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ITEM: |
ACTION
ITEMS |
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19. |
PROVIDE DIRECTION ON PURE
WATER MONTEREY COST SHARING AGREEMENT AND EXTERNALITIES STUDY |
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Meeting
Date: |
May 19, 2014 |
Budgeted: |
Partially |
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From: |
David J.
Stoldt, |
Program/ |
Groundwater Replenishment |
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General
Manager |
Line Item No.: |
Program 1-5-1 |
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Prepared
By: |
David J.
Stoldt |
Cost
Estimate: |
$Various (see Note) |
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General Counsel Review: |
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Committee Recommendations: |
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CEQA Compliance: |
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SUMMARY: There are two issues for consideration, Cost Sharing and the Externalities Study:
Cost Sharing: In May 2013, the District entered into a cost
sharing agreement with Monterey Regional Water Pollution Control Agency
(MRWPCA) for the Pure Water Monterey groundwater replenishment (GWR) project.
The District’s FY2013-14 budget was $2,717,500 and the draft preliminary
“bare bones” District budget for FY 2014-15 is $1,613,000. However, after over a year of negotiations
MRWPCA has not yet secured rights to source water. Staff and Board members from both the
District and MRWPCA believe that fundamental terms of agreement for source
water can be reached by June 2014 or no agreement will ever be reached.
Externalities Study: In September
2013, the District authorized the General Manager to circulate a Request for
Qualifications and hire a consultant to analyze externalites of the Pure Water
Monterey groundwater replenishment project in an amount not to exceed
$80,000. The statements of
qualifications received on May 1, 2014 indicate a fee structure for all three
respondents on the order of $200,000. It
is recommended to proceed with the study, but at a higher authorized cost.
RECOMMENDATION: The General Manager recommends the Board approve continued expenditures of funds already authorized through the mid-year budget adjustment, and to not authorize any work to proceed on FY 2014-15 budgeted services until there is demonstrated agreement on terms and conditions for source water. However, the Board should consider the oral report of the General Manager with respect to source water negotiations status as of the date of the meeting.
The General Manager recommends that the Board of Directors authorize contracting for consulting services related to externalities for GWR and the expenditure of up to $220,000. It is expected that this will become a budgeted item under the GWR project budget, subject to 75% reimbursement by the District. Such authorization would also be subject to demonstrated agreement on terms and conditions for source water.
DISCUSSION: The Cost Sharing Agreement does not provide for easy termination by the District. The sections related to “Term,” “Default,” and “Disputes” are shown below.
Term
This Agreement shall remain in force and effect for five years. Before final design and construction proceeds, and in no case later than within thirty (30) days after the fourth anniversary of the date of adoption of this Agreement, the Parties shall meet to decide whether to extend this Agreement. Any extension of this Agreement shall be in writing and on mutually acceptable terms and conditions.
Event of
Default
The failure of a Party to comply with any provision of this Agreement that has a material and adverse effect on the other Party, except to the extent caused by a breach of this Agreement by the other Party, shall constitute an Event of Default under this Agreement; provided, however, that the defaulting Party shall first have a period of thirty (30) days following receipt of notice from the other Party of such failure to comply to cure such failure, or if such cure cannot be effected within such thirty (30) day period, such period shall extend for a total of one hundred eighty (180) days, so long as the defaulting Party is diligently trying to cure such failure throughout such period.
Dispute
Resolution
Staffs of both Parties shall meet and use their best efforts to settle any dispute, claim, question or disagreement (a "Dispute") arising from or relating to this Agreement. To that end, staffs of both Parties shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both Parties. If the Parties do not reach such a solution within a period of thirty (30) days after the first meeting of the staff regarding a Dispute, then the Parties shall pursue non-binding mediation to be completed within sixty (60) days after the first meeting of the Parties regarding the Dispute. If the Parties do not settle the Dispute within the sixty (60) day period, either Party may pursue any and all available legal and equitable remedies.
With respect to the Externalities Study, the District has stated that it
believes that the role of Groundwater Replenishment (GWR) in the water supply
solution needs to be evaluated in terms of benefits that extend beyond simply
cost to the ratepayer, but also include other factors that affect environmental
and social policy goals, regionally and state-wide. Such benefits are often referred to as
“externalities” and are often difficult to quantify. The concept of “social ROI” (return on
investment) has been introduced in the past decade and is becoming a more
important decision-making criterion. It
is often difficult for the California Public Utilities Commission in to
incorporate factors beyond cost and reliability in their proceedings and the
concept of valuing externalities is challenging, despite being specifically
called upon by other state agencies to support water recycling. The parties to the July 31, 2013 Settlement
Agreements have agreed that these externalities should be quantified and
considered in the decision to include or exclude GWR from the water supply mix.
Areas to be examined by the consultant include:
EXHIBITS
None
U:\staff\Boardpacket\2014\20140519\ActionItems\19\item19.docx