Pacific Grove wrestles with the ups and downs of the water business.

Nearly five years after Pacific Grove officials broke ground with golden-hued shovels for construction of a wastewater reclamation plant on Point Pinos in hopes of creating revenue from the sale of recycled water and water credits, the city is finding out the financial returns aren’t as golden as they had hoped.

The P.G. Local Water Project costs more than the city makes on recycled water. Last fiscal year the city loaned the project $600,000 to make up for less-than-expected revenue since the plant opened in December 2017, according to the 2021-22 budget.

City Manager Ben Harvey says the two main customers for the recycled water – the neighboring P.G. Municipal Golf Course and El Carmelo Cemetery – didn’t purchase as much due to wet winters in 2018 and 2019, among other factors. Building the plant and switching from freshwater to recycled for irrigation was still the “100-percent right thing to do,” Harvey says. It cost $7.7 million to construct using a $2.5 million state grant and a $5.2 million 30-year state construction loan. P.G. spends $206,000 annually to pay off the loan.

The city received permission from the Monterey Peninsula Water Management District to turn water savings into credits it now sells to developers and renovating homeowners. In fiscal year 2020-21, P.G. sold an estimated $250,000 in water credits. On Aug. 18, the City Council voted in favor of a new policy allowing large-scale developers to delay paying until their projects are occupied, with a 10-percent deposit for water credits, thanks to the use of promissory notes.

(That new policy requires a second vote from council for approval, scheduled for Sept. 1.)

Harvey is now looking for a consultant to advise the city on how to increase revenues from the Local Water Project.

In a related P.G. water development, the council voted Aug. 18 to finalize an ordinance that places a moratorium on building permits for projects where no water meter is yet located.