SLVWD Board Meeting Summary

November 2, 2023

Mark Dolson

Highlights:

• Appreciation for Rick Rogers upon his Retirement

• Interim General Manager

• Cross Country Pipeline – Peavine

• 2023 Rate Study

• Next Board meeting is at 6:30 PM on November 16th

Preliminaries

All five Directors were present; Director Fultz participated remotely.

There were no actions to report from the Closed Session prior to the meeting.

There were no additions or deletions to the agenda.

There were no public comments on items not on this evening’s meeting agenda.

New Business

Appreciation for Rick Rogers upon his Retirement

Supervisor Bruce McPherson presented retiring District Manager Rick Rogers with a resolution and thanked him for his long years of service on behalf of the County.  He described Rick as a class act, highly dedicated and loved throughout the San Lorenzo Valley.  He said he didn’t know what SLV would have done without him.

President Smolley presented Rick with a resolution on behalf of the Board.  He said Rick had worked for the District since 1975 and had acquired a wealth of knowledge that was both immeasurable and encyclopedic.   He commended Rick for all of his contributions and especially his work following the 1989 Loma Prieta earthquake, the 2020 CZU Fire, and numerous storms.  He said Rick had been instrumental in keeping water flowing through all of these events and through consolidations with Felton, Lompico, and now Bracken Brae and Forest Springs.  He closed by saying that Rick will be sorely missed.

Director Hill recalled a lunch with Rick that inspired him to become involved with the District.  Director Ackemann described Rick as a tough act to follow.  She said people always felt they could reach out to Rick with whatever issues they were having, and they could know that Rick would be really responsive.  Director Mahood said Rick would be missed by the Board and the members of the SLV community who have a deep and abiding affection for him.  She said Rick had engendered a lot of trust, and she personally thanked Rick for the relationship they had when she was Board president.  Director Fultz said he wished Rick a happy retirement.

Numerous members of the public added their personal appreciations for Rick’s years of service.  Former Director Rick Moran said he was especially grateful for Rick’s significant role in stopping the use of Roundup in the District.  Scotts Valley Water Manager Dave McNair said Rick gave him his start in this business in 1980 and was wonderful to work with.  Together, they dealt with numerous disasters.  He recalled these as very rewarding experiences and some of the highlights of his career.  He described Rick as someone who always had your back and a friend that he could always call on.

Jim Mosher of Felton said he echoed what had already been said, and he thanked Rick for all his dedication and help to the valley.  Larry Ford of Felton said he first met Rick in the early 2000s as a member of FLOW, and he found that Rick always had reliable and practical answers to the group’s questions.  He learned to really trust Rick’s judgment, and he also subsequently enjoyed his discussions with Rick about fire management issues.  Elaine Fresco of Felton said she was honored to work with Rick on the Environmental Committee, and she appreciated his responsiveness to the community.  Alina Layng of Boulder Creek said she too served with Rick on the Environmental Committee, and she echoed what everyone else had said.

Operations Director James Furtado said he started in the trenches with the District 18 years ago, that he learned a lot with Rick’s encouragement, and he just wanted to say thank you.

President Smolley said the Board had a parting gift for Rick.  It was a clock with all fives on it so that it would always be 5:00 for Rick.

Rick thanked the County and Supervisor McPherson and the members of the Board for their kind words.    He said the management team and the employees of the District were what enabled him to accomplish the things that people had talked about.  He recalled that Dave McNair and he worked together in the field for three straight days and nights in 1982.  He talked about the extreme dedication of SLVWD employees, particularly during the CZU Fire.  He acknowledged that valley residents weren’t always happy with what SLVWD was doing, but even some of these people eventually became friends.  He said 48 years had gone by in a blink, but there was still a lot of work to be done, and he welcomed new interim General Manager Brian Frus. 

The motion formalizing the Board’s resolution of appreciation for Rick passed 5-0.

Interim General Manager

President Smolley introduced this agenda item.  He said the Board received resumes for six candidates for Interim General Manager, and they interviewed three of these.   The Board President subsequently began negotiations on an Employment Agreement with Brian Frus.  Brian is a Registered Civil Engineer who resides in Felton and has worked for the City of Salinas as the Manager of the Water, Waste, and Energy division since 2017.

Brian briefly introduced himself, saying that he met Rick in 2004 and did some work for the District at that time.  He said he had lived in Felton for 25 years now, and he appreciated both the strong local community and the District.

President Smolley asked for any Board comments on the employment agreement.  Director Mahood said she welcomed Brian, was thrilled to have him here, and was looking forward to working with him.  She said she had some concerns that had nothing to do with Brian but which were about covering all the bases and contingencies in the attached legal document.  She said she would have liked to have seen some language about this job being based in the office (as opposed to working from home).   She also suggested that leave should be accrued prior to its being granted.  In addition, she wanted to clarify that, while Brian would be paid for the full six months if he were to be dismissed without cause, the contract should make it clear that the District would not pay this if Brian were, for some reason, terminated for cause.  Lastly, she noted that the District has had some bad experiences with indemnification and that the Board Policy Manual has language that identifies limits to indemnification.  She suggested that these limits should be included in the contract.  President Smolley asked if she specifically wanted to amend the current agreement.  Director Mahood said she would prefer to, but she was primarily recommending an improved general practice.

Director Ackemann said she wanted the public to understand the meaning of the interim appointment.  She said the Board still intended to make a final decision in the first few months of 2024 about how to fill the permanent General Manager role.  She said Mr. Frus was a candidate, and the hope was that everything would work out with him.  President Smolley elaborated, saying the search process was continuing, and the executive search firm was still sending the District applicants.

Director Hill said it was his sincere hope that this all works out.  Director Fultz said it was most appropriate at this time simply to welcome Brian aboard.

President Smolley made a motion for the Board to issue the offer for the interim General Manager position to Brian Frus as specified.  Director Hill seconded.

During the public comment, Operations Manager James Furtado questioned the hiring process.  He said the interim position was never posted to the District’s website or to local newspapers.  He asked if this was legal and correct.  The ensuing discussion clarified that there is no obligation to post a temporary/interim position. The permanent General Manager position had been posted, as required, but had not received any applications.

The motion passed 5-0.

Unfinished Business

Cross Country Pipeline -- Peavine

District Manager Rick Rogers introduced this agenda item with the following review:  On September 14, 2023, the Engineering and Environmental Committee directed Staff to prepare a cost estimate to replace the Peavine Pipeline above ground, modeling the replacement on the original Peavine Pipeline which was installed in the late 1980s using helicopters to deliver pipe along the route and relying upon California Conservation Crews for hand labor.  The total cost estimate for the above-ground construction was $2,036,509.05 including a 20% contingency.  A considerable amount of the construction equipment could also be utilized in reconstruction of the Five Mile pipeline, if a decision is made to install it above ground, thereby saving money by not having to mobilize the equipment twice.  FEMA would reimburse 90% of cost to replace the Peavine pipeline to the conditions prior to the CZU Fire.  In contrast, it is not known how much of the cost of installing the pipeline below ground FEMA would agree to reimburse. The Constructability Study Technical Memorandum and Alternative Analysis Report by Freyer & Laureta estimated the cost to construct below ground at between $10.8M and $12.5M, not including tree removal.

On October 18, 2023, the Engineering & Environmental Committee reviewed the cost estimate and discussed replacing the pipeline.  A quorum of the Committee present voted in favor of moving ahead with the replacement starting with hazardous tree removal, trail/bench rebuilding, and environmental review as needed.

The Engineering Committee stopped short of recommending a construction technique, but Rick noted that a construction technique needs to be selected as soon as the tree removal is completed, as formal bidding will be needed for helicopter services and material purchase, and the pipe must be installed shortly after the bench is re-established.  Staff recommended the following motion:

Phase One: The Peavine Supply Line Project begins construction starting with hazardous tree removal, reestablishment of the pipeline trail, and environmental reviews necessary to perform the outlined work.

Phase Two: Continue the discussion in regards to burying the pipe and make a decision in the next couple of months whether to replace the pipe above or below ground.

President Smolley said the Engineering Committee had reviewed the cost estimate which, he noted, it had been seeking for 8-12 months.  However, the Committee did not recommend a construction technique (i.e., above-ground vs. buried).  Director Fultz agreed, saying that there still might be an as-yet-unexplored solution in which hand digging could be employed to insert pipe into the bench to achieve sufficient fire protection without committing to a buried pipeline.

Directors Hill and Ackemann each said they were fine with the proposed motion.  Director Ackemann said she didn’t know enough to comment on Director Fultz’s idea, but her primary question was whether the decision on how to replace the Peavine Pipeline would affect the Five Mile Pipeline replacement decision.  Rick said FEMA might regard an above-ground Peavine Pipeline as a binding precedent for the Five Mile Pipeline.  He stressed, though, that the District would need to move quickly (taking two months maximum to decide) on the remainder of the project once it commits to reestablishing the bench.    Also, he observed that it would be impossible to underground the full length of the pipeline.

Director Mahood said she had a different reaction, as she didn't find the proposed motion very helpful.  She argued that the environmental study could not be undertaken until it was known whether the pipeline would be installed above-ground using hand labor, or below-ground, with the much larger environmental impact of digging equipment and a wider bench. She also felt that the Board already had sufficient information to make this decision.  She said there was no possibility, given the hard granite and metamorphic rocks along the path of the bench, that the District could hand-trench deep enough to protect HDPE pipe from wildfire.  She argued that an above-ground pipeline could be replaced five times for the cost of an underground pipeline, and the environmental damage associated with burying the pipe would likely be unacceptable to the community.  She was also concerned about whether FEMA would agree to pay for the higher costs of a buried pipeline.  She said she would offer an alternative motion directing the General Manager to proceed with above-ground replacement of the Peavine pipeline beginning immediately with tree-removal, trail clearing, and environmental review.

Director Fultz opposed this proposal.  He argued for more investigation into his idea for a hand-digging alternative.  He said protecting the water supply should be the top priority, and he urged the Board not to rush to a decision driven by concerns about minimizing cost and/or construction time.

President Smolley said Director Fultz and he walked a good portion of the Peavine alignment a year ago, and he found hand-digging to be infeasible due to the underlying hard rock.  Director Mahood added that she wasn’t uninterested in fire-hardening.  There might be places where allowing the face of the bench to slough over the pipeline could provide 12” of coverage, and there might be a few places where hand-digging was feasible.  However, if any portion of the pipeline burns, the gasses will migrate throughout unless burning sections are isolated using automatic shut-off valves.

Director Hill observed that the Board needed to decide whether to go forward with the full above-ground plan or with only tree removal.  President Smolley estimated that tree removal could take place in February whereas reestablishing the bench might happen in June.  Director Ackemann said she was inclined to support Director Mahood’s proposal.  She said Staff needed direction to proceed with environmental review, and the Board needed to make a hard decision.

There were two public comments.  Eric Martin of Boulder Creek argued that the critical first question was how the tree removal was going to be accomplished.  Since helicopters would be very expensive, and since trucks would require a substantial roadway, he worried that the downed trees would just serve as fuel for a future fire.  He thought the District would need to pay for routine ongoing clearing.  He rejected the possibility of hand-digging and suggested that the District might need a temporary above-ground solution with ongoing maintenance.

Former Director Rick Moran of Ben Lomond suggested focusing on risk mitigation, for example with isolation valves to minimize the spread of damage.  His understanding was that the cut trees would be left on the ground.  Rick Rogers confirmed that this was the case, the plan being to scatter the trees on the ground far enough removed so as not to add fuel.  He added that there would be isolation valves.   He said isolating the treatment plant saved the system in the CZU Fire, but a massive fire would override isolation valves in the field.  President Smolley suggested that there might be some newer technologies worth including in an above-ground solution.

Director Mahood then made a divided motion. The first part was to direct the interim General Manger to begin replacement of the Peavine Pipeline with an above-ground solution, starting immediately with tree removal. Director Ackemann seconded this.  The motion passed 4-1 with Director Fultz opposed.

The second part of the motion was that the Board directs the General Manager and the Engineering and Environmental Committee to explore ways to make an above-ground solution more resilient, simultaneous with the initial stages of the installation.  Director Hill seconded this.  The motion passed 5-0.

2023 Rate Study

New interim Finance Manager Heather Ippoliti introduced this agenda item.  She reminded the Board that the financial plan was adopted at the October 5th meeting, and alternative rate structure proposals were then developed on this basis.  On October 23rd, six different options were presented to the Budget and Finance Committee.  The Committee unanimously agreed on the option with a 45% fixed cost ratio and three tiers for the volumetric portion of the rates for single-family residential customers.  The Committee also agreed to recommend that, simultaneous to the implementation of a new rate schedule, the District’s low-income Ratepayer Assistance Program (RAP) subsidy should be increased.  There was some subsequent revision based on further input.

Theresa Juretich of Raftelis summarized the proposed rate structure.  She explained that there was both a fixed and a variable (i.e., volumetric, based on the amount of water consumed) component, and there were six customer classes: single family, commercial, industrial, irrigation, hauled water, and private fire service.  Peaking costs can be calculated based on the maximum hourly demand or the maximum daily demand, since this determines size requirements for pipelines, tanks, and pumps.

Higher fixed charges lead to improved revenue stability, but tend to have the largest relative impact on ratepayers who use little water.  To improve affordability for residential customers, the volumetric portion of the rate can be tiered.  Tiered rates are also desirable for promoting conservation.  The current rate structure derives 31% of revenue via a fixed charge and the remainder via a volumetric charge.  The committee recommendation was for increasing the fixed portion to 45% for the sum of a monthly service and a monthly capital charge.  For single-family residential service, three tiers were defined based on the monthly water use (0-4 CCF, 5-8 CCF, and greater than 8 CCF).  In addition, to improve affordability for the lowest-income ratepayers, it was proposed that the Ratepayer Assistance Program subsidy (currently serving 78 households) be increased from the current $10 per month to $15 per month on implementation of the new rate structure, with a further increase to $20 on July 1, 2024.

Heather added that the November 3rd Administration Committee meeting would be discussing the associated public outreach efforts. 

Director Hill suggested that the CZU Fire Surcharge of about $10/month should probably be listed on the slide showing the components of the proposed water bill. 

Director Mahood said everyone will agree that this increase is painful, but the District doesn’t really have any choice in its pursuit of financial stability (i.e., generating sufficient revenue for its essential capital projects and to build reserve funds to appropriate levels).  She said that while assuring greater revenue stability by increasing the fixed portion of the rates, the Committee worked hard to minimize the negative impacts on low- and moderate-use residential customers by steeply tiering the rates, so that most of the impact of the rate increase falls on high-user customers.

Director Ackemann said she supported this plan even though it was painful.  Her concern was with the timing of next steps.  Since this was the first public indication of the proposed new rate structure, she felt that at least one public meeting was needed prior to the Board’s approval.  In order to allow adequate time to raise awareness, she proposed delaying the Board authorization from November 16th to December 7th.  She noted that the Soquel District isn’t having its public hearing until February but is already collecting public feedback.

Director Fultz wanted to know whether the proposed increase in the  low-income RAP subsidy would exceed the current $25,000 budget authorization.  Director Mahood stated that there was proposal to increase that budget authorization at this time as the District was currently spending less than $10,000, so that an increase in the subsidy could be accommodated within the existing budget authorization. but it appeared that perhaps less than a third of eligible customers were participating.

Director Fultz also asked whether there would be any provision for a surcharge in the event of drought (i.e., reduced consumption).  Heather said there was not; the increase of the fixed portion of the rate to 45% will mitigate revenue losses due to greater levels of conservation.

Director Fultz asked about updating the financials for the current fiscal year, assuming the rate increase was adopted.  Heather said she could do this but didn’t expect a large impact on FY2024 because the new rates would be in effect for only four months.

Director Fultz next sought a fuller explanation of the determination of peaking costs, but no detailed explanation was provided. 

Director Fultz also had a concern about what was included in the capital charge portion of the fixed monthly charge.  Theresa said it was intended to cover debt service plus capital expenditures not covered by grants or FEMA.  Director Fultz argued that the District’s capital requirements run $4-5 million each year, whereas the capital charge is only about $800,000, and the current debt payments are about $2 million.  He also asked if the capital charges would increase when the new loan is issued.  Theresa said the charge might not be covering 100% of capital costs each year, but its main function was to cover debt service on loans for capital expenditures.  Director Fultz argued that there was no value to this designation unless the capital charge was actually a dedicated fee that could not be used for operating expenses.

President Smolley said he appreciated the presentation.  He agreed that the new rate structure was difficult and somewhat painful but necessary to keep the District solvent.  He asked how typical the 45% fixed ratio was.  Theresa said it varies between 30% and 50% in other districts.  Director Mahood added that smaller, mountainous districts tend to be on the high side.

President Smolley next turned his attention to Director Ackemann’s concern about outreach.  He said the District had invited numerous groups to a previous meeting in September but had a very low turnout.  Director Ackemann noted that community members only really pay attention when they are confronted with a specific dollar amount increase in their rates, and this evening’s meeting was the first mention of theses amount.  Director Hill added that, in retrospect, he wouldn’t have even have held those earlier sessions on the revenue model and financial plan because the earlier discussions were highly technical and only preparatory for developing the rate structure.

Director Mahood said she saw Director Ackemann’s point, but she was very concerned that every week of delay was costing the District about $20,000 in lost revenue.  Her view was that the goal of outreach was to explain the District’s decision-making in the hope that the public would appreciate its logic.  In the end, though, it was hard to see how public feedback could lead to a different course of action.

Director Ackemann said she appreciated that the Board was unlikely to get public feedback that would materially change its proposal, but, as a public agency, the District still had a responsibility to involve the public.  She felt moving too fast would be missing an essential step.

Director Fultz agreed but complained that the Board still wasn’t doing anything substantive to communicate to the community how it was going to manage the District’s money.

President Smolley moved on to considering Director Ackemann’s proposal to have the Board vote on the proposal December 7th rather than November 16th.   He asked what benefit the two-week delay would provide.  Director Ackemann said she planned to discuss with the Administration Committee having a separate virtual meeting that would inform the decision to proceed.  President Smolley then opened the discussion to members of the public.

Rick Moran said he supported a tiered rate system.  He hoped that Miller Maxfield would follow a format that would present both pros and cons.  Also, he advised holding the public meeting in a large facility like the Felton Community Center.  He said the previous rate increase meeting was well attended at the Senior Center.

Eric Martin of Boulder Creek said the messaging to date had not been pitched at a level appropriate to the average high-school freshman or sophomore.

April Zilber of Felton said she appreciated the presentation but found it dense and hard to follow.  She said it would be really helpful for the community to have something pitched to them.

Mike Smith of Boulder Creek said he appreciated Director Fultz’s efforts to inform the community.

Director Ackemann suggested that, for this evening, the Board should just direct Staff to conduct further outreach.  Director Hill agreed that no vote was needed this evening.  President Smolley said he wanted the Board to vote no later than December 7th.   Director Mahood said the Board could still accept the Staff report this evening.  She agreed that she didn’t want the Board to vote any later than December 7th.

District Secretary Holly Hossack suggested that a virtual meeting might be wiser than a public meeting due to an uptick in Covid cases.  Director Fultz complained that outreach continued to be more ad hoc than methodical, deliberate, structured, and sustained.  He asked if a delay would really accomplish anything.

Director Ackemann said she thought it would be possible to have a virtual public outreach meeting that is more accessible and explains what the Board plans to vote on.  Director Mahood suggested that public attention will ratchet up after ratepayers get the formal notice from the District.  She said this is arguably why education should focus on the period after this notification.  She also sought clarification on the notice itself, asking if there would be one notice or two (i.e., for water and wastewater).  Heather said there would be one (though it is actually two separate votes, as only the Bear Creek Estates wastewater customers vote on the wastewater rates).

President Smolley moved that the Board accept the proposed wastewater rate structure, and that the District conduct further outreach and vote on the proposed water rate structure no later than December 7th.  This motion was seconded.

The motion passed 4-1 with Director Fultz opposed.

Consent Agenda

These items are deemed adopted if nobody pulls any of them for further discussion.

District Reports

There were no Board questions.

The meeting adjourned at 9:30 PM.