Meeting Date:

April 19, 2004

Budgeted:  N/A


Staff Contact:

Andrew Bell

Program/Line Item No.:  N/A


Larry Hampson

Cost Estimate:  N/A


General Counsel Approval:  N/A

Committee Recommendation:  The Administrative Committee reviewed this item on April 13, 2004 and recommended it be discussed by the full Board at its April 19, 2004 meeting.

CEQA Compliance:  N/A


SUMMARY: The Carmel River Advisory Committee and other groups interested in the management of Carmel River resources are concerned that the District may reduce the scope and funding of the MPWMD Mitigation Program.  Director Lehman has requested that the MPWMD Board of Directors consider adopting a resolution to reaffirm MPWMD’s commitment to continue the Mitigation Program to mitigate for adverse environmental impacts from the use of water by the Monterey Peninsula community.  Attached, as Exhibit 16-A is the draft resolution.


This item was initially considered at the February 19, 2004 Board meeting.  During discussion of this item, several comments and questions were posed by members of the Board and the public regarding whether the scope of the Mitigation Program could be reduced and whether other public agencies or California American Water (Cal-Am) could take on responsibility for a portion of the Mitigation Program and/or its funding.  These issues are addressed below under the headings “Potential for Reducing Scope of the Mitigation Program” and “Potential for Shifting Responsibility for the Mitigation Program and/or Obtaining Outside Funding.”  At the February 19, 2004 meeting, the Board directed that the item be referred to the Administrative Committee to assess the issue and make a recommendation to the full Board at the April 19, 2004 meeting.


RECOMMENDATION:  The Board should consider adoption of the resolution attached as Exhibit 16-A.  The Administrative Committee reviewed this item on April 13, 2004 and recommended it be discussed by the full Board at its April 19, 2004 regular Board meeting. 


BACKGROUND:     Carmel River Advisory Committee Action.  The Carmel River Advisory Committee (CRAC) is a standing committee of the District appointed by the Board of Directors to advise the Board with regard to management of the Carmel River and its riparian corridor.  At its November 13, 2003 meeting, the CRAC discussed whether or not to make a recommendation to the Board of Directors regarding continuation of the MPWMD Mitigation Program (Mitigation Program, or program).  Concern was expressed that legislation introduced by Senator Bruce McPherson in 2003 (Senate Bill 149, a bill to amend the statutes governing the MPWMD) could adversely impact the Mitigation Program.  The CRAC voted to write a letter to the MPWMD Board of Directors recommending the continuation of the Mitigation Program and appointed one of the CRAC members to meet with Board members and members of the public regarding the importance of the program.  At the December 18, 2003 CRAC meeting, the Carmel River Steelhead Association (CRSA) and the Carmel River Watershed Council (CRWC) expressed support for MPWMD continuing the program.  The CRAC voted to support a resolution for consideration by the Board of Directors to continue the Mitigation Program at no less than the current funding level. 


Exhibit 16-B is a letter dated January 30, 2004 from CRAC Chair Susan Rogers to Board Chair Alvin Edwards stating that the Mitigation Program has benefited the District’s residents and the Carmel River habitat, transmitting a proposed draft resolution, and requesting “… that the MPWMD directors consider and enact this resolution.”  This letter also includes a statement that the CRAC, the Carmel River Steelhead Association, and the Carmel River Watershed Council recommend that MPWMD continue the Mitigation Program.


Administrative Committee Action. At the February 10, 2004 Administrative Committee meeting, Director Judi Lehman expressed support for continuing the program by sponsoring a resolution incorporating the concerns expressed by the CRAC, CRWC, and CRSA.  At that meeting, the Administrative Committee recommended approval of the draft resolution attached as Exhibit 16-A on a vote of two to one.  The draft resolution was presented to the MPWMD Board of Directors at the February 19, 2004 meeting.  At that meeting, the Board directed that the item be referred to the Administrative Committee to assess the issue and make a recommendation to the full Board at the April 19, 2004 meeting. The Administrative Committee reviewed this item on April 13, 2004 and recommended it be discussed by the full Board on April 19, 2004. 


Mitigation Program Revenues and Expenditures


Mitigation Program activities typically represent one-third to one-half of the District’s annual budget.   Year-to-year fluctuations in revenues and expenditures occur as priorities along the Carmel River change in response to changing environmental conditions.  In addition, the amount of staff resources available for carrying out mitigation activities is somewhat dependent on the demand for staff time to plan MPWMD water supply projects and review other water supply project proposals.  It should be noted that all MPWMD staff work on the Mitigation Program in either a part-time or full-time capacity.


Mitigation Program Revenues 1992-2004.  Exhibit 16-C shows revenues broken out into five categories for Fiscal Year (FY, July 1 through June 30) 1992 through FY 2004.  All data are from year-end audits except for FY 2004, which is the revenue figure that appears in the FY 2004 budget.  Total annual revenue during the period ranged from a low of $1.28 million in FY 1992 to a high of $2.07 million in FY 2001.  For FY 2004, revenue is projected to be approximately $2 million.  Funds have come from a variety of sources including a user fee on Cal-Am connections, grants, an assessment on riverfront properties along the Carmel River, project reimbursements, investment income, and property taxes.  Revenues have increased gradually since FY 1992, but year-to-year differences are difficult to characterize due to the variability of several of the revenue components as discussed below. 

Grant funding is typically for one-time only projects and often depends on funds made available through irregular State and Federal programs for habitat enhancement.  Assessment of riverfront property owners ceased in 1993, as required when the Carmel River Improvement Zone was initially formed and approved by a vote of those property owners in 1983.  “Project reimbursements” consist primarily of reimbursement from Cal-Am for the toilet retrofit rebate program.  “Investment income” from maintaining a positive fund balance is subject to stringent investment criteria and financial market forces and peaked in FY 2000 at a little more than $116,000.  For FY 2004, investment income is projected to be approximately $77,000. “Taxes” consists of property tax revenue shared by the State with MPWMD.  The amount of taxes allocated to the Mitigation Program varies substantially from year to year and depends on the need to fund other District-wide priorities such as development of water supply projects and conservation projects.  The most reliable revenue source for the program has been the Cal-Am user fee.  Annual revenue from the user fee increased by approximately 59% between FY 1992 and FY 2003. For comparison, the Consumer Price Index for Urban and Clerical Wage Earners (CPI-W) in the San Francisco-Oakland-San Jose area rose approximately 39% during the same period.  However, the increase in User Fee income has been offset by declines in other revenue sources.


Mitigation Program Expenditures 1992-2004.  Exhibit 16-D shows Mitigation Program expenditures from FY 1992 through FY 2004 as reported in year-end audits, except as noted, and is broken out into four categories.   Annual expenditures have ranged from approximately $0.6 million in FY 1992 to $1.8 million in FY 2000.  For FY 2004, expenditures are budgeted to be slightly more than $2 million.  However, it is likely that actual expenditures will be several hundred thousand dollars less (see the discussion of Exhibit 16-E below for an explanation of the difference between budgeted and actual expenditures).


It should be noted that Mitigation Program costs from FY 1992 through FY 1995 were significantly lower than in the subsequent years.  The differences are due to two main factors during the FY 1992-1995 period: 1) a lower level of commitment of staff resources to the Mitigation Program, both in total number of staff involved and in the percentage of time each staff member spent on the program; and 2) lower amounts of project and capital expenditures.  During this period, several staff members were involved in completing work on environmental studies for two major water supply projects (i.e., a seawater desalination project in Sand City and the New Los Padres Dam).  Since FY 1995, more staff resources have been committed to the Mitigation Program.  Also, during the first few years of the Mitigation Program, it was necessary to plan and obtain permits for major projects such as the Sleepy Hollow Steelhead Rearing Facility.  Higher annual program expenditures in subsequent years reflect the costs of these major projects.


“Capital Outlay” includes costs for major capital items such as facilities and capital improvements at the Sleepy Hollow Steelhead Rearing Facility, purchases of vehicles, office equipment, and field equipment. “Project Expenditures” includes costs for carrying out major activities such as erosion prevention  projects,  the toilet rebate program, fisheries projects, and irrigation and restoration of riparian (streamside) resources.  “Program Support” includes services and supplies, professional fees, election costs, rents, utilities, and other costs associated with the program.  “Salaries and Benefits” includes costs for all MPWMD personnel involved in the program.


The cost of the Mitigation Program can be separated into two broad categories – District overhead (personnel and program support) and project related expenses (capital outlays and project expenditures).   District overhead ranged from $0.4 million in FY 1992 to $1.2 million in FY 2003.  Project related expenditures ranged from $0.1 million in FY 1992 to $0.7 million in FY 2000 (this value excludes approximately $1 million for one-half of the cost of the District’s Ryan Ranch office building in FY 2000).


The single largest expense component each year is for personnel, which typically represents about one-half of Mitigation Program expenditures and has ranged from $340,000 in FY 1992 to $988,000 in FY 2003.  The increased cost of personnel is primarily due to a combination of the increase in the cost of living and an increase in the number of staff hours allocated to mitigation efforts.  Exhibit 16-E shows total annual Mitigation Program  revenues and expenditures for the FY 1992 through 2004 period.


Exhibit 16-F, titled “Comparison of Planned and Actual Mitigation Program Expenditures 1992-2004,” is a graph of annual expenditure amounts from three sources:  1) total budgeted expenditures for the Mitigation Program for each of the 13 years shown; 2) actual Mitigation Program expenditures from the annual independent auditors’ reports for all but the current fiscal year; and 3) total Mitigation Program expenditures anticipated for FY 1997 through FY 2001 as shown in the October 1996 document titled “Final Implementation Plan for MPWMD Mitigation Program, Fiscal Years 1997-2001.”  The Final Implementation Plan followed a detailed review of the first five years of the Mitigation Program (FY 1992 through FY 1996), and presented an operational plan and estimated budget for the next five years.  One trend that can be seen in this exhibit is that annual expenditures have consistently been less than the budgeted amounts, sometimes significantly less.  This is primarily because it has not been possible to complete all projects and activities included in the budgets, typically due to weather-related factors (e.g., the high Carmel River flows and associated erosion and flood damage in 1993, 1995, and 1998), delays in obtaining required permits, and to the lack of staff time available to complete them.


Background on Implementation of the MPWMD Mitigation Program 


The MPWMD Water Allocation Program Environmental Impact Report (EIR), certified by the Board of Directors in November 1990, describes the environmental impacts associated with the use of water from the Monterey Peninsula Water Resource System (MPWRS).  The MPWRS consists of the surface water and groundwater in the Carmel River, its tributaries, and the associated alluvial aquifer, and groundwater in the Coastal Subareas of the Seaside Groundwater Basin.  The Board’s certification of the EIR incorporated the adoption of the Mitigation Plan, titled “Five-Year Mitigation Program for Option V – 16,700 AF Cal-Am Production,” which includes a set of projects and activities to mitigate the Water Allocation Program’s impacts.  Beginning in July 1991, the District implemented this plan, referred to as the Mitigation Program, to mitigate for impacts from use of water from the MPWRS.  The plan included the continuation of a broad range of existing District programs, including stream gaging, groundwater monitoring, monitoring and reporting of water use by water distribution systems and private wells, water conservation, the Carmel River Management Program (including erosion protection and riparian habitat restoration projects), the Irrigation Program (including planting and monitoring riparian vegetation), the Emergency Irrigation Program, steelhead habitat monitoring and restoration,  rescue of steelhead juveniles and smolts, the Interim Relief Program (a wide-ranging program conducted in coordination with Cal-Am and others to address a number of issues raised in water rights complaints against Cal-Am), various activities related to the water resources and habitat of the Carmel River lagoon, and pursuit of a long-term water supply project to alleviate impacts on the Carmel River.  The principal categories listed in the initial Five-Year Mitigation Program are as follows:


Continue Existing Programs. (Includes the Interim Relief Program.)

Capture and transport emigrating smolts in spring.

Prevent stranding of fall/winter juvenile migrants.

Rescue juveniles downstream of Robles del Rio in summer.  (Includes construction and operation of the Sleepy Hollow Steelhead Rearing Facility).

Modify spillway and transport smolts around Los Padres Dam.

Continue existing programs.  (These include the Carmel River Management Program, construction of erosion protection projects, and the Irrigation Program.)

Conservation and water distribution management.

Prepare and oversee Riparian Corridor Management Plan.

Implement Riparian Corridor Management Program.

Expand soil moisture and vegetative stress monitoring.

Continue existing programs.

Assist with lagoon enhancement plan investigations.

Expand long-term lagoon monitoring program.

Identify feasible alternatives to maintain adequate lagoon volume.

Restore riparian vegetation (see above).


At its June 17, 1996 meeting, the MPWMD Board approved the Executive Summary of the report titled “Evaluation of Five-Year Mitigation Program for 1991-1996, a requirement of the MPWMD Water Allocation Program EIR,” and directed staff to finalize the report after June 30, 1996 so that actual expenses for FY 1996 could be incorporated into the report.  At their September 16, 1996 meeting, the Board accepted an implementation and financing plan for the next five-year period titled “Final Implementation Plan for MPWMD Mitigation Program, Fiscal Years 1997-2001.”  Since FY 2002, the MPWMD Board has continued implementation of the Mitigation Program with funding approved on an annual basis as part of the budget process.


Potential for Reducing the Scope of the Mitigation Program


During the discussion of this item at the February 19, 2004 Board meeting, members of the Board and the public suggested that the scope of the Mitigation Program has been expanded beyond its original intent, and that the District’s Carmel River mitigation activities should be scaled down because of the reduced Cal-Am diversions from the Carmel River mandated by State Water Resources Control Board (SWRCB) Order No. WR 95-10. 


Expansion of Mitigation Program.  Regarding the issue of whether or not the Mitigation Program has been expanded beyond its original intent, the section above titled “Background on Implementation of the MPWMD Mitigation Program” provides information on the genesis of the program and lists the principal categories of the initial program adopted by the Board in November 1990.  The Mitigation Plan containing this list includes an expanded description corresponding to each line in the list, including information for each component of the Mitigation Program.  A review of this original program shows that most aspects of the current Mitigation Program are included in the original plan.  All additions to the original plan have been added following issuance of the SWRCB’s order in 1995, the listing of the California red-legged frog as a threatened species in 1996, and the listing of steelhead as a threatened species in 1997.  These three major events have required the District to make significant changes to its Mitigation Program activities, including expanding habitat monitoring and reporting for all projects, conducting additional surveys to meet more stringent permit conditions from other regulatory agencies, and increasing tracking and reporting of water use by Cal-Am and other water distribution systems.


Effects of Reduced Carmel River Diversions.   At the February 19, 2004 Board meeting, a member of the public suggested that the production limits set by SWRCB in Order 95-10 may have reduced the Cal-Am production enough to allow the District to significantly scale back the Mitigation Program established by the District in 1990.  As a result of SWRCB Order 95-10, the production limit for Cal-Am diversions from the Carmel River system was set at a level not to exceed 11,285 acre-feet per annum (AFA).  For reference, in November 1990, the District set the original Water Allocation Program limit at a total of 16,744 AFA, with approximately 3,000 AFA from the Seaside Groundwater Basin and 13,744 AFA from the Carmel River Basin.  In June 1993, following construction of the Paralta Well, the allocation was increased to 17,619 AFA, comprised of approximately 4,000 AFA from the Seaside Groundwater Basin and 13,619 AFA from the Carmel River sources.  Comparison of the SWRCB limit of 11,285 AFA to the range of 13,619 to 13,744 AFA under the Water Allocation Program indicates that Cal-Am production from the Carmel River Basin has been reduced by approximately 2,400 AFA.  While this is a significant reduction, it has not reduced impacts to public trust resources sufficiently to allow significant scaling back or elimination of the District’s Mitigation Program. 


As an example, since imposition of the SWRCB limit in 1995, a total of 166,000 steelhead have been rescued from the drying stream of the Carmel River.  While diversions from the Carmel River have been reduced, the impact on aquatic habitats remains because the dry season streamflow is exceeded in most years by diversions by Cal-Am and others, causing the lower portion of the Carmel River to dry up.  For example, during the period 1996 through 2003, the average September daily flows at the Narrows ranged from 2.9 to 17.8 cubic feet per second (cfs), while Cal-Am production from the lower Carmel Valley ranged from 12.7 to 21.0 cfs.  The result of the disparity between Carmel River inflow to the upper end of lower Carmel Valley and production from downstream wells is that streamflow could only be sustained in one year out of eight.


 Anticipated Changes to Future Mitigation Program Expenses. The four largest expense categories under the Mitigation Program have been 1) fisheries projects and activities, 2) erosion protection projects, 3) riparian habitat restoration projects, and 4) toilet retrofit rebates.  From FY 1993 through FY 2003, MPWMD expended approximately $1.55 million on fisheries projects and activities, most prominently the Sleepy Hollow Steelhead Rearing Facility. With the completion of the Sleepy Hollow facility, it is likely that future capital expenditures at this site will be significantly lower.  From FY 1993 through FY 2003, MPWMD expended approximately $1.04 million for erosion protection projects and related activities.  Given that most of the District’s erosion protection projects have performed as designed (i.e., reduced bank erosion along the river) during the high Carmel River flows in the mid- to late-1990s, future expenditures for erosion prevention may not require as much of an investment as in the past. The remaining categories of riparian habitat restoration projects and toilet retrofit rebates are expected to require close to the same level of commitment in the future as in the past.


Mitigation Program activities such as fish rescues, riparian vegetation management, streamflow monitoring, groundwater monitoring, and carrying out major capital projects are labor intensive, both in the field and in the office.  Typically, for major capital projects such as the Sleepy Hollow Steelhead Rearing Facility and erosion prevention projects, MPWMD staff perform all tasks except those involving heavy construction equipment or tasks that require special expertise not available on staff.


The Mitigation Program appears to have halted the degradation of the Carmel River for the time being in reaches where there is year-round flow.  However, portions of the river that dry up annually due to water extractions appear to continue to degrade.  Fish rescue and habitat restoration projects, riparian projects, conservation measures, and hydrologic and environmental monitoring are necessary to protect and restore the resource and maintain the successes achieved to date.  It is likely that mitigation activities will be required as long as the community continues to rely on the Carmel River for a significant portion of its water supply.


Potential for Shifting Responsibility for the Mitigation Program and/or Obtaining Outside Funding


During discussion of this item at the February 19, 2004 meeting, questions were posed regarding whether other public agencies or Cal-Am could assume responsibility for a portion of the Mitigation Program and/or its funding.   District staff contacted Cal-Am and a number of public agencies in this regard.  Letters to the Board have been received from three public agencies:  the California Department of Parks and Recreation (letter dated March 8, 2004, attached as Exhibit 16-G), the Coastal Conservancy (letter dated March 17, 2004, attached as Exhibit 16-H), the National Marine Fisheries Service (letter dated March 19, 2004, attached as Exhibit 16-I), and the Monterey Peninsula Regional Park District (letter dated April 12, 2004, attached as Exhibit 16-J).  Although each of these agencies supports the District’s continuation of the Mitigation Program, none of them indicated a willingness or ability to be responsible for activities or costs of the program.


In a March 23, 2004 letter to Steven Leonard (Exhibit 16-K) the MPWMD General Manager posed the following questions:  “In the event the District were to end its Mitigation Program activities, or significantly curtail them, would Cal-Am be able to undertake them?  If so, what length of time would Cal-Am need to prepare for a transfer of responsibility for these activities, including adequate funding?”  Cal-Am’s response as of the date of writing of this staff note is provided in an April 5, 2004 e-mail from Mr. Leonard to Fran Farina (attached as Exhibit 16-L).  However, at the April 15, 1996 Board meeting, prior to the Board’s evaluation of the first five years of the Mitigation Program, the Board considered options for future implementation of the program, including a review of the District to transfer any or all Mitigation Program activities to Cal-Am.  As part of that review, the Board reviewed a letter from Cal-Am dated February 14, 1996 (attached as Exhibit 16-M). In this letter, Cal-Am states that “[t]his is a program that we have always believed should be done by the District, and it has been implemented by the District over the past number of years.  The District has operated a very successful five-year Mitigation program.  I do not think it prudent of the District to request other agencies take over a portion of this program, as it should be maintained totally under one jurisdiction.  … The District should proceed with implementation [of the Mitigation Program] over the next five years, as it has the authority within its jurisdiction to do so and it has the means for the financial funding through the surcharge that is collected through Cal-Am bills.”