Convened at 12:30 p.m. on Wednesday March 12, 2014

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1 MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE SEMITROPIC, BUTTONWILLOW, POND-POSO, AND WILDLIFE IMPROVEMENT DISTRICTS OF SEMITROPIC WATER STORAGE DISTRICT Convened at 12:30 p.m. on Wednesday March 12, 2014 The regular meeting of the Board of Directors was called to order by President Wegis on Wednesday, March 12, 2013, at 12:30 p.m., at the offices of the District, 1101 Central Avenue, Wasco, California. Those in attendance included: Directors Present: Directors Absent: Others Present: Jeff Fabbri, Pat McCarthy, Phil Portwood, Todd Tracy and Dan Waterhouse; Courtney Howard and Fredrick Wegis; General Manager, Jason Gianquinto; District Superintendent, John Lynch; District Engineer, Paul Oshel; District Controller, Bobby Salinas; Staff Engineer, Craig Wallace; District Accountant, Judy Burns; District Exec. Secretary, Marsha Payne; District s Legal Counsel, Ernest Conant; District Consultants, Will Boschman and John Jones; District s Consulting Engineers, Bookman-Edmonston, GEI Consultants, Inc., Represented by Dick Rhone and Larry Rodriguez; W.M. Lyles Representative, Rick Amigh; Wells Fargo Representative, Michael Engelbrecht; District s Bond Counsel, Jeff Stava of Nossaman, Attorneys at Law; Renewable Resource Group Representative, Sejal Patel; Maricopa Orchards Representative, Jon Reiter; District Landowners, Jeremy Blackwell and Kalid Abureyaleh; and Sprague Real Estate Group Representative, Steve Gair. Vice President Portwood opened the meeting with the flag salute, then introduced and welcomed all guests. ACTION ITEMS Approval of Agenda It was noted that one new informational item came to Staff s attention after posting the Agenda and will needs to be reported to the Board before the next meeting: Potential legislation. 1

2 On motion by Director Waterhouse, seconded by Director Tracy, the Amended Agenda was unanimously approved. Consider Resolution Authorizing 2014 Second Lien Revenue Bonds Vice President Portwood welcomed Michael Engelbrecht, Wells Fargo Representative. Mr. Engelbrecht cited a long history with the District and gave a presentation showing that Wells Fargo is among the strongest financial institutions today. Interest rates are currently low and the municipal bond market sales appear strong with low demands and greater supply and a competitive market on short term rates. The District is looking at a 10-year transaction with second-lien bonds. There was a meeting yesterday with Standard & Poors, where the District currently hold an A+ rating on the 2013 bonds and its hopeful for a high rating on the 2014 bonds. Mr. Engelbrecht stated that the timeline is set to release the Preliminary Official Statement this week, receive the bond rating by March 18 th, price the bonds the week of March 24 th and close the transaction on April 10, Jeff Stava, of Nossaman LLP Attorneys at Law, acting as District s Bond Counsel, presented a Board Resolution which authorizes the actions to complete the bond transactions and sets the parameters of financing. The Draft Preliminary Official Statement was submitted for review and discussion followed on the general terms of the bonds, security, disclosures and costs to the District. Wells Fargo will do a pre-pricing exercise so the District has a good idea of the closing. The bonds have subordinate liens on the 2013 and 2007 bonds. On motion by Director McCarthy, seconded by Director Fabbri, the Board authorized the sale of bonds in the form of Resolution No. SID 14-02: RESOLUTION OF THE BONDS OF DIRECTORS OF THE SEMITROPIC IMPROVEMENT DISTRICT OF SEMITROPIC WATER STORAGE DISTRICT APPROVING AN INDENTURE OF TRUST, A CONTINUING DISCLOSURE AGREEMENT, A PURCHASE CONTRACT, AND AN OFFICIAL STATEMENT; MAKING CERTAIN DETERMINATIONS RELATING THERETO; AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH Mr. Engelbrecht and Mr. Stava left the meeting at the conclusion of their presentation and discussion with the Board. Minutes The Minutes of the Regular Board Meeting on February 12, 2014 were presented for approval. On motion by Director Waterhouse, seconded by Director Tracy, the Minutes of the Regular Board Meeting on February 12, 2014 were approved. 2

3 Treasurer s Report The Treasure s Reports for February 2014 were presented for review and approval. On motion by Director Waterhouse, seconded by Director Tracy, the February 2014 Treasurer s Reports for Semitropic Water Storage District and Semitropic Improvement District were approved for filing. Financial Report District Controller, Bobby Salinas, presented the Actual/Projected Cash Flow Report as of February 28, 2014 for Board review. Discussion followed. Accounts Payable The Cash Disbursement List for March 12, 2014 was presented for review and payment. Discussion followed regarding the various tasks performed by GEI Consultants; water testing with BSK Analytical Laboratories; Reeb Government Relations, LLC for consulting work on water legislation issues; and Steven Ehlers & Sons Custom Farming, LLC for labor to drain the fields on Bouldin Island. On motion by Director Waterhouse, seconded by Director Fabbri, the Board authorized payment of the Accounts Payable as listed on the March 12, 2014 Disbursement List for Semitropic Water Storage District and Semitropic Improvement District, contingent upon approval of a consulting contract with Bob Reeb. A copy of the Disbursement List presenting the payments that were approved is attached hereto as "Exhibit A." Consider Landowner Request for Reclassification of Property Subject to GPSC Manager Gianquinto informed the Board that a District landowner submitted a request to reclassify his property subject to the General Project Service Charge. Khalid (Kal) Abureyaleh was introduced then addressed the Board regarding his situation. Mr. Abureyaleh stated that he purchased the land some years ago, then was out of the country for 7-8 years and the land has not been farmed since The assessments now add up to an overwhelming amount and he is about to lose the land through sale by the Kern County Tax Collector for unpaid taxes/assessments. The Manager stated that current policy is that the landowner is required to pay the assessments to bring the account current, present the receipt to Semitropic who will then reimburse the landowner. As a matter of policy, the Board and staff agreed to notify the County to take off the assessment charges (approximately $28,000). The Board requested that the Policy Committee meet to review and discuss the back assessments and recommend any action regarding the request to drop all assessment charges from 2007 forward. 3

4 Consider Consulting Contract with Bob Reeb & Associates The Manager reported that he and others have been working with Bob Reeb, a lobbyist for the Valley Ag Water Committee to amend AB3030 legislation. It was determined necessary to contract with Bob Reeb to provide additional financial support to complete the process. On motion by Director McCarthy, seconded by Director Fabbri, the Board authorized financial support of $3,000 per month through the end of 2014, along with members of the Valley Ag Water Committee to support Bob Reeb s efforts to amend AB3030 Groundwater Legislation. Consider Agreement with John Meek for Management of Delta Islands The Manager proposed that the District retain John Meek as an on-farm manager of the Delta Islands Project who has an established relationship with local farmers. It was requested that the District pay an amount of $2,500 a month through October 2014 (to coincide with the lease term) to remain in charge of maintaining the property per specifications in the lease. Mr. Meek has been actively pursuing a pesticide permit to spray the alfalfa for weevils and also working on a grazing contract with the sheep owners. Discussion followed. On motion by Director McCarthy, seconded by Director Waterhouse, the Board authorized a Management Contract with John Meek for $2,500 per month as on-farm manager of the Delta Islands Project through October Design/Build Team Construction Update W.M. Lyle s representative, Rick Amigh, reported that Entrix is developing a memo that addresses some USFWS concerns expressed in the recent meeting between Semitropic and the USFWS. USFWS has assigned an agent to review the HCP which is in progress. The Service also requested available dates in April for a field meeting to view the project site. The Raw Water Processing Plant operations were halted on February 4 while the 120-inch SWRU pipeline was dewatered to allow for the construction of the BVWSD Turnout. Operations are expected to resume on March 7 and continue for several months, possibly into early June. Project plans and specifications are currently being developed on the Junction Pumping Plant Turbine Generator. WM Lyles has executed Service Agreements with consultants on the Pond Road Substation. The site and substation drawings are currently being drafted. Consulting Engineer s Report Dick Rhone from Bookman-Edmonston, GEI Consultants, Inc. presented the Consulting Engineers Report on Projects for Semitropic Water Storage District for work during February 2014, which was accepted for filing. 4

5 Mr. Rhone also reported on engineering activities related to DWR Ag /Water Use Efficiency Funding, including preliminary work for the construction of a water-holding tank to facilitate the testing and calibration of District flow meters and the planning grant contract for preparation of the Agricultural Water Management Plan. Other activities include providing information as requested to the High-Speed Rail Authority for the proposed alignment; initiation of the groundwater model update; and participation in a project kick-off meeting with the Design-Build Team for installation of temporary pump and motor units at Checks 22 and 28 on the California Aqueduct Reverse Flow Project. Groundwater Storage Services, Inc. Will Boschman of Groundwater Storage Services, Inc. reported on activity during February Several Central Coast agencies have contacted Semitropic for assistance, saying that the water situation is so dire that they may run out of water in July. Mr. Boschman has discussed groundwater storage in Semitropic with these same agencies for years and very little interest was shown at the time. However, if the District is able to help them, it must be conditional that the agencies purchase storage in the District s groundwater banking program. There appears to be renewed interest in the oil industry for working with water agencies to benefit both oil production and agriculture. Work also continued on reverse flow in the California Aqueduct from Kern County to the Delta. Current monthly activity is primarily focused on at least moving the water to the Coastal Branch for in-county needs in Mr. Boschman represented the District in various meetings including the Kern Water Bank Authority Board meeting, State Water Contractors Board meeting, as well as tasks that needed to be addressed such as proving recovery for Homer (2 nd priority user) both in Semitropic and in the Antelope Valley, well drilling, landowner issues, meetings with staff regarding in-district deliveries and Banking Partner recoveries under zero allocations. Developing Water Resources, Inc. John Jones of Developing Water Resources, Inc. reported that well drilling activities are well underway on the first well site and the second site has been located and permit received under the Shared Well Program. Mr. Jones has also been working with engineering getting quotes on tube and shaft along with column pipe for equipping the new wells in the recharge basins. The large pump back units have been sent to the repair shop to be refurbished. The video camera is continuing to be requested by landowners, many of which have commented that this is an excellent program and much appreciated by the landowners. INFORMATIONAL AND UP-DATE ITEMS Manager Gianquinto s written report on District Activity During February dated March 7, 2014 was accepted for filing. In addition, the following items were presented: 5

6 Contract Extensions The Manager reported that negotiations regarding the extension of the SWP contracts has been approved and extends the contracts through The contractors and DWR are now preparing the agreement in principal which is scheduled to be completed in April DWR will now initiate the CEQA process relative to the amended contract. It is anticipated that the CEQA process will take about 15 months to complete. Water Supply Update Manager Gianquinto reported that the State allocation remains at 0%, although the District will maintain its previous commitment of 15%. The District is working with KCWA on water exchanges and routing deliveries for Banking Partners for full recovery operations. The District has committed to drilling 10 wells under the Shared Well Program and there have been 17 total requests to date within the District and 3 more from KWB. There are 8 existing wells that need equipping. Fallowing Program The Manager led discussions on fallowing the land on Bouldin Island in the Delta and delivering it to the South Bay contractors, namely Alameda Co, Santa Clara and Zone 7. Deliveries of Semitropic s water could then be routed to destinations south of the Delta. Discussion followed. Potential Legislation District s legal counsel, Ernest Conant, reported on potential legislation, namely the California Action Plan for Sustainable Groundwater Management. A major objective of the Plan is to expand groundwater storage capacity and improve groundwater management which accounts for 39 percent of the water used by cities and farms. The challenges include overdrafted basins, seawater intrusion, degraded groundwater quality, land subsidence and the decline of ecosystem services provided by the interaction of groundwater and surface water. Mr. Conant stated that the California Action Plan will also bring about: 1) 2014 Water Bond which may appear again on the November ballot. 2) Legislation on groundwater management AB3030. With respect to sustainable groundwater management, the Plan calls for legislation that gives local and regional agencies comprehensive authority to address their groundwater challenges. It is important that we be proactive to influence what the legislature does. 6

7 Closed Session At 2:30 p.m. the District s legal counsel, Ernest Conant, stated that a closed session was needed pursuant to the following: a. Conference with legal counsel to discuss pending litigation (Gov t Code Section (a) 7 items 1) Rosedale-Rio Bravo Water Storage District v. Kern County Water Agency et al 2) Central Delta Water Agency et al v. California Department of Water Resources et al 3) Rosedale-Rio Bravo Water Storage District & Buena Vista Water Storage District v. California Department of Water Resources et al 4) Central Delta Water Agency et al v. Kern County Water Agency, et al 5) State Water Contractors v. Salazar (Delta Smelt BO) 6) San Joaquin County Resources Conservation District, et al. v. California Regional Water Quality Control Board, Central Valley Region 7) North Kern Water Storage District, et al v. City of Bakersfield and North Kern Water Storage District, et al, v. Kern Delta Water District b. Conference with legal counsel to discuss Real Property Negotiations (Gov t Code Section ) Property: Land Retirement Opportunities Negotiator: General Manager Negotiating Parties: Multiple Under Negotiation: Price and Terms c. Conference with legal counsel to discuss Anticipated Litigation (Gov t Code Section ) All visitors left the meeting. Legal counsel reported on and discussed various legal issues with the Board. At 3:40 p.m. the Board reconvened to open session. Vice President Portwood stated that several items were discussed; and that no action was taken. Adjournment The meeting was adjourned by Vice President Portwood until Wednesday, March 26, 2014 at 12:30 p.m. to continue the business of the District. APPROVED: /s/ Fredrick A. Wegis, President /s/ Todd Tracy, Secretary 7