Santa Clarita Water Division • Newhall County Water District • Valencia Water Company • Camulos Ranch

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• Ventura County Watershed Protection District • Fox Canyon Groundwater Management Agency • Friends of the Santa Clara River • Santa Clarita Organization for the Protection of the Environment

The result of the work conducted by the Sanitation District and stakeholders was a revision of the water quality standards for the Santa Clara River and development of an alternative compliance program for the TMDL that provides multiple benefits for the stakeholders in Los Angeles and Ventura County, protects the beneficial uses of the river, saves energy, and provides a significant cost savings to Santa Clarita Valley businesses and residents.

ALTERNATIVE COMPLIANCE PROGRAM

Following scientific studies and the reduction of chlorides from automatic water softener removal, the Sanitation District will now implement the Alternative Compliance Program to reach state-mandated chloride levels for the Santa Clara River. The program will reduce chloride levels in the river to protect aquatic life, salt sensitive agriculture and groundwater and also provide regional benefits to the Santa Clara River watershed, promoting increased water reuse in Los Angeles County and providing increased water supply and preventing sea water intrusion in Ventura County.

Small Scale Desalination Facility

The Alternative Compliance Program includes a number of elements: (1) a new water disinfection process at the WRPs, (2) a small-scale desalination facility to remove salt at one of the WRPs, (3) supplemental groundwater pumping to the river to reduce chloride levels, (4) support for water recycling, and (5) the implementation of new water supply wells and pipelines.

(1) The current chlorine-based disinfection process used at the WRPs contributes about 10% of the chloride in the recycled water. In order to remove this source of chloride and reduce the chloride levels in the recycled water, the Sanitation District will be changing the recycled water disinfection process to ultra violet (UV) light disinfection.

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(2) As part of the program, the Sanitation District has committed to constructing and operating a small-scale desalination facility. Limiting the size of the facility will allow for local disposal of the resulting brine waste produced during the desalination process through deep well injection into old oil fields. A larger desalination facility would have required an expensive 43-mile brine line from the WRPs to the Pacific Ocean. The small desalination facility will still allow the Sanitation District to remove a significant amount of chloride from the recycled water, allowing the Sanitation District to comply with chloride standards in the river during normal conditions. When not needed to comply with the chloride standards in the river, the high quality water produced at this facility will be used in Ventura County to blend with extracted high chloride groundwater from the impacted downstream groundwater basin, which will in turn be used to provide a water supply benefit to Ventura County.

(3) Under normal conditions, the small desalination facility will be enough to help the Sanitation District comply with chloride standards in the river. However, during periods of extreme drought conditions, the water quality in the river could still exceed the new standards. During these infrequent times, the Sanitation District will procure supplemental local groundwater that is low in chloride that will be used to further reduce the chloride levels in the river. The Sanitation District will enter into agreements to participate in a water banking project(s) to import potable water to the Santa Clarita Valley water suppliers to replace the local water supply needed for supplemental water.

(4) The Sanitation District will support the expansion of recycled water reuse in the Santa Clarita Valley by working with the local water purveyors. The Sanitation District will initiate recycled water contracts with the water purveyors and make available high quality recycled water that meets Department of Public Health requirements for reuse. Due to increasing demands for water, limitations on imported supplies and persistent droughts, recycled water reuse is becoming an integral part of the water picture for Los Angeles County. The goal of the Sanitation District is to recycle as much water from its treatment plants as possible to meet the region’s water needs.

(5) As mentioned in item (2), when excess high quality water from the desalination facilities is available, it will be used in Ventura County to blend with extracted high chloride groundwater and export it from the basin. The Sanitation District will construct the necessary facilities, water conveyance pipelines and groundwater extraction wells, to facilitate this project. By building these facilities, the Sanitation District will create the ability to maintain a long term salt balance in the basin by removing the high chloride groundwater, and allow the basin to quickly recharge with higher quality surface water resulting from the higher quality recycled water discharged at the WRPs as well as local storm flows. The blended extracted groundwater and desalination water will then be conveyed further downstream in the river where it will be used to offset groundwater pumping in the Oxnard Plain that is currently leading to seawater intrusion problems in its underlying groundwater basins.

Ultimately, the cumulative benefits provided the Alternate Compliance Program would provide greater overall benefits to all Santa Clara River stakeholders and provide considerable savings to the Sanitation District’s ratepayers.

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COSTS AND NEEDED SERVICE CHARGE RATE INCREASES

Implementation of the Alternative Compliance Program will require upgrades in the wastewater management system, particularly at the Saugus and Valencia WRPs. This investment in the environment of the Santa Clarita Valley and Santa Clara River will increase wastewater rates for the next seven years.

 Costs for Removal of Chloride from Automatic Water Softeners

To ensure Santa Clarita Valley residents and businesses receive environmentally protective, sound wastewater management services at a reasonable cost, the Sanitation District carefully studied the costs of all upgrade options. The cost of the automatic water softener removal program is approximately $2.5 million, which includes buy-back amounts. Removal of automatic water softeners through this program will save ratepayers up to $74 million in additional treatment and disposal costs.

Costs for Compliance Options

In order to comply with the previous State standard and reduce chloride in the Santa Clara River by building the large scale desalination facilities, the cost to the rate payers would have been $500 to $600 million. By working with the stakeholders and conducting the special studies to revise the standard and develop alternatives, the Sanitation District estimates a savings to ratepayers of more than $250 million. The current service charge for a typical single-family home is approximately $14.92 per month. Based on the best available project information for our new plan of action, which includes capital projects and the requirements to

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establish long-term financing and stability, the service charge must be increased steadily over the next seven-year period to approximately $47 per single-family home per month in fiscal year 2015-16. Approximately 73% ($23 per month) of the $32 per month increase will go toward debt service and operating expenses associated with the Alternative Compliance Program, while inflation will contribute 23% ($7.50 per month) of the increase over the same period. The other miscellaneous capital upgrades will account for the remaining 4% ($1.50 per month) of the increase. In an effort to minimize the impact to ratepayers as much as possible in the current economic climate, rate increases will be reasonably uniform percentage increases from year to year. This means that the dollar amount of the proposed increase will be lower in the earlier years (e.g. $3 per month in the first year) and gradually increase each year thereafter (e.g. $6.58 per month in the seventh year). Accordingly, the recommended service charge rates for a single-family home for the first three years are as follows:

Current 2008/09

Proposed 2009/10

Proposed 2010/11

Proposed 2011/12

Service Charge Rate

($/month) $14.92 $17.92 $21.50

$25.75

At this time, the recommendation is for only three years of service charge rate increases, even though the implementation of the Alternative Compliance Plan will require rate increases over a seven-year period. Based on the best available cost information and anticipated debt service requirements to establish long-term financing and stability, projected increases for fiscal years 2012-13 through 2015-16 are provided below. These rates are not being recommended at this time, as they will be more accurately determined once construction bids are received and all funding sources needed for the full implementation of the Alternative Compliance Plan are better known.

Proposed 2012/13

Proposed 2013/14

Proposed 2014/15

Proposed 2015/16

Service Charge Rate

($/month) $29.92 $34.75 $40.42 $47.00

The projected rate increases for a period of approximately seven years are shown in the chart below.

 Sanitation District’s Proposed Rate Increase Schedule

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The proposed rate increases will cover expenses for both the existing facilities and for facilities related to compliance with chloride limits in the river (see diagram below).

Sanitation District’s Proposed Rate Increase Breakdown

FUTURE SCHEDULE

In order to comply with the State regulated chloride limits, the Sanitation District must meet several deadlines related to planning, design, and construction of the facilities identified in the Alternative Compliance Program and achieve final compliance with the chloride limits by May 2015. The Sanitation District is confident we will meet these deadlines and continue to provide the Santa Clarita Valley with a clean, safe water environment and a high quality of life.

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