CONSIDER APPROVAL OF
APPLICATIONS SUBMITTED BY CITY OF
October 15, 2007
David A. Berger,
Line Item No.: N/A
General Counsel Approval: Yes
Committee Recommendation: N/A
CEQA Compliance: MPWMD is a Responsible Agency relying on
FEIR certified by City of
APPROVAL OF MPWMD APPLICATION #20070803SAN TO CREATE
B. CONSIDER MPWMD APPLICATION #20070829CAW
MPWMD CONCEPT ORDINANCE ADDING RULE
23.6 TO ESTABLISH A
SUMMARY: The Board will consider two related Water
Distribution System (WDS) applications (Exhibits
20-A and 20-B)
and one MPWMD Concept Ordinance (Exhibit 20-C) related to the delivery of
water from the Sand City Water Supply Project (Project), a desalination plant
the City of Sand City proposes to build and own that would produce 300
acre-feet per year (AFY) of potable water from shallow, brackish-water sources in
the Seaside Basin. As described in Exhibit 20-D,
California American Water (CAW) would lease the facilities from the City of
Sand City (City) for 15 years, operate the plant, and purchase all of the 300 AFY
once the plant is constructed. According
to the City’s application, within the next 10 to 20 years, the entire 300 AFY
will be used by parcels within the City in accordance with its General Plan. In the meantime, CAW will have access to the
desalinated water to help reduce pumping from the
The two WDS applications under consideration include:
1. Application #20070803SAN (Exhibit 20-A) from the City of Sand City to distribute 300 AFY of desalinated water from the plant site to the CAW system via a 900-foot long pipeline. The exhibit is the cover letter and application form only. A binder with associated attachments submitted by the City is available for review at the District office.
2. Application #20070829CAW (Exhibit 20-B) to amend the current CAW system to add the desalination plant as a new source of supply and to annex one additional parcel into the CAW system. The proposed annexed parcel (APN 011-501-014) is currently the only parcel that is not within the CAW service area but is within the City boundary.
In addition, the Board will consider a Concept Ordinance shown as Exhibit 20-C (referred to as Concept Ordinance No. SS in public notices posted and distributed for this hearing), which would add a new Rule 23.6 and amend Rules 11, 21 and 23.1 of the MPWMD Rules & Regulations to provide a legal entitlement to the City for Project water to be distributed by CAW to all specified parcels within the City. The model for the Concept Ordinance is MPWMD Ordinance No. 109, which provided water entitlements to specified properties within Del Monte Forest based on potable water saved by reason of the Pebble Beach Reclamation Project. This Concept Ordinance is provided to the Board for initial policy review and direction at this time. District General Counsel has opined that the Board may act on the two applications with or without consideration of the Concept Ordinance, and the draft ordinance submitted by the Sand City Attorney differs from Ordinance No. 109 in several substantive ways.
The two WDS applications and the Concept Ordinance are discussed in more detail in the “Discussion” section below. The applications involve extensive documentation and correspondence, and are related to previous actions by other regulatory entities. All files associated with the applications are available for review at the District office. The City also has copies of its environmental review documents and related materials. Public notice of this hearing through a variety of means was provided in the manner required by the applicable District rules.
RECOMMENDATIONS: District staff recommends that the Board take the following actions:
1. Adopt the MPWMD Findings of Approval for Application #20070803SAN (Create Sand City Water Supply Project WDS) shown as Exhibit 20-E with specific reference to Finding #19, District compliance with CEQA as a Responsible Agency. In adopting the Findings, the Board confirms that it has reviewed the Environmental Impact Report (EIR) on the Sand City Water Supply Project (Desalination Project) certified by the City Council (Notice of Determination dated January 21, 2005) and Addendum to the EIR adopted by the City (NOD dated September 19, 2007). The Draft and Final EIR as well as the EIR Addendum were previously distributed to the Board under separate cover for their review, and are available at the District office for public review.
2. Approve Application #20070803SAN; authorize issuance of MPWMD Permit #M07-02-L4 with the 28 Conditions of Approval specified in Exhibit 20-F, and direct staff to file a Notice of Determination with the Monterey County Clerk. The Conditions of Approval include required conditions as specified in MPWMD Rule 22-D as well as special conditions related to use of the Desalination Project Entitlement contemplated by the Concept Ordinance. As the printing deadline approached, City staff raised questions about certain Conditions that District staff and Counsel are reviewing. These will be summarized in the staff presentation on October 15, 2007, and alternative language may be provided at that time.
3. Adopt the MPWMD Findings of Approval for Application #20070829CAW (Amend CAW WDS) shown as Exhibit 20-G. The evidence for many of the CAW Findings is the same as for the City application, as the two are interlinked.
Application #20070829CAW; authorize issuance of MPWMD Permit #M07-03-L4 with
the Conditions of Approval specified in Exhibit
20-H; and direct staff to file a Notice of Determination with the Monterey
County Clerk. The Conditions of Approval
include required conditions as specified in MPWMD Rule 22-D as well as special
conditions related to use of the Desalination Project Entitlement contemplated
by the Concept Ordinance. Notably,
Condition #3 allows expansion of the CAW service territory to serve parcel APN
011-501-014 within the City limits once the desalination project is fully
operational. According to City staff,
this parcel is the only parcel within the City boundary that is not also within
the CAW service area. The parcel is
identified as the “
5. Provide direction to District staff and Counsel regarding its desire to further consider the Concept Ordinance (Exhibit 20-C) and specific guidance on the policy issues described in the “Discussion” section below. Staff recommends that the Board refer the draft Concept Ordinance to the Rules and Regulations Review Committee with direction to include those policy issues the Board determines should be addressed in the next draft. The earliest date for the first reading of the Concept Ordinance would be November 2007, with the second reading and adoption in December 2007. The ordinance would become effective no earlier than mid-January 2008. City water entitlements would not be valid until the desalination plant is fully operational, under the terms of the proposed WDS permit.
Approval of the two WDS applications is not dependent on resolving the policy issues in the Concept Ordinance. However, the City’s use of the production, connection and entitlement limits in Condition #3 of the staff-recommended City WDS permit and CAW WDS permit are contingent on MPWMD Board approval of an entitlement ordinance.
BACKGROUND: The following paragraphs provide background relevant to the applications and Concept Ordinance. Cited documents are available for review at the District office; some are attached as exhibits.
As described in the Addendum to the Project FEIR (main text provided as Exhibit 20-I), the original Project concept was for the City to own and operate a 300 AFY desalination project and its associated water distribution system separate and independent from the CAW system, to provide water to existing users and future development needs in accordance with its adopted General Plan, Local Coastal Plan and Redevelopment Project Plan. Facilities included a reverse osmosis desalination plant that would treat water from the shallow, brackish Aromas Sands Formation, a 7,000-foot pipeline loop system to deliver water to parcels within the City, two water storage tanks, and an emergency intertie to the Marina Coast Water District (MCWD). It is noted that the Superior Court’s Final Decision on the Seaside Basin Adjudication in March 2006 granted the City the right to produce brackish water from the Aromas Sands Formation as the source for its desalination project, so long as there is no “Material Injury” to the aquifer.
Importantly, a January 31, 2006
letter from the SWRCB (Exhibit 20-J) stated that, because the
source of supply is from the
A. Desalination plant construction, operation and environmental impacts associated with its 300 AFY production of potable water are essentially the same.
Desalination plant site was moved approximately 90 feet
west of its original location near the intersection of Elder and Shasta Avenues
One new 900-foot, 8-inch main will be constructed in
existing street right-of-ways to connect to an existing 14-inch CAW main at
Roberts and Olympia Avenues in
D. 7,000 feet of new water mains for water conveyance and fire flows within the City will not be constructed.
E. Two water storage tanks totaling 850,000 gallons will not be constructed.
F. An emergency intertie to MCWD will not be constructed.
H. The current MPWMD water allocations of CAW water will not be retired and replaced by 300 AFY from the City’s desalinated water system. Instead, existing CAW water allocations will remain in place, including the 94 AFY existing CAW water use by the City. Of the 300 AFY to be produced from the desalination project, 206 AFY would be slated for eventual use by new construction and redevelopment projects as a water entitlement via the Concept Ordinance. The 206 AFY amount for new uses is derived from 300 AFY total desalination project production minus 94 AFY existing use.
The water resources (i.e.,
J. Over the next 10 to 20 years, the benefit of the desalination plant to the overall CAW system will diminish to zero as Sand City build-out and redevelopment projects come to fruition, and use the full 300 AFY potable water production capacity of the plant. However, there would be no adverse effect to the CAW system. If the City had seceded from CAW as originally contemplated, an estimated 94 AFY would no longer need to be served by CAW.
K. The desalination project is independent of long-term water supply efforts such as CAW’s proposed Coastal Water Project.
proposed Project is comprised of extraction wells, pumps, 300 AFY reverse
osmosis desalination plant, water mixing equipment and a horizontal brine
injection well. Brackish water extracted
by four beach wells in two locations west of Highway One will be conveyed to
the desalination facility at the 0.8-acre “Campos” property east of Highway One
(west of Catalina Street bounded by Elder and Shasta Avenues). The fresh water produced at the desalination
plant will be adjusted for pH and disinfected, and mixed with water from the
California American Water (CAW) system to reduce the potential for corrosion in
existing CAW pipelines. Water will then
be conveyed through an 8-inch pipeline roughly 900 feet along
According to the City Engineer, completion of project construction is anticipated by mid-February 2009, assuming a Notice-to-Proceed with the design/build contractor in November 2007. The offsite wells and pipelines will run concurrent with this schedule, and work should commence on the wells in November 2007. The offsite infrastructure will likely be completed prior to the plant itself.
The City’s current project cost estimates include a capital cost of $9 to $10 million and approximately $300,000 annual operations cost. A City-CAW agreement approved by the City Counsel on October 9, 2007 contemplates a 15-year lease with CAW paying a base rent of $765,000 annually (Exhibit 20-D).
Environmental Review by Other Agencies
The Final EIR for the original
Project concept (an independent, City-owned water system) was certified by the
City on January 18, 2005 and a NOD was issued on January 21, 2005. The California Coastal Commission (CCC)
relied on the certified EIR to approve a Notice of Intent to Issue a Coastal
Development Permit dated July 11, 2005 (on appeal), which expired two years
later. In June 2007, the CCC granted an
extension and set May 11, 2008 as the deadline to achieve approvals from
various entities, including MPWMD. On
September 18, 2007, the City adopted
MPWMD Process for
City and District staff held
several pre-application meetings with City representatives in Spring 2007. On May 29, 2007, MPWMD General Counsel
prepared a memo on legal questions raised by the City’s potential application (Exhibit 20-K),
which included the recommendation that a CAW water entitlement ordinance be
drafted, similar to Ordinance No. 109 for the Pebble Beach Reclamation
Project. A formal application for the
20-A) was received on August 3, 2007 with a request for
highest-priority processing. As
previously communicated to the Board in a letter dated August 10, 2007, this
request was granted by the General Manager due to the potential environmental
and community benefits from the project as well as potential regulatory and
fiscal impacts to the City. For example,
the desalination project as a new source of supply for CAW would help reduce
pumping from the
A. Application #20070803SAN for Water Distribution System Permit;
B. Application Supplemental Questionnaire;
C. City parcel ownership information;
D. Map of Sand City/proposed service area;
E. Final decision from Seaside Basin Adjudication;
F. Water quality test results from brackish wells;
G. Brackish water well test results and consultant analyses;
H. Zoning map of City;
I. Coastal Commission approvals for original project;
J. Cal-Trans encroachment permit;
K. Draft and Final EIR (12 copies) of original project;
L. CEQA Resolutions by City for original project;
M. SWRCB letter dated January 31, 2006 re: exemption from one-for-one replacement requirement in Order 95-10 (Exhibit 20-J)
N. Adopted Mitigation Monitoring Program for original project;
MPWMD General Counsel’s June 22, 2006 opinion re:
A MPWMD staff letter determining the City’s application was not complete was transmitted to the City with a copy to CAW on August 20, 2007, and included a listing of necessary additional information in order for the City application to be deemed complete. District, CAW and City representatives met on August 30, 2007 to discuss these information needs. Following approvals by the Sand City Council on September 18, 2007, City staff transmitted the following materials to MPWMD staff:
A. Addendum to Final EIR certified by the City, which addresses the changed project description and CAW interconnection (Exhibit 20-I provides main text only);
C. Notice of Determination dated September 19, 2007 approving revised project;
D. CAW letter dated September 18, 2007 summarizing planned Leasing and Wheeling Agreement, which was later replaced by a draft Lease Agreement (Exhibit 20-D);
E. Letter from City Engineer dated September 24, 2007 explaining system losses;
F. Map figure showing parcel to be added to CAW service area;
G. Updated Design/Build Project Manual dated September 5, 2007;
H. Ex Parte Communication Form.
The Sand City Council held a special meeting on September 27, 2007 to consider an earlier version of the CAW Lease Agreement, as well as the design/build contract with the engineering firm CDM for the desalination plant. These actions were continued to a meeting on October 9, 2007 where the City Council (a) started the process to organize a new bond program to fund the Project, (b) approved the Lease Agreement with CAW, and (c) approved the Design/Build Contract with CDM.
The District Board action must comply with CEQA as well as MPWMD regulations. As a responsible agency, MPWMD will rely on the environmental documentation previously certified by the City of Sand City, the CEQA Lead Agency, as well as other application materials submitted by the City and CAW. The District Board has been provided with and independently reviewed the June 2004 Draft and December 2004 Final EIR for the Project as well as the September 2007 Addendum for the revised Project, with an emphasis on subjects related to water resources and water supply. It is noted that Section 3.4 of the Addendum specifies that it would be used for the two WDS applications and entitlement ordinance.
DISCUSSION: The staff recommendations are based on the following information:
The Findings of Approval (Exhibit 20-E) are based on evidence
provided in the application materials, including supporting documents on file
at the District office. Staff believes
the application meets the criteria and minimum standards for Approval set by District
Rules 22-B and C. Pertinent information
includes certified environmental documents, technical studies and reports,
technical memoranda and maps, correspondence between MPWMD staff and the
applicant, and previous approvals by other governmental entities. Based on the
certified EIR and Addendum for the Sand City Water Supply Project, MPWMD
approval of the application is not anticipated to result in a significant
adverse effect to the
The Conditions of Approval (Exhibit 20-F) proposed for Permit #M07-02-L4 for the Sand City WDS are consistent with MPWMD Rule 22-D governing approval of water distribution systems. Conditions #1-5 define the Permitted System, including a system capacity (production) limit of 300 AFY, and the expansion capacity (connection) limit of one master connection to the CAW main at Roberts and Olympia Avenues, and brackish well sources. The municipal unit allocation refers to quantities of water associated with a jurisdiction’s defined water allocation. The amount of existing allocation from the Paralta Well and existing Pre-Paralta and Public Water Credits would not change from current amounts tabulated in MPWMD records.
reflect mandatory conditions in Rule 22-D, including water quality, metering
and reporting, conservation, required Indemnity Agreement, fee payments,
etc. Other conditions address copies of
monitoring reports, access for inspections, timely notice of pending or actual
changes to the system, water rights and other standard elements. Special Condition of Approval #28 is written
to ensure that the 206 AFY water entitlement to the City contemplated by the
Concept Ordinance is not available until the Project is constructed and fully
operational, and remains able to produce 300 AFY. Similar to the process employed for parcels
within Quail Meadows, Water West and Del Monte Forest, a separate accounting of
MPWMD Water Permits for new construction and redevelopment projects in Sand
City will be deducted from a new 206 AFY “Desalination Project Entitlement”
account (300 AFY Desalination Project production minus 94 AFY existing use =
206 AFY remaining). Special Condition
#29 does not allow service to parcel APN 011-501-014 until the
In discussions with the applicants, District staff and legal counsel sought clarification regarding the potential effect of system losses on the 300 AFY estimated production by the Project. That is, how much water would be lost from production at the desalination plant prior to actual consumption by customers. In this case, the focal point is delivery from the desalination plant to the CAW system at the point of inter-connection. As noted by the City in Exhibit 20-M, losses would be extremely low due to lack of means to draw away “unaccounted for” water. Any other losses are already part of the overall CAW system in its entirety and would not be applied directly to the desalination project. The previously approved permits for the desalination project specify delivery of 300 AFY of potable supply, and do not restrict the plant from producing a small amount greater than 300 AFY to make up for any system losses, should they occur. Permit conditions require metering at the point of connection to the CAW system.
Approval of CAW Application #20070829CAW
The Findings of Approval (Exhibit 20-G) are based on evidence provided in the application materials, including supporting documents on file at the District office. Staff believes the application meets the criteria and minimum standards for Approval set by District Rules 22-B and C. The CAW application relies extensively on the information supplied in the City’s application, as described above.
The Conditions of Approval (Exhibit 20-H) proposed for Permit
#M07-03-L4 are consistent with MPWMD Rule 22-D governing approval of
water distribution systems as well as the proposed ordinance to facilitate
water entitlements to parcels within
The cost to CAW rate payers associated with the 15-year lease agreement presently contemplated is not addressed in the application as such information is not required by MPWMD Rule 22. Effects to CAW ratepayers would be addressed via a future CAW rate case hearing before the California Public Utilities Commission (CPUC).
Concept Ordinance Policy Issues
above, District Counsel’s memo of May 29, 2007 (Exhibit 20-K) suggested an entitlement
ordinance associated with the WDS permits. District and City attorneys
coordinated on development of the Concept Ordinance shown as Exhibit 20-C,
known as the Sand City Water Supply Project Entitlement Ordinance. It creates a new MPWMD Rule 23.6 and amends
Rules 11, 21 and 23.1 to facilitate 206 AFY of entitlements of potable CAW
The major sections of the ordinance include:
A. Findings, Short Title and Purpose
B. Create new Rule 23.6 for Sand City Water Entitlement
C. Amend Rule 21-E re: “Benefited Properties”
D. Amend Rule 23.1 re: Water Use Permit for a “Benefited Property”
E. Amend Rule 11 (Definitions) to be consistent with entitlement, and add new definition for Sand City Desalination Facility
A simplified summary of the key aspects of the ordinance include:
A. A Sand City Water Entitlement of 206 AFY is created as a vested property right to the City as long as CAW takes delivery of 300 AFY of potable water from the Desalination Facility. The City may then transfer the vested right to individual properties within the City. MPWMD will track how the 206 AFY “account” is “drawn down” over time.
B. The entitlement begins via a Water Use Permit to the City when the Desalination Facility is fully operational; the entitlement continues through December 2082.
C. The Entitlement is separate and distinct from any other water allocation (Rule 30).
D. Properties within the City must abide by all conservation and water rationing rules.
E. All standard fees associated with MPWMD permits must be paid, as well as all charges imposed by the California Public Utilities Commission (CPUC), CAW or other entities with authority.
F. MPWMD water factors apply to the properties and MPWMD may track water use on these properties.
The summary below simplifies the October 1, 2007 memo prepared by District Counsel (Exhibit 20-N), and poses a set of questions that arise when the Concept Ordinance is compared to the previously approved Ordinance No. 109, or when other unaddressed issues are considered. The designation in brackets in each paragraph below reflects numbering in District Counsel’s memo:
Policy Question: Should language be added to the ordinance to address the situation where production could be limited in order to comply with the Adjudication decision? This is also relevant to questions about long-term system failures (see below).
2. [Memo IB] Ordinance 109 requires CAWD/PBCSD to maintain public ownership and to keep the plant operational. Concept Ordinance Finding #6 refers to public ownership but does not require the City to maintain public ownership of the plant, or to keep it operational (see two additional questions related to this issue immediately below).
question: Should text be added to the
ordinance to require the City of
3. [Memo IB] The Ordinance 109 entitlement was granted pursuant to a guaranteed fiscal sponsorship to ensure a viable reclamation project. The Concept Ordinance does not include a requirement that the City guarantees or ensures that the plant is maintained in good operating condition to be able to reliably produce 300 AFY. It is noted that Condition #3 and Special Condition #28 of the proposed MPWMD WDS permits for the City and CAW (Exhibits 20-F and 20-H) state that the 206 AFY Entitlement is valid only so long as the plant is fully operational and properly maintained to be able to produce 300 AFY of potable supply acceptable to CAW.
Policy Question: Should language be added to the ordinance to require a guaranteed fiscal sponsorship to ensure long-term viability of the plant?
4. [Memo IB] Ordinance No. 109 specifies the definition of a service “interruption” and what happens in a short-term or long-term failure of the reclamation project. It describes how long being off-line is acceptable and the process to address system failure. The Concept Ordinance does not include any information about short-term or longer-term system failure, including the situation where less than 300 AFY is actually able to be produced over the long-term, for whatever reason.
Policy Question: Should text be added to the ordinance to address emergency short-term and long-term system failures, including replacement sources of supply?
5. [Memo IC] Ordinance 109 allowed 380 AFY out of 800 AFY potential reclamation savings to be used for new water use by the fiscal sponsor, or less than half. Concept Ordinance Finding #10 includes 206 AFY for new uses, which is about two-thirds of the 300 AFY production amount.
Policy Question: Is the ratio of entitlement to plant production acceptable?
6. [Memo ID] Concept Ordinance Finding #11 states that the Water Entitlement is separate and distinct from the City’s Allocation and “won’t affect any future Allocation to the City.”
Policy Suggestion: The Board should confirm this separation.
7. [Memo IE] Ordinance 109 specified the cost of the Reclamation Project and who is responsible for paying for it. The Concept Ordinance does not include this type of information.
Policy Question: Should text be added to the ordinance to address project costs, cost of water and who is responsible for payment (see specific questions in memo)?
[Memo IF] Concept Ordinance Finding #18 notes near-term benefits to the
Policy Question: Should text be added to the ordinance to clarify project benefits to the two primary components of the CAW water resource?
9. [Memo IG] Concept Ordinance Finding #18 refers to a “permanent reduction” of 94 AFY, the City’s CAW water consumption in water year 2006. It is unclear how water currently used by the City would be permanently reduced.
Policy Question: Should text for Finding #18 be amended to more accurately describe what the 94 AFY amount represents?
IIA] The purpose of the Concept Ordinance refers to resource benefits but does
not spell out potential benefits to the
Question: Should text for Section Two,
Purpose, be amended to emphasize benefits to the
Question: Should text for Section Two,
Purpose, be amended to include limits on the timing of the sale of entitlements
IIIA] The Concept Ordinance establishes a 75-year life for the entitlement
through December 21, 2082. This appears
to be inconsistent with a 25-year remaining life of the City’s Redevelopment
Plan described in other documents.
Long-term fiscal obligations by
Policy Question: Should text in Section Three, Rule 23.6, be amended to clarify the project life and financial obligations during that period?
Public notice has been provided no later than 10 days prior to this public hearing in several ways, including: (1) mailed notices to property owners within the City of Sand City and within 300 feet of the pipeline alignment; (2) posted notices at the desalination and pipeline sites; (3) posted notice at the District office; (4) notice of the public hearing to recipients of District agendas for the October 15, 2007 meeting; (5) notice of the October 15, 2007 public hearings in The Herald; and (6) posting of the October 15, 2007 agenda and staff note materials on the District website. At the time of noticing, the draft ordinance was referred to as “Concept Ordinance No. SS.”
20-A Application #20070803SAN to Create Sand City Water Supply Project WDS, including map of proposed system
20-B Application #20070829CAW to Amend CAW WDS to add desalination project as a source of supply and amend service area boundary
20-C MPWMD Concept Ordinance No. SS to facilitate
water entitlements to
20-D Resolution of Approval of Lease Agreement between CAW and Sand City dated October 10, 2007 provided on October 9, 2007
20-E Draft Findings of Approval for Application
20-F Draft Conditions of Approval for Permit #M07-02-L4, including:
Attachment 1: Service Area, and
Attachment 2, Indemnity Agreement
20-G Draft Findings of Approval for Application
20-H Draft Conditions of Approval for Permit #M07-03-L4, including:
Attachment 1: Service Area, and
Attachment 2, Indemnity Agreement
20-I Addendum to FEIR (Main text only; excludes Appendices) for Sand City Water Supply Project (Cal-Am Interconnection), September 2007
20-J Letter from SWRCB to
from District Counsel dated May 29, 2007 regarding
from District Counsel dated June 22, 2006 regarding
20-M Letter from City Engineer dated September 24, 2007 regarding system losses
20-N Memorandum from District Counsel dated October 1, 2007 regarding policy issues associated with Concept Ordinance
Provided to MPWMD Board under Separate Cover:
· Draft EIR for Sand City Water Supply Project (Desalination), dated June 2004 (2 vol).
· Final EIR for Sand City Water Supply Project (Desalination), dated December 2004.
· Addendum to FEIR for Sand City Water Supply Project (Cal-Am Interconnection) with Appendices, dated September 2007.