ITEM:		PUBLIC HEARING
11.	CONSIDER APPLICATION TO Amend California American Water Distribution System to ServE Monterey Bay Shores Ecoresort IN Sand City; California American Water and Security National Guaranty, co-applicants; MPWMD Application #20080915MBS-L4; APN 011-501-014
Meeting Date:			November 17, 2008	Budgeted:	N/A
From:			Darby Fuerst,	Program/	N/A
			General Manager	Line Item No.: N/A
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Approval: Yes
Committee Recommendation: N/A
CEQA Compliance: The MPWMD, as a Responsible Agency, will rely on the EIR for the Monterey Bay Shores Resort (SCH #97091005) previously certified by the City of Sand City in December 1998, and the October 2008 Revised Draft Addendum to the EIR.

SUMMARY: The District Board will consider Application #20080915MBS-L4 (Exhibit 11-A) submitted on September 15, 2008 by co-applicants California American Water (CAW) and Security National Guaranty, Inc. (SNG). As noted below, the original application has been refined over time, and now requests approval to enable CAW service of up to 90 acre-feet per year (AFY) to Assessor’s Parcel Number (APN) 011-501-014, the site of the proposed Monterey Bay Shores Ecoresort (MBSE) in Sand City (Exhibit 11-B). CAW extractions from the Seaside Groundwater Basin could increase by up to 90 AFY based on water rights held by SNG as specified in the Seaside Basin adjudication, and approved by the Seaside Basin Watermaster in a letter dated September 19, 2008 (Exhibit 11-C).

Annexation of the 39.04-acre parcel into the CAW service area was approved by MPWMD in October 2007 as part of the City of Sand City’s 300 AFY desalination project water system. However, MPWMD Ordinance No. 132 adopted on January 24, 2008, restricted CAW water service from desalination entitlements to the subject parcel. Thus, the applicant requests separate MPWMD approval for CAW service. There are no new wells or other major facilities associated with this action. Three wells currently exist on the property: two dedicated monitor wells owned by MPWMD, and used by MPWMD and the Watermaster to collect water level elevation and water quality data; and one active production well owned by SNG with nominal annual use. These wells are not part of this Application. Additional background and information are provided in the “Background” and “Discussion” sections below.

The MPWMD serves as a Responsible Agency in this matter in compliance with the California Environmental Quality Act (CEQA), and relies on environmental documents adopted by the City of Sand City (Lead Agency), as discussed below. All files associated with this application are available for review at the District office. Public notice of this hearing through a variety of means was provided in the manner required by the applicable District rules, as described below.

RECOMMENDATIONS: District staff recommends that the Board take the following actions:

1. Adopt the MPWMD Findings of Approval for Application #20080915MBS-L4 to Amend the CAW WDS (Exhibit 11-D) with specific reference to Findings associated with District compliance with CEQA as a Responsible Agency.

2. Approve Application #20080915MBS-L4; authorize issuance of MPWMD Permit #M08-03-L4 with the 28 Conditions of Approval specified in Exhibit 11-E. The Conditions of Approval include required conditions as specified in MPWMD Rule 22-D as well as special conditions for this project.

3. Direct staff to file a Notice of Determination with the Monterey County Clerk in compliance with CEQA Guidelines Section 15096(i).

BACKGROUND: MPWMD Application #20080915MBS-L4 was submitted on September 15, 2008. The District then received additional communications from the applicant on October 1 and 13, 2008 that further refined the application related to potential water consumption, and provided additional documentation related to Seaside Basin Watermaster and California Public Utilities Commission (CPUC) actions. The District determined that the application was incomplete, as described in the letter from the District to the applicant on October 20, 2008. In a series of e-mails and hard-copy deliveries transmitted the week of October 27, 2008, the applicant provided the remaining information with which District staff could determine the application to be complete and enable a public hearing on the application. In a letter dated October 31, 2008, the District staff determined the application as complete. Key application materials on file at the District office include:

Ø MPWMD Application #20080915MBS-L4 to Amend CAW WDS dated September 15, 2008, with several attachments, including a project brochure;

Ø Correspondence in October 2008 that amends the project description;

Ø Site maps and drawings;

Ø Seaside Groundwater Basin Watermaster letter dated September 19, 2008 regarding SNG Water Distribution Plan;

Ø 1998 Monterey Bay Shores Final EIR, State Clearinghouse (SCH) #97091005;

Ø Revised Draft Addendum to the Environmental Impact Report for the Monterey Bay Shores Resort, October 2008, SCH #97091005;

Ø City of Sand City Notice of Determination filed with the County Clerk on December 2, 1998, with California Department of Fish and Game fee receipt #68608;

Ø Sand City resolutions to approve MBSE: SC 98-85, SC 98-86, SC 98-87, SC 98-88, SC 98-93, and RA 98-07;

Ø M011-501-014PWMD approval of Application #20070829CAW that included annexation of APN 011-501-014;

Ø CAW Advise Letter No. 712 to CPUC regarding annexation of APN 011-501-014.

Project Description

The City of Sand City originally approved the Monterey Bay Shores Resort project on December 1, 1998. At that time, the project water supply was to come from onsite wells. MPWMD denied the Water Distribution System (WDS) application due to the adverse hydrologic effects of these coastal wells. The project was also denied by the California Coastal Commission. Litigation ensued for several years with various outcomes. Since 1998, the MBSE project has undergone changes such that the revised project now includes construction of a smaller, 341-unit mixed use “ecoresort” which has been redesigned to reconstruct the dune ecosystem functionality and biodiversity, and to be a model of “green” construction and operation techniques. The 39.04-acre project site was used for sand mining for 60 years, and is currently in a degraded state. The resort proposal now includes the following uses: (1) a 161-room hotel; (2) 46 visitor-serving condominium units; (3) 88 visitor-serving condominium units; (4) 92 residential condominium units; (5) auxiliary uses to include a restaurant, conference and spa facilities; (6) open space area, public access and parking, and trails. An excerpt from the project brochure is provided as Exhibit 11-F. More specific information on the project is found in Section 3 (page 11) of the October 2008 Revised Draft Addendum to the Environmental Impact Report for the Monterey Bay Shores Resort. This Addendum was provided to all Board members under separate cover and is available to the public for viewing at the District office. The MPWMD Board’s action solely relates to CAW supply to the affected parcel, not the merits of the resort itself.

Water Rights and Supply

Integral to the MBSE water supply is the Seaside Groundwater Basin Adjudication Judgment of March 27, 2006 (Final Decision). This Decision sets the groundwater quantity allowed to be used by SNG on its property (APN 011-501-014). The Decision also stipulates that the Seaside Groundwater Basin shall be administered by a Watermaster. The SNG was granted an Alternative Production Allocation (APA) of 149 AFY under the Decision, which is not reduced over time. In a letter dated September 19, 2008 (Exhibit 11-C), the Watermaster confirmed SNG’s right to produce 149 AFY from the Seaside Groundwater Basin for beneficial use on the SNG property. Importantly, the APA does not constrain the production to occur on the subject parcel through SNG’s onsite wells. Water may be produced from another offsite well owned by another entity and delivered to the SNG parcel so long as the well is within the Seaside Basin.

Though the legal quantity of water that can be used by SNG from the Seaside Basin is 149 AFY, the amount of water requested by SNG for operation of the MBSE is 90 AFY. This is roughly 150% of the 63.81 AFY estimated long-term average water use described in the revised application (Exhibit 11-G). In addition, 12.46 AFY is estimated by the applicant to be needed to establish landscaping vegetation after project site grading and prior to completion of construction. Thus, temporary water use could be an estimated 76.27 AFY. As the plants become established, water use would diminish and the total would return to 63.81 AFY. As expressed by the applicant, the 90 AFY amount is reserved as a means to secure rights that are part of the 149 AFY Alternative Production Allocation. This approach preserves the applicant’s APA rights for the MBSE which are “superior” to certain other pumpers’ rights, and provides a buffer for the MBSE in case projected water use estimates are too low. It is noted that some of the water use estimates are based on innovative new technology that does not have a local track record. The water use estimates have not been confirmed by the District’s Water Demand Division, as this will not occur until the project is approved by the Coastal Commission and Sand City, and final construction drawings are prepared in association with the building permit.

The ability to transfer excess water (149 AFY – 90 AFY = 59 AFY) elsewhere in the Basin has been affirmed by the Watermaster in its letter dated September 19, 2008 (Exhibit 11-C). Specifically, subject to timelines set by the Superior Court, SNG or its successor(s) have the right to convert the remaining 59 AFY of the 149 AFY original allotment to a Standard Production Allocation (SPA) by filing a declaration and serving it to all parties in the Seaside Basin litigation. This 59 AFY, if converted from an APA to SPA, would be subject to reduction calculations as provided in the Decision. Water produced from the Basin under a SPA is not restricted to use on the SNG property. Conversion of the 59 AFY is not the subject of Application 20080915MBS-L4 before the District Board.

DISCUSSION: The Findings of Approval for Application #20080915MBS-L4 (Exhibit 11-D) 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 environmental documents prepared for the City of Sand City, technical studies and reports, technical memoranda and maps, correspondence between MPWMD staff and the applicant, previous approvals by other governmental entities, and action by the Superior Court. MPWMD approval of the application, as conditioned, is not anticipated to result in a further effect to the Seaside or Carmel River Basins beyond what has already been approved and/or is allowed. All things being equal, there could be physically more water drawn from the Seaside Basin in the near-term with the project than without it. However, the Superior Court’s action in the Seaside Basin adjudication compels other users to reduce their cumulative use over time to the natural safe yield of the Basin, and preserves the rights of overlying “Alternative Producers” such as SNG to extract water from the Seaside Basin. Thus, approval of the application is consistent with MPWMD Rule 22-C-4 regarding overdrafts.

The Conditions of Approval (Exhibit 11-E) proposed for Permit #M08-03-L4 are consistent with MPWMD Rule 22-D governing approval of Water Distribution Systems. Conditions #1-4 define the Permitted System, including designation of up to 90 AFY of metered CAW sales to serve the MBSE located on APN 011-501-014, based on SNG’s legal right to 149 AFY of Alternative Production Allocation water. Importantly, for the purpose of MPWMD’s Mandatory Conservation and Standby Rationing Program, Condition #3 adds 90 AFY to CAW’s allowed use from the Seaside Basin. This means the current amount of 3,504 AFY would be increased to a new amount of 3,594 AFY in the near-term. It should be noted that even if the Court or Watermaster reduces water available to CAW below the 3,504 AFY amount, the 90 AFY reserved for the applicant would still be added to CAW’s recognized allotment, based on SNG’s Court-established water right. The CAW system production limit of 11,285 AFY from the Carmel River as currently set by the SWRCB Order 95-10 would not be changed by this action.

Conditions #5-23 reflect standard MPWMD mandatory conditions, including water quality, metering and annual reporting, conservation, required Indemnification Agreement, fee payments, timely notice of pending or actual changes to the system, and other required elements. Other Conditions of Approval (Conditions #24-25) address water rights and the Endangered Species Act; these are not required by District rules, but are included in all MPWMD WDS permits.

Special Condition #26 addresses the requirement that District staff have physical access to the two dedicated monitor wells owned by MPWMD on APN 011-501-014, in addition to the existing production well owned by SNG. The District’s wells must be maintained in good condition throughout construction. Special Condition #27 requires SNG and its successors to provide copies to the District of any report submitted to the Watermaster on water levels in its production well(s) on a monthly basis; the amount of water it has produced on a quarterly basis; and certain water quality test results on an annual basis each Fall. It also requires CAW to provide metered sales information to parcel APN 011-501-014 on an annual (water year) basis, and more frequently, if directed. Special Condition #28 requires Security National Guaranty, and its successors, to give notice to the District and copies of any correspondence with the Watermaster regarding transferring the right to produce water from the Basin under an Alternative Production Allocation right to a Standard Production Allocation right.

MPWMD CEQA Compliance

The District Board action must comply with CEQA as well as MPWMD regulations. In the review of this application, MPWMD has followed those guidelines adopted by the State of California and published in the California Administrative Code, Title 14, Section 15000, et seq. Specifically, the MPWMD, as a Responsible Agency under CEQA for this action, has complied with Guidelines Section 15096. The District Board has relied on previous action by the City of Sand City (City), the Lead Agency under CEQA. On December 1, 1998, the City adopted Resolution SC 98-83 certifying the Final Environmental Impact Report (SCH#97091005) for the approving the MBSE. The City also approved the project via a series of resolutions as summarized in Exhibit 11-H. The City’s Notice of Determination for the FEIR was filed with the County Clerk on December 2, 1998. As described below, the Board also relies on a technical Addendum, prepared in October 2008, which describes the reduced size and scope of the project, particularly its reduced water use due to new water-saving technologies that are now part of the project description.

As required by CEQA Sections 15091, 15092 and 15093, the District Board, through Findings (and cited evidence) #21, 22 and 23 (Exhibit 11-D) has determined that: (a) the project will not have a significant effect on the environment, (b) mitigation measures are not required as part of the District’s action on this WDS permit, and (c) a Statement of Overriding Considerations was not adopted by the District Board for this action. If the application is approved by the Board, the District will file its own Notice of Determination in compliance with Section 15096(i).

An October 2008 Revised Draft Addendum to the Environmental Impact Report for the Monterey Bay Shores Resort (SCH # 97091005) has been provided by the applicant to District staff, Board members, and is also available at the District office for public review. CEQA does not require an Addendum to be circulated for public comment. The Addendum was prepared for the City of Sand City because between the date that an environmental document is completed (in this case, 1998) and the date the project is fully implemented, one or more of the following changes may have occurred: (1) the project may change, be modified or revised; (2) the environmental setting in which the project is located may change, becoming more or less sensitive with respect to specific resources; (3) laws, regulations, or policies may change in way that may impact the environment; and/or (4) new or previously unknown information can arise. Before proceeding with a project, CEQA requires the Lead Agency to evaluate these changes to determine whether or not they affect the conclusions in the environmental document. It is noted that the project size has been reduced, “green” building practices have been incorporated, and the anticipated water demand has been reduced as compared to the project analyzed in 1998.

As stated in the Addendum, its purpose is to reevaluate the environmental impacts of the MBSE in compliance with CEQA Guidelines and based on the modifications made to the project to address concerns raised by the California Coastal Commission staff. CEQA Guidelines Section 15164 states that the lead agency or a responsible agency shall prepare an Addendum to a previously certified EIR if some changes or additions are necessary, but none of the conditions described in CEQA Section 15162 – Subsequent EIRs and Negative Declarations -- have occurred. The Addendum will suffice for purposes of the District as a Responsible Agency, thus fulfilling the requirements of CEQA. Furthermore, CEQA Section 15164(c) states that an addendum need not be circulated for public review. The draft Addendum will be provided to the Coastal Commission to assist staff and the commissioners in evaluating the revised project and its impacts. Although not legally required, the draft Addendum will be available to the public as part of the Coastal Commission review.

Noticing

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 300 feet of the subject parcel; (2) posted notices at the project site; (3) posted notice at the MPWMD office; (4) notice of the public hearing to recipients of District agendas for the November 17, 2008 meeting; (5) standard agenda/hearing notices to local media; and (6) posting of the November 17, 2008 agenda and agenda materials on the District website.

EXHIBITS

11-A Application #20080915MBS-L4 to amend the CAW WDS (without attachments)

11–B Map of Project Location

11–C Seaside Basin Watermaster letter

11–D MPWMD Draft Findings of Approval

11–E MPWMD Draft Conditions of Approval

11–F Excerpt from MBSE brochure

11–G Table of estimated water use submitted by applicant

11-H List of Sand City Resolutions of Approval in 1998

U:\staff\word\boardpacket\2008\2008boardpackets\20081117\PubHrgs\11\item11.doc