Meeting Date:

November 20, 2006





David C. Laredo,




General Counsel

Line Item No.:




Reviewed By:


Stephanie Pintar

Cost Estimate:


General Counsel Approval:  Prepared by Counsel

Committee Recommendation:  N/A

CEQA Compliance:  CEQA Guideline 15270 – Disapproved Project


SUMMARY:  This matter enables the Board of Directors to consider the status of and possible rescission of its prior water credit transfer approval on December 13, 2004 to the City of Seaside, in light of the Sixth Appellate District Court Order in Save Our Carmel River (SOCR) v. MPWMD and Monterey.  The Appellate Court found a similar water credit transfer to the City of Monterey did not comply with CEQA.  The Court held that the Monterey transfer did not meet the requirements for a CEQA Class 2 categorical exemption and determined that cumulative impacts of the transfer were not fully considered.


The water credit in this matter originated from Assessor’s Parcel Number 011-293-002 on Broadway Avenue (a.k.a. 866-890 Broadway Avenue) and was transferred to the City of Seaside.  The net water credit transfer amounted to 1.841 AF; 0.325 AF was deducted as permanent water savings.  A legal challenge to this transfer was filed (SOCR v. MPWMD & Seaside, Case No. M 72877), and that matter has been “on hold” pending the appellate court ruling in the Monterey Case.


Rescission of the water credit transfer would parallel action compelled by the Writ of Mandate After Appeal issued by Judge Robert O’Farrell in Save Our Carmel River (SOCR) v. MPWMD and the City of Monterey (Case No.  M72061).  Rescission in this matter is not presently compelled by the Writ of Mandate After Appeal issued on October 16, 2006 by Judge Robert O’Farrell, but the principles underlying that ruling are present in this matter.  The City of Seaside followed the same City process – a Class 2 CEQA exemption under Section 15302 – as was used in the Monterey transfer. 


Rescission would moot the substance of the pending action (SOCR v. MPWMD & Seaside, Case No. M 72877), but would not entirely resolve issues relating to fees and costs in that matter.


RECOMMENDATION:  The Board should consider whether or not it shall rescind its prior approval and vacate the water credit transfer previously authorized from Assessor’s Parcel Number 011-293-002 on Broadway Avenue to the City of Seaside.  The effect of rescission would be the extinction of the original 2.166 AF Water Use Credit, as that Water Use Credit has expired.


BACKGROUND:  On December 13, 2004, the District approved the application of the Redevelopment Agency of the City of Seaside for a Property-To-Jurisdiction Water Use Credit Transfer under District Rule 28-B.  (The action to approve the transfer was adopted on a vote of 4 – 2.  Directors Edwards, Foy, Knight and Potter voted in favor of the motion.  Directors Lehman and Markey voted against the motion.  Director Pendergrass was absent.)


2.166 AF (acre-feet) of commercial Water Use Credits originated from APN 011-293-002 (a.k.a. 866-890 Broadway Avenue) in Seaside.  District Rule 28-B allows the transfer of Water Use Credits to a jurisdiction’s allocation when the credits originate from prior documented commercial water use capacity (Rule 28-B (9)).  The Water Use Credit originated from documented commercial uses that included a movie theater, restaurant, two beauty salons, a photo processing store and retail uses.  The buildings were demolished in December 1994.  If the transfer had not been approved, the Water Use Credit subject to the transfer would have expired on December 27, 2004. 


In support of the transfer application, the City of Seaside acted as lead agency under the California Environmental Quality Act (CEQA).  The City found the project to be exempt from CEQA under Section 15302, Class 2, and filed a Notice of Exemption Exhibit 15-A.  The Notice of Exemption was filed with Monterey County on November 2, 2004.  District staff asked the City of Seaside to clarify this process as the Environmental Checklist prepared by the City indicated a Negative Declaration was in order.  Seaside’s response to the District is attached as Exhibit 15-B.  At the August 26, 2004 joint special meeting of the Board, TAC (Technical Advisory Committee), and PAC (Policy Advisory Committee), members of the TAC and PAC acknowledged that CEQA (California Environmental Quality Act) review of each transfer request would be required by the jurisdiction prior to consideration by the District’s Board of Directors.  It was also acknowledged that as part of its deliberation when an application to transfer water credits, the Board would consider the CEQA analysis of the jurisdiction and any cumulative impacts of the project. 


The Redevelopment Agency’s application to transfer Water Use Credits resulted in a net transfer of 1.841 AF of water to the City of Seaside’s allocation (the remaining 0.325 AF was retained by the District as permanent conservation savings).  The City of Seaside indicated that the water would be returned to the site for use a part of a redevelopment project.


A legal challenge (SOCR v. MPWMD, Case No. M 72877) to the District and City’s action on the water credit transfer was filed on January 6, 2005.  Petitioners Save Our Carmel River, Patricia Bernardi and The Open Monterey Project are represented by attorney Michael W. Stamp.  Respondents are MPWMD, the City of Seaside and the Redevelopment Agency of the City of Seaside.  Insofar as many procedural issues affecting the Foam Street Monterey water transfer are also raised in this matter, the parties stipulated to place this water credit transfer litigation “on hold” pending final determination of the SOCR (Monterey) matter.  The SOCR (Monterey) matter is now resolved.


The Sixth Appellate District Court issued its Order in Save Our Carmel River (SOCR) v. MPWMD and Monterey. ruling in favor of SOCR.  The Court found that Monterey (City), as lead agency, did not comply with CEQA as the water credit transfer did not meet the requirements for a Class 2 categorical exemption.  The Court also ruled the Water District (District) did not properly consider cumulative impacts of the transfer. 


The Court found that Monterey acted as the “lead agency” with principal responsibility for approving the water credit transfer and preparing any environmental documents, and that the District was the “responsible agency” and as such, entitled to rely on the lead agency’s environmental documents.


The Court found that in approving the Monterey water credit transfer, the District made findings that were not supported by substantial evidence in light of the whole record.  District staff concluded the water credit transfer would not have an adverse impact on the water supply based on the Class 2 exemption determination.  The Court found fault with each of the three reasons District staff relied upon to conclude no cumulative impacts.  First, the Appellate Court determined that Monterey’s reliance upon the categorical exemption was flawed and thus did not provide substantial evidence to support the District’s findings. 


The Appellate Court also found that the District’s action related to the City’s commitment to credit the water back to the same property for use by a replacement structure was flawed.  The Court also found that the District did not address “the cumulative impacts of other transfers” in reaching its decision. 


The Court rejected the contention that the small amount of the water credit transfer at issue in the Monterey matter would not have a measurable effect on the water supply, and that since the water credit transfer program was instituted in 1993, only 26 transfers had been made transferring a total of 60.843 acre-feet.  The cumulative effect of the transfer program was argued to be de minimus.  The Court disagreed.  It should be noted that the water credit in the Seaside transfer amounts to 2.166 AF; the amount in the Monterey transfer totaled 0.789 AF.


The Appellate Court also rejected two other assertions.  First was that the Monterey water credit transfer could not impact water resources on the Monterey Peninsula because the State Water Board will count all water credit transfers toward the 11,285 acre-feet water diversion limit imposed by the State Board on Cal-Am under Order 95-10.  Second, the Appellate Court rejected the concept that water credit transfers cannot have a cumulative impact because the District reserves 15 percent of the water credit, finding that no net water savings has been shown to occur in evidence in the record.


In sum, the Appellate Court found that the District’s finding that no cumulative impacts were associated with the Monterey water credit transfer was not supported by substantial evidence.  The Court expressly noted that it did not offer an “opinion as to the possible significance of the evidence of any cumulative impacts or as to whether the Board’s consideration of such impacts might change the outcome.”


The Appellate Court directed issuance of a writ of mandate ordering the City of Monterey and the District to reverse their approvals of the Monterey water credit transfer, and Appellants were awarded costs on appeal.



15-A    Notice of Exemption, Received October 21, 2004

15-B    City of Seaside Correspondence Related to CEQA Conclusion, Dated December 3, 2004