Agenda Item Wording:
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Approve Agreement with California Dairies, Inc. - Approve the agreement with California Dairies, Inc. (CDI) to allow them to increase their permitted wastewater discharge flow capacity and decrease their biochemical oxygen demand under their Industrial Discharge Permit utilizing a fee exchange.
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Deadline for Action: 10/21/2024
Submitting Department: Public Works
Contact Name and Phone Number: Ben Litwack, Public Works Manager, (559)713-4671, ben.litwack@visalia.city
Department Recommendation:
Staff recommends that Council approve the agreement with California Dairies, Inc. (CDI) to allow them to increase their permitted wastewater discharge flow capacity and decrease their biochemical oxygen demand under their Industrial Discharge Permit utilizing a fee exchange subject to any minor conforming changes acceptable to the City Manager and City Attorney.
Background Discussion:
California Dairies, Inc. (CDI) is a significant industrial sewer discharger within the City. Their Visalia facility is their largest in the State and specializes in butter and milk powder production. CDI’s current average daily permitted flow discharge limit is 1.87 million gallons per day (MGD), however they consistently exceed that limit with an average daily discharge of 2.25 MGD. Therefore, City Staff and the City Attorney have been working on drafting an agreement with CDI to modify these limits to better align the permitted amount with CDI's current flow discharge levels due to existing production demands at their facility.
CDI has two operational efficiency projects planned and is currently seeking building permits for both. As part of the review process, City staff advised CDI that before these building permits could be issued, they would need to bring their permitted wastewater discharge flow up to the level they are currently utilizing. The agreement outlined to address this requirement ensures compliance while balancing the City’s environmental and infrastructure goals.
In conjunction with, and as a result of, these projects, CDI has proposed a reduction in its biochemical oxygen demand (BOD) and total suspended solids (TSS) discharge levels. These pollutant reductions will be achieved through the installation of a pre-treatment system designed to significantly reduce the facility’s environmental impact. Specifically, CDI commits to significantly lowering its BOD from 7,266 lb/day to 4,005 lb/day (44.8%) and its TSS from 4,937 lb/day to 3,117 lb/day (36.9%). In exchange for these pollutant reductions, the City is considering CDI’s request to adjust its flow limit without imposing additional impact fees. The impact fee cost to increase CDI’s average daily flow limit to 2.25 MGD would be $1,554,200 and would be equally offset by the impact fee reduction from the reduced BOD and TSS limits, within a reasonable degree of rounding, as per the City’s most recent 24/25 Rates and Fees Schedule. Their flow capacity is specifically being increased by the amount of the monetary value of their
BOD reduction. The fee calculation is outlined below:
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Flow Impact Fee Calculations |
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CDI's Current Permitted Flow (MGD) |
1.870 |
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CDI's Requested Flow (MGD) |
2.250 |
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Amount of Increase (MGD) |
0.380 |
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FY 24/25 Treatment Plant Rate ($ per gallon) |
$ 2.85 |
|
FY 24/25 Trunkline Rate ($ per gallon) |
$ 1.24 |
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Total Flow Increase Impact Fees |
$ 1,554,200.00 |
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|
|
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BOD Impact Fee Calculations |
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CDI's Current Permitted Daily BOD (lb/d) |
7,266.000 |
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CDI's Requested BOD Limit (lb/day) |
4,005 |
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Amount of BOD Decrease (lb/day) |
(3,261) |
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FY 24/25 Treatment Plant BOD Rate ($/pound) |
$ 352.80 |
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Impact Fee Reduction of BOD |
$ (1,150,480.80) |
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|
|
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TSS Impact Fee Calculations |
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CDI's Current Permitted Daily TSS (lb/d) |
4,937.000 |
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CDI's Requested TSS Limit (lb/day) |
3,117 |
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Amount of TSS Decrease (lb/day) |
(1,820) |
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FY 24/25 Treatment Plant TSS Rate ($/pound) |
$ 221.80 |
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Impact Fee Reduction of TSS |
$ (403,676.00) |
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|
|
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Total BOD/TSS Reduction Impact Fees |
$ (1,554,200.00) |
CDI will have 12 months from the date of the final execution of the agreement to complete design, permitting, and construction and installation of the pretreatment system. CDI will then have 6 months from the completion of construction to achieve the BOD/TSS reductions outlined in the agreement.
The City views this trade-off as beneficial for several reasons. First, reducing BOD and TSS levels will lessen the burden on the City’s wastewater treatment infrastructure, ensuring the system remains within compliance with state and federal regulations. This also helps protect local water quality and ensures more efficient operations at the treatment plant. CDI’s investment in pre-treatment technology not only benefits their facility but also supports the City’s broader environmental goals.
By bringing CDI’s permit in line with their current flow levels and allowing them to operate within the new 2.25 MGD limit, the City is addressing both current and future discharge levels in a controlled and environmentally responsible manner. In return for granting this increase in flow, the City is ensuring significant pollutant reductions, which will alleviate strain on the wastewater system.
The agreement also includes safeguards for the City in the event that CDI is unable to meet its obligations. If CDI fails to complete the pre-treatment project within the agreed timeframe or is unable to achieve the pollutant reductions, they will be required to pay $1,554,200 to adjust their permit for the increased flow capacity without the benefit of reduced BOD and TSS limits. This ensures that the City is compensated if the environmental benefits are not realized. Additionally, if the pre-treatment project initially meets the outlined pollutant reductions but then fails to do so at a later date, CDI would be required to pay the appropriate permit exceedance penalties on a monthly basis as per the requirements of their Industrial Discharge Permit.
In conclusion, this agreement provides a balanced approach that aligns CDI’s operational needs with the City’s environmental and infrastructure goals. By approving this agreement, the City ensures compliance, supports sustainable wastewater management, and maintains a cooperative relationship with CDI, all while protecting the public interest through performance-based conditions.
Fiscal Impact:
If CDI’s treatment plant performs per the agreement, $1,544,200 worth of Trunkline Capacity and Treatment Plant Capacity impact fees will be waived in exchange for the reduction in $1,544,200 in impact fees for the reduced BOD and TSS limits.
If CDI’s treatment plant fails to perform per the agreement, CDI will pay $1,544,200 in Trunkline Capacity and Treatment Plant capacity impact fees.
Prior Council Action: N/A
Other: N/A
Alternatives: Reject agreement and require CDI to pay the required impact fees before any building permits for expansion projects are issued.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to approve the agreement with California Dairies, Inc. (CDI) to allow them to increase their permitted wastewater discharge flow capacity and decrease their BOD demand under their Industrial Discharge Permit utilizing a fee exchange, subject to any minor conforming changes acceptable to the City Manager and City Attorney.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: CDI - Agreement Calculation
CDI Agreement
Exhibit A
Exhibit B
Exhibit C
Rates and Fees FY24-25