ITEM:	PUBLIC HEARING
12 D.	presentation from general manager on budget and cost allocation issues for user fee
Meeting Date:		April 16, 2012	Budgeted:
From:		David J. Stoldt, General Manager	Program/
			Line Item No.:
Prepared By:		David J. Stoldt	Cost Estimate:
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: At its February 23, 2012 meeting, the Board directed staff to implement a Proposition 218 process for the development of water fees and charges, including the hiring of a rate consultant and the development of the necessary ordinances, resolutions, and notices for implementation thereof.

This item provides additional background about the uses of the proposed new annual water use fee.

BACKGROUND: The Monterey Peninsula community has expressed a strong desire for construction and operation of new water supply, implementable by December 31, 2016 in order to meet the restrictions on unlawful diversions from the Carmel River as mandated the State Water Resources Control Board Order 95-10 and the Cease and Desist Order.

The proposed regional water supply solution includes a portfolio of three projects: A single scalable desalination facility, a Groundwater Replenishment project (GWR), and completion of Aquifer Storage and Recovery (ASR.) Of these, GWR and ASR have a public ownership component and the disposition of desalination is presently unknown, but it is expected that Cal-Am will submit an application to the California Public Utilities Commission (CPUC) April 23, 2012 that will indicate a privately owned and operated desal plant.

These projects will cost money.

The costs of water supply capital projects will add costs to the District’s budget, over and above existing resources. The largest source of revenue in the District’s budget has traditionally been the District’s “User Fee”, which through a recent CPUC decision, the District’s ability to collect has been impaired, further exacerbating the revenue shortage.

On October 11, 2011, the Water Supply Planning Committee recommended the Board direct the General Manager and Administrative Services Manager to examine alternate approaches to secure the collection of the User Fee going forward and report back at a future meeting. At its October 17, 2011 Board Meeting, the Board made such direction under Item 5 “CONSIDER AUTHORIZATION FOR STAFF TO EXAMINE ALTERNATIVE APPROACHES TO ESTABLISH / INCREASE USER FEE TO FUND WATER SUPPLY PROJECT PLANNING AND IMPLEMENTATION.” This item was discussed in an update at the January 23, 2012 Board meeting and a schedule for implementation was provided. At its February 23, 2012 meeting, the Board directed staff to implement a Proposition 218 process for the development of water fees and charges, including the hiring of a rate consultant and the development of the necessary ordinances, resolutions, and notices for implementation thereof.

The District has embarked on the path of seeking to raise $3.7 million directly from properties within the District that are Cal-Am customers.

The District’s draft Capital Improvement Plan (CIP) (Exhibit 12-D) for the next two fiscal years identifies $2,958,644 of project expenditures for FY 2012-13. Of these, $2,848,771 are related to water supply projects. The two highest priority projects are completion of Water Project 1 (Aquifer Storage and Recovery Phase 1) and the District’s 50% pay-as-you-go portion of costs of Groundwater Replenishment. The FY 2012-13 estimate for costs related to these two projects is $1,921,715. The overall direct capital costs for FY2013-14 are $3,331,570 under the CIP. An additional $1.7 million of staff, services, and supplies is allocable to water supply, water resource planning, and water demand functions of the District. This would allow the District to allocate the full $3.7 million to costs directly related to water supply.

The District proposes to reduce expenditures for its other activities where possible, including mitigation and conservation, but without disrupting legally mandated requirements or leaving grant-funded or reimbursed programs unserved.

Additionally, the District expects to have Cal-Am directly pay a greater share of the Mitigation Program expenses on a recurring basis, approximately $1.6 million each year until the mitigation activities are no longer required by law or can be transitioned.

Hence, the fees are being raised for water supply activities. Section 3 of the Ordinance specifically limits the purposes to the GWR and ASR projects and purposes that confer benefit and/or service to existing main Cal-Am water users to ensure sufficient water is available for present beneficial use or uses, including water supply management, water demand management, water augmentation program expenses such as planning for, acquiring and/or reserving augmented water supply capacity, including engineering, hydrologic, legal, geologic, financial, and property acquisition.

EXHIBIT

12-D Draft Capital Improvement Plan

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