MINUTES BOARD OF DIRECTORS REGULAR MEETING THURSDAY, JUNE 14, :30 AM

Transcription

1 MINUTES BOARD OF DIRECTORS REGULAR MEETING THURSDAY, JUNE 14, :30 AM INTRODUCTION A Regular Meeting of the Board of Directors of the Rancho California Water District was held on Thursday, June 14, 2018, at the appointed meeting place of the Board, the Board Room of the District's Administrative Headquarters Building, located at Winchester Road, Temecula, California. ROLL CALL Sr. Vice President Bill Wilson called the meeting to order at 8:30 AM. A quorum was declared with the following directors being present. Bennett Drake President (Absent) Bill Wilson Sr. Vice President Carol Lee Brady Board Member Angel Garcia Board Member Lisa Herman Board Member Danny Martin Board Member William Plummer Board Member Also present were members of the District staff and others, including but not limited to, General Counsel Jim Gilpin of Best Best & Krieger, General Manager Jeff Armstrong, Assistant General Manager-Engineering & Operations Eva Plajzer, Assistant General Manager-CFO/Treasurer Rick Aragon, Director of Human Resources Eileen Dienzo, Director of Administration Jason Martin, Chief Engineer Andrew Webster, Water Operations Manager Rich Ottolini, Field Services Manager Randy Crowell, Public Affairs Manager Meggan Valencia, Engineering Manager-CIP & Development Jake Wiley, Budget/Debt Administrator Bill Moses, Public Information Specialist Grace Cardenas, Administrative Services Supervisor/Deputy District Secretary Denise Todd, Procurement and Contracts Administrator Mark Smith, Senior Administrative Assistant Milin Ream, and District Secretary Kelli Garcia. Present in the audience were a number of members of the public, including but not limited to, Steve Corona, Donald Van Selus, Tom Gallucci, Roberta Petersen, Clint Lorimore, Greg Thomas, John Vighiotti, and Randy Reinhart.

2 PLEDGE OF ALLEGIANCE Director Martin led the Pledge of Allegiance to the Flag. ADDITIONS TO AGENDA Items may be added to the Agenda in accordance with Section (b)(2) of the Government Code (Brown Act), upon a determination by a two-thirds vote of the legislative body, or, if less than two-thirds of the members are present, a unanimous vote of those members present, that there is a need to take immediate action and that the need for action came to the attention of Rancho California Water District after the Agenda was posted. There were no additions to the Agenda; however, the following was heard by General Counsel Jim Gilpin. Mr. Gilpin requested Consent Calendar Item 2E be pulled and discussed following Closed Session. He further requested the order of the budget resolutions be rearranged with Item 4E reviewed first followed by Item 4J. APPROVAL OF AGENDA Sr. Vice President Wilson entertained a motion to approve the Agenda of the Regular Meeting of the Board of Directors of the Rancho California Water District of June 14, 2018, with the rearrangement of the Agenda item order noted. Director Plummer moved to approve the Agenda of the Regular Meeting of the Board of Directors of the Rancho California Water District of June 14, 2018, as discussed. Director Martin seconded the motion, and it carried as follows: RESULT: APPROVED [UNANIMOUS] SECONDER: Danny Martin, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer PUBLIC COMMENT An opportunity was given for any person to address the Board of Directors (Board) upon any subject not identified on the Agenda, but within the jurisdiction of the Rancho California Water District. For items not listed on the Agenda, the Brown Act imposes limitations on what the Board may do during public comment. As to matters on the Agenda, persons will be given an opportunity to address the Board when the matter is considered. At this time, Steve Corona addressed the Board and stated his concerns regarding the installation of the recycled water meter on his property. ITEM 1. APPROVAL OF MINUTES Director Plummer moved to approve the meeting minutes, as presented Board of Directors Page 2 of 20 June 14, 2018

3 and referenced below. Director Martin seconded the motion, and it carried as follows: RESULT: APPROVED [UNANIMOUS] SECONDER: Danny Martin, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer A. Consider Approval of Minutes of the Board of Directors' Adjourned Regular Meeting of May 17, 2018 ITEM 2. CONSENT CALENDAR Consent Calendar items are expected to be routine and non-controversial, to be acted upon by the Board of Directors (Board) at one time without discussion. If any Board member, staff member, or interested person requests that an item be removed from the Consent Calendar, it shall be removed so that it may be acted upon separately. At this time, Sr. Vice President Wilson reminded the Board that Consent Item 2E has been removed for separate discussion. He then entertained a motion from the Board for the remaining items. Director Herman moved to approve Consent Calendar Items 2A through 2D and 2F through 2G, as presented. Director Brady seconded the motion, and the resolutions are titled: Resolution No Acting as the Legislative Body of Community Facilities District No (Rancon Business Center) of the Rancho California Water District, Establishing the Annual Special Tax Levy for Community Facilities District No. 89-5, County Fund No , for Fiscal Year and Resolution No Acting as the Legislative Body of Community Facilities District No (Woodside Homes) of the Rancho California Water District, Establishing the Annual Special Tax Levies Improvement Area A, County Fund No and Improvement Area B, County Fund No , for Community Facilities District No. 99-1, for Fiscal Year Board of Directors Page 3 of 20 June 14, 2018

4 and Resolution No Acting as the Legislative Body of Community Facilities District No (Western Pacific Housing-Murrieta LLP) of the Rancho California Water District, Establishing the Annual Special Tax Levy for Community Facilities District No. 99-2, County Fund No , for Fiscal Year RESULT: APPROVED [UNANIMOUS] MOVER: Lisa Herman, Board Member SECONDER: Carol Lee Brady, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer A. Consider Approval of Financial Statements - April 30, 2018 B. Consider Approval of Treasurer's Report and Certification of Cash Sufficiency, as of April 30, 2018 C. Consider Ratifying the Register of Audited Demands for the Period April 26 through May 25, 2018 D. Consider Adoption of Resolutions Establishing the Annual Special Tax Levies for Community Facilities Districts (CFD) and Recertification of Reassessment District (RAD) No A of the Rancho California Water District for Fiscal Year (FY) , and Review of Annual Administration Report Executive Summaries for the Various CFDs and for RAD A E. Item Discussed Out of Agenda Order F. Budgeted Contract Item Over $50,000: Consider Request to Award a Construction Contract for the Recycled Water Storage Pond 1/2 Liner Replacement (Project No. D1904) G. Budgeted Contract Item Over $50,000: Consider Approval to Award a Construction Contract and a Professional Services Agreement for Drilling of New Well No. 176, Well No. 124 Replacement (Project No. D1896) ITEM 3. PUBLIC HEARING A. Public Hearing to Consider Adoption of Resolutions for Fiscal Year Operating and Non-Operating Budgets and Fiscal Years and Water and Wastewater Rates, and Charges Addressing the Board of Directors (Board), Assistant General Manager-CFO/Treasurer Rick Aragon provided the Board with an overview of all major factors pertaining to preparing and finalizing Rancho California Water District s (RCWD/District) Fiscal Year Board of Directors Page 4 of 20 June 14, 2018

5 Operating and Non-Operating Budgets, Water and Wastewater Rates, and Charges (Budget). Utilizing a PowerPoint presentation, Mr. Aragon summarized the Budget development process, as follows: Budget formation begins in November Review various elements with Committees/Board (series of public meetings were held October through April 2018) o Budget objectives o 5-year capital improvement projects/non-operating Budget/Long Range Financial Plan o Water resources audit/operating budget/rates Review proposed budgets/rates with Farm Managers Send Proposition 218 Notice to all customers (45 days before public hearing) Receive written public comments/protests o To date, seven written protest letters were received Conduct public hearing Sr. Vice President Wilson entertained a motion from the Board to open the public hearing. Director Garcia moved to open the public hearing. Director Plummer seconded the motion, and it carried by the following vote: RESULT: APPROVED [UNANIMOUS] MOVER: Angel Garcia, Board Member SECONDER: William Plummer, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer COMMENTS FROM THE PUBLIC Following Mr. Aragon s presentation, Sr. Vice President Wilson acknowledged receipt of several request-to-speak forms. The hearing continued with the Board receiving comments from Steve Corona, Donald Van Selus, Tom Gallucci, Roberta Petersen, Clint Lorimore, Greg Thomas, and John Vighiotti. Hearing no other comments, Sr. Vice President Wilson entertained a motion from the Board to close the public hearing. Director Plummer moved to close the public hearing. Director Martin seconded the motion, and it carried as follows: Board of Directors Page 5 of 20 June 14, 2018

6 RESULT: APPROVED [UNANIMOUS] SECONDER: Danny Martin, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer ITEM 4. BUDGET RESOLUTIONS Consider Adoption of Resolution Adopting a Schedule of Rates for Monthly Water Service Charges Commencing with Fiscal Year Per General Counsel s request, Agenda Item 4E was discussed first. Assistant General Manager-CFO/Treasurer addressed the Board of Directors (Board) to present the subject resolution adopting rates for monthly water service charges commencing with Fiscal Year for the Board s consideration. Sr. Vice President Wilson entertained a motion from the Board. Director Plummer moved to adopt a Schedule of Rates for Monthly Water Service Charges Commencing with Fiscal Year Director Herman seconded the motion, and discussion continued. At this time, there was lengthy discussion on the rate increases with Mr. Aragon explaining that if there were any year to perform a second year rate increase, it would be the next two years specifically for the reason that, in the second year, Rancho California Water District s (RCWD/District) major cost driver is the expense from Metropolitan Water District of Southern California (MWD). With MWD just adopting a two-year rate increase, Mr. Aragon conveyed that the District knows what its rates will be from MWD and has incorporated said increases accordingly. As well, he explained that the employee group(s) Memorandum of Understanding has an extended contract through the two years so there is no uncertainty associated with it. Lastly, with Southern California Edison, he stated that staff have a strong indication of what RCWD s energy rates will be and that all these contributing factors make up 90 percent of the Budget. He further advised that the only thing factored into the budget, which would be considered discretionary, is materials and outside service inflation costs that staff have allotted 1.5 percent for overall inflation during the two-year period. At the request of Sr. Vice President Wilson, Mr. Aragon explained the approximate savings of $80,000 to $100,000 a year that the District will realize by setting rates and charges for a two-year period. Discussion continued between the Board and staff regarding costs associated with position sustainability, the Raftelis Financial Consultants water rate study supporting the District s proposed rate increase, aging infrastructure concerns, maintenance priority, and how the District will address deferred maintenance/asset management in the long run. Following discussion, the motion submitted by Director Plummer and the resolution titled below carried by the following vote: Board of Directors Page 6 of 20 June 14, 2018

7 Resolution No Adopting a Schedule of Rates for Monthly Water Service Charges Commencing with Fiscal Year RESULT: APPROVED [4 TO 2] SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Herman, Plummer NAYS: Garcia, Martin Consider Adoption of Resolution Adopting a Budget and Salary Ranges for Fiscal Year and Acceptance of the Two Year Rate Study Per General Counsel s request, Agenda Item 4J was discussed next. Following brief discussion, Sr. Vice President Wilson entertained a motion from the Board of Directors. It was moved by Director Plummer and seconded by Director Brady to approve the subject resolution titled: Resolution No Adopting a Budget and Salary Ranges for Fiscal Year and Acceptance of the Two Year Rate Study RESULT: APPROVED [4 TO 2] SECONDER: Carol Lee Brady, Board Member AYES: Wilson, Brady, Herman, Plummer NAYS: Garcia, Martin A. Consider Adoption of Resolution Establishing an Ad Valorem Assessment in the Rancho Division for Capital Facilities and Equipment and Payment of Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A and 2017B for Fiscal Year Assistant General Manager-CFO/Treasurer Rick Aragon presented the Board of Directors (Board) with a request to consider adoption of the subject resolution; for which, Sr. Vice President Wilson entertained a motion from the Board. Board of Directors Page 7 of 20 June 14, 2018

8 It was moved by Director Plummer and seconded by Director Martin to approve the subject resolution titled: Resolution No Establishing an Ad Valorem Assessment in the Rancho Division for Capital Facilities and Equipment and Payment of Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A, and 2017B for Fiscal Year RESULT: APPROVED [5 TO 1] SECONDER: Danny Martin, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia B. Consider Adoption of Resolution Establishing an Ad Valorem Assessment in the Santa Rosa Division for Capital Facilities and Equipment and Payment of Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A and 2017B for Fiscal Year Assistant General Manager-CFO/Treasurer Rick Aragon presented the Board of Directors (Board) with a request to consider adoption of the subject resolution. With respect to the subject resolution, Sr. Vice President Wilson entertained a motion from the Board. It was moved by Director Martin and seconded by Director Plummer to approve the subject resolution titled: Resolution No Establishing an Ad Valorem Assessment in the Santa Rosa Division for Capital Facilities and Equipment and Payment of Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A, and 2017B for Fiscal Year Board of Directors Page 8 of 20 June 14, 2018

9 RESULT: APPROVED [5 TO 1] MOVER: Danny Martin, Board Member SECONDER: William Plummer, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia C. Consider Adoption of Resolution Levying a Standby Charge in the Santa Rosa Division for Payment of Maintenance and Operating Expenses, Capital Facilities and Equipment, and Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A and 2017B for Fiscal Year Following a brief explanation of the subject resolution, Assistant General Manager- CFO/Treasurer Rick Aragon advised that there is no proposed increase to the standby charge rate for Fiscal Year and presented the Board of Directors (Board) with a request to consider adoption of the subject resolution. Referencing the subject resolution, Sr. Vice President Wilson entertained a motion from the Board. It was moved by Director Martin and seconded by Director Plummer to approve the subject resolution titled: Resolution No Levying a Standby Charge in the Santa Rosa Division for Payment of Maintenance and Operating Expenses, Capital Facilities and Equipment, and Principal and Interest of Rancho California Water District Revenue Bonds, Series of 2005C, 2010A, 2011A, 2016A, 2016B, 2016C, 2017A, and 2017B for Fiscal Year RESULT: APPROVED [5 TO 1] MOVER: Danny Martin, Board Member SECONDER: William Plummer, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia D. Consider Adoption of Resolution Levying a Standby Charge for Payment of Maintenance and Operating Expenses, Principal and Interest of Rancho California Water District, Santa Rosa Division, Improvement District Nos. 2 and 3; Revenue Bonds, Series of 2010A, 2016B, 2016C, 2017A and 2017B for Fiscal Year Assistant General Manager-CFO/Treasurer Rick Aragon advised that there is no proposed increase to the standby charge rate for Fiscal Year and presented Board of Directors Page 9 of 20 June 14, 2018

10 the Board of Directors (Board) with a request to consider adoption of the subject resolution. Referencing the subject resolution, Sr. Vice President Wilson entertained a motion from the Board. It was moved by Director Brady and seconded by Director Herman to approve the subject resolution titled: Resolution No Levying a Standby Charge for Payment of Maintenance and Operating Expenses, Principal and Interest of Rancho California Water District, Santa Rosa Division, Improvement District Nos. 2 and 3; Revenue Bonds, Series of 2010A, 2016B, 2016C, 2017A, and 2017B for Fiscal Year RESULT: APPROVED [5 TO 1] MOVER: Carol Lee Brady, Board Member SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia E. Item Discussed Out of Agenda Order F. Consider Adoption of Resolution Adopting a Schedule of Rates for Wastewater Service Fees for Santa Rosa Division, Improvement District Nos. 2 and 3, Commencing with Fiscal Year Similarly, Sr. Vice President Wilson entertained a motion from the Board of Directors. It was moved by Director Plummer and seconded by Director Herman to approve the subject resolution titled: Resolution No Adopting a Schedule of Rates for Wastewater Services for Santa Rosa Division, Improvement District Nos. 2 and 3, Commencing with Fiscal Year Board of Directors Page 10 of 20 June 14, 2018

11 RESULT: APPROVED [4 TO 2] SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Herman, Plummer NAYS: Garcia, Martin G. Consider Adoption of Resolution Adopting Wastewater Capacity Fees for Fiscal Year With respect to the subject resolution, Sr. Vice President Wilson entertained a motion from the Board of Directors. It was moved by Director Martin and seconded by Director Brady to approve the subject resolution titled: Resolution No Adopting Wastewater Capacity Fees for Fiscal Year RESULT: APPROVED [5 TO 1] MOVER: Danny Martin, Board Member SECONDER: Carol Lee Brady, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia H. Consider Adoption of Resolution Adopting a Schedule of Fees for Services for Fiscal Year It was moved by Director Martin and seconded by Director Brady to approve the subject resolution titled: Resolution No Adopting a Schedule of Fees for Services for Fiscal Year Board of Directors Page 11 of 20 June 14, 2018

12 RESULT: APPROVED [5 TO 1] MOVER: Danny Martin, Board Member SECONDER: Carol Lee Brady, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia I. Consider Adoption of Resolution Adopting Water Capacity Fees for Fiscal Year With regard to the subject resolution, Sr. Vice President Wilson entertained a motion from the Board of Directors. It was moved by Director Martin and seconded by Director Herman to approve the subject resolution titled: Resolution No Adopting Water Capacity Fees for Fiscal Year RESULT: APPROVED [5 TO 1] MOVER: Danny Martin, Board Member SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Herman, Martin, Plummer NAYS: Garcia J. Item Discussed Out of Agenda Order K. Consider Adoption of Resolution Declaring District s Intention to Reimburse Itself from the Proceeds of a Tax-Exempt Financing for Certain Expenditures to be Made in Connection with Specific Capital Facilities for Fiscal Year Presenting the subject resolution, Assistant General Manager-CFO/Treasurer Rick Aragon noted that the subject resolution s intention is to reimburse itself from the proceeds of a tax-exempt financing for certain expenditures to be made in connection with specific capital facilities for Fiscal Year Following explanation, Sr. Vice President Wilson entertained a motion from the Board of Directors. It was moved by Director Garcia and seconded by Director Plummer to approve the subject resolution titled: Board of Directors Page 12 of 20 June 14, 2018

13 Resolution No Declaring District s Intention to Reimburse Itself from the Proceeds of a Tax-Exempt Financing for Certain Expenditures to be Made in Connection with Specific Capital Facilities for Fiscal Year RESULT: APPROVED [UNANIMOUS] MOVER: Angel Garcia, Board Member SECONDER: William Plummer, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer ITEM 5. ACTION ITEMS A. Consider Approval of Necessary Actions to Establish a Section 115 Pension Obligation Funding Trust and Adoption of the Appropriate Resolution By way of a PowerPoint presentation, Assistant General Manager-CFO/Treasurer Rick Aragon provided the Board of Directors (Board) with an overview of the strategy to eliminate Rancho California Water District s (RCWD/District) $34 million unfunded pension obligation by establishing a Section 115 Trust (Trust) for an additional $10.5- million contribution. Next, Mr. Aragon reported that the direction to create the Trust was made in consideration of the ability of the District to earn greater investment returns through a wider array of allowable investment vehicles than is typically allowed for standard RCWD investments. He further summarized the Trust s advantages, as follows: High degree of District control and flexibility o Full control over investments and investment strategy o Direct payments to California Public Employees Retirement System (CalPERS) or reimbursement to District o Can reimburse full amount of pension obligation o District could get funds back with 3-4 years using full reimbursement Continuing, Mr. Aragon reported that staff, along with Chandler Asset Management (Investment Advisor), have prepared the necessary legal documents and policies for the Trust. Moreover, he explained that there are two primary policy documents recommended for Board adoption in order to govern the funds of the Trust: the Funding Policy sets forth parameters on how to put the investment earnings to use, and the Investment Policy governs the limitations and goals on how to invest said funds. Providing a refresher as to the numbers, Mr. Aragon advised that, prior to taking action, the District was looking at having to pay $68 million to CalPERS over the next 24 years Board of Directors Page 13 of 20 June 14, 2018

14 to pay off the unfunded liability; whereas now, the District will pay $37.6 million over the course of 17 years to accomplish the same goal. Following staff s report, Sr. Vice President Wilson entertained a motion from the Board. Director Plummer moved to adopt the appropriate resolution authorizing the following actions: Approval of the Section 115 Trust Agreement creating the Section 115 Trust to help fund Rancho California Water District s Pension Obligations, and appointing Bank of New York Mellon as the Trustee; Payment of lump-sum contribution of $10.5 million to the Trust from the property tax reserve funds; Approval of the Trust Funding Policy; and Approval of the Trust Investment Policy reflecting a 7 percent investment strategy recommended by the Committee. Director Herman seconded the motion, and discussion continued. Director Martin posed a question regarding the worst-case scenario resulting in a loss of principal on the $10.5 million and the overall District liability, as well as any impact to retired employees. Responding, Mr. Aragon advised that should the market crash in the next few years, it would result in a longer recovery period, as there is no liability or obligation for the District to get the fund back to a set pre-determined level. He further stated that the Trust acts as a long-term investment strategy, whereby allowing the District to weather through multi-year cycles. Addressing a comment posed by Director Garcia regarding what occurs once the District reaches the 17-year mark, Mr. Aragon explained that the strategy is based on actuarial assumptions and is essentially a crystal ball into the future based on what we know now. However, what is important to take into account is that the District will be significantly better than where we were before. General discussion ensued between the Board and staff regarding the investment strategy with risk versus reward, market volatility, and the overall advantage and the net present value savings that could potentially be achieved. Following discussion, Sr. Vice President Wilson called for the question on the motion on the floor. Board of Directors Page 14 of 20 June 14, 2018

15 RESULT: ADOPTED [UNANIMOUS] SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer B. Consider Authorization to Enter into Negotiations for an Option Agreement for a Grant of Easement over the Vail Lake Property, at State Highway 79 South and Anja Avenue, for Public and Emergency Access Roads Addressing the Board of Directors (Board), Chief Engineer Andrew Webster introduced the Agenda item and made a note to clarify that today s recommendation is only to authorize staff to enter into negotiations for an option agreement for a proposed emergency access easement and a proposed public road/utility easement over real property owned by Rancho California Water District (RCWD/District). At this time, by way of a PowerPoint (PP) presentation, General Counsel Jim Gilpin addressed the Board to provide a brief summary of the events/actions that have occurred thus far, and presented the following alternatives for the Board s consideration: Deny request Authorize staff to negotiate an Option Agreement for easements Direct staff to pursue declaring the property surplus Continuing, Mr. Gilpin reviewed a PP slide outlining the key points to consider with an option agreement as follows: Option Agreement would give the developer the right, but not the obligation, to acquire the easements Condition precedent County of Riverside (County) conditions of approval Proposed term of option 3 Years If exercised, the easements would be granted and the developer would have five years to complete the improvements Easement would automatically terminate if the improvements are not completed within five years. Director Herman posed a concern that the development plans presented to the County contain the easement improvements, which would receive a conditional approve. Yet, there is still the concern with the unknown use of the property and the inability to consider other alternatives. Mr. Gilpin acknowledged the apprehension and advised that the option agreement does not address this matter. Next, Mr. Gilpin reviewed the pros and cons of the option agreement, as well as the formal process of declaring the subject land as surplus, as follows: Declare Land Surplus Appraisal/Offer to Purchase Written Offer to Sell to Certain Public Agencies (60 Days) Notice of Desire to Purchase Good Faith Negotiations (Not less than 90 Days) Board of Directors Page 15 of 20 June 14, 2018

16 Director Martin opined that should the District grant an option agreement, effectively, it would tie up the marketability of said property for the term of the agreement. Further, he suggested that the District deny the option agreement, start the process of declaring the property as surplus, and sell it. Director Garcia posed his concerns regarding the liability potential, whereby Mr. Gilpin advised that, as the underlying fee holder, the District is at risk for any lawsuit. Addressing Director Brady s query of any other benefits or issues related to the property being declared surplus and selling it, Mr. Gilpin advised that said property and the property south of State Route 79 were acquired in order to control run-off into Vail Lake. By selling the property, the District would lose that control. As well, he stated the District would forego the option to utilize said properties, which are part of the multi-species habitat, as credit for future project and/or development options. Director Plummer commented that there are two additional benefits to granting the option agreement: 1) it is a benefit being part of a multi-species habitat area, and 2) if said improvements are made, the value to the property increases. Further, he stated that with the current road, the District already has a liability. Next, a lengthy discussion ensued amongst the Board and staff regarding options to add additional conditions to the option agreement and limiting it to certain uses, concerns with impeding the District s decisions for future uses of the property, and the potential consideration of a lot-line adjustment and declaring the adjusted parcel as surplus. Sr. Vice President Wilson announced that he received a Request to Speak form and invited Randy Reinhart to address the Board. At this time, Mr. Reinhart addressed the Board to summarize the request by Ken Smith for the easement, as required by the County, the improvements to be made to the District s existing road, support of the lot-line adjustment if it meets the minimum acreage requirement, and moving forward with negotiations. With no further discussion, Sr. Vice President Wilson entertained a motion from the Board. Director Herman moved to deny the option agreement and for staff to explore the possibility of a lot-line adjustment and declaring the adjusted property as surplus that can be sold, as well as fencing off the property immediately. Director Martin seconded the motion, and it carried as follows: Board of Directors Page 16 of 20 June 14, 2018

17 RESULT: APPROVED [5 TO 1] MOVER: Lisa Herman, Board Member SECONDER: Danny Martin, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin NAYS: Plummer C. Consider Review and Approval of a Short-Term Land Lease with Sturgeon Electric Company, Inc. for 3.65 Acres on Assessors' Parcel Number on the Vail Property Addressing the Board of Directors (Board), Assistant General Manager-CFO/Treasurer Rick Aragon provided a summary of the request from Sturgeon Electric Company (Sturgeon) for a short-term land lease agreement for 3.65 acres of the 188-acre Vail Property. Mr. Aragon reported that Sturgeon is requesting the short-term lease for eight months, as a staging area for portable office, vehicles, and supplies while they complete a power line replacement contract for Southern California Edison. Mr. Aragon advised that time is of the essence to execute a lease, as Sturgeon will need to begin staging their equipment by the end of June He further reported that staff negotiated an eight-month lease term at $1,500 per month. Addressing a concern posed by Director Herman regarding fire liability related to work on power-lines, Mr. Aragon clarified that the leased land would act as a staging area only and that there would be no active power line work on the premises. Chief Engineer Andrew Webster added that additional discussions between staff and Southern California Edison would be taking place regarding quitclaim easements and the removal of power lines to reduce fire liability around the Vail Property. Following discussion, Sr. Vice President Wilson entertained a motion from the Board. It was moved by Director Plummer and seconded by Director Brady to authorize the General Manager to execute a short-term land lease agreement with Sturgeon Electric Company, Inc., for 3.65 acres, at Assessor s Parcel Number , in substantial form and terms to the lease agreement, as presented. The motion carried as follows: RESULT: APPROVED [UNANIMOUS] SECONDER: Carol Lee Brady, Board Member AYES: Wilson, Brady, Garcia, Herman, Martin, Plummer D. Consider Review and Approval of Contract with Keyser Marston Associates to Assist in Proposal Review and Lease Negotiation Services Relating to Vail Lake RV Resort Request for Proposals Responses Addressing the Board of Directors (Board), Assistant General Manager-CFO/Treasurer Rick Aragon reported that, at the June 7, 2018 Finance and Audit Committee (Committee) regular meeting, staff brought to the Committee the intention to engage with Keyser Marston Associates, Inc. (KMA) for additional services (lease negotiation Board of Directors Page 17 of 20 June 14, 2018

18 and development opportunity evaluation) beyond the financial capacity analysis originally approved. Based on some of the concerns posed by the Committee regarding the overall cost for the additional services and their associated value, staff revisited the matter and discussions with KMA. In doing so, Mr. Aragon advised that staff is recommending limiting the scope of work to focus on the lease negotiations only, at a cost of $16,000. He further explained that once the Board has made its final selection, KMA would review the information thoroughly, point out any potential concerns, and assist staff with lease terms. Following review and discussion, Sr. Vice President Wilson entertained a motion from the Board. It was moved by Director Plummer and seconded by Director Herman to authorize the General Manager to execute a contract with Keyser Marston Associates, Inc. for services to assist in lease negotiations for the Vail RV Resort for an amount not-to-exceed $16,000. The motion carried as follows: RESULT: APPROVED [4 TO 2] SECONDER: Lisa Herman, Board Member AYES: Wilson, Brady, Herman, Plummer NAYS: Garcia, Martin ITEM 6. INFORMATION ITEMS There was no discussion on the following items: A. Activity Report, Committees of the Board for the Month of May B. Claims Activity Report for the Month of May C. Newspaper Articles ITEM 7. EXECUTIVE REPORTS A. General Counsel's Report General Counsel Jim Gilpin reported that the Board of Directors would be receiving an informational memorandum regarding serial meetings and being vigilant in handling multiple conversations on a specific topic to maintain compliance under the Brown Act. B. General Manager's Report General Manager Jeff Armstrong was pleased to announce that it appears Anthem Blue Cross and Universal Health Systems have entered into a multi-year contract with local hospital in-network availability that is retroactive to June 1, He further provided updates regarding the Murrieta Service Area of Western Municipal Water District (WMWD), as follows: Board of Directors Page 18 of 20 June 14, 2018

19 1. The City of Murrieta has finished the Municipal Services Review Request for Proposals with input from all the water districts and has forwarded it to the Local Agency Formation Commission (LAFCO). LAFCO will review it with their commission on June 28, The District will prepare a letter stating Rancho California Water District s (RCWD) support, as well as RCWD s willingness and commitment to participate in the process, including funding (subject to the final negotiated costs). 2. In relation to the temporary solutions to assist WMWD, RCWD communicated the District s position to General Manager Craig Miller relating to the temporary wheeling agreement and the Sauer property. WMWD will be taking said items to their July 16, 2018 Engineering and Operations Committee meeting for discussion. Concluding his report, Mr. Armstrong informed the Board of Directors (Board) that the Santa Rosa Regional Resources Authority (SRRRA) Board received information/bids on the Santa Rosa Water Reclamation Facility rehabilitation project. Based on the information received, the SRRRA Board took an action to reject all bids and rebid the project immediately. C. Board Members' Comments and Reports Director Plummer commented on his attendance, along with Directors Brady and Garcia, at the informational tour of Chandler Asset Management s offices. There being no further Board member comments, Sr. Vice President Wilson announced a five minute break to be followed by adjournment to closed session. ITEM 8. CLOSED SESSION At any time during the regular session, the Board may adjourn to closes session to consider litigation, personnel matters, or to discuss with legal counsel matters within attorney-client privilege. Discussion of litigation is within the attorney-client privilege and may be held in closed session. Authority Government Code Section Director Martin left the meeting prior to closed session discussion. A. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - Significant Exposure to Litigation (Per Government Code (d) (4)) One (1) Potential Case B. CONFERENCE WITH LEGAL COUNSEL - PENDING LITIGATION (Per Government Code (a)) Rancho California Water District vs. Linda R. Davis, Trustee of the Linda R. Davis Family Income Trust, U/A Dated 01/01/1997; Southern California Addiction Center, Case No. MCC C. CONFERENCE WITH LEGAL COUNSEL - PENDING LITIGATION (Per Government Code (a)) - United States vs. Fallbrook Public Utility District, Case No D. CONFERENCE WITH LEGAL COUNSEL - PENDING LITIGATION (Per Government Code (a)) - United States of America et al. vs. J- M Manufacturing Company, Inc. Case No. 5:06-CV GW Board of Directors Page 19 of 20 June 14, 2018

20 The Board reconvened in open session at 11:58 AM, whereby General Counsel Jim Gilpin announced that there were no reportable actions. ITEM PULLED FROM CONSENT CALENDAR Consider Approval of a Request by Eastern Municipal Water District for a Grant of Easement along Washington Avenue, between Cherry Street and Elm Street, for a New 36-Inch Diameter Recycled Water Pipeline At this time, Engineering Manager-CIP & Development Jake Wiley provided a brief description and summary regarding Consent Calendar Item 2E Consider Approval of Request by Eastern Municipal Water District for a Grant of Easement along Washington Avenue, Between Cherry Street and Elm Street, for a New 36-Inch Diameter Recycled Water Pipeline. Following review, Sr. Vice President Wilson entertained a motion from the Board of Directors. Director Plummer moved to approve a request from Eastern Municipal Water District for the grant of a non-exclusive easement to install and operate a 36-inch diameter recycled water pipeline along (future) Washington Avenue, between Cherry Street and Elm Street, across Rancho California Water District-owned property. Sr. Vice President Wilson seconded the motion, and it carried as follows: RESULT: APPROVED [UNANIMOUS] SECONDER: Bill Wilson, Sr. Vice President AYES: Wilson, Brady, Garcia, Herman, Plummer, Martin ITEM 9. ADJOURNMENT There being no further business to come before the Board of Directors, the meeting adjourned at 12:05 PM. Board of Directors Page 20 of 20 June 14, 2018