ITEM:		DISCUSSION ITEM
11.	DISCUSS CRITERIA FOR DEVELOPMENT OF FEASIBILITY STUDY ON PUBLIC OWNERSHIP OF THE MONTEREY PENINSULA WATER SYSTEM AND CONSIDER SCHEDULING A FUTURE MEETING DATE FOR ACTION
Meeting Date:			February 21, 2019	Budgeted:	N/A
From:			David J. Stoldt	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

DISCUSSION: On November 6, 2018 voters within the District passed Measure J 56% to 44%. Measure J directed that a new Rule 19.8 shall be added to the Monterey Peninsula Water Management District Rules and Regulations, Regulation I, General Provisions. The first section of the rule states that “It shall be the policy of the District, if and when feasible, to secure and maintain public ownership of all water production, storage and delivery system assets and infrastructure providing services within its territory.”

The District Board has determined the best means to meet the “if and when feasible” criterion requires engagement of a team of consulting professionals to work with District General Counsel and Special Counsel to perform a feasibility analysis.

In order to direct the consultants as to which objective measure(s) of “feasible” to apply in their work it is important for the Board to establish its own standards or measures. In doing so, the Board felt it was important to hold “Listening Sessions” for the public in order to both explain the process going forward, and to hear the public’s input on which measure of “feasibility” is most important. Five listening sessions were held over the course of 8 days in January.

Key areas regarding feasibility to discuss are:

Cost Savings: The listening sessions covered the following measures (i) Savings immediately and every year thereafter; (ii) Could freeze rates for 3 to 5 years before they start rising again; (iii) no savings in the first year, but the rate of future increases will be lower; (iv) a slight increase in cost for a few years, but it will be cheaper over the life; (v) No savings until after the debt is paid off; and (vi) Operating costs are the same, but future capital projects will be cheaper.

The recommended Valuation and Cost of Service Study Consultant (see agenda Item 14) has identified the following options for determination of financial feasibility: (i) Immediate and ongoing cost savings; (ii) No net cost change initially, but cost savings in the future; (iii) Higher cost initially, but cost savings in the future; and (iv) No net cost change but greater transparency and control.

The District’s eminent domain attorneys have indicated that in order to prove public necessity at a bench trial, cost savings will have to be shown very early on and must continue thereafter.

Method of Financing: There has been much discussion about the most appropriate method of financing the purchase price, if shown to be financially feasible. The board needs to decide if the financing should be captured within the rates, or if it is willing to do a financing backed by a special tax or ad valorem tax. Tax-backed debt will require a vote, which is not guaranteed. The Investment Banker hired (see agenda Item 14) will need to be provided direction.

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