ITEM:

WORKSHOP/DISCUSSION

 

 1.

MONTEREY BAY REGIONAL WATER AUTHORITY GOVERNANCE PROPOSAL AND DRAFT FORMATION AGREEMENT

 

Meeting Date:
February 22, 2006

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 12 months the Monterey County Water Resources Agency (MCWRA), as directed by the Monterey County Board of Supervisors, has led an interagency working group discussion that focused on a regional approach to resolving 1) the long-standing  water supply deficiency on the Monterey Peninsula, and 2) water supply and water quality problems impacting North County and northern Salinas Valley, including the city of Salinas.  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, Moss Landing harbormaster, Pajaro/Sunny Mesa Community Services District general manager, and representatives of the Army’s Presidio facilities management command staff have each participated in some or all of the meetings of this managers working group.  The consensus work product of this group is a conceptual proposal that the county, and each of the cities, water and wastewater agencies from these three regions, and other interested public entities, consider creating a new, joint-cooperation agency whose current working name is the Monterey Bay Regional Water Authority (formerly known as the Regional Urban Water Supply Board).

 

This is the second of six Board workshops called for in the District’s current Strategic Plan.  This workshop is a follow-up to the October 17, 2005 Board meeting, during which the proposed purpose, function and structure of the Monterey Bay Regional Water Authority (Authority) was described, and Directors and members of the public offered their initial comments and raised questions.  The purpose of this evening’s workshop is for the MPWMD and MCWRA general managers to provide an overview of the agreement drafted by the managers working group to form the Authority, and to receive further Board and citizen comments and questions on the draft formation agreement and alternative governance structures.  The Board will be requested to provide general direction regarding its desired community engagement and decision-making processes for later consideration of a final draft Authority formation agreement and alternative governance structures.    

 

 

RECOMMENDATION:   It is recommended that the District Board: 

 

1)      Receive a brief oral overview and status update by the District and MCWRA general managers on the Monterey Bay Regional Water Authority concept proposal; 

 

2)      Discuss the purpose, function and proposed governance structure of the Monterey Bay Regional Water Authority joint-cooperation agency, as described in its attached draft formation agreement (Exhibit 1-A), and alternative governance structures; and

 

3)      Provide general guidance to staff regarding the Board’s desired approach to engaging the public and considering a final draft Monterey Bay Regional Water Authority formation agreement and alternative governance structures.      

 

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 environmental review of, and will soon be considering initial customer rates to fund, Cal-Am’s proposed Moss Landing regional desalination facility.  In response to this need, the managers generated a Monterey Bay Regional Water Authority (Authority) 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 Authority’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 fastest, most cost-effective, and environmentally sensitive manner.

 

The managers group proposes that the Authority 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 Authority 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 Authority 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 Authority 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 quickest and most practical approach to “standing-up” such an entity to perform these essential functions is an Authority that is 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 reflected in the draft formation agreement presumes that the Authority would operate with the powers 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 Authority, 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  draft formation agreement proposes that the Authority, 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 with directly elected representatives created by special State legislation. 

 

Either of the latter two governance alternatives, or some other approach, could be selected from the outset as the governance structure for the Authority.  Because it would not rely on appointment of elected officials from existing public entities to serve on the Authority policy board, the independent agency alternative would provide full separation from the county, cities and special districts.   Key disadvantages of both alternatives are the significant additional time and resources that would required from the cities and districts to activate the Authority, compared to the county-based governance model the managers grouped has proposed.   The Board should consider and discuss these points in its review of the draft Authority formation agreement.   

 

Other key provisions of the draft formation agreement (Exhibit 1-A) are as follows: 

  1. In the first phase of its existence as a planning entity, the Authority would have the responsibility to evaluate all desalination and other proposed projects and develop a comprehensive strategy for solving the water supply/quality challenges facing the two regions;
  2. The Authority policy board would be comprised of one (1) elected official from each entity that is signatory to the formation agreement, except that the Board of Supervisors and MPWMD each would have two (2) reps, due to the fact of the County's acceptance of initial financial/legal risk and MPWMD needing the greatest quantity of new water resources in the two regions;
  3. A Project Management Team (PMT) comprised of the chief appointed officer (or designee) from each signatory entity would responsible for all technical, financial and managerial decisions not specifically reserved to Authority policy board; and it would be supported by County Water Resources Agency management staff and their consultants;
  4. In its second, or implementation phase the Authority policy board’s scope of responsibility would be to serve as the public entity owner of the regional water supply project(s), should that solution be included in the adopted, comprehensive regional strategy;
  5. Also, during the implementation phase, Authority member entities would control their individual sub-regional projects (e.g. MPWMD Aquifer Storage and Recovery project, MCWD/MRWPCA Urban Recycle Project);   
  6. The Authority would be responsible for coordinating all regional and sub-regional water supply projects to ensure that collective efforts of all member entities fully and most efficiently meet urban water supply needs of entire region;               
  7. In the event during its initial planning phase the Authority determines that a large-scale desalination facility or other publicly-owned, regional water project(s) should be included in the comprehensive regional strategy plan, the PMT and MCWRA staff would develop for consideration by the Authority board the following implementation policy items:

a)      wholesale water supply agreements between the Authority and effected public water entity(s) based on each purchasing entity's proportionate share of estimated water demand as ratio of the project's total water capacity;

b)      basic direct and indirect regional project cost allocation formulas; and

c)      the most cost-effective method for competitive selection of company or entity for design/construct/operation of the desalination facility or other regional project;

  1. The Authority would include the foregoing implementation policy items in a proposed amendment to its formation agreement, which would be presented and have to be approved by all of the Authority’s member entities; and 
  2. The Authority could be dissolved at any time by decision of the majority of member entities.  

Finally, the Board should discuss and provide guidance on its preferred approach for obtaining community input on the governance alternatives and other key policy issues, prior to considering any final draft agreement to form this regional Authority.  It is likely to take several months for the county, and all effected cities and special districts/agencies to consider an agreement.  Some community engagement options to consider could be the following:  

 

  1. Conduct a well-noticed public hearing at a regular Board meeting; 
  2. Schedule a workshop of the Board to receive community input, with widely-circulated advance public notice;
  3. Send the proposal to various community interest groups for their requested individual review and comment; or
  4. Form a citizens ad hoc advisory committee representing a broad community cross section, to provide input to the Board.

 

Of course, these options are not intended to be a complete list, nor are they mutually exclusive.  The Board could combine one or more of these and other options.        

 

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 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 1-B).  At the January 27, 2005 District Board meeting Curtis Weeks, MCWRA General Manager, provided an oral overview of the regional urban water supply project concept and collaboration process.  He explained that this concept involved the county’s convening a working group of senior managers of effected cities, MPWMD and other water/wastewater agencies to develop regional urban water supply project governance and management concept alternatives.  He advised that the regional project 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 regional project 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 regional urban water supply project governance concept alternatives in an April 4, 2005 meeting attended by Board of Supervisors Members Calcagno and Potter, mayors of effected cities, MPWMD then-Board Chair Foy and other water and wastewater district Board chairs.  MPWMD staff made a summary presentation of these regional governance concept alternatives at the April 18, 2005 District Board meeting.  On April 19, 2005, the Monterey County Board of Supervisors reviewed the regional urban water supply governance concept alternatives (Exhibit 1-C). 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 regional water supply policy 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 regional water supply program management function.  Finally, the Board of Supervisors indicated that a Joint Powers Authority (JPA) Board for governing a publicly owned regional urban 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 regional water supply 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  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 this well-attended Town Hall meeting was to enable interested community members to learn about and provide their feedback on each of the projects contained in the District’s long-term water supply alternatives comparison matrix, as well as the regional urban water supply board governance concept that was presented by Curtis Weeks.  Mr. Weeks’ 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 draft agreement to form a regional urban water supply policy board.  The managers completed their input on key provisions to include in a draft agreement in a November 4, 2005 meeting of the working group.  At the suggestion of the managers working group, Mr. Weeks has made presentations on the regional urban water supply board concept proposal to the governing bodies of most of the effected cities, water districts, MRWPCA, FORA and the Moss Landing Harbor District.  He has also sent the draft formation agreement (Exhibit 1-A) to County Counsel for analysis and to put it in a suitable legal form for review and eventual consideration by the Board of Supervisors, and effected city councils, water districts’ boards of directors, and other interested public entities.  District General Counsel and interested city and water agency attorneys also will be provided an opportunity for legal review and comment.  Mr. Weeks will provide an oral update at the Workshop as to when this legal review process is estimated to be completed.      

 

Finally, at the October 17, 2005 Board meeting the District general manager and MCWRA general manager provided an overview and status update of this regional water supply board concept proposal, during which the Board also received a detailed report on its purpose, function and governing structure.  At that meeting the Board decided to hold a special evening meeting  this year to further discuss the Authority governance proposal and its draft formation agreement, receive initial public input, and a discuss a process for its consideration. 

 

IMPACT TO STAFF/RESOURCES:

 

None at this time.  The Authority draft formation agreement contemplates an initial $5,000 contribution from MPWMD and other signatory entities to support its long-term water supply “start-up” planning function.

 

EXHIBITS

 

1-A      Monterey Bay Regional Water Authority Draft Formation Agreement

 

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

 

1-C      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.  This number 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).