ITEM:		ACTION ITEMS
14.	UPDATE ON STATUS OF DISCUSSION RE: REGIONAL URBAN WATER SUPPLY GOVERNANCE PROPOSAL
Meeting Date:			October 17, 2005	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Same	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: Over the past nine months the Monterey County Water Resources Agency (MCWRA), as directed by the Monterey County Board of Supervisors, has led an interagency working group discussion focused on a regional approach to resolving 1) long-standing urban water supply needs of the Monterey Peninsula, and 2) water supply and quality problems impacting North County and the Salinas area. This working group is comprised of the MCWRA general manager, and city managers and general managers of water districts and wastewater agencies, including the Monterey Peninsula Water Management District (MPWMD or District) located in these two regions of the County. The FORA executive director and representatives of the Army’s Presidio staff also are participants. This discussion has resulted in a conceptual proposal that the county, and each of the cities, water and wastewater agencies from these two regions consider creating a new, joint-cooperation entity that would be known as the Regional Urban Water Supply Board (RUWS Board).

At the suggestion of Vice Chair Markey, and with Chair Foy’s concurrence, the purpose of this agenda item is for the District general manager and MCWRA general manager to provide an overview and status update of this RUWS Board conceptual proposal, and for the Board to initially discuss its purpose, function and governing structure. At the September 8, 2005 Strategic Plan Workshop, the District Board chose to hold a special evening meeting later this year to discuss the RUWS Board proposal and a process for its consideration. Staff’s proposed scope and timing of that special meeting are described in the Draft Strategic Plan item also on this agenda.

RECOMMENDATION: It is recommended that the District Board:

1) Receive an overview and status update by the District and MCWRA general managers on the RUWS Board concept proposal; and

2) Initially discuss the purpose, function and governance structure of the RUWS Board.

DISCUSSION: MCWRA and MPWMD have identified the need for significant new water resources to augment existing limited water supplies, and to address current or potential water quality problems, affecting the urbanized Coastal and Northern regions of Monterey County.[1] This additional water resource need is driven primarily by the State-required replacement of 10,730 acre-feet/year (AFY)[2] in unauthorized pumping of the Carmel River by California American Water (Cal-Am); over-drafting of existing groundwater resources by an estimated 2,500 AF in the Seaside Basin serving parts of the Coastal region, and 15,000 AF in groundwater resources that supply North County; and 2,400 AFY of supplemental water supply identified in the adopted reuse plan for redevelopment of former Fort Ord.

Various types and sizes of seawater desalination, recycled and conjunctive use water supply projects have emerged over the past few years that represent alternative—and in some cases competing, ways and means to solve the water quality and supply problems in these two regions. Two projects are proposed on a scale as large as 20,000 acre-feet/year (AFY) or more to meet the supply requirements of both of these regions; while others are sized as small as 300 AFY to meet individual community or sub-regional needs.[3] These projects are in various stages of design development, environmental analysis and permit processing, and all will require additional capital investment to complete and on-going funds to operate. The proponents of these projects include Cal-Am, Marina Coast Water District, MCWRA, MPWMD, Monterey Regional Water Pollution Control Agency, and the Pajaro/Sunny Mesa Community Services District (P/SMCSD).

During its discussions the managers working group recognized that no single land use jurisdiction or water/wastewater agency has the policy responsibility or mission to analyze and coordinate these alternative water supply projects. A consensus of the working group members is that a regional planning and inter-agency coordination mechanism is required to review these water supply projects, in order to ensure that unnecessary duplication of effort is avoided, and that physical solutions are not limited by jurisdictional boundaries. Finally, the managers working group concluded that creation of a regional water supply strategic planning entity should be considered in the near future, given the fact that the California Public Utilities Commission (CPUC) has begun its formal review of Cal-Am’s proposed Moss Landing regional desal facility. In response to this need, the managers generated a RUWS Board conceptual proposal that both 1) has the ability to represent the diverse interests of the Coastal and North County regions; and, 2) can coordinate a comprehensive review of all alternative water supply projects that have been (or will be) proposed to solve the long-term water supply/quality needs of the two regions. As envisioned by the managers working group the RUWS Board’s primary purpose would be to ensure that, taken together in the aggregate, the long-term water supply/quality needs of the Coastal and North County regions are addressed in the most cost-effective, practical and quickest manner

The managers group proposes that the RUWS Board would perform the following essential functions, which would start immediately upon its formation and over an initial transitional phase lasting a year or more: First, it would evaluate urban water supply need of the two regions on both a near- and long-term basis, to ensure that immediate augmentation requirement is met most cost-effectively. Second, it would coordinate and guide the technical analysis and policy-level review of all urban water project alternatives proposed by the above-noted entities (and any others that may emerge) to meet those needs. And, third, it would determine if a single, large-scale desalination facility, or a combination of smaller proposed desalting, recycling and/or conjunctive use projects, represents the best strategy to ensure that the combined urban water needs of both regions is met. Its function in a subsequent implementation phase, provided the RUWS Board concludes that the latter alternative is the best solution strategy, would be to monitor efforts by water supply project proponents to ensure that their implementation is integrated and continuously aligned with supply/quality needs of the two regions. Alternatively, if a single, large scale-desalination facility is made the key component of the strategy, during its implementation the RUWS Board would guide the necessary technical analysis and develop optimal project delivery and financing alternatives for developing a publicly owned facility. This strategy would require consultation with the CPUC to seek terminate of its oversight of the proposed Coastal Water Project. This action presumably then would enable the RUWS Board to evaluate and determine if Cal-Am, P/SMCSD or some other entity has the superior technical, financial, and managerial capacity to build the regional desalting plant.

Among several options they considered, the managers concluded that the fastest and most practical approach to “standing-up” such an entity to perform these essential functions is a RUWS Board aligned to the County organization, and comprised of elected officials from cities, water and wastewater agencies and the county itself. The mangers’ preferred governance concept presumes that the RUWS Board would operate with authority to perform the transitional phase functions delegated to it by the County Board of Supervisors, City Councils and Water/Wastewater Boards of Directors that create it. An important consideration in the managers’ consensus is the fact that County executive management staff offered to propose that MCWRA coordinate management support of the RUWS Board, inject $250,000 of County funds to engage a program management firm for strategic planning and technical analysis functions, and to limit requested financial support to only $5,000 from effected cities and water/wastewater entities to leverage the County amount. Finally, the managers propose that the RUWS Board during its strategic planning phase evaluate and propose its transition into a “pure” Joint Exercise of Powers agency fully separate from the County organization, such as MRWPCA or Transportation Agency of Monterey County; or that it be replaced with an independent agency created by special State legislation.

The District Board most recently received an update by MCWRA General Manager Curtis Weeks on this continuing effort as part of the August 25, 2005 Town Hall meeting held in Seaside. Based on the latest information provided by his office, a draft agreement to form a RUWS Board is anticipated to be available for review by the County Board of Supervisors, effected City Councils and Boards of Directors of water and wastewater districts and agencies in November 2005.

BACKGROUND: In 1995 the State Water Resources Control Board ordered California American Water (Cal-Am) to replace about 70 percent of its unauthorized pumping from the Carmel River, with an entirely new water resource needed to serve most of the Monterey Peninsula’s communities. In July 2004 Cal-Am filed an application with the State Public Utilities Commission (CPUC) for approval to construct (and to finance through later applications that would substantially increase Monterey Peninsula customers’ water bills) a large-scale desalination facility on the Duke Energy plant site in Moss Landing. Desalted water from the then-proposed Cal-Am project would replace unauthorized Carmel River diversions, accommodate future demand on the Monterey Peninsula, and potentially be available to address water quality/supply needs in North County. At the time of Cal-Am’s July 2004 application to the CPUC, the County of Monterey had approved a letter of intent with Cal-Am to negotiate an agreement under which the County would own the Moss Landing desal facility.

In adopting the 2004-05 Strategic Plan in October 2004, the MPWMD Board of Directors decided its future “vision” is of a District that 1) will strive to serve as a catalyst in collaboration with public and private entities for environmentally responsible solutions that result in a reliable and legal water supply; and 2) shall be a fiscally responsible, professionally and publicly respected leader in managing water resources.” The Water Supply section of the District’s 2004-05 Strategic Plan includes an objective that called for convening a Water Summit meeting to address the District’s desired role in Monterey County’s then-anticipated initiation of a publicly-owned, regional desalination facility, or alternative project, to solve the long-term water supply needs of the Monterey Peninsula and other urbanized regions of the county.

A potential publicly-owned, Regional Urban Water Supply project was launched on November 30, 2004 by the Monterey County Board of Supervisors, with an initial focus on developing governance and management concepts for such a RUWS project in collaboration with effected cities, MPWMD and other water districts and wastewater agencies and interested citizens in the coastal and northern communities of the county, including Salinas (see Exhibit 14-A). At the January 27, 2005 District Board meeting Curtis Weeks, MCWRA General Manager, provided an oral overview of the RUWS regional collaboration process, which involved the county’s convening a working group of senior managers of effected cities, MPWMD and other water/wastewater agencies to develop RUWS project governance and management concept alternatives. He advised that the RUWS Board would likely focus on a publicly owned, regional desalination facility at Moss Landing, as well as other proposed project alternatives to address long-term urban water supply needs in the above-described region of the county. At the Board’s March 21, 2005 meeting, Mr. Weeks presented a progress report on the RUWS effort, during which he advised that two good governance concept alternatives had evolved from several meetings of the senior managers’ working group. He stated that these governance concept alternatives were expected to be presented to the County Board of Supervisors, and effected water/wastewater agency boards and city councils in April. Mr. Weeks also advised that the managers working group had not yet addressed how a regional-scale, publicly owned desalting facility would be designed, built and operated; but that proposals from companies/entities in addition to the two current Moss Landing project proponents could be solicited and evaluated to determine the most cost-effective alternative.

At the March 21, 2005 District Board meeting, MRWPCA General Manager, Keith Israel, updated the Board on preliminary findings contained in his agency’s Groundwater Replenishment Project feasibility study that could enable several thousand acre-feet per year of purified, recycled water to be made available for recharging the Seaside Groundwater Basin, and later recovery for indirect potable reuse in compliance with applicable State health standards. The Board also received updates on the status of the large-scale desalination plants proposed by Cal-Am and P/SMCSD.

Mr. Weeks presented a summary of the primary RUWS governance concept alternatives in an April 4, 2005 meeting attended by Board of Supervisors Members Calcagno and Potter, mayors of effected cities, MPWMD Board Chair Foy and other water and wastewater district Board chairs. MPWMD staff made a summary presentation of these RUWS governance concept alternatives at the April 18, 2005 District Board meeting. On April 19, 2005, the Monterey County Board of Supervisors reviewed the RUWS governance concept alternatives (Exhibit 14-B). County Supervisors unanimously approved Mr. Weeks’ recommendation that the County continue to collaborate with the managers of the cities and water districts, wastewater agencies in developing a draft agreement to form a RUWS Board consisting of members of the Board of Supervisors, City Councils and elected Directors of MPWMD and other water districts and wastewater agencies. The Board of Supervisors also directed that County funding sources be identified to establish a RUWS program management function. Finally, the Board of Supervisors indicated that a Joint Powers Authority (JPA) Board for governing a publicly owned regional water supply project remains a viable alternative.

Acting Chair Markey requested that this subject be agendized for discussion and direction at the May 16, 2005 Board meeting. The item was discussed on that date, and the Board scheduled a June 16, 2005 Water Summit planning workshop to determine its desired approach for addressing RUWS governance issues. At the Board’s request an invitation to participate in this planning workshop was sent to all of the entities participating in the RUWS discussions.

On June 16, 2005 the District Board deferred this Water Summit to a future date, following the District’s convening of a Town Hall meeting. The purpose of the well-attended Town Hall meeting was to enable interested community members to learn about and provide their feedback on the RUWS Board governance concept, as well as the proposed desal, aquifer storage and recovery, and recycled water projects described in the District’s long-term water supply alternatives comparison matrix. Curtis Week’s presentation is available at the MPWMD website for the August 25, 2005 Town Hall meeting can be viewed on the Internet at:

www.mpwmd.dst.ca.us/asd/board/boardpacket/2005/20050825/0825ag_notice.htm Item 3-G.

Mr. Weeks re-convened the senior managers working group following the April 19, 2005 Board of Supervisors action, in order to develop and discuss key provisions to include in a RUWS Board draft formation agreement, and currently he is in the process of obtaining comments from those managers on a preliminary draft agreement. Once that process is completed County Counsel, District General Counsel and interested city and water agency attorneys will be asked to analyze the RUWS Board preliminary draft formation agreement for legality and to put it in a suitable form for review by the effected public agency governing boards.

EXHIBITS

14-A MCWRA General Manager Weeks’ RUWS Project Report and Recommendation to MCWRA Board of Supervisors, dated November 30, 2004

14-B MCWRA General Manager Weeks’ RUWS Project Report and Recommendation to MCWRA Board of Supervisors, dated April 19, 2005

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[1] A total population of approximately 300,000 people live in these two regions, which comprise the urbanized Coastal region of the Monterey Peninsula cities of Carmel-by-the-Sea, Del Rey Oaks, Marina, Monterey, Pacific Grove, Sand City and Seaside, plus Carmel Valley, Pebble Beach and other unincorporated locales; and the North County region consisting of the unincorporated communities of Castroville, Granite Ridge, Highlands North/South, Moss Landing, Pajaro, Prunedale, and Springfield Terrace, plus the city of Salinas.

[2] In its Order 95-10 the State Water Resources Control Board (SWRCB) calculated the replacement water need at 10,730 AFY, which was based on Cal-Am’s average Carmel River production from 1979 to 1988 of 14,106, less 3,376 in Cal-Am’s legal right to continued Carmel River water use determined in Order 95-10.

[3] Summary descriptions of most of these projects are contained in the District’s Comparative Matrix of Water Supply Projects, which is located on the District’s website (www.mpwmd.dst.ca.us, click on main page heading Board Meetings, then 9/8/05 Board Meeting).