Pacific Grove council approves staff plan for Pure Water Monterey allocation, raises city entitlement discount to 60%

Pacific Grove City Council on Oct. 15 unanimously approved a staff plan to allocate the city's incoming supply from the Pure Water Monterey project and to increase the city's discount on its remaining entitlement water from 30% to 60%.

The council approved the recommended allocation of the Pure Water Monterey supply and the staff recommendation to reduce the city's entitlement price as a development incentive, with the motion passing by voice vote (6-0-1).

City Community Development Director John Biggs told the council the matter was brought as a discussion item to provide direction before staff returns with a formal resolution. "We are looking for council direction," Biggs said during his presentation, summarizing staff's recommended split of the incoming supplies and the proposed price adjustment.

Biggs said the city has two principal incoming sources to allocate: the Pure Water Monterey Groundwater Replenishment Project (referred to in the meeting as Pure Water Monterey) and the city's existing entitlement water. In the presentation staff said the Monterey Peninsula Water Management District had indicated the city would receive an allocation; the transcript records both "42 acre-feet" and, later in the same presentation slides, "32 acre-feet" in reference to the Pure Water allocation. Staff's recommendation and the allocation table discussed during the meeting were based on a 32-acre-foot figure for Pure Water Monterey and a little more than 19.255 acre-feet for the city's entitlement water (the latter described as the original 47 acre-feet less 11.5 acre-feet set aside earlier for affordable housing and prior sales).

Under the recommendation the Pure Water Monterey supply would be parceled as follows: 0 acre-feet to market-rate residential, 23 acre-feet to restricted affordable housing, 6 acre-feet to commercial, and 3 acre-feet to municipal/local projects. For the city's entitlement water staff recommended approximately 15 acre-feet be allocated to residential uses and 4.25 acre-feet held as an unallocated reserve.

Staff framed the proposed 60% discount as a tool to encourage development where Pure Water is not allocated or not available and to make entitlement water more competitive with Pure Water rates. During the presentation Biggs cited a per-acre-foot comparison: he said calculations from the water management district put Pure Water Monterey costs in the range of about $36,000 per acre-foot, and that a 60% discount on the city's entitlement water would reduce the city's price to a figure in the low six figures per acre-foot. Earlier in the discussion staff gave differing figures for the entitlement fee (at one point referencing $183,000 per acre-foot with a 30% discount; at another point referencing about $236,000 per acre-foot in the city fee schedule). Council members asked staff to clarify pricing and noted the inconsistency during the meeting; staff committed to presenting the formal numbers in the forthcoming resolution.

Members debated how best to prioritize the limited supply. Council Member Garfield and Council Member Laurie both voiced support for prioritizing affordable housing, while Council Member McGrathfield and others asked staff about anticipated demand for commercial conversions (for example, converting an old bank into a restaurant) and the likely water demand for such projects. Biggs said demand is not yet pent up because the Pure Water project had not been fully permitted and online; he told the council that once operating permits are issued interest and applications will likely increase.

Public comment included remarks from Angela Sandermo, who said the city's local water project had operated at a deficit and argued that free Pure Water should benefit housing first. Lisa Chiani asked whether a specific project (referred to as ATC) had its coastal permit; staff clarified that ATC did not need additional water credits because it had sufficient on-site water already, and that the allocation discussion tonight did not change prior approvals.

After discussion Council members agreed to staff's allocation approach and to the recommended 60% discount for the entitlement water. The council directed staff to return with a resolution that memorializes the allocations and the new discount schedule and to bring final pricing and implementation steps for council adoption.

Next steps: staff will draft a resolution based on tonight's direction, provide clarified per-acre-foot pricing and mechanics for assigning water to projects, and return to the council for formal adoption and implementation details.