ITEM: PUBLIC HEARINGS

15.	CONSIDER SECOND READING AND ADOPTION OF ORDINANCE NO. 136– AN ORDINANCE TO ESTABLISH A PROCESS TO AUTHORIZE ADJUSTMENTS TO WATER DISTRIBUTION SYSTEM PRODUCTION AND CONNECTION LIMITS
Meeting Date:		August 18, 2008	Budgeted:	N/A
From:		Darby Fuerst,	Program/	N/A
		General Manager	Line Item No.:
Prepared By:		David Laredo,	Cost Estimate:
		General Counsel
General Counsel Approval: Yes Committee Recommendation: The Water Demand Committee reviewed the first reading draft on July 14, 2008, and unanimously recommended approval.
CEQA Compliance: Categorical exemption, section 15307.

SUMMARY: This matter presents an ordinance for second reading that, if enacted, would establish a process to authorize adjustments to Water Distribution System Production and Connection limits based on the physical ability to supply water.

RECOMMENDATION: Staff presents the draft ordinance (Exhibit 15-A) to the Board for adoption on second reading. The Board should provide guidance on two sets of options as shown on the draft ordinance.

BACKGROUND: The District actively regulates water distribution systems to protect District water resources and to assure that sufficient water will be available for present and future beneficial use by all District inhabitants and lands. The first regulation of the creation and expansion of water distribution systems was enacted on February 11, 1980, by Ordinance No. 1. Later amendments were made to this process by Ordinance No. 105, adopted on December 16, 2002, and Ordinance No. 118 adopted on December 13, 2004.

Ordinance No. 118 revised the District Rules and Regulations to add the definition of “Pro Rata Expansion Capacity” and created a process under Rule 40 by which the owner or operator of a Water Distribution System exceeding its Pro Rata Expansion Capacity is required to implement a plan to bring the Water Distribution System back into balance with its projected Water Distribution System Capacity i.e., average annual use per connection. Rule 40 was also amended to enable adjustment of Water Distribution System limits based on credible evidence where a Water Distribution System could not be brought into balance with its Water Distribution System Capacity. Ordinance No. 118 was enacted to address situations not previously anticipated or explicitly addressed in the Rules and Regulations.

This Ordinance would address a similar circumstance to that remedied by Ordinance No. 118, where a Water Distribution System has not yet exceeded its System Capacity or its Expansion Capacity, as defined by District Rule 11, but for which credible evidence establishes that the System Capacity or Expansion Capacity, or both, require modification based on a system’s physical inability to supply water. For example, in Water Year 2007, California American Water’s (CAW) Ryan Ranch system was only able to supply 12.4 acre-feet (AF) of the 71.5 AF of water needed for customers within the Ryan Ranch system. The difference, 59.1 AF, was provided by sources that supply CAW’s main system, via an emergency intertie. At the recommendation of the Water Demand Committee, the proposed ordinance shall only affect those Water Distribution Systems having ten (10) or more connections.

The Water Demand Committee (Directors Brower, Doyle, and Markey) on July 14, 2008 unanimously recommended the Board adopt the first reading draft. The District’s Technical Advisory Committee (TAC) reviewed the second reading draft on August 5, 2008, and unanimously recommended that the Board defer its second reading until the ordinance can be reviewed by the District’s Policy Advisory Committee (PAC).

The Board of Directors unanimously passed the ordinance on first reading at its meeting of July 21, 2008. At that time, the Board directed the following modifications to the draft:

• The standard of evidence was changed from a “preponderance of the evidence” to “substantial evidence.” Rule 40 B 2 (3)
• The Board determination was changed from one based entirely upon “credible expert evidence” to “substantial evidence, including credible expert evidence.” Rule 40 B 2 (3)

Staff asks the Board to consider two (2) options that are referenced in the second reading draft of this ordinance, each relating to the timing of a moratorium regarding Water Distribution Systems affected by the changes proposed in this ordinance. Staff also proposed a technical word change (Rule 40 B 3, at page 3 of the ordinance) as suggested by TAC, changing the phrase “prior System Capacity” to the phrase “permitted System Capacity”. This change clarifies the meaning of the text, and staff has inserted this into the Second Reading draft as a non-substantive modification.

Moratorium for Systems Exceeding their System Limits. Rule 40 B 2 (4) would impose a permit moratorium upon Water Distribution Systems that have been determined by the Board to have exceeded their System Limits. Two options are presented:

Option A (shown in the draft ordinance) was the version approved by Board on first Reading. This would impose a moratorium on both the receipt of new applications, and the processing of completed applications that were previously received.

Option B (also shown in the draft), offered by staff to make this provision consistent with past District practice, would impose a moratorium on the receipt of new applications, but would not prohibit the processing of any application previously received and deemed to be complete by the General Manager. The rationale for staff’s offered change is that few completed applications – involving relatively minor increments of water - are in progress at any one time, and applicants are required to expend substantial sums developing final plans in order to submit a completed application. Please note that, although TAC recommended delay of the second reading, it did endorse selection of Option B on a 6 – 1 vote, with Pacific Grove dissenting.

Moratorium for Systems Exceeding their Pro-Rata Limits. Rule 40 D 4 would impose a permit moratorium upon Water Distribution Systems that have been determined by the Board to have exceeded their Pro Rata System Limits, but where the Water Distribution System has not yet exceeded its actual System Limit. Again, two options are presented:

Option A (shown in the draft ordinance) was the version approved by Board on first Reading. This option would change the existing text to impose a moratorium on the receipt of new applications, and the proceeding of completed applications that were previously received.

Option B is offered by staff to ensure this provision is consistent with past District practice. This option would retain the existing language and impose a moratorium on only the receipt of new applications. This option would not prohibit processing or issuance of a permit for any application deemed complete by the General Manager. The rationale for staff’s offered change includes the reasons stated above, i.e., that few completed applications, involving relatively minor increments of water, are in progress at any one time, and applicants are required to expend substantial sums developing final plans in order to submit a completed application. In addition, the Water Distribution System has not yet exceeded its actual System Limit, and sufficient water is available to meet the needs of the application. Please note that, although TAC recommended delay of the second reading, it did endorse selection of Option B on a 6 – 1 vote, with Pacific Grove dissenting.

EXHIBIT

15-A Second Reading Draft Ordinance No. 136

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