SLVWD Board Meeting Summary
December 7, 2023
Mark Dolson
Highlights:
Proposed New Rate Structure
Public Outreach for New Rate Structure
Committee Appointments for Members of the Public for 2024
Board Officers for 2024
Cancellation of December 21 Board Meeting
Next Board meeting is at 6:30 PM on January 4, 2024
Preliminaries
All five Directors were present.
There was no Closed Session prior to the meeting.
There was one initial public comment. This being December 7th, Eric Martin of Boulder Creek requested a minute of silence for those whose lives were lost at Pearl Harbor.
President Smolley said he wanted to welcome new Interim General Manager Brian Frus who was attending his first Board meeting. President Smolley also noted the presence of five members of the public along with 15 remote attendees; based on this, he announced that public comments would be limited to a duration of two minutes.
Unfinished Business
Proposed New Rate Structure
Interim General Manager Brian Frus introduced this agenda item. Rather than recapitulate the material in the Board packet, Brian simply said that Staff was recommending that the Board approve the new rate structure and direct the District to mail notifications of a public hearing to be held February 15th. The new rates take effect March 1st.
Brian noted provided new information on rates to be charged on water deliveries via interties. To fully appreciate his comments, though, some additional background is needed: at present there are interties with Scotts Valley Water District, Mt. Hermon Association, and Big Basin Water Company. By State regulation, SLVWD can transfer water through the interties only in emergency situations. Mt. Herman Association has never received water through the intertie. Scotts Valley Water District has received water on rare occasions when they had a shortage of water due to one of their wells malfunctioning and needing repair. Water is currently being provided to Big Basin Water Company due to the damage they sustained in the CZU Fire and due to continued degradation of the system due to inadequate maintenance. There are no formal agreements with these entities; they have been charged the “retail” rate of $12.66 per CCF. These charges are not part of the Proposition 218 process, but the proposed rate, similar to that proposed for apartment buildings and mobile home parks, is provided for informational purposes.
Brian explained that the Proposition 218 process applies to rates paid by customers occupying parcels within the District’s service area. The interties serve entities with customers outside the District’s service area. District Counsel Barbara Brenner added that although not subject to Proposition 218, rates charged to intertie customers are still required to conform to actual costs per Proposition 26; this is what determined the proposed rates General Manager Brian Frus presented.
[Brian presented these as proposed rates in the absence of an agreement with the intertie entities. This is to highlight that they are likely to be the rates for a short period of time, pending other developments. Scotts Valley Water District (SVWD) and the City of Santa Water Department (CoSCWD) are currently constructing a 12” intertie between them with the goal of CoSCWD sending treated water to SVWD when they have excess winter flows, thereby resting SVWD wells, and SVWD wells providing a drought reserve for CoSCWD. They are currently undertaking a rate study to determine what to charge for this water. It is possible that CoSCWD water could be transferred from SVWD to SLVWD via the intertie and used in lieu of SLVWD well water in the southern (Scotts Valley/Pasatiempo) part of the system. Or water might be sent to SLVWD in lieu of the District’s 315 Acre Feet per Year allocation of raw water from Loch Lomond. In other words, there will be some serious negotiations concerning charges for water provided via interties. SMGWA is likely to be involved because any water leaving the Santa Margarita groundwater basin is subject to this agency’s scrutiny. Moreover, transfers via interties on a non-emergency basis are not currently allowed. CoSCWD is far along in the process of requesting a revision to their water rights from the California Division of Water Resources to allow them to send water out of their service area. SLVWD intends to do that in the future, but for now is in the early stages of requesting a revision to its water rights so that Fall Creek water can be transferred to other parts of the system—the current transfers are only being allowed on an emergency basis due to the damage from the CZU Fire.]
Director Mahood said she wanted to address some of the examples of purported typical usage scenarios in the Board packet presentation. She observed that, for most people in the valley, the cost for average usage isn’t all that informative, especially in a tiered-rate system. In the winter, most people will have low usage. In the summer, people with gardens, pools, or large properties will mostly be in Tier 3. Using herself as an example, she said the vast majority of her summer use will be in the third tier, so her bill will increase by $100-150 per month. The steeply tiered rates cause most of the burden to fall on the heaviest users, particularly in the summer. This is why Director Fultz and Jim Mosher have both advocated for providing the public with realistic usage scenarios. Otherwise, people will fixate on the relatively large percentage increase for low usage and the small percentage increase for moderate use. It’s true that 7 CCF summer users will see only a 1% increase, but this obscures the fact that there is still a 10% overall revenue increase, and heavy water consumers are shouldering much of this burden. The bump of $5-10/month for low usage customers is a result of the District wanting to increase the fixed component of its revenue. Director Mahood also advised that only showing consumption up to 16 CCF misses the heaviest use. The chart needs to go up to 40 or 50 CCF to capture summer usage.
Director Hill agreed. He said the District tried to put the bulk of the burden on the big users, and this is exactly what it did. He suggested that the outreach materials might illustrate the effect of the new rate structure month by month.
Director Fultz said he personally expected to see reductions in usage from heavy users due to the increased rates. Not all such users will move to conserve, but this will reduce the District’s estimated revenue. He suggested that it would have been nice if Raftellis had performed a sensitivity analysis for this.
Director Ackemann added that it would also be helpful to show the effect of the new rate structure for subsequent years beyond the first.
Brian said Staff would act on some of these recommendations.
President Smolley asked why there was an almost $2 difference between the $12.03 industrial volumetric rate, which applies to the school district, and the $10.17 rate for intertie sales. Brian explained that these figures were based on the peaking factor which measures variability in demand. Infrastructure must be built to accommodate the peak demand, and the school (and industry) has a higher peaking factor than interties, which largely serve residential customers. Director Hilll added that intertie customers are not guaranteed to have their needs met – they must accept the capacity the District provides. Director Fultz complained that he hadn’t seen any quantitative information to justify the peaking factors used by Raftelis in their analysis.
[Director Smolley’s question inadvertently set up an unfortunate false comparison between the schools and exporting water to neighboring water entities. The District does not “sell” water to outside entities as a matter of course. It can transfer water via the interties only in emergency situations, and, as a result, the amounts are limited. Unfortunately, there was no clarification during the meeting of this important point. This made it seem as if the District was proposing to treat outside users better than the schools, and a few members of the public subsequently reacted to this in their comments.]
President Smolley opened the floor for public input.
Jim Bahm of Ben Lomond said some people would want more information, and some would want less. He supported Director Mahood’s recommendation to provide more detail about usage scenarios.
Bruce Holloway of Boulder Creek said his personal calculations suggested that every tier in the tiered rate system was priced below actual cost. He also criticized the basic rate, likening it to a regressive tax. Lastly, he argued that the school district should receive more favorable pricing than intertie customers. [Note: Constraints on intertie pricing were discussed earlier in the meeting. Mr. Holloway’s cost calculation apparently failed to include the fixed portion of the bill, designed to recoup 45% of the District’s costs.]
Mark Lee said the proposed increase should be rejected by the Board pending development of a more affordable and equitable rate structure. He claimed that there was no defined plan as to where the money will go, and that the new rate structure would result in excessive and outrageous inequity. He argued that homeowners are already paying the highest rates in the County, and he said the community should be aware that the rate increase percentages are deceptive. He concluded by saying that retirees will be forced out of the County, and that the increase will be voted down by the public.
Eric Burke of Felton said he wanted to tell the Board how the rate increase would affect him personally as someone living on a fixed income. Since he moved to Felton six years ago, his PG&E bill increased $100, his water bill increased, his taxes increased, and the price of gasoline increased. He said he didn’t irrigate and couldn’t afford to. He said people like him will be forced to sell and move, and he pleaded with the Board to take such people into account.
An unidentified speaker voiced similar complaints. He said he was retired and living on $2000 per month, so any increase was insane for him. He suggested that people who opposed the increase should be able to opt out, and he argued that the District should find the money it needs elsewhere, maybe by selling some of its property or maybe by improving its insurance coverage against infrastructure damage. [Note: Insurance for damage to infrastructure is not available; the District does have liability insurance.]
Eric Martin of Boulder Creek said he thought it was backward to include the school district in the industrial category because everyone pays for the school district through their taxes. He also argued that water sold via the intertie should be priced as high as possible. [Note: Constraints on intertie pricing were discussed earlier in the meeting.]
Alina Layng of Boulder Creek said her concern regarding the schools is that they don't have money for an increase. [Note: The school district will not experience an increase in the first year.] She expressed a similar concern for the parks, and she objected to intertie water being sold at a lower price. [Note: Constraints on intertie pricing were discussed earlier in the meeting.] She advocated for more District support for rainwater collection to enable homeowners to grow their own food. Overall, she said, she approved the rate increase, but she urged the Board to think about those who can’t afford it.
An unidentified online participant said he understood that rates probably have to increase, but he had mixed feelings. He was confused by the new “capital charge.” Brian explained that this was not a new charge, but rather an explicit identification of that portion of the revenue that would be devoted to paying interest on loans that the District obtained to finance capital expenditures. The participant said he still didn’t understand. Director Mahood elaborated, saying that this was part of the current rate, but the District was trying to be more transparent. This change also allows the District to commit that this amount is devoted solely to repaying the loan for infrastructure. She agreed with Director Fultz’s that it could have been named more clearly.
Mark Strudley of Boulder Creek said he was happy to pay his fair share to help the District. He thought outreach should describe efforts the District has taken to reduce the ratepayer burden (e.g., obtaining grants). This would make it clearer that this is the rate increase that remained necessary after the District has done all of its due diligence.
April Zilber of Felton said she appreciated the points made about needing to see different scenarios during the year. She asked if someone could design a calculator so that people can figure this out for themselves. She also suggested that this should cover all five years. She said she was happy to pay her share, but she thought a lot of people had reasonable concerns, so anything that could be done to alleviate these would be great.
Lorraine Palmer of Boulder Creek requested detailed figures for annual production and corresponding costs. President Smolley advised that much of this information had already been provided in previous presentations on the rate study, and Brian suggested that she could call the District office.
President Smolley moved to approve the new rate structure, and Director Mahood seconded.
Director Fultz offered a lengthy recapitulation of the various arguments that he had advanced in previous Board meetings. He said he viewed the rate increase proposal not only through the lens of what the District needs to fund itself but also through the lens of the District’s performance relative to inflation. He said the price for four units had already increased by 140% over the past ten years, and he had no idea what benefits the community had received in return. Since two thirds of incremental revenue over this time period had gone to operating expenses rather than infrastructure, and since he didn’t feel that the District had followed his recommendation to decrease operating expenses, he wasn’t inclined to give the District more money. He argued that two thirds of the money should be committed to infrastructure, he objected to the Board’s refusal to commit to a fixed five-year budget, and he said there was no reason to believe in the current revenue model. In addition, he objected to the way that Raftelis had conflated borrowed money with reserves, to the lack of detailed Raftelis information in support of tiered rates, and to the District’s inclusion of the Fire Surcharge in its examples of percentage increases in rates. He argued that one public meeting in January was insufficient, and that the District shouldn’t settle for simply doing what every other district does. Lastly, he advised that the District should never again say that saving water will save customers money, because rates will go up anyway. He said it was virtually impossible for 51% of the community to vote against the increase, so the community should expect the same results as in the past: continued skyrocketing operating expenses, inadequate tank maintenance, and an effective operating margin that is about half what the District needs.
Director Ackemann took exception to portions of this statement. She said this was all just Director Fultz’s opinion and that he often stated his opinion as fact, but this didn’t make it true. The reality is that it is burdensome to live here. One of the reasons SLVWD rates are higher is because of the very high costs to deliver water in this mountainous terrain. These costs aren’t under SLVWD’s control and must be reflected in its rates. The District must also honor its union contracts. She asked how SLVWD could continue to do business if the Board didn’t reflect the fact that costs are increasing. She added that it would be really helpful for Staff to talk about all the capital projects that are underway and all the pending projects, along with the associated costs. Lastly, she observed that fire and storm damage necessarily take priority over other maintenance, given the District’s relatively lean 35-person staff.
Director Hill clarified that Director Fultz’s comments about “the Board” primarily referred to previous Boards that included none of the current Directors, other than Director Fultz. He also complained that Director Fultz hadn’t provided any specific examples of overspending or any alternative cost-saving proposals, and he requested that Director Fultz “either put up or shut up.”
Director Fultz said he wasn’t responsible for running the District, and the Board had criticized him pretty severely for his efforts to delve deeper into operations.
Director Mahood said she thought Director Ackemann’s statement was clear, and she also understood where Director Hill was coming from because it was frustrating to hear Director Fultz say the same things over and over. However, she thought it would be inadvisable for her to say more.
The motion passed 4-1, with Director Fultz opposed.
Public Outreach for Proposed New Rate Structure
Environmental Program Manager Carly Blanchard introduced this agenda item. She said the District was working on outreach with the PR firm Miller Maxfield. An FAQ has been developed which will be posted on the website December 8th. There is also a schedule which includes a public event in January.
Director Ackemann, Chair of the Administration Committee, thanked Staff for their work on this. She said the public workshop was really important to enable the community to have their questions answered (e.g., What will people pay? How will the money be used?).
Director Mahood asked what Staff was seeking from the Board this evening. She said she had a lot of comments on the material developed so far, some editorial and some more philosophical. For example, she questioned the wisdom of talking about Big Basin Water Company or an increased Ratepayer Assistance Program discount in the Proposition 218 mailer, though she said it might be appropriate to have questions about them in a FAQ on the District website.
Brian said Board members were welcome to share comments with Carly and him. He said he wanted this work to be carried forward by the Administration Committee and Staff.
Director Fultz applauded the January public meeting but said he thought it should present arguments both for and against the new rate structure, and he feared that the District would only provide information in favor. He also argued that the legally mandated 45-day public review period was too short. In addition, he had concerns about what the District’s mailer would look like in terms of production values, as he thought people would immediately discard anything that appeared to be junk mail. Lastly, he was concerned that the District might be burying the lede on the rate study website, because people have to wade through too many documents.
President Smolley said he had some comments on the text that he would share privately. He recommended that Staff confirm every number in the rate schedule on page 37.
Carly requested Board comments by Tuesday December 12th.
President Smolley moved to accept the memo on public outreach and direct Staff and the Administration Committee to complete the remaining tasks. After this was seconded, he called for public comment.
Jim Bahn of Ben Lomond recommended that Staff try to put on marketing hats, not to sell the new rate structure but to provide crisp communication that is easy to navigate.
Eric Martin of Boulder Creek said the outreach was all a sales pitch. He asked why the District spent almost $18,000 on outreach if ratepayers effectively don't have any say. Director Ackemann clarified that $18,000 referred to the total amount paid to Miller Maxfield for their work and for printing and mailing. The alternative would be not to inform the public at all, so this is just a cost of doing business.
Alina Layng of Boulder Creek suggested the possibility of providing an individualized summary pie chart (similar to that provided by PG&E) in lieu of a calculator app. She said that increased Ratepayer Assistance seemed like an empty promise as things currently stand, and she requested that this be stated as official policy.
Stacey Wilbur of Boulder Creek asked if the new rate structure for the 56 homes on Bear Creek Road relying upon SLVWD for wastewater would be voted on separately. President Smolley said it would be.
Cynthia Dzendzel of Felton said she supported Alina's suggestion that the improved Ratepayer Assistance Program proposal be voted on sooner rather than later. She said it would be helpful for ratepayers to know that this was in place before the Proposition 218 notice went out.
The motion passed 4-1, with Director Fultz opposed.
New Business
Committee Appointments for Members of the Public for 2024
District Secretary Holly Hossack introduced this agenda item. She said only five applications had been received from members of the public wishing to sit on committees.
Director Mahood said she would welcome all five. She noted that three people listed the Engineering and Environmental Committee as their first choice, but only one each listed the Budget and Finance Committee and the Administration Committee. Furthermore, one of the people who listed Engineering and Environmental as their first choice looked to be well qualified to serve on Budget and Finance. She suggested that an additional public member of Budget and Finance would be welcome if the volunteer was open to this.
Director Hill asked if the solicitation could be extended in the hope of recruiting additional volunteers. President Smolley said the District had faced this kind of limited response in the past. He said the application deadline was clear, and he would not advocate for readvertising.
Director Ackemann expressed surprise that one of the current Administration Committee didn’t reapply. Holly said she contacted all current members, and some replied to her indicating that they did not intend to reapply.
Director Fultz said he looked forward to working with the new members of the Engineering and Environmental Committee.
President Smolley moved to appoint the five volunteers to their first-choice committees. Director Hill seconded.
Alina Layng of Boulder Creek said she was a current Engineering and Environmental Committee member who did not receive an email from Holly. She had been expecting committee appointments to be addressed in the second December meeting, but she said she was fine with stepping away.
The motion passed 5-0.
Election of Board Officers
Brian observed that the Board typically elects a new President and Vice President each December.
President Smolley nominated Director Hill (currently the Vice President) to be President for 2024. Director Mahood seconded.
Director Hill said he would serve with pleasure and attempt to do his best to listen to everyone and to do a fair and even job.
Director Ackemann said she supported the nomination and had valued Director Hill’s contributions to the Administration Committee.
Director Fultz said he had no comment, and there was no public comment.
The motion passed 5-0.
Director Hill immediately assumed his new responsibilities as Board President. He nominated Director Ackemann to serve as Vice President. Director Smolley seconded.
Director Ackemann said she appreciated the nomination and was willing to serve, but she would have a recurring meeting conflict on the third Thursday of each month.
There were no further comments.
The motion passed 5-0.
Cancellation of December 21, 2023 Board of Directors Meeting
Brian recommended that the remaining December Board meeting be cancelled due to lack of business. Director Smolley made a motion to this effect, and Director Mahood seconded.
There were no comments. The motion passed 5-0.
Consent Agenda
These items are deemed adopted if nobody pulls any of them for further discussion.
Director Mahood said she was pulling the Discrimination, Harassment, and Retaliation Prevention Policy both for procedural reasons and to make substantive changes. She said the policy must be adopted annually by resolution, meaning that it cannot be handled via the consent agenda. Also, it needs to be publicly promoted. In addition, she said some of the language was out of date (e.g., the names of relevant individuals and the lack of provision for online training). Lastly, she felt the policy should be revised to indicate that it applies to Directors as well. Given the power imbalance, she saw this as important to spell out. Also, management Staff have to interact with the Board on an ongoing basis, so there is much more of a possibility for a hostile workplace. She said that, as Board President, she dealt with three different instances in which three different Board members were potentially in violation of the policy. It would have helped if the policy had explicitly spelled out its applicability and specified consequences. She said she had made a number of suggested revisions. Also, she said the former District Counsel had commented three years ago at her first meeting as Board President that the Respectful Workplace Policy should be revised to harmonize it with the Prevention Policy and the Board Policy Manual. She hoped the Administration Committee would act on this.
Director Fultz offered a lengthy response. He said he viewed this as a fairly sustained authoritarian assault on Board members’ ability to fulfill their responsibility and on their free speech. He said he was deeply concerned, and he thought there would be substantive legal issues that the Board may not be prepared to deal with. He characterized this as a purely political attack that was in keeping with a prevailing culture in which dissenting opinions are to be squashed and not heard.
Director Smolley asked about the time frame in which any potential revisions to these policy guidelines needed to be addressed. President Hill said he would ask Brian to consult with Staff and District Counsel and to report back with a recommended time frame for the Administration Committee. Director Ackemann said the Administration Committee could look at this in January. Director Mahood noted that the Board Policy Manual recommended that these policies be revised and adopted early in the year, but there was no hard deadline. She suggested that any revisions be provided by Staff and vetted by District Counsel before going to the Administration Committee for further work.
There were two public comments. Bruce Holloway said it sounded like this could take many months. He suggested that the trivial changes should be made immediately.
Alina Layng of Boulder Creek said she really appreciated Director Mahood’s attention to this. She recommended that Committee members should be protected as well. She said she had experienced Director Fultz yelling at her as a committee member.
Director Fultz said the Board was allowing a lot of personal attacks against him that, by policy, should not be allowed. He said exceptions were being made to allow attacks directed specifically at him.
District Reports
Finance
One member of the public had a comment. Bruce Holloway said the Finance report showed that more $5 million of the 2019 loan and more than $10 million of 2021 loan is currently still unspent. This meant that the District had borrowed $30 million, spent less than $15 million, and had already paid back $5 million. He suggested that the Budget and Finance Committee should take a look at this. President Hill said he would bring this up with the committee.
[It has been explained at two previous Board meetings that COVID restrictions and related supply chain problems had delayed construction projects, but that much of the remaining loan funds will be spent in the next year on projects now underway.]
The meeting adjourned at 8:50 PM.