ITEM:		ACTION ITEMS
16.	CONSIDER CONCEPTUAL CHANGES TO MPWMD RULES & REGULATIONS GOVERNING WATER DISTRIBUTION SYSTEMS (Ordinances 96 and 105)
Meeting Date:			August 16, 2004		Budgeted:	N/A
From:			David A. Berger,		Program/	N/A
			General Manager		Line Item No.:
Prepared By:			Henrietta Stern		Cost Estimate:	N/A
General Counsel Approval:				Staff note provided for review.
Committee Recommendation:				Rules & Regulations Review Committee expressed general concurrence with recommended action.
CEQA Compliance:				Needed to pursue new ordinance(s) with substantive changes.

SUMMARY: The Board will consider recommendations by District staff and the Board’s Rules & Regulations Review Committee regarding concepts for potential changes to MPWMD Rules and Regulations governing water distribution systems (WDS). The District rules were substantively amended by Ordinances Nos. 96 and 105 in 2001-2002. The current goal is to streamline the permit process, where appropriate, while continuing to protect water resources. The California Environmental Quality Act (CEQA) requirements for a new ordinance will also be reviewed.

RECOMMENDATIONS: The Board should direct staff and counsel to develop two ordinances for Board consideration in the near future. Two ordinances are recommended because it is assumed that substantive changes to the permit process may take more time, and could hold up the housekeeping changes that are needed as soon as possible.

The first ordinance (“Ordinance XX”) would address housekeeping/consistency issues that are needed regardless of changes to the permit process. For example, this ordinance would clarify the importance of production limits and what procedures would occur if a WDS goes over its limit. A first reading could be considered in September 2004.

The second ordinance (“Ordinance YY”) would reflect and codify the multi-level, “impact-based” regulatory concepts presented herein, which would be a substantive change to the procedures currently employed. The level of staff/Board review, documentation, and permit fees would be proportional to the anticipated impact. Anticipated impact would be based on factors such as intensity of water use, number of parcels, total acreage, and proximity to sensitive environmental resources. See the “Discussion” section below for more detail. A first reading could be considered as early as October 2004.

At its June 22, 2004 meeting, the Rules & Regulations Review Committee concurred with the impact-based regulatory concept and recommended that two ordinances be developed. At its August 2, 2004 meeting, the Committee recommended refinements and unanimously concurred with the staff concepts.

DISCUSSION: In the discussion below, distinctions may be made between single- and multiple-parcel water systems. MPWMD Rule 11 defines a “single-parcel connection system” as water facilities that serve one and only one legal parcel. An example might be a well that serves a single-family home and associated landscaping on one lot. A “multiple-parcel connection system” entails facilities that serve two or more legal parcels. An example might be a well that serves the water needs in a small mutual water company comprised of four lots. Unless specifically noted, all regulations address single and multiple systems.

Two other important terms include: (1) “connection limit”, defined as the maximum number of connections allowed, and known formally as the “expansion capacity limit;” and (2) “production limit,” defined as the maximum number of acre-feet per year (AFY) of production allowed, and known formally as the “system capacity.”

Concepts for Ordinance No. XX, Clarify WDS Rules and Regulations

Ordinance No. XX would focus on several “housekeeping” topics for which text revisions are needed to foster clarity. Ordinance No. XX would address the following topics:

Ø Clarify the importance of remaining within the production limit set as part of the permit conditions. For example, Rules 40-C and 40-D direct the Board to hold an annual public hearing to determine whether any system has exceeded its annual connection limit, to notify the system owners, and for staff to deny any application for water in a system that has exceeded the connection limit. Rules 40-C and 40-D should be amended to also include the production limit to be consistent with Rules 40-A and 40-B. From a hydrologic impact perspective, compliance with the production limit is more important than compliance with the connection limit, because production represents what is extracted from the water resource (such as an aquifer).

Ø Clarify what happens when a system goes over its limits, and describe options available (or required) to correct the situation. For example, the Rules & Regulations should state that the General Manager will direct staff to not receive or accept applications for water connection permits within systems that have exceeded their annual production or connection limits (measured from October 1 through September 30), and describe the documentation needed to demonstrate that system water use has fallen below the limit. Examples of documentation may include installation of new water–saving equipment estimated to substantively reduce annual water use; removal of sufficient turf/landscape acreage to substantively reduce water use; one year of production data showing reduced water production; revised rate schedules showing significant incentive to reduce water consumption; and/or other information as deemed acceptable by the General Manager.

Ø Describe the consequences of not obtaining a WDS permit, if one is required, including purposeful inaccurate characterization of the proposed water distribution system. One concept is progressively rigorous enforcement, including warnings, fines, recordation of a lien against the property, legal action/misdemeanor, and/or system removal. Currently, the emphasis is on revocation of a permit if conditions of approval are not carried out. Exhibit 16-A is a letter from the organization HOPE suggesting mandatory removal of illegal systems.

Ø Clarify 60-day deadlines for follow-up action (payment of fees, sign required paperwork) in order for a permit authorized by the Board or hearing officer to be signed and become valid. This would be in addition to the system construction and operation deadlines currently described in Rule 22-D-4. If deadlines are not met, the permit would be denied without prejudice.

Ø Clarify that an evaluation of hydrogeologic information (well pumping test data), prepared by a qualified individual or firm, must accompany an application in order for it to be considered as complete. The revised Implementation Guidelines will include technical guidance as to the proper procedures to follow for the hydrogeologic evaluation. The volume of well applications in 2004 makes it difficult for District staff to perform these assessments and complete other priority tasks in a timely manner. Similar to Monterey County procedures, District staff suggests that the applicant submit the hydrogeologic assessments for District technical staff to review.

Ø Clarify deadlines for responses to incomplete letters and other activity to show that a permit is actively in progress (due diligence). For example, an applicant may have up to six months (180 days) to conduct hydrologic studies or provide other required by the District in an incomplete determination letter from the District. If deadlines are not met, the permit would be denied without prejudice. The option for a request for an extension could also be considered.

CEQA Compliance: Staff recommends that Ordinance No. XX be considered as exempt from CEQA pursuant to CEQA Guidelines 15061(b)(3) because no physical effects to the environment are anticipated to result from these procedural clarifications.

Concepts for Ordinance No. YY, Impact-Based Assessment of WDS

The Board Chairperson asked staff to develop proposed modifications to current regulations to streamline the WDS permit process and lessen financial impact to property owners with less anticipated environmental impact, reduce unnecessary staff effort, and continue to protect sensitive water resources and the environment. The concept described in the following paragraphs is termed an “impact-based” review of water distribution systems. A new Ordinance No. YY would codify the concepts described below. It is envisioned that a CEQA Initial Study/Negative Declaration would be circulated for public review.

Staff recommends a new process whereby all owners of new wells permitted by the County (or other types of systems not based on wells), except for specific situations defined as exempt, submit an application form to MPWMD that briefly describes key characteristics of the property and proposed uses so that a rough estimate of water use and/or potential impact can be made. A preliminary mock-up of this worksheet is provided as Exhibit 16-B.

Based on this first screening, the application would be assigned as Exempt, Level 1, Level 2, Level 3, or Level 4 as shown in Exhibit 16-C. The level of regulation is proportional to anticipated impact based on the sensitivity of the geographic area, size of parcel, number of parcels served, and whether the application is residential or non-residential. In short, the five types of action include:

Ø Exempt from MPWMD Rule 20.

Ø Level 1, Permit Waiver – simplified permit issued but no system limits set.

Ø Level 2, Staff Permit – staff sets system limits and other conditions; no public hearing; can be appealed to General Manager and Board.

Ø Level 3, Public Hearing – Staff hearing officer makes decision; can be appealed to Board.

Ø Level 4, Public Hearing – Board makes decision.

Criteria to Determine Level

The determination of whether an application is Exempt or Level 1 through 4 will depend on the characteristics, or combination of characteristics, of an application. The characteristics are intended to give a general estimate of water use and potential impact. These factors can include:

Ø Land Use Type, such as single-family residential, commercial or agricultural.

Ø Number of parcels/connections, that is, how many parcels are served by the water system.

Ø Size of lot, for example, larger lots are assumed to have the potential for greater water use, especially in residential use. Due to the intensity of possible water in a small space, lot size is not as an important factor in a commercial setting. The lot acreages shown in Exhibit 16-C were selected to represent potential water use as well as be consistent with other District regulations as well as Monterey County regulations.

Ø Geographic area/location, such as inside or outside the alluvial aquifer; based on environmental sensitivity of the area, or similar compelling reason such as water rights, overdraft, etc. The proximity of the proposed well or other facility to existing wells, listed Carmel River tributaries, alluvial aquifer boundaries or the shoreline is also important.

Ø Relation to Cal-Am, that is, whether or not a property is inside or outside the Cal-Am service area, and is already served by Cal-Am.

There is no distinction between a potable (domestic drinking water) and non-potable (agricultural/irrigation only) supply. The reason is that the quantity of water being extracted out of the ground is the key factor in assessing environmental effect, not how it may be treated and used by the property owner. Also, a property owner on a single parcel could initially apply for a non-potable well, ostensibly for irrigation use only, and subsequently convert the well for potable use without the knowledge of the County or District. This scenario is of concern because, until SWRCB Order 95-10 is resolved, the District does not wish to exempt situations where a private potable system may fail, leading to a petition for Cal-Am service. For this reason, any supply (potable or non-potable) proposed within the main Cal-Am service area begins at Level 2.

Characteristics of Action Levels

Following are proposed characteristics for each of the five action levels. In the discussion below, and in the exhibits, the term “parcel” means an existing legal lot of record (see Rule 11), and refers to a residential setting unless noted otherwise. The term “new subdivision” means proposed to create new legal lots of record. For all situations, the well must be properly registered and metered, and report use annually.

The definition of “sensitive receptors” referenced below is based on the following:

Ø The 1,000-foot delineation for the zone of influence of a well drilled in Carmel Valley upland formations or other areas is based on extensive hydrogeologic studies associated with the Santa Lucia Preserve EIR certified by Monterey County in 1996. District staff members were part of a peer review team for these studies, which offer the best available information.

Ø The Carmel Valley Alluvial Aquifer (alluvium) is delineated due to the water rights determinations in SWRCB Order 95-10.

Ø The listed tributaries described in Rule 20 include: Tularcitos, Hitchcock Canyon, Garzas, Robinson Canyon and Potrero Creeks. These creeks were selected because: (1) they reflect the majority of contributed streamflow to the Carmel River in the lower Carmel Valley; (2) portions of each stream are mapped as part of the alluvial aquifer; (3) they are regularly monitored by MPWMD staff (including stream gauges); (4) extensive baseline data currently exist; and (5) data for these tributaries are included in the District’s CVSIM computer model; and/or (6) they are known to support habitat for sensitive species. Other smaller, intermittent tributaries are not recommended to be listed because it would be difficult to make environmental findings about them based on evidence in the record.

Ø The Pacific Ocean shoreline is included to address potential seawater intrusion that potentially could be caused by a well within 1,000 feet of the mean high tide line, depending on the well.

Exemption/No Permit Needed:

Staff would continue to screen all Monterey County well construction permits sent to the District to assess whether an MPWMD WDS permit is needed. As shown in Exhibit 16-C, properties that meet all of the following criteria would be exempt from the requirement to obtain a WDS permit:

Ø one or two parcels totaling less than 2.5 acres;

Ø location outside of the Carmel River Basin and Seaside Basin (entire basin);

Ø location not within the Cal-Am service area (or not served by Cal-Am as a remote meter);

Ø location more than 1,000 feet from sensitive receptors defined above.

Only a very limited number of properties and situations would qualify as exempt. Examples include certain areas within the Carmel Highlands, Aguajito/Jack’s Peak, and Highway 68 uplands (not within Laguna Seca Subarea).

Level l, Permit Waiver

Level 1 properties are distinguished from exempt properties by being located in the upland areas of the Carmel River watershed as shown in Exhibit 16-C. A Permit Waiver would be issued with a basic set of assumptions that must hold true, or the waiver is invalid. No production or connection limits would be set. Characteristics for Level 1 include:

Ø one or two parcels totaling less than 2.5 acres;

Ø location in Carmel Valley Upland more than 1,000 feet from sensitive receptors;

Ø location not within the Cal-Am service area (or not served by Cal-Am as a remote meter).

Level 2, Staff Permit

Level 2 would be similar to the Corps of Engineers "Nationwide Permit," where the process is streamlined for certain situations. There would be no public hearing, but production and connection limits would be set, along with other conditions, as determined by staff (General Manager or designee). Additional information from the applicant, such as a hydrogeologic study, and analysis by staff (or consultant, if needed) may be required in certain situations, such as location of a well within 1,000 feet of certain named creeks. Water rights are not a key issue because Level 2 permits are for parcels outside the Carmel River Alluvial Aquifer (see Exhibit 16-C). Level 2 is the minimum level for situations within the main Cal-Am service area.

Level 3, Public Hearing before Staff Hearing Officer

Level 3 would entail formal notice and a public hearing before the MPWMD staff Hearing Officer, similar to the current situation. As shown in Exhibit 16-C, Level 3 situations reflect sensitive areas such as the Carmel River Alluvial Aquifer and Seaside Basin (Laguna Seca and Coastal Subareas); larger parcels in less sensitive areas; and systems serving three or more parcels. All new subdivisions and non-residential situations are either Level 3 or 4. A low-acreage new subdivision (less than 2.5 acres total) in a less sensitive area would be Level 3. A commercial/industrial situation expected to use less than 1 AFY would be Level 3.

Level 4, Public Hearing before MPWMD Board

Level 4 would entail formal notice and a public hearing before the MPWMD Board, similar to the current situation. As shown in Exhibit 16-C, hearings before the Board would be reserved for larger, potentially controversial projects, and/or wells located within known sensitive areas. New subdivisions of any size in sensitive areas are Level 4. A commercial/industrial situation expected to use more than 1 AFY in Carmel Valley would be Level 4. Level 4 would apply to any commercial entity with anticipated water use over 10 AFY.

Comparison to the Existing Situation

This proposed structure would expand the MPWMD “regulatory net” in sensitive areas, but streamline it in less sensitive areas or potentially lower impact situations. Staff believes this is a reasonable compromise to focus staff and Board attention on situations that require the most oversight and could cause the most impact to the community water resources. All boxes shown in gray in Exhibit 16-C are situations where the level of review is streamlined. All boxes shown in black are situations where the level of review is increased. Boxes in white are the same as the existing situation. Exhibit 16-D provides selected examples where the permit process would be decreased, increased or the same.

Expanded Regulation: The most prominent example of expanded regulation is the need for a Level 3 or 4 permit for single parcels within the Laguna Seca Subarea as well as the Coastal Subareas of the Seaside Basin. Previously, no WDS permit was needed for a single-parcel system in the Laguna Seca Subarea. This change reflects the findings of the Phase III Hydrogeologic Study for the Laguna Seca Subarea, which demonstrated that current water extractions are roughly double the reliable yield of the Subarea (overdraft condition), and that the Subarea is in a water supply deficit. Also, regulation of some single-parcel systems that are outside the Carmel River Basin and Seaside Basin Coastal Subareas, but still within the Cal-Am service would increase. For example, lots with wells in Pebble Beach would not be exempt.

Streamlined Regulation: An example of a more streamlined process (Level 1 or 2, depending on the situation) is that a public hearing would not be required for two-parcel systems outside of the alluvial aquifer. Currently, any two-parcel system would require a public hearing before the MPWMD Board. Under the proposed concept, staff would handle these applications administratively. Also, 3+ parcel situations less than 2.5 acres that currently require a public hearing before the Board would be heard by a staff hearing officer under the proposed refinements.

Comparison: Staff reviewed the nine permits that have been issued since Ordinance No. 96 was approved in April 2001. All entailed public hearings, seven by a staff Hearing Officer (equivalent to Level 3) and two by the full Board (Level 4). If the regulations described in proposed Ordinance No. YY had been in place instead, seven single-parcel situations would have been processed by staff without a public hearing (Level 2) and one public hearing would have been before the staff Hearing Officer rather than the Board. The application fee for seven applicants noted above would have been $1,500 rather than $2,450. Staff time would have still been needed to address environmental and hydrologic questions, but staff time would not have been needed for public hearing notices, logistics, holding the hearing and follow-up – perhaps a savings of 5-10 hours for each application.

Of the nine applications currently in progress, five applications will be heard by the full Board (Level 4) and four will be heard by the staff Hearing Officer (Level 3). If Ordinance No. YY concepts were in effect today, four applications would still be heard by the Board, two would be heard by the staff Hearing Officer, and three would be processed directly by staff without a public hearing (Level 2).

Pros and Cons of Impact-Based System

The multi-level revisions described above were developed to address concerns about regulatory impact to the “small” property owner, increase efficiency, and continue to properly manage and protect sensitive water resources. Exhibit 16-E provides pros and cons of the impact-based permit system from the perspective of the Chair’s direction to streamline the permit process and reduce regulatory oversight for lower impact situations. It is acknowledged that the concept of “pro and con” may be a subjective assessment.

Fee Structure

A sliding scale fee structure is proposed as follows, based on staff’s best estimate of actual time needed to process the permit, follow up on conditions, and track use annually. The staff hourly rate is $70 per hour; fees may be rounded for simplicity.

Ø Basic Application/Screening: $50 for review and determination of exemption or level.

Ø Exemption Confirmation: $50 for written Confirmation of Exemption.

Ø Level 1: $300 to review application, provide Permit Waiver with Conditions, track use.

Ø Level 2: $1,500 application fee, assuming 20 hours as base, plus County CEQA Exemption fee, etc. Charge at $70 per hour (over 20 hours) and all other expenses for more complex cases similar to Ordinance No. 106.

Ø Level 3 or 4: $2,500 application fee, assuming 35 staff hours as base. Charge $70 per hour for all time over 35 hours as well as actual legal and consultant costs (See Ord. 106).

CEQA Review for Ordinance YY

Previous Ordinances No. 96, 105 and 106 complied with CEQA via a Categorical Exemption or via a Negative Declaration. District Counsel has advised that an Initial Study be prepared and circulated for Ordinance No. YY if the Board directs that it be developed.

BACKGROUND AND HISTORY: Since the District was created in 1978, the District has adopted a series of ordinances, beginning with Ordinance No. 1 in 1980, that created or amended MPWMD Rules and Regulations that govern WDS within the District as well as metering and registration of wells. Ordinances since 1980 are briefly summarized below:

Ø Ordinance No. 3, adopted July 7, 1980. Enacted the MPWMD well registration and reporting requirements. Allowed well owners three options to report water usage: (1) land use method (parcels less than 2.5 acres only); (2) power consumption method; or (3) water meter method.

Ø Ordinance No. 48, adopted March 12, 1990. Deleted the power consumption method of reporting for large wells, and required water meters for those wells.

Ø Ordinance No. 56, adopted November 25, 1991. Required that all medium, large and new wells be measured and reported by the water meter method.

Ø Ordinance No. 96, adopted March 19, 2001. Expanded requirements for a permit to create a WDS. Single-parcel systems within the Carmel River Alluvial Aquifer, 1,000 feet from the alluvial aquifer and specific tributaries, and the Seaside Basin Coastal Subareas as well as some previously exempted multiple-parcel systems need a WDS permit.

Ø Ordinance No. 105, adopted December 16, 2002. Changed and refined Ordinance No. 96 requirements, including a WDS permit required for all wells within Carmel River Basin (watershed) located within the MPWMD boundary.

Ø Ordinance No. 106, adopted February 27, 2003. Revised fee structure to ensure that the WDS permit program is self-funded. Set a standard of $70 per hour for all MPWMD staff time.

In April 2001, the District Board approved draft Implementation Guidelines, including a Supplement to the Guidelines, which provide guidance on the water distribution system permit process, and include worksheets, information sheets, an application form and other relevant information. At its July 15, 2002 meeting, the Board authorized additional refinements to the Guidelines recommended by staff.

Current Status

Since Ordinance No. 96 was adopted, staff has processed nine permit applications; all were eventually approved, with conditions that varied with the complexity of the project. The approved permits include seven single-parcel residential situations, one multiple-parcel (4 or fewer lots), and one major subdivision. Twenty requests for written Exemption Confirmation letters were also completed, along with numerous phone consultations.

Currently, there are nine active pending applications, including single-parcel applications (residential, agricultural and a church), multiple-parcel systems and large subdivisions/housing developments. Many inquiries regarding potential new applications are received each week; intensified interest in recent weeks may be related to discussion of a moratorium in the main Cal-Am water system.

Based on the nine permits processed to date, the current permit process takes a minimum of roughly 25 to 35 staff hours and 2 to 4 months between receipt of an application and final approval. Incomplete applications or more complex applications take longer.

The District well registration program currently tracks water use for 49 permitted WDS as well as many individual wells. In water year 2003 (October 1, 2002-September 30, 2003), there were 996 registered wells, with 696 active and 257 inactive (and 43 unknown). Ninety-nine percent (99%) of the groundwater production within the District was reported by the water meter method and 95% of registered well owners reported their water production.

Currently, staff closely coordinates with Monterey County Health Department, Division of Environmental Health (MCHD) regarding issuance of new well construction permits by the County. Coordination activities include review of pending County well construction permits located within MPWMD boundaries by District staff, and quarterly meetings to update respective staffs on current regulations and issues of interest. All County permits for wells within the District include a requirement to comply with MPWMD regulations for WDS; many County permits specifically state that an MPWMD WDS permit must be obtained before the County permit is valid.

IMPACT ON RESOURCES: Implementation of Ordinances No. 96 and 105 has significantly increased District staff workload because a full public hearing process is needed for nearly all new well situations. Each week, District staff consistently receives many requests for assistance regarding WDS regulations from property owners, real estate agents and agency staff. Each permit application processed to completion to date has taken roughly 25-35 hours minimum of total staff time, more if complex hydrologic issues are involved. A consultant has assisted District staff on a regular basis since April 2003 in order to ensure that the tight timelines associated with the State Permit Streamlining Act are met. To date, the staff members most affected by the water distribution system regulations are the Water Resources Division Manager (registered hydrogeologist reviews technical data) and Project Manager within the Planning and Engineering Division (permit processing and CEQA review). The fee structure associated with Ordinance No. 106 has helped enable the WDS permit program to be self-funding; staff recommends that the existing fee structure be continued with the refinements noted above.

The impact-based system described above will take more staff time initially to develop new rules, write implementation guidelines, train staff and educate the public. However, once in place, the impact-based system should result in less staff time spent for lower-impact situations.

Staff has delayed revising the Implementation Guidelines until changes to the Rules and Regulations are finalized. A major effort is needed to create procedures manuals for staff as well as worksheets and booklets for applicants, and put all relevant information on the District website. Training of staff in the Water Demand Division will be helpful, as many members of the public first contact the District through that division. Expansion of the District website to include guidelines, application forms and other information will help educate the public.

LIST OF EXHIBITS:

16-A Comment letter from HOPE on Ordinance No. XX

16-B Preliminary information sheet

16-C Proposed impact-based review, with level of permit review

16-D Examples of whether regulation increases, decreases or stays the same

16-E List of pros and cons of impact-based system

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