1. FIRST READING (ON RECONSIDATION) 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
General Counsel Approval: Yes
Committee Recommendation: None
SUMMARY OF PRIOR ACTION:
Ordinance No. 109 is an ordinance to enable upgrades to the Carmel Area Wastewater District (CAWD)/Pebble Beach Community Services District (PBCSD) Recycled Water Project. This ordinance would enable water entitlements presently held by the Pebble Beach Company to be made available to properties throughout Del Monte Forest, rather than only to properties owned by the Pebble Beach Company (PBC) in order to finance the Project Expansion. This measure has had a lengthy history before the Board, partially summarized below:
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 benefited properties and provide a framework for the ancillary agreements for financing, construction and operation, and sale of recycled water.
Draft CEQA Findings 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 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.
October 20, 2003 - 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).
November 24, 2003 - The Board adopted Ordinance No. 109 on second reading by the unanimous vote of 7– 0 (Motion by Henson, Second by Lindstrom). This motion followed adoption of a motion that Ordinance No. 109 “does not involve any new or different environmental circumstances that would trigger a need for further environmental review under Public Resources Code section 21166.”
The Motion by Henson, Second by Erickson, was adopted on a vote of 5 - 2.
December 15, 2003 – In accord with District Rule No. 23, Director Edwards requested reconsideration of the November 24, 2003 action of the Board to adopt Ordinance No. 109 on second reading. The Motion by Edwards, Second by Potter, was adopted on a vote of 7 - 0.
Current – The present draft of version of Ordinance No. 109 (Exhibit 1-A) is changed from the version approved by Board on second reading on November 24, 2003. The primary changes to the draft Ordinance from the version are in (i) provisions that describe the Project Expansion financing, (ii) inclusion of a placeholder provision (“as required by the SWRCB”) to enable the process to move forward without a resolution of the dispute about measurement of Entitlement Water use, (iii) additional detail concerning the process by which MPMWMD will make select determinations, procedures by which the parties can challenge those MPWMD determinations, (iv) recognition that the various obligations of the parties do not all begin at the same time, and (v) removal of duplicative CEQA findings.
Draft CEQA Findings (Exhibit 1-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 is required to review and approve the CEQA Findings before it takes its roll call vote on Ordinance No. 109.
RECOMMENDATION: Staff recommends that the Board take the following actions:
1. Consider approval of the CEQA Findings (Exhibit 1-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, following public hearing, approval of Ordinance No. 109, as presented, on first reading. A second reading and public hearing is scheduled for May 27, 2004 on Ordinance No. 109.
3. Direct staff and counsel to continue finalize the Supplemental Financing Agreement (Exhibit 1-C), Supplemental Construction and Operation Agreement (Exhibit 1-D), and Agreements for Sale of Recycled Water (Exhibit 1-E) 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.
As noted above, the Board reviewed earlier versions of Ordinance No. 109. 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). On November, 24, 2003, the Board adopted Ordinance No. 109 on second reading by the unanimous vote of 7– 0 (Motion by Henson, Second by Lindstrom). On December 15, 2003, acting pursuant to District Rule No. 23, Director Edwards requested reconsideration of the November 24, 2003 action of the Board to adopt Ordinance No. 109 on second reading. The Motion by Edwards, Second by Potter, was adopted on a vote of 7 - 0.
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.
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.) More recent versions of these draft agreements are provided in this packet, but remain subject to negotiation, review and modification.
The Supplemental Financing Agreement (Exhibit 1-C) is a draft 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 Financing Agreement has been and will be further revised to more closely track and “flesh out” the provisions of Section Three, the provisions describing the financing mechanism proposed for funding the Project Expansion. The agreement will likely become considerably shorter, due to the “deal point” that the existing financing not be affected; recent review of some of the 1992 agreements that encapsulated the COP financing process impacted several proposed revisions to the handling of funds in connection with the Supplemental Construction and Operation Agreement, which contained definitions incorporated into the core agreements comprising the COP financing agreements.
The draft Supplemental Construction and Operation Agreement (Exhibit 1-D) is an agreement between MPWMD, CAWD/PBCSD and PBC that sets forth details relating to production and ownership of the Recycled Water. A great deal of uncertainty exists about certain of the revisions sought in the Supplemental Construction and Operation Agreement in light of the financing documents. An agreement in principle exists between CAWD/PBCSD and MPWMD staff relating to aspects of this document, but a “final” draft is not yet available. The pending issue concerns use of Recycled Water that may not be temporarily usable by Recycled Water users, primarily due to limited storage capacity in Forest Lake Reservoir.
The Agreements for Sale of Recycled Water (Exhibit 1-E) are a series of agreements between MWPMD and the owners of the properties that use Recycle 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.
One primary change in the Water Sales Agreement template reflects the recognition that the key changes concerning the use of potable water (the Interruption procedures) cannot take effect until the Project Expansion is “Completed.” Another change is the Recyled Water users’ agreement to pay higher than potable prices (if needed to meet expenses) for the higher quality water, thus eliminating the need for MPWMD to make sure that the price is “comparable” as a condition to non-consensual use of recycled water. Finally, CAWD/PBCSD and the Recycled Water users agree on a fact-based set of water quality criteria (to be added as Exhibit F in lieu of the former Exhibit A), the definition of “Capital Costs” has been eliminated, and the Recycled Water users agree to revise a portion of Exhibit D addressing the right of first refusal for surplus Recycled Water.)
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.
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 ordinance, as proposed, 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 1-B).
The Board reviewed the prior draft of these findings at the October 20, 2003 meeting. On November 24, 2003, the Board, instead of adopting CEQA Findings as proposed by staff, adopted a motion that Ordinance No. 109 “does not involve any new or different environmental circumstances that would trigger a need for further environmental review under Public Resources Code section 21166.” (Motion by Henson, Second by Erickson, adopted on a vote of 5-2.)
As an alternative to this action, staff proposes that the Board instead review and approve the CEQA findings included in this staff note after it closes the public hearing draft 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.