MPWMD BOARD MEETING--MARCH 17, 2014--ITEM 16--CONSIDER APPROVAL OF BUDGET ADJUSTMENT FOR JOINT FUNDING OF GROUNDWATER REPLENISHMENT PROJECT AND INCORPORATE INTO MPWMD FISCAL YEAR 2013-14 BUDGET

ITEM:		PUBLIC HEARING

16.	CONSIDER APPROVAL OF BUDGET ADJUSTMENT FOR JOINT FUNDING OF GROUNDWATER REPLENISHMENT PROJECT AND INCORPORATE INTO MPWMD FISCAL YEAR 2013-14 BUDGET

Meeting Date:			March 17, 2014	Budgeted:	No

From:			David J. Stoldt, General Manager	Program/	Groundwater Replenishment Project
				Line Item No.:	1-5-1

Prepared By:			Suresh Prasad	Cost Estimate:	$938,851 (75% of budget increase)
General Counsel Approval: N/A
Committee Recommendation: The Administrative Committee reviewed this item on March 10, 2014 and recommended approval. On March 4, 2014 the Water Supply Planning Committee recommended approval of this item.
CEQA Compliance: N/A

SUMMARY: At its June 17, 2013 meeting, MPWMD Board adopted Fiscal Year (FY) 2013-2014 budget which included $2,717,500 for GWR. This budgeted amount represented 75% of the total GWR expenditure for FY 2013-2014. The other 25% of the project cost is funded by Monterey Regional Water Pollution Control Agency (MRWPCA). Grants are also used to fund a portion of the project. Exhibit 16-D shows the many parallel activities and the 20 project team consultants currently at work on the project.

Based on recommendations made by the project’s Independent Advisory Panel, expansion in scope of project components, and the acceleration of certain project activities, new mid-year budget estimates were developed by MRWPCA, resulting in a need to increase the GWR FY 2013-2014 budget by an additional $1,557,714. This budget adjustment was approved by the MRWPCA Board on January 27^th. It was recommended for approval by the District’s Water Supply Planning Committee 3-0 at its meeting February 5^th. The Water Supply Planning Committee approval was conditioned on expected reductions in the “Internal Labor” and “Public Outreach” budgets, as well as the expectation that certain expenditures for Public Outreach would be deferred until source water contract negotiations make demonstrable progress. MRWPCA since made recommended reductions and increases, for a net reduction from the approved amount, to a new amount of $1,389,714 as shown in Exhibit 16-B.

The reduced budget adjustment shown in Exhibit 16-B was not approved by the District Board at its meeting on February 13, 2014. Instead, the budget was referred back to the Water Supply Planning Committee. At its February 18, 2014 meeting the Water Supply Planning Committee evaluated three tactics for reducing the budget adjustment (i) reductions in the cost of certain activities, (ii) deferrals of some activities to FY2015, and (iii) deferral of budget authorization for some activities until April 2014, allowing more time for demonstrated progress on source water agreements. The Committee instructed staff to confer with MRWPCA on the first two tactics, but determined that a second mid-year budget authorization in April would not be prudent. Thus, the recommendation for adoption of a mid-year budget adjustment is as shown in Exhibit 16-A and is comprised of a $1,149,808 adjustment at the March 17, 2014 Board meeting, a reduction of $20,881, and a deferral of $219,025.

The District’s share of this revised increase based on the Cost Sharing Agreement with MRWPCA will be $938,851 ($862,356 or 75% of the increased budget, plus an additional $76,495 for differential between MPWMD and MRWPCA originally adopted budgets). Approximately half of the funding for this increase will come from Aquifer Storage Recovery Phase I and Alternate Desalination Project. Most of the project costs for these two projects have been deferred to FY 2014-2015. However $438,061 of the increase will have to come from external sources or interfund borrowing.

This mid-year adjustment includes costs for outreach activities, water rights related services, and externalities analysis all based on MPWMD recommendations.

Attached as Exhibit 16-C to this staff report is Amendment 1 to the Cost Sharing Agreement between MPWMD and MRWPCA. This proposed Amendment addresses MPWMD’s concerns about Monterey Peninsula ratepayers paying for services and benefits to entities outside Cal Am’s Monterey District. If in the future GWR facilities funded under the Cost Sharing Agreement provide benefits or services to entities outside Cal Am’s Service area, MPWMD would be reimbursed by MRWPCA for such costs.

RECOMMENDATION: It is recommended that the Board authorize the increase in budget for Groundwater Replenishment Project of $938,851 for Fiscal Year 2013-2014 and approve Amendment 1 to the Cost Sharing Agreement. On March 4, 2014, the Water Supply Planning Committee recommended approval of this item.

EXHIBITS

16-A Mid-Year GWR Budget Adjustment - Summary

16-B MRWPCA February 7, 2014 Memorandum

16-C Amendment 1 to GWR Cost Sharing Agreement

16-D Project Phasing and Team

U:\staff\Boardpacket\2014\20140317\PublicHrngs\16\item16.docx

March 17, 2014

Budgeted:

No

General Counsel Approval: N/A

Committee Recommendation: The Administrative Committee reviewed this item on March 10, 2014 and recommended approval. On March 4, 2014 the Water Supply Planning Committee recommended approval of this item.

EXHIBITS