MP Regional Water Authority TAC Meeting

MINUTES MONTEREY PENINSULA WATER AUTHORITY (MPRWA) TECHNICAL ADVISORY COMMITTEE (TAC) TAC Regular Meeting 2:00 PM, Monday, November 19, 2012 CITY COUNCIL CHAMBER FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Members Present: Israel, Narigi, Riedl, Riley, Stoldt Members Absent: Chair Burnett Staff Present: Clerk of the Committee, Legal Counsel CALL TO ORDER ROLL CALL Member Stoldt called the meeting to order at 2:04 p.m. PLEDGE OF ALLEGIANCE REPORTS FROM TAC MEMBERS There were no reports from TAC members. PUBLIC COMMENTS Member Stoldt invited public comments for items that were not on the agenda. Donald Murphy responded to George Riley’s presentation during the Authority meeting on November 8, 2012 and expressed concern that Mr. Riley’s affiliations may present a conflict with his ability to participate impartially as a TAC Member. He expressed the position that the TAC should be a an unbiased and non political group. With no further requests to speak, Mr. Stoldt closed public comment. APPROVAL OF MINUTES 1. September 17, 2012 On a motion by Member Israel, seconded by Member Riedl and carried by the following vote, the MPRWA Technical Advisory Committee approved the September 17, 2012 minutes as amended: AYES: 4 MEMBERS: Stoldt, Riedl, Israel, Riley  MPRWA TAC Minutes Monday, November 19, 2012 NOES: 0 MEMBERS: None ABSENT: 1 MEMBERS: Burnett ABSTAIN: 1 MEMBERS: Narigi RECUSED: 0 MEMBERS: None 2. October 15, 2012 On a motion by Member Riedl, seconded by Member Israel and carried by the following vote, the MPRWA Technical Advisory Committee approved the October 15, 2012 minutes as amended: AYES: 4 MEMBERS: Stoldt, Riedl, Israel, Riley NOES: 0 MEMBERS: None ABSENT: 1 MEMBERS: Burnett ABSTAIN: 1 MEMBERS: Narigi RECUSED: 0 MEMBERS: None AGENDA ITEMS 3. Discuss MPWMD “Financial Analysis of SPI Cost Comparisons” Report Member Stoldt introduced the item and made a presentation about the principals and calculations for public financing and explained the economic analysis performed for recovery of capital is very much like how public financing is done. He also explained how a capital recovery factor is used to convert a single up front capital cost into an annual amount to be recovered as if the money was to be repaid as a loan, based on an interest rate and time period. Member Stoldt then discussed how public debts must include borrowed interest and during construction, issuance costs and a reserve fund. How and when interest is calculated and accrued and the benefits and draw backs to public funding. There was discussion from the TAC over borrowing funding all at one time versus incrementally over the life of the project Member Stoldt opened the item for comments or questions from the public. Having no requests to speak, Member Stoldt closed public comment on this item and moved on to the next agenda item. 4. Discuss Cal Am Requested Surcharge 2, Impacts to Ratepayers, and Provide Direction to Staff Member Stoldt introduced the item and distributed a document outlining the scenario that zero's out the proposed Cal Am surcharge 2, instead of including the surcharge of the proposed $99 million. Member Stoldt explained the surcharge and the effects of changes in different scenarios and how it would impact the rate base. He also expressed that the fundamental concern of the ratepayer is the idea that current ratepayers will have an unequal burden with minimal benefits compared to future resident. The Authority Board will address their position on this item in the near future. Member Stoldt opened the item for comments from the TAC who requested clarification on specific calculations. Member Stoldt then opened the item for comments from the public. 2  MPRWA TAC Minutes Monday, November 19, 2012 Doug Wilhelm expressed his view that the Cal Am surcharge is equivalent to extortion and is unequally charged and unfairly distributed. Dale Haikus spoke representing the Peninsula Water Ratepayers Alliance clarifying the $99 million surcharge is currently a proposal before the CPUC and is not guaranteed however it would be a gambling of ratepayer money. He urged the continuance of competition between the three projects and expressed concern with the level of risk associated with the Cal Am project which if failed, would leave rate payers with extensive stranded costs. He requested the MPRWA to facilitate three things 1) ensure continuance of a fair playing field 2) advance funding proposal would not go forward without providing rate payers an equity stake and 3) encouraged the Mayors to protect the best interest of the community. Safwat Malek questioned Cal Am’s proposed budget figures and disagreed with supporting Cal Am's proposed surcharge. Member Stoldt spoke to Mr. Malek's question and indicated that Cal Am provided the $207 million discounted figure to the Consultants. With no further requests to speak Member Stoldt brought the discussion back to the board. The TAC discussed different rate and borrowing scenarios and possibilities as well as tried to compile the direct message the TAC wants relayed to the Authority Board. With no further discussion on the item, Member Stoldt closed discussion and moved to the next agenda item. 5. Review Cost Model and Discuss Strategy and Recommendation for CPUC Cost and Financial Workshops December 11-13, 2012 Member Stoldt introduced the item and walked through the assumptions to discuss inputs and alternatives. He indicated that the purpose of this item was to provide the Authority any guidance of scenarios the TAC thinks should be evolved for the cost workshops or if there are specific topics that should be presented to the Authority Board. George Riley commented about instructions to recues himself over the surcharge, due to his presentation at the November 13, 2012 Authority Board meeting which preempted his participation on this item. He felt he should not participate in this discussion either because it was too closely related therefore recused himself from this item as well. Don freeman spoke to this comment and indicated that if a member advocates strongly for a position representing an outside group that it makes it very difficult for the public to understand if that person is keeping an open mind. While there are no financial conflicts of interest, or incompatibility of office in any way, Mr. Reily recusing himself was a way to preserve the integrity of the position and of the Authority. Mr. Reily is entitled to have his opinion, but if he recused himself, he will be stepping down from all communication related to this item including public comments. Member Stoldt redirected the discussion back to preparing direction to present to the Authority. Member Israel clarified the calculations of percentages on the worksheet as well as mitigation allowance not being high enough to resolve. He requested it be higher figures for mitigation and lower figures for electricity and control systems. Member Narigi requested inclusion of a line item factor for test wells and TAC members agreed to include under the plant assumptions. 3 MPRWA TAC Minutes Monday, November 19, 2012 Member Stoldt clarified that the default scenario of 2,500 cost per acre foot and pointed out that under the cost of debt, financing area should be looking at authorized cost of debt, corporate debt, and questioned what if corporate debt was tax exempt without credit support as well as consider looking at it without backstop. State revolving fund debt should be looked at as a debt and then moving it over as a surcharge. Member Israel requested reconsideration of the cost of energy and any impacts of using methane generated power from the Monterey Regional Waste Management District. Member Riedl questioned turning off surcharge 2 and state revolving fund as an option, as it was lumped together in the worksheet, and asked if they be equitable. You could make a public contribution at no ownership, but it's a non starter. The TAC agreed to indicate to the Authority that surcharge 2, although cheaper, has specific issues such as is unequally charged and that ratepayers and businesses may suffer from "rate shock" when implemented. The goal would be to determine how to get the benefits of the surcharge without affecting the population. Member Stoldt opened the item for questions from the public. Salfwat Malek questioned any safeguards the ratepayers have if the project fails. Libby Downey expressed disagreement with Legal Counsel Freeman, and encouraged the TAC to appear as if they are advising and not advocating. Doug Wilhelm questioned the surcharge and assumptions on the key assumptions page. Member Stoldt clarified the layout of the table under the Surcharge and Construction Assumptions section of the Key Assumptions hand out. The TAC agreed to write a memo about the assumptions and recommendations discussed to provide for reference and inclusion to the CPUC Cost Workshop and for future discussion for the Authority Board. Member Stoldt clarified that these are not the consultant’s numbers presented today, but generated for the cost modeling workshop. With no further discussion or items to come before the TAC, Member Stoldt adjourned the meeting at 4:13 p.m. ADJOURNMENT Respectfully Submitted, Approved, Lesley Milton, Clerk to the Authority Director Burnett, TAC Chair 4