VALLEY CENTER MUNICIPAL WATER DISTRICT

VALLEY CENTER MUNICIPAL WATER DISTRICT

Regular Board Meeting

Monday, October 15, 2007

Time: 2:00 P.M.

Place: Board Room

29300 Valley Center Road

Valley Center, CA 92082

The Valley Center Municipal Water District Board of Directors’ meeting was called to order by President Broomell at 2:00 P.M.

ROLL CALL

Board members present were: Directors Broomell, Aleshire, Stone and Haskell. Director Polito was absent. Staff members present were: General Manager Arant, General Counsel Cowett, Director of Finance Jeffrey, District Engineer Grabbe, Director of Operations Hoyle, Board Secretary Stetson, Consumer Services Supervisor Tilley and Information Technology Specialist Learue. Spectators present were: Mr. Craig Justice and Mr. David Ross.

CONSENT CALENDAR

1. Upon motion by Stone, seconded by Haskell and unanimously carried, the following consent calendar items were approved:

• Minutes of the Board meeting held September 17, 2007

• Concept approval of the Meadows 35 water and wastewater line extension project consisting of approximately 1,500 feet of 8-inch water main, 3,300 feet of low pressure wastewater main, two 6-inch fire hydrants and other required appurtenances

• Audit demand check numbers 115176 through 115538 and wire disbursements 07-063 through 07-098

• Treasurer’s Report and Financial Statements for the period ended August 31, 2007

• Board of Director’s request for per diem compensation and reimbursement of expenses

• Quarterly report of expense reimbursements per Government Code §53065.5

• Report of the assessed values for the Valley Center Municipal Water District for Fiscal Year 2007-08 compared to 2006-07

• Annual report of properties approved for deferral of water availability charges per Administrative Code Section 165.2

ACTION AGENDA

2. IAWP Supply Reduction Implementation Program’s Status Report and Review of Domestic, Commercial and Institutional Conservation Programs:

A report on the status of the Interim Agricultural Water Program’s supply reduction implementation program was given by General Manager Arant. Specifics on the Program are being communicated through the District’s web site and presentations at community and organization meetings and the workshop conducted by the Farm Bureau and Avocado Commission. Billing software is being programmed to provide data on the water bills of the month’s usage in the previous year and the customer’s allocation. All participants in the IAWP will receive a notice of their monthly water allocations for 2008 based on the percentage reduction of water usage in 2006-07 and invited to attend an informational meeting on the water supply reduction that will be held in the Maxine Theater at the Valley Center High School. Irrigation training sessions will be conducted. A letter from Metropolitan establishing the supply cut-backs to IAWP customers of 30% to be effective January 1, 2008, is expected to be issued soon. Guidelines for addressing customers’ appeals pertaining to the supply reduction implementation program are being drafted. Customers’ requests for an increase in water allocation based on usage in the base year of 2006-07 have been denied as Metropolitan will impose penalties for usage over the reduced water supplies for agriculture and agencies will incur additional supply cuts if allocations are exceeded.

Domestic, commercial and institutional (public agencies) customers have been asked to reduce water consumption by 10% and the 20 gallon challenge to reduce water usage by 20 gallons per person per day has been promoted through a newsletter and the District’s web site. The web site and material to new customers also provide information on conservation programs such as the residential surveys evaluating customers’ outdoor water use, rebates for smart irrigation controllers and vouchers for high efficiency washing machines. Additional rebates are available for commercial and public sites to replace or upgrade irrigation equipment. As an on-going policy, reports of water waste are investigated and customers contacted to modify water usage.

Billing software changes are also being implemented for the domestic, commercial and institutional accounts to provide water usage data for customers to track their consumption and compare usage to the same period the previous year. Should there be a heightened request for voluntary water conservation, wasteful water use practices will be identified and the customer forwarded a letter explaining the current water supply conditions and the importance of wise use of the limited water resources. Anonymous reports of wasteful water practices can be reported on a conservation hotline that will be established. If mandatory conservation measures for domestic, commercial and institutional customers are initiated, a conservation rate structure will be considered with inclining block rates to encourage water savings. These accounts may also be given monthly usage allocations. Staff reviewed that implementing measures for mandatory conservation will necessitate additional expenditures for computer programming, mailers, and staff resources which could be met by reallocating existing personnel. General Manager Arant stated that Metropolitan is investigating securing water through the spot market in an effort to avoid mandatory cut-backs for domestic, commercial and institutional accounts.

A restriction or moratorium on meter sales was discussed. Per Metropolitan’s Act, agricultural water is surplus and has been delivered as “interruptible” under the Interim Agricultural Water Program (IAWP). In the event of a declaration of a shortage of firm supplies by Metropolitan, the sale of new water meters could be curtailed. If no shortage is declared, a moratorium on meter sales would likely be challenged. The District’s Project Facility Availability letter issued to a developer has been amended to state:

Water facility capacity is or is anticipated to be available to serve this development within the next five years. However, given the current and potentially long-term hydrologic, legal and regulatory conditions negatively impacting quantity and reliability of supplies from the State Water Project and the Colorado River delivered through our sole source suppliers, the Metropolitan Water District and the San Diego County Water Authority, there exists the very real possibility that at any point in the foreseeable future the Valley Center Municipal Water District may not have adequate water supplies available to issue a Project Facility Commitment or actual water meters to serve this development.

Annexation of additional property by the San Diego County Water Authority and Metropolitan Water District may not be approved due to the limited water supplies and cutbacks imposed to existing customers. However, Metropolitan is continuing to certify water availability for projects within its existing service area.

Mr. Craig Justice of Canyon Country Lane addressed the Board stating that he recently planted a vineyard and became a participant in the IAWP in May 2007. Because of his recent plantings and his water consumption in the base year for water allocations (FY 2006-07) is very low, Mr. Justice suggested increasing the water cut backs to be in excess of the 30% level, such as a 30.02% cutback, to create “extra water” that could be allocated to agricultural customers with low allocations due to changes since the base year. Staff reiterated that no additional water for agricultural customers beyond the 30% cutback of IAWP supplies will be provided by Metropolitan, and imposing an excess cutback on supplies for reallocation to those with low allocation levels due to implemented changes was not considered equitable. The District’s policy to no longer permit customers to sign up for the Interim Agricultural Water Program was adopted in June 2007. Invoking Metropolitan’s provision that IAWP customers may exit the Program if a metered account initiated participation in the IAWP after December 31, 2006, will be investigated for applicability to Mr. Justice’s account. Also, an alternative is to truck water from the District’s Lake Turner.

3. Resolution Approving Joint Execution of Resolution of Partnership in the Carlsbad Desalination Project:

Adoption of Resolution No. 2007-40 was requested which authorizes joint execution of a resolution of partnership in the Carlsbad desalination project. The resolution to reaffirm support for the Carlsbad desalination project will be jointly signed by the San Diego Desal Partners on October 24^th. The Carlsbad desalination project will provide San Diego with 56,000 acre feet per year of a new local water supply. Two hearings on the proposed desalination project will be held soon; the State Lands Commission hearing on October 30^th, and the California Coastal Commission hearing on November 14-16.

Upon motion by Stone, seconded by Haskell and unanimously carried, the following resolution, entitled:

RESOLUTION NO. 2007-40

A RESOLUTION OF THE BOARD OF DIRECTORS

OF THE VALLEY CENTER MUNICIPAL WATER DISTRICT

AUTHORIZING JOINT EXECUTION OF RESOLUTION OF

PARTNERSHIP IN THE CARLSBAD DESALINATION PROJECT

was adopted by the following vote, to wit:

AYES: Directors Broomell, Aleshire, Stone and Haskell

NOES: None

ABSENT: Director Polito

4. Review of Performance Measurement Results for Fiscal Year 2006-2007;

A report on the District’s Strategic Plan Performance Measurement results for Fiscal Year 2006-2007 was reviewed. The performance indices were developed as part of the strategic planning process, and are listed below:

Customer Satisfaction – Greater than 95% “Meets” or “Exceeds” expectations

Unknown Water Loss – Less than 5%

Operating Reserves – Six months’ operating expenses

Local commodity rate vs. wholesale cost: domestic - 13% and Ag. - 16%

Pump efficiency – Greater than 95% of design efficiency criteria

Project’s actual cost - +/-10% of Engineer’s estimate

Water service reliability – Greater than 99% reliable

Compliance with all state and federal regulations

Lost-time accidents – Less than 1% of total work hours

Return on investments – Greater than the 12-month rolling average return on U.S. Treasury bonds

General Manager Arant summarized that of the 10 performance measurement standards, 8 met the standard with 5 of these exceeding the standard. The operating reserve at the end of 2006-07 was $2,300,000 or 2.5 months of operating and maintenance expenses. The operating reserves are below the goal of 6 months’ operating and maintenance expenses as funds had been allocated for capital improvement projects which were to be refunded through the issuance of debt. However, due to extenuating circumstances, the District has delayed going to the debt market. Adjustment of water rates for local costs will be considered during the budget deliberations for Fiscal Year 2008-09 or the spring of 2008. At this time, consideration will be given to a rate adjustment to increase the operating reserve funds. The return on investments for FY 2006-07 was 4.83% which was 0.1457% below the 12-month rolling average for U.S. Treasuries (4.96%) performance measurement standard. It was noted, however, that the rate of return in FY 2006-07 was up 145.7 basis points or a 43% increase in the rate of return compared to FY 2005-06.

Upon motion by Aleshire, seconded by Haskell and unanimously carried, the District’s Strategic Plan Performance Measurement results for Fiscal Year 2006-2007 were accepted and modifying reporting on the Performance Measurement Standards to be based on a calendar year with the next report to be incorporated in the FY 2009-2010 budget was approved.

5. Use of Funds in the Pumping Rate Stabilization Reserve:

Board approval to use up to $1,087,000 from the Pumping Rate Stabilization Reserve for the Couser Pump Station replacement project was requested. The Pumping Rate Stabilization Reserve’s balance was $3,249,141. Earmarking $1,087,000 from the Reserve for the Couser Pump Station Replacement project will result in a remaining balance of $2,162,141 which is 40% of the annual budgeted pump charge revenue. The District’s Administrative Code provides that the Pumping Rate Stabilization Reserve shall be limited to no more than 50% of budgeted pump charge revenues. The reserve may also be used for the replacement of pump facilities with Board approval, provided that such use does not reduce the reserve below 25% of the annual budgeted pump charge revenue.

Upon motion by Aleshire, seconded by Haskell and unanimously carried, the use of up to $1,087,000 from the Pumping Rate Stabilization Reserve for the Couser Pump Station Replacement project was approved.

GENERAL MANAGER’S AGENDA

6. Review of Miscellaneous Information Items:

• Status Report for September 2007 – The Automatic Meter Reading (AMR) conversion program is progressing at an aggressive rate with 400 water meters retrofit in September and 3,638 in service thus far.

• Solar Electrical Power Project – The District’s Lake Turner property is being prepared for the solar generating project. WorldWater and Solar Technologies’ environmental consultant began work on this project.

• Lake Turner Recreational Agreement – The agreement with Valley Center Parks & Recreation for development of the District’s Lake Turner property for recreational use has expired with there being no activity or indications of interest. The Board concurred with staff’s recommendation that the District not pursue recreational development of Lake Turner until such time that a recreational entity expresses an interest in a project on the property.

• Notices of Fluoridation – Customers will receive notices of fluoride being added to their water by Metropolitan Water District through an insert in the water bills of October 15 and 31, 2007.

• Municipal Service Review – The San Luis Rey Municipal Water District has not forwarded its Municipal Service Review to LAFCO due to the concern of an agency being designated as the preferred service provider but there being no guarantee of receiving water service from the agency due to the water supply cutbacks, and under such circumstances, annexation to the Metropolitan Water District and the San Diego County Water Authority may not be feasible.

• San Diego County Water Authority’s Legislative Position – The Authority took action on Senator Perata’s and Senator Cogdill’s legislation for a proposed 2008 state-wide water bond with the position of “Support, If Amended”. Their opposition to the proposed bills is due to the insufficient funding for conveyance facilities and funds for the Authority’s water storage project, raising San Vicente Dam.

GENERAL COUNSEL’S AGENDA

7. Litigation Challenging Biological Opinion Affecting Water Operations on the Sacramento-San Joaquin Delta:

General Counsel Cowett reported that a hearing was held on the litigation filed by the National Marine Fishery Services challenging the validity of the biological opinion guiding water operations on the Sacramento-San Joaquin Delta for protection of the salmon steelhead and green sturgeon fish. It is felt that the Judge will rule that the biological opinion is unlawful, but that the remedies to be imposed will not severely impact Southern California’s water supply as did the ruling pertaining to the biological opinion and water operations protecting the Delta Smelt.

General Counsel Cowett stated that a series of informational memos on drought management will be developed and distributed to agencies to address pertinent issues on this matter, such as applicability of Proposition 218 to penalty rates, conservation water rates and annexations.

BOARD OF DIRECTORS’ AGENDA

8. ACWA Board of Directors:

Director Aleshire reported that results of a survey conducted on Californian’s water issues indicates that residents are supportive of improving the state’s water infrastructure for reliability of the water supply. The blueprint principles guiding Delta conveyance were evaluated. The failure of the through-Delta operation needs to be recognized and new solutions needed such as support of a Delta conveyance plan. The Governor’s comprehensive water infrastructure bond may be on the June 2008 ballot as well as a legislative water bond.

The expense reimbursement policy governing the ACWA-JPIA Executive Committee members had recently been revised to disallow reimbursement of expenses at ACWA/JPIA meetings for spouses and guests and for alcohol consumption, as well as a reimbursement of $125.00 per day for food and lodging at the conference or group rate. These policy revisions are being circumvented by a ruling that there will be no authorized expenditures for alcohol or spouses except those events pre-approved by the Executive Committee which also provides up to $350.00 per day for food and lodging. This matter will be considered by the full ACWA Board of Directors at the ACWA 2007 Fall Conference in Indian Wells.

ADJOURNMENT

9. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 4:14 p.m.

ATTEST: ATTEST:

____________________________ _______________________________

President Secretary