FINAL MINUTES

Town Hall Meeting/Special Meeting

Board of Directors

Monterey Peninsula Water Management District

August 25, 2005

1. Welcome/Pledge of Allegiance

The meeting was called to order at 7 PM in the Embassy Suites Hotel in Seaside. Board Chair, Larry Foy, welcomed the panel members and audience. The other Directors in attendance were Kristi Markey, Vice Chair; Alvin Edwards; Judi Lehman; Michelle Knight; and David Pendergrass. Director Potter was present for a portion of the meeting.

2. Introductions/Purpose of Meeting/Format for the Evening

Chair Foy introduced the panelists. He explained that the Board would make no decisions that evening. The focus of the meeting was to hear from each panelist and receive comments from the public. A question and answer period would be conducted, followed by a public comment period.

3. Presentations

A. Coastal Water Project sponsored by California-American Water Company – Steve Leonard, Vice President and Manager Coastal Division

A summary of Mr. Leonard’s presentation is on file at the District office.

B. North Monterey County Desalination Project, sponsored by the Pajaro/Sunny Mesa Community Services District – Marc Del Piero, District Counsel

Mr. Del Piero reported that the Pajaro/Sunny Mesa Community Services District (PSMCSD) proposes to construct a 21,000 to 23,000 acre-foot desalination project to meet regional water needs. The PSMCSD worked for two years to develop a lease agreement for a 20-acre site in Moss Landing for the regional desalination plant. The site has a seawater intake and outfall, and 9 tanks that vary in capacity from 3 to 7 million gallons. The project is intended to provide water to correct an 11,000 acre-feet overdraft in the North Monterey County area and address the growing problem of seawater intrusion in wells in that area. He stated that efforts to obtain water from the Central Valley Water Project have been unsuccessful. The proposed project could also meet the needs of the Monterey Peninsula identified by the State Water Resources Control Board, which ordered California American Water (Cal Am) to correct a shortfall of 10,730 acre-feet. Water could also make up for an overdraft in the Seaside Groundwater Basin that has been estimated at 2,000 to 3,000 acre-feet per year. He stated that one advantage to the project is that it would be owned by a public entity. He noted that the California Coastal Commission has expressed support for construction of a single, regional desalination plant.

C. Long-Term Water Supply Project/Desalination, sponsored by the Monterey Peninsula Water Management District – Henrietta Stern, Project Manager

A summary of Ms. Stern’s presentation is on file at the District office.

D. Aquifer Storage and Recovery in Seaside Basin, sponsored by the Monterey Peninsula Water Management District – Joe Oliver, Water Resources Manager

A summary of Mr. Oliver’s presentation is on file at the District office.

E. Regional Urban Water Augmentation Project sponsored by Marina Coast Water District (MCWD) and Monterey Regional Water Pollution Control Agency – Mike Armstrong, General Manager MCWD

A summary of Mr. Armstrong’s presentation is on file at the District office.

F. Groundwater Recharge Project sponsored by Monterey Regional Water Pollution Control Agency – Keith Israel, General Manager

A summary of Mr. Israel’s presentation is no file at the District office.

G. Regional Urban Water Supply Policy Board, a shared governance concept to guide regional solutions to water supply needs, facilitated by Monterey County Water Resources Agency. Presentation by Curtis Weeks, General Manager

A summary of Mr. Week’s presentation is on file at the District office.

H. Overview of Water Supply Project Comparative Matrix (update in progress) by Monterey Peninsula Water Management District (MPWMD); next steps for MPWMD Board. Presentation by Dave Berger, General Manager

Mr. Berger thanked the panelists for their presentations. He announced that an updated version of the Comparative Matrix of Water Supply Options developed by District staff with input from the various water supply project proponents would be completed by early September 2005. The document was available at the District’s web site, and would be discussed at the Board of Directors’ September 8, 2005, Strategic Planning Workshop.

4. Question and Answer Period

Question: Hank Smith, Carmel River Steelhead Association, asked Mr. Del Piero to explain why the PSMCSD desalination project proposal is preferable to California American Water’s (Cal Am) Coastal Water Project.

Answer: Mr. Del Piero replied that the PSMCSD project would provide a regional solution to satisfy the 10,730 acre-feet shortfall in the Cal Am system, and over-pumping of the Seaside aquifer. The existing permit associated with the intake and outfall at the National Refractory site is for 75,000 acre-feet per year. The proposed project will not utilize the full capacity of the outfall. The goal is to address the immediate water supply problems first.

Question: Joe Vierra stated that the Board should not abandon construction of a dam on the Carmel River. Political situations change quickly, and there may be the political will at the state level to construct a new dam.

Question: Ruth Smith, a resident of Carmel, asked Mr. Del Piero if utilization of solar energy sources is planned for the PSMCSD project.

Answer: Mr. Del Piero replied that alternative power sources could not provide enough energy to operate the desalination plant. However, solar technology could be integrated into the plant design to power a portion of the project. The cost of desalination has been radically reduced over time.

Mr. Leonard – The critical need for energy production is not limited to the proposed desalination project. The energy needs of the desalination project will be addressed in the same context as all power needs.

Mr. Weeks – Effective use of energy must be part of any proposed water project.

Mr. Armstrong – Our project is likely to take advantage of micro turbine generation which is extremely efficient.

Question: Susan Goldberg asked Mr. Leonard and Mr. Del Piero to explain how each proposes to complete construction first.

Answer: Mr. Leonard -- Cal-Am has already begun the permitting process by preparing a Proponents Environmental Assessment (PEA) for the Public Utilities Commission, the lead agency.

Mr. Del Piero – PSMCSD estimates that as lead agency for their own project, it can be constructed by 2008 or 2009. PSMCSD maintains that its lead agency status means that fewer permits are needed and review by other agencies is also reduced. The pilot project should be constructed within the next 75 days and will operate for a year.

Question: Susan Goldberg asked when the Coastal Water Project would be constructed.

Answer: Mr. Leonard responded that the project should be completed by December 2008.

Question: Clive Sanders, representing the Carmel River Watershed Conservancy, commented to Mr. Del Piero that producing desalinated water and selling it will not help the Carmel River. He asserted that the PSMCSD is only looking for a customer to buy its desalinated water.

Answer: Mr. Del Piero stated that flow is needed in the Carmel River to provide water and spawning gravel for the steelhead fish. There is still no new dam on the Carmel River to increase the water supply and provide adequate fish flows.

Question: Yvette (no last name stated) asked the panelists to compare the benefits of the proposed desalination plants. She asked if similar projects were constructed in other communities.

Answer: Mr. Berger noted that the Comparative Matrix of Water Supply Options that is being updated by the District would provide the requested information.

Mr. Leonard – There are two desalination plants in Southern California. The MCWD has operated a desalination project since 1997. Cal Am’s consultant has designed plants in Baja California and Southern California.

Question: David Dilworth, representing Helping Our Peninsula’s Environment (HOPE), asked how each project proponent will ensure that the public has an opportunity to vote on the water supply projects.

Answer: Mr. Del Piero stated that since Mr. Dilworth lives outside of the PSMCSD boundary, he would not have an opportunity to vote on that project.

Mr. Leonard – Our project may not be brought forward for a public vote. The persons who make the decisions are democratically elected. There is no need to place the project on the ballot.

Mr. Armstrong – I don’t envision a public vote on our project.

Mr. Weeks – If a governance structure is formed, we have not yet identified how authority would be shared.

Mr. Israel – A public vote could occur if it is required for project financing.

Question: Ron Chesshire asked if Cal Am is for sale.

Answer: Mr. Leonard responded that the company is not for sale.

Question: Ron Chesshire asked how the Board would use information obtained from a proposed study on the cost for public acquisition of Cal Am.

Answer: Chair Foy stated that only questions related to proposed water supply projects would be answered that evening.

Question: Ron Chesshire asked Mr. Leonard if Cal Am would move forward on releasing water from its project for growth, or if collaboration with other agencies is needed before that water could be released.

Answer: Mr. Leonard replied that Cal Am’s proposal is for 11,030 acre-feet of water. Alternatives with higher production have been developed in response to requests from the PUC. Cal Am’s preferred proposal is to provide replacement water for the 10,730 acre-feet shortfall identified by the SWRCB on Order 95-10. Additional environmental review must be completed if the project is to be sized to allow an increment of water for growth.

Question: George Riley, a resident of Monterey, asked Mr. Leonard if Cal Am proposes that the Coastal Water Project be a privately or publicly held project.

Answer: Mr. Leonard replied that Cal Am maintains that Monterey County’s ordinance requiring that desalination projects be publicly owned is in violation of state law. He hopes that the Regional Urban Water Supply (RUWS) governance planning process will result in formation of an entity that can partner with Cal Am on development of the Coastal Water Project, or can take over the project and sell the water to Cal Am. Until that happens, Cal Am is obligated to move forward to meet the water supply shortfall identified by the SWRCB in Order 95-10.

Question: Madeleine Clarke asked Mr. Weeks why the public has not been allowed to participate in the RUWS governance planning process.

Answer: Mr. Weeks stated that he is working on development of a management agreement that would be distributed to all the RUWS participants for their review and discussion, which will foster public debate about formation of the RUWS governance board. He noted that he has made presentations at various venues throughout Monterey County on the RUWS planning process.

Question: Madeleine Clarke asked why the public and media have not been allowed to participate in the management group meetings that are focused on formation of the RUWS governance board.

Answer: Mr. Weeks responded that the water managers are developing ideas regarding formation of the RUWS governance board that will be brought to the publicly elected city council and agency boards for review and discussion. The public debate should occur at that level.

Question: Madeline Clark asked Mr. Foy why the District doesn’t assert its authority and partner with Cal Am for construction of the Coastal Water Project, since it will provide water for the Monterey Peninsula.

Answer: Mr. Foy stated that the idea has been discussed. He noted that the Coastal Water Project is still in the planning stage, and would be located outside of the District’s management authority.

Question: Paul Bruno asserted that Nadar Agha could earn between 106 and 160 million dollars over a twenty-year period according to the lease agreement he has with PSMCSD. According to Mr. Bruno, that is equal to $265 per acre-foot of water which is a 40 percent increase over the present rate paid for Cal Am water. Mr. Bruno asked if the $265 per acre-foot included in the estimated cost for the PSMCSD project is a fair deal for the ratepayer?

Answer: Mr. Del Piero stated that the $265 per acre-foot estimate is incorrect. The agreement calls for payment of $100 for every acre-foot of water produced. He explained that the project would save ratepayers money because it proposes use of an existing intake and outfall. Also, existing storage tanks can hold an eleven-day supply of seawater. This will allow intake water to be collected and stored for use when the Duke Energy plant is not in operation.

Question: John Fischer, resident of Pacific Grove, asked for an estimate of the costs to monitor and mitigate for the effects of discharge water on the Monterey Bay and Elkhorn Slough.

Answer: David Berger advised that the Comparative Matrix of Water Supply Options has a category for mitigation costs. Information provided by the project proponents has been included.

Question: Barbara Williams, resident of Castroville, asked if there are plans for the community to utilize only available water resources, instead of creating new water projects.

Answer: Mr. Foy stated that per-capita water use on the Monterey Peninsula is lower than any other community in California. Water conservation is presently a way of life in Monterey County.

Mr. Armstrong listed water conservation measures adopted by the Marina Coast Water District including installation of re-circulating hot water systems or point-of-use systems and high efficiency washing machines in all new homes. All landscaping plans must include evaporation- transpiration controllers. In addition, waterless urinals are required for all commercial and industrial facilities.

Mr. Leonard mentioned that Cal Am distributes thousands of low-flow showerheads each year. Cal Am considers water conservation to be a priority. It is the “water supply” Cal Am has depended on over the past few years.

Mr. Weeks reminded the group that there are several recycled water projects in Monterey County.

David Berger noted that an expanded retrofit-rebate program and a turf retirement program could be funded by Cal Am as part of the present general rate case application before the PUC.

Question: Lynn Morris, resident of Pebble Beach, asked for an explanation of the difference between the Monterey Peninsula Water Management District and the Monterey County Water Resources Agency.

Answer: Mr. Weeks stated that the agencies have memorandums of understanding to ensure there is no duplication of services. The District has management responsibility for the Carmel River. The MCWRA has management responsibility for the Salinas River watershed.

Question: Manuel Fiero asked what would happen if one agency is unwilling to join the RUWS governance board and another agency says all must participate?

Answer: Mr. Weeks explained that all the management group members are focused on collaborative development of a solution.

Question: Alvin Edwards asked Steve Leonard if source water for the aquifer storage and recovery component of the Coastal Water Project will come from the Carmel River or the desalination project.

Answer: Mr. Leonard stated that the water would come from the desalination project or the Carmel River, whichever source had excess capacity.

Question: Alvin Edwards asked Mike Armstrong if the Marina Coast Water District (MCWD) had plans to connect to the regional desalination project.

Answer: Mr. Armstrong stated that the MCWD is aware of both the PSMCSD project and the Coastal Water Project. The challenge for MCWD is to decide when to pursue its own project, or if it is better to participate in a regional project.

Question: Alvin Edwards asked Mr. Del Piero how the PSMCSD project would be funded.

Answer: Mr. Del Piero listed bonds, certificates of participation and prime financing as possible funding sources.

Question: Alvin Edwards asked Mr. Israel how many wells would be drilled to accomplish his project goals.

Answer: Mr. Israel stated that initially one or two test wells would be drilled, but he could not estimate the total number of wells at this time. His agency has not yet developed a funding plan, but they are searching for government grants and loans.

Question: Mr. Edwards asked Mr. Weeks if money allocated from Proposition 50 funds could be distributed to a private company.

Answer: Mr. Weeks doubted that funds could be distributed to private companies.

Question: Mr. Edwards asked Mr. Weeks who would vote first on the RUWS management agreement, would it be Monterey County or the City Councils.

Answer: Mr. Weeks said it should be brought to the city councils in September 2005 before it goes to the Board of Supervisors.

Question: Bruce Smith asked if he could get a copy of the cross-section of the Seaside aquifer that was displayed that evening.

Answer: District staff member Joe Oliver agreed to provide the information to Mr. Smith.

Question: Ed Childs asked Steven Leonard to comment on the rate of loss in the Cal Am system.

Answer: Mr. Leonard described the loss as “unaccounted for water,” which is water that is metered but is not charged to any customer. Cal Am’s unaccounted for water is 9.2 percent of production. The industry standard is 10 to 15 percent and the District’s goal is 7 percent.

Question: Mr. Foy read a question handed him from a member of the public. The question was to Steven Leonard and asked what desalination projects Cal Am has built or managed separate from its parent company.

Answer: Mr. Leonard stated that the company has not built a desalination plant in California. However, consultants hired by the company have been involved in engineering and permitting for desalination plants in California and around the world.

5. Public Comment

Ron Chesshire asked Mr. Leonard if Cal Am was for sale. Mr. Leonard replied that it was not.

Ron Chesshire asked Chair Foy to explain what the District would do with the proposed report on the cost for public acquisition of Cal-Am, if the voters do approve preparation of the study. Chair Foy replied that the information would be provided to the community.

Ron Chesshire asked Mr. Del Piero if it was true that PSMCSD has agreements with two entities related to construction of the proposed desalination project. Mr. Del Piero replied that one agreement is with Poseidon Resources Corporation for preparation of an EIR and development of cost estimates for various components of the project. There is also a lease agreement for the project site.

William Clark asked Mr. Foy to explain why the Board of Directors made a decision on May 16, 2005 to reject an opportunity to save 500 gallons of water per year. Mr. Berger noted that Mr. Clark was referring to a decision made by the Board on May 16, 2005 to deny a request for a variance filed by Ms. Deborah Gramespacher. Mr. Clark referred to correspondence sent to the District and dated August 25, 2005, which is on file at the District office.

Joe Vierra asked if previous proposals to construct a dam on the Carmel River could be brought up again for consideration. Mr. Leonard replied that anything is possible, but Cal Am was focused on pursuing a desalination project.

Paul Bruno asked Mr. Foy to explain how the District arrived at the estimated cost of $500,000 for preparation of a report on public acquisition of Cal Am, since a similar report done in the 1960’s cost nearly seven hundred thousand dollars. Mr. Foy explained that the $500,000 equates to a 1% surcharge on each customers’ Cal Am water bill. No analysis or proposal was received by the District related to the cost for such a study. Mr. Bruno asked if it was reasonable to assume that a report which cost seven hundred thousand dollars in 1960, would cost less to prepare in 2005. Mr. Foy replied that he did not know of anything that would cost less in 2005 than it did in 1996.

David Dilworth, representing HOPE, requested that a public vote be conducted for all projects. He stated that HOPE supports a combination of projects including a desalination plant in Sand City. He requested that the District restore funding for completion of an EIR on that project.

John Fischer expressed a desire to review the updated Comparative Matrix of Water Supply Options. He urged project proponents to provide all the information required by District staff to complete the Matrix, including the cost for mitigation measures and monitoring.

Alvin Edwards stated that the cost to Cal Am ratepayers would be approximately one dollar per month for preparation of a study on public acquisition of Cal Am.

6. Adjournment

The meeting was adjourned at approximately 9:30 PM.

________________________________

David A. Berger, Secretary to the Board

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