ITEM:

PUBLIC HEARINGS   

 

20.

CONSIDER APPROVAL OF APPLICATIONS SUBMITTED BY CITY OF SAND CITY AND CALIFORNIA AMERICAN WATER FOR TWO WATER DISTRIBUTION SYSTEM PERMITS, AND A CONCEPT ORDINANCE, FOR SAND CITY WATER SUPPLY PROJECT 

 

Meeting Date:

October 15, 2007

Budgeted:

N/A

 

From:

David A. Berger,

Program/

N/A

 

General Manager

Line Item No.:     N/A

 

Prepared By:

Henrietta Stern

Cost Estimate:

N/A

 

General Counsel Approval:  Yes 

Committee Recommendation:  N/A

CEQA Compliance:  MPWMD is a Responsible Agency relying on FEIR certified by City of Sand City Council on January 18, 2005, and Addendum to FEIR adopted by City Council on September 18, 2007.

 

A.      CONSIDER APPROVAL OF MPWMD APPLICATION #20070803SAN TO CREATE WATER DISTRIBUTION SYSTEM FOR SAND CITY WATER SUPPLY PROJECT (All parcels in City)

B.      CONSIDER MPWMD APPLICATION #20070829CAW TO AMEND CALIFORNIA AMERICAN WATER DISTRIBUTION SYSTEM TO RECEIVE NEW SOURCE OF SUPPLY AND ADD ONE PARCEL TO SERVICE AREA

C.      CONSIDER MPWMD CONCEPT ORDINANCE ADDING RULE 23.6 TO ESTABLISH A WATER ENTITLEMENT FOR SAND CITY AND AMENDING RULES 11, 21 AND 23.1 TO REFLECT THE PROCESS FOR ISSUING WATER USE PERMITS

 

SUMMARY:  The Board will consider two related Water Distribution System (WDS) applications (Exhibits 20-A and 20-B) and one MPWMD Concept Ordinance (Exhibit 20-C) related to the delivery of water from the Sand City Water Supply Project (Project), a desalination plant the City of Sand City proposes to build and own that would produce 300 acre-feet per year (AFY) of potable water from shallow, brackish-water sources in the Seaside Basin.  As described in Exhibit 20-D, California American Water (CAW) would lease the facilities from the City of Sand City (City) for 15 years, operate the plant, and purchase all of the 300 AFY once the plant is constructed.  According to the City’s application, within the next 10 to 20 years, the entire 300 AFY will be used by parcels within the City in accordance with its General Plan.  In the meantime, CAW will have access to the desalinated water to help reduce pumping from the Carmel River Basin and comply with State Water Resources Control Board (SWRCB) Order WR 95-10, as well as to help reduce pumping from the Seaside Groundwater Basin as required by the 2006 Superior Court adjudication decision.  System-wide, no intensification of use of CAW water is planned – that is, no new construction and remodels outside of the City limits would occur with the desalinated water.  The MPWMD serves as a Responsible Agency in this matter in compliance with the California Environmental Quality Act (CEQA), and relies on environmental documents certified by the City.

 

The two WDS applications under consideration include: 

 

1.      Application #20070803SAN (Exhibit 20-A) from the City of Sand City to distribute 300 AFY of desalinated water from the plant site to the CAW system via a 900-foot long pipeline.  The exhibit is the cover letter and application form only.  A binder with associated attachments submitted by the City is available for review at the District office.

 

2.      Application #20070829CAW (Exhibit 20-B) to amend the current CAW system to add the desalination plant as a new source of supply and to annex one additional parcel into the CAW system.  The proposed annexed parcel (APN 011-501-014) is currently the only parcel that is not within the CAW service area but is within the City boundary.  

 

In addition, the Board will consider a Concept Ordinance shown as Exhibit 20-C (referred to as Concept Ordinance No. SS in public notices posted and distributed for this hearing), which would add a new Rule 23.6 and amend Rules 11, 21 and 23.1 of the MPWMD Rules & Regulations to provide a legal entitlement to the City for Project water to be distributed by CAW to all specified parcels within the City.  The model for the Concept Ordinance is MPWMD Ordinance No. 109, which provided water entitlements to specified properties within Del Monte Forest based on potable water saved by reason of the Pebble Beach Reclamation Project.  This Concept Ordinance is provided to the Board for initial policy review and direction at this time. District General Counsel has opined that the Board may act on the two applications with or without consideration of the Concept Ordinance, and the draft ordinance submitted by the Sand City Attorney differs from Ordinance No. 109 in several substantive ways.

 

The two WDS applications and the Concept Ordinance are discussed in more detail in the “Discussion” section below.  The applications involve extensive documentation and correspondence, and are related to previous actions by other regulatory entities.  All files associated with the applications are available for review at the District office.  The City also has copies of its environmental review documents and related materials.  Public notice of this hearing through a variety of means was provided in the manner required by the applicable District rules.

 

RECOMMENDATIONS:  District staff recommends that the Board take the following actions:

 

1.      Adopt the MPWMD Findings of Approval for Application #20070803SAN (Create Sand City Water Supply Project WDS) shown as Exhibit 20-E with specific reference to Finding #19, District compliance with CEQA as a Responsible Agency.  In adopting the Findings, the Board confirms that it has reviewed the Environmental Impact Report (EIR) on the Sand City Water Supply Project (Desalination Project) certified by the City Council (Notice of Determination dated January 21, 2005) and Addendum to the EIR adopted by the City (NOD dated September 19, 2007).  The Draft and Final EIR as well as the EIR Addendum were previously distributed to the Board under separate cover for their review, and are available at the District office for public review.  

2.      Approve Application #20070803SAN; authorize issuance of MPWMD Permit #M07-02-L4 with the 28 Conditions of Approval specified in Exhibit 20-F, and direct staff to file a Notice of Determination with the Monterey County Clerk.  The Conditions of Approval include required conditions as specified in MPWMD Rule 22-D as well as special conditions related to use of the Desalination Project Entitlement contemplated by the Concept Ordinance.  As the printing deadline approached, City staff raised questions about certain Conditions that District staff and Counsel are reviewing.  These will be summarized in the staff presentation on October 15, 2007, and alternative language may be provided at that time.

 

3.      Adopt the MPWMD Findings of Approval for Application #20070829CAW (Amend CAW WDS) shown as Exhibit 20-G.  The evidence for many of the CAW Findings is the same as for the City application, as the two are interlinked.   

 

4.      Approve Application #20070829CAW; authorize issuance of MPWMD Permit #M07-03-L4 with the Conditions of Approval specified in Exhibit 20-H; and direct staff to file a Notice of Determination with the Monterey County Clerk.  The Conditions of Approval include required conditions as specified in MPWMD Rule 22-D as well as special conditions related to use of the Desalination Project Entitlement contemplated by the Concept Ordinance.  Notably, Condition #3 allows expansion of the CAW service territory to serve parcel APN 011-501-014 within the City limits once the desalination project is fully operational.  According to City staff, this parcel is the only parcel within the City boundary that is not also within the CAW service area.  The parcel is identified as the “Monterey Bay Shores site” in Attachment 1 (service area) to Exhibit 20-H.   District staff will address possible alternative language for certain Conditions on the October 15, 2007 meeting.

 

5.      Provide direction to District staff and Counsel regarding its desire to further consider the Concept Ordinance (Exhibit 20-C) and specific guidance on the policy issues described in the “Discussion” section below.  Staff recommends that the Board refer the draft Concept Ordinance to the Rules and Regulations Review Committee with direction to include those policy issues the Board determines should be addressed in the next draft.   The earliest date for the first reading of the Concept Ordinance would be November 2007, with the second reading and adoption in December 2007.   The ordinance would become effective no earlier than mid-January 2008.  City water entitlements would not be valid until the desalination plant is fully operational, under the terms of the proposed WDS permit. 

 

Approval of the two WDS applications is not dependent on resolving the policy issues in the Concept Ordinance.  However, the City’s use of the production, connection and entitlement limits in Condition #3 of the staff-recommended City WDS permit and CAW WDS permit are contingent on MPWMD Board approval of an entitlement ordinance.

 

BACKGROUND:  The following paragraphs provide background relevant to the applications and Concept Ordinance.  Cited documents are available for review at the District office; some are attached as exhibits.

Sand City Desalination Project Description and Changes

As described in the Addendum to the Project FEIR (main text provided as Exhibit 20-I), the original Project concept was for the City to own and operate a 300 AFY desalination project and its associated water distribution system separate and independent from the CAW system, to provide water to existing users and future development needs in accordance with its adopted General Plan, Local Coastal Plan and Redevelopment Project Plan.  Facilities included a reverse osmosis desalination plant that would treat water from the shallow, brackish Aromas Sands Formation, a 7,000-foot pipeline loop system to deliver water to parcels within the City, two water storage tanks, and an emergency intertie to the Marina Coast Water District (MCWD).  It is noted that the Superior Court’s Final Decision on the Seaside Basin Adjudication in March 2006 granted the City the right to produce brackish water from the Aromas Sands Formation as the source for its desalination project, so long as there is no “Material Injury” to the aquifer. 

 

Importantly, a January 31, 2006 letter from the SWRCB (Exhibit 20-J) stated that, because the source of supply is from the Seaside Basin, the desalinated water would be exempt from the Order WR 95-10 one-for-one replacement requirement for CAW water.  This determination enabled the City and CAW to contemplate an operations/water delivery agreement where the sole customer for the system would be CAW, and CAW would be retained to operate the City-owned plant.  Thus, the Project described in the December 2004 certified FEIR was affected by that determination in the following ways:

 

A.      Desalination plant construction, operation and environmental impacts associated with its 300 AFY production of potable water are essentially the same.

B.       Desalination plant site was moved approximately 90 feet west of its original location near the intersection of Elder and Shasta Avenues in Sand City.

C.      One new 900-foot, 8-inch main will be constructed in existing street right-of-ways to connect to an existing 14-inch CAW main at Roberts and Olympia Avenues in Seaside.

D.      7,000 feet of new water mains for water conveyance and fire flows within the City will not be constructed.

E.       Two water storage tanks totaling 850,000 gallons will not be constructed.

F.       An emergency intertie to MCWD will not be constructed.

G.      Parcels in Sand City will not be served directly by the City with water solely from the desalination plant; instead, City parcels will be served by CAW from its main distribution system, which is comprised of several sources of supply, including the proposed desalination Project.

H.      The current MPWMD water allocations of CAW water will not be retired and replaced by 300 AFY from the City’s desalinated water system.  Instead, existing CAW water allocations will remain in place, including the 94 AFY existing CAW water use by the City.  Of the 300 AFY to be produced from the desalination project, 206 AFY would be slated for eventual use by new construction and redevelopment projects as a water entitlement via the Concept Ordinance.  The 206 AFY amount for new uses is derived from 300 AFY total desalination project production minus 94 AFY existing use.

I.         The water resources (i.e., Carmel River and Seaside Basins) that comprise the CAW system would experience near-term benefits under both scenarios due to the existence of a new source of supply available for use by the CAW system.  The net near-term benefit is reduced from 300 AFY under the City-supplied water system to 206 AFY under the revised proposal where CAW serves the City. 

J.         Over the next 10 to 20 years, the benefit of the desalination plant to the overall CAW system will diminish to zero as Sand City build-out and redevelopment projects come to fruition, and use the full 300 AFY potable water production capacity of the plant.  However, there would be no adverse effect to the CAW system.  If the City had seceded from CAW as originally contemplated, an estimated 94 AFY would no longer need to be served by CAW. 

K.      The desalination project is independent of long-term water supply efforts such as CAW’s proposed Coastal Water Project. 

 

The currently proposed Project is comprised of extraction wells, pumps, 300 AFY reverse osmosis desalination plant, water mixing equipment and a horizontal brine injection well.  Brackish water extracted by four beach wells in two locations west of Highway One will be conveyed to the desalination facility at the 0.8-acre “Campos” property east of Highway One (west of Catalina Street bounded by Elder and Shasta Avenues).  The fresh water produced at the desalination plant will be adjusted for pH and disinfected, and mixed with water from the California American Water (CAW) system to reduce the potential for corrosion in existing CAW pipelines.  Water will then be conveyed through an 8-inch pipeline roughly 900 feet along Catalina Avenue, where it will directly enter the CAW system at a 14-inch main at Roberts and Olympia Avenues in Seaside.  The “reject” water from the desalination plant will conveyed by a 6-inch pipeline back toward the beach, diluted as needed with brackish water to attain a concentration similar to full seawater, and will be injected via a horizontal injection well along Vista Del Mar Drive into the naturally-occurring seawater wedge to eventually flow subsurface towards Monterey Bay.  Pipelines associated with the Project will be placed in City right-of-ways in existing streets or other streets identified on subdivision maps, or via an encroachment permit issued by Cal-Trans.  A figure showing these components is included as part of Exhibit 20-A.

 

According to the City Engineer, completion of project construction is anticipated by mid-February 2009, assuming a Notice-to-Proceed with the design/build contractor in November 2007. The offsite wells and pipelines will run concurrent with this schedule, and work should commence on the wells in November 2007. The offsite infrastructure will likely be completed prior to the plant itself.

 

The City’s current project cost estimates include a capital cost of $9 to $10 million and approximately $300,000 annual operations cost.  A City-CAW agreement approved by the City Counsel on October 9, 2007 contemplates a 15-year lease with CAW paying a base rent of $765,000 annually (Exhibit 20-D).  

 

Environmental Review by Other Agencies

The Final EIR for the original Project concept (an independent, City-owned water system) was certified by the City on January 18, 2005 and a NOD was issued on January 21, 2005.  The California Coastal Commission (CCC) relied on the certified EIR to approve a Notice of Intent to Issue a Coastal Development Permit dated July 11, 2005 (on appeal), which expired two years later.  In June 2007, the CCC granted an extension and set May 11, 2008 as the deadline to achieve approvals from various entities, including MPWMD.  On September 18, 2007, the City adopted Resolution SC 07-84 to adopt the Addendum to the certified EIR and approve the revised Project (i.e., CAW as sole customer for the desalinated water), and issued a Notice of Determination dated September 19, 2007.   It is noted that the CAW application extensively refers to environmental review by the City.

 

MPWMD Process for Sand City and CAW Applications 

City and District staff held several pre-application meetings with City representatives in Spring 2007.  On May 29, 2007, MPWMD General Counsel prepared a memo on legal questions raised by the City’s potential application (Exhibit 20-K), which included the recommendation that a CAW water entitlement ordinance be drafted, similar to Ordinance No. 109 for the Pebble Beach Reclamation Project.  A formal application for the Project (Exhibit 20-A) was received on August 3, 2007 with a request for highest-priority processing.  As previously communicated to the Board in a letter dated August 10, 2007, this request was granted by the General Manager due to the potential environmental and community benefits from the project as well as potential regulatory and fiscal impacts to the City.  For example, the desalination project as a new source of supply for CAW would help reduce pumping from the Carmel River.  It also represents the only near-term water supply project that is exempt from the Order 95-10 “one-for-one” Carmel River pumping reduction requirement, which will be available to help meet CAW’s requirement under the Seaside Basin Adjudication Decision to reduce production from Seaside Basin native sources.  Specifically, the Decision requires CAW to reduce production from the Seaside Basin Coastal Subareas by 10% as of January 2009; this results in a 313 AF reduction in water year (WY) 2009 and a 417 AF reduction in WY 2010. 

 

The initial Sand City application materials that were submitted include:

 

A.      Application #20070803SAN for Water Distribution System Permit;

B.       Application Supplemental Questionnaire;

C.      City parcel ownership information;

D.      Map of Sand City/proposed service area;

E.       Final decision from Seaside Basin Adjudication;

F.       Water quality test results from brackish wells;

G.      Brackish water well test results and consultant analyses;

H.      Zoning map of City;

I.         Coastal Commission approvals for original project;

J.         Cal-Trans encroachment permit;

K.      Draft and Final EIR (12 copies) of original project;

L.       CEQA Resolutions by City for original project;

M.     SWRCB letter dated January 31, 2006 re: exemption from one-for-one replacement requirement in Order 95-10 (Exhibit 20-J)

N.      Adopted Mitigation Monitoring Program for original project;

O.      MPWMD General Counsel’s June 22, 2006 opinion re: Sand City water rights (Exhibit 20-L).

 

A MPWMD staff letter determining the City’s application was not complete was transmitted to the City with a copy to CAW on August 20, 2007, and included a listing of necessary additional information in order for the City application to be deemed complete.  District, CAW and City representatives met on August 30, 2007 to discuss these information needs.  Following approvals by the Sand City Council on September 18, 2007, City staff transmitted the following materials to MPWMD staff:

 

A.      Addendum to Final EIR certified by the City, which addresses the changed project description and CAW interconnection (Exhibit 20-I provides main text only);

B.       Resolution SC 07-84 adopting Addendum to Final EIR and approving revised project;

C.      Notice of Determination dated September 19, 2007 approving revised project;

D.      CAW letter dated September 18, 2007 summarizing planned Leasing and Wheeling Agreement, which was later replaced by a draft Lease Agreement (Exhibit 20-D); 

E.       Letter from City Engineer dated September 24, 2007 explaining system losses;

F.       Map figure showing parcel to be added to CAW service area;

G.      Updated Design/Build Project Manual dated September 5, 2007;

H.      Ex Parte Communication Form.

 

The Sand City Council held a special meeting on September 27, 2007 to consider an earlier version of the CAW Lease Agreement, as well as the design/build contract with the engineering firm CDM for the desalination plant.  These actions were continued to a meeting on October 9, 2007 where the City Council (a) started the process to organize a new bond program to fund the Project, (b) approved the Lease Agreement with CAW, and (c) approved the Design/Build Contract with CDM.

 

On August 29, 2007, CAW submitted WDS Application #20070829CAW to amend its water distribution system to add the City desalination project as a new source of supply.  E-mail correspondence with the City identified the need for the CAW service area to be amended by adding one parcel (APN 011-501-014) that is presently within the City boundary but not within the CAW service area.  Thus, this second change is also part of the MPWMD Board’s consideration of the CAW application.  On September 27, 2007, District staff transmitted a letter to CAW advising them that the application is complete and requesting confirmation that adding the one parcel to the service area is acceptable.  No response has been received to date. 

 

MPWMD CEQA Compliance

The District Board action must comply with CEQA as well as MPWMD regulations.   As a responsible agency, MPWMD will rely on the environmental documentation previously certified by the City of Sand City, the CEQA Lead Agency, as well as other application materials submitted by the City and CAW.  The District Board has been provided with and independently reviewed the June 2004 Draft and December 2004 Final EIR for the Project as well as the September 2007 Addendum for the revised Project, with an emphasis on subjects related to water resources and water supply.  It is noted that Section 3.4 of the Addendum specifies that it would be used for the two WDS applications and entitlement ordinance. 

 

DISCUSSION:  The staff recommendations are based on the following information: 

 

Approval of Sand City Application #20070803SAN

The Findings of Approval (Exhibit 20-E) are based on evidence provided in the application materials, including supporting documents on file at the District office.  Staff believes the application meets the criteria and minimum standards for Approval set by District Rules 22-B and C.  Pertinent information includes certified environmental documents, technical studies and reports, technical memoranda and maps, correspondence between MPWMD staff and the applicant, and previous approvals by other governmental entities. Based on the certified EIR and Addendum for the Sand City Water Supply Project, MPWMD approval of the application is not anticipated to result in a significant adverse effect to the Carmel River or Seaside Groundwater Basins.  Near-term beneficial effects are anticipated due to availability of a new water source that is exempt from the one-for-one replacement requirement of SWRCB Order 95-10.

 

The Conditions of Approval (Exhibit 20-F) proposed for Permit #M07-02-L4 for the Sand City WDS are consistent with MPWMD Rule 22-D governing approval of water distribution systems.  Conditions #1-5 define the Permitted System, including a system capacity (production) limit of 300 AFY, and the expansion capacity (connection) limit of one master connection to the CAW main at Roberts and Olympia Avenues, and brackish well sources.  The municipal unit allocation refers to quantities of water associated with a jurisdiction’s defined water allocation.  The amount of existing allocation from the Paralta Well and existing Pre-Paralta and Public Water Credits would not change from current amounts tabulated in MPWMD records. 

 

Conditions #6-23 reflect mandatory conditions in Rule 22-D, including water quality, metering and reporting, conservation, required Indemnity Agreement, fee payments, etc.  Other conditions address copies of monitoring reports, access for inspections, timely notice of pending or actual changes to the system, water rights and other standard elements.  Special Condition of Approval #28 is written to ensure that the 206 AFY water entitlement to the City contemplated by the Concept Ordinance is not available until the Project is constructed and fully operational, and remains able to produce 300 AFY.  Similar to the process employed for parcels within Quail Meadows, Water West and Del Monte Forest, a separate accounting of MPWMD Water Permits for new construction and redevelopment projects in Sand City will be deducted from a new 206 AFY “Desalination Project Entitlement” account (300 AFY Desalination Project production minus 94 AFY existing use = 206 AFY remaining).  Special Condition #29 does not allow service to parcel APN 011-501-014 until the Sand City Project is fully operational.

 

In discussions with the applicants, District staff and legal counsel sought clarification regarding the potential effect of system losses on the 300 AFY estimated production by the Project.  That is, how much water would be lost from production at the desalination plant prior to actual consumption by customers.  In this case, the focal point is delivery from the desalination plant to the CAW system at the point of inter-connection.  As noted by the City in Exhibit 20-M, losses would be extremely low due to lack of means to draw away “unaccounted for” water.  Any other losses are already part of the overall CAW system in its entirety and would not be applied directly to the desalination project.  The previously approved permits for the desalination project specify delivery of 300 AFY of potable supply, and do not restrict the plant from producing a small amount greater than 300 AFY to make up for any system losses, should they occur.  Permit conditions require metering at the point of connection to the CAW system.

 

Approval of CAW Application #20070829CAW

The Findings of Approval (Exhibit 20-G) are based on evidence provided in the application materials, including supporting documents on file at the District office.  Staff believes the application meets the criteria and minimum standards for Approval set by District Rules 22-B and C.  The CAW application relies extensively on the information supplied in the City’s application, as described above. 

 

The Conditions of Approval (Exhibit 20-H) proposed for Permit #M07-03-L4 are consistent with MPWMD Rule 22-D governing approval of water distribution systems as well as the proposed ordinance to facilitate water entitlements to parcels within Sand City.  Notably, the existing limitations placed on CAW by the SWRCB and the Seaside Basin Adjudication would not change.  Because the SWRCB recognizes the City’s Project as a new source of supply that is exempt from the one-for-one replacement requirement in Order 95-10 (see Exhibit 20-J), a new, separate “Desalination Project Entitlement” account of 206 AFY will be established, as described above.  If approved by the Board, one additional connection to parcel APN 011-501-014 (Monterey Bay Shores site” shown in Attachment 1 to Exhibit 20-H) will be added and the CAW service area map will be amended to include this parcel.  Special conditions similar to the City permit described above are also added.

 

The cost to CAW rate payers associated with the 15-year lease agreement presently contemplated is not addressed in the application as such information is not required by MPWMD Rule 22.  Effects to CAW ratepayers would be addressed via a future CAW rate case hearing before the California Public Utilities Commission (CPUC).   

 

Concept Ordinance  Policy Issues

As noted above, District Counsel’s memo of May 29, 2007 (Exhibit 20-K) suggested an entitlement ordinance associated with the WDS permits. District and City attorneys coordinated on development of the Concept Ordinance shown as Exhibit 20-C, known as the Sand City Water Supply Project Entitlement Ordinance.  It creates a new MPWMD Rule 23.6 and amends Rules 11, 21 and 23.1 to facilitate 206 AFY of entitlements of potable CAW water to Sand City parcels for new and intensified use based on production from the Desalination Project.  The Concept Ordinance is generally modeled after Ordinance No. 109 that provided water entitlements in Del Monte Forest due to production from the Pebble Beach Reclamation Project.  The content of the Concept Ordinance reflects substantive policy choices as presented by the City attorney, though some minor text refinements were made by District General Counsel.  However, General Counsel in an October 1, 2007 memo (Exhibit 20-N) identifies policy considerations not addressed in the Concept Ordinance submitted by the City on which he suggests the Board consider and provide guidance. 

 

The major sections of the ordinance include:

 

A.      Findings, Short Title and Purpose

B.       Create new Rule 23.6 for Sand City Water Entitlement

C.      Amend Rule 21-E re: “Benefited Properties”

D.      Amend Rule 23.1 re: Water Use Permit for a “Benefited Property”

E.       Amend Rule 11 (Definitions) to be consistent with entitlement, and add new definition for Sand City Desalination Facility

 

A simplified summary of the key aspects of the ordinance include:

A.      A Sand City Water Entitlement of 206 AFY is created as a vested property right to the City as long as CAW takes delivery of 300 AFY of potable water from the Desalination Facility.  The City may then transfer the vested right to individual properties within the City.  MPWMD will track how the 206 AFY “account” is “drawn down” over time.

B.       The entitlement begins via a Water Use Permit to the City when the Desalination Facility is fully operational; the entitlement continues through December 2082.

C.      The Entitlement is separate and distinct from any other water allocation (Rule 30).

D.      Properties within the City must abide by all conservation and water rationing rules.

E.       All standard fees associated with MPWMD permits must be paid, as well as all charges imposed by the California Public Utilities Commission (CPUC), CAW or other entities with authority.

F.       MPWMD water factors apply to the properties and MPWMD may track water use on these properties. 

 

The summary below simplifies the October 1, 2007 memo prepared by District Counsel (Exhibit 20-N), and poses a set of questions that arise when the Concept Ordinance is compared to the previously approved Ordinance No. 109, or when other unaddressed issues are considered.  The designation in brackets in each paragraph below reflects numbering in District Counsel’s memo:

 

1.      [Memo IA] Finding #4 of the Concept Ordinance recognizes Sand City’s right to brackish water.  However, the Seaside Basin Adjudication judgment states that production from the Aromas Sands Formation may occur “so long as such Production does not cause a Material Injury,” and enables the Watermaster to curtail extractions.

Policy Question:  Should language be added to the ordinance to address the situation where production could be limited in order to comply with the Adjudication decision?  This is also relevant to questions about long-term system failures (see below).

 

2.      [Memo IB] Ordinance 109 requires CAWD/PBCSD to maintain public ownership and to keep the plant operational.  Concept Ordinance Finding #6 refers to public ownership but does not require the City to maintain public ownership of the plant, or to keep it operational (see two additional questions related to this issue immediately below).

Policy question:  Should text be added to the ordinance to require the City of Sand City to maintain public ownership of the desalination plant?

 

3.      [Memo IB] The Ordinance 109 entitlement was granted pursuant to a guaranteed fiscal sponsorship to ensure a viable reclamation project.  The Concept Ordinance does not include a requirement that the City guarantees or ensures that the plant is maintained in good operating condition to be able to reliably produce 300 AFY.  It is noted that Condition #3 and Special Condition #28 of the proposed MPWMD WDS permits for the City and CAW (Exhibits 20-F and 20-H) state that the 206 AFY Entitlement is valid only so long as the plant is fully operational and properly maintained to be able to produce 300 AFY of potable supply acceptable to CAW.

Policy Question:  Should language be added to the ordinance to require a guaranteed fiscal sponsorship to ensure long-term viability of the plant?

 

4.      [Memo IB] Ordinance No. 109 specifies the definition of a service “interruption” and what happens in a short-term or long-term failure of the reclamation project.   It describes how long being off-line is acceptable and the process to address system failure.  The Concept Ordinance does not include any information about short-term or longer-term system failure, including the situation where less than 300 AFY is actually able to be produced over the long-term, for whatever reason. 

Policy Question:  Should text be added to the ordinance to address emergency short-term and long-term system failures, including replacement sources of supply?

 

5.      [Memo IC] Ordinance 109 allowed 380 AFY out of 800 AFY potential reclamation savings to be used for new water use by the fiscal sponsor, or less than half.  Concept Ordinance Finding #10 includes 206 AFY for new uses, which is about two-thirds of the 300 AFY production amount. 

Policy Question:  Is the ratio of entitlement to plant production acceptable?

 

6.      [Memo ID]  Concept Ordinance Finding #11 states that the Water Entitlement is separate and distinct from the City’s Allocation and “won’t affect any future Allocation to the City.”

Policy Suggestion:  The Board should confirm this separation. 

 

7.      [Memo IE] Ordinance 109 specified the cost of the Reclamation Project and who is responsible for paying for it.  The Concept Ordinance does not include this type of information.

Policy Question:  Should text be added to the ordinance to address project costs, cost of water and who is responsible for payment (see specific questions in memo)?

 

8.      [Memo IF] Concept Ordinance Finding #18 notes near-term benefits to the Carmel River and Seaside Basins; earlier communications by the City to the SWRCB infer that benefits would be solely for the Carmel River.  District technical staff notes that desalinated water would enter the CAW system and quickly be integrated with other sources, similar to one electrical source entering the power grid.  Thus, one cannot designate specifically where the desalinated water would travel.  However, similar to the District’s Phase 1 Aquifer Storage and Recovery (ASR) Project, indirect benefits occur to the Carmel River and Seaside Coastal Subareas due to the presence of the desalinated water source, because fewer acre-feet would need to be extracted from wells to meet the same demand.   Importantly, MPWMD, CAW and state and federal resource agencies meet quarterly to develop a strategy to address community and environmental needs for the upcoming 3-month period, which includes all CAW production sources.  

Policy Question:  Should text be added to the ordinance to clarify project benefits to the two primary components of the CAW water resource? 

 

9.      [Memo IG] Concept Ordinance Finding #18 refers to a “permanent reduction” of 94 AFY, the City’s CAW water consumption in water year 2006.  It is unclear how water currently used by the City would be permanently reduced. 

Policy Question:  Should text for Finding #18 be amended to more accurately describe what the 94 AFY amount represents?

10.  [Memo IIA] The purpose of the Concept Ordinance refers to resource benefits but does not spell out potential benefits to the Carmel River and Seaside Basins. 

Policy Question:  Should text for Section Two, Purpose, be amended to emphasize benefits to the Carmel River and Seaside Basins due to reduced extractions?

 

11.  [Memo IIC] The Pebble Beach agreements provided a specific water entitlement in exchange for fiscal sponsorship, and placed limits on the quantity of entitlement that could be sold within a specific time frame.  For the Reclamation Project, project costs that exceed CAW’s cost of potable water are paid by the project sponsor.  The Concept Ordinance allows the City to convey its entitlement “for valuable consideration” without limitation. 

Policy Question:  Should text for Section Two, Purpose, be amended to include limits on the timing of the sale of entitlements to Sand City Sites, and relate “valuable consideration” to the project cost? 

 

12.  [Memo IIIA] The Concept Ordinance establishes a 75-year life for the entitlement through December 21, 2082.  This appears to be inconsistent with a 25-year remaining life of the City’s Redevelopment Plan described in other documents.  Long-term fiscal obligations by Sand City over the life of the project are not included.  

Policy Question:  Should text in Section Three, Rule 23.6, be amended to clarify the project life and financial obligations during that period?

 

Noticing

Public notice has been provided no later than 10 days prior to this public hearing in several ways, including: (1) mailed notices to property owners within the City of Sand City and within 300 feet of the pipeline alignment; (2) posted notices at the desalination and pipeline sites; (3) posted notice at the District office; (4) notice of the public hearing to recipients of District agendas for the October 15, 2007 meeting; (5) notice of the October 15, 2007 public hearings in The Herald; and (6) posting of the October 15, 2007 agenda and staff note materials on the District website.  At the time of noticing, the draft ordinance was referred to as “Concept Ordinance No. SS.”

 

EXHIBITS

20-A    Application #20070803SAN to Create Sand City Water Supply Project WDS, including map of proposed system

20-B    Application #20070829CAW to Amend CAW WDS to add desalination project as a source of supply and amend service area boundary

20-C    MPWMD Concept Ordinance No. SS to facilitate water entitlements to Sand City parcels from desalination plant

20-D    Resolution of Approval of Lease Agreement between CAW and Sand City dated October 10, 2007 provided on October 9, 2007

20-E    Draft Findings of Approval for Application #20070803SAN (Sand City)

20-F     Draft Conditions of Approval for Permit #M07-02-L4, including:

Attachment 1: Service Area, and

Attachment 2, Indemnity Agreement

20-G    Draft Findings of Approval for Application #20070829CAW (California American Water)

20-H    Draft Conditions of Approval for Permit #M07-03-L4, including:

Attachment 1: Service Area, and

Attachment 2, Indemnity Agreement

20-I     Addendum to FEIR (Main text only; excludes Appendices) for Sand City Water Supply Project (Cal-Am Interconnection), September 2007

20-J     Letter from SWRCB to Sand City dated January 31, 2006 regarding exemption from one-for-one requirement in Order 95-10

20-K    Letter from District Counsel dated May 29, 2007 regarding Sand City application

20-L    Letter from District Counsel dated June 22, 2006 regarding Sand City water rights

20-M   Letter from City Engineer dated September 24, 2007 regarding system losses

20-N    Memorandum from District Counsel dated October 1, 2007 regarding policy issues associated with Concept Ordinance  

 

Provided to MPWMD Board under Separate Cover:  

·        Draft EIR for Sand City Water Supply Project (Desalination), dated June 2004 (2 vol).

·        Final EIR for Sand City Water Supply Project (Desalination), dated December 2004.

·        Addendum to FEIR for Sand City Water Supply Project (Cal-Am Interconnection) with Appendices, dated September 2007.

 

 

 

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