MPWMD BOARD MEETING--FEB 24, 2011--ITEM 16--REVIEW INITIAL STUDY FOR FIRST READING OF ORDINANCE NO. 146 -- AN ORDINANCE OF THE MONTEREY PENINSULA WATER MANAGEMENT DISTRICT TOLLING THE EXPIRATION DATE FOR WATER CREDITS FOR THE DURATION OF ANY MORATORIUM PRECLUDING THEIR USE

ITEM:		ACTION ITEMS

16.	REVIEW INITIAL STUDY AND PROVIDE DIRECTION TO STAFF ON PREPARATION OF A MITIGATED NEGATIVE DECLARATION FOR ORDINANCE NO. 146 -- AN ORDINANCE TOLLING THE EXPIRATION DATE OF AFFECTED WATER USE CREDITS FOR THE DURATION OF ANY MORATORIUM PRECLUDING THEIR USE

Meeting Date:			February 24, 2011	Budgeted:	N/A

From:			Darby Fuerst	Program/		N/A
			General Manager	Line Item No.:

Prepared By:			Stephanie Pintar	Cost Estimate:	N/A

General Counsel Review: N/A
Committee Recommendation: The Water Demand Committee reviewed the revised ordinance on February 4, 2011 and recommended a Mitigated Negative Declaration be prepared.
CEQA Compliance: N/A

SUMMARY: Ordinance No. 146 suspends or “tolls” the expiration date of a Water Use Credit during a California Public Utility Commission (CPUC) ordered moratorium. At the November 15, 2010 meeting, the Board delayed a scheduled first reading of draft Ordinance No. 146 until after a thorough California Environmental Quality Act (CEQA) review had been conducted. After reviewing the District’s documented Water Use Credits (i.e., those Water Use Credits documented by written correspondence), and after considering current rules, expert opinion, and other substantial evidence as required by CEQA, staff determined that an Environmental Impact Report (EIR) would be required to implement Water Use Credit as proposed in the draft ordinance scheduled for Board consideration on November 15, 2010.

At the direction of the Chair and Vice-Chair, staff revised Ordinance No. 146 (Attachment 2 to Exhibit 16-A) to reduce its environmental impacts to a less than significant level. This was done by adding two provisions to the ordinance. The first amendment lengthens the time tolling would remain in place, and the second amendment terminates a Water Use Credit when a water efficient fixture or retrofit that is the basis for the Water Use Credit becomes mandated. An Initial Study was prepared for the revised ordinance and is attached as Exhibit 16-A.

With Board authorization, the Initial Study will be signed, filed, and circulated for public comment. Staff is prepared to file the necessary documents as early as February 25, 2011. Given a 20 day comment period, comments would be due on March 21, 2011. As this is the same date as the Board meeting, if the ordinance is brought back for first reading at the March meeting, it is likely that staff will not have had an opportunity to review or prepare a response to comments received. However, should substantial comments be received, the Board has the option of continuing the hearing to the April meeting.

DISCUSSION: The following points summarize information contained in the draft Initial Study:

Quantity of Water Use Credits

To prepare this Initial Study, MPWMD reviewed its records of documented Water Use Credits for a ten year period, from November 1, 2001 through October 2010. This process identified approximately 67 acre-feet of valid Water Use Credits documented as of October 31, 2010. Almost two-thirds of the Water Use Credit was documented for Non-Residential reductions in use. The remainder of the Water Use Credit is Residential.

In considering the environmental impacts of a tolling ordinance, staff also looked at reasonably foreseeable indirect physical changes to the environment. One foreseeable indirect physical change results from significant quantities of Water Use Credits that have not been formally recognized, but that could be documented as a Water Use Credit during the tolling proposed by Ordinance No. 146. These credits include voluntary retrofits to higher water efficiency fixtures than currently required by the District.

Voluntary installation of High Efficiency Toilets (HET) is one example of retrofitting to higher efficiency fixtures than required. During January 2011, District staff noted the number of voluntary installations of HET seen during Site inspections. The District mandates Ultra-Low Flush Toilets (ULFT). In January 2011, staff noted 68 voluntary HET installations in place of ULFT. Assuming that each HET has a potential Water Use Credit of 0.004 Acre-Feet Annually (AFA), staff identified 0.272 AFA of undocumented Water Use Credits during routine Water Permit and Change of Ownership inspections. An unknown number of retrofits occur that the District is not aware of.

The District has mandated future retrofits of existing Non-Residential uses and the State has mandated future HET sales and installations. During the time between now and when these mandates occur, retrofits to the new standards are potential Water Use Credits. Significant, although unquantified water savings are expected to occur when Non-Residential uses (with the exemption of Visitor Serving Commercial that installed ULFT by December 31, 2000) convert from older non-ULFT to HET and implement other retrofits required by the District by 2013. A State mandate for HET by 2014 also creates a significant potential for Water Use Credit.

Sunset of Water Use Credits for Mandated Fixtures and Retrofits

Ordinance No. 146 (revised) amends Rule 25.5-B to expire Water Use Credits when the fixture becomes mandated by MPWMD, State or Federal conservation programs. This amendment to Rule 25.5-B eliminates many of the currently undocumented Water Use Credits and will reduce the potential quantity of tolled Water Use Credits in the event of a CPUC-ordered moratorium. As proposed in Ordinance No. 146 (revised), Water Use Credits expire upon the date mandated despite tolling during a CPUC-ordered moratorium.

Sunset of Water Use Credit Tolling

The original ordinance (Ordinance No. 146 from the October 2010 Board meeting) contemplated tolling Water Use Credits until a CPUC-ordered moratorium was lifted. However, there would be a potentially significant impact associated with concluding tolling before new water supplies are available, particularly if the use of pent up Water Use Credits creates additional unlawful diversions from the Carmel River or extractions from the Seaside Groundwater Basin. To counteract a potential increase in demand associated with Water Use Credits that could in turn result in additional non-compliance with California American Water’s Water Rights for the Carmel River and the Seaside Basin Adjudication Decision, the project adds Rule 25.5-K. This rule continues the tolling of Water Use Credits until sufficient new water supplies are available to offset the potential burden of increased demand resulting from tolling.

Committee Review

Ordinance No. 146 (revised) was considered during the February 4, 2011, Water Demand Committee meeting. The committee voted 3-0 to bring the tolling ordinance back to the Board with the proposed revisions. The revised ordinance has not been reviewed by other committees.

RECOMMENDATION: Due to the potential controversy associated with this project, the Board should consider the information contained in the draft Initial Study and provide direction to staff. In considering the authorization of the Initial Study, the Board has four options:

Authorize staff to finalize and file the Initial Study and a Notice of Intent to Adopt a Mitigated Negative Declaration for the revised Ordinance No. 146 project. During this process, the Initial Study and attachments will be sent to a list of interested parties for their review and comments.

Direct staff to prepare a Notice of Preparation for an EIR on the version of Ordinance No. 146 considered at the November 2010 Board meeting. (Note that preparation of an EIR is not funded in the Fiscal Year 2010-2011 budget and budget expenditures are currently on hold pending resolution of the User Fee issue. Estimated cost of an EIR for this project is $25-50,000).

Table the tolling concept.

Consider other options.

BACKGROUND:

Water Use Credits

Water Use Credits are documented when there is a Permanent Abandonment of Capacity (MPWMD Rule 25.5-E). The process allows the reuse of the entire reduced increment of water on the same Site. Non-Residential Water Use Credit may be transferred to another Site that has an expanding use, or may be transferred into a Jurisdiction’s Allocation. The latter two options can only occur only when the Water Use Credit has been transferred pursuant to Rule 28 and are not components of this project.

A Water Use Credit is calculated in one of three ways: (1) by using the District’s factors as displayed in either Rule 24, Table 1: Residential Water Use Factors, or (2) by using Table 2: Non-Residential Water Use Factors, or (3) by using water savings factors that are recognized by the California Urban Water Conservation Council or that are clearly more accurate based on clear and convincing evidence. Water Use Factors are used to document Water Use Credit upon demolition of a building or use that has been recognized by the District as being a lawful water use; upon the permanent disconnection of a lawful water use from a Water Distribution System; and upon removal of Residential water fixtures. The Non-Residential Water Use Factors are based on regional averages; therefore actual water use may be higher or lower than the factored use. Water Use Credits may also be determined using equipment-specific water savings for Ultra-Low Consumption Technology.

A Water Use Credit allows the reuse of the reduced increment of water for up to ten years (up to 20 years at Redevelopment Project Sites) unless that credit is transferred to a Jurisdiction’s Allocation, at which point it does not expire. The Water Use Credit rule was adopted to accommodate reconstruction of demolished buildings if the Water Use Credit was not abandoned or expired or moved to another Site or Allocation. The District’s Water Use Credit rules were also designed to provide incentives for undertaking extraordinary retrofitting and/or installation of proven new technology and to provide a mechanism for offsetting potential intensification in use.

California American Water Request for Moratorium

On May 24, 2010, California American Water (CAW) filed an Application for an Order Authorizing and Imposing a Moratorium on Certain New or Expanded Water Service Connections in its Monterey District (A1005020) with the CPUC. In August 2010, staff met with representatives of the parties involved in CAW’s request for a moratorium to comply with the State Water Resources Control Board (SWRCB) Cease and Desist Order 2009-0060 (CDO). The CPUC is scheduled to take action on CAW’s request on February 24, 2011.

On October 18, 2010, District staff recommended the Board consider the potential effects of a CPUC-ordered moratorium on properties that have a Water Use Credit. A draft ordinance that would “toll” or suspend the expiration of a Water Use Credit during a CPUC-ordered moratorium was prepared in response to the Board’s direction. The District’s Expanded Water Conservation and Standby Rationing Plan suspends credit expirations in Stages 6 and 7 (Water Rationing), but the plan does not consider a moratorium by the CPUC that impacts Water Use Credits in earlier stages.

IMPACT ON STAFF/RESOURCES: Varies depending on action taken. If a Mitigated Negative Declaration is prepared for Ordinance No. 146 (revised), staff time will be required to process CEQA comments. Additional staff resources will be used to communicate with the community interests that will be impacted by the proposed amendments to District Rule 25.5.

EXHIBITS

16-A Initial Study on MPWMD Ordinance No. 146

U:\staff\word\boardpacket\2011\20110224\ActionItem\16\item16.doc

February 24, 2011

Budgeted:

N/A

General Counsel Review: N/A

Committee Recommendation: The Water Demand Committee reviewed the revised ordinance on February 4, 2011 and recommended a Mitigated Negative Declaration be prepared.