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BACKGROUND PFAS are a large group of man-made substances that have been extensively used since the 1940s in common consumer products designed to be waterproof, stain- resistant, or nonstick. In addition, these substances have been used in fire- retarding foam and various industrial processes. PFAS are unregulated contaminants of emerging concern in drinking water due to their health impacts and tendency to accumulate in groundwater. Perfluorooctanesulfonic acid (PFOS) and perfluorooctanoicacid (PFOA) are the most studied substances and are the focus of initial regulatory efforts in California. DDW has provided a tentative schedule to regulate PFOA and PFOS by establishing draft MCLs by fall of 2022 and final MCLs by early 2024. DDW has also started the process of reviewing other PFAS for possible regulation, but a schedule has not yet been identified. The City began testing its groundwater for PFAS in the second quarter of 2019 in compliance with general orders issued by DDW to numerous water agencies. Test results have shown that the City's Wells 5, 6, and 8 groundwater supply facilities contain the presence of PFAS. Well 8 contains the presence of PFOS above advisory levels and as a result, has not been operating since June 2019. On September 1, 2020, City Council supported a work plan to address PFAS that: • Prioritizes efforts on advancing the planning, design, and construction of self-implemented PFAS treatment at City wells. • Explores regional alternatives with Zone 7 on a parallel path. To begin the process of self-implemented PFAS treatment, the City established CIP21166 - PFAS Treatment and Wells Rehabilitation Project (Project). The goal of the Project is to extend the useful life of Wells 5, 6, and 8 as safe, reliable, and locally controlled sources of water for the City by: • Implementing a PFAS treatment system that can reduce concentrations to meet the City's low-treatment goal (defined as the consumer confidence report detection levels listed in the current DOW Order DW-2020-0003-DDW). • Rehabilitating the well facilities to extend their useful life by 30 years to be comparable to the useful life of a new PFAS treatment system. • Allowing for expansion of the PFAS treatment system site to accommodate potential future water treatment regulations. • Implement improvements in a timely fashion to increase probability of commissioning facilities prior to the required PFAS regulatory compliance date and reduce the risk/duration for purchasing supplemental water from Zone 7. On June 15, 2021, the City Council received a presentation on the Basis of Design Report (BODR) prepared by Carollo Engineers and approved finalizing the project design. The Project is estimated to cost approximately $46 million of which $3.3 million has already been allocated from the Water Operating Fund to cover design costs leaving $42.7 million to be funded. At the June 15, 2021 City Council meeting, City Council directed staff to prepare a funding plan for the unfunded portion of the estimated project cost and bring that plan to City Council for review and approval. Page 2 of 7