SLVWD Board Meeting Summary
December 15, 2022
Mark Dolson
Highlights:
Election of Officers
FY 2021-2022 Financial Report
Public Committee Members
Peer Review of Cross-Country Pipeline Study
Blue Ridge Tank Replacement
Next Board meeting is at 6:30 PM on January 12th.
Preliminaries
There were no actions to report from Closed Session. President Mahood announced that the Board would reconvene in Closed Session at the end of the Open Session but that there would be no actions to report from this.
There were no non-agenda-related public comments. Four members of the public were present.
Director Ackemann announced that she would need to be absent after the first hour of Open Session.
President Mahood delivered her final President’s Report. She confirmed that the Santa Margarita Groundwater Agency had followed through on its submission of a $2.6 million grant proposal (discussed extensively at the Board’s December 1st meeting) to the Department of Water Resources in furtherance of the Agency’s Groundwater Sustainability Plan. The proposal includes about $300,000 for the SLVWD’s Conjunctive Use Plan. Awards will be announced in June 2024. President Mahood thanked Environmental Planner Carly Blanchard for her work on this.
President Mahood said she had been honored to preside over SLVWD Board meetings for the past two years. She thanked District Manager Rick Rogers, Legal Counsel Gina Nicholls, District Secretary Holly Hossack, and the rest of the Staff for their support. She said she had seen an increasing professionalism amongst the Board over these two years, and she felt optimistic about the upcoming term. She noted that there were inevitable disagreements, but these were managed with a sustained level of mutual respect.
New Business
Election of Officers
The SLVWD Board members for 2023 are Jayme Ackemann, Bob Fultz, Jeff Hill, Gail Mahood, and Mark Smolley. President Mahood invited nominations for Board President for 2023.
Director Ackemann said she had really enjoyed being Vice President but that increased professional responsibilities would limit her availability for 2023. She nominated Director Smolley to be President. Director Hill seconded this, and Director Smolley confirmed that he was willing to serve in this role.
There was one public comment. Alina Layng said she had worked with Director Smolley for the past two years on the Engineering and Environmental Committee, and this had been an amazing experience. She said she would like to see him in the role of President.
Director Smolley was confirmed as Board President for 2023 by a vote of 5-0.
As her final presidential responsibility, President Mahood said it had been the Board’s custom in the past four years to allow the incoming President to express a preference for filling the role of Vice President. Director Smolley said he had gotten to know all five Board members over his past eight months on the Board, and he wished to nominate Director Hill based on the similarity of their thinking styles. President Mahood seconded this. There was no public comment.
Director Hill was confirmed as Board Vice President for 2023 by a vote of 5-0.
Fiscal Year 2021-2022 Annual Comprehensive Financial Report
Finance Manager Kendra Reed introduced this agenda item. She explained that Staff, with the assistance of auditors, had prepared an Annual Comprehensive Financial Report in accordance with state law and guidelines established by the Government Finance Officers Association. As in previous years, the District received an “unmodified CLEAN opinion,” meaning the financial statements fairly presented, in all material respects, the financial position of the District as of June 30, 2022. Jonathan Abadesco of the firm Fedak & Brown LLP walked the Board through the major findings of the report:
Net position increased 7.51% or $2,828,846 to $40,475,164. There were three components to this:
Net investment in capital (net of related debt) increased 2.4% or $826,337. There was depreciation expense of $1,838,242 compared to the investment in current year capital of $2,837,366, with ~$1.6M funded by debt.
Restricted net position increased $724,222 to $1,350,297. Restricted is for contractual restricted amounts such as required by debt covenants and assessment districts.
Unrestricted net position increased $1,278,287, leaving a positive balance of $4,426,902.
Operating revenues increased 6.71% or $769,442 to $12.2M, primarily due to increased water sales revenues related to the 2017 rate study.
Operating expenses decreased 10.76% or $1,042,989 to $8.6M, primarily due to decreases of $728,424 in salaries & benefits, $241,103 in professional services, and $55,897 in facilities. The decrease in salaries included non-cash transactions of $179,771 related to the pension and OPEB expenses.
Non-operating revenues decreased $147,230 to $1,581,076. This is attributed to a decrease in operating grant of $183K, offset by an increase in property tax of $48K.
Non-operating expenses increased $90,206 to $1,072,056. This was mainly due to interest expense payments and loss on disposal of capital assets, offset by decreases in change in investment in JPA and bond issuance costs.
Net income before capital contributions increased $1.2M to $2.4M. The decrease to operating expenses was a contributing factor to the increase.
Director Fultz had multiple questions and comments. He first noted that he focused more on operating margins than net positions. Operating margins were not part of the report, but Director Fultz said the District’s operating margin looked to be close $3.6 million (which is greater than the $3 million targeted in 2017 rate increase based on the District’s pending capital improvement expenses). Director Fultz also noted that the District has unfunded liabilities in excess of $10 million if tank replacement is included. Jonathan suggested that a table addressing operating margins could be added to next year’s report.
Director Fultz noted that the District’s liability associated with its defined benefit pension plan decreased significantly, and Jonathan confirmed that was because the stock market did will up until June of 2021. Director Fultz observed that 2022 was a negative year for the market, so the District’s funded status subsequently went from 82% down to 71%. Director Fultz also had a detailed question about a sensitivity analysis in the report looking at changes in the Current Discount Rate re: net pension liability.
Director Fultz commented that between 2021 and 2022, water sales declined substantially (10%). The District is now down from about 2000 acre feet in 2014 to around 1400 acre feet. This is because the SLV community has done a really good job of conserving water. He recommended being attentive to this when looking at volumetric rates in the upcoming rate study.
President Smolley sought to better understand the order of magnitude drop in capital contributions from 2021 to 2022. Jonathan said this was related to the FEMA grant, and Kendra explained that expenses incurred in FY21 that the District intends to submit to FEMA were booked as Revenue Earned with a corresponding offset in Grants Receivable.
President Smolley move that the Board approve the FY21-22 report. Director Fultz seconded this.
President Smolley opened the floor for public comment. Cynthia Dzendzel asked for an explanation of reported water losses in one of the report’s tables. Operations Director James Furtado said the losses were the sum of leaks and required system flushing. Cynthia asked if 27% was unusually high, and James said it was not (at least in view of the District’s aging infrastructure).
Bruce Holloway was concerned about a discrepancy regarding Certificate of Participation rates. He engaged in an extended exchange with Jonathan about this until President Smolley halted the discussion, saying that Bruce had made his point, and Jonathan had adequately responded. Director Mahood said she knew that Bruce had already had extensive conversations with Rick about this, so she didn’t see it as a good use of the Board’s time.
Rick thanked Kendra for diving into her first audit immediately upon her return from leave and for doing a great job.
Director Fultz asked what accounted for the substantial reduction in operating expenses from 2021 to 2022. Kendra said this was due to a decrease in salaries due to vacant positions and a decrease in contract professional fees (as compared to the previous year in which there were more CZU-Fire-related expenses). Jonathan added that a CALPERS pension adjustment decreased operating expenses as well.
The motion to accept the report passed 5-0.
Committee Appointments for Public Applicants for 2023
Rick Rogers reported that eight applications were received for nine openings for public members of the District’s three primary standing Committees. Five of the applicants were reapplying for positions that they currently occupy.
President Smolley briefly reviewed the applications:
Administrative Committee: Amanda DeJesus and Mark Dolson.
Budget and Finance Committee: Monica Martinez, Jim Bahn, and Jim Mosher.
Engineering and Environmental Committee: Alina Layng, Michael Murphy, and Kevin O’Conner.
Mark Dolson and Alina Layng were present and briefly introduced themselves.
Director Mahood said the Staff memo recommends that everyone be appointed to their first choice. She said she thought all applicants were well qualified, and she moved to approve the Staff recommendation. Director Fultz seconded this.
There was one public comment. Mark Lee said he supported this motion as he thought all candidates were excellent.
President Smolley expressed his appreciation to the members of the public who were willing to serve. Director Fultz commented that since 2018, when the Board moved to expand committee membership to multiple public members, there has been a welcome increase in public participation. Director Ackemann added her thanks and especially praised Amanda and Mark.
The motion passed 5-0.
Peer Review of Cross-Country Pipeline Constructability Study
District Engineer Josh Wolff introduced this agenda item. He said the peer review by Haro Kasunich and Associates (HKA) had been received and discussed by the Engineering and Environmental Committee. The goal was to “ground truth” the Freyer & Lauretta (F&L) Constructability Study completed this past spring. The underlying thinking was that more eyes are better and that John Kasunich and Mark Foxx are especially well qualified due to their extensive expertise with respect to the geology of the SLV. The HKA report goes beyond the F&L report, but the committee felt that F&L’s survey was appropriate to the scope that the District initially requested. F&L indicated in their report that the next step would be to learn more about the relevant conditions.
Josh’s memo in the Board packet recommended five next steps:
Prepare an RFQ for required Environmental Impact Report (EIR).
Prepare an RFP for survey of the pipe alignment.
Prepare an Opinion of Probable Cost for Option 1, as defined in the F&L Study.
Review Option 3b with both F&L and HKA to refine required retaining structures and areas infeasible for burial of pipe, then prepare a revised Opinion of Probable Cost.
Present the above developed data and analysis to the Committee and the full Board of Directors for further discussion and/or direction.
President Smolley, Chair of the Engineering and Environment Committee, noted that the committee discussed this for over an hour and agreed to bring it to the Board but did not concur with all of the listed recommendations.
Director Fultz, a member of the Engineering and Environment Committee, said he had come to view this not so much as a formal peer review but more as a peer review with some augmentation. There was more focus on quantitative assessment of the mountain slope. He recommended moving forward as rapidly as possible on replacing the Peavine pipeline while recognizing that the Five-Mile Pipeline (serving Clear Creek and Sweetwater Creek) may take longer. His reasoning was that bringing Peavine Creek back online will be easier and will increase the District’s surface water access from 40% to 60% of its full pre-fire capacity.
Director Fultz added that he hoped F&L viewed the peer review as a constructive addition to their work. He continued to believe that the right thing to do is to bury the pipe as much as possible while avoiding any scenario that would allow Volatile Organic Compounds (VOCs) to be injected into the pipe system.
Director Madhood said she was very glad to read this report with its greater detail and more quantitative efforts, especially drawing slopes to scale. The main thing she didn’t like about the F&L report was that she thought it greatly underestimated the difficulties with maintaining the required benches (for burying the pipe) because the sedimentary rocks were much more prone to landslides. For example, she said the landslide near the Lyon tank was a consequence of the access road construction. Also, the cost of excavating a 12-foot-wide bench would be high. She felt that what F&L was advocating would be very difficult for the District to maintain and would expose it to liability for downhill consequences of landslides. She agreed with Director Fultz that the two studies were somewhat complementary. She came away thinking that although it intuitively seems more sensible to bury pipes, and maybe the District should do this on milder slopes like Peavine, the damage and cost would not justify this in general.
Director Hill said he was impressed by the level of Engineering and Environment Committee discussion, and he agreed with what he had heard so far this evening. The HKA study is far more detailed about the exact locations and the associated problems. He thought the District needed to move forward as the clock is ticking, but he wanted to proceed in discrete steps, and he wanted to get some construction people on site who have relevant practical experience so that the District could get their opinions. He thought the peer review study was a good move that brought the District a much better understanding.
President Smolley agreed that this report was more detailed in a number of areas than the F&L report, particularly with regard to steep slopes and chokepoints, and how to get equipment and pipelines past those areas. Josh’s recommended next steps include getting either contractor or engineering firm input. The one recommended next step that President Smolley did not agree with at the current time was preparing an RFQ for an EIR. He felt that the District still lacked a sufficiently well-defined project.
Director Fultz asked if the District could consider an EIR just for the Peavine pipeline. He said President Smolley and he had walked about half the route, and he was surprised at how much of the bench was still there. Rick Rogers said he would like to have a goal of having Peavine Creek back online this summer by replacing it in kind (i.e., above ground, as it was originally constructed). He didn’t think enough of it could be buried, and he thought burying it would create maintenance issues. He said there were pending meetings to discuss the level of environmental review needed for Peavine (whereas the Five-Mile Pipeline will be a much lengthier process). He said next steps were to come back with a project scope and to consider a public outreach session. He recommended treating this as a high priority. He said Staff was discussing doing this as a District contractor project.
President Smolley said the next step would be for Rick to bring a proposal to the Engineering and Environmental Committee for upcoming expenditures. Director Mahood asked if the District knew whether FEMA would be willing to pay 90% toward burying the pipe. Rick said it will take considerable time for FEMA to provide an answer. They will pay 90% of the original replacement cost and some percentage of the remaining cost difference.
Director Fultz said he wasn’t yet prepared to move forward on an above-ground solution for Peavine. He noted that the District had buried the Foreman pipeline, and he wanted to see a fair analysis of both options for Peavine (and he also wanted to see this communicated to the community). Director Hill agreed that the District needed to consider the community reaction to the above-ground vs. buried question. President Smolley agreed as well that it was premature to commit to putting the pipe above-ground without obtaining an opinion of probable cost for this (i.e., F&L “Option 1”). This is one of the next steps that Josh is recommending.
Director Mahood asked Rick for his opinion about treating the Peavine Pipeline and the Five-Mile pipeline separately. Rick said he didn’t see a difference between the two. He said the H&K proposal reflects a better understanding of the mountain than the F&L study. He felt that the District did not want retaining structures on the mountain. Also, the EIR process for burying will be quite lengthy. Josh added that he didn’t think there were any intermediate options for either pipeline – he said it was all buried or all above-ground for each.
President Smolley proposed that Staff do further work defining next steps and come back to the Committee or the Board with a clear plan. Rick said that all he was asking the Board to do this evening was to accept the H&K report.
President Smolley moved to accept the report and request Staff to come back with a further description of next steps. Director Hill seconded this.
Director Mahood said that all of the proposed next steps in the Staff memo looked reasonable to her except for the proposal to move ahead with the EIR before the District has decided on its approach. Following some further discussion, President Smolley amended his motion to suggest that the Board accept the HKA report and approve Staff moving ahead with four of the steps listed in the memo (i.e., everything except the RFQ for the EIR). He still wanted to see more detailed cost estimates for burying vs. above-ground.
Director Fultz was reluctant because he worried that Staff might stack the deck against burying the pipeline. He felt it was important to get at least 60% of the District’s surface supply protected against future fires.
Three members of the public offered comments. Alina Layng said, at the start of the assessment process, she agreed with Bob about wanting the pipe to be buried, but she said her opinion had since evolved. She felt it was important to restore the surface water supply as rapidly as possible. She also wanted to see strong community outreach. A lot of people may initially favor burying the pipe to protect it, but if the cost differential turns out to be sufficiently large, it might make more sense to leave it above ground.
Mark Lee said he had read the whole report and was quite amazed. He agreed with President Smolley’s motion and didn’t want to jump to any conclusions.
Cynthia Dzendzel said she appreciated Alina’s statement.
Director Fultz still wanted further assurance that District would apply the same diligence to assessing both options. Josh said everything would be looked at thoroughly, in part because Rick Rogers and he didn’t always agree. He said he wrote his memo the way that he did because the District doesn’t yet have a detailed cost estimate for Option 1. He wanted the District to base its opinion on the probable cost of Option 1 (above-ground pipe) and to refine its opinion of probable cost for Option 3b (buried pipe). He assured Director Fultz that the District would be as creative as possible in looking at options for burying the pipe.
Director Fultz asked what percentage of the District is currently being served by surface water. Rick said it was 100% (entirely from Foreman Creek and Fall Creek) as the entire system had been switched to surface water the past week with wells no longer being used. Director Fultz wanted to know how long the District could continue to operate this way (assuming adequate rainfall), and Rick said that it depended on the Emergency Declaration which was allowing the District to use Felton water outside of its official zone (and this will presumably be the case until the pipelines are replaced). In the absence of the Peavine Pipeline, the District can also be forced to shut off its Foreman treatment plant when there is too little water from Foreman Creek.
President Smolley requested a vote on the motion. The motion passed 4-0 (Director Ackemann was absent) with Director Fultz stating that he was trusting Josh to look carefully at possible strategies for burying the pipeline.
Blue Ridge Tank Replacement Initial Study Mitigated Negative Declaration
Environmental Planner Carly Blanchard introduced this agenda item. She explained that the District is seeking to replace an existing 40,000-gallon redwood tank, known as Blue Ridge Tank, with a new tank providing 120,000-gallons of effective storage. The project is in the community of Boulder Creek, south and east of Blue Ridge Drive and north of Short Street. The existing tank is currently undersized and leaking.
The District prepared a draft Initial Study & Mitigated Negative Declaration (IS-MND) to meet requirements of the California Environmental Quality Act (CEQA). The draft was circulated for a 30-day public review period beginning October 14, 2022, and SLVWD received two comment letters.
Director Mahood described this item as pretty straightforward. She requested that an error in the draft version be fixed, and Carly said this had already been done.
Director Fultz asked about the two responses. Carly said one response was from a community member concerned about restoration of roads after installation. Jessica Koteen, the Project Manager for Panorama Environmental, said the other response was from the Department of Water Resources.
President Smolley asked if all figures had been corrected, and if the surveys for butterflies, bees, amphibians, and bats were all handled by a single biologist. Jessica said yes. President Smolley then moved to adopt the IS-MND, and Director Mahood seconded this.
There was one public comment. Mark Lee asked about a conflict with provisions of the Habitat Conservation Plan, and Jessica confirmed that there was no impact.
The motion passed 4-0 (Director Ackemann was absent).
Consent Agenda
These items are deemed adopted if nobody pulls any of them for further discussion. Director Fultz pulled the Minutes for the December 1st Board of Directors meeting. He requested that a sentence be added stating, "Staff stated they were changing the leak adjustment and leak adjustment appeals processes to include owners only and not tenants." Director Mahood seconded this. The motion passed 4-0 (Director Ackemann was absent).
District Manager’s Report
Rick Rogers reported that the District is currently operating completely on surface water. The District received about 6” of rain in recent weeks. President Smolley complimented the Staff member, Jesse Guiver, responsible for the necessary rerouting.
Department Status Reports
Director Fultz had questions about each of the reports. With regard to Engineering, he asked how many attendees were at the Fall Creek Fish Ladder pre-bid meeting. Josh said there were more than five. Director Fultz asked if there was an estimate of the replacement cost for the Lyon Slide. Josh said they were looking at between $9 and $11 million and were waiting to see if FEMA will cover this. Lastly, Director Fultz asked if the Quail Hollow walk-through with the County went well. Josh said it had, and the project was now totally complete. With regard to Environmental, Finance, and Operations, Director Fultz had only minor questions.
President Smolley asked about the status of submitting invoices for engineering work on Bracken Brae and Forest Springs to the Department of Water Resources. Rick said the District can’t submit invoices right now because the District hasn’t yet signed off on the funding agreement with the State, but it will submit before the end of 2022.
There was one public comment. Mark Lee asked about the possibility of getting higher yields on some of the District’s savings accounts. Director Mahood said Mark had spoken to the Budget and Finance Committee about this. Rick said the District was looking into this, and the Budget and Finance Committee would undertake further review in January. The District needs to balance the return opportunities against its cash-flow needs.
Written Communications
Director Fultz noted that the District received a letter from Deb Loewen in which she made a point about median household income in the SLV. 23% of households earn less than $50,000 per year. He cautioned the District to look at more than just median household income when it looks at rate increases. Director Mahood said she had responded to this letter. She said both Director Hill and she agreed that it was important to include demographic information about the valley in the upcoming rate study.
The open session adjourned at 9:05 PM. The Board agreed to reconvene in Closed Session at 9:15 PM, but it did not expect any actions to be taken there, so it saw no need to report back.