Consider approval of Resolution 2024-10 adopting the Municipal Service Review (MSR) for Flood Protection Services and approving a Sphere of Influence (SOI) Update for Reclamation District (RD) 999, and determine the MSR/SOI is exempt from the California Environmental Quality Act (CEQA) (LAFCo No. 23-03)

1. Open the Public Hearing to receive staff presentation and public comment on the MSR/SOI Update.
2. Close the Public Hearing and consider the information presented in the staff report and during the Public Hearing. Discuss and direct staff to make any requested changes.
3. Approve Resolution 2024-10, adopting the MSR for Flood Protection Services and approving the SOI Update for RD 999.
4. Direct staff to conduct outreach in the Clarkburg Basin regarding potential reorganization of RD 307, RD 765 and RD 999 and return with a later agenda item accordingly. 

This is an abbreviated version of the Executive Summary and MSR Overview contained in Section 1 of the attached MSR.

Most of the districts included in this MSR were formed in the late 1800s and early 1900s when farmers could "reclaim" swampland by building their own levees and acquire the land for $1 per acre. Flood protection has evolved over the decades since into a patchwork of federal, state, and local maintenance responsibilities for discreet segments of the overall Sacramento River System, a 1,600-mile system of levees. In 2005, Hurricane Katrina was a wake-up call for the need to step up flood protection resources and planning. Since then and with more state funding allocated, there has been extensive flood planning work done through the Department of Water Resources (DWR) 2012 Central Valley Flood Protection Plan (CVFPP), resulting regional flood management plans, and the DWR funded 2014 UC Davis Yolo County Flood Governance Study. Yolo LAFCo began to implement the governance recommendations contained in these framework documents in its 2018 MSR in an attempt to determine one Local Maintaining Agency (LMA) for each system/basin, because a basin is only as strong as its weakest link. Some of this reorganization work has already been accomplished with dissolving two inactive RDs in 2018 (RDs 2076 and 2120), the 2020 reorganization of the West Sacramento Basin (involving RD 537 and RD 900), and the 2020 reorganization of the Lower Elkhorn Basin (annexing RD 785 and RD 827 into RD 537). 

The LMAs in each USACE system (i.e. basin) are inexorably tied together. After Hurricane Katrina, USACE realized it needed to step up its maintenance standards and all the systems were systematically inspected and deemed unacceptable. Rehabilitation plans for each system (called System Wide Improvement Framework or SWIF plans) were required for each system to regain standing in the rehabilitation program. If a system loses its “active” status in the USACE PL 84-99 Rehabilitation Program, districts are no longer eligible for rehabilitation of flood damaged facilities at 100% federal cost sharing to pre-disaster conditions. Therefore, the USACE Rehabilitation Plan is a huge incentive for LMAs to perform. However, any individual LMA can cause the entire system to lose its status, and therefore, can be a liability to other districts. 

For this 2024 MSR/SOI, the overarching goal is to continue to identify the recommended “single local entity” for each system/basin. There are 11 systems identified by the US Army Corps of Engineers (USACE) in Yolo County, but 4 of them do not include any LMAs under LAFCo purview (only state agencies). Therefore, this MSR focuses on the 7 systems that do include LMAs. Of these 7 systems, 3 of them are already down to one LMA. In addition to conducting an MSR for each of the 13 agencies included, this MSR recommends a successor agency for each of these 4 systems/basins. In particular, it is timely to move forward with reorganization for one of these basins, the Clarksburg Basin. Correspondingly, staff recommends LAFCo approve an SOI Update for RD 999 as the successor agency and direct staff to bring back a subsequent item to consider initiating reorganization. 

The DWR Flood System Improvement Branch Chief and staff were consulted and concur with LAFCo’s governance recommendations for the successor agency identified for each system/basin included in this MSR. DWR operates only roughly 300 miles of the 1,600 total levee miles in the State Plan of Flood Control and, therefore, relies heavily on LMAs, which would benefit from efficiency, shared services, expertise, appropriate size/scale, and borrowing power.

The MSR/SOI provides a detailed review of each of the 13 agencies, in addition to an overview section and executive summary. A list of recommendations for each agency is attached to the resolution. Below is a summary overview of each basin and its districts from the Executive Officer's perspective.

North County Basin
This basin extends far up into Colusa County with many agencies involved, and it may be unrealistic to ultimately have one LMA for this entire basin. However, for the Yolo County portion of it, there are 3 districts: RD 787, RD 108, and the Sacramento River West Side Drainage District. The latter two are not included in this MSR because Colusa is their principal county. 

RD 787 is unusual in that River Garden Farms Co. owns 86% of the district and essentially operates the district as part of its business (somewhat similar to RD 2035 and Conaway Ranch). Surprisingly, the State Controller's Office and Board of Equalization did not have a record of RD 787 existing. RD 787 generally achieves high ratings from DWR and works closely with RD 108. The MSR recommends RD 787 create some separation and transparency separate from River Garden Farms Co. and operate more as a public agency. The MSR recommends that RD 787 eventually be annexed into RD 108, but it's not urgent because they already work closely together and levee maintenance is not suffering, according to inspection reports. 

Knights Landing Basin
CSA 6 was not performing well up until 8–10 years ago, when the County CSA Manager transitioned to new staff. Since then, the CSA has been more active with implementing projects and the County's goal has been to bring the district up to par such that another district would be willing to take it over. DWR funded a Knights Landing Small Communities Study which determined flood projects that would bring the town of Knights Landing out of the 100-year flood plain, so development could resume with fewer restrictions. The Knights Landing Flood Management Project is underway. Once improvements are completed and if a new Prop 218 assessment for maintenance is passed, then CSA 6 will be in a better position to negotiate a governance change. The MSR recommends Knights Landing Ridge Drainage District (KLRDD), which already covers the same territory, should be the successor agency. KLRDD is operated by RD 108, which is a robust, highly functional, and widely respected district. However, a governance change is premature at this time and therefore, the MSR recommends this be revisited in the next MSR cycle. 

RD 730 no longer maintains levees (incidentally, it used to maintain the levees now maintained by CSA 6) and its sole function is to operate pump stations to drain farm fields in the event of flooding. The MSR recommends it consider whether KLRDD could operate the District more efficiently. But in the end, RD 730 doesn't pose a risk outside its territory. 

Woodland/Conaway Basin
RD 2035 has been the sole LMA in this basin for a long time, and it is performing well in terms of DWR ratings, finances, and accountability. RD 2035 is the one district in this MSR that is also a purveyor of water, both for farmland irrigation and a water supplier to the Woodland-Davis Clean Water Agency. Similar to RD 787 and River Garden Farms Co., this District also operates together with Conaway Ranch. However, there's better separation with its documentation and transparency. There are no recommended governance changes for this basin. 

Elkhorn Basin
DWR is completing the Lower Elkhorn Basin Levee Setback (LEBLS) Project to widen the bypass and increase flow capacity. This project greatly impacted the three RDs that were operating in Lower Elkhorn (RDs 537, 785, and 827) and therefore, they voluntarily requested LAFCo combine them under RD 537 as the successor district, which became effective July 2020. Some of RD 537/785/827's poor ratings in the 5-year trend are due to DWR taking control of the bypass levee during project construction. Currently, only RD 537 and RD 1600 remain in the overall Elkhorn Basin. RD 537 is the larger of the two, but RD 1600 also functions reasonably well. Also, DWR is studying a similar widening project for Upper Elkhorn which has the potential to greatly impact RD 1600 (the Upper Yolo Bypass Regional Planning Process and the Yolo Bypass Comprehensive Study). It's possible that a cross-levee will be constructed such that RD 1600 would become its own basin altogether. Therefore, the MSR recommends that, tentatively, RD 537 should be the successor agency, but this should be revisited in the next MSR cycle once the Upper Elkhorn project is determined.

West Sacramento Basin
This basin was reorganized, detaching RD 537 out of the northern portion of the City and aligning RD 900 with the City boundary. Part of this reorganization was also making RD 900 a subsidiary district under the City of West Sacramento. According to those met with during the MSR process, being a successor district has been a positive change for the RD 900, and it now operates more professionally. The only downside is that the City Council meeting as its Board may not have the same level of technical flood management expertise as before. However, its excellent staff operate the District well. At one point, the City was investigating special legislation which would allow the City Council to appoint several subject-matter experts to the Board, but that effort was abandoned. 

RD 900 is very well funded by a robust assessment and has a large fund balance ($12M) that continues to grow (at 17% per year averaging the last 5 years). This balance makes sense because it is the only district in this MSR held to urban flood protection standards and RD 900 is hoping to fund future improvements without carrying any debt. The MSR recommends the District adopt a Capital Improvement Plan (CIP), not because it doesn't have sufficient funds, but because it may want to explain the rationale for the funds it's collecting.   

Clarksburg Basin
This basin includes three RDs, two of which are not performing well overall, and reorganization is needed. RD 307 and RD 765 have had consistently unacceptable ratings from DWR 2019-2021 and recent improvements to minimally acceptable may only be a result of the USACE SWIF Rehabilitation Plan. Neither of these RDs participate in training, conduct audits, have a website, or have been responsive to staff during this MSR process. RD 765 in particular only has three landowners and maintains only 1.78 miles of levee. RD 999 is a larger, more robust district with five full-time employees and is a relatively functional, accountable district. Therefore, the MSR recommends RD 999 be the successor agency and LMA for the entire basin, and the SOI Update reflects these future boundaries accordingly. Staff recommends the Commission consider conducting additional outreach and potentially initiating reorganization of these districts at a later date, presumably dissolving RD 307 and RD 765 and annexing the territory into RD 999. Limited feedback from RD 307 has been opposed to the MSR's recommendation and there's no interest in working with RD 999 in any capacity. RD 765 is open to consolidation regarding levee maintenance and drainage responsibilities, but there's a concern about water rights being sought after even though these rights are privately held and not District-owned.

Merritt Island Basin
RD 150 has always been the sole district for this basin and is performing reasonably well. It struggles with sufficient funding because it has many levee miles to maintain as an island and not a lot of acreage to spread assessments across to generate revenue. No governance changes are recommended for this basin.  

Agency/Public Outreach
Staff began this MSR/SOI process in August 2023 by emailing an introductory letter and requesting an in-person meeting/site tour with each agency, which occurred during the August through October 2023 timeframe (RD 307 is the only district that would not meet with the Executive Officer). In addition, information was requested from each agency (all eventually responded except RD 307 and RD 765). Staff stayed in sporadic touch with the districts over the winter with questions here and there. Administrative draft MSRs were emailed to each agency for review and comment in early May 2024. Comments were received from all the agencies, except RD 765. A public hearing notice was published in the West Sacramento News-Ledger on June 28, 2024. Staff also prepared social media information that was posted by the City of West Sacramento, Yolo County, and potentially some of the Commissioners' elected official newsletters/social media accounts. A Public Draft MSR/SOI incorporating district comments was posted on the LAFCo website on Monday, July 8th and emails were sent to all 13 agencies notifying them. Additional more targeted follow-up emails were sent on July 12th to the Clarksburg RDs in particular, emphasizing the governance recommendation.

Staff's understanding is that most of the agencies are reasonably okay with the MSR recommendations and some even support them.  But since the Draft MSR was posted on July 8th, we have not received any formal comments or any requested changes. In the Clarksburg Basin, RD 765 indicates an openness to reorganization as noted above, and will be submitting correspondence that will be shared in a supplemental packet. RD 999 indicated they would attend the meeting, offer comments and provide input on moving forward. RD 307 has not responded. 

CEQA
LAFCo staff has reviewed the MSR pursuant to the California Environmental Quality Act (CEQA) and determined that the proposed MSR and SOI Update are exempt from CEQA pursuant to Section 15061 (b)(3) and Section 15320 of the State CEQA Guidelines. CEQA Guidelines section 15061(b)(3) sets forth the general rule exemption, which provides that CEQA only applies to projects which “have the potential for causing a significant effect on the environment.” Section 15320 is a Categorical Exemption for reorganization of local governmental agencies where the changes do not change the geographical area in which previously existing powers are exercised. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA.