July 20, 2009

VALLEY CENTER WATER DISTRICT

Regular Board Meeting

Monday, July 20, 2009

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, Polito, Aleshire, Stone and Haskell. Staff members present were: General Manager Arant, General Counsel Cowett, District Engineer Grabbe, Director of Operations Hoyle, Director of Finance Jeffrey, Board Secretary Stetson, Manager of IT Pilve, Manager of Accounting Pugh, Consumer Services Supervisor Tilley, Pumps and Motors Supervisor Stetson, Project Manager Carrillo. San Diego County Water Authority representative was Mr. Paul Lanspery, Deputy General Manager. Spectators present were: Messrs. Mike Halloran, Robert Bolt, Tom Riggs, and Mr. and Mrs. Juan Macias.

CONSENT CALENDAR

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

• Minutes of the Board meetings held July 6, 2009

• Audit demand check numbers 122852 through 123027

• Quarterly report of employees’ expense reimbursements for the quarter ended June 30, 2009

PUBLIC HEARING

2. Ordinance Amending Water Rates, Wastewater Service Rates and Pressure Sewer Maintenance Fees:

The public hearing to consider increases in the water rates to pass-through rate increases from the District’s wholesale water suppliers, the Metropolitan Water District and San Diego County Water Authority, increases in wastewater service rates and pressure sewer maintenance fees was opened at 2:01 p.m. In compliance with Proposition 218, all property owners of record within the District’s service area were mailed a notice of the public hearing to receive input and consider the proposed rate and fee increases.

Mr. Paul Lanspery, Deputy General Manager of the San Diego County Water Authority, gave a presentation reviewing the wholesale water rate providers’ adopted rates and charges. Effective September 1, 2009, the Authority’s M&I treated water rate will increase 18.1% from $766 to $905/ac. ft., the Special Agricultural Water Rate will increase 18.6% from $671 to $796/ac. ft. and the Interim Agricultural Water Rate will increase 21.9% from $556 to $678/ac. ft. with an additional increase of 5% effective January 1, 2010 to $712/ac. ft. The major cause of the rate increases is reduced water supply, costs for supplemental transfer water, and the economic downturn, as well as expenses to fix the Bay-Delta infrastructure and capital improvement programs.

Metropolitan Water District’s treated water rates to the San Diego County Water Authority increased 21.1%. This increase was due to several factors; including, supply challenges which make securing water more expensive and a shift to more expensive supplies with a reduced State Water Project allocation. The 21.1% increase from Metropolitan Water District to the San Diego County Water Authority for treated water was mitigated to an 18.1% increase to the Authority’s member agencies through CIP cost management and reductions in personnel and contract services. The San Diego County Water Authority has enhanced its reliability by diversifying its water supplies through projects such as the Colorado River supplies through the Quantification Settlement Agreement, the Twin Oaks Valley Water Treatment Plant, pipeline relining projects, and Emergency Storage Project facilities. Mr. Lanspery explained that over the next 3 or 4 years, the Authority’s Capital Improvement Program expenditures will be reduced as projects are completed or nearing completion. The Authority’s debt service will be a consideration in setting future rates. Supply diversification will be pursued through local investments in desalination and reclamation projects.

Bill Jeffrey, Director of Finance, stated that the water and wastewater rates being considered would be effective for bills mailed on and after September 1, 2009 and on and after January 1, 2010. The proposed ordinance to increase the rates also provides, annually after January 1, 2010 through 2014, authorization for future limited increases in water rates by action of the Board of Directors to meet operating and capital requirements. Also included in the ordinance is the ability to pass through the effects of a loss of the District’s property tax revenue. Proposed water rate increases for September 1, 2009 and January 1, 2010, are required to cover wholesale water rate increases. The proposed rates for January 1, 2010, include no increase for the District’s local share of the water rate. As such, the District’s share of the total domestic/commercial water rate will be just 9.2% effective January 1, 2010. The commodity rates (per HCF) with the proposed changes were reviewed, as follows:

A change in the Infrastructure Access Charge (IAC), which is a fixed charge based on the number and size of active meters in the District assessed by the San Diego County Water Authority, is also included in the ordinance for adoption. The proposed increases to the IAC are a pass through from the Authority and are effective for calendar year 2010, as listed below:

An increase in the Lower Moosa Canyon Water Reclamation Facility’s monthly wastewater service fee of $4.00 per EDU per month to a monthly per EDU charge of $44.50 effective September 1, 2009, was proposed. This increase offsets inflation costs since 2006. Also, increases in the Lower Moosa Canyon Water Reclamation Facility’s Capacity Reservation Charge to $22.25 per EDU per month ($2.00/EDU/month increase), and the STEP Surcharge to $36.75 per month ($3.25/month increase) were proposed.

Director of Finance Jeffrey reiterated that notices of the public hearing to consider the proposed rate changes were mailed to all property owners of record in the District which totaled 39,303 parcels. Forty-one letters protesting the increased charges were received from 33 families that own a total of 61 parcels. Comments ranged from inquiring why the notice was mailed to them (largely owners of vacation property) to reducing costs rather than increasing charges and inquiries if the increases are due to the water reductions. Staff reviewed that the District has, over the last several years, reduced costs by a reduction of staff (17%) and deferred maintenance and capital projects. Water costs have increased due to several factors including reduced availability (drought and court imposed) which has driven up the cost of water purchased. The water rate increases proposed are a pass through of the wholesale water suppliers’ charges and, if the increases are not passed through to the customers, the water delivered would be sold at less than its purchase price resulting in the District becoming financially insolvent in two years.

Discussion ensued regarding the need for strong governance in California and action to fix the State’s water system. There are challenges ongoing to contest the science used that determined the operating schedule of the pumps on the State Water Project and if the impact on the economy and people were considered. At present, there are several cases filed challenging the operating permits for the State Water Project that have reduced pumping due to the Delta Smelt and Salmon cases.

Mr. Mike Halloran, Pebble Beach Way in the Woods Valley Ranch subdivision, inquired as to the allocation method. Mr. Halloran stated that because he is a new owner of the property and it was either undeveloped or unoccupied during the majority of the base years (Fiscal Years 2004-05, 2005-06 and 2006-07), his allocation is very low with the policy of providing a minimum of 10 HCF/month for those with no usage or low usage in the base years. Mr. Halloran stated that he has implemented conservation measures at his property, but additional allocation is needed to avoid the penalty rate if the allocations become mandatory due to the low usage for his property during the base years. General Manager Arant stated that the District has been allocated its water supply based on deliveries in the base years of FYs 2004-05 through 2006-07. Ten hundred cubic feet (10 HCF) is an accurate measurement of usage within a home based on wastewater flows. At present, residential customers have been asked to voluntarily reduce usage by 8%. This voluntary reduction program will be re-evaluated for its continuance throughout FY 2009-10, and mandatory allocations may be imposed by January 2010 if the conservations levels are not met through the voluntary program. There will be an appeal process to request an increase in allocation if the usage reductions become mandatory.

Mr. Juan Macias of 26937 Red Ironbark Drive addressed the Board and stated that he has a similar situation as does Mr. Halloran with a low allocation as he is a new owner. Mr. Macias stated that he has limited landscaping with efficient sprinklers to conserve water where possible and is above his allocation on his 3 acre parcel with the application of a minimum of 10 HCF per month during the base years. Mr. Macias suggested that allocations should be assigned based on property sizes with consideration of the neighborhoods. Staff explained that average water usage for residential accounts pose difficulties due to the diversity of lot sizes and usage within the District’s service area. As noted previously, there will be an opportunity for customers to appeal their allocation levels in the event the water use reductions become mandatory.

Upon motion by Aleshire, seconded by Stone and unanimously carried, the following ordinance, entitled:

ORDINANCE NO. 2009-08

ORDINANCE OF THE BOARD OF DIRECTORS

OF VALLEY CENTER MUNICIPAL WATER

DISTRICT ADOPTING INCREASES IN WATER

AND WASTEWATER RATES AND CHARGES

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell

NOES: None

ABSENT: None

ACTION AGENDA

3. Ordinance to Amend Construction Water Permit Fees:

Ordinance No. 2009-09 was presented for the Board’s approval to increase the District’s construction water permit fees and establish nonpotable construction water permit fees that are commensurate with increases in the water rates. The daily construction water permit fees range from $165 for a water truck of 2,500 gallons or less capacity and $325 for a truck of 5,000 gallons or more capacity. The proposed nonpotable construction water permit fees range from $100 to $195 for a water truck with a capacity of 2,500 gallons or less and 5,000 gallons or more, respectively.

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

ORDINANCE NO. 2009-09

ORDINANCE OF THE VALLEY CENTER MUNICIPAL

WATER DISTRICT AMENDING THE ADMINISTRATIVE

CODE TO PROVIDE FOR CHANGES IN CONSTRUCTION

WATER PERMIT FEES

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell

NOES: None

ABSENT: None

4. Proposed Changes to Various Charges and Fees for Special Services:

Ordinance No. 2009-10 setting forth increases in various service charges and fees based on the cost of living adjustments since their last adjustment in 2004 was presented for Board adoption. The charges and fees and the proposed changes are summarized below:

A motion was made by Director Aleshire to deny approval of Ordinance No. 2009-10 which did not proceed due to the lack of a second motion.

Upon motion by Polito, seconded by Stone, the following ordinance, entitled:

ORDINANCE NO. 2009-10

ORDINANCE OF THE VALLEY CENTER MUNICIPAL

WATER DISTRICT AMENDING THE ADMINISTRATIVE

CODE TO PROVIDE FOR CHANGES IN CERTAIN

FEES FOR SERVICE

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Stone and Haskell

NOES: Director Aleshire

ABSENT: None

5. Request to Approve Award of Contract for the Circle R Wastewater Line Replacement Project and an Amendment of the 2009-10 Budget:

Project Manager Carrillo reported that bids for the Circle R Wastewater Line Replacement Project, which is to replace 310 feet of existing 12” pipe with new 18” pipe, were opened on July 8^th. HTA Engineering & Construction, Inc. submitted the lowest bid at $118,800. Staff recommended award of contract for the Circle R Wastewater Line Replacement Project to HTA Engineering & Construction, Inc. noting that favorable references for this firm were received. A transfer of available funds totaling $125,000 from the Aerobic Digester No. 2 and Aeration Tank Retrofit Project will provide funding for the construction phase of the wastewater line replacement project. The project is scheduled to be completed by October 11, 2009.

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

RESOLUTION NO. 2009-32

RESOLUTION OF THE BOARD OF DIRECTORS OF

VALLEY CENTER MUNICIPAL WATER DISTRICT AWARDING

THE CONTRACT FOR THE CIRCLE R WASTEWATER LINE

REPLACEMENT PROJECT (ACCOUNT NO. 13-5677.78),

AMENDING THE FY 2009-10 BUDGET BY THE TRANSFER

OF FUNDS FROM THE AEROBIC DIGESTER NO. 2 AND

AERATION TANK RETROFIT PROJECT (ACCOUNT NO. 13-5612.78)

AND DECLARING INTENT TO REIMBURSE CAPITAL

EXPENDITURES FROM PROCEEDS OF INDEBTEDNESS

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell

NOES: None

ABSENT: None

6. Resolution Awarding Contract for the Recoating of West No. 2 Reservoir:

Bids for the recoating of the interior and exterior of the 2 MG West No. 2 Reservoir were opened on July 7^th with the lowest received from Simpson Sandblasting, Inc. at $216,729. This bid is higher than had been budgeted as it reflects the addition in the project’s specifications for Tnemec zinc primer coating that will extend the life of the coating and provide future cost savings. Pumps and Motors Supervisor Stetson reported that sufficient funds are available in the 2009-10 budget as the recoating of three reservoirs had been proposed.

Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:

RESOLUTION NO. 2009-34

RESOLUTION OF THE BOARD OF DIRECTORS OF

VALLEY CENTER WATER DISTRICT AWARDING

CONTRACT FOR RECOATING THE EXTERIOR AND

INTERIOR OF WEST #2 RESERVOIR

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell

NOES: None

ABSENT: None

GENERAL MANAGER’S AGENDA

7. Review of Miscellaneous Informational Items:

• The District’s Status Report for June 2009 states that water deliveries in Fiscal Year 2008-09 are 32,697 acre feet. Budgeted water sales had been 34,114.5 acre feet. In June 2009, water purchases were 3,043.12 acre feet compared to water purchases in June 2008 of 3,957.88 acre feet.

GENERAL COUNSEL’S AGENDA

8. Update on Litigation:

General Counsel Cowett reported that regarding San Diego Gas & Electric’s proposal to turn off power under certain weather conditions as part of the utility’s fire-prevention plan, the Administrative Law Judge is expected to render a decision on this proposal during the week and it will be taken into consideration by the PUC Commission. The Commission is expected to rule on the proposal by mid-August.

Pertaining to the litigation filed challenging the State Lands Commission’s approval of a permit for the Carlsbad desalination project, there are indications that the Judge will rule favorably for Poseidon Resources.

BOARD OF DIRECTORS’ AGENDA

9. ACWA-JPIA:

Director Aleshire commended the accomplishment of Dan Dentino for completing the Risk Management Specialty Program classes which are a part of the ACWA-JPIA’s Professional Development Program. Director Aleshire noted that the JPIA offers extensive courses for its training programs that are beneficial to the District.

The ACWA/JPIA Executive Committee allocated $100,000 for a consultant to evaluate the need for a new building (existing or new construction) or if the existing one should be remodeled. Jerry Gladbach, Chair of the Committee, requested another $50,000 to complete the building evaluation process.

Director Aleshire reported that Mary Gibson, ACWA/JPIA Executive Committee member, resigned. He recommended Chuck Muse of Helix Water District to be appointed to fill the vacancy as Mr. Muse had been a candidate during the May 2009 election for Executive Committee members and, other than the incumbents that were re-elected, had received the highest votes. Melanie McDonald, who was not a candidate during the recent election, was appointed to fill the ACWA/JPIA Executive Committee vacancy.

CLOSED SESSION

10. A Closed Session was called by President Broomell at 4:00 p.m. pursuant to:

● Government Code §54956.8 – Real Property Transaction, Conference with Negotiator

Property: Fawn Creek Lane, Escondido (APN 187-350-16)

Agency Negotiator: Gary T. Arant, General Manager and Wally Grabbe, District Engineer

Negotiating Party: Jane Wiggans, Wiggans Group, Inc.

Under Negotiation: Terms and Price

● Government Code §54956.9(b), Conference with Legal Counsel, Anticipated Litigation

Number of potential cases: 1

RECONVENE

11. The Regular Board meeting was reconvened at 4:11 p.m. No action was reported.

ADJOURNMENT

12 Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 4:12 p.m.

ATTEST:                                                 ATTEST:

____________________________ _______________________________

President                                             Secretary