2. Consider First Reading ofOrdinance No. 100 - An Ordinance of the Board of Directors of the Monterey Peninsula Water Management District Temporarily Suspending Receipt of Applications for Water Credit Transfers

ACTION: The proposed ordinance would establish a 90-day period in which only water credit transfers between "like to like," commercial to commercial or industrial to industrial uses would be allowed, in addition, the sale of water credits for profit would be prohibited. Public comment will be received on this item.

SUMMARY: At the request of the Chair and Vice Chair, Draft Ordinance No. 100 (Exhibit B-1) is being considered for first reading by the Board. It is identical to Ordinance No. 95 which expired on December 18, 2000. The proposed ordinance temporarily suspends the authority of the Water Management District to receive any water credit transfer applications under District Rule 28 B that are not for "like to like" commercial-to-commercial or industrial-to-industrial expansions of an existing use. The ordinance also states that any payment of money or other value in compensation for the transfer cannot exceed the connection fee that would apply to the increment of water use capacity pursuant to Rule 24. If adopted, the ordinance is written to sunset after 90-days. It could be extended for a 90-day period in the event that additional time is needed. Time extensions to the ordinance require a majority vote of the Board at a regularly scheduled meeting.

RECOMMENDATION: The Board should consider of the first reading of Ordinance No. 100. If the Board approves the first reading, staff should be directed to return the ordinance to the Board for second reading and adoption in February. Adoption of the ordinance will provide time for the Board to consider lifting the temporary suspension on receiving water credit transfer applications or to take further action to modify or discontinue the water credit transfer program. A third party analysis by DCI Inc. of the findings presented to the Board in September 2000 on water consumption data supplied by Cal-Am and the water savings associated with credit transfers that was made by staff at the September 2000 meeting has been initiated. Once the consultant has completed his analysis of the information, a report will be made to the Board. The third party analysis should be available by the March 2001 board meeting.

BACKGROUND: At the January 27, 2000 meeting, the Board considered modifying the water credit transfer program to include residential uses. At the time, the key issue was whether current District rules, which allow the transfer of commercial water credits to another commercial site but prohibit the transfer of residential water credits to another residential site, should be amended. The Board did not take action at the January meeting other than to direct staff to set a public hearing for review of the water credit transfer ordinance at the February 24, 2000 board meeting.

At the February 24, 2000, board meeting, staff was directed to prepare a report on whether or not water demand has been reduced as a result of the existing water credit programs. The preliminary report that was presented on March 20, 2000, indicated that the anticipated water savings from the program were not occurring. Staff was directed at the March 20, 2000 meeting to continue researching the water savings associated with Water Use Credits and transfers and report back to the Board in 90 days.

District staff began an extensive data collection process following the March 20, 2000 board meeting. Cal-Am customer-specific data related to individual water consumption is proprietary and confidential information owned by Cal-Am. For the District to access this information, a non-disclosure agreement was necessary. The non-disclosure agreement was signed by both parties on June 7, 2000. This agreement allows the District access to Cal-Am's confidential customer consumption records for limited purposes on the condition that the District maintains confidentiality and agrees that information obtained from Cal-Am is the property of Cal-Am and will not be distributed to third parties.

Transfers of commercial water credits from an existing commercial use to an expanding commercial use in the same jurisdiction have been allowed since December 1993. In September 1995, Ordinance No. 79 modified the transfer rule to allow commercial credits to transfer into a jurisdiction's allocation. Once the water use credit is assigned to the jurisdiction's allocation, the water becomes available for use at the jurisdiction's discretion and can be used for residential and nonresidential uses, new connections, and remodels. All transfers require the authorization of the jurisdiction and the District, and the property owner must agree to transfer the water use credit and must agree to a deed restriction on the property.

District Ordinance No. 95 was adopted on June 19, 2000, to allow only commercial-to-commercial water credit transfers of like kind to occur during a 90-day moratorium on water credit transfers. During the 90-day period, the effectiveness of the water credit program was to be reviewed. The proposed ordinance was effective for 90 days and was extended for a second 90-day period on September 18, 2000 to give staff time to have a third party review the findings from its credit analysis. The ordinance expired on December 18, 2000, after consideration of a third extension of the ordinance was continued by lack of a quorum at the December 11 board meeting. The third party analysis of the water credit program is underway but has not been completed to date.