WATER DEMAND COMMITTEE
ITEM:		ACTION ITEM
2.	DEVELOP RECOMMENDATION ON WATER PERMIT REQUIREMENTS FOR OUTDOOR SEATING
Meeting Date:			December 5, 2014	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Stephanie Locke	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: Drought and the Cease and Desist Order (CDO) against California American Water (Cal-Am) necessitate careful management of our water supply. Recent press coverage regarding downtown revitalization programs in the cities of Monterey and Pacific Grove have focused attention on the growing popularity of al fresco dining as a means to attract more patrons to restaurants and bars (hereafter referred to only as restaurants). Historically, MPWMD has not required a Water Permit for outdoor seating, but the obvious increase in this type of use warrants examination by the MPWMD Board to determine whether existing policy should change. The Board should consider whether it desires to regulate on a Site-by-Site basis, where greater seating capacity is intended to increase sales, likely resulting in increased water consumption, or instead to view the practice on a larger scale, where overall water consumption on the Monterey Peninsula as a result of outdoor seating is not likely to be impacted as consumers tend to dine locally and outdoor seating is not the primary reason additional visitors come to the Monterey Peninsula.

DISCUSSION: Board action in the appeal of Rappa’s Restaurant in November 1990 supported the position that outdoor seating had insignificant or no water demand impact. In the Rappa’s appeal, staff denied a Water Credit for outdoor seats when the proprietor proposed to enclose the seating area, stating that outdoor dining was “seasonal and temporal – lunching or dining al fresco in Monterey is a limited activity at best.” Further discussion during the hearing noted that outdoor dining was “limited by season and time of day.” The Board upheld the recommendation to deny credit for outdoor seating. As a result of that Board action, staff continued to take the position that outdoor seating had no Water Use Capacity when issuing Water Permits.

Al fresco dining in 2014 has significantly changed from the 1990’s. Today’s technology provides for sturdy coverings (awnings, canopies, etc.) above and beside the diners. Patio heaters and other heating technologies provide warmth on all but the chilliest of days. Restaurants that invest in this equipment are able to utilize their outdoor areas nearly year-round. Other restaurants that offer basic outdoor seating continue to be affected by weather and do not have the same capacity.

The Water Demand Committee, and ultimately the Board, needs to consider the future of Water Permits and outdoor seating. But first the Committee must examine two fundamental questions: (a) If overall water use in the District is not increased, should the practice be further regulated? (b) If permitting is desired to be done on a Site-by-Site basis, does outdoor seating significantly affect water consumption at that site and require additional regulation? Several potential actions have been identified for discussion and consideration:

Option 1: Require new outdoor seating capacity to obtain a Water Permit.

· “Grandfather” existing outdoor seating. All existing restaurants should be surveyed by mail to obtain the existing seat counts for indoor and outdoor seating. Based on this response, a Water Permit could be issued for every restaurant that identifies the number of each type of seat. Restaurants could be required to obtain a Water Permit prior to the date of implementation of the new policy or the business would be required to go through the normal permit process after that date. Water Permits issued during this interim time would be processed without charge. The incentive to complete the permit process, other than a fee exemption, is that the Jurisdiction would likely not authorize water from its Allocation, resulting in the restaurant having to remove any unpermitted seats.

The effort to identify, contact, survey and permit existing outdoor seating would have an impact on staffing. However, obtaining this information is critical to enforcing a future Water Permit requirement, if the current practice changes. Surveys could be mailed using Cal-Am’s restaurant customer information, health department and/or business license records. The survey would also be a means of conveying the new permitting requirements. Staff would visit each restaurant to verify compliance with current water efficiency requirements before issuing a Water Permit.

· Consider allowing a percentage of the interior seat count or a specific number of outdoor seats to be added at restaurants that do not have outdoor seating as of the date a change in policy is implemented. This assumes there is no increase in capacity when a minimal number of seats are available for outdoor dining. Staff suggests the Committee discuss 25 percent or 20 seats.

· The Committee should determine whether outdoor seating has the same Water Use Capacity (and Water Use Factor) as an indoor seat. Depending on the level of investment in outdoor dining equipment, the answer to this question varies. Should the District use its current factor for all outdoor seating or only for outdoor seating that has the potential for year-round use?

· The Committee should determine if designated dining areas (i.e., fenced, decked, delineated dining space) should be viewed differently than casual sidewalk seating. This question goes to the concept that more permanent overhangs, umbrellas and canopies, coupled with outdoor heaters make the area usable during most of the year. If so, and if there is a difference in one type of seat versus another and what are the defining factors?

· The Committee should consider a future implementation date, such as July 1, 2014, to allow time to complete the required communication and permitting.

· Projects in progress (as of a specific date) should be addressed. There are several large projects that have been moving through the approval process with the Jurisdictions that have not yet obtained a Water Permit. These include the Shake’s new Scales restaurant, an expansion to A Taste of Monterey, outdoor seating at Cibo, an extensive make-over to the former Latitudes restaurant in Pacific Grove, and probably several others. Significant investment has been made in these projects based on the past practice that MPWMD does not require a Water Permit for outdoor seating.

· The Committee should discuss a concept that allows outdoor seating when all Best Management Practices (BMPs) for water use efficiency have been implemented at the restaurant. The BMPs would be in addition to the District’s water efficiency requirements for Non-Residential Users. For example, a restaurant who installs BMPs such as efficient dishwashers, hot water systems, disposals, steam ovens and stoves, dipper wells, employee training programs, etc. could be considered extremely efficient and allowed to add outdoor seating without requiring water from a Jurisdiction’s Allocation or other offsets.

· Option 2: Require all unpermitted outdoor dining seats to obtain a Water Permit or remove seats.

This option responds to the concept that “a seat is a seat” and that the District requires a Water Permit for all restaurant seats. To implement this option, restaurants that have outdoor seating that was installed between 1985 and today without a Water Permit would have to obtain either an Allocation from the Jurisdiction or would have to establish sufficient Water Credit to offset the seating.

· The Committee previously discussed a potential option that a restaurant that could demonstrate actual current water use within its allotment under its current Water Permit would be entitled to receive a permit for its existing outdoor seating. Unfortunately, the District’s Water Permit records do not contain seating information for many restaurants, making this a difficult option to implement. The allotments that Cal-Am used for ratemaking purposes between 2001 and 2012 were confidential and self-reported records. Cal-Am has since changed its billing system and no longer maintains seat count information. Another challenge would be access to Cal-Am water records, as they are proprietary and only available to the current account holder. That account holder may be a landlord or a previous tenant. The current occupant may not be able to produce this information, and MPWMD currently does not have access to it.

· Requiring all unpermitted outdoor dining seats to obtain a Water Permit or remove seats is problematic for a number of reasons:

Ø The District does not have adequate records to determine the number of outdoor restaurant seats that have been added through the years.

Ø The Jurisdictions do not have water available to permit all outdoor seating that has been added in the past three decades.

Ø In some cases, the proprietors could have obtained a Water Permit for outdoor seating, but District staff would not have issued a permit due to the Rappa’s appeal decision.

Ø Many restaurants have invested significant dollars in outdoor comfort equipment and seating and would not have done so if there was a requirement to obtain a Water Permit first.

Ø Staff has not issued Water Credit for outdoor seating removed during this time.

Option 3: Maintain the current practice. The current practice allows outdoor seating as a supplement to the existing Water Use Capacity of a restaurant and assumes there is no Intensification in Use as a result of outdoor seating. This option would recognize that most restaurants operate nowhere near their capacity every day of the year and there is sufficient water use capacity in their existing or proposed Water Permit based on the indoor seat count. It would also recognize that overall demand for dining, hence water use, within the District is not significantly affected by outdoor seating, rather the competition between restaurants for a customer’s demand is affected.

RECOMMENDATION: Staff recommends the Committee review the three options presented above, discuss the matter and forward a recommendation to the Board for consideration at the December meeting.

BACKGROUND: As early as 2001, staff noticed an increase in outdoor seating and questioned whether Board policy should be changed. The situation was brought to the attention of the Water Demand Committee, the Technical Advisory Committee (TAC), and the combined TAC/Policy Advisory Committee (PAC). These committees reviewed this topic in 2001and took no action. It was discussed again in 2003, 2012, and 2013. Each time, there was no change to the existing practice to permit restaurant seating based on indoor seating capacity and that outdoor seating neither resulted in a debit nor a credit.

Restaurant Factor

The factor for restaurant seats is 0.02 acre-foot per seat. This factor is based on a regional average for full service restaurants and was last updated in 1991. The factor was originally used to assess the Water Use Capacity to determine the appropriate Capacity Fee for new or expanding restaurants. Since 1990, the factor has also been used to determine the appropriate amount of water to deduct from a Jurisdiction’s Allocation when a Water Permit is issued. The samples used to establish the factor included restaurants that mostly offered two meals per day, and at least two had outdoor seating at that time, although it is unclear whether the seat count reported in the study included the outdoor seating. The information used to assess the factor did not consider the level of business or the number of days the restaurant was open. A review of the factor by A&N Technical Services in 2011 suggested that current restaurant use is within 0.02 af/seat, but further review would be necessary to substantiate a change to the factor.

Another discussion should take place regarding the use of outdoor areas for Group II uses, such as delis, cafes, coffee houses and other “lower” capacity food-related uses. These uses are permitted using a square-footage factor (i.e., 0.0002 af/sf).

Jurisdiction as Gatekeeper

The District’s Water Permit process largely relies on the Jurisdiction as “gatekeeper” of its water Allocation. The Jurisdiction, typically through its building department, sends projects that require Water Permits to the District to obtain a permit prior to issuance of a building permit. In the case of outdoor dining, Jurisdictional involvement varies by city from having significant oversight (in the case of dining along Alvarado Street and other areas that require encroachment permits), to having no oversight or requirement for review. In the latter case, there is no trigger that would notify a restaurateur to contact the District. Tenant improvement plans may or may not provide outdoor seating schematics. Communication with the Jurisdictions will be crucial to implementing a successful outdoor dining permitting policy in the future. Even then, there is a high likelihood of added seating without a permit, and enforcement will be difficult.

Previous Committee Review

Summaries of past discussion are shown below.

May 11, 2001 – Staff requests direction from GM/Counsel

Staff requested direction on charging for outdoor restaurant seats as a result of a request for a credit analysis at the Barnyard. It was noted that historically, the District has not charged for outdoor seating because it was not used year-round or at night when it was cold. New outdoor heaters prompted the request for direction. Staff recommended enforcing permit requirement for outdoor seating that was in an enclosed area (private area not accessible to general public).

June 6, 2001 – TAC/PAC

Staff noted that outdoor seating had increased. Staff asked for guidance from the committee on the following items: (1) should a water permit be required for the addition of outdoor seating; and (2) should permits be issued only for outside seating in enclosed areas. No formal motion was made. During the discussion it was clear that each jurisdiction had its own method of permitting outdoor restaurant seating. The following comments were made by committee members: (1) The increase in restaurant seating is driven by smoking regulations (1995 & 1998). If water use increases significantly in a restaurant as a result of outdoor restaurant seating, the District should investigate. (2) This is a case of micro-management of the resource. Unless there is evidence of a real problem, this should not be pursued. (3) Outdoor restaurant seating is similar to installation of water fountains. No water credit should be given for outdoor restaurant seating, only for enclosed seating.

May 14, 2003 – Water Demand Committee

Chair Erickson stated that this item could be brought forward to a future meeting at the request of any committee member.

October 30, 2012 – Water Demand Committee

The committee discussed the merits and drawbacks of requiring any restaurant that has installed outdoor seating to obtain a Water Permit for the increased capacity for water use. The committee requested that District staff review this issue with local chambers of commerce before taking further action.

January 17, 2013 -- TAC

Staff gave a presentation that offered suggestions for permitting outdoor restaurant seating. A summary of her presentation is on file at the District office and can be viewed on the MPWMD website. The committee provided the following comments. (a) Outdoor seating will be utilized on a seasonal basis, so a factor of .01 could be assigned for each seat. (b) The amount of water used for outdoor seating is minimal, and the water credit offered for removal of those seats would be minimal so adding a new rule will have little effect. (c) Water utilized for outdoor restaurant seating may not be minimal and could affect the community’s ability to remain within water production limits. (d) Cleanliness is an issue, storm water regulations prohibit hosing off sidewalk areas. (e) Opposed to creation of new regulations. The permitting process for commercial projects is rigorous without considering outdoor seating. (f) If rationing were implemented, this would be a moot point because restaurants would be required to keep water use at a specific level. (g) The additional workload and enforcement required for such a small benefit is not warranted when there are more important issues to be addressed. (h) Enforcement would be accomplished on evenings and weekends which would be a significant expense for the MPWMD. (i) The factor for outdoor seating should be significantly less than .01 per seat. (j) Suggest that if seating is increased by 50% or more, then a water permit would be required. (k) The MPWMD should reevaluate its current restaurant seat factor.

January 17, 2013 – Water Demand Committee

Summary of staff presentation: MPWMD has not enforced Water Permit requirements for outdoor seating. In the past, outdoor seating was minimal due to comfort constraints. Smokers primarily used outdoor seats. Recent technological improvements (outdoor heaters, heated flooring/seating, fire pits, coverings and overhead protection from the elements) have made outdoor seating more comfortable year-round. The rules differ in each jurisdiction: Carmel requires a Use Permit. Recent outdoor seating additions have been up to 30% of the total seating capacity. The county did not report any permitting requirement. Monterey and Pacific Grove require encroachment permits only if the seats are in the right of way. Projects are reviewed for parking compliance. Seaside does not require permits other than parking review. Staff indicated that significant increases in the number of meals/customers that can be served corresponds to an increase in water use, but that some of the use may be shifted from indoor to outdoor and water consumption for outdoor seats may be less than indoors. Staff also pointed out that permitting and enforcement of outdoor seating is problematic: It’s difficult to establish a baseline when there is no jurisdictional permitting requirement; Since permits are rarely required, there is a high likelihood that outdoor seating would be dramatically inflated to establish the baseline count; enforcement would be required, including time to investigate and follow up, often on weekends or after normal business hours; and there was a question about equity between Jurisdictions. Staff recommended three options for consideration: That the District enforce the Water Permit requirement for all outdoor seating in excess of 50% (or some other threshold) of the total allowed interior seating or apply a reduced factor for outdoor seating (restaurant seats are 0.02 af/seat) or maintain the status quo.

The committee discussed the issue of restaurants adding outdoor seating without benefit of a water permit. There was no consensus to enforce or further regulate the addition of outdoor restaurant seating at this time. If the community were subject to water rationing, it might be necessary to take this issue up again.

EXHIBIT

None

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