Convened at 12:30 p.m. on Wednesday March 11, 2015

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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 11, 2015 The regular meeting of the Board of Directors was called to order by President Wegis on Wednesday, March 11, 2015, 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, Dan Waterhouse and Rick Wegis; Tim Thomson; General Manager, Jason Gianquinto; District Superintendent, John Lynch; District Engineer, Paul Oshel; District Controller, Bobby Salinas; Staff Engineer, Water Resources, Isela Medina; Staff Engineer, Craig Wallace; District Accountant, Judy Burns; District Executive Secretary, Marsha Payne; District s Legal Counsel, Ernest A. Conant; District s Consultant, John Jones; District s Consulting Engineers, Bookman-Edmonston, GEI Consultants, Inc., Represented by Dick Rhone; W.M. Lyles Representative, Rick Amigh; Wells Fargo Securities Representative, Michael Engelbrecht; Maricopa Orchards Representatives, Jon Reiter and Jason Pucheu; And, District Landowner, Jim Neufeld. President Wegis opened the meeting with the flag salute, then introduced and welcomed all guests. ADMINISTER OATH OF OFFICE General Manager, Jason Gianquinto, reported that the Kern County Board of Supervisors officially reappointed four Directors whose terms were up for re-election. Those reappointed for another 4-year term included: Director Jeff Fabbri Division 1 Director Dan Waterhouse Division 3 1

2 Director Tim Thomson Division 4 Director Todd Tracy Division 6 The Oath of Office was administered by Executive Secretary, Marsha Payne, to three Directors present: Fabbri, Waterhouse and Tracy, after which the Directors officially assumed full privileges and responsibilities of their reappointed positions. ACTION ITEMS Approval of Agenda The Agenda was reviewed and unanimously approved as posted on Motion by Director Waterhouse, seconded by Director Tracy. Minutes The Minutes of the Regular Board Meeting on February 11, 2015 were presented for approval. On motion by Director Tracy, seconded by Director Portwood, the Minutes of the Regular Board Meeting on February 11, 2015 were approved. Treasurer s Report The Treasurer s Reports for February 2015 were presented for review and approval. On motion by Director Waterhouse, seconded by Director McCarthy, the February 2015 Treasure s Reports for Semitropic Water Storage District and Semitropic Improvement District were approved for filing. Financial Report District Controller, Bobby Salinas, presented an Income Statement for Board review and well as the Actual and Projected Cash Flow Report for Accounts Payable The Cash Disbursement List for March 11, 2015 was presented for review and payment. Discussion followed regarding payment to BSK Analytical Lab for water testing; Coast Crane Co. for a new diesel powered telescopic boomtruck to replace the 1973 model; Irrigation Concepts for materials to repair E107 groundwater pump for Westside Waterfowl; the cultural resource letter report for Pond Road Substation; and the first of two payments to Kern County Water Agency for the purchase of dry year water north of the Delta. 2

3 On motion by Director Portwood, seconded by Director McCarthy, the Board authorized payment of the Accounts Payable as listed on the March 11, 2015 Disbursement List for Semitropic Water Storage District and Semitropic Improvement District. A copy of the Disbursement List presenting the payments that were approved is attached hereto as "Exhibit A." Wells Fargo 2015 Bond Recap Michael Engelbrecht, of Wells Fargo Securities, presented a summary of the 2015 Bond Sale. One month ago, Mr. Engelbrecht addressed the Board seeking authorization for the 2015 Second Lien Revenue Bonds. Standard and Poor s rating changed from a previous AA- to an A. Bids were solicited from two bond insurance companies and Assured Guaranteed submitted a bid for a bond insurance policy of 10.2 basis points. The interest rate was locked in at 3.67% on a 30- year amortization and a portion of the 2009 bonds were refunded which resulted in debt savings of almost $400,000 for the District. Today the transaction was closed and the money was transferred into Semitropic s account. Again, Mr. Engelbrecht and Wells Fargo led the District to a successful Bond Sale for which the Board was appreciative. Mr. Engelbrecht left the meeting at the conclusion of the presentation. Consider Landowner Transfer of Contract Water The Manager reported that two landowners, Tim Thomson and J & R Dairy, were swapping 80-acre parcels of land and has requested that the District transfer the Contract Water from one parcel to the other, similar to transfers approved for other landowners in the past. There are no impacts to others, both landowners are agreeable and Turnouts are already in place. Discussion followed. On motion by Director Waterhouse, seconded by Director Portwood, the Board authorized the transfer of Contract Water between two District landowners, Tim Thomson and J & R Dairy. Consider Amended Contract with Groundwater Storage Services Manager Gianquinto stated that last month the Board discussed and requested a modification to the Consulting Contract with Will Boschman of Groundwater Storage Services, which because of budget considerations, was set at $150,000 per year starting March 1, 2015 with no deductions on commissions. On motion by Director Waterhouse and seconded by Director Tracy, the Board authorized amending the Consulting Contract with Will Boschman of Groundwater Storage Services. Consider District Acquisition of 2015 Dry Year Transfer Water Manager Gianquinto stated that the District, as a Member Unit of the Kern County Water Agency, is eligible to participate in the 2015 Dry Year Transfer Program which is coordinated 3

4 through the State Water Contractors. Kern County has approximately 35,000 to 38,000 acre-feet which is potentially available. Semitropic s share would be approximately 7,500 to 8,500 acrefeet. The cost of water supply north of the Delta is $700 per acre-feet, assuming a 30 percent loss by the time it reaches Semitropic s gate. The cost in-district would be approximately $1,000 per acre-foot. The intent is that the water would go into a Dry Year Pool and made available to District water users. Discussion followed. The Dry Year Transfer Pool is a 2015 budgeted item; therefore, no action is required. Consider Submittal of Projects as Requested by California Water Commission The Manager stated that the California Water Commission, under Prop. 1 with Chapter 8 funds put out a questionnaire for entities looking at storage projects with grant funding. Two projects were submitted for consideration: the Stored Water Recovery Unit and the Tulare Lake Project. Further details will be discussed at a later time. CONSULTANT REPORTS Design/Build Team Construction Update W.M. Lyle s Representative, Rick Amigh, reported that one Purchase/Sale Agreement (PSA) has been approved and another transaction is moving forward. The estate counsel for the second PSA requested that the eminent domain action be dropped and then proceed with the probate process. The Raw Water Processing Plant (RWPP) restarted in February and engineering resources are currently focused on upgrading the RWPP and constructing a shallow serpentine treatment reservoir adjacent to the Junction Pumping Plant. Field work continued on both the Pond Road Substation and the PG&E Smyrna Substation in March. It is anticipated that the Pond Road Substation will be on-line sometime in June. W.M. Lyles continued working with GEI on the administration and construction of the SWSD 2015 Reverse Flow Project. Field work commenced at the Pond Poso Spreading Grounds in March and should be completed in April. Pump Station improvements will be performed in May, June and July. 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 2015, which was accepted for filing. Mr. Rhone reported on activities related to the Groundwater Banking Program, including contact with MWD; administration of various grants; staff assistance with energy reconciliation; and assistance with development of the 2015 Delta Wetlands Transfer Program. 4

5 Groundwater Storage Services, Inc. Manager Gianquinto submitted Will Boschman s report for Board review on Groundwater Storage Services activity during February Developing Water Resources, Inc. John Jones of Developing Water Resources, Inc. reported that long-term staff members are retiring from the Kern County Environmental Department, being replaced by younger, inexperienced staff members which may slow down the process in issuing permits for well drilling. The drilling staff moved the drilling rig from Garces and Magnolia to the next well site located west of Wildwood and just south of Jackson Avenue. Maintenance work was then performed on the rig. Balance Public Relations The Manager reported that Dean Florez of Balance Public Relations has registered as a Lobbyist and will be representing the District as an advocate for regulatory and legislative affairs. Mr. Florez will be tracking legislative bills and attending various meetings concerning water, energy and issues of interest to the District. Contacts have been made with various State legislators to visit the District which will take place in the near future. INFORMATIONAL AND UP-DATE ITEMS District Engineer, Paul Oshel, presented groundwater maps to the Board, showing water levels from well measurements taken from District and landowner wells. Discussion followed. Director Fabbri reported that he recently met with about 8-9 landowners just north of the District to discuss the benefits of forming a water district or annexing to a viable water district. With landowners developing new lands, there is a need for representation as a group to acquire water for their crops. Various options were discussed. Manager Gianquinto s written report on District Activity During February dated March 6, 2015 as accepted for filing. In addition, the following items were presented: Irrigated Lands Regulatory Program The Manager reported that at the Kern River Watershed Coalition Authority (KRWCA) meeting on March 5 th, the Board set the fees at $6.50 per irrigated acre, which was an increase of $.25 per acre over the original estimate to provide additional funds to support potential litigation. The Central Valley Regional Water Quality Control Board has taken issue with regard to the determination of High Vulnerability Areas (HVA s) within the KRWCA area; however, there wasn t a clear indication of the issues and concerns that would determine why various lands were classified as HVA s. 5

6 Delta Issues Representatives from Kern County Water Agency met with the Governor s team regarding concerns on the Bay-Delta Conservation Plan. It was specifically noted that for the BDCP to work for Kern County, the project must be affordable, provide an improvement in water supply yield and that the Contractors must have a significant role in the contract management of the project and that the State must consider design-build. Agency representatives also met with the San Luis-Delta Mendota Authority regarding the project and local concerns. Delta Island Fallowing The District continued to work with John Meek to prepare farm leases for the islands in the event the lands are not fallowed. After discussions with DWR, GEI and Land IQ, staff recommends the District not go forward with fallowing at this time. It appears that the State Water Resources Control Board is doing their homework and that a curtailment action may be in consideration. Kern Groundwater Management Authority Manager Gianquinto reported that the Kern Groundwater Management Authority held its monthly meeting on February 25 th. It was noted that work is being done to prepare a White Paper which discusses the concept of Sustainable Yield and the checkbook balance approach. The White Paper is being prepared by Jason Gianquinto, Eric Averett and Maurice Etchechury Water Supply On March 2, 2015, the State Department of Water Resources increased the allocation from 15% to 20%, primarily due to runoff from storms in December and February which was exported and stored in San Luis Reservoir. The Federal system is holding with 0% allocation. Closed Session At 2:00 p.m. the District s legal counsel, Ernest A. 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

7 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 Real Property Negotiators (Govt. 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 2:00 p.m. the Board reconvened to open session. President Wegis stated that several items were discussed, including various legal issues and agreements. On motion by Director Tracy, seconded by Director Fabbri, the Board authorized Legal Counsel to accept the late claims as requested by counsel for Minor & Haas and that the claim be deemed submitted on the date that leave is granted. On motion by Director Fabbri, seconded by Director McCarthy, the Board authorized the General Manager to execute a consulting contract with Robert Foster. Adjournment The meeting was adjourned at 3:00 p.m. by President Wegis until Wednesday, March 25, 2015 at 12:30 p.m. to continue the business of the District. APPROVED: /s/ Fredrick A. Wegis, President /s/ Todd Tracy, Secretary 7