REPORT TO THE CITY COUNCIL FROM: BRIAN BARR, Director General Services Department BROCK D. BUCHE, PE, PLS, Director Department of Public Utilities BY: DESIREE NARANJO, Property Specialist II General Services Department SUBJECT ..Title Actions pertaining to the lease of city-owned agricultural land at the Fresno-Clovis Regional Wastewater Reclamation Facility (Bid File #101824DN) (District 3): 1. Adopt a finding of Categorical Exemption per staff determination pursuant to Sections 15301/Class 1 and 15304/Class 4 of the California Environmental Quality Act (CEQA) Guidelines 2. Approve a Lease Agreement between the City of Fresno and James F. Cook in the amount of $243,200 annually for lease of approximately 400 acres of City-owned agricultural land at the Fresno-Clovis Regional Wastewater Reclamation Facility (RWRF) for an initial term through December 31, 2028, plus one optional four-year extension; and authorize the Director of General Services or designee to execute the Lease Agreement and subsequent extensions on the City's behalf ..Body RECOMMENDATION Staff recommends Council approve actions pertaining to the lease of city-owned agricultural land at the Fresno-Clovis Regional Wastewater Reclamation Facility: 1. Adopt a finding of Categorical Exemption per staff determination pursuant to Sections 15301/Class 1 and 15304/Class 4 of the California Environmental Quality Act Guidelines 2. Approve a Lease Agreement between the City of Fresno and James F. Cook (Lessee) in the amount of $243,200 annually for lease of approximately 400 acres of City-owned agricultural land at the Fresno-Clovis Regional Wastewater Reclamation Facility for an initial term through December 31, 2028, plus one optional four-year extension; and authorize the Director of General Services or designee to execute the Lease Agreement and subsequent extensions on the City's behalf. EXECUTIVE SUMMARY The General Services Department (GSD) and Department of Public Utilities completed a competitive proposal process for leasing approximately 400 acres, over various parcels, at the RWRF. These acres are spread over APN 327-030-22ST, APN 327-040-08ST, APN 327-040-11ST, and APN 327-040-26ST. Three proposals were received and an Evaluation Committee selected James F. Cook as the best value proposer with the highest proposal amount per acre. The Lease Agreement provides for an initial term from March 1, 2025, through December 31, 2028, with an option of one additional four-year extension. Approval of the Lease Agreement will result in lease revenues to the Sewer Enterprise Fund of $932,266.67, or up to $1,905,066.67 if the optional four-year extension term is exercised. Pursuant to Waste Discharge Requirements by the California Regional Water Quality Control Board, undisinfected secondary-treated (effluent) wastewater is permitted for irrigation of agricultural land to reduce the amount of effluent sent to irrigation ponds. As a result, the agricultural land is restricted to the farming of crops not for human consumption such as cotton or crops used for animal feed. BACKGROUND The Department of Public Utilities (DPU) operates the RWRF which is regulated under Waste Discharge Requirements (WDR) Order R5-2018-0080 issued by the California Regional Water Quality Control Board. The facilities' primary means of disposing undisinfected secondary-treated effluent is to percolate on 1,720 acres of disposal ponds. In addition to the onsite disposal ponds, DPU is permitted to convey undisinfected secondary effluent as recycled water to farmers, reducing the amount of effluent sent to disposal ponds. Since the early 2000's, DPU has leased several tracts of agricultural land to farmers within the boundaries of the RWRF for this purpose. Recycled water at the undisinfected secondary treatment level is restricted to the irrigation of crops not for human consumption, such as cotton, or crops used for animal feed, such as alfalfa, Sudan grass, forage, winter wheat, silage corn and other fibrous crops. These conditions are included in the terms of the Lease Agreement. A Request for Proposals was advertised on Thursday, January 2, 2025, in the Fresno Business Journal and Planetbids. Three farmers submitted lease proposals. The proposals ranged from $450 to $608 per acre. James F. Cook was determined to provide the best value for the City of Fresno at $608 per acre for a total of 400 acres (all parcels), for an annual payment of $243,200. The Lease Agreement has been reviewed by the City Attorney's Office and has been approved as to form. ENVIRONMENTAL FINDING Staff has performed a preliminary environmental assessment of this project and has determined that it falls within the Categorical Exemption set forth in section 15301 which exempts operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public structures and facilities involving no expansion of use beyond that existing at this time because the authorized use specifically included in the Lease Agreement continues the historical use of the properties for agricultural purposes. Staff has determined that it also falls within the Categorical Exemption set forth in section 15304 which applies to minor alterations in the condition of land, water, and/or vegetation which do not involve the removal of healthy, mature, scenic trees except for forestry or agricultural purposes, because the limitations of use expressly prohibit the construction of improvements as well as the alteration, improvement, or removal of trees upon the leased premises, minimizing possible alterations. Furthermore, Staff has determined that none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, section 15300.2 apply to this project. LOCAL PREFERENCE Local preference was not implemented because this is not an award of product, services, or construction contract. FISCAL IMPACT The Lease Agreement will result in lease revenues to the Sewer Enterprise Fund of $932,266.67, or up to $1,905,066.67 if the optional four-year extension term is exercised. Attachments: Lease Agreement