ITEM:		PUBLIC HEARINGS
19.	CONSIDER SECOND READING AND ADOPTION OF ORDINANCE NO. 132 --ADD A NEW RULE 23.6 TO ESTABLISH A WATER ENTITLEMENT FOR SAND CITY AND AMEND RULES 11, 21 AND 23.1 TO REFLECT THE PROCESS FOR ISSUING WATER USE PERMITS
Meeting Date:			January 24, 2008	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.: N/A
Prepared By:			Same	Cost Estimate:	N/A
General Counsel Approval: Yes
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, for purposes of considering this proposed ordinance.

SUMMARY: The purpose of this agenda item is for the District Board of Directors to consider second reading and adoption of Ordinance No. 132 (Exhibit 19-A). If adopted, this ordinance would grant the City of Sand City a legal entitlement to 206 acre-feet/year (AFY) of the water produced by its proposed, 300 AFY capacity desalination plant, officially called the Sand City Water Supply Project. The ordinance also would create a District water use permitting process to authorize new California American Water (CAW) connections for parcels within the City to be served by its desalinated entitlement water. Although a separate legislative action, potential adoption of this ordinance is contemplated and referenced in a Water Distribution System (WDS) permit for the City’s desalination plant that the Board approved at its October 15, 2007 meeting; as well as in an amendment approved at the same meeting to the CAW WDS permit to allow acceptance of this desalinated water resource into its distribution system that serves the Monterey Peninsula. This item was continued from the December 10, 2008 Board meeting.

At its November 19, 2007 meeting, the Board approved for first reading proposed Ordinance No. 132. As part of its first reading approval, the Board excluded a parcel (known as the “Monterey Bay Shores site, or APN 011-501-014), which is the only property located in the City of Sand City with its own adjudicated water production right that is not currently part of the CAW distribution system. City of Sand City representatives who attended the November 19 Board meeting indicated that the City had no objection to excluding this parcel from Ordinance No. 132, and the CAW representative present made no comment on this issue. As described in his attached memo, General Counsel Laredo has revised Ordinance No. 132 to define “Sand City Sites” (excluding the Monterey Bay Shores parcel) that are benefited properties eligible to receive a portion of the water entitlement that the ordinance would create (Exhibit 19-B). In response to a concern the Board raised at the November 19 meeting, Mr. Laredo’s memo also describes a new requirement in the ordinance that CAW continuously monitor its operation of the Sand City Desalination Facility and submit monthly production reports to the District. This new provision reinforces Condition #28 in the City’s WDS permit the Board approved on October 15, which states that the City’s 206 AFY water entitlement created by the proposed ordinance will “remain valid so long as the Permitted System, including the desalination plant, is properly maintained and continues to be able to reliably produce 300 AFY of potable water acceptable for use by the CAW WDS system.” City staff and legal counsel advise that they support the revised ordinance.

RECOMMENDATION: District staff recommends that the Board approve for second reading and adopt Ordinance No. 132 (Exhibit 19-A). The ordinance will become effective 30 days from the date of adoption.

BACKGROUND: On October 15, 2007 the Board considered and approved a WDS permit to allow the City of Sand City to convey water from its proposed 300 AFY brackish water desalination plant to the CAW water distribution system. The permit allows CAW to deliver this desalinated water to existing customers within its Monterey Peninsula service area and, subject to certain special conditions, to serve future CAW customer connections within the City limits. The Board also approved a separate-but-related amendment to the CAW WDS permit, which allows the company to use this desalinated water as a new source of supply. A separate 15-year lease agreement for CAW to operate and maintain the desalination plant has been entered into between CAW and the City.

As described in the City’s WDS permit application attached to the October 15, 2007 Board meeting staff report, within the next 10 to 20 years, the entire 300 AFY is projected to 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 as required by State Water Resources Control Board (SWRCB) Order WR 95-10, as well as to serve as a replenishment source to partially offset phased, pumping reductions in the Seaside Groundwater Basin under the March 2006 Superior Court adjudication decision. The first of these court-ordered pumping reductions occurs on January 1, 2009, and will reduce CAW’s Seaside Basin authorized production by approximately 540 AFY.

The MPWMD served as a Responsible Agency in acting on both the City and CAW WDS permits, which also covers District consideration of this City water entitlement ordinance, in compliance with the California Environmental Quality Act (CEQA), and relied on environmental documents certified by the City. The staff report on this subject submitted for the October 15, 2007 Board meeting is available from the District office upon request, and can be found on the District’s website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2007/20071015/20/item20.htm

At its October 15, 2007 meeting the Board received, but did not directly address or consider, a MPWMD concept ordinance prepared by District counsel, which was largely based on a draft concept ordinance submitted by the City’s legal counsel. The draft concept ordinance proposed to grant the City a legal entitlement to 206 AFY of the water produced by its desalination plant, and would create a District water use permitting process to authorize new CAW connections for parcels within the City to be served by its desalinated entitlement water. Special conditions in both the City and CAW WDS approved permits anticipate District adoption of such an ordinance. Specifically, the City’s permit authorizes a single connection to the CAW system; and approval of future CAW connections serving parcels located within the City limits is contingent upon creation by the ordinance of a 206 AFY “Desalination Water Entitlement,” provided the plant is completed, properly maintained and reliably able to produce 300 AFY of potable water under the CAW WDS permit. At the October 15 meeting, the Board referred the water entitlement concept ordinance to the Rules and Regulations Review Committee without policy guidance, and directed that the Committee study and submit its recommendation regarding the ordinance to the Board for consideration.

At its November 8, 2007 meeting, the District’s Rules and Regulations Review Committee (RRRC) reviewed a concept draft version of this ordinance. The RRRC members discussed several policy issues previously raised by District counsel related to the concept ordinance, which were subsequently analyzed by District staff. The RRRC discussion covered each of the 12 policy issues, which included a review of written and oral comments thereon submitted by Sand City and CAW representatives at the November 8 meeting, plus one new issue raised by the City at the meeting. At the conclusion of that November 8 meeting, the RRRC recommended that the Board consider approval of a revised version of the concept ordinance. District Counsel subsequently revised the concept ordinance, to reflect the RRRC’s recommended changes, in the form of Ordinance No. 132. The Board approved the ordinance for first reading, as proposed by the RRRC, with the changes described in the Summary section, above. Due to its length the staff report submitted to the Board for the November 19 meeting is not attached, but copies are available in the District office and can be found on the District’s website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2007/20071119/14/item14.htm

EXHIBITS

19-A Ordinance No. 132, revised for Second Reading and Adoption

19-B December 3, 2007 Memo from General Counsel Laredo summarizing revisions made at First Reading approval of Ordinance No. 132

Proposed Errata for Ordinance No. 132

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