MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF SIERRA LAKES COUNTY WATER DISTRICT August 12, 2011 Time: 5:00 p.m. Place: 7305 Short Road, Serene Lakes, California I. Open Meeting Directors in attendance at the Sierra Lakes Board Room were: Director Wade Freedle - President Director Ulrich Luscher - Vice President Director Thomas Burns - Secretary Director Bill Oudegeest Director Martin D. Bern Staff members present: Guests present were: Minute Recorder: Anna Nickerson Maya Stafford, Water Rights Attorney Kevin O Brien, Water Rights Attorney James Curtis, District Counsel Kirk Syme, Royal Gorge Representative Cheryl LeBel, Serene Lakes resident Bernard Pech, Serene Lakes resident Gene Bowles, Serene Lakes resident Tom Skjelstad, Donner Summit PUD Linda Waddle Anna Nickerson II. Public Forum: NONE The meeting was scheduled to go into closed session but due to the delayed arrival of Kevin O Brien, one of the District s Water Rights attorneys, a motion was made by Director Oudegeest and seconded by Director Luscher to adjust the agenda and move on to item V. Consent Items Calendar. The motion passed on a unanimous vote. V. Consent Items Calendar: The consent items calendar was presented to the Board for review and approval. The consent items consisted of the July 8, 2011 meeting minutes and the July 2011 Check Register. Director Oudegeest noted that on page 7 of the minutes, he had voted no to the mileage rate increase. A motion was made by Director Luscher and seconded by Director Burns to approve
Page 2 the consent items calendar as corrected. The motion passed on a unanimous vote. VI. Operations Report: A. Bill Quesnel s operations report was presented to the Board for review. Cheryl LeBel commented that Mr. Quesnel s report did not provide the chart showing how much water was being released. She also said that it didn t matter if water was still flowing over the dam; the District was required to release an amount of water equal to the amount of water flowing into the lake. Director Luscher said that the calculation as to how much water was being release pertained to the period when the District was drawing water from storage and since the water was still flowing over the dam the District was not drawing from storage. Ms. LeBel disagreed with this statement. Director Bern suggested that the topic be addressed when Mr. Quesnel was available to answer questions. B. Bill Quesnel s memo regarding the Award of Material Testing Contract for 2011 Utility System Repair Projects was presented to the Board. A motion was made by Director Oudegeest and seconded by Director Luscher to approve Mr. Quesnel s recommendation to award the Material Testing Contract for 2011 to Holdrege & Kull. The motion passed on a unanimous vote VII. Old Business A. Director Freedle s President s Report was presented to the Board for review and discussion. Director Oudegeest asked why the Wastewater Treatment Plant Project was already behind schedule. Director Luscher asked that the topic be discussed later in the meeting when the Board discussed Tom Skjelstad s letter to the California State Water Resources Control Board. Director Freedle said that Tom Skjelstad would also be available later in the meeting to answer any questions. Director Freedle also said that he had been concerned from the beginning that the project would not be finished by the deadline date. He said that he was going to propose that a critical-path construction schedule be developed while the final engineering design was being completed. This would enable a more thorough analysis of the schedule and possibly enable completion of the project by the permit deadline of April 2014. Director Freedle mentioned the importance of the proposed Memorandum of Understanding and the possibility of advancing Donner Summit PUD (DSPUD) funds to finance the final engineering design work. Director Luscher asked if DSPUD had obtained a loan for all the pre-engineering and design work. Director Freedle said that DSPUD had obtained a $1,500,000 loan that covered the environmental review and pre-design; the loan was not adequate to cover the final engineering design. He also said that he suggested that Sierra Lakes and DSPUD work up a Joint Cash Flow Statement to ensure that the necessary funds would be available to support the project. Currently, Sierra has access to $3,000,000 that could carry the project through the final engineering design. DSPUD s SRF loan would carry the project through the first year of construction until Sierra s tentative USDA funding became available in December 2012. B. Director Freedle said that the District s USDA loan application for funding had been
Page 3 submitted. He said he received a call from Doug Colucci, USDA s Rural Development Department, who said everything looked good and that the next step was to post a Notice of Public Hearing at least 10 days before the September 4, 2011 meeting. Mr. Colucci had reviewed the District s draft Notice of Public hearing and asked that the notice include more information about the expansion of the spray irrigation field that was part of the project. C. The Board reviewed the letter that Tom Skjelstad, DSPUD, had sent to Diana Messina, California Water Resources Control Board, that requested additional time to achieve full compliance with DSPUD s current permit. The response from the California Water Resources Control Board was that there was no staff available to respond to amendment requests. It was suggested that a new application be submitted instead. DSPUD planns to submit a new permit application, based on information from the current permit, for a cost of approximately $50,000. III. Closed Session The Board began to discuss the Draft Memorandum of Understanding between Sierra and DSPUD but due to the arrival of Kevin O Brien, at 5:30 pm, a motion was made by Director Luscher and seconded by Director Burns to move the meeting into closed session. The motion passed on a unanimous vote. At 6:30 pm, a motion was made by Director Luscher and seconded by Director Oudegeest to move the meeting back into Open Session. The motion passed on a unanimous vote. Director Freedle reported that no decisions were made during closed session. He asked Kevin O Brien to summarize the recent negotiations the District has had with Royal Gorge. Kevin O Brien s summarized that the District currently had two petitions pending with the State Water Resources Control Board in regard to the District s Water Rights Permit No. 19248; one for the extension of time and one for a petition of change. He explained that Downey Brand Attorneys LLP was the District s lead law firm for the purpose of the petitions, in terms of compliance with the California Environmental Quality Act (CEQA). He also said they were told some months ago by the State Water Resources Control Board that the District needed to submit the required environmental documents in order to move forward with the pending petitions. Currently the District was out of compliance with their permit because the time limit for the submission of the required documents had passed. Mr. O Brien said that numerous letters, discussions and meetings had been held with Royal Gorge dating back to February 2011, and that on April 5, 2011, a letter was sent to Royal Gorge by Downey Brand proposing a reimbursement agreement and later a request for a Letter of Credit in the amount of $400,000 for environmental review costs associated with Royal Gorge s proposed development. Since April 5, 2011, Downey Brand has had several exchanges with Andrew Hitchings, attorney for Royal Gorge, supplying more clarification for the cost and the extent of the environmental review that was proposed. As of the time of the meeting, Royal Gorge had not agreed to sign the reimbursement agreement or provide a letter of credit for the environmental work. Mr. O Brien expressed his concern that if the District didn t move forward within the next 60 days, another year for field work would be lost. Director Bern asked if Royal
Page 4 Gorge had been provided with a deadline to present the letter of credit. He was told that the most recent deadline of August 5, 2011, which had been extended from July 2011, had passed without an agreement being reached. Kirk Syme, Royal Gorge, said that Royal Gorge s attorney, Andrew Hitchings, was on vacation so he would not be able to respond to the legal comments. He did, however, ask that another meeting be scheduled to work out the agreement. He said one of the questions Mr. Hitchings had was what part of the proposed scope of environmental work was incremental to Royal Gorge. He suggested having a meeting where the environmental consultants could be available to answer questions regarding the scope and cost of the proposed work. He said because the letter of credit was tied to the cost of the incremental environmental work they could not respond to the request until they were clear about what part of the proposed work was incremental to Royal Gorge. When asked by Director Bern, Maya Stafford, attorney for Downey Brand, said the information regarding the scope of environmental work was provided to Mr. Hitchings a week after the July 8, 2011 Board Meeting; mid July 2011. Director Bern than asked Ms. Stafford to confirm that the District had completed almost all the environmental work necessary to complete its Mitigated Negative Declaration and that all of the additional environmental work would be necessary to include Royal Gorge in the water rights permit. Both Maya Stafford and Kevin O Brien confirmed that all of the proposed additional environmental work was incremental to Royal Gorge s inclusion in the Water Rights Permit. Jim Curtis explained that the District was in a position to finalize its Mitigated Negative Declaration and to include Royal Gorge at this time would require that some work be repeated. Since current rate payers have already paid for the initial work, the cost of repeated work should also be charged to Royal Gorge. Director Burns added that the $400,000 line of credit was based on rough estimates. The actual estimated cost would not be known until the environmental consultants submitted detailed proposals. Mr. Syme asked when the District decided to go forward with a Mitigated Negative Declaration. Kevin O Brien said that a final decision whether to submit a Mitigated Negative Declaration or an EIR had not been made yet and that the District had gone forward with the work associated with the Serene Lakes portion of the water issue; adding Royal Gorge to the petition would require environmental review with an estimated cost of up to $400,000 to be paid by Royal Gorge. The discussion continued. Kevin O Brien offered that, under CEQA, the Board could go forward with the process by presenting a Notice of Preparation, a mechanism used to inform the public of the District s intent to develop an environmental document and allow the public the opportunity to comment on the scope of the document. Mr. Syme then informed the Board that one of the last conversations he had with Andrew Hitchings was that Royal Gorge had already done a significant amount of environmental review work and that he thought the work could substantially reduce the proposed scope of work, thus reducing the amount of the letter of credit. Members of the Board were astounded that Royal Gorge had not previously mentioned that they had already completed a substantial amount of environmental work; work that could potentially reduce the proposed scope of work. Kevin O Brien said the Board had two options 1) go forward with a Notice of Preparation and at the same time try to resolve Royal Gorge s questions and concerns and work out an agreement for reimbursement of the cost of an EIR, or 2) go forward with the Mitigated Negative Declaration and exclude Royal Gorge even though Royal Gorge had agreed that for them to be included in the
Page 5 water rights petition an EIR was needed and that they would have to pay for it, but had not agreed to do so at this time. A motion was made by Director Oudegeest and seconded by Director Luscher to move forward with the Notice of Preparation while continuing negotiation with Royal Gorge to reach an agreement for reimbursement for the required EIR. There was further discussion and Director Bern asked if Director Oudegeest would consider changing his motion to read to direct our consultants to prepare a Mitigated Negative Declaration, without Royal Gorge in the project description, to receive public comment and to submit the water rights petition. Director Oudegeest clarified that Director Bern was deleting any parallel negotiation with Royal Gorge. Director Bern said Royal Gorge had been given plenty of time to work out an agreement. Two deadlines had passed and it was time to move forward without them. He also said that the Royal Gorge project could be noted in the petition as an un-submitted project, with projected water needs, but with no environmental documents supporting the project. Director Oudegeest rejected the modification. The secretary reread the motion: to move forward with the Notice of Preparation while continuing negotiations with Royal Gorge to reach an agreement for reimbursement for the required EIR. The motion was passed on a roll call vote: Ayes: Directors Freedle, Luscher, Oudegeest and Burns. Noes: Director Bern. Abstentions: None. Absent: None. Kevin O Brien noted that the minutes should reflect that the motion was in response to Item VII. Old Business, E. Water Rights Permit Update. VII. Wastewater Treatment Plant Project status report. C. The earlier discussion regarding DSPUD s letter to the State Water Resources Control Board continued. Tom Skjelstad, DSPUD, said that due to the very tight design and construction schedules, a letter was sent in an attempt to buy an extra year of time to complete the project. He clarified that the request for additional time was for the monitoring the performance of the new plant; the plant would be completed but some adjustments to the process could be required. He also said that the California Water Board suggested they submit an early application for renewal since the State only had staff to process new applications, not amend them. Director Bern asked about the estimated $50,000 fee for submitting a new application. Mr. Skjelstad said he didn t know the actual cost but thought the new application would only cost around $50,000 since DSPUD would not be trying to obtain dilution credits with this application; the last permit application cost $175,000. Mr. Skjelstad also said a new permit application had to be sent anyway because the permit had to be renewed every five years. Currently, the final design process had begun based on a verbal approval by Mr. Skjelstad and he was confident that the DSPUD Board would approve the pre-design contract at their meeting held on August 27, 2011. D. The Board was presented with a Draft Memorandum of Understanding (MOU) that included a capacity allocation between DSPUD and Sierra Lakes and a funding advance by SLCWD to DSPUD for the final engineering design. Director Freedle explained that DSPUD would not have access to their funding until March 2012 (after final design was complete and a construction contract
Page 6 was awarded) and Sierra Lakes would not have access to their funding until December 2012, pending award of a USDA loan. Sierra Lakes did, however, have access to $3,000,000 on their Line of Credit (LOC) with Bank of the West. The MOU proposed that Sierra Lakes could fund the final design with part of the $3,000,000 available on their LOC. He also said the favor would be returned later when DSPUD s funding would carry the project through the initial construction stage and both Districts would have funding in place to complete the project. Director Luscher had some questions about the information contained in the MOU. Director Freedle said information from the current version of the Service Agreement dated 2003 between Sierra Lakes and DSPUD was used in writing the MOU, that the construction costs would be allocated 56%(DSPUD / 44% Sierra Lakes and that the allocation rate would be adjusted at the end of the project. Jim Curtis, District Counsel, asked about the allocation rate of 56%/44%. Director Freedle said that, for the Benefit Assessment District, there would be two allocation rates; one for the current rate payers (the upgrade portion of the project) and one for the lot owners who have not opted out (the expansion portion of the project). The expansion allocation rate would be based on the final number of additional EDUs for both Districts, and Tom Skjelstad agreed that Donner s presold connections would be part of the expansion allocation rate since they were not contributing to the load on the present plant. Director Luscher also provided Mr. Curtis with some language that referred to Sierra Lakes access to funds to cover the cost of completing final design. There were no objections to the proposed language. Director Bern asked what safeguards were in place to protect the District if DSPUD were to file for bankruptcy for example. Director Freedle said that DSPUD would be loaning Sierra Lakes more money for the initial construction stage than what Sierra Lakes would be advancing for final design. With that, the Board agreed that no security clause was required for the MOU. The allocation rates would be worked out by Director Freedle, Jim Curtis and Tom Skjelstad. Finally, Director Luscher asked that DSPUD provide monthly accounting of the design costs and Mr. Skjelstad agreed with the request. The MOU would be amended and presented at the September meeting for approval. E. The water rights permit update was discussed earlier in the meeting. The Board agreed to have the attorneys write the Notice of Preparation and to post the notice. The Board also agreed that the notice would not be mailed out to Sierra Lakes rate payers. A motion as made by Director Oudegeest and seconded by Director Bern to have the Notice of Preparation prepared and publicized. The motion passed on a unanimous vote. F. The Board discussed Director Ulrich s Draft Plan of Retiree Health Insurance Benefit for Employees hired after September 1, 2011. Director Luscher said he didn t think enough information was available at this time to determine if changes could be made to retiree medical benefits for existing and retired employees. He suggested that an employment specialist be contacted before any such changes were considered. Director Freedle said he would contact Jeffery Chang, a specialist recommended by the District s auditor Bob Johnson. Director Luscher continued that,, for future employees, the District should consider changing the current benefit plan to provide the minimum benefits available based on the CalPERS plan, or a tiered plan based on years of service and a retirement age of age 65. Director Oudegeest asked why the District would provide any post-retirement benefits if the retirement age was 65, the age people become eligible for Medicare benefits. Director Burns said that the District would want to offer a competitive benefit package to attract good employees. The Board agreed to hold off on any decisions, including on
Page 7 benefits for new employees, until more information can be obtained from an employment specialist. G. The Board discussed the agenda for the September 4, 2011 Public Hearing meeting. Director Freedle said that Kristin Lowell would present information about what an Assessment District was, how the cost allocations would be made, and answer questions from the public. He also asked what the Board thought about making September 4, 2011 the regular meeting. Director Oudegeest didn t think it was a good idea. Director Burns suggested that the regular meeting be postponed a week or two and combine it with the scoping meeting that would result from the Notice of Preparation scheduled to be sent out. The date of the September meeting would be determined after the Notice of Preparation was complete and the appropriate time for public notice and comment had passed (thought to be 30 or 45 days). The thought was that the meeting could be postponed to 9/16/11 or possibly 9/23/11, based on regulations associated with the Notice of Preparation. If the hearing cannot be held by 9/23/11, the regular meeting would be set for 9/9/11, the regularly scheduled date. Also, the meeting on September 4 would be noticed to start at 11:30 am, immediately following the SLPOA meeting. VIII. New Business A. ACWA s Region 3 Board Ballot for the 2012-2013 Term was presented to the Board for discussion and possible action. A motion was made by Director Luscher and seconded by Director Burns to vote for the Nominating Committee s Recommended Slate. The motion passed on a unanimous vote. B. A letter dated 7/10/11 from William R. Folk requesting a refund of the 2008/2009 water/sewer fees paid was presented to the Board for review and action. The consensus of the Board was to send the same letter that was to be sent to Barbara Chapman, denying the request for refund. C. The Board reviewed the August 8, 2011 letter from SLPOA s Ed Bubnis requesting approval for a addition to the storage building on Lot 1. A motion was made by Director Oudegeest and seconded by Director Burns to approve the addition of an enclosed storage area as proposed. The motion passed on a unanimous vote. D. Director Oudegeest asked the Board if they were interested in obtaining the domain name slcwd.com. It would allow the District to have both slcwd.org and slcwd.com, making it easier for the public to get to the District website. A motion was made by Director Bern and seconded by Director Burns to acquire the domain name slcwd.com when it becomes available. The motion passed on a unanimous vote. IX. Administration
Page 8 A. The Board reviewed the list of follow-up items from July 8, 2011. Director Freedle said the USDA loan application had been sent, the letter of credit was requested from Royal Gorge and Jim Curtis would send a letter to Barbara Chapman denying her claim for reimbursement of fees. B. The Board reviewed the Action Items list. No changes were made. X. Finance A. Disbursements for Board Approval were presented to the Board. A motion was made by Director Luscher and seconded by Director Burns to approve payment of the disbursements presented for Board approval. The motion passed on a unanimous vote. Ms. Nickerson asked that the Board determine if it will be necessary to include all backup documents for DSPUD s monthly billings in the Board packet. The Board agreed that the summaries would be sufficient for the Board packets, originals would be available at the District office for review. Director Luscher asked to continue to receive the backup. 2011. B. The Board reviewed the following Financial Reports for the month ending July 31, 1. Operating Expenses Budget vs Actual (Month and Year-to-Date) 2. Capital Expenses Budget vs Actual (Year-to-Date) 3. Cash Flow Forecast One Year 4. Cash Flow Forecast Five Year The Board discussed taking a $2,000,000 draw from the line of credit; the interest rate was estimated to be 1.5%. Director Freedle said that the District currently had $2,200,000 of committed expenses pending to be paid out within the next six months. It was to the consensus of the Board to take the draw. Director Oudegeest asked about item II. B. Personnel Evaluation. He wanted to know the result of Director Freedle and Director Luscher s conversation with Mr. Quesnel after the last meeting. Director Freedle said the conversation went well, Mr. Quesnel agreed that his responsibilities were diminished with the completion of the significant capital projects and that he would not be billing as much as he had been. Director Luscher concurred that the meeting went very well; he added that he had reviewed Mr. Quesnel s billing for July and didn t see anything for tasks that could have been handled by staff. Director Oudegeest cautioned that the Board should be careful about asking Mr. Quesnel to perform tasks that could be done by staff and was glad the conversation went well. XI. Adjournment A motion was made by Director Burns and seconded by Director Oudegeest to adjourn the meeting at 9:10p.m. The motion passed on a unanimous vote. The next regular meeting was tentatively set for September 9, 2011 at 5:00 pm.
Page 9 APPROVED BY: Financial Consultant President