M I N U TE S MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Special Meeting 7:30 PM, Wednesday, November 14, 2012 FEW

MEMORIAL HALL OF RECORDS CITY COUNCIL CHAMBER MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL President Della Sala opened the meeting at 7:33 p.m. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF 1. Reports from Technical Advisory Committee Action: Received Reports Director Burnett commented that the TAC met on November 13, 2012, discussed Item 6 on tonights agenda and will reserve comments from the TAC for later in the meeting. 2. Reports from Authority Directors Action: Received Reports Director Burnett reported on a phone call from Rob McClain from Cal Am discussing the agricultural community and indicated that Cal Am is looking at a slant well that has the ability to draw water from both the deep and shallow well aquifer. Vice President Bachofner reported that he and Director Edelen attended a Watermaster meeting and discussed the replenishment rate Cal Am is proposing of the Seaside aquifer. Both Directors are hoping that the ultimate replenishment rate is accomplished in less than 50 years. The Watermaster will consider a revised proposal at the next meeting. Director Edelen reported as Treasurer to the Authority that there was $9,935.35 in the MPRWA checking account. President Della Sala requested a written report on the MPRWA financial status at the next meeting. PUBLIC COMMENTS President Della Sala opened the floor to public comments for items not on the agenda. Nina Beety spoke against the installation of Cal Am water meters and is requesting consideration of physical ailments that may come from associated radiation levels and spoke in opposition to our cultural dependence on oil, fracking and EMF artificial radiation. She urged the Authority to consider long term health effects of our community over water projects. Tom McDonald spoke about specific articles listed in local publications about the bravado of Cal Am and that they would not consider public participation if the Authority continued researching other projects. He also questioned the decrease in Cal Ams estimated costs asking if that was related to the $99 Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None Legal Counsel, Clerk to the Authority

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million contribution made by the ratepayers. Lastly, he questioned Cal Ams legal rights to the water they propose to desalinatate and thinks the matter should have been resolved earlier in the process. With no further requests to speak, President Della Sala closed public comment. APPROVAL OF MINUTES 3. June 28, 2012 Action item: Amended and Approved On a motion by Director Burnett and seconded by Director Edelen and passed by the following vote, the MPRWA voted to approve the minutes of June 28, 2012 as amended with minor corrections of names and grammar. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4. 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

October 22, 2012 Special Meeting Action item: Amended and Approved On a motion by Director Burnett and seconded by Vice President Bachofner and passed by the following vote, the MPRWA voted to approve the minutes of October 22, 2012 as amended. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

5.

October 25, 2012 Special Meeting Action item: Amended and Approved On a motion by Director Pendergrass and seconded by Director Burnett and passed by the following vote, the MPRWA voted to approve the minutes of October 25, 2012 as amended. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Bachofner, Burnett, Edelen, Garcia, Pendergrass, Della Sala None None None None

AGENDA ITEMS 6. Receive and Discuss Draft Consultant Report, TAC Recommendation and Provide Direction to Staff Regarding Policy Position on Desalination Projects to be Communicated to California Public Utilities Commission Action: Received report, Discussed and Provided Direction to Staff Monterey Peninsula Regional Water Authority Special Meeting Minutes - Wednesday, November 14, 2012 2

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President Della Sala introduced the item and identified the order in which the item will be presented and comments received. Alex Wesner, Vice President of Separation Processes Inc. (SPI) delivered a presentation for the Evaluation of Seawater Desalination project study explaning the process used to obtain the results presented in the printed report. Mr. Wesner, SPI President Gerry Filteau and Kris Helm from Kris Helm Consulting were present to answer questions from the Authority and the public. President Della Sala brought the discussion back to the Board. Director Burnett reported from the November 13, 2012 TAC meeting indicating the TAC prepared a summary of significant points for the Authority Board to consider and requested additional time for written public comments to be submitted. He indicated that the TAC recommendations fall into the five basic categories listed below: 1. Identification of significant issues or deal stoppers that must be addressed. No deal stoppers were identified by the TAC, merely clarifications. 2. Clarification of assumptions. The assumption leads to the conclusion, so they want to clarify that they agree with the conclusion. 3. Other improvementsdetailed comments were made in the attached memo. 4. Schedule Final report needs to be received no later than the 3rd week in December, including additional comments from the public and the authority 5. Any additional clarifications or questions the Authority may have in addition to the TAC recommendations. The Water Management District developed a comprehensive memo looking at financing structures which is agendized for discussion at the TAC meeting on November 19, 2012, at 2:00 p.m. Director Edelen questioned how specific calculations were derived, thanked the consultants for the unbiased, non-political review and encouraged the consultants to make a recommendation for a specific project. Mr. Helm responded the scope of work did not include making a recommendation for a project but to provide a comparison in order to assist the Authority in developing a path and recommendation. Mr. Wesner responded to comments from the Board indicating that conclusions were developed from information available through October 15, 2012, and additional information would result in a substantial impact on the agreed timeline and the ability to produce within the contracted budget. Director Pendergrass requested the final document consider energy recovery cost proposals, identify if potential litigation, water rights or outfall issues would be considered fatal flaws and asked if the document could also include brine discharge permits for all three projects. Mr. Wesner responded acknowledging all projects have energy recovery proposed in some form, however an independent energy audit for cheaper energy or ways to lower their energy costs should be done by the projects themselves.

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President Della Sala adjourned the meeting for a 3 minute break, reconvening the meeting at 9:37 p.m. and opened public comment on the item. TAC Member Dave Stoldt spoke to Director Edelens comments indicating preliminary discussions about the report making a recommendation and concluded that it was better have the report give the tools rather than requesting consultants to dictate policy decisions. He Said he also understood the Consultants would not be able to analyze litigation and political risks and fatal flaws would be viewed from the technical standpoint. He also stated that the intention of the report was to be snapshot in time in order to avoid mission creep, and indicated all tables should be clear and meaningful so the public can understand, noting comparison between the public versus the private projects will be difficult to manifest in one table alone. Prunedale resident Ed Mitchell spoke indicating there are major difference in the competitive approaches of the projects specifically identifying that Cal Am has picked the most challenging, riskier and costly strategy compared to the other projects. He listed his perceived flaws with the Cal Am project; EIR referenced was found faulty, Cal Am does not own the land and will have lease/purchase costs and issues, no legal rights to water and that the contingency assumptions should be higher for Cal Am than the other projects. Dale Hawkins questioned the Consultants level of confidence in the schedule implementation and asked if the six Cal Am contingencies identified were taken into account in formulating the estimates. Mr. Wesner responded that the report did not evaluate the contingencies because they came in after the October 15th deadline. Doug Wilhelm expressed three concerns: the report does not include Cal Ams profit margin, all three proposals assumed a similar equipment replenishment rate per year, but slant wells are expected to last for a much shorter time period and should be reflected and finally, he disagreed with taking the 40% contingency standard rate out of the proposal for Cal Am as it was approved by the CPUC and the fact that it cannot be changed. TAC Member Rick Riedl thanked the consultants for their efforts and questioned if the two projects drawing water from the open intakes were required to have additional mitigation measures that will impact costs. He also noted that Cal Am is doing pilot testing for feed water quality and questioned if the other two projects have indicated any plans for pilot testing. He then requested that Cal Ams modification of the PCA outfall be added into the report and asked if that would trigger NEPA. Rudy Fischer spoke in appreciation for the work of the consultants and spoke to the request for a recommendation of a project. He also supported combining multiple features of the three projects as an efficient, cost effective opportunity and expressed support for public governance to give ratepayers a voice. Seaside Resident Jason Camble questioned the contingencies listed in the report, water supply rights and costs. He then thanked the Authority for pursuing multiple projects and expressed support for public governance. Dan Turner spoke in support of Ed Mitchells comments about risks. He commented about Marc Del Pieros comments at a recent meeting to the effect that there is no water unaccounted for in Monterey County. Mr. Turner spoke in opposition to considering Cal Am as a prospective project and questioned the projected profit margins of the three projects.

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Nelson Vega encouraged finding a solution to the water shortage before the 2016 deadline and stressed that our local economies will be negatively affected if it is missed and supported a more costly project if it meant having water so that businesses do not fail. He also expressed that if water is all returned to the basin, the rate at which it is replaced is less important. President of Monterey Chamber of Commerce Jody Hansen expressed concern about the Cal Am project proposal and requested consideration of a large desalination project as future community development projects will be stalled due to lack of water. She indicated that the timing of the project is important for the health of the community, as construction costs are currently low and projects will lag if no prospect of water is in sight. TAC Member John Narigi spoke independent of the TAC and on behalf of the Business Coalition to express general comments from the coalition. Mr. Narigi complimented the consultants on the superb job on the report and recalled that the goal was to evaluate the project independently without political influence. He encouraged the Authority finalize the report not incorporate additional information and honor deadlines. Lastly he said community development is stalling and impacting potential projects due to lack of water and encouraged consideration of a larger sized plant than what is proposed. Ron Cohn read a letter from resident Ron Wiseman expressing three points. First, that State agency actions will prohibit Cal Ams proposed slant wells, second that interest rates applied in the report use 5% when the CPUC authorized 6% percent, increasing to 9% with a weighted cost of capital which should be reflected in the report and third, the Deep Water Desal project should not be considered since the CPUC has eliminated the eligibility of that project. Speaking individually, Mr. Cohn said the Peoples Project, though the report indicates would take the longest it could be done the soonest due to the claim they currently have the right to pump water. He questioned the validity of the pumping rights and asked if it could affect the schedule positively. Lastly he requested the study to provide costs to the rate payers and not production costs. With no more requests to speak, President Della Sala closed public comment on the item, allowed SPI staff to answer the questions asked by the public then brought the discussion back to the Board. President Della Sala then recommended a schedule to provide an additional two weeks for written questions or comments to be submitted to the consultants ending on Wednesday November 28,, 2012. The Consultants agreed to have answers to submitted comments by Friday December 14, 2012. Director Garcia questioned additional charges that would be required with the additional requested work. Mr. Filteau responded if the questions maintained the scope of work, responding and preparing the final report will not incur additional charges and any additional charges would need to be authorized from President Della Sala or TAC Chair Burnett. Director Bachofner requested consideration of expending more dollars if necessary to make sure that specific extra considerations be put into the report. President Della Sala indicated any additional expenditures would need to be authorized by the Authority prior to the December 13, 2012 meeting date and asked if the board would Authorize the President and TAC Chair to authorize additional expenditures. Director Pendergrass did not support additional funds at this time. No motion was made and discussion the item was closed. 7. Response Letter to California Public Utilities Commission Application 12-04-019 Dated November 8, 2012 (Information Only) Action item: No Action Taken. For Information Only

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8.

Presentation from Ratepayers First and Citizens for Public Water Action item: Received Presentation TAC Member George Riley gave a presentation as a ratepayer and community advocate representing ratepayers and not as part of the TAC. He indicated that ratepayers are displeased with Cal Am and the Water Management District and indicated as a general consensus, they are not reliable and that ratepayers feel like victims because things happen to them and not for them. He then indicated that the Authority has taken on a similar reputation because of levels of inaction and the time it takes to make decisions. Mr. Riley discussed the Cal Am Surcharge and indicated that the ratepayers do not want to participate or contribute to the project. Director Burnett spoke as Chair of the TAC expressing that if Mr. Riley has already taken a position on the surcharge that is tentatively on the agenda for the November 19, 2012, TAC meeting it may be a conflict with his participation. Mr. Riley encouraged competition between projects as it will bring down costs and indicated support for the Water Management District to be the lead agency. He proposed asking the Water Management District to take the lead in developing a publicly owned option by using the best found practices or a hybrid of the best ideas. Mr. Riley also requested the Authority support the Pacific Grove Small Water Projects. In conclusion, Mr. Riley discouraged the JPA to default to supporting Cal Ams project. President Della Sala opened public comment on this item. Nelson Vega expressed opposition to supporting the Water Management District to lead a project and said the Authority should be the lead. He also expressed concern that no project currently holds a water purchase agreement and the Authority needs to separate the issues of growth and water. Dan Turner said he does not believe Cal Am has the communitys best interest at heart and spoke in support of public governance over any chosen project. Mr. Turner agreed with Mr. Reilys comments about supporting the Water Management District as a lead agency for a desalination project. ADJOURNMENT With no further requests to speak, President Dell Sala closed public comment. With no further business to come before the board, President Della Sala adjourned the meeting at 11:02 p.m.

ATTEST:

Lesley Milton, Clerk of the Authority

Chuck Della Sala, MPRWA President

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