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BACKGROUND In June 2010, recognizing the benefits recycled water can provide through supply reliability and local control, City Council approved a Recycled Water Surcharge Fee in conjunction with a water rate increase. This funding source was the first step in developing a revenue stream to support the development of the City's Recycled Water Program. More recently, on November 5, 3013, City Council approved the Recycled Water Feasibility Study and authorized staff to move forward with the environmental compliance documents necessary with state and federal governments to move forward and help fund the City's Recycled Water Project. CEQA and NEPA environmental documentation is currently underway and will be completed very soon. The environmental work comprehensively covers all aspects of treatment expansion, distribution phasing, and possible recycled water services the City might be interested in offering in the near term and future. DISCUSSION Since City Council's November 5th, 2013 action, California's water supply situation has worsened which has led to the Governor's January 17, 2014 declaration of a State of Emergency due to drought conditions. The City Council recognized the Governor's declaration and at its February 4 meeting it adopted a resolution declaring a water shortage implementing Stage 1 of the water shortage contingency plan calling for all water customers to voluntarily reduce water shortage by 20%. Stage 1 drought declaration was consequently upgraded to a stage 3 drought declaration requiring 25% mandatory reductions due to the state water allocation for 2014 dropping to 0% for the first time in State history. In addition, the state has directed all departments within the state to plan on continuing drought conditions for 2015 due to the driest and lowest storage available. The State has approved low interest loans of 1% for thirty years for projects that will be ready for construction by December 2014. The federal government also has legislation working through Congress presently for 0% interest for forty years for recycled water projects that can be ready for construction immediately. To obtain funding for the City's projects, staff has successfully filed an application with the state's Clean Water State Revolving Fund (CWSRF) which provides low interest loans (0.5%) for major water projects and it anticipates pursuing additional funding for federal programs as they become available. To meet project planning and construction requirements, staff considered a number of options including increasing City staff, utilizing an engineering firm or pursuing specialized contract services. While all of the above have advantages and disadvantages, considering the availability and technical ability of Mr. Requa, staff determined that his services offer the best alternative for this project. Mr. Requa served previously as the former Assistant General Manager and District Engineer for DSRSD and provided contract operation services for DERWA, as such he is very familiar with our current water supply and recycled water project, environmental processes, designing recycled water infrastructure and negotiating agreements to integrate the new Page 2 of 3