SPECIAL JOINT MEETING OF THE POLICY AND TECHNICAL ADVISORY COMMITTEES
ITEM:		PRESENTATIONS
1.	PROPOSAL FOR ESTABLISHMENT OF ALTERNATIVE USER FEE COLLECTION MECHANISM
Meeting Date:			April 3, 2012	Budgeted:	N/A
From:			David J. Stoldt,	Program/
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:
General Counsel Approval: N/A
Committee Recommendation:
CEQA Compliance: N/A

SUMMARY: On October 11, 2011, the Water Supply Planning Committee recommended the Board direct the General Manager and Administrative Services Division Manager to examine alternate approaches to secure the collection of the User Fee going forward and report back at a future meeting. At its October 17, 2011 Board Meeting, the Board made such direction under Item 5 “CONSIDER AUTHORIZATION FOR STAFF TO EXAMINE ALTERNATIVE APPROACHES TO ESTABLISH / INCREASE USER FEE TO FUND WATER SUPPLY PROJECT PLANNING AND IMPLEMENTATION.” This item was discussed in an update at the January 23, 2012 Board meeting and a schedule for implementation was provided. At the February 23, 2012 Board meeting the Board authorized hiring a rate consultant to develop alternatives for allocating desired revenue by water usage by parcel type and category, using industry accepted usage factors, a method prevalent to wastewater and water agencies in California who use the concept of “equivalent dwelling units or EDUs” and assigning them based on type of property.

This presentation will provide an overview of the District’s proposed new revenue collection mechanism in support of water supply projects. Discussed will be the method of cost allocation, alternative collection mechanisms, overview of the Proposition 218 process, and implementation timeline.

BACKGROUND:

The Monterey Peninsula community has expressed a strong desire for construction and operation of new water supply, implementable by December 31, 2016 in order to meet the restrictions on unlawful diversions from the Carmel River as mandated the State Water resources Control Board order 95-10 and the Cease and Desist Order.

The proposed regional water supply solution includes a portfolio of three projects: A single scalable desalination facility, a Groundwater Replenishment project (GWR), and completion of Aquifer Storage and Recovery (ASR.) Of these, GWR and ASR have a public ownership component and the disposition of desalination is presently unknown, but it is expected that Cal-Am will submit an application to the California Public Utilities Commission (CPUC) April 23, 2012 that will indicate a privately owned and operated desal plant.

These projects will cost money.

The costs of water supply capital projects will add costs to the District’s budget, over and above existing resources. The largest source of revenue in the District’s budget has traditionally been the District’s “User Fee”, which through a recent CPUC decision, the District’s ability to collect has been impaired, further exacerbating the revenue shortage.

The District’s draft Capital Improvement Plan (CIP) for the next two fiscal years (Exhibit 1-A) identifies $2,958,644 of project expenditures for FY 2012-13. Of these, $2,848,771 are related to water supply projects and $109,873 are related to the Mitigation Program. The two highest priority projects are completion of Water Project 1 (Aquifer Storage and Recovery Phase 1) and the District’s 50% pay-as-you-go portion of costs of Groundwater Replenishment. The FY 2012-13 estimate for costs related to these two projects is $1,921,715. The overall direct capital costs for FY2013-14 are $3,331,570 under the CIP.

The District has embarked on the path of seeking to raise $3.7 million directly from properties within the District that are Cal-Am customers. This amount was chosen because it is the amount budgeted to be collected from the User Fee in the last three years when the District collected it. However, the collection of $3.7 million with a new collection mechanism, assuming no use of reserves and no reimbursement of Mitigation Program expenses by Cal-Am, would yield only $826,322 for new water supply capital expenditures – a shortfall relative to the draft Capital Improvement Plan.

The District proposes to reduce expenditures for its other activities where possible, including mitigation and conservation, but without disrupting legally mandated requirements or leaving grant-funded or reimbursed programs unserved. Additionally, the District expects to have Cal-Am directly pay a greater share of the Mitigation Program expenses on a recurring basis, approximately $1.6 million each year until the mitigation activities are no longer required by law or can be transitioned.

This would allow the District to allocate the full $3.7 million to costs directly related to water supply – approximately $2.5 million directly to capital projects, and the remainder allocable to the staff, supplies, and services related to the water supply, water resources, and water demand functions of the District. For example, in FY2011-12 the District budget for personnel, services, and supplies related to water supply, water resources management, water use permitting, and water conservation totaled $1,618,000.

Over the next two-and a half months, the District will hear and act on the following items:

· Rate Ordinance: This ordinance will determine the allocation of rates and charges (annual water use fee) to properties within the District based on category of water use. This is a proven method used for many wastewater and water utilities in California. Alternate allocation methods were presented by the rate consultant at the District’s March 28, 2012 workshop. At the District’s April 16, 2012 meeting the Board will have a first reading of the rate ordinance containing the preferred rate structure. The second reading will occur June 12, 2012.

· Resolution for Collection of Annual Water Use Fee: At its April 16, 2012 meeting the Board will review two alternative resolutions for the actual fee collection mechanism, (a) bills sent directly by the District or through a third-party mailing house, or (b) use of the semi-annual County Assessor’s bill, similar to what is the current practice for Carmel Area Wastewater District and the water recipients under the Castroville Seawater intrusion Project. The actual mechanism for collection will not be determined by the board until its June 12, 2012 meeting.

· “Roadmap” Resolution: At its April 16, 2012 meeting, the District will act on a resolution that describes the manner in which the District will conduct its Proposition 218 protest hearing process.

· Proposition 218 Hearing Notice: A notice of public protest hearing will be acted upon at the District’s April 16, 2012 meeting. The notice will subsequently be distributed to all record owners of property within the district. A hearing will be scheduled for June 12, 2012.

An updated schedule is attached as Exhibit 1-B.

EXHIBITS

1-A Draft Capital Improvement Plan

1-B Implementation Timeline

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