Convened at 12:30 p.m. on Wednesday May 13, 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 May 13, 2015 The regular meeting of the Board of Directors was called to order by President Wegis on Wednesday, May 13, 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, Phil Portwood, Tim Thomson, Todd Tracy, Dan Waterhouse and Rick Wegis; None; 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 Consultants, Will Boschman and John Jones; District s Legal Counsel, Ernest Conant; District s Consulting Engineers, Bookman-Edmonston, GEI Consultants, Inc., Represented by Dick Rhone; W.M. Lyles Representative, Rick Amigh; Balance Public Relations Representative, Dean Florez; Maricopa Orchards Representatives, Neema Assemi and Jon Reiter; Barbich, Hooper & King Accountancy Corp. Representative, Mark Gehring; Renewable Resources Group, Jim James; Paramount Farms Representatives, Mike Widhalm; Poso Creek Representative, Mike Henry; District Landowner, Rogelio Rios; Sandridge Partners Representatives, Jon Vidovich, Ted Page and Matt Hurley; and Via Conference Call: Prometheous Advisors Representatives, Robert Foster, Roger Faubel, and Edric Guise. President Wegis opened the meeting with the flag salute, then introduced and welcomed all guests. 1

2 Public Comment District landowner, Rogelio Rios addressed the Board in Spanish while Staff Engineer, Isela Medina, translated. Mr. Rios has a shared well agreement with the District for an agricultural well and as part of the agreement was allowed to put in a submersible pump for domestic water serving 3-4 homes. He was provided an estimate of cost of $10,000 from the District before the well was drilled in 2010, which he paid at that time. Meanwhile, Mr. Rios had a financial hardship and has filed for bankruptcy. In 2014 the District reconciled the true costs of the well which left a balance of an additional $10,000 which was much higher than anticipated due to the equipment for the domestic pump. He contacted District staff to negotiate the balance due plus two water payments he is behind on. The Board discussed the situation and possible conclusions. Mr. Rios indicated he could pay the two water payments on the ag water charges; however, he could not pay the additional charges on the domestic well equipment. Legal counsel recommended the District accept payment for the ag water and then file a claim in bankruptcy court on the domestic well equipment. ACTION ITEMS Approval of Agenda It was noted that three new items came to Staff s attention after posting the Agenda and will need action before the next meeting: Consider Special Purpose Water; Consider Policy Regarding the Shared Well Program; and Consider Policy Regarding Water Wheeling Within the District. Also, the Minutes from the April 30, 2015 Special Board Meeting were submitted for approval. On motion by Director Fabbri, seconded by Director Portwood, the Amended Agenda was unanimously approved. President Wegis presented a Letter of Resignation from Director Pat McCarthy dated April 30, The Resignation was accepted and Staff was directed to post the vacancy. The Board has 60 days to fill the position, either on or before June 30, Minutes The Minutes of the Regular Board Meeting on April 10, and Special Board Meeting on April 30, 2015 were presented for approval. On motion by Director Fabbri, seconded by Director Portwood, the Minutes of the Regular Board Meeting on April 10, and Special Board Meeting on April 30, 2015 were approved. Treasurer s Report The Treasurer s Reports for April 2015 were presented for review and approval. On motion by Director Waterhouse, seconded by Director Fabbri, the April 2015 Treasure s Reports for Semitropic Water Storage District and Semitropic Improvement District were approved for filing. 2

3 Financial Report District Controller, Bobby Salinas, reviewed the Actual and Projected Cash Flow Report for 2015 with the Board. The balance at year-end is projected to be about $15.5 Million. Accounts Payable The Cash Disbursement List for May 13, 2015 was presented for review and payment. Discussion followed regarding costs related to the farm lease agreement and work to get the land bank to farming conditions on Bouldin Island and consulting services for the Tulare Lake Flood Control Project. On motion by Director Waterhouse, seconded by Director Fabbri, the Board authorized payment of the Accounts Payable as listed on the May 13, 2015 Disbursement List for Semitropic Water Storage District and Semitropic Improvement District, except for expenses related to Bouldin Island which was held for further discussion during closed session. A copy of the Disbursement List presenting the payments that were approved is attached hereto as "Exhibit A." Consider Acceptance of the 2014 Audited Financial Statements District Controller, Bobby Salinas, presented the Audited Financial Statements and reported that Barbich Hooper & King representatives met with the Financial Committee prior to the Board meeting to discuss their findings. Mark Gehring was on hand to review the Statements with the Board. The Income and Expense activities were discussed as well as the 2014 Agreement with Metropolitan Water District. On recommendation by the Financial Committee and on motion by Director Waterhouse, seconded by Director Portwood, the Board accepted the Audited Financial Statements for filing. Consider Resolutions Fixing GASC & GPSC and Set June Hearing Manager Gianquinto led discussion on the General Administrative and General Project Service Charges and Resolutions. Paul Oshel, District Engineer reviewed the calculations to set the charges at $1.50/Ac and $137.90/Ac and the staff recommendation for setting the Special General Project Service Charges at $10.90/Ac. On motion by Director Waterhouse, seconded by Director Fabbri, the Board set the preliminary General Administrative and General Project Service Charges at $1.50/Ac and $137.90/Ac, set the Special General Project Service Charges at $10.90/Ac and adopted all resolutions and documentation necessary for processing as listed below: 3

4 BW Resolution No : RESOLUTION FIXING CHARGES FOR GENERAL ADMINISTRATIVE SERVICE RENDERED BY THE IMPROVEMENT DISTRICT AND CHARGES FOR GENERAL PROJECT SERVICE RENDERED BY THE IMPROVEMENT DISTRICT; ORDERING THAT THE SAME BE COLLECTED FROM THE OWNERS OF LANDS RECEIVING THE BENEFIT THEREOF; ORDERING PREPRATION OF A PRELIMINARY ROLL AND PRELIMINARY RATES AND SETTING OF NOTICED HEARING (2015; COLLECTED ) PP Resolution No : RESOLUTION FIXING CHARGES FOR GENERAL ADMINISTRATIVE SERVICE RENDERED BY THE IMPROVEMENT DISTRICT AND CHARGES FOR GENERAL PROJECT SERVICE RENDERED BY THE IMPROVEMENT DISTRICT; ORDERING THAT THE SAME BE COLLECTED FROM THE OWNERS OF LANDS RECEIVING THE BENEFIT THEREOF; ORDERING PREPARATION OF A PRELIMINARY ROLL AND PRELIMINARY RATES AND SETTING OF NOTICED HEARING (2015; COLLECTED ) The NOTICE, order mailed with the adoption of the foregoing resolutions, form of letter to transmit the notice to landowners, and the following resolution, were approved by the Board. Concurrent Resolution No. BW and PP 15-03: PROCEDURE FOR CONDUCT OF PUBLIC HEARING TO COLLECT AND FINALIZE THE ROLL FOR THE GENERAL ADMINISTRATIVE AND GENERAL PROJECT SERVICE CHARGES FOR 2015 (COLLECTED ) Consider Delano Waste Water Project Manager Gianquinto reported that Staff has been working with duck clubs regarding the Delano Waste Water Project to see how the District can make use of the recycled water for the duck clubs. Water from the Delano facility could be conveyed by a new pipeline along Garces Hwy. The concept would be to create constructive wetlands on a portion of District property just north of Garces Hwy. The water would be recharged and then conveyed in duck season via the Alpaugh Ditch. With the passage of Prop. 1, grant funds are available for recycled water facilities to clean the water partially for wildlife purposes and for the benefit of the District. Discussion followed. By general consensus, the Board authorized Staff to move forward in scoping the details of the Project and report back at a later date. 4

5 Consider Emergency Water Rates The Manager stated that in prior years, various District water users requested Emergency Water and there may likely be requests during the 2015 irrigation season. Last year the District set the rate structure at: Tier 1 - $250, Tier 2 - $350, and Tier 3 - $600. Discussion followed concerning well failures and the necessity of keeping the well in good operating condition. On motion by Director Portwood, seconded by Director Fabbri, the Board authorized 2015 Emergency Water rates starting today: Tier 1 - $400 for true emergency first time requests, Tier 2 - $600 for water users who did not fix their well and having problems, and Tier 3 - $1,000 for repeat offenders. Consider Contract with PG&E on Pond Road Substation The Manager stated that the District received the contract with PG&E for the Pond Road Substation. Paul Oshel reviewed the two options with the Board, recommending the 50 percent discount option with the District s portion of cost at $946,928 out of a total cost of $3.1 Million for the Project. On motion by Director Portwood, seconded by Director Waterhouse, the Board authorized the General Manager to execute an Agreement with PG&E for construction of the Pond Road Substation. Consider Duck Club Request for Proposals (RFP) Manager Gianquinto reported that the lease for the District s Duck Club property in the Goose Lake Bottom has expired so the Board needs to discuss a reasonable rate for a water supply for the club before a Request for Proposals is released. The last lease was set at $18,000 for 3 years with $7,000 a year for water. Discussion followed concerning fees, the drought and the lack of available water. On motion by Director Waterhouse, seconded by Director Tracy, the Board voted that the Duck Club would not be leased for the season. Voting for the motion to not lease the club included Directors Portwood, Tracy and Fabbri. Voting in favor of leasing the club included Directors Thomson and Waterhouse. The motion carried. Consider Groundwater Banking Agreement with Castaic Lake Water Agency District Consultant, Will Boschman, reported that a final draft had been accepted on a Groundwater Banking Agreement with Castaic Lake Water Agency and is seeking Board approval to execute the Agreement. Mr. Boschman stated that the Castaic Agreement is identical to the previously approved Stored Water Recovery Unit agreements. Castaic has been approved for a grant to help with the purchase of 5,000 Shares with upfront down payment of $422,500 on an ultimate capital payment of $8.45 Million. Castaic has previously been a Second Priority Banking Partner; however, starting February 1, 2016 their capacity status changes to a First Priority Banking Partner. 5

6 On motion by Director Portwood, seconded by Director Waterhouse, the Board authorized the President and General Manager to execute a Groundwater Banking Agreement with Castaic Lake Water Agency. Consider Special Purpose Water Manager Gianquinto reported that a solar company has contacted the District inquiring about water for construction purposes, washing panels and dust control. Discussion followed regarding the rates for Special Purpose Water. On motion by Director Portwood, seconded by Director Fabbri, the Board authorized Special Purpose Water be made available at $1,000 per acre-foot with a $2,000 minimum. Consider Policy Regarding the Shared Well Program The Manager reported that there are a number of shared wells that have been drilled and are under different phases of completion. Due to the amount of time it is taking to equip the wells and connect power, Staff is requesting approval to amend the Shared Well Agreements to pro-rate the amount of water from a shared well if the targeted completion date is not met. That would help out a number of landowners who are relying on the shared well for irrigation water. The O & M charge would also be pro-rated under the program based upon the estimated amount of water the landowner would get this year. Discussion followed. On motion by Director Fabbri, seconded by Director Waterhouse, the Board authorized staff to amend the Shared Well Program Policy to pro-rate charges based on completion dates. Consider Policy Regarding Water Wheeling Within District Manager Gianquinto stated that it is policy that a landowner can wheel water from one parcel to another as long as it is under common ownership. A situation has risen where there are a number of landowners who have long distances between parcels under common ownership. There has not been an issue to date; however, it would be wise to reconsider existing policy or consider new policy before problems rise. Discussion followed. A meeting date was set for the Policy Committee to discuss further for clarification. CONSULTANT REPORTS Design/Build Team Construction Update W.M. Lyle s Representative, Rick Amigh, reported that the Team continued with efforts to execute the final Water Service Agreements and Easements for Areas X, Y & Z on the Stored Water Recovery Unit area. The Raw Water Processing Plant (RWPP) continued to treat flows which varied from 40cfs to 150cfs as needed. The plant was in idle mode on several of the warmer days due to internal demands within the District. 6

7 Work continued on the Pond Road Substation. The concrete foundations for the electrical equipment was completed and the perimeter fencing, conduits and grounding is scheduled for May as well as the installation of the major electrical equipment. W.M. Lyles completed pipeline work on the SWSD 2015 Reverse Flow Project. Equipment and material procurement is in progress and the pump station and electrical improvements will be performed in May, June and July. Project development of the Raw Water Processing Plant Expansion is on-going. The civil design of the reservoir is finished and the structural designs for the overpour and canal dam structures are in progress. A preliminary budget will be prepared soon for District review. 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 April 2015, which was accepted for filing. Mr. Rhone reported on engineering activities including preparation and participation in the Semitropic Monitoring Committee and coordination with Ken Schmidt s office; development of a task order for evaluation of a potential water supply project; review of Kern Delta s Public Records Request; Poso Creek IRWM Group activities; discussions regarding the Madera Avenue Intertie; staff assistance with energy reconciliations; and development of a preliminary project description of the Tulare Lake Floodwater Storage Feasibility Study. Groundwater Storage Services, Inc. Will Boschman of Groundwater Storage Services, Inc. reported on activity during April 2015 which included signing the Mid-Valley/Lazy Dog Agreement and accepting the capital payment of $1,764,000. It was also reported that Castaic Lake Water Agency agreed to all terms of the banking agreement and is ready for execution. Castaic is obligated to pay $422,500 as a down payment on a total capital payment of $8,450,000, the balance of which will be paid as Castaic receives funds under a grant that is being processed. Mr. Boschman also met with several companies that are not only interested in disposing oil field water from oil wells within Semitropic but also additional water from the east side as well as from the west side of the valley. The production water is not of good quality, but various water treatment companies have requested that the District consider their particular technology for cleaning up the water. Mr. Boschman also represented the District at the Kern Water Bank Board meeting, State Water Contractor s Board meeting, the Semitropic-Rosamond Water Bank Authority and various other meetings with water agencies and District landowners. 7

8 Developing Water Resources, Inc. John Jones of Developing Water Resources, Inc. reported that the drilling crew has again finished another well and moved the drilling rig to another site. The pilot hole was drilled to 1,320 feet and the e-log report showed that there was water from 130 feet down. The developing unit has also moved from one well site to another as operations progress. Well permits were received from the Kern County Environmental Health Department. Balance Public Relations Dean Florez of Balance Public Relations stated that there has been a fair amount of activity in Sacramento as a new legislative session prepared to start tomorrow. The Smelt Bill failed as it was somewhat controversial; however, it can be taken up again in June. A meeting has been arranged for Manager Gianquinto to meet Danny Curtain of the California Water Commission, and together tour the proposed Tulare Lake Flood and Conveyance property. Mr. Florez continued to make numerous contracts with various State legislators who have shown interest in visiting the District in the near future. INFORMATIONAL AND UP-DATE ITEMS Delta Issues Manager Gianquinto presented his report on District Activity During April. The Governor finally announced that the Bay-Delta Conservation Plan as we know it is dead. The focus is now on the conveyance aspect under the Section 7 Permit Process. Outreach There were various meetings at ACWA. Manager Gianquinto and President Wegis met with Jason Jeff Kightlinger and Randy Record of Metropolitan Water District to discuss various issues including the Tulare Lake Project. There was also a meeting that included Will Boschman with Jose Gutierrez of Westlands as well as three Board members regarding water banking and storage within Semitropic. There have been meetings during the past month with various members of the California Water Commission and Department of Water Resources Water Supply The State water allocation remains at 20% supply, although a portion of this will not be available until the fall. Banking recovery operations are going well. In-Delta Licenses have been curtailed on Pre-1914 Water Rights for several agencies. There has been some talk of curtailing riparian rights in the Delta. 8

9 Dry Year Transfer Program Kern County is expecting to receive about 5,000 to 8,000 AF of water supply from the Dry Year Transfer Program which was started last year. Semitropic s portion will be between 1,000 to 1,700 AF to be made available for water users who are a little short of water and willing to pay the price. There have been requests from District landowners for about 2,500 AF. Closed Session At 3:20 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 Real Property Negotiators (Govt. Code Section ) Potential Water Supplies Negotiator: Jason Gianquinto, General Manager c. Conference with legal counsel to discuss Anticipated Litigation (Gov t Code Section ) Legal counsel reported on and discussed various legal issues with the Board. At 5:45 p.m. the Board reconvened to open session. President Wegis stated that several items were discussed, including various legal issues and agreements. The President also reported that by a unanimously passed motion the Board approved and authorized the execution of a Purchase and Sale and Grant of Easement Agreement and Escrow Instructions between the District and Sandridge Partners, L.P. (subject to legal counsel s review as to form), which provides for the District s purchase of an easement for a proposed water storage and recovery project on Tulare Lake lands being evaluated by the District. On motion by Director Portwood, seconded by Director Waterhouse, the Board authorized payment of bills on the May 13, 2015 Disbursement List as related to Bouldin Island. On motion by Director Waterhouse, seconded by Director Thomson, the Board authorized the General Manager to execute a Non-Binding Term Sheet with Cadiz, Inc. and to draft a Partnership Agreement for a Groundwater Storage and Water Supply Project. 9

10 On motion by Director Tracy, seconded by Director Thomson, the Board authorized the General Manager to execute a Non-Binding Term Sheet with Aqua Planet Utilities, Inc. and to draft a Water Purchase Agreement Adjournment The meeting was adjourned at 5:50 p.m. by President Wegis until Wednesday, May 27, 2015 at 12:30 p.m. to continue the business of the District. APPROVED: /s/ Fredrick A. Wegis, President /s/ Todd Tracy, Secretary 10