7. CONSIDER SECOND READING OF ORDINANCE NO. 109 – REVISING RULE 23.5 AND ADOPTING ADDITIONAL PROVISIONS TO FACILITATE THE FINANCING AND EXPANSION OF THE CARMEL AREA WASTEWATER DISTRICT (CAWD)/PEBBLE BEACH COMMUNITY SERVICES DISTRICT (PBCSD) RECYCLED WATER PROJECT, APPROVAL OF RELATED CEQA FINDINGS
Program/Line Item No.: N/A
Staff Contact: David Laredo Cost Estimate: N/A
Action on First Reading: The Board passed Ordinance No. 109 on October 20, 2003 on First Reading by the unanimous vote of 7– 0 (Motion by Henson, Second by Edwards).
General Counsel Approval: Yes
Committee Recommendation: The Administrative Committee reviewed this item on September 10, 2003 and October 14, 2003, but made no formal recommendation.
The original financing plan to facilitate construction of the Wastewater Reclamation Project was approved by the MPWMD Board in 1989 by Ordinance No. 39. This financing plan was followed by agreements among MPWMD, CAWD, PBCSD, PBC, and other recycled water users to finance, construct and operate, and sell recycled water. Problems have arisen relating to the quality of recycled water available for its intended use and inadequate quantities of recycled water. As a consequence, a significant amount of potable water has been needed each year to supplement or replace recycled water. Plans to physically improve the existing project have been developed. The purpose of proposed Ordinance 109 is to facilitate the financing of the contemplated improvements to the existing project.
To fund project improvements, the Pebble Beach Company has proposed a financing plan whereby water entitlements held by the PBC, in accordance with MPWMD Ordinance No. 39, would be made available to residential properties throughout Del Monte Forest, rather than only to properties owned by the PBC. Ordinance No. 109, as approved on first reading, would modify MPWMD Rule 23.5 to re-define the “Benefited Properties” and provide a framework for the ancillary agreements for financing, construction and operation, and sale of recycled water.
Before adopting Ordinance No. 109 on first reading, the Board proposed and approved a series of revisions, including a set of changes that had been raised by the Administrative Committee and were incorporated by staff into an “Errata sheet.” The primary focus of the revisions approved by the Board – apart from attempting to improve internal consistency – was to provide additional accountability in the financing plan. In this respect, the District committed to furnish additional information about quantities of Entitlement Water and Recycled Water used within the Del Monte Forest, and required: (1) that the Pebble Beach Company provide information to enable the District to monitor its water usage and its attempts to raise the funds for the proposed Project Expansion, and (2) that the Recycled Water users furnish weekly tallies of the potable water used during any Interruption of Recycled Water deliveries, and (3) that the Project operators complete the Project Expansion and any repair efforts to restore service during any interruption as soon as possible. In addition, time periods relating to the use of potable water to irrigate golf courses were “tightened.”
Other key revisions made to Ordinance No. 109 on first reading include adding findings to provide a more complete picture of the status of the Carmel River and Seaside basin as sources of water for Cal-Am and the environmental consequences of these ongoing activities, clarifying that the Ordinance shall take effect only upon execution of the implementing agreements, and adding a more precise definition of the “trigger” that would set the Project Expansion in motion and allow the use of the Water Entitlement on the other parcels within the Del Monte Forest.
The attached Exhibit 7-A (2) is a red-lined version of Ordinance No. 109 that shows text changes approved by the Board on first reading, as compared to the prior draft version presented to the Board in the meeting packet of October 20, 2003.
Draft CEQA Findings, attached as Exhibit 7-B, support the Board’s determination that the criteria of CEQA Guideline Section 15162 enable the Board to rely on the prior EIR certified for the original recycled wastewater project. The Board also reviewed the prior draft of these findings at the October 20 meeting; this attached version of the CEQA Findings incorporates modifications directed by the Board. The Board is required to review and approve the final set of CEQA findings after it closes the hearing, and before it takes its roll call vote on the second reading of Ordinance No. 109.
As characterized below, a series of additional documents is needed to complete the proposed Financing Plan, including: (a) the Supplemental Financing Agreement, (b) the Supplemental Construction and Operation Agreement, and (c) the Agreement for Sale of Recycled Water. Preliminary draft versions of these documents were provided to the Board in the October 20, 2003 meeting packet. (Reference Exhibits 2-B (1) , 2-B (2), 2-C (1), 2-C (2), 2-D (1) and 2-D (2) to the October 20, 2003 meeting packet.) Those draft agreements remain subject to negotiation, review and modification, but have not yet been modified from the earlier versions presented to the Board. With respect to these additional agreements, it is important to note that Ordinance No. 109 provides that the ordinance shall not become effective until all of the agreements are fully executed.
The Supplemental Financing Agreement is drafted as an agreement between MPWMD and PBC that sets forth the detailed financing plan that will fund both the existing project and physical improvements to that project. This document confirms the Financial Commitment of PBC and provides details by which entitlement water can be used.
The Supplemental Construction and Operation Agreement is drafted as an agreement between MPWMD, CAWD/PBCSD and PBC that sets forth details relating to production and ownership of the Recycled Water.
The Agreements for Sale of Recycled Water are a series of agreements between MWPMD and the owners of the properties that use Recycled Water to irrigate their lands. These agreements require Recycled Water be used for irrigation, and define the limited circumstances and consequences under which potable water may be used for irrigation.
As noted in the Board meeting packet of October 20, 2003, the State Water Resources Control Board (SWRCB) promulgated letters on March 27, 1998, and on October 18, 2001 stating its acquiescence to the conceptual transfer of not more than 380 acre-feet per annum of potable water supplies freed up through use of treated wastewater on the Del Monte Forest property for new purposes, provided that diversions from the Carmel River do not exceed 11,285 acre-feet per year plus the quantity of potable water provided to Pebble Beach Company and other sponsors under this entitlement for use on the Del Monte Forest properties. Copies of the referenced letters from the SWRCB were provided to the Board as Exhibit 2-F and Exhibit 2-G in the October 20, 2003 meeting packet.
Attached as Exhibit 7-C is a letter dated November 11, 2003 from the attorney for the Independent Reclaimed Water Users Group (IRWUG), Lloyd Lowrey.
RECOMMENDATION: Staff recommends that the Board take the following actions:
1. Consider approval of the CEQA Findings (Exhibit 7-B) supporting enactment of Ordinance No. 109. The Board may vote to adopt Ordinance No. 109 only after it approves the CEQA Findings.
2. Consider approval of the second reading of Ordinance No. 109 shown in Exhibit 7-A (1). If Ordinance No. 109 is approved on second reading as presented, the ordinance would take effect on December 17, 2003, subject to the execution of all agreements.
3. Direct staff and counsel to continue efforts to negotiate and modify the Supplemental Financing Agreement, Supplemental Construction and Operation Agreement, and Agreements for Sale of Recycled Water in order to implement Ordinance No. 109. Staff should be directed to return these revised documents to the Board for review and approval.
BACKGROUND: The CAWD/PBCSD Wastewater Reclamation Project began operation in August 1994. Since operation began, the recycled water users have experienced apparent stress-related symptoms in some of their turf areas, primarily the greens, due to the combination of high levels of sodium in the recycled water with low-salt-tolerant grass species used in those portions of the golf courses. As a result, significant quantities of potable water have been needed to meet the recycled water users’ water quality needs. In addition, potable water has been required to provide sufficient quantity of irrigation water during periods when demand for irrigation water exceeded the available supply of recycled water.
To address the problems of recycled water quantity and quality, all parties involved in the project have been working since 1995 to develop solutions. The parties now all agree that the best, most cost-effective solution is to (1) retrofit Forest Lake Reservoir in Del Monte Forest, formerly owned by California-American Water Co. but taken out of service several years ago, to provide the additional recycled water storage capacity needed to meet the water quantity requirements, and (2) add additional treatment facilities at the CAWD treatment plant to produce final treated water quality that meets the recycled water users’ needs.
In order to fund these improvements, the Pebble Beach Company has proposed a financing plan whereby water entitlements held by the Pebble Beach Company in accordance with MPWMD Ordinance No. 39 and current project agreements would be made available to residential properties throughout Del Monte Forest, rather than only to properties owned by the Pebble Beach Company. Ordinance No. 109 would change MPWMD Rule 23.5 to re-define Benefited Properties and provide a framework for the ancillary agreements for financing, construction and operation, and sale of recycled water.
The Board reviewed earlier versions of Ordinance No. 109, and following a series of modifications approved the First Reading by a vote of 7-0. This version is attached as Exhibit 7-A (1). A red-lined version of Ordinance No. 109, attached as Exhibit 7-A (2), shows changes as approved by the Board on first reading, as compared to the draft version presented in the Board meeting packet of October 20, 2003. Ordinance No. 109 proposes to change MPWMD Rule 23.5 to re-define Benefited Properties and provide a framework for the ancillary agreements for financing, construction and operation, and sale of recycled water.
The following documents have been prepared pursuant to the California Environmental Quality Act (CEQA) relating to the CAWD/PBCSD Project:
· MPWMD Resolution No. 89-21 adopted on October 3, 1989, certifying MPWMD’s reliance, as responsible agency, on the Final EIR for CSD/PBCSD Waste Water Reclamation Project certified September 21, 1989 by CAWD.
· Final Expanded Initial Study, Phase II – CAWD/PBCSD Wastewater Reclamation Project, dated February 23, 1996 and Negative Declaration adopted in PBCSD Resolution No. 96-04 adopted February 23, 1996.
Guideline 15162 provides a logic tree under which the Board is authorized to determine whether or not the present action (a) would cause a substantial change in the project which will involve new significant environmental effects or a substantial increase in the severity of identified significant effects, or (b) would involve changed circumstances or new information relating to significant new effects of the project or as to the severity of impacts of the project. The proposed ordinance will support findings under this Guideline, enabling the adoption of Ordinance No. 109 upon existing CEQA documents, as supplemented by the Findings, attached as Exhibit 7-B. The Board must review and approve the CEQA findings after it closes the hearing on the second reading of Ordinance No. 109.
IMPACT ON STAFF/RESOURCES: MPWMD’s legal and other expenses associated with development of this ordinance and subsequent agreements for implementation of the project improvements are eligible for reimbursement from the current CAWD/PBCSD Wastewater Reclamation Project.