SLVWD 6.1.23

SLVWD Board Meeting Summary

June 1, 2023

Mark Dolson

Highlights:

General Legal Counsel
Special District Risk Management Authority (SDMRA) 2023 Board Election Ballot
Emergency Contract for Exploratory Repair of Failed Quail Hollow Road Mainline Trench
Biennial Draft Budget Fiscal Years 2023-2025
Next Board meeting is at 6:30 PM on June 21st

Preliminaries

There was no Closed Session prior to the meeting.

Director Fultz participated remotely.

There were no additions or deletions to the agenda.

President Smolley opened the floor for public communications. Jim Mosher, a public member of the Budget and Finance Committee, called attention to California’s recent upgrade of the Low Income Household Water Assistance Program (LIHWAP). LIHWAP now offers up to $15,000 on a one-time basis for qualified ratepayers to have their bills paid. Jim reported that he has been in touch with the program’s administering agency in Watsonville (Central Coast Energy Services), and everything is now set up for District ratepayers to participate. In addition, Mountain Community Resources can help people to fill out the forms and navigate the process (which can be challenging). Jim suggested that it would be helpful for SLVWD to reach out as best it can to specifically make people having trouble paying their bills aware of the program. There was a mailing, but it would be good to have more readily accessible information on the website. It took Jim four clicks to find the relevant page. Director Fultz requested that this item either be agendized for a future Board meeting or assigned to the Budget and Finance Committee. President Smolley agreed to assign it to the Committee.

There was no President’s Report.

New Business

General Legal Counsel

District Manager Rick Rogers introduced this agenda item. He said the District has contracted with Nossaman LLP for General Legal Services since June 28, 2017. On May 26, 2023 the District sent notice discharging Nossaman as General and Special Legal Counsel effective May 31, 2023 due to non-performance. This created an immediate and emergency need to contract with new legal services. The Districts Procurement Policy provides for Noncompetitive Negotiations (sole-source) when the District Manager deems an emergency exists, with ratification by the Board of Directors.

Rick said he had already reached out to White Brenner LLP which specializes in environmental law with over 30 years of experience and has available staff to start immediately in removing the current backlog of projects. Barbara Brenner was in attendance via Zoom, and she provided a brief introductory statement. She said she was one of founding partners of White Brenner when it formed ten years ago with the goal of focusing more locally (she lives in the Sierra foothills but is still involved in projects from Shasta to the Colorado River). Barbara has been working a lot in recent years on Sustainable Groundwater Management. Her firm pitched SLVWD several years ago, and she was happy to have a second opportunity.

Director Mahood asked how Barbara worked with other members of her staff to address tasks as a team. She noted that a district such as SLVWD requires a wide range of expertise, and she asked how Barbara delegated tasks to ensure they were completed on time. Barbara said they have task meetings as well as litigation meetings. They go into the office as well as meeting via Zoom, and they also rely heavily on Slack. Each project has an assigned lead, and paralegals assist with calendaring. She added that representing smaller and medium-sized districts is one of their missions. Her own specialty is environmental and natural resources litigation, but the firm also focuses on land use, construction contracts, and water supply and sewer treatment capital improvement projects. Tasks are assigned with internal and external deadlines.

Director Hill asked how many people were on staff by specialty. Barbara said there were two paralegals, an office manager, a legal secretary, five partners, two counsels, three associates, two law clerks, and a current opening for one full-time attorney. Director Hill asked if these resources were sufficient to meet the District’s needs, and Barbara said this was a good time for the firm to assume new responsibilities as a case had just ended, and the firm was separating from another pretty large client.

Director Ackemann noted that the District has a significant backlog and some urgency attached to this. She asked how quickly White Brenner could get SLVWD current. Barbara said she didn’t yet have sufficient information to provide a timeline. She said she hoped to provide one by the next Board meeting, but would first need a more in-depth conversation with Rick.

Director Fultz had questions both about the agenda item and about some of the specific wording in the proposed contract. He began by asking if it would be fair to say that the Nossaman non-performance referred to the tremendous backlog of agreements and the lack of a path forward to resolving these. President Smolley agreed. He couldn’t provide a specific number, but he said the District had made some progress since the last Board closed session.

Director Fultz also asked about coordinating the transition between the two firms. Rick said there were maybe four or five agreements in backlog, and White Brenner might receive some initial assistance from Nossaman. Director Fultz requested a recurring briefing on these until they are resolved. He said he couldn’t yet conclude that White Brenner will be able to clear these matters quickly, so the Board would need to monitor this closely. Rick said the plan was to meet and provide a monthly report to the Board, eventually transitioning to quarterly.

Director Fultz asked if White Brenner would include Rick and Staff in its Slack discussions. Barbara said this could be done for certain procedures but not on an ongoing basis.

President Smolley asked about the proposed length of time for the contract with White Brenner. Rick said it was a five-year contract that locks in a rate for five years. The District can terminate at any time. He recommended moving ahead with this agreement because he felt that White Brenner’s background was appropriate, and he didn’t want to have to bring another firm up to speed in the near future. President Smolley suggested that it might be more realistic for the Board to receive a projected schedule at the first Board meeting in July if June 15th is too soon.

Director Fultz suggested that five years was excessive, and he recommended three. He also expressed concern about the wording of the termination clause. He recommended additional language to clarify that the contract was explicitly allowing termination for convenience. Barbara was fine with this.

Director Fultz also sought clarification on ownership of White Brenner work products and intellectual property. Barbara said attorneys own their own notes, but all other documents are owned by the client. Director Fultz asked if this would enable the District to continue using a template developed by White Brenner. Barbara said these were owned by the District, and White Brenner encouraged this to simplify review of subsequent contracts.

Director Fultz asked if the contract had been reviewed by the District’s own legal counsel. Rick said it had not. Director Fultz offered an amendment to make the contract term three years with sixty days’ notice for one-year renewal and with language that clarifies the option of termination for convenience. Other Board members were fine with this, and President Smolley introduced a motion to enter into a contract with White Brenner with the amendment as proposed by Director Fultz. Director Fultz seconded this.

There was no public comment. The motion passed 5-0.

Special District Risk Management Authority (SDMRA) 2023 Board Election Ballot

District Secretary Holly Hossack introduced this agenda item. She explained that an SDMRA Board election is held every four years. The SDMRA is a public agency with a membership of over 650 individual public agencies; its mission is to provide excellent risk financing and risk management services through a financially sound pool to California public agencies, delivered in a timely and responsive cost-efficient manner. The Board is being asked to vote for three candidates (out of a total of four).

Director Hill said he supported the three incumbents because they are all employees or directors of small independent districts such as SLVWD whereas the fourth candidate is a city manager in a large county. President Smolley and Director Ackemann agreed.

Director Mahood said she saw value in the fourth candidate because of her involvement with issues of water equity. Conversely, she wasn’t very impressed with the statement submitted by Jesse Claypool. President Smolley and Director Fultz agreed with her.

President Smolley moved that the Board vote for Robert Swan, Acquanetta Warren, and Sandy Seifert-Raffelson. There was no public comment. The motion passed 5-0.

Unfinished Business

Emergency Contract for Exploratory Repair of Failed Quail Hollow Road Mainline Trench

District Engineer Josh Wolff introduced this agenda item, describing it as an unusual request. He explained that District contracted in 2021 and 2022 for construction of a new 12-inch water main beneath a section of Quail Hollow Road. Backfill of the trench and restoration of the paving was accomplished according to the applicable Santa Cruz County standard. Santa Cruz County accepted the paving restoration, and the District accepted the water main construction.

During the unprecedented storms experienced by the District in January of 2023, the asphaltic concrete installed during the 2022 project was observed to sink. In the immediate aftermath of the storms, the District consulted with Santa Cruz County Public Works (DPW) and then executed an emergency contract with Anderson Pacific Engineering Construction, Inc. (APEC) to remove the previously installed steel plates, excavate the previously installed slurry, and restore the roadway in conformance with the standard. This work proved impossible to complete due to the exceedingly high water table and presence of large volumes of water flowing less than 2-feet below grade.

The District again consulted with DPW; the joint decision was made to backfill the excavation with drain rock, re-install steel plates, and return to the area to make a permanent repair after the subgrade had dried out. However, Quail Hollow Road is a heavily travelled commute route, and this has resulted in the installed plates regularly being shifted out of position, despite being welded, pinned, and ramped. Consequently, DPW and District Staff have determined that another attempt should be made to repair the road. APEC has completed several difficult projects for the District on an emergency basis, leading Staff to identify APEC as the preferred contractor for this repair.

The proposed repair will be exploratory in nature. Neither DPW nor District Staff are able to completely identify the extent of the failed subgrade, so the plan must be to excavate a portion of the failed asphaltic concrete and subgrade, make a repair, and move on to the next portion of the failure. DPW and Staff are in agreement that this staged and exploratory methodology will provide the greatest probability of a successful repair. In addition, Staff and DPW have determined that backfill for this repair should not conform to the previous standard, as there is some debate as to the contribution of the slurry wedge to the failure. Instead, backfill will be accomplished using sand/native material (this area is in the Sand Hills habitat), Class II aggregate base, and asphaltic concrete.

Director Fultz said he assumed the District will coordinate closely with the County, but he wondered what would happen if the solution doesn’t match their requirements. Josh said the District has discussed this with the County, and there are some options they can proceed with. If other options are identified, the County will respond quickly.

Director Ackemann asked if the District might have to retrench elsewhere. Josh said it would not. Director Ackemann asked if this will be a continuing problem, and Josh said he did not expect this because the District will no longer be using slurry backfill. He said the final cost was not yet known, which is why the recommended motion had a $250,000 not-to-exceed number. Josh said the District will also be submitting the repair expense to FEMA.

Director Mahood asked if this work was purely exploratory or part of an incremental approach to a solution. Josh said it was both. He said the District needed to determine not just how much of the area has failed but also what the subsurface water conditions and compaction conditions were. Josh said the District would, if necessary, place a well upslope to pull groundwater.

President Smolley asked if any outside expertise would be involved. Josh said the project would involve himself, licensed County civil engineers, and the very experienced foreman. President Smolley also asked whether the material beneath the pipe might be washed out. Josh said this was possible. The District plan is to create a backfill that mimics the surrounding natural conditions as closely as possible. Lastly, President Smolley asked how many days of work $250,000 would translate to. Josh estimated maybe two and a half weeks. The intent is to incorporate the repair into the exploratory process.

Director Ackemann asked if FEMA covers exploratory work. Josh said the District’s message to FEMA will be that it did what was necessary to repair the road.

President Smolley moved to direct the District Manager to enter into the proposed contract, and Director Mahood seconded this. There was no public comment. The motion passed 5-0.

Biennial Draft Budget Fiscal Years 2023-2025

Finance Manager Kendra Reed introduced this agenda item. This was the Board’s second look at the evolving budget which should be finalized in June. Previous versions were discussed by the Board on April 11th and by the Budget and Finance Committee on May 16th. Initially, it was assumed that all Forest Springs/Bracken Brae and CZU homes would be back online and using water again, but this estimate was lowered substantially. Various other detailed adjustments were made to anticipated expenditures and revenues.

Director Mahood thanked Kendra and Rick for revising the budget on a short time frame after feedback. She noted that the trends in reserves and debt coverage made it clear that a rate increase will be necessary. She also noted that cash flow will need to be closely monitored due to the unpredictable timing of FEMA reimbursements.

Director Hill agreed that the revised budget was much improved, and that some further adjustment will be needed depending on the outcome of the pending rate study. Director Ackemann agreed as well.

Director Fultz asked if the District was currently serving Bracken Brae and Forest Springs. Kendra said Forest Springs was currently being served via a master meter, but the budget assumes individual meters based on the expectation that consolidation will be completed by June, 2024. Director Fultz recommended extending waivers of the basic monthly fee for lost homes indefinitely. Kendra noted that the policy was established for three years, and that she and Rick plan to bring the question of whether the policy should be extended to the Budget and Finance Committee in the near future.

Director Fultz asked about the decrease in anticipated spending for document management. Rick said the task of converting the remaining paper records to digital was deleted.

Director Fultz repeated his request that the Fire Recovery Surcharge be listed separately from other revenues. He also asked if all the referenced capital grants had been awarded. Kendra said they had: Bracken Brae/Forest Springs consolidation, AMI meter replacements, fire hardening, and the Fall Creek Fish Ladder.

Director Fultz requested monthly cash flow projections (with associated risks). Kendra said she was planning to provide this. Director Mahood suggested that, in order to make the best use of Kendra’s limited time, these estimates should be limited to the first of the two fiscal years, given the uncertainties in FEMA reimbursements. Director Hill recommended building a reusable spreadsheet model, and Director Fultz requested that there at least be routine cash flow reports to the Board.

Director Fultz commented that, in the absence of the Fire Recovery Surcharge, an immediate raise of 11% would be needed to boost the District’s operating net back up to $3 million (still without addressing unfunded capital projects). He also expressed skepticism about the assumption that operating expenses will be managed to match inflation whereas, he said, percentage increases have exceeded inflation by a factor of two to three.

Director Fultz asked if the capital budget was assuming plastic pipe for replacing the raw water pipeline. Rick said a decision on how to proceed has not been made, and the current number is a placeholder. Director Fultz suggested that this be noted in a footnote.

Director Fultz asked if the District was allowed to use the Fire Recovery Surcharge revenues in calculating its debt ratio. Kendra said she would look into this.

President Smolley asked if the budgeted salaries included currently vacant positions. Kendra said the budget assumed the District is fully staffed. Currently, there are three open positions: Environmental Planner, Field System, Water Treatment.

Rick thanked Kendra and Staff for their hard work on the budget. He said Kendra did a fantastic job.

Consent Agenda

These items are deemed adopted if nobody pulls any of them for further discussion. The revised minutes for the Board’s May 4th meeting were adopted without comment.

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