SLVWD Board Meeting Summary
May 2, 2024
Mark Dolson
Highlights:
Monthly Financial Report
Glen Arbor Bridge Change Orders
Bracken Brae and Forest Springs Consolidation Scope
Update on Current District Reports
Farewell Statement from Resigning Director Mahood
Next Board meeting is at 6:30 PM on June 6, 2024
Preliminaries
All five Directors were present, with Director Ackemann participating remotely.
President Hill had one item to report from the just-concluded Closed Session. He said the Board voted 5-0 to offer to extend the Interim District Manager’s contract for two months in order to allow for further negotiations regarding the permanent position.
There was one addition to the agenda, as this was the final Board meeting for retiring District Secretary Holly Hossack. President Hill read a Proclamation of Appreciation for Holly for her exemplary service over the past ten years. Directors Smolley and Mahood thanked Holly, with Director Mahood saying that Holly had saved her from many serious mistakes when she was a new Board president. Directors Ackemann and Fultz wished Holly well.
There was one public comment. Jim Mosher from Felton said Holly had been really great with ratepayers and with him personally. He thanked her for all of her service to the Board, the District, and ratepayers.
There was one public comment on non-agendized items: Rick Moran of Ben Lomond called attention to the pending plan for SLVWD to supply water to the new Valley Gardens development to be constructed on the site of the former Scotts Valley Golf Course. He said that, contrary to what had been suggested, this would actually create a significant new demand for the District’s water (because the Golf Course irrigation water had been drawn directly from a private well). This concerned him because the SLVWD water supply has been depleted by fire damage to raw water supply pipelines and remains at risk due to climate change. He suggested that the developers make a meaningful financial investment to expedite the pipeline replacement as a condition for Board approval, and he recommended that two separate Board meetings be held to discuss this, with adequate notice to the public as well.
Unfinished Business
None.
New Business
Monthly Financial Report
Acting Finance Director Heather Ippoliti introduced this agenda item. She said she had heard some concerns that insufficient information was being provided via the Quarterly Report, so she planned to provide monthly reports as part of the Consent Agenda.
Director Fultz asked if the Quarterly Report will have information similar to what the Board has been receiving on a monthly basis, and Heather said it would. Director Smolley asked where he could see the status of the District’s reserves. Heather said this was not provided, per the reserve policy, but she did report working capital (current assets minus current liabilities), which is effectively the working reserves. Upon closer examination, she realized that she needed to make a change, and she said she would add the working balance to the monthly report. Director Fultz asked if this included both loan proceeds and free cash. Heather said it was broken out between restricted and unrestricted. After some further discussion, Heather agreed that she could make the presentation a little simpler to review.
There was no public comment.
Glen Arbor Bridge Change Orders
District Engineer Garrett Roffe introduced this agenda item. The Glen Arbor bridge was constructed in 1967. In 2017, an embedded 6” pipeline began to leak. In January of 2020, the District awarded a design bid. In January of 2022, the District awarded a construction bid to Monterey Peninsula Engineering for a replacement pipeline. This project replaced the leaking 6-inch water main with a new main suspended alongside the bridge structure. This was done both to reduce costs and to simplify permitting through Santa Cruz County and Caltrans.
In October of 2022 the District received seven change orders. In November of 2023 the District was notified that the project was complete, but payment was pending for construction and change orders. The District negotiated with the contractor to remove three change orders totaling roughly $39,000. Staff now recommends that twelve of the change orders be granted totaling an additional $123,158. To fund these change orders, Staff recommends using money from the Quail Hollow Sinkhole Repair Project which is complete with unspent funds and will eventually be reimbursed by FEMA.
President Hill commented that he recognized that none of the current Staff were involved in the original planning, but that this was part of a pattern in which a fair number of things weren’t well anticipated in the design work. Garrett agreed that this process should be improved, and Director Fultz suggested an analysis of all recent change orders. Garrett said Staff has a list of engineering problems that are being tracked to avoid recurrences.
Director Fultz noted that for Change Order #12 ($49,442), it might have been worth explaining that this wasn't directly related to the project. Director Smolley echoed the recommendation for a more global review, looking for patterns that engineers might be able to identify. He also asked if Change Order #12 should be paid via a different funding source. He recognized that this was a separate accounting question for future follow-up.
Director Ackemann said she suspected that the District would continue to see this condition because there are many situations in which important information is lacking. Some of this may be due to a loss of institutional knowledge that resided with Rick Rogers. She asked what the District was doing to preserve institutional knowledge. Director Fultz agreed that it was important to address this. Director Mahood commented that the recent change orders all dated back to decisions made prior to the possible loss of institutional knowledge.
There was one public comment. Karen Brown of Boulder Creek said this dilemma had been seen in the past as well. She recommended that drawings be updated for all change orders.
Director Smolley moved to approve Change Orders #1-12, and the motion was seconded. The motion passed 5-0.
Bracken Brae and Forest Springs Consolidation Scope
General Manager Brian Frus introduced this agenda item. SLVWD is looking to consolidate two small water systems owned by Forest Springs Improvement and Maintenance Association (128 connections, population 385), and Bracken Brae Country Club (24 connections, population 54), to provide a safe and reliable water supply to the customers served by these two systems. Both water systems were severely impacted by the 2020 CZU Fire and have requested consolidation. On October 7, 2021, the Board directed the District Manager to begin negotiations with Bracken Brae and Forest Springs immediately regarding consolidation while awaiting the outcome of a grant application. On November 10, 2021, the Board was notified that the State Department of Water Resources (DWR) had approved the grant application and awarded the District $3.2 million for consolidation interties with Bracken Brae and Forest Springs.
On May 5, 2022, the Board authorized the signing and sending of the Bracken Brae and Forest Springs Letters of Intent to Consolidate. On May 5, 2022, the Board authorized the District Manager to enter into a contract with Sandis Civil Engineers for the development of the plans and specifications for the consolidation of Bracken Brae and Forest Springs mutual water companies. In addition, Bracken Brae has been allocated $1.25 million in FEMA funding to make upgrades and repairs to their portion of the system.
The consolidation costs to date total $841,500. These include environmental compliance and permitting, water service agreements, engineering design, and legal fees. Of these costs, $550,000 has been funded by the awarded DWR grant. This leaves $291,500, of which approximately $140,000 will not be eligible for reimbursement and the remaining $151,500 is pending approval. In addition, Bracken Brae will refund the District $65,000 in engineering design fees, reducing District unreimbursed costs to $85,000.
Sandis has provided the initial plans, specifications, and engineer’s construction cost estimate for construction of the entire consolidation project: connecting to the District’s existing system, the new pump station and the new water mainline through each of the mutuals excluding the storage tanks. The engineer’s estimate for this work totals $12.8 million and far exceeds the District’s remaining grant funds and those obtained by Bracken Brae.
To move the project forward and to keep it on time (so as to avoid losing the awarded grant funding), Staff has developed a reduced scope of work with Sandis that comprises a logical subset of the whole both from an operational and engineering standpoint. There is a trunk line (shown on the map as “yellow line”), a second part of the trunk line (shown on the map as a “red line”), and two branches (also in red, one to Forest Springs and one to Bracken Brae). The Staff recommendation is to construct at least the first part of the trunk line (i.e., the yellow line), but even this needs additional funds. The District has $2.5 million and the total cost is $3.9 million ($3 million quote plus 30% soft costs). It's reasonable that some of this cost can be attributed to the District because it will upgrade the current 4” pipeline to a 12” pipeline. There are also hydrants and lateral connections long the way, some of which the grant will not fund. Staff proposes to use District reserves to make up the difference in available funds. Staff does not want to go out to bid without Board support for this plan. It doesn’t make sense to build only a smaller section of this pipeline.
Director Smolley asked a series of questions which established that the District would not have considered initiating this upgrade in the next several years in the absence of the planned consolidation, and that this plan risked drawing down the District’s reserves unless loan funds can be tapped (and most loan funds are restricted). He also asked If the District could proceed with consolidating if it did nothing or if it completed only Phase 1. Brian said no to both, but proceeding with Phase 1 would make consolidation more viable. The District is obligated to spend the grant money that it has received. Not doing so would result in a bad report card. The District has made efforts to consolidate, and this would be a win-win scenario because the District would benefit from the grant money and also benefit from the District’s own spending. The big surprise was the $12 million cost for what was originally estimated to be $3 million. It doesn’t make sense operationally to do this differently. Brian is trying to get things moving because this is very time critical.
Director Fultz said he was in favor of consolidation if the District can make it work so existing customers do not pay. He said he followed Brian’s logic, and he never believed the $3.2 million estimate. The ensuing discussion established that the District would upgrade to 8” pipe in the absence of the consolidation, and that the increased cost of upgrading to 12” was not yet known. Brian was hesitant to solicit dual bids, and he didn’t think the difference in pipe size would be substantial. When pressed, he seemed to suggest that an 8” pipeline might cost 75% of what a 12” pipeline would cost, but he never fully confirmed this. Director Fultz drew a distinction between accelerating the pipeline upgrade (which would deliver a benefit to current ratepayers) and subsidizing the increase from 8” to 12” (which would not).
Director Fultz said he was reluctant to repurpose existing loan funds. He said the District’s loans have been prescriptive about the projects they are being applied to, so the District would have to review its current commitments and retract some. On the other hand, taking the money out of reserve funds would draw these down too far. He said the District’s $4 million in cash reserves were nearly depleted by the CZU Fire, and he felt that $6 million should be the bare minimum. The alternative would be to get another loan.
Director Fultz said he wasn’t prepared to commit this evening to spending the money. If Brian just wanted approval to get the bids, that would be different. Brian said he didn’t want to risk getting a bid and having the Board refuse to award it. Director Fultz asked about upcoming deadlines, and Environmental Planner Carly Blanchard said the grant deadline was December, 2024, but the District was optimistic about getting an extension. Director Fultz objected to being asked to provide blanket approval this evening or else. Brian reiterated that the District has Letters of Intent with Bracken Brae and Forest Springs, that he thought he was making a reasonable request, and that he wanted to avoid going out to bid and then having the Board refuse to fund it.
Director Mahood said she understood that the District would derive some benefit, but she had two main concerns. First, Brian was essentially asking the Board for an open-ended spending commitment. Estimated expenses have repeatedly proven to be underestimates, and this made her uncomfortable. Second, there was a question as to whether it would make sense to build just part of the new pipeline without any assurance that the rest would be built. Brian said he was optimistic about getting additional grant funding. He cited the recent $1 million in State funding from Representative Panetta (already earmarked for tanks) as an encouraging data point.
Director Smolley asked what the Department of Water Resources (which has said that it doesn’t have additional funds available) would say about the District building only a third of what it originally proposed. Brian said the District would get a green light from DWR before beginning any actual work.
There were public comments from six different individuals from Bracken Brae and one from Forest Springs. Unfortunately, poor audio quality made it very difficult to make out what they were saying.
Nicole Launder Berridge of Bracken Brae spoke at length about the situation between SLVWD and Bracken Brae. She said that recent meetings between the two parties have been insufficient. Director Fultz followed up, saying he thought the Board had already agreed to hold a workshop-style meeting with the entire Board and the consolidation parties. Nicole pointed out that this pipeline will also lay the groundwork for a future Big Basin consolidation.
A resident of Bracken Brae said she supported Brian’s proposal. Bracken Brae is facing deadlines for spending its obligated FEMA funds.
Eva of Forest Springs recounted her history as President of that organization. She said Brian’s proposal wasn’t what everyone originally envisioned, but that Forest Springs supported it as the best next step.
Bo Jenson of Bracken Brae requested that Bracken Brae be included in Phase 1 of the mutual consolidation efforts, and that SLVWD contribute their share.
Matt Dunston of Bracken Brae said he had a lot of ideas in support of the main goal of consolidation, and he thought working meetings would be helpful.
Scott Tucker of Bracken Brae. He said Bracken Brae had maintained its own water system since 1903, and Forest Springs since 1912. The County has looked the other way for years and failed to do anything about crumbling infrastructure. Bracken Brae is putting a full effort into this and is committed to making this go as smoothly as possible.
Another resident of Bracken Brae said he wanted to echo what his wife said.
Director Mahood said she appreciated the tone of all the Bracken Brae comments – she found them all constructive and agreed that everyone needs to work together. She asked if there was any potential for FEMA to pay for some fraction of the consolidation itself, since it was precipitated by the CZU Fire. Brian said he hadn’t asked FEMA this question, but there was a lot that the District was currently juggling to get FEMA money, and he thought this would just complicate and slow things down. Director Mahood clarified that she wasn’t expecting a quick FEMA solution but rather just some eventual additional assistance. Brian said Bracken Brae has FEMA money, but the District already has a shortage of Staff for dealing with FEMA reimbursements. He didn’t want the additional complication.
Director Fultz said he thought he heard Bracken Brae and Forest Springs saying that the DWR money should be spent on the red line, whereas the District should spend its own money on the yellow line (Phase 1). He urged Bracken Brae to spend their money as soon as possible, and he again complained about insufficient coordination and planning. At the same time, he said he couldn’t approve the District expending $3 million on the yellow line. He saw no good outcomes at this point.
Director Smolley said he was hearing a concern about the second portion of the motion (i.e., the funding portion). He moved to approve the solicitation of bids only. Director Mahood seconded. Director Hill supported this so that the District could have some hard numbers. Brian said it was problematic to go out for bid and then refuse to fund the bid. He thought the District was getting a pretty fair deal on the yellow section. He was trying to be strategic.
Director Mahood said she understood Brian’s concern, but she didn’t think the Board would refuse to fund. Rather, it would likely take out a loan to build reserves, rather than drawing them down. In a disaster-prone valley, the District always needs to have cash on hand. She agreed with Director Fultz that the District couldn’t risk running its cash down to zero again. A loan would allow the costs to be amortized over a much longer period of time. This is the motivation for dividing the motion. Brian proposed an amendment to the motion on the table, striking the reference to reserve funds in the original Staff-recommended motion, but nobody pursued this.
Director Fultz said that further discussion was needed re: the Bracken Brae and Forest Springs claim that the remaining $2.5 million was for the red line, not the yellow line. This requires a separate meeting. However, approving the funding this evening would threaten the reserves.
Nicole Launder Berridge of Bracken Brae again spoke at length but was not clearly audible. She encouraged moving forward and thought that additional funds could be eventually be found.
Director Smolley said his concern was that the bigger the dollar amount today, the harder it would be for the District to move forward. He understood that Bracken Brae and Forest Springs would prefer to tackle the whole project.
Director Fultz advised Bracken Brae and Forest Springs to move forward with spending their money and not to wait any longer on the District in terms of getting pipe back into the ground and not losing money.
The motion on the floor was that the Board directs the General Manager to solicit bids for the Forest Springs and Bracken Brae Phase 1 consolidation project. The motion passed 4-0. Director Ackemann was no longer present.
Brian sought to clarify that Director Fultz’s comment advising Bracken Brae and Forest Springs not to wait for the District did not reflect the position of the Board and Staff. Director Fultz took strong exception to this, as he said that all of his comments were always his personal opinion.
Nicole Launder Berridge of Bracken Brae said there was no guarantee that SLVWD would ever get to them.
President Hill said he would schedule a workshop meeting before any further consideration of the second part of the Staff-recommended motion.
Consent Agenda
The Consent Agenda had one item (which could be moved to the regular agenda upon request from a Director):
a. Board Meeting Minutes for April 18, 2024.
President Hill moved to approve the items on the Consent Agenda, and Director Smolley seconded. There was no public comment. The motion passed 4-0.
Update on Current District Reports
Interim General Manager Brian Frus said he had a supplemental report. A Town Hall meeting is being held in Boulder Creek 5/15 with the Big Basin receiver. President Hill and he will attend a prior meeting with the receiver. They understand the sensitivity about the District putting in any funds of its own. They would still like to have a road map. They have nearly a million dollars that they can spend on a feasibility study. He has discussed this with District Counsel. Being able to tell people in person that money is needed to help Big Basin will be valuable as officials need to fund any consolidation. Brian was hoping to be able to tell them that the District was committed to funding a 12” line in the yellow section on the map, and then push them to fund the red line.
Farewell Statement from Resigning Director Mahood
Director Mahood said she has resigned effective May 3rd because she has placed her home on the market and will no longer be able to serve on the Board. She said she wanted to thank Staff, especially Holly, Carly who has been a stalwart, and Garrett who has really grown. She also wanted to thank the other members of the Board, one of the most qualified that SLVWD has had. She hoped other people will jump in to fill the vacancy.
The meeting adjourned at 8:35 PM.