MPRWA Regular Meeting Agenda Packet 07-11-13

Agenda
Monterey Peninsula Regional Water Authority (MPRWA)

Regular Meeting

7:00 PM, Thursday, July 11, 2013
City Council Chamber
580 Pacific Street
Monterey, California

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

PUBLIC COMMENTS
PUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on any
subject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any person
or group desiring to bring an item to the attention of the Authority may do so by addressing the
Authority during Public Comments or by addressing a letter of explanation to: MPRWA, Attn:
Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriate staff person will contact
the sender concerning the details.

APPROVAL OF MINUTES

1. June 13, 2013

AGENDA ITEMS

2. Receive Presentation, Discuss and Provide Direction to Staff Regarding the City of
Salinas' Efforts to Bring Additional Waste Water to the Monterey Regional Pollution Control
Agency for Use in the Ground Water Replenishment Project

3. Election of Officers for Fiscal Year 2013-14

4. Receive, Discuss, and Approve Revised Authority Position Statement and Provide
Directions to Staff on Outreach Opportunities for the Position Statement

5. Review, Discuss and Consider Execution of Legal Conflict Waiver Letter to Allow
MPRWAs Water Counsel, Brownstein Hyatt Farber Shcreck, LLP, to Represent the City of
Carmel-by-the-Sea with Respect to the Citys Efforts to Acquire Table 13 Water Rights (As
Described in SWRCB D. 1632 and Related Subsequent SWRCB Orders) from the Odello
Ranch

6. Adopt Resolution Memorializing the Approved Fiscal Year 2013-14 Operating Budget

ADJOURN TO CLOSED SESSION

Thursday, July 11, 2013
2

7. Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9
California Public Utilities Commission, In the Matter of Application of California-American
Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project
and Authorization to Recover All Present and Future Costs in Rates, A.12.04.019, Filed
April 23, 2012

ADJOURNMENT

The Monterey Peninsula Regional Water Authority is committed to include the disabled in all of
its services, programs and activities. For disabled access, dial 711 to use the California Relay
Service (CRS) to speak to staff at the Monterey City Clerks Office, the Principal Office of the
Authority. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services
24 hours a day, 7 days a week. If you require a hearing amplification device to attend a
meeting, dial 711 to use CRS to talk to staff at the Monterey City Clerks Office at
(831) 646-3935 to coordinate use of a device or for information on an agenda.

Agenda related writings or documents provided to the MPRWA are available for public
inspection during the meeting or may be requested from the Monterey City Clerks Office at 580
Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with California
Government Code Section 54954.2(a) or Section 54956.

MI NUTES
MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)
Regular Meeting
7:00 PM, Thursday, June 13, 2013
COUNCIL CHAMBER
FEW MEMORIAL HALL
MONTEREY, CALIFORNIA

Directors Present: Burnett, Kampe, Pendergrass, Della Sala

Directors Absent:

Edelen, Rubio

Staff Present: Alt Legal Counsel, Clerk of the Authority, Executive Director

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

President Della Sala opened the meeting at 7:15 p.m. recognizing that Attorney Bill Connors
will be the acting Legal Council for this meeting. He then spoke to the recent renovation of the
Council Chamber which was completed to be in compliance with the American's with
Disabilities Act. President Della Sala then invited reports from the Directors and staff.

Director Pendergrass spoke to a press release regarding a lawsuit filed against the Monterey
Peninsula Water Management District by the Monterey Peninsula Taxpayers Association. The
lawsuit alleged the MPWMD has been using collected fees for a different purpose than was
intended.

Director Burnett reported progress working with the permitting agencies for the Monterey
Peninsula Water Supply Project (MPWSP) in advance of the California Public Utilities
Commission decision. He noted that it was important to parallel the process of permits as much
as possible, then spoke to a meeting on Monday June 10, 2013 with relevant State and
Federal agencies. He reported making progress toward achieving permits for the test well in
time for the construction to begin November 1, 2013.

PUBLIC COMMENTS

President Della Sala opened the floor for public comment for items not on the agenda. David
Lifland questioned the location of the proposed test wells for the MPWSP and questioned what
data has been collected to date for alternative areas such as Dana Point. With no further
requests to speak, public comment was closed.
CONSENT ITEMS

1. Approve Future Meeting Dates and Agenda Items
Action: Approved
On a motion by Director Pendergrass, seconded by Director Burnett and carried by the
following vote, the Monterey Peninsula Regional Water Authority approved the proposed future
meeting dates.

AYES: 4 DIRECTORS: Burnett, Kampe, Pendergrass, Della Sala
NOES: 0 DIRECTORS: None
MPRWA Meeting, 7/11/2013 , tem No. 1., tem Page 1, Packet Page 1
MPRWA Minutes Thursday, June 13, 2013

Monterey Peninsula Regional Water Authority
Regular Meeting Minutes - Thursday, June 13, 2013
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ABSENT: 2 DIRECTORS: Edelen, Rubio
ABSTAIN: 0 DIRECTORS: None
RECUSED: 0 DIRECTORS: None

2. Receive Financial Update and Authorize Staff to Contract for Financial Services Audit for Fiscal
Year 2012-13
Action: Approved

On a motion by Director Burnett, seconded by Director Kampe and carried by the following
vote, the Monterey Peninsula Regional Water Authority authorized staff to contract for a
financial services audit for Fiscal Year 2012-13 to be completed by November 30, 2013:

AYES: 4 DIRECTORS: Burnett, Kampe, Pendergrass, Della Sala
ABSENT: 2 DIRECTORS: Edelen, Rubio

3. Review Final Recommendations for Draft Request for Proposal for The Monterey Peninsula
Water Supply Project
Action: Received Report
Director Burnett reported on this item and indicated that the final document is consistent
with Authority direction. Director Pendergrass commended the ability to participate, with an
active, legitimate Governance Committee. He further commented that the cooperation between
the Governance Committee and Cal Am is notable.

President Della Sala opened the item for public comment. Nelson Vega expressed concern that
the Authority wants the lowest price water solution but demanding prevailing wage increases
the price and could add 20% to the cost of the project. He requested the Authority look at the
constituency for how many people are earning prevailing wage. With no further requests to
speak, public comment was closed.

Director Burnett responded to Mr. Vega's concern that this element is important because some
of the sources of financing the Authority is requiring requires a prevailing wage component.
Director Kampe questioned how the goal for local hiring was included, and asked if a local
hiring requirement would limit the firm's ability to hire outside of the region if the expertise was
not available locally.

Alternate Director Ian Oglesby arrived at 7:29 p.m.
END OF CONSENT AGENDA

APPROVAL OF MINUTES

4. May 23, 2013
Action: Approved

On a motion by Director Pendergrass seconded by Director Oglesby and carried by the
following vote, the Monterey Peninsula Regional Water Authority approved the minutes of May
23, 2013:

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AYES: 4 DIRECTORS: Burnett, Pendergrass, Oglesby, Della Sala
ABSENT: 1 DIRECTORS: Edelen
ABSTAIN: 1 DIRECTORS: Kampe

AGENDA ITEMS

5. Receive Report on California Public Utilities Hosted Ground Water Replenishment Workshop
on June 12, 2013

Director Burnett spoke regarding the Groundwater Replenishment workshop sponsored by the
California Public Utilities Commission on June 12, 2013. He reported the purpose was to further
define the criteria to be used to make the GWR recommendation and to determine if GWR is to
be included in the water solution portfolio. Director Burnett spoke to the details regarding the
methodology and timing for approval and inclusion of the GWR project. He also noted that it is
necessary to determine if GWR is viable so Cal Am can determine what size plant they can
build, which also impacts the outcome of the water purchase agreement.

Director Burnett outlined the eight criteria for the GWR recommendation and the changes made
as a result of the workshop. A red line version was included in the agenda packet and for the
public. He noted that a Tier II advice letter cannot have any discretion and all but the below
three proposed criteria will met the check box test of the Tier II letter:
1. Water purchase agreement
2. Debt equivalency
3. Cost estimated first year revenue requirement to pay for the water from the GWR
project.
Director Burnett then answered questions from the Directors.

President Della Sala opened the item to public comment. Nelson Vega spoke to the item and
questioned the cost impacts for inclusion of the GWR project. He urged the Directors to focus
on the cheapest project and the solutions that deliver the required amount of water.

John Narigi, TAC Member and representative of the Coalition of Peninsula Businesses
distributed a memo representing the Coalition of Peninsula Businesses. He reported attending
the workshop and concurred with the recap by Chair Burnett, but regrettably indicated that he
does not believe the GWR project will come to fruition in time. He then expressed frustration
that requests for information submitted to the MRWPCA were not adequately answered. He
then spoke in support of building a larger size desal facility to ensure adequate capacity and
urged the authority and other agencies to listen to the business community. David Lifland
questioned the proposed source water for the desal project. Having no more requests to
speak, President Della Sala closed public comment.
Director Burnett responded to public comment questions clarifying where the proposed water
supply would come from and reiterated the need for a portfolio approach. He then spoke to Mr.
Narigi's comments and encouraged MRWPCA to increase efforts to answer questions of the
community and the businesses.

4

President Della Sala requested clarification on the request to review the revenue requirement
instead of the cost of water. Director Burnett responded that they are not interchangeable due
to accounting and tax implications. Cost per acre foot calculations do not account for issues
such as purchase agreements recorded as debt, which require a debt equity balancing and
could raise the revenue requirement.
Director Kampe expressed concern that the small water projects gives the impression that it
subtracts from the total capacity of the desal facility, but instead could be operational sooner
than the other projects and could demonstrate progress to the State Water Resources Control
Board for compliance with the CDO and the whole peninsula will benefit.

6. Receive Update and Provide Direction Regarding Draft Power Purchase Agreement Term
Sheet
Action: Received Update and Discussed

Executive Director Cullem reported about recent meetings he facilitated to develop a power
sales agreement between the MPWSP and the Monterey Regional Waste Management District.
He noted that William Merry, General Manager for the District spoke to the TAC on June 3,
2013 and reminded the Authority that the District has a fiduciary responsibility to their Board of
Directors to sell energy at the best market price available .Mr. Cullem explained that the
ultimate agreement would not be a power purchase agreement as originally discussed because
of the possibility to trigger a debt equivalency issues for Cal Am. Instead they are considering a
power sales agreement, which would allow the Cal Am to bypass the debt equivalency issue.
He noted the next meeting will be on July 8, 2013 and the Authority will facilitate moving
forward and working towards an MOU and the final agreement. Mr. Cullem then answered
questions from the Directors.
President Della Sala questioned what the range would be for fair market value for energy and
Executive Director Cullem indicated it could be approximately $.15 per kwh but noted there are
options for savings in many places, including a clean power component. He explained the need
for clean, stable power for deal operations and indicated that the District may provide cleaner
power than PGE.
President Della Sala opened the item for public comment. Nelson Vega questioned the legal
authority for the District to transmit power and questioned if PG& E had any exclusive franchise
rights to transmissions. He questioned if PG&E would seek into the water distribution or
desalination business and expressed concern there is a huge overlap with services and it may
affect prices. Having no additional requests to speak, President Della Sala closed public
comment.

Executive Director Cullem responded regarding who is permitted to sell utilities and noted that
private sellers are regulated by the CPUC. He further explained that power producers are
allowed to sell power to the grid, but what profit can be made by it is determined by who is
willing to buy it.
President Della Sala indicated that there is more negotiation needed and requested to be kept
apprised of developments and to provide the Authority information about current market rate
power costs.


5
7. Receive Report and Provide Guidance Regarding Reproduction of Water Article And Other
Outreach Opportunities
Action: Report Received and Direction Provided

Executive Director Cullem spoke to the public outreach line item of the adopted Fiscal Year
2013-14 budget and then discussed an article published on July 2, 2013 in the Monterey Herald
titled The Path To Your Tap. He requested permission to reproduce the article as a cost
effective, informational and non partisan document. He also indicated he will be looking for
additional opportunities for cost effective public outreach. Mr. Cullem then requested direction
from the Directors.
President Della Sala questioned the Authoritys desires for reproduction of this article. He then
opened public comment and had no requests to speak.
Director Pendergrass requested the article be made available on the Authoritys website. The
Directors agreed to the development of a marketing piece that includes the article, some
frequently asked questions, as well as the adopted position statement. Alternate Director
Oglesby confirmed the need for collaboration and indicated that he supports the reproduction of
marketing materials as long as they include the Authoritys policy positions. The Directors
agreed and requested staff to price the reproduction cost for 1000 copies to be made available,
as well as requested staff to contact the Monterey Peninsula Water Management District and
the Monterey Regional Water Pollution Control District to discuss collaborative outreach efforts.
8. Receive, Update, and Discuss MPRWAs Position on Issues for MPRWAs Participation and
Decision-Making with Respect to California Public Utilities Commission Settlement Proceedings
in A.12.04.019
Action: Received Update and Discussed

Director Burnett reported that since the original adoption of the Position Statement the Authority
has adopted additional policies that should be incorporated. He requested the Directors to
adopt the presented revised position statement reflecting the totality of the Authoritys position
with respect to the portfolio of the water solution projects.
Director Burnett spoke to the suggested changes and the general topics are listed below:
Benefits of a portfolio approach
Adopted concept of a service connection fee
Adopted governance committee agreement
Defined more clearly what Significant contribution entails
Clarify the difference between the two facility sizes
Water Allocation - the size project is for engineering purposes but the allocation
decisions will be made locally
Need to produce a new estimate of what general plan build out will be, outdated
Elaborate more on the position for the Pacific Grove Water Projects
Project Cost Control and appropriate use of surcharge two
Contingency Planning: previous statement was for source water intake but is key
variable and we should keep approach focused, but that would recognize other parts of
the project that would benefit from contingency planning as well.

6
President Della Sala opened the item for public comment. David Lifland requested clarification
about the contingency plans, proposed well types and the locations. Director Burnett responded
that the contingency statement on the proposed position statement includes three alternate
locations for wells and for each location both slant and Rainey wells would be tested.
John Narigi requested clarification of the intent under additive considerations regarding general
plan build out. Director Burnett responded that the Authority requested the Environmental
Impact Report to include a full general plant build out. He then suggested that the Authority
should develop a trigger for when discussion should begin to develop a new water supply so
the community does not face a water shortages in the future. Mr. Narigi then questioned if the
Governance Committee would have oversight over the GWR project.
Nelson Vega suggested adopting a position of support over the larger desal facility size with the
option of deferring to smaller project size if other projects come online. He then reminded the
Directors that the mission of the Authority was to meet the CDO in the most cost effective way.
Having no additional requests to speak, President Della Sala closed public comment and spoke
to Mr. Vega's comments regarding the Authority's mission and assured him that there are many
variables but the Authority is still looking for most cost effective solution. He also assured him of
the need to show progress on other fronts if the community is to have leniency with regard to
the CDO.
Director Oglesby thanked the public for their questions and for their participation. He reminded
the Authority that if this Agency and the Governance Committee was not in place, these
discussions and decisions would take place at the PUC and there would be no local control. He
thanked the Authority for the ability to allow the public to vet to us and thinks this Agency is
making significant progress for affecting change from Cal Am to compromise with some of the
cost and procedures, in part, due to public input.
Director Burnett then suggested an amendment to the document under additional
considerations to identify criteria that would trigger a need to begin discussions to expand
existing water projects to avoid a similar future water shortage.
The Directors then discussed the need for such an amendment and Director Pendergrass
made a motion to adopt Director Burnetts statement. The Directors discussed, modified the
statement and came to an agreement on an amended statement.
On a motion by Member Pendergass and seconded by Member Oglesby and passed by the
following vote, the MPRWA voted to adopt the amended positions statement as presented with
the following two additions:
Under Additive Considerations: Water Allocation:
The Authority recognizes that future circumstances may trigger a need for review of future
water supply needs for the Peninsula to either expand or develop a new water supply to
avoid future pending shortage situations. The Authority will request Cal Am to initiate a
process to address the adequacy of the water supply to meet the future service obligations
of Cal Am customers as defined by the California Public Utilities Commission.
Under Condition #1: Cal Am Must accept a significant Contribution of public funds:
Cal Am's traditional financing entails a blend of 53% equity and 47% debt. A significant
public contribution (combined with Surcharge 2) should be of sufficient size to reduce Cal
Am's equity to approximately half that much (26 to 27%).

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AYES: 5 DIRECTORS: Burnett, Kampe, Pendergrass, Oglesby, Della Sala
ABSENT: 1 DIRECTORS: Edelen

ADJOURN TO CLOSED SESSION

President Della Sala invited public comments for the closed session item and had no requests
to speak. He then adjourned the meeting to closed session at 9:20 p.m.

9. Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9 California
Public Utilities Commission, In the Matter of Application of California-American Water Company
(U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to
Recover All Present and Future Costs in Rates, A.12.04.019, Filed April 23, 2012
Action: None Taken

Legal Counsel Connors reported that the Authority received a report and took no action.

ADJOURN TO OPEN SESSION

10. Receive, Update, and Discuss MPRWAs Position on Issues Identified During Closed Session
for MPRWAs Participation and Decision-Making with Respect to California Public Utilities
Commission Settlement Proceedings in A.12.04.019
Action: None Taken

ADJOURNMENT

With no further business to discuss, President Della Sala adjourned the meeting at 10:12 p.m.

ATTEST:

Lesley Milton, Clerk of the Authority MPRWA President


Agenda Report

Date: July 11, 2013
Item No: 2.

06/12
FROM: Authority Clerk

SUBJECT: Receive Presentation, Discuss and Provide Direction to Staff Regarding the City
of Salinas' Efforts to Bring Additional Waste Water to the Monterey Regional
Pollution Control Agency for Use in the Ground Water Replenishment Project

RECCOMENDATION:
There is no written report for this item. An oral report will take place at the meeting.

Agenda Report

Date: July 11, 2013
Item No: 3.

06/12
FROM: Authority Clerk Milton

SUBJECT: Annual Election of Officers and Appointment to Advisory Committee

RECCOMENDATION:
Staff recommends that the Authority Directors appoint the Chair, Vice-Chair, Secretary,
Treasurer, and Technical Advisory Committee Chair for Fiscal Year 2013-2014.

DISCUSSION

Article 3 of the adopted Bylaws indicate at the first meeting of the Board of each fiscal year,
nominations for the Officers will be made and seconded by a DirectorThe initial term of the
elected Officers shall run from the date of their election to office until June 30, 2013. Thereafter,
each officer shall serve a term of one (1) year. An officer may succeed himself/herself and may
serve any number of consecutive or non consecutive terms.

This is the first meeting of the 2013-14 Fiscal Year and below is a list of the positions currently
held by the Authority Directors and the associated appointment dates. The amended by-laws
eliminated the requirement that the TAC Chair be a Director, however appointment of a Director
is still allowed if so desired.

Authority Directors Current Position Appointment
Date
1. Mayor Jason Burnett Vice President, TAC Chair December 2012
2. Mayor Chuck Della Sala President February 2012
3. Mayor Jerry Edelen Treasurer February 2012
4. Mayor Bill Kampe - -
5. Mayor David Pendergrass - -
6. Mayor Ralph Rubio Secretary December 2012


Agenda Report

Date: July 11, 2013
Item No: 4.

06/12

SUBJECT: Receive, Discuss, and Approve Revised Authority Position Statement and
Provide Directions to Staff on Outreach Opportunities

RECCOMENDATION:
There is no written report for this item. An oral discussion will take place at the meeting.

ATTACHMENT:
Draft Policy Position Statement
DRAFT POLICY POSITION STATEMENT

The Authority considered and adopted this position statement as direction to our staff and
consultants in preparing Public Utilities Commission (PUC) testimony due
February 22
nd
, 2013. This position was adopted, in advance of a completed EIR and in
recognition that more information will be forthcoming, because the PUC decision process is
underway and the Authority seeks to have a voice in that process. This document was adopted
at the January 31, 2013 Special Meeting and amended at the June 13, 2013 Regular meeting.
POSITION STATEMENT
Reiterate our support for a portfolio approach. This includes Ground Water Replenishment
(GWR), Aquifer Storage and Recovery (ASR), and Pacific Grove Small Projects, all of which
have public ownership, in addition to a desal project described here. Benefits of a portfolio
approach allow each individual element (PG small projects, GWR, ASR, desal) ability to move
on its own track and schedule such that a delay in one doesn't necessarily delay others. As
such, the Authority supports efforts to move forward with any individual element on its own,
especially if one element of the portfolio can move faster than the rest. For example, we
support ASR (and the associated pipeline infrastructure) moving forward even if desal is
delayed." The Authoritys position is consistent with the powers afforded to the Governance
Committee and as set forth in the Authoritys direct PUC testimony submitted on February 22,
2013.
Any project must meet four basic criteria:
1. Project economics must be competitive.
2. Project must have suitable public governance, public accountability and public
transparency.
3. Project must have clear path to permitting and constructing the facility as near to the
CDO deadline as feasible.
4. Project must have contingency plans to address significant technical, permitting and
legal risks.
None of the three projects (Cal Am, Deepwater Desal or DWD, or Peoples Moss Landing or
PML) as proposed meet these criteria. Therefore, none of the three projects as proposed
warrant Authority support. However, at this time Cal Ams proposed project appears to be
closest to meeting these four criteria. Cal Ams Project would earn our support if Cal Am
makes certain modifications. Consequently, the Authoritys support for the Cal Am Project is
subject to the following conditions:
FINANCIAL CONSIDERATIONS
1. Cal Am must accept a significant contribution of public funds consistent with the
parameters set forth within the Authoritys direct testimony submitted to the PUC on
February 22, 2013. Without the interest rate advantages afforded by such approach,
the costs of water from the Cal Am Project will be materially higher, and likely
substantially in excess of the cost of water from the alternative projects. A significant
contribution of public funds will avoid such an unwarranted expense to Cal Ams rate
payers. At the May 23, 2013 meeting, the Authority approved the refinement of the
previously adopted position to define significant contribution of public funds to mean
that Cal Am must accept the contribution of public funds of approximately 50% of the
cost of the project to include both surcharge two and the rate reduction bonds to count
toward the public contribution of 50%. Cal Am's traditional financing entails a blend
of 53% equity and 47% debt. A significant public contribution (combined with
Surcharge 2) should be of sufficient size to reduce Cal Am's equity to
approximately half that much (26 to 27%).
2. Cal Am must diligently seek to secure lower electricity rates for the project (e.g., $0.08-
$0.09 cents/kWh as most recently estimated by Cal Am) including agreement to
purchasing power through a municipal electrical utility, generation of on-site power if
necessary, other public entity or other source of low-cost power.
3. Cal Am must agree to limit the use of revenue from Cal Ams Surcharge 2 to reduce risk
to Cal Am ratepayers in the event the Cal Am project does not move forward. For
example, Cal Am could agree only to use Surcharge 2 to fund lower risk parts and
phases of the project (such as only the construction phase after the issuance of a
Coastal Development Permit from the Coastal Commission) or could provide other
mechanisms of reducing the risk to Cal Am ratepayers.
4. Cal Am must show something in writing from the State demonstrating its ability to
secure SRF financing. Absent such a document, the Authority will work with the Water
Management District to secure SRF financing as public agencies. Cal Am must accept a
public agency partner for SRF purposes if necessary, even if doing so results in a
reduction in Cal Ams equity position.
GOVERNANCE
5. Cal Am must agree, upon mutually-acceptable terms, to form a Governance Committee
to provide publicly-accountable oversight of the project.
PERMITTING & CONTINGENCY PLANS
6. To promptly address concerns pertaining to Cal Ams proposed intake wells, Cal Am
must:
a. Address or cause to be address all issues raised in the December 2012 Tim
Durbin testimony;
b. Proceed with the planned test wells and any other advanced geotechnical work
to support the proposed intake wells as soon as practically feasible;
c. Collaborate with local public agencies to advance permitting efforts with other
responsible agencies, including the California Coastal Commission;
d. Seek to clarify whether the installation of Cal Ams intake wells will require
approval from any federal agency, which would, in turn, require NEPA
compliance; and
7. Continue to explore and advance alternative intake strategies as a contingency if Cal
Am's proposed intake wells prove legally or technically infeasible.
a. Cal Am must fully develop a contingency plan or plans and implement that plan
or those plans for source water that do not involve wells in the Salinas Basin.
This must be done concurrently along with Cal Am planning and testing of slant
wells.
8. Cal Am must address questions about sea level rise and coastal erosion with respect to
the placement and longevity of their proposed slant wells. Coastal sands are also prone
to liquefaction in seismic events and coastal facilities are susceptible to damage from
tsunami events as well.

If Cal Am meets the above conditions, the Authority conditionally supports the Cal Am Project
because:
1. Cal Ams desal project size (9.6 desal only or 6.4 desal with GWR) appears to be
consistent with the Authoritys position of focusing on water for replacement and
replenishment including lots of record, pebble beach, allocation entitlement, and
economic rebound and accommodates the policy desire to pursue a portfolio of projects to
meet the needs of our communities, thereby reducing the risk associated with any project
failing or being delayed. The Coastal Commission identifies proposed projects with a
defined service area with a known level of build-out as involving an easier review while
projects with an unknown or extensive service area as involving a more difficult review.
Cal Ams project would involve this easier review while DWD would involve a more
difficult review.
2. Cal Ams project, DWD project and PML project are all in the planning stage although Cal
Ams project is the most advanced according to both SPI and the TAC.
3. Permitting agencies will require the least environmentally harmful feasible alternative for
source water intake. The Coastal Commission states that a subsurface intake (such as Cal
Ams proposed slant wells) involve an easier review while an open-water intake involves
a more difficult review. State Water Board staff likely will recommend that subsurface is
preferred. If subsurface is not feasible, consider Track 2 (infiltration galleries or open
water intake). It is unlikely that open water intake will be permitted unless test slant wells
have shown subsurface intake to be infeasible. Any project must therefore include a test
slant well. Only Cal Ams project proposes to do so.
4. Only Cal Am has demonstrated ability to finance a project. Their financing plan is
comprised of four different sources of capital; short-term construction financing, Surcharge
2, SRF, and equity. Neither of the other two projects have a detailed financing plan and
neither would likely have access to short-term construction financing, Surcharge 2 or SRF,
all advantageous forms of financing (Cal Am offers the short-term construction financing
but only for their project. Surcharge 2 is only permitted for a Cal Am facility. SRF is unlikely
to be available for open water intake.) We propose to include a significant public
contribution as a fifth source of capital. Doing so would significantly lower the Net Present
Value (NPV) cost of the project.
5. Cal Am has the capital necessary to complete the permitting of its project. Neither of the
other projects have demonstrated this ability.
6. Cal Am has indicated the potential for securing electricity at $0.087 per kwh and could
possibly purchase electricity at a lower rate through a municipal electrical utility formed by
a local public agency. DWDs proposed municipal electrical utility involves the City of
Salinas and its success is therefore outside of the direct control of the Authority.
7. The ultimate unit cost of water from the Cal Am Project in comparison to the cost of water
from the DWD and PML projects are close in amount presuming a significant public
contribution is made to lower the financing costs of the Cal Am Project and that Cal Am
secures electricity in the $0.08-0.09 per kwh range.
a. SPI estimates that Cal Ams production cost would be $2,310/$3,015 per acre foot
for the larger/smaller desal projects respectively if the cost of financing is brought
down to 4% and the cost of electricity is reduced to $0.087 per kwh. This is within
about 10% of the unit production costs of DWD ($2,100/$2,670) and is largely due to
the increased cost of slant wells.
b. The range of these estimates is minus 30% to plus 50%. The TAC recommends the
Authority focus its attention on the ranges.
c. For the larger plant, the range of the cost per acre foot of Cal Ams project with
Authority conditions is $1617 to $3465. The corresponding range for DWD is $1470
to $3150.
d. For the smaller plant, the range of the cost per acre foot of Cal Ams project with
Authority conditions is $2110 to $4522. The corresponding range for DWD is $1870
to $4005.
8. The DWD project involves a complex relationship of various entities, including a
municipal electrical utility, a data center, the formation of a regional JPA, a water purchase
agreement with Cal Am. The Authority is not aware that any of these relationships have
been established. This unresolved complexity leaves more room for possible delay or
failure. In contrast, Cal Ams organization structure is described as good by SPI.
9. Both DWD and PML will likely face questions from permitting agencies regarding the
placement of the desalination plant in relationship to the 100 year flood plain and sea level
rise. It is unclear how either project will respond to such questions.
10. The CEQA review for Cal Ams project is well underway and is being handled by the
Public Utility Commission as the lead agency. Any court challenge to the CPUCs EIR
must be made by a petition directly to the State Supreme Court (very few petition are
granted), reducing the legal risk of a challenge and also reducing the likelihood of project
delay in comparison to a CEQA challenge to a project involving a local lead agency.
Moreover, the Authority reiterates its request that both alternatives be reviewed at a
project level such that no further environmental review would be required if the Cal Am
project fails in whole or part.
11. The draft Governance Committee agreement strikes the right balance of ensuring that the
most important decisions are either made by public agencies or are fully informed by
recommendations from public agencies. The draft Governance Committee agreement
avoids inserting the public agencies into decisions that are judged to be better made by a
private entity.

ADDITIVE CONSIDERATIONS
Water Allocation. The proposed project is sized based on an estimate of the water needed for
replacement, replenishment, economic rebound, Pebble Beach allocation entitlement, and lots
of record. The estimate has been established for project design, engineering, and financial
planning purposes. The Authority supports this size for this purpose. Allocation decisions about
the use of the water should not be made by the PUC but instead should be made locally. The
Authority supports the MPWMDs proposal to initiate a process, in collaboration with the
Authority and other public agencies, to develop proposed amendments to MPWMDs water
allocation ordinances to address the allocation of water obtained from the Project. While the
Project is not sized for General Plan build-out within Peninsula jurisdictions, the Authority has
requested that the EIR evaluate a full range of plant sizes up to and including the size
necessary for full General Plan build-out. Further, the MPWMD, in collaboration with other
public agencies, should seek to update the estimate of the added capacity necessary to meet
the General Plan build-out projections for the Peninsula jurisdictions. The Authority
recognizes that future circumstances may trigger a need for review of future water
supply needs for the Peninsula to either expand or develop a new water supply to avoid
future pending shortage situations. The Authority will request Cal Am to initiate a
process to address the adequacy of the water supply to meet the future service
obligations of Cal Am customers as defined by the California Public Utilities
Commission.
Pacific Grove Non-Potable Water Projects. The Authority supports Cal Ams inclusion in its
next general rate case application proposals for Cal Am to collaborate with Pacific Grove in the
development of its projects to generate as much as 500 acre-feet of recycled, non-potable
water per year.
Project Cost Control. The Authority is working to reduce the Projects ratepayer impacts
through a significant public contribution, appropriate use of Surcharge 2, the Governance
Committees review of the RFP process, and the Governance Committees value engineering
process. Any cost cap imposed on the Project should be reasonably calculated to avoid
frustrating project financing or causing project delay.
Contingency Planning. As described in condition #6 above, the Authoritys primary concern
regarding contingency planning involves contingencies for the source water intake. We also
recognize the need to do contingency planning for certain other aspects of the Project,
including brine discharge.
Water Connection Fee. At the May 23, 2013 regular meeting the Authority approved support of
the concept of a new water service connection fee with the reservation of seeing further
information and study to refund the connection fee costs for possible integration.

Agenda Report

Date: July 11, 2013
Item No: 5.

06/12

SUBJECT: Review, Discuss and Consider Execution of Legal Conflict Waiver Letter to Allow
MPRWAs Water Counsel, Brownstein Hyatt Farber Shcreck, LLP, to Represent
the City of Carmel-by-the-Sea with Respect to the Citys Efforts to Acquire Table
13 Water Rights (As Described in SWRCB D. 1632 and Related Subsequent
SWRCB Orders) from the Odello Ranch

RECCOMENDATION:
There is no written report for this item. An oral report will take place at the meeting.

ATTACHMENT:
Disclosure of Relationship, and Waiver of Potential Conflict of Interest

Russell M. McGlothlin
Attorney at Law
805.882.1418 tel
805.965.4333 fax
RMcGlothlin@bhfs.com
July 8, 2013
VIA EMAIL
Daphne Hodgson
Deputy City Manager of Administrative Services
City of Seaside
440 Harcourt Avenue
Seaside, CA 93955
dhodgson@ci.seaside.ca.us

James Cullem
Executive Director
Monterey Peninsula Regional Water Authority580 Pacific Street, Monterey
Monterey, CA 93940
Cullem@monterey.org

Jason Stilwell
City Administrator
City of Carmel
P.O. Box 805
Carmel, CA 93921
cityatty@ix.netcom.com

RE: Disclosure of Relationship, and Waiver of Potential Conflict of Interest
Dear Ms. Hodgson, Mr. Cullem, and Mr. Stilwell:
This letter confirms our recent discussions regarding Brownstein Hyatt Farber Schreck, LLP
(Brownstein) proposed representation of the City of Carmel (Carmel) with respect to Carmels efforts
to acquire Table 13 water rights (as described in SWRCB D. 1632 and related subsequent SWRCB
orders). Carmel is considering contracting for Table 13 water rights, including those held by the Odello
Ranch, and to obtain orders from the State Water Resources Control Board (SWRCB) and the
California Public Utilities Commission (CPUC) to authorize a portion of the water rights to be used by
California American Water Company (Cal-Am) to service new and expanded water use within Carmel
(Proposed Representation). This will require agreement by the SWRCB and CPUC to allow an
exception from the currently-applicable water service moratorium in effect pursuant to orders by the
SWRCB and CPUC that are binding on Cal-Am.
We presently represent the Monterey Peninsula Regional Water Authority (Authority) with respect to
issues relating to Cal-Ams proposed Monterey Peninsula Water Supply Project (MPWSP) for which
Cal-Am is presently seeking approvals from the CPUC and other agencies. We also generally represent
the MPWSP concerning water supply by Cal-Am to the Monterey Peninsula, which may involve future
proceedings before the SWRCB, CPUC, other regulatory agencies, or the California Courts. Brownstein
also represents the City of Seaside (Seaside) with respect to matters concerning the Seaside
Groundwater Basin (Seaside Basin) and Seasides use of groundwater from the Seaside Basin.
Because of these ongoing representations, we must obtain conflict of interest waivers before
July 8, 2013
Page 2
013849\9000\10485387.2
Brownstein can proceed with the Proposed Representation of Carmel. Brownstein has also previously
represented Cal-Am with respect to issues pertaining to the Carmel River, but no longer does so.
The applicable California Rules of Professional Conduct (attached) require us to explain the extent of
our client relationships, fully disclose any existing or potential conflicts of interest, and obtain your
written consent to our proposed representation of Carmel with respect to the Proposed Representation.
It is important that you understand the nature of these potential conflicts before signing the attached
Consent and Waiver of Conflict of Interest. Pursuant to the Rules of Professional Conduct (attached),
Brownstein discloses and requests that you waive any actual or potential conflict of interest that may
arise from our representation of Carmel regarding the Proposed Representation.
Although we do not perceive a present conflict nor a likelihood of a future conflict arising from the
Proposed Representation, Seasides and the Authoritys interests respecting the matters for which we
respectively represent them, and Carmels interest in the Proposed Representation may potentially
conflict. Cal-Am uses water from the Carmel River and the Seaside Basin to supply the Monterey
Peninsula. The pending application before the CPUC for approval of the MPWSP is intended, in part, to
provide a replacement water supply to allow Cal-Am to reduce its unauthorized use of Carmel River
water, consistent with the SWRCBs directive in SWRCB WR Order 2009-60.
It is possible Carmels efforts to procure and permit use of the Odello Ranch Table 13 water rights could
interfere with Cal-Ams efforts to obtain CPUC approval and other necessary permits for the MPWSP,
or efforts to obtain SWRCBs modifications to SWRCB WR 2009-0060 relating to Cal-Ams use of water
from the Carmel River. This could raise a conflict of interest with respect to Brownsteins representation
of the Authority regarding the MPWSP or other water issues before the CPUC or SWRCB . For
example, it is possible that should Carmel seek permission from the CPUC and SWRCB to relieve the
presently-imposed moratorium on new and expanded water service occasioned by the acquisition of
the Odello Ranch Table 13 water rights, such effort could conflict with the interest of the Authority as
they relate to the CPUC or the SWRCB. While we dont presently perceive such a conflict of interest as
likely to occur, such a conflict is a possibility.
It is also possible that Carmels efforts to procure and permit the use of the Odello Ranch Table 13
water rights could conflict with the interests of Seaside as to the matters on which Brownstein
represents Seaside. Although we do not presently perceive a likely conflict of interest and cannot
predict with specificity the manner in which a conflict could arise, the interrelated nature of the Carmel
River and the Seaside Basin, which are used by Cal-Am in an integrated manner to serve water
demands on the Monterey Peninsula, could cause a conflict of interest to arise.
Should an actual conflict occur between the Authority or Seaside and Carmel regarding the Proposed
Representation, we will attempt to resolve the conflict in a manner that protects our ability to continue
our concurrent representation of all our clients. However, that may not be possible or practical given the
ethical rules presented below. Thus, we request that Seaside, the Authority and Carmel waive any
potential conflict of interest with respect to our representation of Carmel regarding the Proposed
Representation. Should a conflict or dispute arise that we cannot resolve informally regarding the
Proposed Representation, we will terminate our representation of Carmel regarding the Proposed
Representation and Carmel will need to obtain separate independent counsel regarding the conflict or
dispute. We will not represent any client with respect to the dispute.
In conclusion, we request that you sign, date and return to us a copy of this letter acknowledging that
you have been advised of the Rule and of the potential conflicts associated with your respective
interests, and that you nevertheless agree to the concurrent representation and the waiver of conflicts
regarding other Brownstein clients.
July 8, 2013
Page 3
013849\9000\10485387.2
We encourage you to seek the advice of independent counsel in reviewing this consent. Should you
have any questions concerning this letter or the consent, please discuss them with your own,
independent counsel before signing and returning the enclosed copy of this letter.
Best Regards,

Russell M. McGlothlin
Brownstein Hyatt Farber Schreck, LLP

Enclosures: California Rules of Professional Conduct

July 8, 2013
Page 4
013849\9000\10485387.2
CONSENT AND WAIVER

The undersigned acknowledge receipt of the above written disclosure pursuant to the California Rules
of Professional Conduct and understand the matters discussed therein. Having all this information in
mind, I consent and give approval to Brownsteins representation of Carmel as described in this letter,
and waive any actual or potential conflict of interest arising from Brownsteins concurrent representation
of Seaside, the Authority and Carmel as described in this letter. In the event that such an actual conflict
of interest occurs, Brownstein will continue to represent Seaside and the Authority on matters unrelated
to the Proposed Representation and Seaside, the Authority and Carmel will be represented by
independent counsel regarding any dispute arising from the Proposed Representation.

I acknowledge that I have had an opportunity to review this matter with independent legal counsel. In
the event that I have not discussed the matter with a legal counselor of my choice before executing this
consent/waiver, I freely and voluntarily waive such counsel, although I understand that I have the right
to seek such independent counsel regarding this matter at any time.

CITY OF SEASIDE
By: _______________________________ Dated: _________________
Daphne Hodgson
Deputy City Manager, City of Seaside

MONTEREY PENINSULA REGIONAL WATER AUTHORITY
By: _______________________________ Dated: _________________
James Cullem
Executive Director

CITY OF CARMEL
By: _______________________________ Dated: _________________
Jason Stillwell
City Administrator, City of Carmel

July 8, 2013
Page 5
013849\9000\10485387.2
California Rules of Professional Conduct, Rule 3-310 (B) and (C)

"(B) A member shall not accept or continue representation of a client without providing
written disclosure to the client where:

(1) The member has a legal, business, financial, professional, or personal
relationship with a party or witness in the same matter; or

(2) The member knows or reasonably should know that:
(a) the member previously had a legal, business, financial, professional, or
personal relationship with a party or witness in the same matter; and

(b) the previous relationship would substantially affect the members
representation; or

(3) The member has or had a legal, business, financial, professional, or personal
relationship with another person or entity the member knows or reasonably
should know would be affected substantially by resolution of the matter; or

(4) The member has or had a legal, business, financial, or professional interest in
the subject matter of the representation.

(C) A member shall not, without the informed written consent of each client:
(1) Accept representation of more than one client in a matter in which the interests
of the clients potentially conflict; or
(2) Accept or continue representation of more than one client in a matter in which
the interests of the clients actually conflict; or
(3) Represent a client in a matter and at the same time in a separate matter
accept as a client a person or entity whose interest in the first matter is adverse
to the client in the first matter.

RESOLUTION NO. - C.S.

A RESOLUTION OF THE MONTEREY PENINSULA
REGIONAL WATER AUTHORITY

APPROVE OPERATING BUDGET FOR FISCAL YEAR 2013-14

WHEREAS, the Authority has provided direction for needs and services to carry out its
purpose and mission, and

WHEREAS, the anticipated cost of carrying out the direction of the Authority will require
$423,680 in funding for fiscal year of 2013-14 as outlined in EXHIBIT 1, and

WHEREAS, the anticipated unspent funds from the previous fiscal year will be $82,417 and
will be applied to the FY 2013-14 operating budget, and

WHEREAS, the Monterey Peninsula Regional Water Authority (The Authority) approved the
operating budget for Fiscal Year 2013-14 on April 25, 2013, and

WHEREAS the Authority member cities have been allocated percentages based on water
usage and agreed upon within the Joint Powers Agreement,

NOW, THEREFORE, BE IT RESOLVED that the Authority adopt this resolution
memorializing the operating budget for FY 2013-14 adopted on April 25, 2013.

BE IT ALSO RESOLVED that the Authority request all Member Cities to forward this to their
respective councils for approval of contributions for the operation of the Authority so that a suitable
solution for water can be found.

PASSED AND ADOPTED BY THE MONTEREY PENINSULA REGIONAL WATER
AUTHORITY this
th
day of , 2013, by the following vote:

AYES: DIRECTORS:
NOES: DIRECTORS:
ABSENT: DIRECTORS:
ABSTAIN: DIRECTORS:

APPROVED:

ATTEST:

Chuck Della Sala, President

Authority Clerk

Exhibit 1

Based on the Authoritys Joint Powers Agreement, Table 1 is the approved Member
City expense allocation based on water usage.

Table 1: Member City Expense Allocation Based On Water Usage

Member City Weight
Carmel By the Sea 9.30%
Sand City 1.30%
City of Pacific Grove 18.80%
City of Seaside 22.00%
City of Monterey 46.50%
City of Del Rey Oaks 2.10%

Table 2: Proposed Budget 2013-2014 Fiscal Year

Adopted
Budget
12-13
Propose
d Budget
13-14
Carry
Over
From
12-13
Funds
Requested

Professional Services
Legal Counsel $20,000 $63,000 $4,500 $58,500
Attorney of Record $149,412 $100,000 $0 $100,000
Staff $35,000 $35,000 $0 $35,000
Financial Advisor Services $12,500 $0 $0 $0
Executive Director $131,868 $94,680 $63,548 $31,132
Studies $10,000 $10,000 $10,000 $0
Project Evaluation $86,650 $20,000 $1,545 $18,455
Contract Assistance $0 $15,000 $0 $15,000
Travel $0 $5,000 $0 $5,000
Public Outreach $0 $49,000 $0 $49,000
Insurance $4,000 $7,000 $86 $6,914
Audit $5,000 $5,000 $0 $5,000
Contingency $22,295 $20,000 $2,738 $17,262
Total Budget FY 13-14 $476,726 $423,680 $82,417 $341,263

Exhibit 1

Table 3: Proposed Public Outreach Budget Expanded

Website Update/Redevelopment $15,000
Ease of use
Attractiveness
Search engine by keyword
Speakers' Bureau Support $20,000
Research
Develop Brochure
Key Points
Cost/Benefit Analysis
Ratepayer Impacts
Significant Issues and Concerns
Televising Meetings $14,000
TOTAL $49,000


Agenda Report

Date: July 11, 2013
Item No: 7.

06/12

SUBJECT: Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9
California Public Utilities Commission, In the Matter of Application of California-
American Water Company (U210W) for Approval of the Monterey Peninsula
Water Supply Project and Authorization to Recover All Present and Future Costs
in Rates, A.12.04.019, Filed April 23, 2012

RECCOMENDATION:
There is no written report for this item.


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