Meeting Date:

August 21, 2006





David A. Berger,




General Manager

Line Item No.:




Prepared By:

Stephanie Pintar

Cost Estimate:



General Counsel Review:  Yes

Committee Recommendation:  At its January 23, 2006 meeting, the Water Demand Committee expressed support for revised rules that would provide clear guidelines for  the public and staff, and voted unanimously that the Board should review the conceptual draft ordinance prior to first reading.  At its March 7, 2006 meeting, the Technical Advisory Committee (TAC) unanimously supported the proposed changes and recommended the Board consider the draft ordinance.

CEQA Compliance:  Negative Declaration Approved June 22, 2006


SUMMARY:  This is the second reading and consideration of adoption of Draft Ordinance No. 125 (Exhibit 11-A).  The ordinance updates permit and water credit-related rules to conform to adopted policies and administrative practices by adding new language and definitions, by deleting obsolete and redundant text, by simplifying text to make it understandable to the public, and by focusing the subject matter of the rules.  This draft ordinance also serves to fill in the gaps where practices are not supported by language in the existing rules, but where administrative memorandums, Board-approved policies not incorporated in the rules, past practice and other Board directives have supported staff’s actions and policy interpretations.  The first reading of Ordinance No. 125 was approved by the Board at its June 22, 2006 meeting along with approval of a Negative Declaration, in compliance with the California Environmental Quality Act (CEQA). 


Ordinance No. 125 does not contain changes to Rules 23.5, Permits for Water from the Cal-Am Water Distribution System Dedicated for Use in Connection with the Plan to Finance the Recycled Water Project, or to Rule 24.5, Connections for Affordable Housing.  Staff plans to review the edits to Rule 23.5 with the parties involved in the adoption of Ordinance No. 109, which most-recently amended Rule 23.5, and the affordable housing definitions were referred to the Technical Advisory Committee (TAC) for further consideration of a uniform definition that would apply to all jurisdictions.  It is anticipated that edits to these two rules will be returned for consideration by the Board at a future meeting as part of a follow-up ordinance.


The staff report from the first reading of this ordinance (June 22, 2006), including the summary of policy changes made by this ordinance, can be found on the District’s website at:

DISCUSSION:  During review of the ordinance with respect to the recent Superior Court decision in SOCR v. MPWMD (H029242), legal counsel identified several areas of the proposed ordinance that could be vulnerable to challenge.  A legal opinion was submitted on July 7, 2006 by Associate Counsel Farina that indicated that the proposed modifications to Rule 25.5 and Rule 28-B do not conflict with the court’s determination.  However, a confidential follow-up memo from Ms. Farina was distributed to the Board on July 11, 2006, to address a broader CEQA issue dealing with water credit transfers.  The focus of the first memo was on comparing specific issues raised by the court with modifications proposed in the ordinance:  It did not address a broader CEQA issue dealing with water credit transfers.


Associate Counsel’s July 11, 2006 memo suggested that further review of Rule 25.5 should be conducted and that Rule 28-B should be clarified.  This is discussed further in a memorandum to staff from Ms. Farina dated August 1, 2006 (Exhibit 11-B).  In addition to clarifications to Rule 28, further review of Rule 25.5, and minor edits to Rule 20 and 24, Ms. Farina recommended retaining several definitions that Ordinance No. 125 deleted (page 4 of Exhibit 11-B):  These definitions will not be deleted by the second reading of the ordinance.  Staff has also reviewed the other comments discussed in Exhibit 11-B and has made the appropriate corrections to the ordinance.


Rule 28, Water Use Credit Transfers

In developing the proposed ordinance last year, the Water Demand Committee and staff operated under the assumption that there was no potential CEQA impact by modifying the language of Rule 28 from referring to “commercial” and “industrial” to “non-residential” transfers.  In a memo dated February 11, 2005, General Counsel Laredo advised that water credit transfers were not limited to commercial or industrial use and applies to the transfer of water credits among governmental agencies subject to the remaining conditions of the rule (Exhibit 11-C).  Based on this interpretation, the change in terms to “non-residential” would not have any impact on the implementation of the rule.


After reviewing the history of the Water Credit Transfer Program, it became apparent to legal counsel and staff that transfer of water credits originating from publicly owned facilities was not contemplated as a component of Rule 28.  Ordinance No. 75, adopted April 17, 1995, added Rule 25.7, Public Water Credits.  These credits were allowed to be added to a jurisdiction’s allocation when a publicly owned facility was retrofitted to conserve water.  Rule 25.7 was repealed in January 1999 by Resolution 99-01 after a lawsuit was filed in July 1998 in the Monterey County Superior Court (Case No. M40865) by Save Our Carmel River.  The lawsuit challenged that the CEQA exemption asserted by the District was not pertinent to the public water credit program.  On December 21, 1998, the Monterey County Superior Court ruled the CEQA categorical exemptions filed by the District when Ordinance No. 91 was enacted were inappropriate.  The resolution was passed and the Jurisdictions were notified of the action.


The following three options were proposed to the Water Demand Committee on August 10, 2006.  Changes to the proposed language are highlighted in gray.  The options are attached as Exhibits 11-F and are summarized below:


Option 1:   Make no changes to proposed language of Rule 28, contained in Ordinance 125, notwithstanding legal counsel concerns (Exhibit 11-D).


Option 2:   Change language of Rule 28, contained in Ordinance 125, to clearly exclude public authority facilities from the Water Use Credit transfer program and clarify the title of the rule (Exhibit 11-E). 


Option 3:   Change language of Rule 28 in Ordinance 125 to include references to “commercial” and “industrial” uses to track the original language of Ordinance No. 71 and clarify the title of the rule (Exhibit 11-F).


The Water Demand Committee discussed the proposed clarifications to Rule 28 at its August 10, 2006 meeting.  The committee unanimously recommended Option 3, adding language to Ordinance No. 125 that (1) clarifies that Water Use Credits from public authority uses are not eligible for transfer; and (2) restores former language identifying “commercial” and “industrial” Water Use Credits as being eligible for transfer.  The Committee also recommended that the Board task the Water Demand Committee with initiating a transfer program ordinance that would allow public authority Water Use Credit transfers to the Jurisdiction.  Representatives from the City of Monterey attended the meeting and submitted a letter requesting action to allow public transfers (Exhibit 11-G). 


In other action, the Water Demand Committee requested further explanation from District Counsel on the necessity of clarifying that public authority uses are not eligible to transfer:  General Counsel Laredo’s confidential response will be provided under separate cover.  The committee also reviewed staff’s revisions to Rules 25.5 and Rule 11 and supported the clarifications.


Rule 25.5, Water Use Credits and On-Site Water Credits

Associate Counsel’s July 11, 2006 memo suggested that further review of Rule 25.5 should also be conducted, and this subject was further discussed in the August 1, 2006 memo from Ms. Farina.  Rule 25.5 in Exhibit 11-A has been modified to clarify that Water Use Credits are only available for savings that occur beyond the mandatory retrofits contemplated to achieve the District’s 15 percent conservation goal.  This was necessary due to the exclusion of similar language from the existing Rule 25.5 where reference to the 15 percent reduction lacks clarity on the implementation of the terms.


Staff spent considerable time researching the Board action that established the District’s long-term water conservation goal and believes that water savings resulting from retrofits in excess of the required measures are not subject to the 15 percent reduction:  The water savings expected to achieve the 15 percent conservation goal is attained by mandated District programs.  To ensure these conservation savings are achieved, two additions have been made to Rule 25.5:  First, Rule 25.5-B contains new language that states, “Water savings resulting from mandatory District programs, including water savings resulting from the installation of Low Water Use Plumbing Fixtures Mandated by the District, shall not result in a Water Use Credit.  Such savings shall be set aside as permanent water conservation savings essential to the District’s 15 percent conservation goal approved by the Board in March 1984.  Second, the ordinance was amended to include a provision that when actual water consumption records are used to assess a Water Use Credit (in the case of non-residential retrofits), and when the project applicant cannot demonstrate that the credit site has continuously met the District’s mandated conservation requirements for the entire water use record, the District will reduce the water savings estimate by 15 percent to meet the original intent of the conservation goal.  These changes are found in Rule 25.5-F-4-d-(3) on page 74 of the ordinance.


Rule 11, Definitions

Finally, Counsel recommended retaining several definitions that Ordinance No. 125 deleted, including “commercial use,” “industrial use” and “public authority use.”  These definitions will not be deleted by the second reading of the ordinance.  Minor grammatical corrections have also been made to the ordinance.


RECOMMENDATION:  Staff recommends that the Board take the following actions:


  1. Concur with the Water Demand Committee recommendation to include Option 3 in Rule 28.  This option is currently incorporated into Exhibit 11-A.


  1. Approve the second reading and adopt Ordinance No. 125 as shown in Exhibit 11-A.  If adopted, the ordinance will become effective on November 1, 2006. 


  1. Direct staff to prepare a Notice of Determination (and Certificate of Fee Exemption) for transmittal to the Monterey County Clerk in compliance with CEQA.    


  1. Direct staff to place an item on the next available Water Demand Committee agenda to review the process for considering a water credit transfer program that will allow transfers of public authority water credits from one site to another or to a Jurisdiction’s water allocation.  The Water Demand Committee should report back to the Board on this matter.



Ordinance No. 125 facilitates completion of a Policies and Procedures Manual.  Before the manual can be completed, a significant number of policy interpretations, procedures, and practices must be incorporated into the rules and regulations to allow consistency in application.  In addition, stand-alone policies approved by the Board have been added.  There are two staff members who have institutional knowledge of these policy interpretations, procedures, and practices.  This institutional knowledge is captured in the revised rules.  Clarification and inclusion of these Board policies, policy interpretations, procedures, and practices in the rules will also facilitate the accuracy of the Water Demand Division database project.


Draft Ordinance No. 125 was developed after careful review of existing rules and staff-suggested changes by the Water Demand Committee.  During committee meetings held on June 14, August 2, September 1, October 11, December 8, 2005 and January 24, 2006, Water Demand Committee members provided comments and feedback to staff.  The Water Demand Committee and staff’s goal while drafting the ordinance was to reorganize and rewrite the rules in ways that make them easier for permit applicants to understand.  With this in mind, Rule 20 was revamped to address under what circumstances a water permit is required.  Rule 21 deals exclusively with the application, and Rule 23 outlines the process for reviewing an application and issuing a water permit.  Rule 24 explains how water use capacity is calculated and how to determine the appropriate connection charges.  Rule 25 has been clarified to state a definitive water permit expiration date.  Rule 25.5 has been revised to simplify the Water Use Credit process by eliminating two application timelines and now includes the existing administrative process for documenting the credit.  This rule also speaks to other administrative practices and policies related to water credits.  Rule 26 addresses the reapplication process, and Rule 28 has been edited to reduce redundancy.  Rule 30 has been modified to delete obsolete language regarding water credits.  Finally, definitions have been added to Rule 11 associated with the water permit and water credit process, and other definitions have been modified to conform to District rules, policies and practices.


The draft ordinance was reviewed by the TAC on February 7 and March 7, 2006.  The TAC unanimously endorsed the ordinance.



11-A    Draft Ordinance No. 125 - Clarifying Rules Related to Water Permits and Water Credits

11-B    August 1, 2006 Memo by Associate Counsel Farina

11-C    February 11, 2005 Memo by General Counsel Laredo

11-D    Rule 28, Option 1

11-E    Rule 28, Option 2

11-F    Rule 28, Option 3

11-G   August 14, 2006 Letter from Dan Albert, Mayor, City of Monterey