May 21, 2001

Regular Board Meeting

Monday, May 21, 2001

Time: 2:00 P.M.

Place: Board Room

29300 Valley Center Rd.

Valley Center, CA 92082

The Valley Center Municipal W ater District Board of Directors’ meeting was called to order by

President Broomell at 2:00 P.M.

Board members present were: Directors Broomell, Polito, Aleshire and Stone. Director Armstrong

was absent. Staff members present were: General Manager Arant, General Counsel Strand,

District Engineer Jewell, Director of Finance Jarrell, Director of Operations Dacus, Manager of

Accounting Jeffrey, Field Department Supervisors Simon, Stetson, Jones and Hoyle, Project

Engineer Grabbe, Manager of Human Resources Hale and Board Secretary Stetson. Spectators

present were: Messrs. Preston and Scalone of California Power Partners; Principal Johnson of the

Valley Center Upper Elementary School and winners in the Fourth Grade Water Conservation

Poster Contest; Mr. Ross, Valley Roadrunner Newspaper and Christine Mallay, San Diego Union-

Tribune.

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include continuing discussions with California Power Partners, prepare Requests for

Proposals (RFP) open to all providers or request proposals from a limited prequalified list of

providers. Staff mentioned that the City of Escondido had received 3 acceptable proposals

for construction of its proposed power plant as a result of the RFP process and California

Power Partners was selected. Following selection of a power provider from proposals

submitted, the contract would need to be negotiated.

Director Polito stated that he has been advised that, due to the close proximity of the

proposed power plant site to his residence, until a ruling is issued from the Fair Political

Practices Commission (FPPC) he cannot participate in the discussions as a Board member.

Director Aleshire expressed that due to the complexity of siting a power plant, which is not

within the District’s expertise, it would be prudent to proceed with utmost caution. As such,

the retention of a consultant to provide advice and recommendations following detailed

analysis was recommended. To be addressed are the details of a contract with a power

provider such as the length of the contract, what would be the long-term implications,

provisions for lease rates, termination clause and terms for removal of the facility in the future.

In this manner, the ratepayers’ interest would be protected as a favorable contract would be

executed. Seeking alternative proposals could result in better terms for the District.

President Broomell concurred with the need to proceed with caution regarding entering into

a contract for the siting of a power plant on District property. However, due to the timeliness

of the proposal from California Power Partners, which would secure more favorable pumping

rates for District customers, continuing to pursue their proposal may be more advantageous.

He further noted that if the terms of the contract are not acceptable to the District, it will not

be executed. Consultants would assist in the contract negotiation process to provide

knowledgeable advice to ensure beneficial terms for the District.

Director Aleshire cautioned that if terms of a contract for the siting of a power plant with a sole

source provider cannot be successfully negotiated, delays in the process would be

experienced. Utilizing parameters developed by consultants for the proposed power plant

project, input from power plant providers could be obtained. Responses could be sought

from pre-qualified providers identified by a consultant.

Director Stone noted that many of the specifics for a contract to site a power plant are

unknown at this time, but will be addressed as this process proceeds. Continuing to pursue

the proposal from California Power Partners will enable the siting of a power plant in a timely

manner and, thus, electrical purchases at a reduced price.

Representatives of California Power Partners, Rob Preston and John Scalone, responded to

the Board noting that since the proposal to construct and operate a power plant on District

property was presented and the Board’s consensus to proceed with siting a power plant on

either the Betsworth Pumping Station or Lake Turner property, a substantial amount of

resources and effort has been allocated toward this project in a good faith effort to move

forward with this timely project. Mr. Preston stated that a competitive process will delay the

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time schedule rather than pursuing the solution proposed by CPP and that the information

accumulated thus far in CPP’s analysis of siting a power plant on District property would not

be released pending resolution of selection of a power provider. Also, processes have been

initiated (CEC, air quality and CEQA permits) that affect time schedules. Mr. Scalone

clarified that many particulars of a contract for the power plant (term, escape clause, etc.)

need to be identified by the District.

5. Certificate of Achievement for Excellence in Financial Reporting:

Director of Finance Jarrell informed the Board that the District was awarded the Certificate

of Achievement for Excellence in Financial Reporting from the Government Finance Officers

Association for the Fiscal Year 1999-2000 Comprehensive Annual Financial Report (CAFR).

The Certificate of Achievement is a national award recognizing conformance with the highest

standards for preparation of state and local government financial reports. Manager of

Accounting Jeffrey was commended for this accomplishment. The District’s CAFR also

received an award from the State Municipal Finance Officers for Special Districts.

The San Diego County Water Authority’s audit of its member agencies’ accounting and

reporting of the Infrastructure Access Charge, which is collected based on customers’ meters

and meter size, concluded that the District is in full compliance with no exceptions.

6. San Diego County Water Authority’s Survey of Member Agency Water Rates:

A report compiled by the San Diego County Water Authority of its member agencies’ water

rates was reviewed. In a comparison of those agencies with no local water supply, the

District has the lowest domestic commodity rate and second lowest agricultural commodity

rate. The Authority’s member agencies’ average monthly meter service charge on the

smallest meter is $11.81. The District’s monthly meter service charge on its 3/4" meter is

$15.75. Staff noted that the District’s policy is to recover 50% of its fixed costs from its meter

service charge, a fixed revenue source.

Meter connection capacity charges on the sale of a meter has a direct relationship to the

costs for facilities that are needed to provide service. As such, those agencies with water

systems that are “built-out” do not assess this charge upon the sale of a water meter.

7. Proposed Budget for Fiscal Year 2001-2002:

A presentation of the District’s operations and maintenance and capital budgets proposed for

Fiscal Year 2001-2002 was provided by Manager of Accounting Jeffrey, which is summarized

as follows:

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The Skyline Treatment Plant has been in operation since 1971 or 1972. It is a steel

aboveground facility with a single aeration tank (lacking redundancy for maintenance). Initial

discussion with the owner of these treatment facilities was held regarding replacement and

upgrade of the treatment plant. It was proposed to use a temporary plant which will allow the

District to assess the condition of the plant. The owner has indicated that he is prepared to

pursue replacement of the plant if the need is so indicated.

Staff recommended adoption of Resolution No. 2001-24 adopting the operations and capital

budget for Fiscal Year 2001-02, and Ordinance Nos. 2001-06 and 2001-07 to approve an

authorized staffing level of 65 and a 3.5% cost of living raise per the MOU with employees.

Proposed increases in the Lower Moosa Canyon Water Reclamation Facility monthly sewer

service charge ($3.00/EDU), and the STEP maintenance fee ($1.00/EDU) will be considered

at a subsequent Board meeting. Further, pass through of the San Diego County Water

Authority’s proposed increase in its water rates ($5.40/ac. ft.) will be presented to the Board

if so adopted in the future.

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8. San Diego County Water Authority’s Antagonism Against Metropolitan Water District of

Southern California:

The affects upon the District as a result of the San Diego County Water Authority’s actions

to thwart Metropolitan Water District of Southern California’s policies was discussed. Such

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actions have included the preferential rights lawsuit filed against Metropolitan, though

Metropolitan’s new rate structure provides for agencies to enter into long-term contracts as

requested by the Authority, support of legislation (SB 350) which will grant the Legislature

the authority to restrict the level and disposition of Metropolitan’s reserves, and, as amended,

its member agencies. The majority of the voting power on the San Diego County Water

Authority Board (City of San Diego and other South County agencies) oppose many of

Metropolitan’s actions. Metropolitan’s actions during the drought of 1987-1992 are cited as

the reason to pursue amendment of the preferential rights though water supply cut-backs

during this period were throughout the region and preferential rights were not invoked.

The Economic Study Group, comprised of many North San Diego County water agencies,

continues to communicate its position on water issues which often is contrary to the

Authority’s stance. It is known by Metropolitan that there is not unanimity among the

Authority’s member agencies on many issues that have been contended and that most North

San Diego County agencies are not aligned with the Authority’s position and its acrimony

against Metropolitan. Staff noted that Metropolitan’s revised rate structure includes an

extension of the Interim Agricultural Water Program which will continue to greatly benefit the

District’s agricultural customers.

A divergence between North and South San Diego County is becoming more apparent. The

District’s and other North San Diego County water agencies’ secession from the San Diego

County Water Authority and becoming a member of Metropolitan could become a reality in

the future especially if the Authority pursues construction of the Mexican Pipeline. Efforts will

continue to publicize the actions of the San Diego County Water Authority’s Board on issues

that might be detrimental to the region. This matter will be further discussed at an upcoming

Economic Study Group meeting.

9. Report on the ACWA Spring Conference:

A report on the ACWA Spring Conference was provided by Director Aleshire which is

summarized below:

• There are 40,000 megawatts of electrical capability in the state, and it’s predicted that

there could be peak demands this summer up to 50,000 megawatts. Rolling blackouts

in the summer months may be as high as 1,000 hours.

• In a presentation by Ed Means titled “Strategic Assessment of the Future of Water

Utilities” it was reported that the water infrastructure needs in the United Stated will

require a significant amount of investment capital which will increase consumer costs.

This will result in politicization on many water agencies’ governing boards. It was

recommended that utilities begin to develop plans to meet infrastructure needs along with

consequences of a failing system.

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• More stringent environmental regulations are expected further constraining water

resources in the state. These tightening drinking water regulations could result in pointof-

use treatment systems rather than a centralized treatment plant.

• Consumption of bottled water has increased 8% annually from 1987 to 1998 though it is

substantially more expensive than tap water and not of higher quality. As such, the

effectiveness of the water utilities’ position that its water supply meets all health

standards at a fraction of the cost of bottled water has not been heeded.

• A consolidation of regional water utilities is anticipated to realize the economy of scale

and to meet customers’ needs and complete infrastructure capital improvements.

Further, the water utilities may combine with electric and gas utilities.

• Water desalination will become an important component of our water supply. There have

been substantial improvements in the membrane technology and water desalination

projects have become more cost effective.

10. A Closed Session was called by President Broomell at 4:05 p.m. pursuant to:

• Government Code §54956.9(c), Conference with Legal Counsel - Existing

Litigation

Name of case: Sweetwater Authority, et al. v. Dynegy, Inc., et al.

SDSC Case No. GIC 760743

• Government Code §54957.6(a), Employee Performance Evaluation

Title of Position: General Manager

The Regular Board meeting was reconvened at 5:10 p.m., and the following action was

reported:

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