Use the below video from Bay Friendly as a step by step guide on how to use sheet mulching techniques to turn your traditional lawn into a water efficient garden with healthy soil. Once the sheet mulching is complete you can plant a meadow garden with native species or a vegetable garden.
The best time to sheet mulch is in the fall by taking advantage of the rains. By sheet mulching your lawn, you are naturally suppressing weeds while improving the soil health.
The following PDF will explain the 7 steps to transforming your water intensive lawn into a healthier garden.
For detailed instructions on how to convert your sprinkler system to a drip system, please see this post.
Once you have your meadow garden in place, you can use this PDF on how to set up a watering schedule.