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ITEM: |
PUBLIC
HEARINGS |
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14. |
CONSIDER FIRST READING OF
ORDINANCE NO. 117 – AMENDING RULE 28-B CLARIFYING THE MINISTERIAL REVIEW OF
WATER USE CREDIT TRANSFER APPLICATIONS, SETTING STANDARD CONDITIONS OF APPROVAL,
AND SETTING FEES FOR TRANSFERS AND REVIEW OF NEW TECHNOLOGY |
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Meeting
Date: |
July 19,
2004 |
Budgeted: N/A |
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Staff
Contact: |
Stephanie
Pintar |
Program/Line
Item No.: N/A |
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Cost
Estimate: N/A |
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General Counsel
Approval: General Counsel has
reviewed the ordinance. |
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Committee
Recommendation: The Water Demand
Committee recommends the Board proceed with a draft ordinance to modify the
Water Use Credit transfer program. Additional notification of transfer
decisions should be included in the General Manager’s weekly letter, as well
as in a monthly staff report to the Board.
These noticing procedures should be included in the Policies and
Procedures Manual. |
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CEQA Compliance: N/A |
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SUMMARY: At the March
15, 2004 Board meeting, staff was directed to prepare an ordinance to modify
the Water Use Credit Transfer process.
Draft Ordinance No. 117 (Exhibit 14-A) represents the Water Demand Committee’s recommendation
to the Board, including the TAC recommendation to change consideration of
applications to transfer credits from a discretionary process to a ministerial
process. In addition to changing the
level of approval for Water Use Credit transfers from the discretionary level
to the ministerial level, the ordinance also incorporates safeguards from
Ordinance No. 101, adds standard Conditions of Approval, and sets fees for both
Water Use Credit Transfers and requests for review of projects utilizing new
water saving technology.
Staff prepared and circulated an Initial Study and Notice of Intent to
Adopt a Negative Declaration in compliance with the California Environmental
Quality Act (CEQA) from June 1 to June 21, 2004 (Exhibit
14-B). Comments were received from Richard
Rosenthal, representing Save Our Peninsula Committee and Ed Leeper, and from
Michael Stamp, representing The Open Monterey Project. Copies of the responses are attached as Exhibit 14-C. Both responses object to
adoption of a Negative Declaration on the grounds that there is a fair argument
that the project may cause a significant impact on the environment.
This item was scheduled for a public hearing on June 21, 2004, but not
heard due to a lengthy agenda.
RECOMMENDATION: The Water Demand Committee reviewed this item and made its recommendation prior to receipt of the comment letters on the Initial Study. In light of the comments received, staff recommends the Board not proceed as contemplated with the first reading of Ordinance No. 117 due to the public controversy that has been identified in the letters submitted during the comment period. Staff further recommends that if the Board wishes to proceed with the ordinance, an Environmental Impact Report (EIR) should be prepared prior to consideration. No funds are budgeted for this expense.
Staff’s recommendation results from the review of Section 15064, Determining the Significance of the Environmental Effects Caused by a Project, of the CEQA Guidelines and the letters submitted by Mr. Rosenthal and Mr. Stamp. Under Section 15064, subparagraph (f), the guidelines state: “ The decision as to whether a project may have one or more significant effects shall be based on substantial evidence in the record of the lead agency.” The following subparagraph 15064 (f) (1) goes further to say: “If the lead agency determines there is substantial evidence in the record that the project may have a significant effect on the environment, the lead agency shall prepare an EIR (Friends of B Street v. City of Hayward (1980) 106 Cal. App. 3d 988). Said another way, if a lead agency is presented with a fair argument that a project may have a significant effect on the environment, the lead agency shall prepare an EIR even though it may also be presented with other substantial evidence that the project will not have a significant effect (No Oil, Inc. v. City of Los Angeles (1974) 13 Cal. 3d 68).”
Further evaluation of the CEQA guidelines points to the following two subparagraphs that also address the situation at hand and support staff’s recommendation to proceed with an EIR if the program is to be considered further:
Section 15064 (g):
“After application of the principles set forth above in Section 15064(f) and in marginal cases where it is not clear whether there is substantial evidence that a project may have a significant effect on the environment, the lead agency shall be guided by the following principle: If there is disagreement among expert opinion supported by facts over the significance of an effect on the environment, the Lead Agency shall treat the effect as significant and shall prepare an EIR.”
Section 15064 (h)(1):
“When assessing whether a cumulative effect requires an EIR, the lead agency shall consider whether the cumulative impact is significant and whether the effects of the project are cumulatively considerable. An EIR must be prepared if the cumulative impact may be significant and the project’s incremental effect, though individually limited, is cumulatively considerable. “Cumulatively considerable” means that the incremental effects on an individual project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects.”
Funding for a water credit transfer EIR was eliminated from the fiscal year 2004-2005 budget. The estimated cost of the document is $80-$150,000. At the January joint Policy Advisory Committee/Technical Advisory Committee (PAC/TAC) meeting, and again during the TAC committee’s deliberation of options for the water credit transfer program, the jurisdictions were asked to share the cost of a water credit transfer EIR, if one is pursued. The jurisdiction representatives were also warned that in the event of litigation on the proposed ordinance to change the approval process from discretionary to ministerial approval, the jurisdictions would be asked to provide financial assistance to the District to defend its CEQA position.
At the January 27, 2000 meeting, the Monterey
Peninsula Water Management District Board of Directors (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, District 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. A
preliminary report presented to the Board on March 20, 2000 indicated that the
anticipated water savings from the program were not occurring. District 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. Both parties signed the
non-disclosure agreement 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.
However, even
with a non-disclosure agreement between the District and Cal-Am, access to
Cal-Am water records is difficult, and the data provided by Cal-Am is often
inadequate or conflicts with other available data. Although deed restrictions are recorded on the originating site
and the receiving site granting the District access to water records, Cal-Am is
not always cooperative in providing water use data. In addition, data for post-project water usage was limited during
the previous studies that contributed to inconclusive findings.
Transfers of
commercial water credits from an existing commercial use to an expanding
commercial use in the same jurisdiction were allowed starting 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. Since the inception of the
Water Credit Transfer program in 1993, the District has approved 26 transfers
that resulting in the movement of 60.843 acre-feet of water from one site to
another or to a jurisdiction.
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, 2000 Board meeting.
Ordinance No.
100, a 90-day ordinance suspending 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” (identical) commercial-to-commercial or
industrial-to-industrial expansions of an existing use, was adopted on March
19, 2001. The ordinance expired on June
18, 2001. The third party analysis of
the water savings on commercial sites and sites receiving water from credit transfers
was completed on June 1, 2001 and provided to the Board.
On June 18,
2001, the District’s Board of Directors suspended receipt of water credit
transfer applications for 60 days (through August 17, 2001). District staff was directed to consider modifications
to the water credit transfer process that would incorporate additional
safeguards to prevent an increase of water use beyond the original projection
at the receiving site, and safeguards that would ensure that accurate estimates
of historical water use at the donor site are developed.
At the August
20, 2001 meeting, District staff presented a number of policy questions to the
Board and asked for their feedback.
Members of the Board provided individual thoughts on the various issues,
and the proposed draft ordinance reflected the consensus of the feedback. The
District’s Technical Advisory Committee (TAC) and Policy Advisory Committee
(PAC) reviewed Draft Ordinance No. 101 on July 20, 2001 and again on August 29,
2001. The TAC and PAC members agreed
with the concept, but objected to the set-aside of a total of 50 percent of the
available water credit. The Board’s consensus was that 35 percent of
the savings should be set aside as permanent savings. The TAC and PAC members maintained that true equity would only be
achieved by allotting 25 percent of the established water credit to the
District.
The TAC/PAC
reasoned that the 35 percent conservation savings figure is based on the
assumption that the commercial water use factors are not accurate and may
underestimate historic water use at the transferring site, so that more than 25
percent must be saved in order to compensate for the underestimation of the
water credit. Proposed amendments to
Rule 28 that have been incorporated in the proposed ordinance would base the
water credit calculation on both commercial water use factors and actual
historic water use at the transferring site.
Combining both calculation methods is the District’s way of correcting
for the inaccuracy of the commercial water use factors. Therefore, there is no need to increase the
District’s conservation savings to 35 percent, and a 25 percent conservation
savings figure is adequate and also fair to the property owner.
The TAC/PAC
was united in its request that no restrictions be placed on use of the 15
percent that would be transferred to the jurisdiction. According to the committee, the
jurisdiction should decide whether to allot that water for commercial,
residential or affordable housing projects.
There were no objections to providing the District with information
about the recipients of water originating from a transfer.
Ordinance No.
101 was adopted November 19, 2001.
At the following Board meeting, Director Henson submitted a request for
reconsideration. Ordinance No. 101 was
rejected on December 17, 2001.
The Board of Directors deleted District Rule 28-B in its entirety on March 26, 2002 by adoption of Ordinance 102, after determining that the water transfer program had not resulted in the anticipated savings of water that originally motivated the program and, in some cases, may have resulted in an increase in water usage. On March 27, 2003, as part of a settlement agreement between the District and the Cities of Seaside, Carmel, Del Rey Oaks, Monterey, Pacific Grove and Sand City, the Board of Directors completed first reading of Ordinance No.107, repealing Ordinance No. 102, thereby effectively reinstating District Rule 28-B. Rule 28-B was immediately modified by the adoption of Ordinance No. 108 on the same evening. Ordinance No. 108 clarified that the Board of Directors will make the decisions concerning water credit transfers after taking into account whether an application would have an adverse impact on the area’s water supply.
CEQA Review of Proposed
Transfer Program(s)
Despite extensive successful conservation efforts, water supply for new construction and remodeling projects on the Monterey Peninsula is extremely limited for a variety of environmental, regulatory and technical reasons. The Water Credit Transfer Program (WCTP) began in 1993 as a means to facilitate commercial expansion within the community while also supporting the District’s conservation goal. Environmental review on the WCTP ordinance was not carried out at that time.
MPWMD Ordinance No. 102, adopted in February 2002, rescinded Rule 28-B and the WCTP as a whole after the Board determined that the program had not resulted in the anticipated water savings that originally motivated the program. Six cities filed suit against the District in May 2002 challenging the rescission of the program on CEQA grounds.
On March 17, 2003, the MPWMD Board approved the first reading of Ordinance No. 107, which rescinds Ordinance No. 102, thereby restoring the WCTP as defined in Rule 28-B prior to Ordinance No. 101. On April 2, 2003, the Board approved the first reading of Ordinance No. 108, which clarifies that approval of a water credit transfer application is a discretionary act by the Board, and such action requires CEQA review. On May 19, 2003, the MPWMD Board adopted on second reading both Ordinances No. 107 and 108; both become effective on June 18, 2003. Finding No. 5 of Ordinance No. 107 states that it is the Board’s intention to prepare an EIR to address concerns that have been raised about the program. The Board had earlier directed at its February 27, 2003 meeting that applications for water credit transfer approval will not be considered by the Board until after the EIR is certified. Enactment of Ordinance No. 108 allows submittal of applications with individual environmental assessment and the decision-making is discretionary by the District’s Board of Directors.
At its February 27, 2003 meeting, the Board directed staff to work with a sole source consultant to develop a scope of work for a focused EIR on the environmental impacts of having or not having a water credit transfer program. The stated goal at that time was completion of the Final EIR no later than September 30, 2003. The Board also directed that the Board should not consider applications for water credit transfer approval until after the EIR is certified.
Turnstone Consulting
At its March 17, 2003 meeting, the Board determined that Turnstone Consultants of San Francisco should be retained to prepare an EIR that evaluates the environmental effects associated with a water credit transfer program. The Board further directed that Directors Henson and Lindstrom should negotiate with Turnstone to refine the scope of work, and address Board concerns about the high cost and extensive reliance on staff work products.
A revised Turnstone scope of work was prepared for the April 21, 2003 Board meeting, but this item was continued until the May 19, 2003 meeting. A significant addition was to include an economic analysis in the scope to address certain concerns raised by litigants. Considerable information also remained to be provided by staff. The cost estimate for Turnstone to produce only a Draft EIR was $155,400; this amount included an estimated $42,200 for a specialist to perform an economic analysis. Negotiations between MPWMD and Turnstone representatives continued in mid-April, but it became evident that a mutually satisfactory result was not forthcoming.
District staff was directed in late April 2003 to prepare an RFP to be transmitted to a variety of environmental consulting firms for an EIR that would focus on termination of the existing WCTP. The overall goals of the EIR were to assess environmental effects associated with terminating the WCTP, and respond to assertions by litigants who challenged Ordinance No. 102 rescinding the WCTP. The emphasis on terminating the WCTP was at the direction of District Special Counsel, Clement Shute. Mr. Shute directed that the EIR should respond to litigant assertions that terminating the WCTP would result in direct and indirect adverse physical effects.
District adoption of Ordinance Nos. 107 and 108 in May 2003 also affected the proposed EIR. Ordinance No. 107 reinstated the water credit transfer program (Rule 28-B). Ordinance No. 108 clarified some of the processes and vague terminology contained in Rule 28-B. Specifically, decisions about water credit transfers will be made by the MPWMD Board of Directors and will be considered to be discretionary decisions subject to CEQA.
On May 19, 2003, the Board approved the RFP drafted by staff with review by the Water Demand Committee, and directed that it be transmitted to a list of 18 non-local consulting firms. The RFP was transmitted electronically on May 21 with a deadline of July 1, 2003. The intent was for staff to review proposals and make a recommendation for consideration by the Administrative Committee on July 15 and the full Board on July 21, 2003. No proposals were submitted by July 1, and the deadline was extended to August 6, 2003.
The Board considered retaining the firm of Resource Design Technology, Inc. (RDT) of Folsom, California, to prepare an Environmental Impact Report (EIR) on the termination of the Water Credit Transfer Program (WCTP). RDT was the only firm to submit a proposal to prepare an EIR in response to the District’s RFP. The full RDT Proposal was reviewed by the District’s Administrative and Water Demand Committees at their respective August 12 and August 21, 2003 meetings, and was also reviewed by Special Counsel. Significant portions of the RDT Proposal were provided to all Board members as part of the Administrative Committee packet. The bound complete proposal is available at the District office for public review.
The RDT proposal originally estimated a total cost of $261,820, which was reduced to an estimate of $255,500 upon further discussion. The proposed EIR costs were more than double the estimated MPWMD budget of $125,000. RDT emphasized that they “do not feel [they] can produce a robust, legally defensible document in the [District] price range due to the unusual nature of the proposed action as well as the legal issues involved.” It is notable that several firms who declined to propose indicated that the District’s budget estimate was too low.
The RDT proposal estimated a total of 36 weeks (roughly nine months) from the Notice of Preparation to completion of the Final EIR, preparation of CEQA Findings and hearings. This time frame was within the estimated schedule in the RFP.
The proposed
EIR included project level evaluation of the proposed project to terminate the
WCTP, and evaluation of two alternatives at a lesser level of detail. The alternatives include: (1) Rule 28-B is
reinstated (No Project alternative pursuant to Ordinances No. 107 and 108); and
(2) enact amended water credit transfer program as described in Ordinance 101.
The Board
voted on August 28, 2003 not to proceed with the EIR.
Since the beginning of the Water Credit Transfer program in 1993, 60.843 acre-feet of water credits have been moved from the originating site to another expanding site or to a jurisdiction’s account. This figure equates to just over 0.3 percent of the overall total Cal-Am water use. Although the amount of water transferred appears to be minimal and to have no measurable impacts on the environment, questions have been raised regarding the future use of the water credit transfer program. Specifically, there is the potential for increased utilization of the program, particularly as water supplies are less available in the local jurisdictions and transfers provide one of the only ways to obtain a water permit for expanded uses. It is believed that the increased safeguards proposed by Ordinance No. 117 that are not currently in Rule 28 would reduce the likelihood of not achieving the projected non-transferable water savings (15 percent of the total saved).
In correspondence received during the Initial Study comment period on Ordinance No. 117, the issue of changed environmental conditions was raised. Since 1993 when the water credit transfer program began, the water supply within the District has been subject to State Water Resources Control Board Order No. 95-10, the red legged frog and the steelhead have become listed as threatened species under the Federal Endangered Species Act, the District’s Water Allocation Program EIR has not been updated to reflect the changed conditions, and there are questions about the status of the Seaside aquifer.
Reexamination of the
Water Credit Transfer Program Approach
In January 2004, the Board
indicated it might reconsider an EIR on the WCTP. At the January 28, 2004 joint PAC/TAC meeting, the group asked
the Board to delay moving forward immediately on an EIR. Discussion of this action was to be
considered on January 29, 2004 at the regular Board meeting. Committee members suggested there might be
other water credit transfer concepts the TAC should review and possibly
recommend for consideration by the Board.
The District’s Board agreed to give the TAC thirty days to consider and
recommend an alternative transfer program.
The TAC met on February
25, 2004 to discuss an alternative transfer concept submitted by the City of
Monterey. Although the TAC did not
recommend using Monterey’s proposal, the committee recommended changing water
credit transfers (Rule 28, Transfer) from discretionary approval to
ministerial approval. The TAC
unanimously supported this recommendation, and staff prepared a draft ordinance
incorporating the TAC recommendation for review by the Water Demand Committee
on March 9, 2004.
On March 9, 2004, the Water Demand Committee considered both the TAC
recommendation and the Board’s original concept of moving forward with an EIR
on the water credit transfer program as proposed in Ordinance No. 101. It was agreed that the District needs
additional information on the cost and time for preparing a Water Credit
Transfer Program EIR and that staff should request this information from
Resource Design Technology (RDT), the firm who submitted the original EIR
proposal on the Water Credit Transfer Program.
At the March 15, 2004 Board meeting, the Water Demand Committee
unanimously recommended that the Board direct staff to modify the preliminary
draft ordinance that represents the TAC recommendation by incorporating
safeguards from Ordinance No. 101 and other standard Conditions of
Approval. The Water Demand Committee
considered this amended preliminary draft ordinance on April 13, 2004. The Water Demand Committee also reviewed the
proposed CEQA process for the draft ordinance on April 13, 2004.
On April 8, 2004, staff received the following updated information
about the costs of pursuing an EIR on the Water Use Credit Transfer Program
from Resource Design Technology, Inc. (RDT) of Folsom, California. RDT is the firm that was considered to do a
comprehensive EIR on the transfer program in 2003. RDT reworked the budget for an EIR, addressing enactment of
Ordinance No. 101 or a substantially similar ordinance. As expected, the costs are significantly
lower at an estimated $80-$150,000 versus the previous estimate of $255,500. A number of previously budgeted tasks (aesthetics, urban blight,
population/housing, public services and utilities impact evaluations) would not
be evaluated in the EIR. RDT would still address some
of these issues in an Initial Study, allowing them
to document why these would not be addressed in the
EIR. The EIR would be focused on Hydrology, Land Use/ Planning, Agriculture and Biologic Resources. The scope of Alternatives would
depend largely on input from the MPWMD. Again, it should be noted that no funds were
allocated for an EIR during fiscal year 2004-2005.
On May 17, 2004, the Board approved the recommendation of the Water Demand Committee to complete an Initial Study on draft Ordinance No. 117 and bring the ordinance forward for first reading at the June 21, 2004 Board meeting. An Initial Study was circulated during June 2004 and two comments were received. The ordinance was scheduled for first reading on June 21, 2004, but was continued due to a lengthy agenda.
14-A Draft Ordinance No. 117
14-B Initial Study and Notice of Intent to Adopt a Negative Declaration
14-C Responses To Initial Study Comment Period
U:\demand\Work\Board Pack\2004\July\Ord 117 Staff
report_19Jul04_Pintar.doc