minutes

Regular Meeting

Governing Board of Sweetwater Authority

May 25, 2005

The Governing Board of Sweetwater Authority held a regular meeting on Wednesday, May 25, 2005, at the Sweetwater Authority Administrative Office, 505 Garrett Avenue, Chula Vista, California. Chair Pocklington called the meeting to order at 3:30 p.m.

· ROLL CALL

Directors Present: Alkire, Beauchamp, Doud, Inzunza, Pocklington, Salas and Welsh.

Directors Absent: None.

Others Present: General Manager Bostad, Operations Manager Rogers, Legal Counsel Cowett, Treasurer Avery, and Board Secretary Farpón. Staff members Hank Gaus, Kevin Kasner, Sue King, Bill Olson, Jim Smyth, and Don Thomson.

· PLEDGE OF ALLEGIANCE TO THE FLAG
Director Welsh conducted the pledge of allegiance to the flag.

· OPPORTUNITY FOR PUBLIC COMMENT (Government Code Section (54954.3)
There were no members of the public present for comment.

· CHAIR ’S PRESENTATION
There was none.

ACTION CALENDAR ITEMS

1. PRESENTATION BY PETER MACLAGGAN, POSEIDON RESOURCES, INC.
Carlsbad Seawater Desalination – Project Update

Mr. Maclaggan thanked the chair and the board to allow him the opportunity to talk about the Environmental Impact Report for the Carlsbad Desalination Plant. He said that he is trying to get around to all the interested stakeholders to make sure that everyone has a current understanding of the status of the project and what it is about. This project has been under development since 1998 and it is intended to produce 56,000 acre-feet per year of water for approximately 300,000 San Diego County residents. It is located at the Encina Power Station in Carlsbad because of the ready source of water supply. The power plant uses a lot of water because the power station is cooled with seawater. There is an intake and outfall and an ability to dilute the saline byproduct from the desalination project to levels that are acceptable to the environment. It takes two gallons of seawater to make one gallon of drinking water. They produce one gallon of very high-quality drinking water and send back to the ocean, via the power plant, the other gallon of water, which now contains twice the salts that they started with. They have an opportunity at this location to produce a new water supply for the region in an environmentally responsible fashion.

He said that Poseidon is currently discussing with CWA and the City of Carlsbad their respective interests on this project. The comment period for the EIR will go through June 29th and they are encouraging comments from all interested stakeholders. Once the comment period closes, there is an obligation on the part of the lead agency, the City of Carlsbad in this instance, to prepare a detailed response to comments in a final EIR and present it to the council most likely in the fall of this year. This would clear a path to secure the remaining state permits and move forward with the project. There are discussions with the CWA going on concurrently and they hope to be at a point by the latter part of this year where they can define specifically what this project is about, how it is going to move forward, and how water will be provided into the system. Mr. MacLaggan showed a video that provided an overview of the project.

Mr. MacLaggan talked about the possible corrosion of the pipes. In the case of delivering to Carlsbad’s local system, their pilot plan has been augmented to include a series of piping systems that represent the plumbing in the city streets and in houses. They have municipal size steel pipe duplicate systems. One is charged with MWD supplies and the other is being charged with the desalinated water from the pilot plan. For six months a team of corrosion experts analyze that water on a weekly basis to see if there is any differential corrosion between the imported water and the desalinated water. Desalinated water is of a higher purity than imported water and, whenever the water chemistry is changed, there are concerns with potential corrosion and its impact. The water is conditioned for rust at the plant but there are no assurances, without doing the tests, that it is adequately conditioned to prevent any additional corrosion.

With regards to the municipal pipes, he said that if additional corrosion is not identified after the six-month test, they will stop the test. If there is a problem, they will readjust the water and start retesting. As for the residential plumbing, they are concerned about compliance with the lead and copper in the household. He explained how they will be testing and monitoring for lead and copper. They will also have a six-month study where corrosion experts will analyze the data and tell them whether or not they will be facing problems, in which case they will readjust the chemistry and retest as necessary.

Director Beauchamp asked about the entrainment issue at the Encina plant. Mr. Maclaggan said that the open intake to the power plant causes the mortality of the vast majority of microscopic organisms of marine life species in embryonic form. The power plant is under independent obligation under Federal Law to conduct studies. There is a new Federal Law that requires mitigating five percent reduction over time of their take, and that process is going forward independent of Poseidon. As far as Poseidon, its obligation in the study for the purposes of the EIR is to determine what percentage of the fish that are pulled into the power plant, the entrainment, survive. The survival rate that they identified was on the order of two and one-half percent. A fifth of that water will go to their plant. The incremental take identified in the EIR marine species is a half of one percent of the fish going into the intake will subsequently survive the ride through the power plant.

Answering a question regarding the issue of CEQA and growth impacts, Mr. MacLaggan said that they took a multi-tiered approach starting at Carlsbad and building outward. Carlsbad has a voter-approved growth management initiative that can only be overturned by the voters and was approved in 1986 that fixes the number of homes that can be built in the City of Carlsbad. They assumed that the water was going to serve other surrounding cities, so they looked at the need for water within the plans that were approved and found that the remainder of the output would be taken up by someone else within the region that already has pre-CEQA approved growth allowance within their community. The EIR for the CWA’s program reached the same conclusion. They contemplated a 50 million gallon per day desalination plant at this location, and there is sufficient documentation for the need for additional water to serve the plan growth that has already been through a CEQA process.

Mr. MacLaggan said that the cost of the desalinated water would be $861 per acre foot plus a delivery charge of about $100 - $120 to be established after the EIR is approved, for a total of about $1,000 an acre-foot. Operations Manager Rogers asked if there would be modifications to the Encina Power Plant, given that it is 50 years old, that would affect the cost of the desalinated water. Mr. Maclaggan said that the elements of the plant are about 50 years old and the two largest generator units are about 30 years old. He said that the plant would ultimately be replaced or retired. The expectation is that it will be replaced with a modern facility.

2. ITEMS TO BE ADDED, WITHDRAWN, OR REORDERED IN THE AGENDA

There were none.

3. APPROVAL OF MINUTES

Director Beauchamp made a motion, seconded by Director Doud, that the Board approve the minutes of May 11, 2005. The motion carried.

4. APPROVAL OF DEMANDS AND WARRANTS

Director Alkire made a motion, seconded by Director Doud, that the Governing Board approve Warrants 100056 through 100236 including all voided checks. The motion carried.

5. FINANCE AND PERSONNEL COMMITTEE (Meeting of May 16, 2005)

A. Review of leak adjustment report for the period January 1 through March 31, 2005. This was an information item and no action was required by the Governing Board.
Directors Doud and Salas questioned some of the bill adjustments. After some discussion on the issue, it was decided that the Policy on Adjustments for Water Bills should be reevaluated by the Finance and Personnel Committee at a future meeting.

B. Director Alkire made a motion, seconded by Director Doud, that the Governing Board approve a high water bill adjustment to Save-A-Lot Ltd., in the amount of $1,320.30. The motion carried.

C. Director Alkire made a motion, seconded by Director Welsh, that the Governing Board approve a high water bill adjustment to Simcal Properties in the amount of $896.76. The motion carried.

D. Director Alkire made a motion, seconded by Director Welsh, that the Governing Board award a sole-source contract to Montgomery Watson Harza in the amount of $35,000 to prepare a Capacity Fee Schedule for Sweetwater Authority. The motion carried.

E. Consideration of refunding bond indebtedness and issuance of a new debt. This was an information item and no action was required by the Governing Board.

F. Overview of Fiscal Year 2005/06 Budget. This was an information item and no action was required by the Governing Board.

6. OPERATIONS COMMITTEE (Meeting of May 18, 2005)

A. Robert A. Perdue Water Treatment Plant – Proposed process to procure membranes. This was an information item and no action was required by the Governing Board.

B. Director Doud made a motion, seconded by Director Alkire, that the Governing Board award a contract in the amount of $2,000 to Sign-a-Rama, 1371 6th Avenue, San Diego, CA 92101 to provide funding in the amount of $3,000 from the Unallocated Reserve Fund to include the cost of the sign and other related costs. The motion carried.

C. Director Doud made a motion, seconded by Director Alkire, that the Governing Board award a sole-source contract in the amount of $13,397 to Dirt Cheap Demolition, Inc., P.O. Box 1186, Bonita, CA 91902. The motion carried.

D. Director Doud made a motion, seconded by Director Alkire, that the Governing Board award a contract in the amount of $16,275 to Underground Solutions, Inc., 2247 San Diego Avenue, Suite 133, San Diego, CA. 92110. The motion carried.

E. Director Doud made a motion, seconded by Director Beauchamp, that the Governing Board direct the Chairman to select a three-person Ad Hoc Committee to work with staff on a “Blueprint for California Water” presentation and to develop a list of groups and individuals to address. Directors Beauchamp, Salas and Welsh were appointed as members of the Ad Hoc Committee, with Director Beauchamp as Chair. The motion carried

F. Discussion of Water Supply Assessments requested by the City of Chula Vista and the San Diego Unified Port District. This was an information item and no action was required by the Governing Board.

G. Director Doud made a motion, seconded by Director Welsh, that the Governing Board approve funding in the amount of $34,000 from the Unallocated Reserve Fund for the required furniture for the office modifications for Director of Environmental and Government Services. The motion carried. .

7. FINANCE AND PERSONNEL COMMITTEE (Meeting of May 19, 2005)

A. Director Alkire made a motion, seconded by Director Beauchamp, that the Governing Board award a contract in the amount of $72,470 to URS Corporation, 1615 Murray Canyon Road, Suite 1000, San Diego, CA 92108, for the design of San Diego Formation Well No. 7. The motion carried.

B. Review of 2005 Fiscal Year 2005-06 Budget. This was an information item and no action was required by the Governing Board.

C. Director Alkire made a motion, seconded by Director Doud, that the Governing Board authorize the updating of the Authority’s Official Statement for the purpose of refunding of existing $24.5 million debt service and the issuance of $6.5 million of new debt; that Sutter Securities be used as the bond underwriter; that Orrick, Herrington & Sutcliffe be used as bond counsel; and with the understanding that the Authority will incur no major issuance costs if the refunding does not take place. The motion carried.

8. COMMUNICATIONS COMMITTEE (Meeting of May 23, 2005)

A. Discussion of Sweetwater Authority’s Internet site and potential upgrades. This was an information item and no action was required by the Governing Board.

B. Discussion and review of 2005 Water Quality Report. This was an information item and no action was required by the Governing Board

C. Discussion and review of yearly community and special event participation. This was an information item and no action was required by the Governing Board.

D. Information items: press releases, other items prepared for public information distribution, update on major projects. No action was required by the Governing Board.

9. NEW BUSINESS

A. ACWA – CALL FOR NOMINATIONS FOR REGION 10 LEADERSHIP – Seeking Candidates for Region Officer and Board Member Positions for 2006-2007 Term. None of the directors expressed an interest in being nominated as candidates for the Region 10 Board. No action was required by the Governing Board.

B. Request from Mesa Consolidated Water District to support Trudy Ohlig-Hall as Region 10 Chair of the Association of California Water Agencies. This item was filed without action.

C. Consideration of scheduling the Board Budget Workshop on June 10, 2005, at 3:00 p.m. The Board was in agreement to hold the Budget Workshop on June 10, 2005, at 3:00 p.m.

D. Consideration of rescheduling the Board Meeting of June 22 due to a conflict with the WESTCAS Summer Conference in San Diego. After a brief discussion, the Board determined that there was no need to reschedule the Board Meeting of June 22, 2005.

10. REPORT OF THE SOUTH BAY IRRIGATION DISTRICT REPRESENTATIVE AND THE CITY OF NATIONAL CITY REPRESENTATIVE TO THE SAN DIEGO COUNTY WATER AUTHORITY

Chair Pocklington briefed the Board on issues that will be discussed at the CWA Board meeting tomorrow. Such items included a construction contract for Pipeline 4 Relining Del Dios Highway to Black Mountain Ranch; an update on Peak Treated Water Demand Management Plan; several bills that CWA is opposing or seeking to amend, such as opposition to AB 672, which allows body contact in the reservoir, amendment to AB 1466, Laird the Tamarisk Plant control, opposition to SB 113 which deals with the California Bay Delta Act, and opposition to AB 771, the Coastal Resources California Coastal Commission, which is supported by environmental agencies that are trying to stop desalination; a contract with Helix Environmental for a 40-month period to provide environmental construction monitoring and support services; and a Regional Seawater Desalination update. He said that the Board would discuss MWD issues and the Quantification Settlement Agreement. They will have an oral report on the status of All American and Coachella Canal lining projects, and an update on the Colorado River Drought Management Program. He noted that there would be a Public Hearing on June 23, 2005, for Two-Year Rates and Charges and continuing the Annual Standby Availability Charge. They will establish a project in the Capital Improvement Program budget for the All American and Coachella Canal lining projects.

11. APPROVAL OF DIRECTORS’ ATTENDANCE AT MEETINGS AND FUTURE AGENDA ITEMS

A. WESTCAS Summer Conference – June 22-24, 2005 at the Hyatt Islandia Hotel, San Diego: Director Doud will attend this pre-approved conference. Director Salas will attend on the 22nd and Director Pocklington will be giving a presentation on the 22nd. No action was required by the Governing Board.

B. Water Education Foundation – 2005 Water Law & Policy Briefing – July 21-22, 2005 at the Hyatt Regency Islandia Hotel, Mission Bay, San Diego. Director Doud will attend this pre-approved event. No action was required by the Governing Board.

12. REPORT OF TREASURER – WANDA AVERY

Ms. Avery reported that the interest rates at the Local Agency Investment Fund are at 2.87 percent.

13. BUDGET REPORT – DIRECTOR OF FINANCE GAUS
Report as of April 30, 2005.

Director of Finance Gaus said that the water sales are $2 million below budget at this time. The Other Income is $285,680 above budget and the Interest Income is $83,635 higher than the budget. Our cash flow at this time is $650,000 above what we expected. As for Capital Projects, we had estimated to spend 71 percent and we have only spent 47 percent.

14. MANAGEMENT REPORT

A. Report of Operations Manager Rogers: Mr. Rogers reported that 33 percent of Sweetwater Authority customers leave their payments in our drop box. On April 29th we started a credit card payment program and he estimates that we can reduce the total number of walk-in and drop-off payments by about 1,100 from the current amount of 65,000 payments received in this office. He reported that beginning on May 9th we had been experiencing taste and odor issues due to algae blooms in the reservoir. Some other water agencies were also experiencing the same problems at Lake Hodges, Lake Miramar, San Vicente, and Lake Skinner. We have dropped copper sulfate in the lake on three different occasions for the last three weeks and it appears that we have finally started killing the algae. Since May 9th until about noon today, we received 442 water quality complaints about taste and odor. Staff tries to respond to the complaints as they come up. The last time we had an incident like this was in 1998 and apparently this is the worst algae bloom that we have had. This is a strain of algae that we have never had before and which produces twice the compounds that are normally found in the ones that we had in the past. We are taking now 75 percent of imported raw water and the problem seems to be under control now.

B. Report of General Manager Bostad: Manager Bostad referred to an article that had been distributed to the members of the Board titled “Huge Tab Seen for State Retire Health Cost.” One estimate puts the figure at $40 billion and there are significant concerns. He wanted to reassure the Board that Sweetwater has planned ahead how to address retiree health cost. He also informed the Board that today he provided a presentation at the CWA City 10 from the City of San Diego on the cost of free water. It was very well received and helped to clarify some of the concerns and issues that the City has.

15. DIRECTORS’ COMMENTS

Director Salas said it is amazing that so many people come to pay their water bill. She thinks there is a benefit to that because we build a one-on-one relationship with our customers and, when we have these smelly blooms, they might be more tolerant.

Director Doud showed a half-page add in the Monday paper from SDG&E saying that they have contracted to buy power from a second new large plant that is being built in the Otay Mesa area of the South Bay and is scheduled to be finished in 2008. He did not know about it.

Director Beauchamp said there is a Federal Senate Bill to take NOAA out of the weather reporting to the public and that Accuweather is trying to get control. It is from a Senator in Pennsylvania, where Accuweather is headquartered, and they are trying to put the Government in the back seat and get the credit and the profit from using the weather data. With regards to the All American Canal Lining, he said that they made a deal with Mexico. The Mexican farmers were using a leakage. They are going to run the canal way to the west and the Mexicans will take out their allocation there. Mexicali is expanding to the west. That is where everything is happening and this fits in the Mexicali/Northern Baja California scenario.

Counsel Cowett commented regarding the Dynegy case. He is hoping to be able to report another settlement by the next Board meeting. Regarding the 1090 issue at the City of San Diego, they have received many questions from people wondering about a 1090 violation. In all of the orientations with directors, he has gone over what 1090 is. He is going to pay particular attention to that and cover it so that everyone is very familiar with what is going on. He will be getting a report to all the districts.

16. CLOSED SESSION
There was no need for one.

17. ADJOURNMENT
With no further business before the Board, Chair Pocklington adjourned the meeting at 5:17 p.m., to the hour of 6:00 p.m. on June 8, 2005.