ADMINISTRATIVE COMMITTEE
3.	CONSIDER FIRST READING OF ORDINANCE NO. 138 TO RE- AUTHORIZE A WATER USER FEE TO FUND AQUIFER STORAGE AND RECOVERY FACILITIES AND RELATED WATER SUPPLY PROJECTS
Meeting Date:		November 10, 2008	Budgeted:	N/A
From:		Darby Fuerst,	Program/	N/A
		General Manager	Line Item No.:
Prepared By:		Rick Dickhaut	Cost Estimate:	N/A
General Counsel Approval: Yes
Committee Recommendation: The Administrative Committee reviewed this item on November 10, 2008 and recommended ____________________.
CEQA Compliance: Notice of Exemption – CEQA Guideline section 15273(a)(1)

SUMMARY: On August 15, 2005, the Board of Directors approved Ordinance No. 123 which increased the District’s water user fee by 1.2% (from 7.125% to 8.325%) to fund Aquifer Storage and Recovery (ASR) Project costs and related water supply expenditures. On May 22, 2008, the Board approved proceeding with the process to re-authorize the 1.2% portion of the water user fee.

The water user fee re-authorized by Ordinance No. 138 (Exhibit 3-A) is a fee imposed upon actual water use that varies by the amount consumed. The District water user fee is equally applied to all water use categories, including residential, multi-residential, commercial, industrial, golf course and public agency water users. The water user fee authorized and extended by Ordinance No. 138 will not collect funds beyond those required to maintain plant, equipment, facilities, supplies and personnel necessary to provide water service. The fee is to meet District operating expenses, including employee wage rates and fringe benefits, consultant services, legal services and direct costs, including permit processing, enforcement and associated litigation expenses. The charge to any specific water user shall not exceed the proportional cost to provide or reserve water to that water user. This fee may not be used for any other purpose or to fund general governmental activities.

Ordinance No. 138 is exempt from CEQA pursuant to CEQA Guidelines section 15273(a)(1) – Rates, Tolls, Fares, Charges. A Notice of Exemption will be filed. A draft Notice of Exemption is attached as Exhibit 3-B. The Notice of Ordinance No. 138 that was mailed to all CAW customers within its applicable services areas complies with the provisions of Article XIII D, §6(a) of the California Constitution, as construed by the California Supreme Court in Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205 (2006) and as clarified by the Proposition 218 Omnibus Implementation Act (A.B. 1260 of 2007), codified in California Government Code §53750 et seq.

Based on a reasonable and fair investigation, the Board of Directors has determined that re-authorization of the 1.2% increase in the District’s water user fee is needed to fund the Phase 1 ASR Project and proposed future ASR expansion costs. The District budgeted ASR Project costs of $345,000 in fiscal year 2005-06, $2,630,000 in fiscal year 2006-07, $1,280,000 in fiscal year 2007-08, and $1,760,000 in fiscal year 2008-09. Actual capital expenditures through fiscal year 2007-08 totaled $2,391,700 and an additional $1,480,000 is budgeted for capital expenditures in fiscal year 2008-09, bringing total estimated ASR Project capital expenditures through fiscal year 2008-09 to approximately $3,872,000. Ongoing ASR Project operation costs are estimated to be $275,000 per year. Re-authorization of the CAW water user fee in the amount of 1.2% will generate approximately $525,000 per year. This is the portion that the District will use to fund ASR Project costs, including capital expenditures and operating costs.

So long as this water user fee is collected, the Board of Directors shall hold a public hearing each calendar year in connection with review of the annual District budget to review the amounts collected and expended in relation to the purposes for which the fee is imposed. The District will require the 1.2% CAW user fee to sunset in full or in part unless the Board determines that the purpose of the fee is still required, and the amount of the fee is still appropriate.  If the purpose had expired, the fee shall be required to sunset. If the purpose for the fee is determined to continue, but the amounts needed to fund that purpose are decreased, the fee shall be reduced to that lesser amount.

RECOMMENDATION: District staff recommends that the Board: 1) approve the first reading of Ordinance No. 138, An Ordinance of the Board of Directors of the Monterey Peninsula Water Management District to Re-Authorize a Water User Fee to Fund Aquifer Storage and Recovery Facilities and Related Water Supply Projects; and 2) approve the Notice of Exemption to be filed after the second reading and final adoption of Ordinance No. 138.

BACKGROUND: The District has collected a user fee since 1983. Exhibit 3-C is a history of the user fee percentages collected since that time. The current user fee of 8.325% has been in effect since 2005. At that time, Ordinance No. 123 increased the user fee by 1.2% to fund ASR Project costs and related water supply expenditures. At the time Ordinance 123 was adopted, it was widely interpreted that Proposition 218, approved by the California electorate on November 5, 1996, did not apply to water related charges because they did not meet the definition of “property related fees”. However, since enactment of Ordinance No. 123, the California Supreme Court in Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205 (2006) determined that Proposition 218 does apply to fees imposed upon consumption of utility services such as water related charges. Bighorn reversed a long-standing practice followed by water agencies. Previously, the Supreme Court held such utility fees to not be “property related” and subject to Proposition 218 as those fees could be avoided by means such as not taking water.

This matter is brought to the Board at this time as substantial questions posed by the Bighorn decision have now been answered by enactment of the Prop. 218 Omnibus Implementation Act (A.B. 1260 of 2007) which took effect in 2008 by amending amended Government Code § 53750. This Act clarified the type and manner for which notice of the fee authorization is to be given to water users.

The Proposition 218 process only applies to the portion of the user fee adopted in 2005 to fund the completion of the Phase 1 ASR Project; this amounts to a 1.2% charge on the CAW water bill. The remaining portion of the user fee pre-dated enactment of Proposition 218, and is therefore not be affected by this process. The Board may choose either to re-authorize the 1.2% 2005 User Fee increase, or in the alternative, the Board may direct staff to modify the ordinance to reduce the user fee in like amount.

Notice and majority protest proceedings are required to be completed before the Board may adopt this ordinance in accord with Article XIII D of the California Constitution. Those proceedings are set to be completed on November 17, 2008. An election, however, is not required because a specific exemption applies to water services.

EXHIBITS

3-A Draft Ordinance No. 138

3-B Draft Notice of Exemption

3-C User Fee History

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