Monterey Peninsula Regional Water Authority

MINUTES MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Special Meeting 5:00 PM, Thursday, January 14, 2016 COUNCIL CHAMBER SEASIDE, CALIFORNIA Directors Present: Downey, Kampe, Pendergrass, Rubio, Burnett Directors Absent: Edelen Staff Present: Executive Director, Legal Counsel, Clerk ROLL CALL President Burnett called the meeting to order at 5:05 PM. Director Edelen was not present. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF Executive Director Cullem reported that the latest information on the Water Supply Project (WSP) is available on the California American Water (Cal Am) website, www.watersupplyproject.org. President Burnett gave an update that he was in Sacramento and met with Secretary John Laird and State Water Board Chair Felicia Marcus and gave them an update on the WSP. He said he was able to pitch the low interest loan and grant money that the Monterey Regional Water Pollution Control Agency (PCA) has applied for on the Ground Water Replenishment (GWR) Project. PUBLIC COMMENTS President Burnett opened public comments.  George Riley spoke about the research he gathered on slant wells, and the data concludes that vertical wells could be a lower cost source of water for desalination (desal) compared to slant wells with the same output. He encourages the board to persuade Cal Am to look into the option of multiple vertical wells instead of slant wells. President Burnett responded to George by suggesting that he speak with Norm Groot about vertical wells, which take more fresh groundwater and necessitate returning more water to the Salinas Valley which would cause a higher cost to Peninsula rate payers. CONSENT AGENDA Libby requested that changes be made to the minutes from December 10th regarding what she said about the Authority budget. President Burnett made a suggestion to continue the approval of minutes to the next meeting.  MPRWA Minutes Thursday, January 14, 2016 On a motion by Director Kampe, seconded by Director Rubio, and carried by the following vote, the Authority Directors continued the approval of the December 10th minutes to the next meeting: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None President Burnett opened public comments:  Tom Rowley provided comment that he watched the Monterey Peninsula Regional Water Authority (MPRWA) December 10th meeting, and he believes the accusations that the Authority’s expenses being too high are unwarranted. He added that the Authority’s annual budget is much lower than the County’s, and to keep up the good work. With no further requests to speak, President Burnett closed public comments. On a motion by Director Pendergrass, seconded by Director Downey, and carried by the following vote, the Authority Directors approved the consent agenda: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None 1. Approve Minutes from December 10, 2015 - Romero Action: Continued to next meeting. 2. Approve and File Authority Checks Through January 14, 2016 – Romero Action: Approved 3. Approve Extension of Contract with the City of Seaside for Financial Support Services for the Monterey Peninsula Regional Water Authority (MPRWA) to June 30, 2016 at a Price of $2500 - Cullem Action: Approved 4. Approve Schedule of Calendar Year 2016 Meeting Dates for the Water Authority - Romero Action: Approved AGENDA ITEMS Executive Director Cullem requested that item #6 on the agenda be moved to the end of the evening, and the Directors agreed. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 2  MPRWA Minutes Thursday, January 14, 2016 5. Receive and Accept Annual Financial Report and a Full Opinion Audit for FY 2014-2015 from McGilloway, Ray, Brown and Kaufman (Kaufman) CPA, Approve a Modification to the Kaufman Contract to Complete the FY 2015- 2016 and FY 2016-2017 Audits with a Completion Date of March 1, 2018 at an additional fee not-to-exceed $14,500, and Provide Direction to Staff - Kaufman/Cullem Action: Received report; accepted recommendation and amended contract Executive Director Cullem introduced Patricia Kaufman, CPA, from McGilloway, Ray, Brown and Kaufman Accountants and Consultants. Patricia Kaufman gave a presentation of the financial report and audit for FY 2014-2015. Ms. Kaufman stated that overall operating revenue is up, due to increases in the County membership fees received. She added that generally expenses were consistent with the previous year. She said the audit went extremely well, and the only recommendation was for journal entries to have a secondary review. President Burnett asked Executive Director Cullem what the process is for addressing the recommendation from the consultants to have a secondary review, and a solution to the deficiency being brought back to the board for consideration. Executive Director Cullem responded that within the next 6 months the City of Monterey will take over the financial bookkeeping from the City of Seaside, and at that time will address the issue of secondary review of journal entries. Mr. Cullem said that in addition to receipt of the report, he is requesting approval of the modification to extend the contract with McGilloway, Ray, Brown and Kaufman to do the next 2 years of Audits, with the proposals provided by Kaufman. President Burnett opened public comments on this item.  Tom Rowley spoke, representing Monterey Peninsula Taxpayers Association (MPTA), congratulated the directors who lobbied effectively with the County to get most of what they owed caught up. He said it’s nice to know that the County is financially supporting the MPRWA. With no further requests to speak, President Burnett closed public comments. President Burnett expressed his appreciation to the County for contribution to the MPRWA budget. Director Rubio commented that Director Edelen and he met with Ms. Kaufman earlier to go over the financial report in a very detailed manner, and they were impressed with the process. He made a motion to accept the report and amend the contract. Director Kampe said he would also like to give appreciation for the very thorough audit process, and for the candid feedback that was given to the Authority to improve on. Director Downey thanked Ms. Kaufman for the recommendation to make the reporting in the journal entries more accurate. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 3  MPRWA Minutes Thursday, January 14, 2016 On a motion by Director Rubio, seconded by Director Kampe, and carried by the following vote, the Authority accepted the Annual Financial Report and a Full Opinion Audit for FY 2014-2015 from McGilloway, Ray, Brown and Kaufman (Kaufman) CPA, and Approved an Amendment to the Kaufman Contract to Complete the FY 2015- 2016 and FY 2016-2017 Audits with a Completion Date of March 1, 2018 at an additional fee not-to-exceed $14,500: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None President Burnett said that the meeting will skip ahead to item #7. He also stated that this is a very significant meeting which the board must make 3 key decisions on before the January 22nd California Public Utilities Commission (CPUC) deadline for submitting testimony. He also noted that there will be two additional opportunities for the Authority and others to weigh in during the CPUC process, through rebuttal, and during settlement discussions. The Authority skipped ahead to item #7 on the agenda. 6. Receive an Update on the Summary Project Schedule for the Monterey Peninsula Water Supply Project (MPWSP) and the Status of Test Slant Well Operations and Results, and Receive a Report on Prices of the MPWSP Which Cal Am Submitted to the CPUC on December 15, 2015 – Crooks Action: Received update and report Ian Crooks with Cal Am gave a presentation on the project schedule for the Monterey Peninsula Water Supply Project and the status of the test slant wells. He reported that the three test wells are at 120 days of pumping at 2,000 gallons per minute with no loss of well efficiency, and are at 92% salinity. Vice Chair Kampe opened public comment:  Tom Rowley, from Monterey Peninsula Taxpayers Association, asked when the desal plant will be partially up and running. Ian Crooks from CalAm responded to Mr. Rowley’s questing saying that a partial start up of the desal plant is on their schedule, and they are working on it with the design builder. 7. Receive Report, Discuss, and Provide Direction on the Pure Water Monterey (PWM) / Ground Water Replenishment (GWR) Project Draft Testimony to the California Public Utilities Commission and the Request from the Monterey Regional Water Pollution Control Agency and the City of Monterey to Send a Letter to Cal Am in Support of Finalization of the Water Purchase Agreement - Cullem/Stoldt Action: Received report and gave support for President Burnett to make testimony to the CPUC on behalf of the Authority Dave Stoldt, General Manager of the Monterey Peninsula Water Management District (MPWMD), gave a presentation on the update on the Water Purchase Agreement (WPA) and cost comparison discussion. Mr. Stoldt invited questions of the board. President Burnett asked how the 30 year term with a 10 year extension would be managed with this contract. Mr. Stoldt responded that there will be a 5 year meet and confer requirement Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 4 MPRWA Minutes Thursday, January 14, 2016 before the end of each term, so that there is adequate time if either party wants to sever the relationship, Cal Am can add additional RO trains, or the PCA more customers . Rob McClain with California American Water (Cal Am) stated that Mr. Stoldt’s presentation appropriately represents the agreement that Cal Am reached today. He added that he is going to Philadelphia to seek approval from Cal Am executives to endorse the agreement, and hopes by January 19th he will have confirmation that the agreement was approved. President Burnett said that with respect to the WPA he believes that further discussions are being had with the Office of Ratepayer Advocates (ORA) and the 16 settling parties from the settlement from 2 years ago. He added that his goal is to have those parties support the additional aspects that were put forward. He said he hopes in the end ORA will be supporting the WPA as well. Dave Stoldt continued his presentation on the cost criteria of the WPA. He gave points urging approval of the WPA even with a few unknowns, and showed how the agreement meets statewide policy goals. He further went over social and environmental factors involved. Mr. Stoldt presented cost comparisons between the 6.4 MGD vs. 9.6 MGD desalination plants, and future cost issues. President Burnett clarified part of Mr. Stoldt’s cost comparison study for the public by stating that the bids for the 6.4 and 9.6 desal plants came back with a smaller cost differential than originally estimated. He said that due to economies of scale there are lower operating costs, and that generally it’s cheaper to build one large plant than two smaller plants. Mr. Stoldt continued his presentation, and explained the high cost scenario of the 9.6 MGD Desal, the median cost scenario, and the low cost scenario of the 6.4 MGD desal plant, and the long term cost comparisons. Mr. Stoldt invited questions of the board at the end of his presentation. Rich Svindland from Cal Am stated to the board that $7 million has been included in base construction cost element for brine disposal improvements, for either the 9.6 or 6.4 MGD plant. He added that the number could be even higher. President Burnett said that the Authority has a critically important decision to make which has been in the works for 4 years. He said that water recycling has been part of the portfolio approach, and it now has a certified EIR, approved project, and agreements that back it up. He said one of the key reasons the Authority exists is to be an advocate for the portfolio approach and for rate-payer protection. He added the CPUC is likely to give deference to what the community says, and the ratepayer impact in the median scenario would mean an approximate 1% increase in cost. He said the Authority must decide if this increase is justified in light of some of the uncertainties, and the variety of other benefits that having a portfolio would bring. President Burnett said his draft testimony to the CPUC outlines the types of arguments that will be effective with the CPUC, such as support having Ground Water Replenishment (GWR) in the portfolio, and having the lowest cost desal plant size. He stated that the position the Authority takes will hold the most weight in the CPUC’s decision to approve Cal Am’s water purchase agreement. He added that if a decision can be made tonight, and testimony is submitted to the CPUC, the Authority would have the opportunity to refine the loose ends of the agreement during the rebuttal stage in March. Director Downey asked Dave Stoldt about the status of the negotiations with Cal Am and if the Authority is ready to make a presentation, or if it’s being stalled by the cost analysis. Mr. Stoldt Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 5  MPRWA Minutes Thursday, January 14, 2016 responded that the Authority is ready to submit the testimony, and if Cal Am approves the WPA as it is written, then all 3 parties involved can acknowledge a form of joint agreement to sign with CPUC approval. He added in regards to the cost issues, a definitive cost is not needed to get the testimony submitted. President Burnett opened public comments on this item.  George Riley said he attended the externalities meeting, and stated his concern that data shows no long term testing of the slant well has been performed, and that the pump inefficiency issue has not been addressed.  John Narigi, Vice Chair of the Monterey Peninsula Coalition of Business, asked that the Authority hold off on pushing the WPA forward. He said there appears to be a lot of sustainability questions and “what-ifs” that the Coalition has many concerns about this. He said he also attended the externalities study and said it was a lot of smoke and mirrors but did not see any real benefit to ratepayers or long term solutions. He stated the Coalition does not give support to moving this agreement forward.  Tom Rowley, representing Monterey Taxpayers Association, said that he is skeptical of moving forward with EIR’s if the source water has not been nailed down. He said that he believes GWR and grant money makes the agreement technically feasible, GWR should be considered a backup to the desal plant. He added that if there are social and environmental benefits, the ratepayers shouldn’t be responsible for paying for this. He opined that more of the cost questions need to be answered before moving forward with the agreement.  Norm Groot, representing Monterey County Farm Bureau, said he has been supporting this project as it’s going through the process with the CPUC. He said the WPA needs to be a separate decision from the size of the desal plant. He said the Peninsula’s water supply should not be dependent upon another project that has unknowns. He added that as a ratepayer, he would be dismayed if the decision to have a small desal plant with GWR raised the cost of his water bill. He urged the board to look at the long term effects of opting for a small desal plant that limits future growth. Receiving no more requests to speak President Burnett closed public comment. He addressed the public comments by stating that the cost comparison chart shows how a small desal plant with GWR eventually becomes less expensive. President Burnett asked Mr. Stoldt if the externalities are in the cost analysis, and he responded that they are not included. Mr. Stoldt said there is 8,400 acre ft of source water available, and the agricultural wash water is already recycled 3 or 4 times before discharging it. He said that the 4,300 acre ft needed will always be there. President Burnett invited questions of the board. Director Rubio said that no matter what size desal plant is approved, the water issue will have to be revisited again in 10 years but hopefully it will be easier. He said the Authority should consider a project with an EIR that covers the full range of all the general plans that are affected by this project, and regards to the timing of the decision, we cannot wait any longer on the delivery of water, especially in light of the CDO. He added in regards to Salinas’s agriculture, they pay for their own water. Director Rubio said as far as source water, each City has to deal with storm water and if it can be cleaned that will be an endless supply of water for the GWR. He stated that a significant milestone is a completed Environmental Impact Report (EIR), and he urges approval of President Burnett giving testimony on this project. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 6  MPRWA Minutes Thursday, January 14, 2016 Director Kampe echoed the overall sentiments of the Board. He stated that the priorities are to have enough water in time to satisfy the CDO and the cost of water. He added that sustainability wise, source water for GWR will be reliable. Director Kampe continued that he is optimistic about the unknowns and if the benefits go beyond our jurisdiction and ratepayer interests, he said he hopes there will be pricing consideration so we are sharing the benefit of the solution. He acknowledged that the effects on the Bay are pressing and going to be a challenge. He concluded that he supports the approach that has been recommended. Director Pendergrass voiced his agreement with his colleagues. He said that two agencies have unanimously agreed on the WPA and the CDO threat is real. He added that GWR and EIR went forward with no issues and the water quality is incredible. He said he supports President Burnett making testimony before the CPUC on this project. Director Downey stated that she supports GWR. She added that this is going to come to fruition before CalAM does, and said given the CDO time constraints there is no other choice. She said in the future the desal plant size will need to be expanded and the cost of adding a module is not insurmountable. She reported that MRWPCA and MRWMD have already worked nonstop with the growers and the community to bridge the gap between the small and the large size desal plant. Director Downey urged CalAm to finalize their part of the agreement. President Burnett expressed his support for GWR and giving his testimony. He added that the ratepayer cost scenarios will roughly translate to a 1% bill increase. He stated that having the portfolio, EIR, and the support of the MRWPCA and MRWMD will garner support from the community. President Burnett said that there’s substantially more chances for GWR to receive grants. On a motion by Director Downey, seconded by Director Rubio, and carried by the following vote, The Monterey Peninsula Regional Water Authority gave support for President Burnett to make testimony to the CPUC on behalf of the Authority: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None 8. Receive Report, Discuss, and Provide Direction on a Draft Term Sheet from the Castroville Community Services District (CCSD) for the Purchase and Use of Return Water from the Monterey Peninsula Water Supply Project (MPWSP) Desal Facility – Cullem Action: Authorize President Burnett to execute the Draft Term Sheet and submit to the CPUC President Burnett said that in the desal project, per the agency act, all water pumped from Salinas Valley ground water must be returned to Salinas Valley. He posed that a very important question to answer is what to do with the excess return water, and said that the agreement to have Castroville Community Services District (CCSD) receive the return water would resolve a dispute between the parties involved and reduce potential litigation. He continued that the Draft Term Sheet discusses the cost and benefits of the CCSD building a pipeline to accept the return water and offset pumping. President Burnett stated that if the authority agrees, the Draft Term Sheet would be submitted to the CPUC on Jan. 22nd. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 7  MPRWA Minutes Thursday, January 14, 2016 President Burnett opened public comments.  Norm Groot, representing Monterey County Farm Bureau, said that the solution for the use of return water is supported by the Farm Bureau. He added that this solution shows the state water board and the CPUC that the loose ends are being resolved. He urged the Authority to support the return water going to the CCSD.  Tom Rowley, representing MPTA, said that timing is critical and thanked the Authority for taking reasonable steps to move forward. President Burnett closed public comments and guided the discussion back to the Board. Director Kampe gave support of the Draft Term Sheet and said that it reduces the contention of an issue that could turn into a stumbling block. He said that even with unknowns this is an important step in moving forward. On a motion by Director Kampe, seconded by Director Rubio, and carried by the following vote, the Monterey Peninsula Regional Water Authority authorizes the Chair to execute the Draft Term Sheet and submit to the CPUC: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None 9. Receive Report, Discuss, and Provide Direction on a Draft Term Sheet from the Surfrider Association Concerning MPWSP Desal Facility Brine Disposal – Cullem Action: Received report and discussed; Authorized Al Preston and President Burnett to submit testimony to the CPUC supporting brine monitoring outlined in the memo President Burnett said that consultant Al Preston has been working with the Surfrider consultants to lay out a general approach to the brine issue. He said that without a solution to the brine issue, Surfrider would likely ask for a pressurized diffuser which is about 10 million dollars and the Authority would like to avoid that cost. He added that Al Preston’s memo states that monitors would need to be in place to check salinity levels monthly for the first few years and then eventually reduced to quarterly monitoring. President Burnett recommended that the Authority authorize submitting his testimony and Al Preston’s testimony providing general support for the brine monitoring to the CPUC. Director Rubio asked to clarify that if the Authority agrees with the approach laid out in the memo that the details would be worked out before a decision is made. Don Freeman responded that agreeing with the approach in the memo is conceptual, but the Authority would need to come back with details before the Authority makes a final decision. Executive Director Cullem said that Al Preston is working closely with legal counsel to work out the technical aspects of the agreement. He added that the Authority is still within budget for this work. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 8  MPRWA Minutes Thursday, January 14, 2016 President Burnett opened public comments:  Rich with CalAm said that they would be doing the standard monitoring which is similar to what other agencies are currently doing. Receiving no more requests to speak, President Burnett closed public comments. On a motion by Director Kampe, seconded by Director Rubio, and carried by the following vote, the Monterey Peninsula Regional Water Authority will adopt the approach to have Al Preston and President Burnett submit testimony to the CPUC supporting brine monitoring: AYES: 5 DIRECTORS: Downey, Kampe, Pendergrass, Rubio, Burnett NOES: 0 DIRECTORS: None ABSENT: 1 DIRECTORS: Edelen ABSTAIN: 0 DIRECTORS: None RECUSED: 0 DIRECTORS: None President Burnett left the meeting at 7:27pm. Director Kampe took over as Chair/President. See item #6 ADJOURNMENT Vice Chair Kampe adjourned the meeting adjourned at 7:32 pm. ATTEST: Nova Romero, Clerk of the Authority MPRWA President Monterey Peninsula Regional Water Authority Special Meeting Minutes - Thursday, January 14, 2016 9