ITEM:

GENERAL MANAGER’S REPORT

 

13.

UPDATE ON DEVELOPMENT OF WATER SUPPLY PROJECTS

 

Meeting Date:
May 20, 2013

Budgeted: 

N/A

 

From:

David J. Stoldt

Program/

N/A

 

General Manager

Line Item No.:     N/A

 

Prepared By:

David J. Stoldt

Cost Estimate:

N/A

 

General Counsel Approval:  N/A

Committee Recommendation:  N/A

CEQA Compliance:  N/A

 

DISCUSSION:

 

Desalination Facility (A.12-04-019):  On April 25, 2013 the District co-hosted with the Monterey Peninsula Regional Water Authority (Authority) a public workshop at Sunset Center on the issues that might be considered for settlement under Cal-Am’s application A.12-04-019.  Then on April 30, 2013 the General Manager and General Counsel participated in a kick-off meeting for settlement discussions.  The parties expect to have several meetings and conference calls on identified topics for settlement during the next several weeks.  The administrative law judge has set June 14, 2013 as the deadline for settlement proposals not including GWR and June 28, 2013 for proposals related to GWR.  Closed session Item 3 further addresses this issue.

 

The District and the Authority continue to advance the proposed Ratepayer Relief Bonds with proposed legislation.  This is subject of Items 3, 19, and 21 on today’s agenda.

 

On April 3, 2013 the State Water Resources Control Board published for public comment its “DRAFT REVIEW OF CALIFORNIA AMERICAN WATER COMPANY’S MONTEREY PENINSULA WATER SUPPLY PROJECT” which primarily discusses water rights for the proposed desalination facility.  Public comment was due May 3, 2013.  The District did not provide comment.  The document can be found at the following link:

http://www.waterboards.ca.gov/waterrights/water_issues/programs/hearings/caw_mpws/docs/calam_report040313.pdf

 

On May 3, 2013 staff from the District, MRWPCA, Cal-Am, the Authority, and the Monterey Regional Waste Management District met to discuss potential terms and parameters for a Power Sales Agreement for meeting desalination facility electricity needs with power generated from renewable landfill gas at MRWMD.

 

Groundwater Replenishment (GWR):  District staff has been meeting with MRWPCA staff and consultants every other Friday, tracking project progress. CEQA work and source water feasibility studies continue to proceed.

A cost sharing agreement has been developed (see Agenda Item 4) which will allow the District to begin to expend funds (see Agenda Item 5.)

 

The California Public Utilities Commission (CPUC) has set a June 12, 2013 workshop to discuss the Groundwater Replenishment project’s role in the water supply solution, including criteria for inclusion of the project in the preferred alternative.  The District, MRPCA, the Authority, and the Monterey Peninsula Water Supply Project (MPWSP) Governance Committee have been reviewing and refining a list of criteria which might be considered in evaluation of GWR (see Agenda Item 20.)

 

The General Manager also had discussion with Eleanor Torres, Orange County Water District’s Director of Public Affairs, and Lois Humphries, consultant to MRWPCA, to discuss public outreach

 

Aquifer Storage and Recovery (ASR):  The District closed on its loan with Rabobank, thereby replenishing the almost $2.2 million of reserves that were expended to pay for Water Project 1.  The remaining loan proceeds will be used to complete the project.  The City of Seaside met last month to consider expanded back-flush pit alternatives prepared by the District and recommended a configuration at the existing Santa Margarita site.  Once final plans are complete, the easement’s metes and bounds will be revised and draft documents for the site will be forwarded to the City of Seaside, which should allow work to finish construction at the site to proceed.  Exhibit 13-A shows the sources and uses of the loan for ASR.

 

Water Project 2 (Seaside Middle School) is expected to be complete in December 2013, with the exception of final back-flush pit construction which will be located at the Santa Magarita site.

 

Alternative Desalination Project:  In the past month District staff has met with DeepWater Desal representatives 3 times to review the status of legal agreements, technical progress, and financial status.  Staff also met with a representative of the State Lands Commission who had previously been requested by DeepWater to serve as Lead Agency for the CEQA work.  The State Lands Commission has indicated that it is not interested in working with the District as a “Co-Lead Agency” so the District has to decide, if it wishes to continue to partner to advance the alternative project, whether it wants to be the sole lead agency or merely a responsible party.

 

The DeepWater representatives submitted a detailed project description to the CPUC environmental consultants on May 1 to be included in the MPWSP EIR as a potential alternative project.  The project description was also forwarded to State Lands Commission and to the District.

 

District staff is presently developing a draft cost sharing agreement for the project, including a list of deliverable milestones that would affect the District’s financial commitments.

 

Local Water Projects:  The Cities of Pacific Grove, Carmel-By-The-Sea, and Seaside have discussed local water supply initiatives of their own.  In addition to creating additional water supply, such local projects would likely provide some leverage in future discussions with the SWRCB in discussing changes to the CDO even if the desalination project is delayed. 

The Water Supply Planning Committee on May 2, 2013 discussed whether the District should allocate some portion of the annual Water Supply Charge to help seed such projects.  It was discussed whether such aid should be in the form of grants or loans, and whether or not the District should ask for an allocation of any water created.  The Ordinance 152 Oversight Panel’s consensus was that the District should make it a priority to allocate some moneys for local projects and that reimbursement from the permanent financing of such projects, if any, would be better than outright grants.  The panel did not support allocating a portion of the water created to the District as a reserve.  Staff will bring a proposal for local project funding to the Water Supply Planning Committee at its next meeting.

 

The City of Pacific Grove (City) has a shortage of potable water for domestic residential and commercial uses.  The City currently uses approximately 100 to 125 acre-feet per year (AFY) of potable water for irrigation of the Pacific Grove Municipal Golf Links and the adjacent El Carmelo Cemetery. Additional potable water is used for public irrigation in other areas throughout the city and in nearby areas, including the Presidio of Monterey.  Replacement of this irrigation demand with non-potable supplies will create a new offset of at least 100 to 125 AFY of potable water per project, for use by California American Water in meeting its obligations to find a replacement to its use of water from the Carmel River.

 

The proposed projects can be expanded beyond this capacity to meet other local non-potable demands or can be combined with each other to provide expanded benefits.

 

The following three Pacific Grove projects are proposed:

 

• Project 1: Pacific Grove Satellite Recycled Water Treatment Project. A new satellite recycled water treatment facility will be constructed at the former Point Pinos Wastewater Treatment Plant and deliver recycled water to irrigation sites throughout the City. Raw wastewater will be captured and diverted from the City’s sanitary sewer Basin 1 and conveyed to the new satellite recycled water treatment plant via 1,100 lineal feet of new 8-inch diameter sewer pipeline constructed within the golf links. Approximately 1,300 lineal feet of new 12-inch diameter recycled water pipeline will be constructed to deliver water to the golf links, cemetery, and other irrigation demands. Costs of water are between $2,624 and $3,042/AF, depending on the final annual volume of water produced.

 

• Project 2: Pacific Grove Recycled Water Project. Recycled water will be obtained from the Pebble Beach Community Services District (PBCSD). Raw wastewater from 500 homes in the Del Monte Park area of Pacific Grove will be captured and diverted to the existing Carmel Area Wastewater District (CAWD) reclamation facility for treatment. The wastewater diversion will flow through the existing wastewater collection system owned by the PBCSD. Recycled water from CAWD will be stored in the Forest Lake Reservoir and returned to the City through existing CAWD and PBCSD recycled water systems to a delivery point near the Spanish Bay Golf Course in Pebble Beach. Approximately 10,000 to 13,500 lineal feet of new 12-inch diameter recycled water pipeline will be required to be constructed to deliver water to the golf links, cemetery and other irrigation demands. Costs of water are $2,105/AF produced.

 

• Project 3: Pacific Grove Storm Water Recycling Project. Storm water from the City’s Congress Avenue or Greenwood Park Storm Drain Watersheds will be retained during the fall-winter wet period to be recycled to meet irrigation demands during the spring-summer season. Storm water will be diverted from the Congress Avenue or Greenwood Park storm drainage systems in a new storm water diversion structure, treated to remove trash and debris, and pumped to storage. A new 15-million gallon (MG) concrete reservoir or open storage reservoir will be constructed at the California American Water Company’s David Avenue property. The storm water will be treated to meet aesthetic requirements and to comply with Title 22 Regulations for irrigation with non-potable water.  Treatment will include a constructed wetland, microfiltration, ultraviolet radiation, and disinfection. Approximately 8,800 lineal feet of new 12-inch diameter recycled water pipeline will be required to deliver water to the golf links, cemetery irrigation and other irrigation demands. Costs of water are $8,977/AF, depending on the final annual volume of water produced.

 

The City of Carmel has discussed perennial springs under the Harrison Memorial Library to irrigate Devendorf Park in order to free up potable water.  There is also the Del Mar Avenue perennial spring.  The City has also recently entered into a recycled water purchase agreement with the District for approximately 0.5 acre-feet per year of Reclamation Project water and desires to investigate additional uses up to 5 acre feet per year.

 

The City of Seaside has determined that it has an approximately 110 acre-foot per year shortfall in its needs for the Seaside municipal water system as a result of the basin adjudication.  City staff have approached the District for help in identifying replacement supplies.

 

MPWSP Governance Committee:  The MPWSP Governance Committee met April 22, 2013.  The Committee received a presentation from William Merry, General Manager of MRWMD on landfill gas generated electricity for possible sale to the desalination facility, discussed “Go/No-Go” criteria for GWR, and the schedule for the Cal-Poly design team reviews.

 

Upcoming meetings include Friday, May 17, 2013, 1 pm to review Cal-Poly design team concepts and develop GWR criteria for 6/12 PUC hearing;  Thursday, May 23, 2013, 1 pm to review and comment on Cal-Am draft design/build RFP; and Tuesday, May 28, 2013, 2 pm  for final review of Cal-Am design/build RFP.

 

Ordinance 152 Oversight Panel:  The Ordinance 152 Oversight Panel met on April 23, 2013.  After adopting minutes of its January 2013 meeting, the following topics were discussed:

 

·         Discussion of Legal Liability:  Panel members expressed concerns over their liability, should they make statements or recommendations that prove to be controversial or at odds with the views of someone else.  General Counsel Laredo outlined that their position qualifies them as “government officials” for this purpose.  Statutory immunity and qualified immunity were briefly discussed. The panel members were assured that the District has a duty to provide a defense.

 

·         Review of Allocation of Water Supply Charge on Capital Projects, Labor, and Overhead; Discussion of 15% Overhead Limit:  The panel was provided a table designed to provide quarterly updates of revenues and expenditures on water supply activities.  This is to better demonstrate the uses of the Water Supply Charge, as well as variances in receipts or expenditures compared to budget.  The District showed how most expenditures for FY2012-13 have been delayed, primarily for Groundwater Replenishment.  Further, it was shown how there would be insufficient revenues in FY2013-14 to meet preliminary capital budget items.  The panel expressed concerns that overhead was not adequately shown and that it should include more than “Supplies & Services” and that a large component of labor should be included.  The District countered that the Water Supply Charge was always intended to include the direct costs of labor engaged in water supply activities, but conceded that indirect labor costs were probably not portrayed adequately and that staff would go back and clarify.  Such clarification was provided in a subsequent distribution included as Exhibit 13-B attached.

 

There was also a discussion surrounding whether debt service on the Rabobank loan is “overhead” or “capital.”  The consensus of the group was that interest should be treated as a capital cost to the extent the loan was all used for a capital project. 

 

·         2013-14 Preliminary Budgets:  With respect to Groundwater Replenishment (GWR), the panel was informed of the potentially changing cost-sharing arrangement with MRWPCA, with the District’s share increasing to 75% of out-of-pocket costs beginning FY2013-14.  The FY2013-14 GWR budget for the District becomes $2,850,000 versus $1,469,200 previously estimated.  However, there will unexpended water supply charge income carried forward from the present fiscal year.  The consensus of the panel was that GWR is a priority and a 75% share is acceptable.

 

Aquifer Storage and Recovery (ASR) was also discussed.  While the budget going forward is unchanged, it is expected that of the $1,578,827 remaining to be spent in FY2012-13 through FY 2014-15, an amount equal to approximately $1,496,101 would come from proceeds of the Rabobank loan, freeing up additional Water Supply Charge revenue for GWR and desalination.

 

The panel was apprised of the expenditure of Water Supply Charges on the Cal-Am desalination project for legal expenses related to the CPUC application, as well as consultant expenses related to the proposed public contribution of funds.

 

The panel inquired about the proposed expenditure on CEQA and permitting of an “alternative desalination project.”  Several panel members expressed concern over such an expenditure and suggested that it be made less a priority than the other projects.  Other panel members suggested it was a necessary safety net.

 

The consensus of the panel was that more detailed analysis be performed to show the availability of future Water Supply Charge revenue for all the various projects.  Such an analysis is attached as Exhibit 13-B and shows that there will be sufficient moneys available for all anticipated projects over the next 3-4 years, there are timing issues related to availability.  Hence, some interfund borrowing may be required if all projects move forward on the currently anticipated timeline.

 

·         Local Water Supply Projects:  The local water supply initiatives of the Cities of Pacific Grove, Carmel-By-The-Sea, and Seaside were discussed with the panel.  It was discussed how the local projects would likely provide some leverage in future discussions with the SWRCB in discussing changes to the CDO even if the desalination project is delayed.  The panel was asked whether the District should allocate some portion of the annual Water Supply Charge to help seed such projects.  It was also discussed whether such aid should be in the form of grants or loans, and whether or not the District should ask for an allocation of any water created.  The consensus of the panel was that the District should make it a priority to allocate some moneys for local projects and that reimbursement from the permanent financing of such projects, if any, would be better than outright grants.  The panel did not support allocating a portion of the water created to the District as a reserve.

 

·         Discussion of Rabobank Loan:  The uses of the loan proceeds were discussed.  Several panel members expressed reservations about use of the revenues to reimburse prior expenditures, but no consensus was put forward on the subject.  It is the District’s belief that such a use is a refinancing – that is, repaying loan proceeds with new loan proceeds – all payable from the Water Supply Charge because ASR is a capital project for water supply.

 

·         The meeting concluded with a visit to the Santa Margarita Aquifer Storage and Recovery Project Site at 1910 General Jim Moore Boulevard.

 

EXHIBITS

13-A    Sources and Uses of Loan for ASR

13-B    Water Supply Charge Availability Analysis

 

 

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