M I N U TE S MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Regular Meeting 7:00 PM, Thursday, April 11, 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. and all members were present. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF President Della Sala invited reports from Directors and staff and had no requests to speak. PUBLIC COMMENTS President Della Sala invited comments from the public for items not on the agenda. David Armanasco representing Deep Water Desal provided a brief update indicating they have responded to requests from the California Public Utilities Commission (CPUC) to meet and provide information as an alternative project to the Cal Am Monterey Peninsula Water Supply Project (MPWSP) Environmental Impact Report (EIR). He also indicated that DWD will be submitting a project description simultaneously to the CPUC and the State Lands Commission. With no further requests to speak, President Della Sala moved to the first agenda item. APPROVAL OF MINUTES 1. February 14, 2013 Action: Approved On a motion and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the minutes of February 14, 2013. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 2. 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 Executive Director, Legal Counsel, Clerk of the Authority

March 14, 2013 Action: Approved On a motion and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the minutes of March 14, 2013.

MPRWA Minutes AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS:

Thursday, April 11, 2013 Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

AGENDA ITEMS 3. Receive Report From The Monterey Regional Water Pollution Control Agency and The Monterey Peninsula Water Management District Regarding The Ground Water Replenishment Project (Israel, Stoldt) Action: Received Report and Discussed Review Scopes of Work for Feasibility and CEQA Analysis Monterey Peninsula Water Pollution Control Agency (MRWPCA) General Manager Keith Israel introduced the item and acknowledged the support the Monterey Peninsula Water Management District has provided, specifically with regards to funding. He spoke to the goals of the Ground Water Replenishment (GWR) project of bringing an additional 3,500 acre foot of water into the Seaside Basin. He then reported on the three components to the project; 1) Bringing source water to facility, 2) Reverse Osmosis Treatment and 3) Pumping water into Seaside Basin. The anticipated cost for the program is $2,000 to $2,600 per acre foot of water. He provided a handout with the projected schedule which is outlined below: • • • CEQA to be completed by Second Quarter 2014. Monitoring test well completed by end of 2013. Two phase feasibility study to address sizing, which will complete phase 1 by June 2013 to be able to provide concept to partners (farmers and city of Salinas) regarding the source of water under consideration. Continue to work on pilot tests in 2013 Design work to be completed in 2014, Design-Build staring in 2015 to be completed by end of year

a.

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Mr. Israel then reported the MRWPCA passed the budget authorizing various components of the project and indicated that public outreach is the next major hurdle and they are working with an independent consultant for assistance. The current focus is trying to understand the key issues from the stakeholders. He then invited agencies to coordinate public outreach efforts to maximize the use of the dollars available. Mr. Israel then spoke about the public workshop being sponsored by the California Public Utilities Commission on June 12, 2012 to determine criteria for Ground Water Replenishment. He also spoke about conducting a water feasibility study to determine water rights, how much water is needed and how to distribute it. He identified additional sources of potential water which could be treated and used such as produce wash water, Peninsula and Salinas storm water flows, drain water and unused waste water.

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Monterey Peninsula Water Management District General Manager Dave Stoldt then presented a report highlighting things the District is doing separately to support the GWR project and touched on the GWR “Go/No Go” criteria that is being developed. He reported that the District intents to reach out to the three intervening parties to ensure they understand the criteria prior to the cost workshop. He reported that the model for the first draft of cost sharing needs some tweaking and the District is considering taking a more significant role. Mr. Stoldt listed the following hurdles the District is trying to work through: • • • • Storage agreement - must be modified from those who have current rights. Develop water purchase agreement with assurances that will work for Cal Am Address the debt equivalence issues. Policy consideration for GWR, there are four key policy areas state wide, 3 from the water resources control board. Trying to forge a nexus between what they want and how it is a solution, and how it interacts with the CDO. AB 32 related to energy use. Need for hospitality-specific public outreach

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Both Mr. Stoldt and Mr. Israel answered questions from the Directors. Director Edelen suggested a press conference, and coordinating a trip to the Orange County facility for media related personnel and encouraged arming them with complete and accurate information about successful programs. Director Rubio spoke in support of public outreach and suggested bringing back cases of water for distribution as samples by the public. He then questioned the completion of the scoping of the EIR and requested consideration of a full scale EIR for the GWR project. He questioned the recycled water project if it would supply enough water to have a recycled component for landscaping. Mr. Israel responded that the Marina Coast Water District is ready to talk specifics on the use of Recycled water and it is targeted as an additional source of water. Director Pendergrass spoke to the difference in perspective after a trip to the Orange County facility and spoke to the positive impact it makes to perspective of the project and he encouraged anyone that is available to tour the facility. Director Kampe questioned the process that astronauts use to clean water during missions and Mr. Israel confirmed it is the same process. Vice President Burnett spoke to the support of the intervener’s testimony, including the Planning and Conservation League, who indicated that they would be willing request a partial relaxation of the Cease and Desist order if it moved the GWR project forward. The June 12, 2012 CPUC meeting will help establish the go-no go criteria and Vice President Burnett, as Chari of the TAC will vet through the TAC and other interveners before bringing it back to the Directors. President Della Sala invited public comments on the item. Nelson Vega questioned the water rights of the agricultural community and requested an explanation of the ownership of the Seaside Aquifer. He also questioned why there has been no discussion on the facility that would be used to filter and treat the water. He suggested that water be sold at different rates for those that have different uses of water and urged the Directors to support the lowest cost water supply. With no further requests to speak, President Della Sala closed public comment.

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Mr. Israel spoke to Mr. Vega’s comments that the MRWPCA is looking for additional sources of water to avoid legal conflict and that conversations with the agricultural community have been positive. The goal is proposing a project that meets that need by working with multiple sources of water to solve the water rights issue. Member Stoldt responded to Mr. Vega’s question about cost and indicated that the small desalination facility will cost approximately $3,400 per acre foot and the GWR project costs could be approximately $2,400 per acre foot. He then said the cost of the desalination facility plus the GWR project is the most cost effective option and that there is an analysis being done to illustrate and will be presented to the public. He then spoke to the question about control of the aquifer and said that storage is allocated based on what the Adjudication Judge assigned to existing pumpers. If storage is going unused, it can be made available to others. The Water Master has a storage recovery agreement, which is something that can be modified. Would look to the current rights holders and request agreement. Lastly he spoke to the comment about selling water at different rates and he said there is a legal mechanism to allow the highest bidder purchase, however, the bidding process works against all models in California. There is an opportunity to recover the different costs by charging a connection feel, but not through cost adjustment. There will come a time that water will need to be allocated differently to the different jurisdictions. 4. Receive Report Regarding The Status of the Monterey Peninsula Regional Water Management District Back up Projects (Stoldt) Action: Received Report and Discussed Mr. Stoldt presented the report for this item and indicated that the Request for Qualifications (RFQ) for a desalination facility was issued and received 2 statements of qualifications. Both were reviewed at the committee and board level and the MPWMD elected to begin negotiations with Deep Water Desal for a cost sharing with the permitting issues. Currently they are meeting with an attorney to solidify contractual relationships and other related pieces. Next there will be a meeting with the State Lands Commission to potentially be a co-lead agency for the environmental work. The process is to ensure that there is a backup plan in progress while waiting for the results for the MPWSP test wells. There is still a high risk for not receiving permits for open water intake and it is still worth making an investment to a certain level to advance an alternative plan. President Della Sala opened the item to public comment. Nelson Vega clarified that it was the Deep Water project supported as an alternative project and expressed concern for the selection of firm and the cost to tax payers associated with pursuing the alternative plan. Tom Rowley spoke representing Monterey Peninsula Taxpayers Association expressing concern that there is duplication of effort and costs for pursuing an alternative project and environmental studies as the Authority requested the CPUC to require a project level analysis of DWD. He requested that the Authority question this duplication of efforts and funds spent. Having no further requests to speak, President Della Sala closed public comment. President Della Sala spoke to Mr. Rowley’s comment indicating the duplication of effort and cost is a hedge against the eventuality of litigation that could paralyze the desalination project. MPWMD did endorse the MPWSP, and adopted the 8 conditions, including pursuing an alternative intake project, which Cal Am is not pursuing. The WMD is doing what has been asked of Cal am to move along and qualify an alternative intake that is out of the Salinas valley Ground Water to be in a better position to move the project along. 5. a. Receive Report on Second Governance Committee and Provide Direction (Burnett) Cal Am Request for Qualifications for Design Build Firms Desalination Plant Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, April 11, 2013 4

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Vice President Burnett reported on the recent Governance Committee which discussed the Request for Qualifications (RFQ) for the MPWSP. He communicated the comments provided by the Authority and Cal Am incorporated all requested comments and the RFQ has been released. The Request for Proposal (RFP) will be released in draft form in May and Cal Am will allow the Authority to provide comments before publication. Other action items from the meeting included a letter sent to Judge Weatherford requesting a workshop to discuss criteria for the GWR decision. Also, efforts have been made to meet with the Monterey Regional Waste Management District to explore opportunities with the landfill gas recovery program. A letter of interest describing the parameters and timeline will be prepared and sent. Vice President Burnett answered questions from the Directors. President Della Sala opened the item to public comment. Nelson Vega questioned access to information being sent or received by public officials during public meetings. Legal Counsel Freeman responded that it is not illegal, even with the Brown Act, but it would be a public comment and would be accessible to the public. Sue McCloud commented on pursuing discussions with the MRWMD as their agenda packet is being published tomorrow and encouraged a letter of interest to be sent prior to distribution of the packet. With no other requests to speak, President Della Sala closed public comment. 6. Review 2013 -2014 Budget for Public Outreach and Provide Comments to Staff (Reichmuth) Presented Report and Received Direction Executive Director Reichmuth spoke to the request by the Authority for a comprehensive public outreach campaign. Provided in the agenda report, was an expansive public outreach program for a water supply project, GWR and desalination facility. Mr. Reichmuth answered questions and received direction from the Directors. Director Kampe spoke to Mr. Reichmuth’s comments and suggested of a public outreach budget of approximately $40,000 and requested staff explore some cost sharing opportunities with other agencies. Director Rubio spoke in support of Director Kampe’s comment. President Della Sala opened the item to the public. Tom Rowley spoke to the credibility of the Authority from their past actions, acknowledged the need for public outreach including the need to avoid rationing. He said the best outreach you have is the reputation of the Authority then spoke to having all Land use jurisdictions represented. Doug Wilhelm suggested more research about what type and level of outreach that is needed and spoke about the level of effort of public outreach that occurred with the Poseidon project. Nelson Vega spoke to the cost of outreach per person and suggested outreach to the public via the water bill. Sue McCloud spoke to previous comments about how to combine outreach efforts with other agencies. With the last project there was a vetting many firms and the objectives to be achieved must be identified and broken down into functional methods. Past efforts could be reformatted for this campaign. With no further requests to speak, President Della Sala closed public comment. Director Pendergrass suggested a subcommittee of the board collaborate with other agencies for public outreach. Director Rubio agreed with Director Pendergrass and said Cal Am also has responsibility to communicate to their constituents.

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President Della Sala spoke to the need to be transparent and be good representatives, suggested a budget of $40,000 for the next Fiscal Year, scheduled to be spent quarterly or by tasks for a tracking for the expenditure of money, to be able to allow staff to prepare and have the Directors approve the budget for next year to be passed on to the member City jurisdictions prior to adoption of their annual budgets. Director Kampe spoke to the need for an upgraded website, televised meetings, and spoke to the emotional sensitivity to the public that needs to be documented, distributed and available. He suggested a budget of $45,000. He then commented that he does not know what the purpose of the outreach is intended to be, what the goal is or what the time line will be. The Authority came to a consensus that staff return at the next meeting with a tier 1 approach budget of $45,000 for the next fiscal year. 7. Receive Update Report from Cal Am Regarding Compliance with Conditions for Authority Support of Cal Am Desal Project (Bowie) Action: Merged Items 7 & 8, Received Report and Discussed Vice President Burnett reported that staff for the MPWSP project have been at the CPUC hearing testifying and have not had the opportunity to update on progress made since the last presentation therefore will not be able to provide a full report. He then requested that Items 7 and 8 on this agenda be merged. The Directors agreed. Mr. Burnett indicated that the CPUC Testimony Hearing was a productive exercise and spoke to the great work our Legal Counsel Russ McGlothlin provided. He then spoke to the process that took place throughout the proceeding and said the productive work was accomplished spending time with all the intervening parties to understand their issues and make agreements. He reported that the next step includes hearings which will be completed in early May, after which begin the legal briefings, which will be a potentially a costly endeavor. There is a 30 day window of opportunity to submit to the CPUC compromises that have been worked out by intervening parties. Legal Counsel Freeman spoke in support of eliminating issues prior to the Briefings to reduce legal costs. Vice President Burnett then spoke to the two handouts presented which are matrix updates of the testimony hearings and Cal Am’s compliance with the Authority adopted support conditions. He noted that the topic of public contribution received the largest amount of attention at the hearings, as well as the construction of public funds. Vice President Burnett then described the process that could be used to cover the $40 billion dollars in transactions, $6 billion approved by the CPUC through a process called securitization. He indicated that a testifying Cal Am expert admitted that although there are many potential problems from utilizing public funding, there are ways Cal Am could be willing to accept since it is not recourse debt. Mr. Burnett then reported that a meeting that occurred after the hearings concluded resulted in generation of four potential scenarios for public contribution. Ken Talmage spoke to explain the different scenarios. President Della Sala opened the item for public comment. Nelson Vega thanked Vice President Burnett for his efforts, then expressed concern that it was very risky to the rate payers and in many scenarios could leave them with stranded costs. With no further requests to speak, President Della Sala closed public comment. Vice President Burnett answered that an agreement can be made to have a reserve fund set aside or to have up to one year of bond servicing in reserve in the event of default.

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Vice President Burnett then commented on progress made to meet the eight compliance conditions for the MPWSP. He noted that Cal Am has acknowledged that the project likely will NEPA and has applied to the Army Corps of Engineers. Also Cal Am continues to push back and is not actively pursuing a contingency plan and questioned what should be done about that. He then indicated that there is a request from an intervening party for a change to the brine discharge system, which is not part of the conditions but it is important to note. The request is to change from a depressurized to a gravity controlled brine discharge system, which would force the brine to mix. Cal Am indicated that is not necessary and would add $10 million to the project cost. The argument is that it could cause a dead zone if not remediated. Lastly he reiterated that many areas are amenable to a settlement and should be perused. President Della Sala opened the item to public comment. Tom Rowley spoke to the eight policy conditions and questioned the timing for the release of the EIR in relation to the release of the Administrative Law judge decision and what the process would be if it is denied. He then expressed concern about the duplication of efforts. Nelson Vega also expressed concern about the process and questioned the development of contingency plan, and expressed frustration with Cal Am that they will not develop a contingency because they cannot recoup the costs from the ratepayers. With no additional requests to speak, public comment was closed. Vice President Burnett spoke to Mr Vega's comment that Cal Am cannot recover cost for something that is not used and useful. Legal Counsel Freeman confirmed that the CPUC could direct the resistance to engage in a parallel process, where they would only be able to be reimbursed for the one successful project. Vice President Burnett requested agendizing for a future meeting contracting for professional help, not to exceed $10,000, to assist with the settlement process to reduce the amount of work assigned to the Attorney of Record, indicating the settlement process will require more structure rather than ad hoc availability. Legal Counsel Freeman suggested not losing the two weeks between now and the next meeting and suggested the Authority authorize the action. The Directors Agreed. 8. Receive Update and Provide Direction for California Public Utilities Commission Testimony Hearing for Application (A-12-01-019) Action: Item Merged with Agenda Item 7 ADJOURNMENT With no further business to come before the Authority, President Della Sala adjourned the meeting at 9:57 p.m.

ATTEST:

Lesley Milton, Clerk of the Authority

Chuck Della Sala, MPRWA President

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