ITEM:		PUBLIC HEARINGS
16.	CONSIDER FIRST READING OF ORDINANCE NO. 123 – IMPLEMENTATION OF A 1.2% USER FEE INCREASE TO FUND COMPLETION OF PHASE I ASR PROJECT
Meeting Date:			July 18, 2005	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Rick Dickhaut	Cost Estimate:	N/A
General Counsel Approval: Yes
Committee Recommendation: N/A
CEQA Compliance: Notice of Exemption Proposed

SUMMARY: The District, based in part on the April 14, 2005, “Seaside Groundwater Basin: Update on Water Resource Conditions” report prepared by Gus Yates, Martin Feeney and Lewis Rosenberg, has determined that the annual quantity of groundwater that can be produced in the Coastal Subarea of the Seaside Groundwater Basin without causing adverse effects, such as seawater intrusion, declining water levels and land subsidence (characterized as “Sustainable Yield”) is 2,220 acre feet per year. During water year 2004, production from the Coastal Subarea of the Seaside Groundwater Basin exceeded Sustainable Yield by 2,651 acre-feet.

The District’s Aquifer Storage and Recovery (ASR) Project has artificially replenished groundwater supplies of the Coastal Subarea by adding non-native water to offset cumulative overproduction from the Seaside Basin, has produced water in excess of the amounts injected, and provides an extra increment of water to California American Water (Cal-Am) for delivery to its customers. However, expansion of the project is needed to address and mitigate potential adverse effects that may result from overproduction from the Seaside Groundwater Basin and to promote the adequacy and integrity of the waters of the Basin. ASR expansion is also required to meet existing commitments for water demand, as well as to satisfy water quantity and quality requirements. ASR expansion is necessary to provide sufficient water for present or future beneficial use, and to protect District water resources. The need for ASR expansion is also based upon the lack of legal Cal-Am water supplies resulting from the State Water Resources Control Board Order WR 95-10, and the listing of the California red-legged frog and steelhead trout as threatened species under the Federal Endangered Species Act.

The cost to complete Phase I of the ASR project cannot be adequately funded without increasing water use fees. Based on reasonable and fair investigation, the Board of Directors has determined that an increase in the District’s existing water user fee is needed to fund the Phase I expansion effort, and proposed future ASR expansion costs. The Board has further determined that debt issuance secured by the increased user fee is the most cost-effective way to fund the ASR expansion costs. The District has budgeted $345,000 in anticipated expenditures, including labor and expansion costs, in the 2005-06 budget and anticipates additional ASR expansion costs in the amount of $2,660,000 in fiscal years 2006-07 and 2007-08 for a total estimated expenditure of $3,005,000. In addition, costs of the debt issuance including underwriter, bond counsel and trustee fees, etc. are estimated to be approximated $85,000 bring the total amount of debt issued to about $3,090,000. The annual debt service over fifteen years at an assumed interest rate of $4.5% would be about $287,700 per year.

On June 20, 2005 the Board of Directors approved the District’s 2005-06 budget which included a 1.25% increase in the user fee (from 7.125% to 8.325%) to the user fee collected on the Cal-Am bills. This will provide approximately $300,000 per year to fund completion of the Phase I ASR Project and pay labor costs related to the project. The increase is not intended to collect funds beyond those required to maintain plant, facilities, equipment, supplies and personnel necessary to provide water service, and the charge to any specific water user will not exceed the proportional cost to provide or reserve water to that water user.

Ordinance No. 123 (Exhibit 16-A) which implements the user fee increase is exempt from California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15273 (a) (1) – Rates, Tolls, Fares, Charges. The water use fee is to meet District operating expenses including employee wage rates and fringe benefits, consultant services, legal services and direct costs, including permit processing, enforcement and associated litigation expense. A draft Notice of Exemption is attached as Exhibit 16-B.

RECOMMENDATION: District staff recommends that the Board: 1) approve first reading of Ordinance No. 123, An Ordinance of the Board of Directors of the Monterey Peninsula Water Management District Increasing Water Use Fees to Fund Aquifer Storage Recovery and Related Water Supply Expenses; and 2) approve the Notice of Exemption to be filed after the second reading and final adoption or Ordinance No. 123.

BACKGROUND: The District has collected a user fee since 1983. Exhibit 16-C is a history of the user fee percentages collected since that time. The current user fee of 7.125% has been in effect since 1992. At that time Ordinance No. 61 decreased the user fee from 8.125% to 7.125% and allocated 6.015% to the Mitigation Fund and 1.110% to the Conservation Fund. In 1993 Ordinance No. 67 changed the allocation of the user fee so that the 1.110% portion of the fee could be allocated to any fund, rather than it being directly to the Conservation Fund. Since that time the 1.110% portion has continued to be allocated to the Conservation Fund, however, in Fiscal Year 2003-04 $500,000 was transferred from the Conservation Fund to the Capital Fund. On June 20, 2005 the Board of Directors approved the District’s 2005-06 budget which included a 1.25% increase in the user fee (to 8.325%) to fund completion of the Phase I ASR Project.

EXHIBITS

16-A Draft Ordinance No. 123

16-B Draft Notice of Exemption

16-C User Fee History

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