Agenda Monterey Peninsula Regional Water Authority (MPRWA) Regular Meeting 7:00 PM, Thursday, December 27, 2012

Council Chamber Few Memorial Hall of Records

Monterey, California

ROLL CALL PLEDGE OF ALLEGIANCE 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. 2. 3.

November 14, 2012 December 10, 2012 December 13, 2012

AGENDA ITEMS

4.

Discussion of Financial Advisory Services

***Adjourn to Closed Session***

5.

Closed Session Pursuant to California Government Code Section 54957: Public Employee/Public Employment Appointment - Executive Director
ANNOUNCEMENTS FROM CLOSED SESSION 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.

Thursday, December 27, 2012 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.

MINUTES MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Special Meeting 7:30 PM, Wednesday, November 14, 2012 FEW MEMORIAL HALL OF RECORDS CITY COUNCIL CHAMBER MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL President Della Sala opened the meeting at 7:33 p.m. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF 1. Reports from Technical Advisory Committee Action: Received Reports Director Burnett commented that the TAC met on November 13, 2012, discussed Item 6 on tonights agenda and will reserve comments from the TAC for later in the meeting. 2. Reports from Authority Directors Action: Received Reports Director Burnett reported on a phone call from Rob McClain from Cal Am discussing the agricultural community and indicated that Cal Am is looking at a slant well that has the ability to draw water from both the deep and shallow well aquifer. Vice President Bachofner reported that he and Director Edelen attended a Watermaster meeting and discussed the replenishment rate Cal Am is proposing of the Seaside aquifer. Both Directors are hoping that the ultimate replenishment rate is accomplished in less than 50 years. The Watermaster will consider a revised proposal at the next meeting. Director Edelen reported as Treasurer to the Authority that there was $9,935.35 in the MPRWA checking account. President Della Sala requested a written report on the MPRWA financial status at the next meeting. PUBLIC COMMENTS President Della Sala opened the floor to public comments for items not on the agenda. Nina Beety spoke against the installation of Cal Am water meters and is requesting consideration of physical ailments that may come from associated radiation levels and spoke in opposition to our cultural dependence on oil, fracking and EMF artificial radiation. She urged the Authority to consider long term health effects of our community over water projects. Tom McDonald spoke about specific articles listed in local publications about the bravado of Cal Am and that they would not consider public participation if the Authority continued researching other projects. He also questioned the decrease in Cal Ams estimated costs asking if that was related to the $99 Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None Legal Counsel, Clerk to the Authority

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million contribution made by the ratepayers. Lastly, he questioned Cal Ams legal rights to the water they propose to desalinatate and thinks the matter should have been resolved earlier in the process. With no further requests to speak, President Della Sala closed public comment. APPROVAL OF MINUTES 3. June 28, 2012 Action item: Amended and Approved On a motion by Director Burnett and seconded by Director Edelen and passed by the following vote, the MPRWA voted to approve the minutes of June 28, 2012 as amended with minor corrections of names and grammar. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4. 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

October 22, 2012 Special Meeting Action item: Amended and Approved On a motion by Director Burnett and seconded by Vice President Bachofner and passed by the following vote, the MPRWA voted to approve the minutes of October 22, 2012 as amended. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

5.

October 25, 2012 Special Meeting Action item: Amended and Approved On a motion by Director Pendergrass and seconded by Director Burnett and passed by the following vote, the MPRWA voted to approve the minutes of October 25, 2012 as amended. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

AGENDA ITEMS 6. Receive and Discuss Draft Consultant Report, TAC Recommendation and Provide Direction to Staff Regarding Policy Position on Desalination Projects to be Communicated to California Public Utilities Commission Action: Received report, Discussed and Provided Direction to Staff Monterey Peninsula Regional Water Authority Special Meting Minute - Wedneda November 14, 2012 MPRWA Meeting, 12/27/2012 , Item No. 1., Item Page 2, Packet Page 2 2

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President Della Sala introduced the item and identified the order in which the item will be presented and comments received. Alex Wesner, Vice President of Separation Processes Inc. (SPI) delivered a presentation for the Evaluation of Seawater Desalination project study explaning the process used to obtain the results presented in the printed report. Mr. Wesner, SPI President Gerry Filteau and Kris Helm from Kris Helm Consulting were present to answer questions from the Authority and the public. President Della Sala brought the discussion back to the Board. Director Burnett reported from the November 13, 2012 TAC meeting indicating the TAC prepared a summary of significant points for the Authority Board to consider and requested additional time for written public comments to be submitted. He indicated that the TAC recommendations fall into the five basic categories listed below: 1. Identification of significant issues or deal stoppers that must be addressed. No deal stoppers were identified by the TAC, merely clarifications. 2. Clarification of assumptions. The assumption leads to the conclusion, so they want to clarify that they agree with the conclusion. 3. Other improvementsdetailed comments were made in the attached memo. 4. Schedule Final report needs to be received no later than the 3 rd week in December, including additional comments from the public and the authority 5. Any additional clarifications or questions the Authority may have in addition to the TAC recommendations. The Water Management District developed a comprehensive memo looking at financing structures which is agendized for discussion at the TAC meeting on November 19, 2012, at 2:00 p.m. Director Edelen questioned how specific calculations were derived, thanked the consultants for the unbiased, non-political review and encouraged the consultants to make a recommendation for a specific project. Mr. Helm responded the scope of work did not include making a recommendation for a project but to provide a comparison in order to assist the Authority in developing a path and recommendation. Mr. Wesner responded to comments from the Board indicating that conclusions were developed from information available through October 15, 2012, and additional information would result in a substantial impact on the agreed timeline and the ability to produce within the contracted budget. Director Pendergrass requested the final document consider energy recovery cost proposals, identify if potential litigation, water rights or outfall issues would be considered fatal flaws and asked if the document could also include brine discharge permits for all three projects. Mr. Wesner responded acknowledging all projects have energy recovery proposed in some form, however an independent energy audit for cheaper energy or ways to lower their energy costs should be done by the projects themselves.

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President Della Sala adjourned the meeting for a 3 minute break, reconvening the meeting at 9:37 p.m. and opened public comment on the item. TAC Member Dave Stoldt spoke to Director Edelens comments indicating preliminary discussions about the report making a recommendation and concluded that it was better have the report give the tools rather than requesting consultants to dictate policy decisions. He Said he also understood the Consultants would not be able to analyze litigation and political risks and fatal flaws would be viewed from the technical standpoint. He also stated that the intention of the report was to be snapshot in time in order to avoid mission creep, and indicated all tables should be clear and meaningful so the public can understand, noting comparison between the public versus the private projects will be difficult to manifest in one table alone. Prunedale resident Ed Mitchell spoke indicating there are major difference in the competitive approaches of the projects specifically identifying that Cal Am has picked the most challenging, riskier and costly strategy compared to the other projects. He listed his perceived flaws with the Cal Am project; EIR referenced was found faulty, Cal Am does not own the land and will have lease/purchase costs and issues, no legal rights to water and that the contingency assumptions should be higher for Cal Am than the other projects. Dale Hawkins questioned the Consultants level of confidence in the schedule implementation and asked if the six Cal Am contingencies identified were taken into account in formulating the estimates. Mr. Wesner responded that the report did not evaluate the contingencies because they came in after the October 15 th deadline. Doug Wilhelm expressed three concerns: the report does not include Cal Ams profit margin, all three proposals assumed a similar equipment replenishment rate per year, but slant wells are expected to last for a much shorter time period and should be reflected and finally, he disagreed with taking the 40% contingency standard rate out of the proposal for Cal Am as it was approved by the CPUC and the fact that it cannot be changed. TAC Member Rick Riedl thanked the consultants for their efforts and questioned if the two projects drawing water from the open intakes were required to have additional mitigation measures that will impact costs. He also noted that Cal Am is doing pilot testing for feed water quality and questioned if the other two projects have indicated any plans for pilot testing. He then requested that Cal Ams modification of the PCA outfall be added into the report and asked if that would trigger NEPA. Rudy Fischer spoke in appreciation for the work of the consultants and spoke to the request for a recommendation of a project. He also supported combining multiple features of the three projects as an efficient, cost effective opportunity and expressed support for public governance to give ratepayers a voice. Seaside Resident Jason Camble questioned the contingencies listed in the report, water supply rights and costs. He then thanked the Authority for pursuing multiple projects and expressed support for public governance. Dan Turner spoke in support of Ed Mitchells comments about risks. He commented about Marc Del Pieros comments at a recent meeting to the effect that there is no water unaccounted for in Monterey County. Mr. Turner spoke in opposition to considering Cal Am as a prospective project and questioned the projected profit margins of the three projects.

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Nelson Vega encouraged finding a solution to the water shortage before the 2016 deadline and stressed that our local economies will be negatively affected if it is missed and supported a more costly project if it meant having water so that businesses do not fail. He also expressed that if water is all returned to the basin, the rate at which it is replaced is less important. President of Monterey Chamber of Commerce Jody Hansen expressed concern about the Cal Am project proposal and requested consideration of a large desalination project as future community development projects will be stalled due to lack of water. She indicated that the timing of the project is important for the health of the community, as construction costs are currently low and projects will lag if no prospect of water is in sight. TAC Member John Narigi spoke independent of the TAC and on behalf of the Business Coalition to express general comments from the coalition. Mr. Narigi complimented the consultants on the superb job on the report and recalled that the goal was to evaluate the project independently without political influence. He encouraged the Authority finalize the report not incorporate additional information and honor deadlines. Lastly he said community development is stalling and impacting potential projects due to lack of water and encouraged consideration of a larger sized plant than what is proposed. Ron Cohn read a letter from resident Ron Wiseman expressing three points. First, that State agency actions will prohibit Cal Ams proposed slant wells, second that interest rates applied in the report use 5% when the CPUC authorized 6% percent, increasing to 9% with a weighted cost of capital which should be reflected in the report and third, the Deep Water Desal project should not be considered since the CPUC has eliminated the eligibility of that project. Speaking individually, Mr. Cohn said the Peoples Project, though the report indicates would take the longest it could be done the soonest due to the claim they currently have the right to pump water. He questioned the validity of the pumping rights and asked if it could affect the schedule positively. Lastly he requested the study to provide costs to the rate payers and not production costs. With no more requests to speak, President Della Sala closed public comment on the item, allowed SPI staff to answer the questions asked by the public then brought the discussion back to the Board. President Della Sala then recommended a schedule to provide an additional two weeks for written questions or comments to be submitted to the consultants ending on Wednesday November 28, , 2012. The Consultants agreed to have answers to submitted comments by Friday December 14, 2012. Director Garcia questioned additional charges that would be required with the additional requested work. Mr. Filteau responded if the questions maintained the scope of work, responding and preparing the final report will not incur additional charges and any additional charges would need to be authorized from President Della Sala or TAC Chair Burnett. Director Bachofner requested consideration of expending more dollars if necessary to make sure that specific extra considerations be put into the report. President Della Sala indicated any additional expenditures would need to be authorized by the Authority prior to the December 13, 2012 meeting date and asked if the board would Authorize the President and TAC Chair to authorize additional expenditures. Director Pendergrass did not support additional funds at this time. No motion was made and discussion the item was closed. 7. Response Letter to California Public Utilities Commission Application 12-04-019 November 8, 2012 (Information Only) Action item: No Action Taken. For Information Only

Dated

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8.

Presentation from Ratepayers First and Citizens for Public Water Action item: Received Presentation TAC Member George Riley gave a presentation as a ratepayer and community advocate representing ratepayers and not as part of the TAC. He indicated that ratepayers are displeased with Cal Am and the Water Management District and indicated as a general consensus, they are not reliable and that ratepayers feel like victims because things happen to them and not for them. He then indicated that the Authority has taken on a similar reputation because of levels of inaction and the time it takes to make decisions. Mr. Riley discussed the Cal Am Surcharge and indicated that the ratepayers do not want to participate or contribute to the project. Director Burnett spoke as Chair of the TAC expressing that if Mr. Riley has already taken a position on the surcharge that is tentatively on the agenda for the November 19, 2012, TAC meeting it may be a conflict with his participation. Mr. Riley encouraged competition between projects as it will bring down costs and indicated support for the Water Management District to be the lead agency. He proposed asking the Water Management District to take the lead in developing a publicly owned option by using the best found practices or a hybrid of the best ideas. Mr. Riley also requested the Authority support the Pacific Grove Small Water Projects. In conclusion, Mr. Riley discouraged the JPA to default to supporting Cal Ams project. President Della Sala opened public comment on this item. Nelson Vega expressed opposition to supporting the Water Management District to lead a project and said the Authority should be the lead. He also expressed concern that no project currently holds a water purchase agreement and the Authority needs to separate the issues of growth and water. Dan Turner said he does not believe Cal Am has the communitys best interest at heart and spoke in support of public governance over any chosen project. Mr. Turner agreed with Mr. Reilys comments about supporting the Water Management District as a lead agency for a desalination project. ADJOURNMENT With no further requests to speak, President Dell Sala closed public comment. With no further business to come before the board, President Della Sala adjourned the meeting at 11:02 p.m.

ATTEST:

Lesley Milton, Clerk of the Authority

Chuck Della Sala, MPRWA President

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MINUTES MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Special Meeting 6:00 PM, Monday, December 10, 2012 FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None Monterey Assistant City Manager, Legal Counsel Freeman, Legal Counsel McLaughlin, Monterey City Attorney, Clerk to the Authority

ROLL CALL PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF Director Burnett reported on pursuit of County of Monterey participation in the MPRWA and indicated the County Council's office sent a letter to the State of California Attorney General on October 30, 2012 seeking a legal opinion on compatibility of offices. The Assistant Attorney General estimated an advice letter by the end of the year but a full process letter could take up to 1 year. Director Burnett was hopeful an advice letter would be adequate to allow the County of Monterey participation which would allow the Authority to speak with one voice. Director Burnett also updated the Authority on the Governance and Finance committee. They provided a counter proposal to California American Water (Cal Am) on October 1, 2012 which was codified in the agreement with the County of Monterey. He indicated another meeting scheduled for December 11, 2012 where he will continue to work toward achieving the governance the Board has directed, and best financing in the best interest of the ratepayers. Director Rubio requested to agendize discussion of an addendum to the CPUC application expanding the comments regarding desalination facility sizing and the EIR process and requirements. Legal Counsel Freeman introduced Russ McLaughlin, contract Legal Counsel to the Authority. PUBLIC COMMENTS President Della Sala opened the floor for public comments for items not on the agenda. Having no requests to speak, closed public comment. AGENDA ITEMS 1. Consideration of a Resolution Approving a Conflict of Interest Waiver for the City Attorney Regarding Providing Legal Services for the Monterey Peninsula Regional Water Authority (MPRWA) Action: Passed Resolution 2012-06

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City of Monterey City Attorney Davi introduced the item and explained the requirement of the State of California bar rules of professional conduct indicating when an attorney is representing multiple parties on the same issue, there is a required written waiver of the conflict of interest. If Mr. Freeman takes on the services of the Authority, three clients would have overlapping services, which is justification for the waiver. The agenda packet included written consent from the overlapping jurisdictions. Mrs. Davi indicated that this item is reviewing the rules and the waivers and approving the conflict, and if approved, at the December 13, 2012 meeting the MPRWA will vote on Mr. Freemans contract. Director Edelen questioned Mr. Freemans participation at Watermaster meetings to which Legal Counsel McLaughlin clarified that Mr. Freeman provides legal services for the City of Seaside and makes comments at the meeting representing the City of Seaside therefore there is no conflict. The Watermaster does not have independent legal counsel. President Della Sala opened public comment on the item and having no requests to speak closed public comment. On a motion by President Della Sala, seconded by Directors Edelen and Burnett, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the Resolution Approving a Conflict of Interest Waiver for the City Attorney Regarding Providing Legal Services for the Monterey Peninsula Regional Water Authority AYES: NOES: ABSENT: ABSTAIN: RECUSED: 2. 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: elen, Kampe, Pendergrass, Rubio,

Review Recommendations from Technical Advisory Committee for California Public Utilities Commission Cost Model Workshop on December 11 - 13, 2012, Provide Direction and Designated Representative to Communicate Key Topics of Concern Action: Received Recommendation and Provided Direction to Staff Director Burnett referred to the memo in the agenda packet which included the recommendations the TAC encouraged the Authority to present at the CPUC Cost model workshop and then gave details of the pending workshop format. He indicated that the included basic cost model will be the model used at the Workshop, which will allow the Authority representatives to request the CPUC and Cal Am to address during the Workshop. Director Burnett pointed out that most are financial models but some issues include cost of debt and explained how the level and cost of debt that Cal Am carries will impact to ratepayers. Director Burnett then recommended looking at varying surcharge amounts, the possible charge on water bills in advance of a desalination facility coming on line, and the effect of public contribution on funds lowers the amount of debt and equity Cal Am would need to put into the project. He then requested feedback from the Directors and the public about the presented TAC recommendations so appointed representatives will be able to speak on behalf of the MPRWA at the Workshop. Director Burnett answered questions from the Board. Monterey Peninsula Regional Water Authority Special Meeting Minuts Mondy December 10, 2012 MPRWA Meeting, 12/27/2012 , Item No. 2., Item Page 2, Packet Page 8 2

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On question, Director Burnett indicated that Cal Am has been provided with the discussed recommendations prior to the Workshop and should be prepared to respond. Director Kampe then questioned if the repayment of public funds is included as part of the model to which Director Burnett responded that public funds would be put forward by the Water Management District and the cost would be the tax exempt debt based on the public credit rating. A blended debt equity rate is somewhere in the range of 9% where the cost of the tax exempt public debt is in the range of 3.7% so by putting in more at 3.7% and taking out at 9%, the public would come out ahead. President Della Sala opened the item to public comment. Nelson Vega questioned the modeling formula and who would own the plant at the end if public funds were used as contributions. With no other requests to speak, President Della Sala closed public comment. Legal Counsel McLaughlin spoke to Mr. Vega s question about the modeling formula indicating Cal Am has authorization from the CPUC for 9.9% interest rate and a cost of debt (debt to capital ratio) approved as part of a multi utility approval.
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President Della Sala recommended providing direction to communicate with the CPUC regarding information that was presented in the packet. On motion by Director Edelen and Seconded by Director Kampe to support the recommendation, as presented by the Technical Advisory Committee. Discussion on the motion. Director Rubio agreed to the primary recommendations but questioned secondary recommendati or Burnett responded to questions on the secondary recommendations. Director Kampe agreed that with the different scenarios, a few of the scenarios will fall out as no ed to prime alternatives. On a motion by Director Edelen, seconded by Director Kampe, carried by the following vote, the Monterey Peninsula Regional Water Authority approved the recommendations as presented by the Technical Advisory Committee to present at the California Public Utilities Commission Cost Model Workshop on December 11 - 13, 2012 and designated Director Burnett and TAC Member Dave Stoldt to attend as representatives of the Authority. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 3. 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Appointment of Vice President and Secretary for the Monterey Peninsula Regional Water Authority Action: Approved Appointment of Director Burnett as Vice President and Director Rubio Secretary

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President Della Sala introduced the item and indicated that the previously approved Vice President and Secretary were not re-elected to their jurisdictions and have been replaced by the new Mayors Kampe and Rubio. President Della Sala then nominated Director Burnett to serve as Vice President and Director Rubio to serve as Secretary to the Authority. He then invited other nominations from the Board. Director Edelen expressed support for the nominations. President Della Sala opened the item to the public and with no requests to speak closed public comment. On a motion by President Della Sala and seconded by Director Edelen, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the appointment of Director Burnett to serve as Vice President and Director Rubio to serve as Secretary to the Authority. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4. 6 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Authorize Change to Scope of Work for SPI Consultants and Allocate Additional Funding Director Burnett introduced the item a f synopsis of the included staff report. He recommended the Authority authorize changing the scope of work for the SPI Consultants and Independent consultant Kris Helm to include additional information and clarifications requested by the public and the Autho luded in the final report. Director Burnett then answered questions from President Della Sala opened the item for public comment. Nelson Vega questioned the cost differences listed in the reports for electricity charges and also questioned if allocation of additional funds would have a drastic change on the content of the report. He then encouraged the Authority to make a recommendation to support a specific project. Tom Rowley welcomed the new Directors and encouraged going forward with the additional funding, and thanked the Authority for seeking a project that is feasible and cost effective. With no further requests to speak President Della Sala closed public comment and responded to Mr. Vega s question about the costs of electricity. He indicated that different sources of power and the distance the energy must travel to get to the facility both will impact the unit costs. He then brought the discussion back to the board.
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Director Rubio motioned and seconded by Director Kampe ta Authorize the change to the scope of work for SPI Consultants and to allocate additional funding for inclusion and modification of additional information. President Della Sala invited discussion on the motion. Director Kampe indicated support to include cost modeling and financial feasibility to be able to compare all projects.

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Director Burnett questioned incorporation into the scope of work, the financial ability of each project applicant to carry their project through completion. The motion was amended by Director Rubio and Director Kampe agreed to the modified motion. Director Burnett commented that previous information excluded confidential information which impacted the results of the study and hoped this would relieve that issue. Legal Counsel Freeman indicated that this analysis was specifically excluded from the scope of work and report and inclusion would necessitate additional costs. After discussion, Director Kampe withdrew his second due to inconsistency between desired strategy and the budget. The motion died for lack of a second. ADJOURNMENT With no further business to come before the board, the meeting was adjourned.

ATTEST:

Lesley Milton, Clerk to the Authority

MPRWA President

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MINUTES MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Regular Meeting 7:00 PM, Thursday, December 13, 2012 COUNCIL CHAMBER FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL President Della Sala called the meeting to order at 7:04 p.m. indicating Director Edelen is absent due to a prior City commitment and Mr. Kampe is expected to arrive late. Director Burnett is represented by Alternate Director Ken Talmage. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF President Della Sala invited reports from Directors. Director Pendergrass reported on the major outcomes of the Monterey Peninsula Water Management District (MPWMD) meeting on December 10, 2012 to discuss and approve going forward with a secondary or back up desalination facility program. The MPWMD Council was unanimous supporting the motion to have an alternate project in the event the Monterey Peninsula Water Supply Project (MPWSP) project is not completed prior to the 2017 deadline, and to release a Request for Qualifications (RFQ). 1. Pendergrass, Rubio, Carmel Alternate Talmage, Della Sala Kampe, Edelen Interim Executive Director, Legal Counsel, Clerk of the Authority

Update from Ad Hoc Committee on Governance and Financing Regarding Discussions with California American Water Action: Received Update Carmel Alternate Director Ken Talmage gave an update on the California Public Utilities Commission Desalination cost workshop he and Director Burnett attended December 11, 12 & 13, 2012. He also reported a separate meeting took place December 11, 2012 with MPRWA and Cal Am representatives to discuss the capital costs of the proposed Cal Am desalination facility and the potential to substitute public funds for Cal Ams equity. Cal Am representatives requested a written proposal from the MPRWA before they would consider alternatives. Cal Am also suggested the Water Management District prepare multiple strategies to support viable public funding options. President Della Sala acknowledged that this was only an update but for the sake of transparency and input, opened the item for public comment. Doug Wilhelm spoke against Cal Ams $99 million surcharge, the risks associated with project failure and potential stranded costs. Mr. Wilhelm also spoke to Director Pendergrass update regarding the Water Management Districts meeting last week and encouraged information sharing as not to duplicate efforts. Nelson Vega encouraged the Authority to look at establishment of a water purchase agreement which would allow the Authority to sell the water to Cal Am and let Cal Am facilitate the desalination of the water. Having no further requests to speak President Della Sala closed public comment and moved on to the next agenda item.

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Interim Director Meurer responded to the comments about the budget regarding future anticipated costs. The Authority agreed to agendize a budget update and possible request for additional funding at a future Authority meeting. 2. Update from California Public Utilities Commission Cost Workshop and Pre-Hearing Conference Action: Received Report Alt Director Talmage presented a report on the outcomes of the CPUC Cost workshop and noted changes to previously released information from Cal Am and indicated the below areas o concern that should be addressed in the future. The size of the proposed facility: The proposal has no allocation for general plan buildout. The plant should be sized to meet maximum monthly demand and pipes must be sized to meet peak pipe demand. Cal Am estimated water need was based on usage factors gathered in the last 5 years, which will not be representative of true need due to extraneous factors that have occurred in that time frame. The completion schedule has slipped to October 2017 and this timeline does not include any flexibility for potential litigation. The operating budget had the cost of power as more than 50% of total operating budget which calls into question the power cost estimates in the SPI Consultants report.

Mr. Talmage additionally reported about the cost of project delay indicating for every 1% ry six months for a total amount of 11 inflation the project will increase by $ million dollars. He also noted Cal Am s on Benson Road for a desalination facility, straight east from cement plant in City of Marina, adjacent to waste water plant, at 100 foot level past the 500 year flood plain. Mr. Talmage lastly reported that the Cal Am identified their financial model needs adjustments and wdill introduce two new model sizes and revise demand numbers around January 1, 2012He suggested the TAC discuss this model at their January 7, 2012 meeting. Pacific Grove City Manager Frutchey presented information about the third day of the workshop agreeing with all points made by Mr. Talmage and added emphasis that Cal Ams savings estimates are due to the current economic situation which are very questionable assumptions and are unreliable. He also noted that with respect to schedule slippage, Cal Am did not indicate the cause was based on delay of test well or permitting, which generates more questions about further potential slippage. Russ McLaughlin communicated that Judge Weatherford and Andrew Barnsdale agreed to major alternatives will be considered to be analyzed at the same level and depth as the initial proposal and Cal Am acknowledge that their original proposal had serious risks. Judge Weatherford communicated six major issues that need resolution before he will make a decision:

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1. Any changes in the project description of the applicant which causes problems for environmental analysis and political discussions. Three Changes: site acquisition, screening levels of the wells, and timeline 2. Suggested to shift the cost recovery issues to a separate phase of the project. 3. Status of the public agency participation proposals. 4. Environmental Review NEPA/CEQA process 5. Protocols and procedures for the hearing: pushed for submission of joint testimony as unanimity was seen as important and helpful for achieving a decision. 6. Two motions have been filed: 1) Size of the plant based on the groundwater recharge the motion requested plant sizing be based solely on objective criteria. 2) Argued that public input is also important and Cal Am needs to do a better job of providing a quarterly report to the public on project status and being up front with the community.

George Riley spoke to Mr. Talmage remarks and added that he was pleased Cal Am was very forthright with data and commended them for their openness. He was concerned that Cal Am did not identify potential hazards, making many assumptions without addressing potential permitting or legal issues. PUBLIC COMMENTS President Della Sala invited public comments for items not on the agenda and with no requests to speak closed public comment. APPROVAL OF MINUTES 3. June 14, 2012 Action: Approved as Amended On a motion by Director Pendergrass, seconded by Alternate Director Talmage, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the minutes of June 14, 2012 as amended. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4. 3 DIRECTORS: 0 DIRECTORS: 2 DIRECTORS: 1 DIRECTORS: 0 DIRECTORS: Pendergrass, Talmage, Della Sala None Edelen, Kampe Rubio None

Approval of Appointments to the Technical Advisory Committee Action: Approved Addition of Three New TAC Members President Della Sala introduced the item requesting the Authority appoint three individuals as members of the TAC. Alternate Director Talmage provided a verbal synopsis of each of the three recommended candidates. President Della Sala opened the item for questions from the Board. Director Pendergrass questioned the appointment of Mr. Bill Reichmuth while contending for the Executive Director position and staff indicated there was no conflict. Director Pendergrass also spoke in support of the appointment of Dale Haus indicating he might be able to be a key negotiator to the Salinas Valley Growers region. President Della Sala opened the item to public comment and having no requests to speak, closed public comment on the item.

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Thursday, December 13, 2012

On a motion by President Della Sala, seconded by Director Rubio and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the Appointments to the Technical Advisory Committee of Dale Haus, Bill Reichmuth and Robert Siegfried: AYES: NOES: ABSENT: ABSTAIN: RECUSED: 5. 4 DIRECTORS: 0 DIRECTORS: 2 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Rubio, Pendergrass, Talmage, Della Sala None Edelen, Kampe None None

Legal Counsel Discussion of Brown Act, Closed Session Conduct and Noticing Requirements for Public Agencies Action: Received Presentation and Discussed Legal Counsel Freeman presented the report explaining the purpose of the Ralph M. Brown Act is to ensure that public agency actions are transparent and responsive to the public, ensuring members do not make decisions outside of a public meeting. Closed session meetings have specific exceptions which are limited to specific categories, but likely outside of the scope of the MPRWA. Mr. Freeman discussed agenda noticing requirements and noted that in June of this year, the state of California waived the requirements of the Brown Act noticing, but acknowledged the MPRWA will still continue to comply with public noticing requirements as it is in the best interest of the public trust. President Della Sala opened the meeting to public comments. Pacific Grove resident Donald Murphy the trust of the public and applauded the effort of the Authority. State law d ssion meetings but requested the Authority always consider the necess sessions, and only schedule if the public could benefit from the results. Having no further requests to speak, President Della Sala closed public comment and proceeded to the next agenda item.

5.

Discuss Outreach Strategy for Engaging the Public on the Role of the Water Authority and Provide Direction Action: Discussed and Continued to Future Meeting President Della Sala requested an update for video services for future Authority meetings. Interim Director Meurer reported he will request Monterey City Council fund the staff time to televise future Authority meetings. Director Pendergrass encouraged more interaction with the local media, specifically written publications to vocalize the Authoritys position with accurate information. Alternate Director Talmage requested continuing the item until a future meeting when all Directors are present. President Della Sala opened the item for public comment and having no requests to speak closed public comment and continued the item to an unspecified future meeting date.

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Thursday, December 13, 2012

7. Approval of MPRWA Meeting Dates for 2013 Action: Approved Scenario A Clerk to the Authority presented an update on future potential meetings for the Authority noting that the regularly scheduled meeting dates of the second and fourth Thursday of the month has potential facility conflicts. The Authority directors were presented with two scenarios of future meeting dates. President Della Sala opened the item for public comments and Pacific Grove City Manager Tom Frutchey offered the City of Pacific Grove facilities to host the Authority meetings on the alternate dates. With no future requests to speak President Della Sala closed public comment. On a motion by Director Rubio, seconded by Director Pendergrass and carried by the following vote, the Monterey Peninsula Regional Water Authority approved future meeting dates as presented in scenario A through March 31 st , 2012: AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4 DIRECTORS: 0 DIRECTORS: 2 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Rubio, Pendergrass, Talmage, Della Sala None Edelen, Kampe None None

8. Adopt Resolution Approving Legal Services Contract to the Firm of Perry and Freeman Action: Approved Contract and Adopted Resolution No. 2012-07 Legal Counsel Freeman introduced the sistency with the Request for Qualification the Authority released for l oted the contract included a previously approved 90 day review period and the ully executed as of December 15, 2012. President Della Sala opened the ment and having no requests to speak, closed public comments and brought discussion back to the board. On a motion by Alternate Director Talmage, seconded by Director Pendergrass and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the legal services contract for The Firm of Perry and Freeman as presented and adopted resolution number 2012-07. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4 DIRECTORS: 0 DIRECTORS: 2 DIRECTORS: 0 DIRECTORS: 0 DIRECTORS: Rubio, Pendergrass, Talmage, Della Sala None Edelen, Kampe None None

ADJOURNMENT With no further business to come before the Authority, President Della Sala adjourned the meeting at 8:23 p.m. ATTEST:

Lesley Milton, Clerk of the Authority

MPRWA President

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Monterey Peninsula Regional Water Authority Agenda Report

Date: December 27, 2012 Item No: 4.

FROM:

Clerk to the Authority

SUBJECT: Discussion of Financial Advisory Services

DISCUSSION:

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

06/12

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