SLVWD Board Meeting Summary
June 13, 2024
Mark Dolson
Highlights:
Filling Current Board Vacancy
Tank Replacement Project Agreement for Design
New Board Vacancy
Resolution Regarding the Initiative Petition
Next Board meeting is likely to be at 6:30 PM on July 18, 2024
Preliminaries
There was a power outage which delayed the start of the meeting until 7:00 PM.
All four directors were present.
Unfinished Business
Board Vacancy
President Hill introduced this agenda item. He said four candidates had applied to fill the vacant Board seat created by the resignation of Gail Mahood effective May 3rd. He said each candidate would be given an opportunity to introduce themself and they would then be asked to respond to a fixed set of Board questions. The candidates were called on in alphabetical order by last name.
The first candidate was Karen Brown. She said she had lived in Boulder Creek for 46 years and ran for the Board in 2014. She described herself as very familiar with the District, up to date on relevant documentation, knowledgeable about applicable protocols, attentive to fiduciary responsibilities, and focused on clean water at a fair rate.
Director Ackemann asked Karen about her experience with a family-run water association and whether she had experience with any of the SLVWD Board committees. Karen said her role in the family association was secretarial, and she had recently attended a Budget and Finance Committee meeting.
President Hill asked what subject Karen felt was most important to the Board at this time. Karen said she wanted the Board to resume meeting twice per month in order to address issues and approve or disapprove projects in a timely manner.
Director Fultz asked Karen for her view on a potential merger with Scotts Valley Water District (SVWD). Karen said SLVWD didn’t need to include Scotts Valley any more than it was already doing. SLV water should stay in the SLV.
Director Smolley asked Karen about her knowledge and views regarding the Santa Margarita Groundwater Agency (SMGWA). Karen said it was monitoring water taken from the aquifer by SLVWD and SVWD.
The second candidate was Michael Duffy. Michael introduced himself as a resident of Felton and a registered professional forester with 20 years of experience. He said he wanted to increase the focus on working families in the valley, and on recognizing and addressing new wildfire challenges.
Director Ackemann asked Michael how his background would influence Board policy setting and whether he had any committee involvement. Michael said he understood that the Board provided guidance to Staff, that he was familiar with appropriate processes, and that he understood the financial side. He said his lesson from the CZU Fire was that SLVWD needs to prepare for inevitable catastrophic fires, not just water lines, tanks, and filtration, but land management and the promotion of a solid functioning ecosystem with a safe fuel load and pure water. He said he had no committee involvement, but his children were older now, and he had more time.
President Hill asked what subject Michael felt was most important to the Board at this time. Michael singled out providing guidance re: staffing and coping with the challenges of regional affordability. He hoped the Board could create a framework and financial backing to help working families live in the SLV.
Director Fultz asked Michael for his view on a potential merger with Scotts Valley Water District (SVWD). Michael said it was difficult to share water, but water availability should be the guiding factor, and any growth should be water based. He said he was open to discussion but worried that the current balance of power would place the SLV at long-term risk in a merger scenario.
Director Smolley asked Michael about his knowledge and views regarding the Santa Margarita Groundwater Agency (SMGWA). Michael said it was about trying to maintain aquifer levels.
The third candidate was Bryan Largay. He said he had lived in the valley for 24 years, had a graduate degree in hydrology, and had worked for special districts and nonprofits for 25 years. He also had experience that familiarized him with Board procedures. Bryan said he was dedicated professionally to water ecologically, financially, and culturally.
Director Akemann noted Bryans strong background and asked where his past might put him at odds with the District and also what experience he had with Board committees. Bryan said he was confident his primary responsibility would be to the Board. He said he currently serves on the County Water Commission along with Board members and employees of other districts. He also said he would disclose any potential conflicts of interest. With regard to committees, Bryan said he served on the 2014 Citizens Advisory Commission for SLVWD but hasn’t attended more recently.
President Hill asked what subject Bryan felt was most important to the Board at this time. Bryan said the greatest challenges relate to infrastructure cost and the urgency of repairs and upgrades. He said there was an enormous opportunity for grant and FEMA funds, but it takes money to get money.
Director Fultz asked Bryan for his view on a potential merger with Scotts Valley Water District (SVWD). Bryan said rainfall is greatest in the SLV so everyone is interested in gaining access. He said he was very uncomfortable with the prospect of giving up SLV water, but he also recognized the financial challenges the District faced and thought it needed to be open to new possibilities. He said the devil was in the details, but his initial reaction was negative.
Director Smolley asked Bryan about his knowledge and views regarding the Santa Margarita Groundwater Agency (SMGWA). Bryan answered in detail. He said the Groundwater Sustainability Act obligates critically over drafted aquifers to be managed in a way that brings them into balance. Conjunctive use is considered state-of-the-art practice for this.
The fourth candidate was Alina Layng. She identified herself as an environmental scientist who has been involved with the District for the past three years, getting involved after the CZU Fire. She ran for a Board seat in November 2022 and lost by 51 votes while being outspent ten to one. She has long been involved in government service, has expertise in fish monitoring, and encouraged the District to seek grants for the Fall Creek Fish Ladder project. Alina said she cared deeply about affordability and equity and would dedicate herself fully to the Board.
Director Ackemann asked Alina how her background would inform her decision-making. Alina said she would be a particularly appropriate choice for a short-term appointment because she already had a lot of relevant District knowledge.
President Hill asked what subject Alina felt was most important to the Board at this time. She singled out recovery from the CZU Fire, particularly since there is grant funding due to expire.
Director Fultz asked Alina for her view on a potential merger with Scotts Valley Water District. Alina said it was best for SLVWD not to take on more customers.
Director Smolley asked Alina about her knowledge and views regarding the Santa Margarita Groundwater Agency (SMGWA). Alina said its focus was on water sustainability.
There were three public comments: Debra Loewen of Lompico said these were all good candidates, but she felt Karen Brown was the best choice.
Jim Mosher of Felton said he appreciated all four candidates but felt that Bryan Largay would be an outstanding choice. He also supported Alina Layng.
An unidentified speaker from Ben Lomond called all four candidates “impressive.” He really liked Bryan Largay’s technical skills. He liked Alina Layng’s background in fish and environmental management. He described Karen Brown as having excellent operational skills.
Director Smolley said he was impressed with Bryan Largay’s resume and his service on the County Water Commission. He was also appreciative of the time and effort Alina Layng has put in over the past three years. He said his selection was Bryan.
Director Fultz had a procedural comment that he said he would have made at the previous Board meeting had he been present. He expressed concern about a recurring pattern of resignations just before elections. He described this as affront to our system of government and our community. He said all four candidates were well qualified, but they should make their case to the electorate on a level playing field in November. He wasn’t enthusiastic about making any appointments.
Director Ackemann said the timing of the two most recent Board vacancies (Gail’s seat and, now, her own) was completely coincidental. Both resignations were necessitated by home sales which led to Directors leaving the District. She said, in a perfect world, the seats would be filled via election in November, but the Board needs to get things done between now and December, and the District would not be well-served by not appointing replacements. She said she viewed scientific background as particularly important for filling Gail’s role on SMGWA. She therefore favored Bryan, but she hoped Alina would give serious consideration to filling the next vacancy (which would be created by her own departure next week).
President Hill said all four candidates were excellent, but he agreed with Director Ackemann that Bryan’s qualifications were the strongest. His second choice would be either Alina Layng or Karen Brown.
President Hill moved to appoint Bryan Largay. Director Ackemann seconded.
There was one public comment: An unidentified speaker from Ben Lomond recommended that the Board not appoint anyone this evening.
The motion passed 3-0 with Director Fultz abstaining.
Director Ackemann advised that Bryan should begin participating immediately. He was sworn in and seated midway through the next agenda item.
Tank Replacement Project Agreement for Design
Interim General Manager Brian Frus introduced this agenda item. He reminded the Board that this matter concerned selection of a design consultant for a $5 million project, that only two candidates had applied, and that the Staff had chosen Mesiti Miller Engineering (MME) over Sandis. This choice was discussed at the previous Board meeting, but the Board felt that Staff had provided insufficient justification for preferring MME when their bid was $220,000 higher.
This evening’s Board packet included further details of the Staff evaluation. One was past performance and schedule control. Brian said Sandis had recently had some issues in this area. He also explained that the fee (which was about 4% of the total project cost) accounted for only 10% of the evaluation criteria. Overall efficiency and obtaining the most qualified person were most important.
Director Smolley still wanted to understand this better. He noted that Sandis was deemed to be qualified, but Brian said this only meant that Sandis met the basic requirements. Director Smolley asked for examples of recent concerns regarding Sandis and project design. Brian said there had been design oversights that caused cost overruns. District Engineer Garrett Roffe provided specific examples. Director Smolley asked for examples of recent work by MME, and Garrett said they handled the Probation Tank. Garrett said the manufacturer provides the details for tanks whereas the design engineer provides higher level specifications. Director Fultz said he was troubled by weighting the contract cost at only 10%. He didn’t think that recent work by Sandis was poor enough to justify leaving $220,000 on the table.
Director Fultz asked about the added value that Staff expected MME to deliver for the additional $220,000, and Brian essentially said Staff thought that it would likely pay off.
Director Largay said he was familiar with MME and knew them to be a reputable firm. He was unfamiliar with Sandis. He said he had worked on the inspection of water tanks and was familiar with the extraordinary sensitivity of the design, particularly the foundation. He was surprised that there were only two bidders. Director Largay said he was inclined to defer to Staff. Typically, 15% of overall project cost goes into design, and this project was at 12%.
Director Fultz said he was hearing that there will now be few if any change orders, given the premium that the District would be paying. President Hill clarified that the concern was with change orders due to MME vs. those attributable to the District. Director Fultz said he expected MME to anticipate everything.
Director Ackemann moved to approve the agreement with MME. President Hill seconded.
The motion passed 4-1 with Director Fultz opposed.
Director Smolley directed Garrett to communicate to MME that the District was paying a premium with the expectation that MEE would minimize change orders both from MEE and from the contractor.
New Business
Notice of Board Vacancy
General Manager Brian Frus introduced this agenda item. He reported that Director Akemann had resigned effective June 21st. The District has 60 days from this date to decide whether to appoint a replacement. Brian also noted that the deadline for candidates to file to run for this seat in the upcoming November election was August 9th. Staff recommend that the Board appoint a replacement August 1st. Brian said there was both demonstrable public interest and a Board need.
Director Akemann explained that her relocation was necessary so that she could live nearer to her elderly father. She said she felt obliged to abstain from discussion on this agenda item.
Director Smolley said he supported the appointment process. He was appointed himself, and the Board has time-critical items to address.
President Hill agreed. He said that recent changes in his own family could have potentially led him to relocate as well. A full Board is important.
Director Fultz took strong exception. He described this as probably the worst example of the Board taking a matter that should legitimately go to election and instead placing it in its own hands. He said appointing someone in the middle of the filing period would be putting not just a finger on the scale but an entire body. The appointed Board member would gain an advantage in the November election that Director Fultz said he personally wouldn’t want to be the beneficiary of. He also objected to recognizing the vacancy so rapidly. He concluded by saying that he understood this was how the game is played, but it just reeked. He subsequently argued that the Board could easily get by with four members. He found the idea of appointing someone unbelievable.
There were two public comments. Bruce Holloway of Boulder Creek said that since the appointed Board member would not be an actual “incumbent” he disagreed with Director Fultz’s parenthetical observation that the filing period will be extended by five days.
An unidentified speaker said he concurred with Director Fultz, especially with a controversial ballot measure coming up. He found an appointment to be grossly unfair and recommended no more of them.
President Hill moved to fill the vacancy by appointment. Director Largay seconded. The motion passed 3-1 with Director Ackemann abstaining and Director Fultz opposing.
Adopt a Resolution Regarding the Initiative Petition
Legal Counsel Barbara Brenner introduced this agenda item. The County Clerk informed the Board at its June 6th meeting that the “Fixed Charge Limitation Ordinance” citizen initiative petition had collected a sufficient number of signatures to qualify for November ballot. This initiative repeals all fixed water service charges adopted by the Board on February 15, 2024, except for the regular water service charge (ready-to-serve charge) and the private fire service charge. The initiative further proposes to limit future increases to the remaining fixed service charges to 2% per calendar year until January 2049. The Board has two legal options:
Adopt the ordinance proposed by the initiative without alteration; or
Adopt a resolution submitting the initiative to the District’s registered voters at the November 5, 2024 District General Election.
The Staff recommendation was that the Board adopt a resolution submitting the initiative to the District’s registered voters at the November 5, 2024 District General Election.
Barbara noted some errors in the document prepared by her office, and she advised that these should be amended as part of the Board’s action this evening.
Brian provided a brief supplementary presentation in which he summarized the impacts of the initiative on the District:
The District has already incurred $40,000 in additional legal fees.
The District’s credit worthiness has already been reduced. Consequently, the planned $19 million bond will need to be partitioned into two separate issuances of $12 and $8 million. This directly translates to $200,000 in increased issuance costs.
The County will charge the District $40,000 to $80,000 if the District elects to place the initiative on the November ballot.
The projects for the District’s Capital Improvement Plan (CIP) have been reprioritized.
The District is facing a 5-year loss of revenue totaling $7.7 million. To avoid this, it will need to develop a new rate structure and get it approved via the same Proposition 218 process that it complied with in 2023.
In response to a question from Director Smolley, Finance Consultant Heather Ippoliti estimated that the District would immediately begin losing $60,000 per month in revenue as soon as the initiative takes effect. In summary, the initiative has already cost the District $240,000; it will cost an additional $40,000-80,000 to place the initiative on the November ballot; and the District will experience an additional shortfall of roughly $420,000 between the time the initiative takes effect and the time the District establishes a new rate structure (assuming a revenue loss of $60,000 per month for six months plus $60,000 for a new rate study). In other words, unless the initiative is defeated in November, the total cost of this initiative to the District will likely be in the vicinity of three quarters of a million dollars.
Director Akemann asked if the District could cover its operating costs on an immediate monthly basis, and Heather said the initial impact would be on the capital improvement program because the District is running out of funds for this. Director Ackemann asked what would happen if the District encounters substantial emergency repair costs this winter, and Heather said the District would not have sufficient funds for this.
Director Fultz revealed that he had signed the petition in support of the petition. He said he had unaddressed concerns about the District’s loan process and its cash flow, and he was also awaiting an Appeals Court decision later this year in a case concerning tiered rates. He argued that having the initiative on the November ballot allows the District to go to the public and lets the public vote democratically.
There were five public comments: Bruce Holloway of Boulder Creek identified himself as one of the proponents of the initiative (along with Debra Loewen of Lompico). He complained about not having had sufficient time to review the Board packet, and he argued that the District should just return to its old rate structure. He also had comments on a recent Budget and Finance Committee moving. Mr. Holloway’s desire to exceed his allotted three minutes led to an extended exchange between Directors Ackemann and Fultz.
Mark Lee of Ben Lomond urged the Board to adopt the ordinance now without placing it on the ballot. If the measure were to go to ballot, he predicted that “we will win.”
Debra Loewen of Lompico argued that the Board should simply adopt the terms of the ordinance. She said her experience collecting signatures had been extremely positive. She said the initiative was consistent with a special clause in Proposition 218. She said “we will prevail.”
Jim Mosher of Felton said he felt very sad. The District faces huge challenges and is likely to face more. He said there would inevitably be disagreements, but everyone needed to work together. He recounted his experience working on the new rate structure on the Budget and Finance Committee and his attempts to understand all perspectives. He saw this initiative as completely the wrong approach, akin to throwing in a hand grenade. In a representative democracy, he said the November election would allow the public to weigh in without this initiative. He strongly urged the proponents to withdraw their initiative and allow the issue to be debated between the candidates in the November election.
Rae Spencer agreed. She expressed concern about how the District could comply with the 2% cap on annual increases when inflation has been substantially greater than this.
Director Fultz asked if there were any options the Board was overlooking. For example, he asked if there could be a negotiation process. Director Ackemann asked how this would work. Barbara said a negotiation was possible but would still have to comply with the Proposition 218 process. Director Fultz said a negotiation would require a certain level of trust (because the initiative would have to be withdrawn by August 9th, but it would take far longer than this to get a new rate structure approved). Barbara and Brian said the Board’s only choice this evening was whether or not to put the initiative on the ballot. The latter choice would still not preclude further discussion.
There was an extended discussion between Barbara and various directors about details of the wording in her proposed motion and resolution. When this discussion expanded to include members of the public, things became a bit confusing. Director Smolley moved to adopt the resolution submitting the initiative to the ballot and also the resolution detailing next steps. Bruce Holloway said he thought the resolution was drafted in a slapdash manner, and he recommended various revisions. Director Fultz requested a brief recess to allow Barbara to make corrections to the resolution prior to the vote on the motion. Director Largay said Barbara had identified very minor revisions, and he was seconding Director Smolley’s motion.
Mark Lee was recognized to comment further, and he urged the Board to wait for further corrections. When he improperly extended his comments, Director Ackemann threatened to call the sheriff to evict him. Barbara said the resolution was just prescriptive, and the Board was obligated to follow the correct process independent of the precise language in the resolution. Director Fultz again requested a recess to review the pending changes in the detailed wording of the resolution. He feared some unknown and unexpected consequence of moving ahead without this clarification. Director Largay said he had high confidence in counsel’s guidance to proceed, and he encouraged the Board to vote now and move forward. After considerable additional discussion and some further confusion, the Board voted 5-0 to approve Director Smolley’s seconded motion and let the initiative appear on the November ballot.
Consent Agenda
The Consent Agenda had one item (which could be moved to the regular agenda upon request from a Director):
a. 5-MILE PIPELINE HAZARD TREE INVENTORY SERVICES AGREEMENT.
President Hill moved to approve the items on the Consent Agenda, and Director Largay seconded. There was no public comment. The motion passed 5-0.
The meeting adjourned at 10:10 PM.