REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Chau Vu, Director of Public Works
PREPARED BY: Chris Davis, Senior Management Analyst
Subject:
title
Amend Fiscal Year 2026/27 West Orange County Water Board (WOCWB) Budget by $4,600,000 to Return Unexpended Cathodic Protection Program Funds to Member Agencies’ Water Enterprise Funds Based on Ownership Percentage
body
Statement of Issue:
WOCWB currently holds a fund balance of $7.6 million. This balance is the result of pre-financing for the Cathodic Protection Program. However, now that the Cathodic Protection Program is no longer necessary, these funds are no longer intended for a specific project, and the Board could return them to member agency’s enterprise funds.
Financial Impact:
Approval of the budget amendment would reduce the WOCWB fund balance to approximately $2,000,000. Funds in the amount of $2,580,600 would be added to the City’s Water Master Plan Fund (507) undesignated unreserved fund balance.
Recommended Action:
recommendation
Approve budget amendment and return funds to member agency’s water enterprise funds.
end
Alternative Action(s):
Do not approve budget amendment and maintain current fund balance with WOCWB and direct staff accordingly.
Analysis:
The City is a member of the West Orange County Water Board (WOCWB) Joint Powers Authority. The individual member agencies of WOCWB need to approve the proposed WOCWB budget amendment prior to ratification by the Board as a whole.
The Board currently holds a fund balance of $7.6 million as of June 30, 2026. This high balance is the result of pre-financing for the Cathodic Protection Program. However, the Cathodic Protection Program is no longer necessary, and these funds are no longer intended for a specific project - therefore, the Board could return them to member agencies.
In 2020, Engineering staff presented to the WOCWB Board of Directors a proposal to implement a Cathodic Protection Program on the OC-9 and OC-35 transmission mains to extend the lifespans of the 60+ year old mains. At the time, the cost of Cathodic Protection for both mains was estimated to be $8 million. This cost was based on comparable projects at that time and not based on a physical analysis of the pipelines.
To mitigate the financial burden on member agencies, the WOCWB approved a plan to contribute a total of $1 million per year beginning in Fiscal Year 2020/21, prorated by each agency’s ownership percentage of the Board. Design on the OC-9 project was to begin in Year 3, with construction to be performed in Year 4. Due to the pandemic and staff turnover, design was delayed on the project. Member agency contributions continued annually, with $6 million collected from member agencies for this project. Additionally, the WOCWB had approximately $1.4 million on hand prior to FY 2020/21, and accrued interest on its unspent money. The WOCWB’s fund balance currently stands at $7.6 million.
In Fiscal Year 2023/24, the Board’s engineering consultant, Ardurra, began a study of the OC-9 transmission main as part of the initial project design. During the study, it was determined that Cathodic Protection was not a feasible solution for OC-9 or OC-35 due to certain segments of the mains being too narrow.
At the October 2024 Board meeting, the Board authorized Ardurra to perform a condition assessment of both transmission mains to better determine their feasibility. The study identified numerous areas to be investigated further or monitored, but there is no immediate danger of failure in either transmission main. Specifically, the study listed repairs totaling $620,000 to areas of high concern. The study also recommended performing a condition assessment every five (5) years to identify areas of concern before they become major problems. Upon receiving the report, the WOCWB included $1,000,000 in funding to perform these repairs (plus contingency) as well as correct any ancillary issues discovered during repairs and ongoing maintenance.
As noted above, the WOCWB has a fund balance of approximately $7.6 million. Approximately $2 million is held in CAMP Term, which is a fixed CD-like instrument that matures in November 2026. Staff is proposing to return $4.6 million to the member agencies, prorated by each agency’s ownership percentage of the WOCWB. WOCWB would retain $3 million, including $1 million in the FY 2026/27 approved budget. Of the $3 million that WOCWB would retain, approximately $1 million would remain liquid until the other $2 million in the CAMP Term Account matures in November 2026. WOCWB would be able to access the $2 million in CAMP Term if needed, but there would be an early redemption penalty and WOCWB would lose any interest earnings. As of June 30th, 2026, the estimated earnings from CAMP Term were $27,890.96. Upon maturity on November 2026, the $2 million will be transferred back to the CAMP Pool and available to be redeemed that day. Under this scenario, the WOCWB would receive the initial principal of $2 million and anticipated interest earnings of approximately $57,957.81.
|
Agency |
Percent Owner |
Total Return |
|
Huntington Beach |
56.1% |
$2,580,600 |
|
Westminster |
25.4% |
$1,168,400 |
|
Seal Beach |
14.3% |
$657,800 |
|
Garden Grove |
4.2% |
$193,200 |
|
Total |
100% |
$4,600,000 |
Assuming the WOCWB spends the full $1,000,000 on repairs, staff believe that it would be prudent to keep $2,000,000 in the WOCWB reserve. This would provide a financial buffer in the event of emergency repairs.
These funds could also be directed towards the next recommended condition assessment in Fiscal Year 2029/30. Conversely, the Board has not held a balance greater than $1.4 million prior to the beginning of the Cathodic Protection program, and staff is not recommending keeping an excessive balance.
At July 15, 2026, WOCWB regular meeting, the Board voted 5-0 in favor of returning funds to each member agency’s water enterprise fund. Each member agency’s City Council will need to approve the amendment, and WOCWB will vote to ratify the amended budget at the October 21, 2026, regular meeting. Funds would be returned to each member agency after the CAMP term ends in November 2026.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(5), administrative activities of governments that will not result in direct or indirect physical changes in the environment do not constitute a project.
Strategic Plan Goal:
Non Applicable - Administrative Item
Attachment(s):
1. PowerPoint Presentation