M I N U TE S MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Regular Meeting 7:00 PM, Thursday, March 14, 2013 COUNCIL

CHAMBERS FEW MEMORIAL HALL MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL President Della Sala Called the meeting to order at 7:02 p.m. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF President Della Sala invited reports from Directors and Staff. Vice President Burnett noted that Staff is working with the State Water Resources Control Board and the Coastal Commission to coordinate permits for the Monterey Peninsula Water Supply Project (MPWSP). He then confirmed that Cal Am had submitted their application to City of Marina for the test well project and he has requested Congressman Farr to assist with coordination of all of the State and Federal permitting agencies that will be involved. Legal Counsel Freeman informed the Authority and the public that next Governance Committee meeting is on Wednesday, March 30,, 2013 at 4:00 p.m. and staff is currently forming an agenda distribution list and anyone interested to be included in distribution should contact Arlene Tavani at www.mpwmd.net. PUBLIC COMMENTS President Della Sala invited public comments for items not on the agenda. George Riley questioned a recent conference call regarding the process of the California Public Utilities Commission (CPUC) evidentiary hearings and the schedule for witness testimony. He questioned the legitimacy of a comment about settlement discussions and informed the Authority that they should anticipate litigation. Nelson Vega spoke about recent Monterey City Council meetings and is concerned there is no consensus. He then requested the Authority be in communication with The State Water Resources Control Board requesting an extension to the Cease and Desist order, in the event the MPWSP stalls. President Della Sala clarified that Council Members are also citizens and have the right to speak their position at any time. Vice President Burnett commented that staff and Directors are reaching out to the SWRCB but does not think the timing is ripe for requesting and extension. Jim Cullem questioned the location of the MPWSP facility and specifically questioned the rightof-way assessments. He asked if the Directors had considered requesting first rights of refusal for the public right away then suggested working with the Transportation Agency of Monterey County (TAMC). Executive Director Reichmuth responded that discussions are being facilitated and TAMC is in the appraisal process to determine fair market value. The land was purchased with State Lands funds, and currently there is no objection for pipeline utilization. Rick Riedl indicated that portions of the land are owned by the City of Seaside and encouraged Burnett, Edelen, Kampe Pendergrass, Rubio, Della Sala None Executive Director, Legal Counsel, Clerk of the Authority

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discussions to include the City. Sue McCloud encouraged the televising of the Governance meetings to ensure access to the public and also requested clarification between the different Boards and their responsibilities, so there is not duplication of efforts. Lastly, she encouraged the ability to have information distributed earlier so it could be reviewed by the public prior to the meeting. Vice President Burnett responded that staff will work to determine the responsibilities for the different Boards. APPROVAL OF MINUTES 1. February 14, 2013 Action: Continued to Next Meeting February 28, 2013 Action: Approved as Amended On a motion by Director Kampe, seconded by Directors Pendergrass, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the mintues of February 28, 2013 as amended 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

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AGENDA ITEMS 3. Review and Provide Recommendations on Cal Am Draft Outline of RFQ and List of Qualifications and Selection Criteria Action: Recommendations Provided Vice President Burnett presented the item and reported about the comments made at the Governance Committee meeting regarding the proposed Request for Qualifications (RFQ). He qualified that under Category B1 of the Authority adopted policy agreement, the Governance Committee can make a recommendation and if Cal Am chooses not to follow, they need to provide written documentation. Vice President Burnett then spoke to the outline in the packet, and to the time frame provided by Cal Am. They are currently talking with eight qualified firms. The RFQ will be issued by the April 1,, 2013 to narrow the field from eight to four firms. In June, 2013 the Request for Proposal (RFP) will be released with a 90 day response time, and the winning firm will be selected. Vice President Burnett then read a list of changes to the document suggested by the Governance Committee and the Directors discussed. Executive Director Reichmuth added that this will likely be a design-build contract, which reduces the liability to Cal Am and leaves it with contractor. Also, the extent and type of State and Federal funds used will determine if prevailing wages are required. Vice President Burnett answered questions from the Directors

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Director Rubio spoke to the prevailing wage requirements and requested the RFQ to include compliance with Federal and Local requirements regarding prevailing wage. Director Edelen disagreed and expressed it will drive the cost up to the consumer. He added that considerations for energy efficiency and LEED certification (Leadership in Energy and Environmental Design) should only happen as long as it does not increase the costs of water. Director Pendergrass questioned hiring a firm before the California Public Utilities Commission (CPUC) makes a decision and supported Director Rubios request. Vice President Burnett clarified if Cal Am utilizes public funding; the project would be required to employ only prevailing wage workers. President Della Sala opened the item to public comment. Doug Wilhelm spoke to Director Pendegrass comment and encouraged developing a critical path and a schedule, including a safety factor. Nelson Vega spoke in support of Director Edelen's comment indicating cost is the most important factor and that most of the people on the peninsula don't earn paid a prevailing wage and the goal should be to have the best value for the dollar spent. Jim Cullem questioned how much more the construction would cost if prevailing wages were required and requested that criteria be added to the RFP to include maintainability and adaptability of the facility, noting that processes might be very efficient, but might not be easy to maintain. He also requested the firm be required to be able to design to emerging technologies to make it less costly to operate in the future. With no more requests to speak, President Della Sala closed public comment and brought the discussion back to the Board to provide recommendations on the RFQ. The following recommendations were made: 1. Consider eliminating the requirement for LEED design, but maintain requirements for energy efficiency to the extent that it delivers real savings to customers. 2. The maintainability and adaptability of the plant over time, that is open to new technologies

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Report from Cal-Am Regarding Test Well Design, Development and Permitting Action: Update Provided by Cal Am Water Representative Cal Am Water Representative Catherine Bowie discussed changes that have occurred since the last Authority update. She reported that four of the six required permits have been submitted; the State Lands Commission and the Monterey Bay National Marine Sanctuary are outstanding. Construction of the test wells is on track to begin in November 2013 and the project is on track to meet the current construction schedule. Ms. Bowie then answered questions from the Authority. Vice President Burnett added that with respect to the City of Marina application, it has not yet been approved due to an agreement with the Sierra Club. The permit requires any applicant requesting a Negative Declaration Environmental Impact Report (EIR) have approval from the Sierra club. Vice President Burnett has been working with Marina Mayor Delgado with respect to this requirement. Congressman Farr is assisting with coordinating with the federal agencies for alignment of interest to expedite the permitting processes. President Della Sala opened the item to public comment and had no requests to speak.

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Receive Report on First Governance Committee Meeting and Provide Direction Action: Recommendations Provided

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Vice President Burnett reported on the first meeting of the Governance Committee and indicated the largest agenda item was discussion of the RFQ. He reported that he was elected as Chair of the Governance Committee and will be working on agenda management to determine appropriate timing of decisions. Also discussed was the timeline for the Ground Water Replenishment(GWR) project, and the Committee agreed to send a letter requesting the CPUC to hold a workshop on the issue in the future. Director Pendergrass questioned the status of support and progress of the GWR project and indicated that the MPWSP is impacted because the GWR project will determine the ultimate size of the MPWSP facility that will need to be built. President Della Sala reminded the Directors and public that this body is in support of GWR but is working with the timeline to get it online at the same time the desalination facility. If that is not feasible, the Authority would support a larger desalination facility. MRWPCA Director and TAC Member Keith Israel have identified the following criteria that will be needed for the GWR to be successful: 1. 2. 3. 4. 5. 6. 7. 8. 9. Course complete and certify an EIR Water rights are secured for the recycled water project Public support from groups Cost estimate should be less than Time estimate no later than January 2017 Permit status is consistent with schedule Receive SRF Funds Complete preliminary design Commitment to purchase water

Director Kampe assumed that GWR would be a preferred substitute for desalinated water, but requested to see that the confirmation of the cost factors is comparable or less than that of desalinated water. Vice President Burnett confirmed that cost would be less than $300 per acre foot from the well head and noted the TAC will take up the item again on March 18, 2013. President Della Sala opened the item for public comment. Nelson Vega thinks there is overemphasis of the GWR as it will come as a price and encouraged the Authority to continue to focus on which facility is the lowest cost and produces the highest volume of water. Catherine Bowie spoke to answer some questions asked previously about the timeline to hire the design build contractor indicating the decision to hire the prior to the CPUC decision will assist with the ability to obtain the Coastal Commission permit, three months earlier. President Della Sala followed up by asking; in the event Cal Am was able to hire a design build contractor prior to the CPUC decision being released, how much would the ratepayers would be at risk. Ms. Bowie responded that the only projects the firm would be tasked with is working toward obtaining permits and does not know if any public funds would be at risk. With no further requests to speak, President Della Sala closed public comment. Vice President Burnett also reported on discussions of procurement of alternative power by the Governance Committee and indicated he will contact the Monterey Regional Waste Management District to begin discussions of opportunities and will report back. 6. Review of Mid-Year Budget and Projections for Remainder of Fiscal Year Action: Discussed and Recommendations Provided

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Executive Director Reichmuth gave a brief overview indicating the report is informational and staff is seeking direction prior to adoption of the budget for Fiscal year 2013-14. Clerk Milton provided details about current obligations still pending, the proposed changes for the next fiscal year and requested feedback from the Authority. The Authority discussed the need for additional public outreach in addition to televising Authority meetings to include items such as increased web presence, educational materials, press releases and more. President Della Sala opened the item for comments from the public. Nelson Vega spoke in support of increased public outreach and suggested an effective tool to use for outreach would be a comparison to the user water bill. He encouraged Authority to spend funds to ensure the public is informed prior to the water rates increasing. Sue McCloud suggested giving a bonus to the contractor for finishing ahead of time and a penalty for not completing on time. She also proposed an idea of utilizing students from California Polytechnic Institute and their design team to assist with the design work to save cost. Dale Heikus requested caution with public outreach as the public is very skeptical. He said the Authority holds many meetings, produces many reports, and has many discussions, but should begin outreach only when there is something significant and unmistakable that can prove the project has moved forward. With no further requests to speak, President Della Sala closed public comment. Director Edelen requested that public relation efforts be focused on energizing the public to support the projects and not to publicize the successes of the Authority. Director Kampe clarified what public funds can be spent on for public outreach, but agrees to the need for outreach. He indicated the focus should be informing about the best course for best results for the water users on the Peninsula. As a comprehensive approach, there must be education on all the projects and elements including, GWR, ASR, backup plans, Contingency plans and the Local Small Water Projects. He encouraged the program to be diligent, to make information as accurate and available as possible. In the absence, it undermines what the Authority and other agencies are trying are trying to do. Vice President Burnett suggested using their positional influence as mayors, if provided with a cost effective tool, such as a position statement, presentation or brochure that could be distributed at meetings, events, or functions. Director Rubio spoke against a focused public outreach campaign indicating that the Authoritys position is monitoring and advising and cannot be seen as trying to sway public opinion. Any project should be tasked with the community outreach and describing their project to the public. President Della Sala requested that staff propose a public outreach program including the associated costs, at the 20K 40K level and to allow the Authority to make an informed decision. 7. Review Rebuttal Testimony Submitted To California Public Utilities Commission for Application (A- 1204-019) and Provide Direction Action: Discussed and Recommendations Provided Vice President Burnett spoke to the item and highlighted the most relevant sections as it pertains to the Authority adopted Position Statement. He reported that Cal Am is working toward meeting the conditions and also agreed to add an eighth condition, the consideration of tax principles. Cal Ams rebuttal testimony included a large focus on the requirement that Cal Am accept public funding, and Cal Am staff presented reports from several outside financial and tax experts who pointed out the challenges associated with public contributions. Chair Burnett provided an update on each of the conditions as set forth below, and then answered questions from the Directors.

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1. The summary on condition one, we are working though, have had some success, recognize the overall framework, but will take tremendous work to come to an agreement. 2. Adoption of a Governance Agreement: Agreement has been signed and the committee is operational. 3. Electricity Rates: Addressed in Rich Svinland's testimony. Meetings will be forthcoming with the Monterey Regional Waste Management District, and the Governance Committee will assist. Cal Am Water has agreed with the condition in principle. 4. Surcharge 2: General testimony is in support of conditions for utilization that funds can only be applied to tangible assets that do not leave stranded costs. 5. Subsurface Wells: Point to the CEQA process as the way to justify compliance with the condition. 6. Alternative Intake Strategies: Still in progress. Cal Am understands the need for contingencies, but is not currently planning on fully developing the contingencies as we stipulated. 7. SRF Financing: No report at this time. 8. Address Sea Level and Coastal Erosion: Issue will be covered in the Environmental Impact Report (EIR), the main infrastructure will be behind the dunes and safe from those factors. President Della Sala opened the item for public comment. Dale Heikus expressed caution with regard to finance and the availability of public funds. He requested the Authority try to identify ways to lower the project risk before using public funds, including the development of a risk assessment. Nelson Vega questioned the status of a water purchase agreement and spoke to Mr. Heikus comment that there will always be risk. With no further requests to speak, President Della Sala closed public comment. Executive Director Reichmuth responded to Mr. Heikus comment by referring him to review the testimony of Mr. Linlam, which was included in the Agenda Packet. The testimony lists the principles for utilization of public funds. He suggested reviewing pages 92, 93, and 94 to help to explain the financial issues. Director Kampe spoke to the adopted condition for the development of a contingency plan and encouraged Cal Am to not lose sight of that. He expressed that the testimony of the hydrologist Tim Durbin was notable, due to the uncertainty of the productivity of the slant wells but there is still a need for alternate sourcing. ADJOURNMENT With no more business to come before the Authority, President Della Sala Adjourned the meeting.

ATTEST:

Lesley Milton, Clerk to the Authority

Chuck Della Sala, MPRWA President

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