M I N U TE S MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Regular Meeting 7:00 PM, Thursday, January 24, 2013 FEW

MEMORIAL HALL OF RECORDS COUCIL CHAMBER MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL PLEDGE OF ALLEGIANCE APPROVAL OF MINUTES 1. January 10, 2013 On a motion by Director Pendergrass, seconded by Director Kampe, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the minutes of January 10, 2013: AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None Legal Counsel, Interim Executive Director, Clerk to the Authority

PUBLIC COMMENTS Opened public comment David Armanasco spoke representing the Deep Water Desal project and informed the Authority that DWD has begun the CEQA/EIR process and has been in contact with the CPUC to provide information in the Cal AM MPWSP EIR. He also said DWD has entered into an MOU with the City of Salinas for a power sponsor agreement to purchase wholesale energy from Dynagy. The relationship will allow DWD to purchase energy at a cheaper rate and the data centers located on the Dynagy site will use the cold sea water to cool down the data center, in turn preheating the water for desalination. This process will reduce total energy consumption and will help the project achieve California carbon reduction requirements. Dale Hekhuis expressed concern about a published interview with Director Burnett in the Herald which indicated that Cal Am had a clear edge over the other projects. He also expressed concern about the governance proposal and the proposed cost of the Cal Am project in relation to the other projects. He questioned the criteria the Authority will consider to make the selection of a preferred project. Director Burnett spoke to Mr. Hekhuis comments that he was speaking on his own behalf, not on that of the Authority and that he was stating a position

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with facts based from the SPI consultants report that they are further along in their process than the other projects and do have an edge in various capacities over other project. Tom Rowley reflected on the public defeat of prior opportunities for public ownership of water and attributed it to a lack of collective leadership by the public officials, which lead to people being mislead, and vote no. He then thanked all of the elected leaders indicating that taxpayers appreciate the collective leadership to get behind and support a project that the Peninsula so desperately needs. Bill Hood said he would not object if the Authority selects the Cal Am project, if the decision is based on the purpose to develop the lowest cost water supply and providing water in the shortest possible time. He commented on the surcharge that it should not be a burden on the taxpayers, which it could leave with stranded costs, and encouraged sharing of the risk by utilizing the surcharge during less risky project phases. George (name) discouraged the Authority from acting too quickly but to grant a thorough evaluation in the taxpayers best interest. If the Authority works diligently and prudently, the State Water Board should grant more time. He then spoke in support of local ownership and public independence encouraging more individual participation with rainwater capture and gray water incorporation, then encouraged the Mayors empower their citizens to be proactive. Safwat Malek spoke representing Rate Payers First and a provided a petition addressing the Water District, the Authority and the CPUC asking for lowest cost, and public ownership and financing. Rudy Fisher encouraged the Authority to still continue pursuing a contingency project as a backup plan and spoke in support of the surcharge as away to lower the overall cost of producing water. He encouraged structuring the surcharge as a last dollar in method to ensure Cal Am adopts a certain amount of risk which would keep the project on track. He disagreed with Mr. George () comments that the authority should act quickly. With no further requests to speak President Della Sala closed public comment.

AGENDA ITEMS 2. Approve Contract for Executive Director Services with the City of Monterey (Discussion/Action) Action: Approved Interim Executive Director Meurer presented the report including the recommendation that the Authority approve the contract. The City of Monterey would be the hiring agency, and made the selection with the recommendation of the JPA. The position was budgeted for 600 hours for the next 6 months, and 20 hours a week thereafter. Mr. Meurer also commented that this was contingent upon all member Cities approval of additional allocations to fund the budget adjustment passed on January 10, 2013.

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President Della Sala opened the item for public comments and Bill Hood congratulated the Authority and Mr. Reichmuth on his appointment. With no further requests to speak, President Della Sala closed public comment and brought the discussion back to the Board. Director Burnett commented that he was pleased Mr. Reichmuth accepted and is willing to take on the challenge and thinks he is the right person to work with the Authority. On a motion by President Della Sala, seconded by Director Pendergrass, and carried by the following vote, the Monterey Peninsula Regional Water Authority authorized entry into a contract with the City of Monterey for Executive Director Services. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 3. 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Review and Discuss Project Evaluation Matrix Submissions by the TAC, Monterey Peninsula Water Management District and SPI Consultants (Information/Discussion) President Della Sala opened the item indicating the Monterey Peninsula Water Management District was not able complete the matrix due to the time constraints. Director Burnett, as Chair of the TAC, delivered the matrix with comments from the TAC from the meeting on January 24, 2013 at 2:00 p.m. He prefaced the discussion indicating the TAC only made comments when they had a different view than what the SPI consultants prepared and acknowledged that while there are three projects, based on the current questions surrounding the People's Moss Landing (PML) project and no communication with them to refute, the TAC focused the deliberation on the first two of three projects. He requested If the PML is still a live project, they need to make that known since they have not been involved. President Della Sala commented that Director Burnett acted as a moderator for the TAC and represented the TAC members independent of Director Burnetts personal perspectives and comments. Director Burnett then indicated the purpose of the matrix was to assist the Authority with collecting the information communicated important by the Authority. Pendergrass asked if the intent of this discussion was to make a decision on project support. President Della Sala responded that the matrix is a tool that will assist with the decision making. He said there will be a special meeting on January 31, 2013 and it will be agendized to identify a project to support. Director Burnett discussed information on the matrix and answered questions of the board. Director Rubio, questioned if the possibility of a Tsunami was considered and if it would the placement of other projects. Director Burnett answered that the TAC did not discuss the issue of Tsunami, but acknowledged it should be added to the matrix. With no more questions from the Directors, President Della Sala opened the item for public comments.

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Bill Hood questioned the TAC position on private vs. public ownership indicating he knew different TAC members had clearly opposite opinions. Director Burnett acknowledged that there was a diversity of views represented on the TAC and they tried to incorporate into the document. Dennis Ing answered questions about the Deep Water Desal Project financial ability to compete indicating they are private investors that are seeking to build the facility with 100% risk and no impact on the ratepayers. If the project is successful through the permitting process, they proposed it to be a publicly financed project. A JPA would be the financing agency and would own the project. The project owners have engaged professional firms since the beginning and have professional opinions that assure that the project would be eligible for tax free municipal bond status. Norm Grut the Executive Director of the Monterey County Farm Bureau indicated he is a Pacific Grove resident and that personally and professional wants a solution for an adequate water supply. He spoke to the reluctance of the agricultural community to support a project and indicated that the aquifer is an asset which the Agricultural community has spent millions of dollars to enhance, improving and protecting after they found about the salt water intrusion problem. Therefore they are unwilling to take a risk without a guarantee of success. The test wells will take years, but will give verifiable evidence that there will be no harm. He encouraged the Authority to look at alternative risks and alternative projects. George Schroder spoke representing the People's Moss Landing project apologize for the lack of interaction as he was out of the country. He requested a few more days to respond, and was disappointed the TAC ignored the committee because no one responded. He feels it is the best site for the project, and as a public agency. He assured the Authority that they would respond to any questions posed in the next three days and requested more time to provide information to the Authority. He said PML will be continuing to work with ESA to provide responses to the EIR. Nancy Isakson from the Salinas Valley Water Coalition spoke in support of the comments made by Mr. Grut that the Salinas Valley has spent thousands of dollars and still has not resolved the salt water intrusion problem. She expressed appreciation of the TAC's recommendation that the Hydrologist Tim Durbin's comments are addressed. The well does need to be real time tested, at least 2 years for adequate data, to show there will be no impact or harm to the basin. She said it was short sighted to select a project when the EIR's are not completed yet, as the potential impacts and mitigations measures will determine the true cost of the project. Tom Rowley thanked the TAC for the detailed analysis and requested the Authority address three additional hurdles: intake source, Hydrologist Tim Durbin's testimony and build a survivable project that can withstand earthquakes. David Armanasco spoke to the SPI report that the Monterey Peninsula residents are concerned about costs, so it is important to point out the cost per acre foot on each project. Nelson Vega suggested using this matrix to pull the components together that make the most sense and focus on the issue of source water. Dale Haikus expressed concern that there was not more mention of project risk. Director Burnett encouraged Mr. Haikus to attend the next TAC meeting on January 28, 2013 at 2:00 p.m. to voice the comments and participate in the discussion.

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Lorin Letendre President of the Carmel River Watershed Conservancy thanked the Authority for the efforts to attain a water supply and encouraged consideration of contingency plans and about who is going to be advocating before the State Water Resources Control Board for an extension. With no more requests to speak, President Della Sala closed public comment and brought the discussion back to the board. Director Pendergrass questioned the necessity to make a decision for project endorsement at this time indicating there is too much legal risk and said the Authority should be concentrating on GWR and recycled water options. Director Burnett responded that if the Authority desires to

submit testimony prior to the February 22, 2013 CPUC deadline for the Cal Am project, staff will need adequate time facilitate the direction provided.
Director Rubio encouraged the Authority to make a decision indicating the information Director Pendergrass is requesting could take up to a year or more to have. He supported a decision now to be able to submit testimony to the PUC to include what is important to the public, an adequate water supply. Director Burnett reaffirmed that he only acted as a moderator during the TAC meeting but as a Director would like to express his positions on the different categories. He indicated that it was important to share his position before the Special meeting and receive feedback.

Size and Intake Source: the size of the facility is less important than the source of water intake and permitting. For permitting, a project must pursue slant wells first then over to open water without having to start from scratch. If DWD wants to accommodate this position, they need to come forward with a proposal. Economics: If the Authority chooses to support the Cal Am project, the Authority must insist acceptance of a Public Financing Proposal. Cal Am must provide proof that they have access to SRF funds and Surcharge 2 lowers Net Present Value calculations to reduce rate shock, but must be targeted at portions of the project that are lower risk. Public vs. private ownership: there are two benefits to public ownership; cost and control. Control, not for control sake, to make sure the public has a voice in the decisions that matter. Government is not always better at doing things than private business and vice versa. The governance proposal will identify the key decision points that the public has a local voice in.

Director Burnett stated that this is not an opportunity to submit a list of questions and problems with the proposal but to provide what solutions the Authority wants to see come out of it. Director Kampe applauded the specific and tangible proposal and a great point of reference for the next meeting. He acknowledged that there will be controversy from some perspectives, but to point to a clearly preferred alternative will take 2 years with the slant well tests. President Della Sala thanked the TAC and Director Burnett for his work on the item and encouraged the Authority and the public to consider what was presented and be ready to discuss next Thursday, January 31, 2013 at a special meeting. Director Pendergrass indicated that he was not comfortable with taking action next Thursday to select a project but should discuss it further. Director Rubio suggested a two part decision. One backing a project, second what project. He also requested Director Burnett to provide his comments in writing for review.

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Director Edelen acknowledged that there will never be perfect information but the Authority needs to rally collectively. City Manager Meurer stated that the public is looking to the authority to make a decision and bring order to all aspects and give a rational point of view on behalf of your constituents. 4. Discuss Draft Governance Proposal and Provide Direction to Staff Action: Discussed and Provided Direction Don Freeman introduced the item and explained the three categories and indicated it was structured in such a way it is not CEQA reviewable. Only decisions this body will be involved in and will not require any type of change or effect on the environment. If Cal am does not take the recommendations, they will have to answer to the CPUC. Director Burnett indicated that the document included in the packet is similar version to what the Authority voted on in September 2012 as well as the draft version that was before the board on January 10, 2013. He indicated that this project is a good case study how CEQ could be improved. He requested comments and direction from the Authority to be incorporated before the next meeting. Director Pendergrass questioned if the proposed governance committee would be subject to the Brown Act. Legal Counsel Freeman responded that if this proposal is it would be a separate group in and of itself. President Della Sala opened the item for public comment. Bill Hood said that the document as excellent but should consider value engineering and to give a definition of what that is. He also suggested that the stipulation listed in Category B that allows the agency to give direction should remain in category A. He said that the dispute section was in conflict and inconsistent. He then spoke to review and recommendations of change orders of over $1 million saying it should remain in category A if you are going to exert cost control. With no more requests to speak, President Della Sala closed public comment and brought the discussion back to the board. Director Burnett responded to Mr. Hood's comments indicating defining the role of value engineer is excellent and the committee will work more on that and indicated that he wants this governance to work but that it cannot create delay. ADJOURNMENT With no further business to discuss, President Della Sala adjourned the meeting at 10:12 p.m.

ATTEST:

Lesley Milton, Clerk to the Authority

MPRWA President

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