ITEM:		CONSENT CALENAR
4.	CONSIDER AUTHORIZATION OF STAFF TO PROCEED WITH FILING AN APPLICATION FOR A DEPARTMENT OF WATER RESOURCES CONSTRUCTION LOAN TO FUND THE AQUIFER STORAGE AND RECOVERY PROJECT EXPANSION
Meeting Date:			July 20, 2009	Budgeted:	No, payback of loan would not occur in FY 2009-2010 Budget
From:			Darby Fuerst,	Program	N/A
			General Manager	Line Item No.:
Prepared By:			Jonathan Lear	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: The Administrative Committee reviewed this item on July 14, 2009 and recommended approval.
CEQA Compliance: N/A

SUMMARY: In May 2009, District staff prepared and submitted a $1.9 million application to the Challenge Grant Program offered by the Bureau of Reclamation to fund the Expanded Phase 1 ASR project. If the District is successful in obtaining grant funds, the grant will cover 50% of the $3.8 million project construction costs. District staff has been investigating funding mechanisms to cover the portion of the project to be funded by the District and have identified a low-interest construction loan offered by the Department of Water Resources (DWR). By submitting an application, the District can pre-qualify for up to a $5 million loan, which would also provide a funding option for the entire Expanded Phase 1 ASR project if the District does not receive grant funding. The pre-approval application must be accompanied by a Board resolution. The resolution is attached to this item as Exhibit 4-A.

RECOMMENDATION: Approve the resolution to submit a pre-approval application to DWR, authorize staff to prepare the initial application to pre-qualify for a construction loan through the DWR and work with DWR staff should the Board select this option as the preferred funding mechanism for the Expanded Phase I ASR Project.

IMPACTS TO STAFF/RESOURCES: Financial impacts related to staff time are minimal as most of the information required for the initial application was compiled for the May 2009 grant application to the Bureau of Reclamation.

BACKGROUND:

A. History of ASR to date: Since the ASR testing program began in 1998, over 2,100 acre-feet of Carmel River System water have been diverted for recharge in the Seaside Basin. The Phase 1 component of the ASR project has been operational for the past two years and is designed for an annual average of 920 acre-feet. Expansion of Phase 1 would expand the annual yield of the project by an estimated 1,000 acre-feet per year and provide the District with the ability to inject an annual average of 1,920 acre-feet of Carmel River System water.

B. Expanded Phase 1 ASR Progress Report: The District is currently working to establish an increase in water rights to support the expanded facility. The State Water Resources Control Board (SWRCB) is currently processing the District’s water rights application. Phase 1 ASR is permitted through the California Environmental Quality Act, National Environmental Protection Act, and District staff have obtained permits and approvals required for annual operation of the project from the State Department of Fish and Game, SWRCB, Regional Water Quality Control Board, Monterey County Health Department, City of Seaside, California Department of Public Health, Environmental Protection Agency, and the US Army. The Expansion of Phase 1 ASR can piggyback on the previous environmental compliance and engineering work. District staff is working with California American Water to coordinate the construction of the Expanded Phase 1 ASR facilities with the installation of the delivery pipeline that will be able to convey the full diversion volumes.

C. Loan Details: This program was established in 1988 by a Water Conservation Bond which authorized the DWR to administer a $20 million program to provide construction and feasibility study loans to local public agencies for the development of local water supplies. A maximum of $5 million is available per construction project. Funding of the loan is provided through Proposition 84 funds. Terms of the loan are 20-year payback period at 4.6% interest rate. To date, $15 Million of the program have been lent, leaving $5 million still available. Currently the State funds are frozen, but an educated guess by DWR staff is the money will become available when funding to water bonds (Propositions 1E, 40, 50, and 84) are unfrozen by the State legislature.

EXHIBITS

4-A Draft Resolution No. 2009-10

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