ITEM:

BOARD WORKSHOP

2.

DISCUSS TIMELINE, BUDGET AND STAFFING NEEDED TO POTENTIALLY UPDATE WATER ALLOCATION PROGRAM

Meeting Date:

#### Pending Board Action

From:

David A. Berger,

Program/

N/A

General Manager

Line Item No.:

Prepared By:

Henrietta Stern and

David C. Laredo

Cost Estimate:

$0 -$200,000

## Committee Recommendation:N/A

CEQA Compliance:   Would be initiated if a “project” to update the District’s Water Allocation Program is proposed by the Board

SUMMARY:  At its September 8, 2005 Strategic Plan Workshop, the Board discussed whether or not the District’s existing Water Allocation Program (WAP) should be updated.  The workshop minutes indicate that the Board’s  direction was to “conduct a discussion on the timeline, budget and staffing needed to update the Water Allocation Program,” at the preliminary study session on the FY 2006-2007 budget, assuming the Seaside Basin Adjudication issue is settled (Directors Foy and Pendergrass opposed).  The following paragraphs provide information relevant to this discussion.

RECOMMENDATION:  The Board should review the Background and Discussion information and initially discuss this issue at the May 25, 2006 budget workshop.   If a more detailed discussion is desired by the Board on the merits of various options associated with the WAP, this issue should be considered at one of the following meetings: (1) quarterly workshop reserved for August 31, 2006; (2) September 25, 2006 Strategic Plan Workshop; or (3) another future meeting date to be set by the Board.

It is notable that an update of the Environmental Impact Report (EIR) for the WAP is not required if no changes to the current program are contemplated.  Please refer to the Background and Discussion sections below for more information on this matter.

BACKGROUND:  The MPWMD EIR on the WAP was first certified by the MPWMD Board of Directors by Resolution No. 90-22 on November 5, 1990.  Technically, the Board reviewed its proposed WAP as a decision-making model pertaining to: (a) how much total water could be produced from the Monterey Peninsula Water Resources System (MPWRS); and (b) how much water would be allotted among the jurisdictions within the California American Water (Cal-Am) service area.  Specifically, the “project” considered by the Board was to select a water supply option from among several alternatives that had been analyzed.  The EIR concluded that each and every water supply option, including the “No Project” option and an even lower water supply alternative than the then current levels of production, would result in significant adverse impacts to plant and wildlife and habitat of the Carmel River.

The WAP was initially set by District Ordinance No. 52 in December 1990, based upon evidence presented in the District's Water Allocation Program EIR, which confirmed the selection of Supply Option V and established an annual production limit from the MPWRS of 19,881 acre-feet (AF), and an annual production limit of 16,744 AF from the Cal-Am water distribution system.  The WAP adoption was based upon a full set of California Environmental Quality Act (CEQA) findings, and the Notice of Determination was duly posted.  The WAP substantially altered past assumptions regarding the quantity of water available from the MPWRS. Together with adoption of the WAP, the Board adopted a Statement of Overriding Considerations and a Mitigation Plan.

The effect of Ordinance No. 52 (later amended and republished by Ordinance No. 59 in 1991 and Ordinance No. 62 in 1992) was to implement the WAP, to modify standards for the issuance of water connection permits, and to temporarily limit new uses of water.  That limit established a moratorium on issuance for most water connection permits that lasted 28 months.

Required Review:  Resolution No. 90-22 (Paragraph 10), adopted on November 5, 1990, required that the “Water Allocation Program and the selection of Supply Option V shall be reviewed at the end of five years, or at an earlier date as maybe determined by the Board of Directors.” The Final Five-Year Mitigation Plan adopted on the same date, provided at page 2, “The mitigations described herein will be funded and implemented by MPWMD over a five-year period.  After five years, the allocation program as a whole, including the mitigation program, will be reassessed, based on results of the mitigation monitoring studies, development of new water supplies, and other factors.  Necessary amendments to the program would be made at that time.”

WAP Review:  The original WAP was reviewed three years later, in 1993, when the Board modified jurisdictional water allocations pursuant to Ordinance No. 70, effective June 21, 1993, to account for water then made available by the Paralta Well.  Finding 5 of that ordinance stated, “The moratorium enacted by Ordinance No. 52 is no longer needed as new water deriving from the Seaside Coastal Ground Water Basin (through the Paralta Well) has been developed.  This new water source ensures consumption of potable water shall not exceed existing water supplies.”

The Board, through Ordinance No. 70, set a revised annual production limit from the MPWRS at 20,673 AF, with the annual production limit of 17,619 AF from the Cal-Am water system (equivalent to metered sales of 16,380 AFY).  An annual production limit of 3,054 AF was set for non-Cal-Am water users and water systems that also derive their source of supply from the MPWRS.  The Board found that the quantity of water then available to the Cal-Am system by reason of the Paralta Well was a quantity between Supply Option IV (17,500 AFY) and Supply Option I (18,400 AFY).  The 17,619 AF Cal-Am annual limit replaced the former Supply Option V limit of 16,744 AFY selected by District Ordinance No. 52.

Ordinance No. 70 effectively eliminated the water use deficit of 230 acre feet (calculated against water available under Supply Option V) recognized by Ordinance No. 52, and allocated 385 AF of additional Paralta Well production among member jurisdictions within the District.

The environmental analysis pertaining to Ordinance No. 70 was documented in the formal Resolutions adopted by the MPWMD Board on June 21, 1993.  These include Resolution 93-11, A Resolution of the Monterey Peninsula Water Management District Adopting Findings for Increasing the Cal-Am System Capacity Limit, Adjusting the Non-Cal-Am Production Limit, and Certifying the Supporting CEQA Documentation” and Resolution 93-12, A Resolution of the Monterey Peninsula Water Management District Certifying and Adopting Findings for the Water Allocation Program Environmental Impact Report and Selecting a Water Distribution Formula for Paralta Well Water.  These resolutions refer to the MPWMD Board’s December 13, 1990 adoption of a Negative Declaration for water to be provided by the Paralta Well, “tiering” off of the 1990 WAP EIR as allowed by CEQA, and a reaffirmation of the Statement of Overriding Considerations.

Mitigation Program Review: The Board completed the five-year review of its mitigation program as required by Paragraph 10 of Resolution No. 90-22.  A report entitled, “Draft Evaluation Report on the Five-Year Mitigation Program – 1991 through 1996” was the subject of a public hearing on May 20, 1996.  The Board considered MPWMD staff responses to comments received on the Draft Report on June 17, 1996.  The Board accepted the “Final Evaluation Report on the Five-Year Mitigation Program – 1991 through 1996” at its October 21, 1996 meeting.

Concurrently, District staff developed the “MPWMD Implementation Plan for Mitigation Program, Fiscal years 1997-2001,” which was accepted by the District Board at its September 16, 1996 meeting.  This document was subtitled, “A Continuing Component of the MPWMD Water Allocation Program Environmental Impact Report (originally certified in 1990).  Among the “Conclusions” listed in the Implementation Plan is the provision, “This Implementation Plan functions as a blueprint for future action, but funding for each year must be determined by the District Board through its annual budget-setting process.”  A subsequent formal review was not required based on the understanding that program reviews would be carried out via the Mitigation Program Annual Report or annual budget processes.  For example, Mitigation Program Annual Reports since 2001 include a section titled, “Observed Trends, Conclusions, and/or Recommendations” for each major impact category.

MPWMD Ordinances Subsequent to 1993:  A series of WAP-related ordinances subsequent to Ordinance No. 70 were later enacted to effect minor modifications to jurisdictional water allocations.  Ordinance No. 73 distributed the remaining 35 AF of a District Reserve Allocation was distributed to jurisdictions in 1995.  A retrofit investment credit to be repaid from a future water allocation was recognized in 1995 by Ordinance No. 75, and later modified in two later ordinances. A minor adjustment was made to Cal-Am and non-Cal-Am production limits in 1996 by Ordinance No. 83, and a special community reserve allocation of 20 AF was created for the benefit of Community Hospital of the Monterey Peninsula in 1997 by Ordinance No. 87.  The current Cal-Am production limit is 17,641 AFY.  A variety of CEQA processes related to these actions, but most relied in some manner upon the Water Allocation Program EIR, as amended.

Notwithstanding the minor WAP amendments referenced above, MPWMD water connection permit activities continue to rely upon water remaining from the water supply option recognized and selected by the Ordinance No. 70 allocation of Paralta Well water in 1993, and the environmental analysis upon which that water supply assumption was based.

Relevant Action by Other Entities Subsequent to 1993:  Two specific regulatory actions have occurred since 1993 that supersede the Cal-Am production limits for the MPWRS set by the WAP.  These include:

Ø      State Water Resources Control Board (SWRCB) Order WR 95-10, issued in July 1995, determined that roughly 70% of Cal-Am’s diversions (an estimated 10,730 AFY) from the Carmel River Basin are without a basis in legal right.  In the interim, Cal-Am’s total diversions from the Carmel River are limited to 11,285 AFY while a replacement supply is being developed.  The order also required a one-for-one offset for any new water supply sources that are developed – that is, for each new acre-foot developed, Carmel River diversions must be reduced until the full unlawful diversion amount is replaced.

Ø      In March 2006, the Superior Court of Monterey (Judge Randall presiding) issued the Final Decision on the Seaside Basin Adjudication.  This Decision  determined that there  is an overdraft in the Basin above its “natural safe yield”; established water rights for producers and overlying property owners that were parties in the adjudication lawsuit;  set an “operating yield” that allocates and limits the amount of water available to Cal-Am and others to produce annually from the Seaside Groundwater Basin; and established a multi-party Watermaster to implement an aggressive timeline for actions involving expanded monitoring against potential seawater intrusion, and introduction of supplemental water sources needed to replenish the basin and eliminate its overdrafted condition.

The net result of these two actions is that Cal-Am total annual production from the MPWRS has been limited to 15,285 AFY or less since 1995.  This amount is 2,356 AF less than the 17,641 AFY production limit currently established.  As a practical matter, MPWMD Ordinance No. 92, adopted in January 1999, established a seven-stage mandatory conservation and standby rationing program and codified the 15,285 AFY limit.  Stages 1-3 are specifically geared to ensure compliance with SWRCB Order 95-10.

Other relevant action that indirectly affects the amount of water that Cal-Am can produce from the MPWRS includes:

Ø      Listing of Carmel River Steelhead fish and California Red-Legged frogs in 1996 and 1997 as threatened species protected under the federal Endangered Species Act.  This protection has resulted in changed Cal-Am operations and restrictions via formal agreements between Cal-Am and federal resource agencies.

Ø      Seismic safety and siltation concerns at San Clemente Dam have resulted in restricted operations as required by the Department of Water Resources, Division of Safety of Dams.  A Draft EIR/EIS has been issued on a proposed seismic safety project and alternatives; comments are due by June 20, 2006.

DISCUSSION:  Staff asked District Counsel to address whether or not additional CEQA review for the WAP is required.  As noted in the Background section above, the District has complied with the WAP review requirements that were included in the November 1990 Resolution 90-22, and the Final Five-Year Mitigation Plan.  No additional review is required for the current program.

Importantly, any project is exempt from CEQA if “the project will be rejected or disapproved by a public agency” as stated in CEQA Guidelines, Section 15061(b)(4).  CEQA Guidelines, Section 15270 further provides:

(a)        CEQA does not apply to projects that a public agency rejects or disapproves.

(b)        This section is intended to allow an initial screening of projects on the merits for quick disapprovals prior to the initiation of the CEQA process where the agency can determine that the project cannot be approved.

Absent a decision to modify the allocation or its mitigation program, or to take some action that meets the definition of a “project”, CEQA does not impose a requirement upon the District to revise, update or republish the Water Allocation Program EIR.

Counsel has advised that any decision to modify the Water Allocation Program would require full CEQA compliance.  The “project” to be analyzed under CEQA would be the Board’s action to modify the Water Allocation Program, or to modify the mitigation program adopted in conjunction with that program.  The key determination as to the CEQA process and the scope of environmental analysis that relates to any proposed decision is to identify the nature and extent of the proposed discretionary action to be taken by the District.

Put simply, if the Board concurs that the current program should remain the same, no further CEQA analysis is needed.  Any change that is supported by the Board will trigger CEQA review. The proposed action to modify the existing program will define the nature and scope of any required environmental analysis.

Future Steps and Board Action

At a future meeting (a workshop is suggested), the Board  should review the status of its Water Allocation Program, mitigation efforts taken under that program, and provide direction as the nature of any modifications – if any – that it wishes to consider.  Change to any aspect of the allocation or the mitigation program would then be subject to the CEQA process, including an Initial Study as required by CEQA Guidelines Section 15063, and the scoping process referenced in CEQA Guidelines Section 15082, as appropriate.

Given the complexity and controversy surrounding the allocation issue, an initial informal scoping workshop might include the following components:

Ø      Review brief history of WAP;

Ø      Review current status of allocation amounts remaining for jurisdiction use;

Ø      Review CEQA requirements as they relate to the WAP and Mitigation Program;

Ø      Review mitigation efforts to date and recommended changes, if any, by staff;

Ø      Discuss Board concepts to amend WAP and/or Mitigation Program, if any;

Ø      Discuss alternatives to proposed concepts;

Ø      Solicit input from the public on proposed concepts and alternatives;

Ø      Provide policy direction to staff on project proposal and alternatives.

If the Board proposes a specific change to the WAP or Mitigation Program, the CEQA process would begin with circulation of an Initial Study for 30-day review. The Initial Study must identify whether the Board proposes to adopt a (Mitigated) Negative Declaration or prepare an EIR on the proposed project.  If the Board knows an EIR will be prepared, the Initial Study may be skipped, and the first step would be circulation of a Notice of Preparation (NOP) of an EIR for 30-day review and a public hearing to receive comments on the contents of the EIR.  The standard CEQA process would follow: circulate Draft EIR, receive comments, and prepare a Final EIR, including Responses to Comments and Mitigation and Monitoring Plan.

IMPACT TO STAFF/RESOURCES:   District staff and Counsel could facilitate the initial scoping workshop, if one is desired, as staff is very familiar with the issues and history of the WAP.  If the Board decided to initiate a WAP revision, consultant assistance would be needed to undertake the CEQA process given staff workload and competing priorities.  Staff time would also be needed to retain a consultant, and the effort would vary depending on whether or not a sole-source or proposal process is to be followed.  Staff would need to prepare materials for Administrative Committee and Board review as well.  Several weeks of actual staff hours would be involved in these early stages, and total running time could involve several months.  Once a consultant is retained, and the CEQA process is well under way, staff time would be focused on contract administration, providing information, document review, etc.  A notable exception might be hydrologic modeling, if required.  This would be performed by the Senior Hydrologist using the District’s CVSIM model.

Depending on the nature of the “project” selected by the Board, the CEQA process costs could conceptually range from a few hundred dollars for room rental, notices, publications, etc. to a preliminary rough estimate of $200,000 for a full EIR. Certain project concepts could potentially meet the criteria for a CEQA exemption, while others will require a full EIR. The timeframe could range from a few weeks to a year for a full EIR with extensive public participation and comment. Another budget ramification is the higher potential for District Counsel’s time to address legal questions and challenges associated with the allocation issue. The level of legal effort cannot be predicted at this time. Fiscal impacts associated with the decision-making process described above would vary. Modest additional expense for a Board scooping session could be covered by the contingency amount included in the 2006-07 proposed budget. Subsequent initiation of a CEQA process to revise the Water Allocation Program EIR and related expenses are not included in the proposed budget. The estimated$200,000 amount for this project would need to be covered by a supplemental appropriation from the general operating reserve, which is adequate to cover that one-time amount.                                               U:\staff\word\boardpacket\2006\2006boardpackets\20060525\02\item2.doc