EXHIBIT 2-B

OPTION 1: CURRENT RULE 28 PROPOSAL

Rule 28-B. PROPERTY-TO-PROPERTY AND PROPERTY-TO-JURISDICTION TRANSFERS OF WATER USE CREDITS FOR NON-RESIDENTIAL USES

Water Use Credits for existing water use which has been allowed by the District on or after March 1, 1985, may be transferred from one property to another for Non-Residential uses pursuant to this Rule and upon the approval of the Board of Directors. Non-Residential Water Use Credits may also be transferred directly into a jurisdiction’s Allocation upon the approval of the Board of Directors. Open space water use shall not be transferred except as allowed by Rule 28-C. The following conditions shall apply:

1. Due to the District’s ongoing concern about the viability of the available water supply and the possibility that water transfers may result in additional water usage, water transfers shall be approved by the Board of Directors, subject to the other provisions of this Rule, if the transfer will not have an adverse impact on the water supply. In exercising its discretion, the Board of Directors shall consider the impacts of the application under consideration, as well as the cumulative impacts of other transfers, on the water supply.

2. Water Use Credit transfers shall only occur within a single Jurisdiction. No inter-Jurisdictional transfer shall be allowed. Property-to-property transferred Water Use Credits shall not have any impact on a Jurisdiction’s Allocation. Property-to-Jurisdiction transfers shall increase a Jurisdiction’s available Allocation.

3. Water Use Credit transfers shall only occur within a single Water Distribution System. No inter-system transfers shall be allowed.

4. Water Use Credit transfers shall only occur with the prior approval of the Jurisdiction.

5. Water Use Credit transfers shall only be allowed from an existing Non-Residential use, and shall be applied to the intensification of another existing Non-Residential use or added to a Jurisdiction’s Allocation. . Transfer credits shall not derive from any prior open space water use.

6. Property-to-property Non-Residential Water Use Credit transfers shall only enable intensification of an existing Non-Residential Water Use Capacity, as proposed by a current application for a Water Permit. Transfers shall not provide Water Use Capacity for Non-Residential water meter Connections. Transferred Water Use Credit shall not be “banked” for future use at any new or different Site.

7. The use of Water Use Credits resulting from a property-to-Jurisdiction transfer shall be at the discretion of the Jurisdiction.

8. All Water Use Credit transfers shall originate only from prior documented Non-Residential Water Use Capacity and shall be subject to each and every limitation on the calculation of Water Use Credit set forth in Rule 25.5. The District shall permanently retain 15 percent of the amount of Water Use Credit transferred as a contribution to general water conservation savings.

9. All transfers of Water Use Credit shall occur only by the written (and recorded) agreement of the owner of record for each Parcel from which the transfer originates. This agreement shall confirm that the transfer of Water Use Credit is irrevocable, shall quantify remaining Water Use cCapacity required by the originating Parcel(s), and acknowledge that any intensification of Water Use Capacity on the originating Site thereafter shall result in additional Connection Charge fees. If all prior Water Use Capacitywater use capacity is transferred from a Site (due to demolition of all structures on that Site), the recorded agreement and notice shall consent to permanent removal of the meter Connection from the originating Site, and acknowledge that the placement of a new meter shall be limited due to unavailability of water.

10. Transfer of Water Use Credits shall only occur upon approval by the Board of Directors. The Board of Directors shall have sole and exclusive authority to determine the Water Use Capacity which cannot be transferred by reason of Capacity requirements for the originating Site. The Board of Directors shall not approve any Water Use Credit transfer where money or other valuable consideration has been given in exchange for the Water Use Credit transfer. In addition, the General Manager shall not approve any Water Permit application using water from a transferred Water Use Credit in any circumstance where money or other valuable consideration has been given in exchange for use of the transferred credit. These limitations shall nonetheless allow the recipient of a Water Use Credit transfer to reimburse the donor of that credit for Connection Charges associated with the transferred Water Use Capacity that was previously paid to the District for a Water Permit. As a condition of approval, the property owner of the originating Site shall complete and submit a Declaration Regarding Consideration Given for Transferred Water Use Credit.

11. Violation of the prohibition on the transfer of Water Use Credit for money or other valuable consideration shall result in immediate revocation of the transfer credit.

12. Violation of the prohibition on the transfer of Water Use Credit for money or other valuable consideration is a misdemeanor as provided in Section 256 of the Monterey Peninsula Water Management District Law.

13. Conditions of the transfer shall be recorded on both the originating and receiving Sites prior to completion of the Water Use Credit transfer.

14. The effect of any approved Water Use Credit transfer shall be the irrevocable extinction of any right or entitlement to the actual water use, Water use Capacitywater use capacity, or Water Use Credit which has been transferred from the originating (transferring) Site.

1615. Before any Water Use Credit transfer shall occur, the transfer fee required by Rule 60 for each originating Site shall be paid by the Applicant.

16. Before any Water Use Credit transfer shall occur, the Applicant shall enter into an indemnification agreement with the District as a Condition condition of Approvalapproval, whereby the Applicant agrees to indemnify, defend and hold harmless the District from any and all legal and financial responsibility that may arise in connection with approval of the Aapplication, including but not limited to attorney’s fees and costs that the District may incur.

17. The Jurisdiction in which the Water Use Credit transfer occurs shall be notified in writing upon completion of the transfer.

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