BOARD OF DIRECTORS

Regular Meeting of January 28, 2005

MINUTES

CALL TO ORDER

A regular meeting of the Board of Directors of the Pebble Beach Community Services District ("PBCSD") was held in the District Boardroom on January 28, 2005. Board President Gary D. Hornbuckle called the meeting to order at 9:33 a.m.

ROLL CALL

Present: Directors David R. Hendrick, Gary D. Hornbuckle,

Leo M. Laska, Nancy D. McCullough, Richard Verbanec

Absent: None

Others Present

Richard Andrews, General Manager/Board Secretary

Laura Paxton, Board Clerk, Paxton Ad Hoc

Robert Wellington, District Legal Counsel

Suha Kilic, Finance Officer

Michael Niccum, District Engineer

Sam Mazza, PBCSD Fire Chief/California Department of Forestry and Fire Protection ("CDF"), San Benito-Monterey Counties Unit

Dennis Carreiro, Fire Prevention Battalion Chief, CDF

Jackie Scoggins, Operations Battalion Chief, CDF

George Haines, Asst. Unit Chief, CDF, San Benito-Monterey Counties Unit

June Stock, Director, Del Monte Forest Properties Owners ("DMFPO")

John Tormey, PBCSD resident

John Fisher, Pacific Grove resident

Mark Verbonich, Vice President, Community Affairs, Pebble Beach Company ("PBCo")

Spencer Thompson, PBCSD resident

Vinod Badani, Vice President, E2 Consulting Engineers

William Merry, General Manager, Monterey Regional Waste Management District (“MRWMD”)

Charlotte Townsend, Director, Carmel Area Wastewater District (“CAWD”)

Barbara Buikema, Finance Officer, CAWD

APPEARANCES AND ORDER OF BUSINESS

President Hornbuckle suggested and directors concurred that Item 21 be moved ahead of Item 9 due to presenter William Merry of MRWMD having time restrictions. Directors confirmed they all had received Board supplemental reports sent out by District staff last Wednesday and one report via email yesterday relating to Item 22.

MINUTES

MOTION 01-05-01

Moved by Director Hornbuckle, seconded by Director McCullough, and unanimously carried, to approve the minutes of the regular Board meeting held December 10, 2004.

FINANCIAL MATTERS

The Board received and reviewed the Statement of Receipts and Disbursements and the Warrants Register for November and December 2004. Director Laska inquired whether property tax installments shifted to the State would be repaid to the District by the State at the end of the legislated two-year period. Mr. Kilic clarified that property tax revenue shifted to the State this and the next fiscal year would not be recovered from the State, however any funds obtained by the State from special districts after the two-year tax-shift period are required to be repaid by the State.

MOTION 01-05-02

Moved by Director Verbanec, seconded by Director McCullough, and unanimously carried, to approve the Warrants Register for November and December 2004.

The Board received and reviewed the mid-year Budget Report for fiscal year 2004-05. Mr. Kilic explained that the monthly budget reports presented to the Board are prepared on a cash basis of accounting. He said, in order to provide a more comprehensive outlook of the District’s economic position the mid-year budget report is presented on an accrual basis. He explained further that revenues were higher than 50% of the budgeted amounts mainly because of: 1) the District’s receipt of about 60% of the budgeted property tax and service fee revenues in the month of December, 2) the sale of the District’s surplus fire truck in the first half of the year, and 3) higher reimbursement revenues due to Forest Lake water quality engineering services which were not included in the original budget. Director Laska questioned how the Forest Lake Reservoir construction revenue and expenditures would be handled in the budget. Mr. Kilic advised that PBCo would open an escrow account and deposit funds necessary for construction. The District will expend the funds once they are placed in the District budget and will be reimbursed by PBCo from the escrow account.

Mr. Kilic explained that property tax revenue apportioned to the District to date by the County Auditor had increased the District Operations Fund balance to $5 million. As a portion of the Operations Fund balance would not be necessary to meet operating expenses, he recommended an interim transfer of funds from the Operations Fund to the District Capital Outlay Fund. He said, later in the fiscal year the staff will recommend more specific transfers to the Capital Outlay Fund and various reserve funds based on the update of the District’s long-term capital outlay program and the financial plan.

MOTION 01-05-03

Moved by Director Verbanec, seconded by Director Hornbuckle, and unanimously carried, to adopt Resolution 05-01 transferring $2,000,000 uncommitted balance from the Operations Fund to the PBCSD Capital Outlay Fund.

The Board received and reviewed the Monterey County Treasurer’s Report of Investments for the quarter ending December 31, 2004. Mr. John Tormey, PBCSD resident, inquired whether there was any anxiety at the County level as to the return on investments in the County Investment Pool currently earning 2% compared with other investment returns now running at 3%. Mr. Kilic responded that, it would be prudent to compare the returns of different investment vehicles over time rather than one point in time. He said, furthermore that while returns may be modest when compared to conventional investment practices, they are consistent with State Law, which establishes three goals that must be met for local governmental investment pools in the following priority order: 1) safety, 2) liquidity and 3) earnings. Mr. Kilic said when viewed in light of these goals the County investment portfolio has performed well over the past one-year period.

SOLID WASTE MANAGEMENT

Monterey Regional Waste Management District Presentation

William Merry, General Manager, MRWMD, presented background information and data regarding the MRWMD to the PBCSD Board. Mr. Merry explained the intent of his presentation: 1) to introduce himself as the incoming General Manager as of December 1, 2004, and 2) to present the rationale for the rate increase for basic tipping services at the MRWMD landfill, which will commence January 2006. Director Laska, PBCSD’s representative on the MRWMD Board, supplemented Mr. Merry’s comments by relating past MRWMD Board discourse regarding prudent use of excess landfill capacity for full environmental and District fiduciary benefit. He said options considered included taking in waste from outlying areas to generate revenue sources to mitigate garbage collection rate increases to the District’s residential customers, including those within PBCSD. Mr. Kilic clarified that requests for garbage collection fee increases are submitted to PBCSD staff by the contracted hauler (Waste Management Inc.) every fiscal year, and among other factors, any landfill tipping fee increases that MRWMD levies on the hauler are included in local collection fees. Mr. Merry said acceptance of waste from outlying area haulers would generate added MRWMD revenue, with the aim of mitigating tipping fee increases, which would otherwise be passed on to District contracted haulers and subsequently to PBCSD and other area residents.

In response to questions from the Board, Mr. Merry indicated the projected lifespan of the landfill is 104 years based on increasingly refined projections developed over 20 years. He said the elevation limit of the landfill is 284 feet.

FIRE PROTECTION

Fire Chief’s Monthly Report

The Board received and reviewed the monthly fire department operations report. Battalion Chief Scoggins had no further comments regarding the report. There were no questions from the Board.

Tsunami Preparedness

CDF Assistant Unit Chief Haines reviewed orally the submitted Staff Report regarding his assignment by the District to participate in Monterey County Office of Emergency Services (“OES”) discussions regarding tsunami preparedness. The first in a series of meetings was held in September 2004. Chief Haines responded to questions from the Board regarding tsunami alert protocol; and referenced information regarding the Tsunami Ready initiative for tsunami preparedness, which was included with the submitted Staff Report. The current priority is to refine wave run-up maps of the County coast line to better determine areas at risk due to tsunami activity. Director Laska requested a demonstration of alert systems be presented to the Board at a future meeting.

EMS Personnel Oversight

A Staff Report regarding the Oversight of Emergency Medical Service (“EMS”) Ambulance Personnel was received and reviewed by the Board. Chief Mazza noted a typographical error under the first topic “Issue:” in the first sentence: “January 26, 2005” should be “January 26, 2004.” There was no recommendation at this time for improving state, County or PBCSD oversight of EMS personnel assigned to work in PBCSD, as it appears to be satisfactory. Director Hornbuckle commented that EMS personnel within the District employed under contract with American Medical Response ambulance service reside at the fire station, along with PBCSD fire department personnel, which would imply greater observation and control over performance and conduct. Director Laska inquired whether the County request for quote for EMS services to commence January 2006 contains any change in terms and conditions that affect the requirements of PBCSD’s Quick Response Vehicle program as far as the need for the District to continue to provide supplemental services where the EMS requirements fall short. Chief Mazza responded that the opposite is the case; theoretically, more stringent contract terms and conditions are intended to raise EMS provider performance levels to a degree that PBCSD may eventually eliminate its supplemental QRV services.

MAINTENANCE, ENGINEERING, AND CONSTRUCTION

Wastewater collection, treatment and disposal system

The Board received and reviewed the District Engineer’s Report of Utilities Operations and Maintenance for 12/2/04-1/19/05. Additional to the report, District Engineer Niccum reported a 200-gallon sewer overflow that occurred adjacent to Sawmill Gulch caused by debris in the manhole at a low-elevation sewer line junction.

General Manager Andrews reported orally regarding the Reclamation Management Committee meeting held on January 7, 2005, stating that the focus of that meeting was on Expanded Reclamation Project financing matters, which would be discussed in detail later in today’s meeting.

Forest Lake Reservoir Financing

The Board reviewed the proposed draft side agreement between the District and the Pebble Beach Company (“PBCo”) for financing construction of Forest Lake Reservoir. Indicating the agreement had been prepared by District staff, Mr. Andrews, summarized the agreement and identified those provisions that he believed were most important. In particular, he referenced paragraph number 3, which would establish an escrow account for Forest Lake construction funds and the total amount of funds that PBCo would be obligated to deposit into the escrow account. He said that amount would be based on the construction contract price, the construction management engineering contract price and a 5% contingency. In response to Director Laska’s inquiry, Mr. Andrews stated that change order limitations in the proposed agreement should not be an issue as the verbiage is the same as provided in the Construction and Operations Agreement for the Expanded Reclamation Project and other project agreements that have already been approved by all of the parties. He said that while PBCo had been able to perform only a cursory review of the proposed agreement no issues of a substantive nature were noted.

In response to inquiry of the Board, Mr. Andrews indicated that approximately 76 acre-feet of water sales applications, with an approximate value of $15 million, were reported to be on file with the PBCo. He said now that the District has received an acceptable bid for construction of Forest Lake Reservoir, the main remaining issue that PBCo believes it should resolve before giving PBCSD a financial commitment to proceed is to resolve questions regarding the transferring of water rights that have been raised by attorney Richard Rosenthal on behalf of complainants who desire separate metering of any water rights sold and transferred to other parties by the PBCo for remodeling purposes.

Director Laska inquired as to when the contract would be awarded for the reverse-osmosis element of the Expanded Reclamation Project. District Engineer Niccum estimated the advanced treatment plant would be operational sometime during the second irrigation season after completion of Forest Lake Reservoir construction. Director Laska expressed concern whether the Forest Lake Reservoir water, without excess salinity being removed, would be acceptable to users if the other elements of the Expanded Reclamation Project were forestalled. Mr. Niccum expressed optimism that the golf course users of recycled water would prefer to have available for their use the additional water provided by increased Forest Lake storage capacity to meet the peak irrigation demands even if salinity is not reduced to the ultimately desired level.

Mr. Tormey inquired as to whether overall authority in charge of coordination of the Forest Lake Reservoir and advanced treatment components of the Expanded Reclamation Project has been established, or if each component was proceeding independently. Director Hornbuckle explained that the Reclamation Management Committee has project oversight responsibilities and consists of two representatives each of PBCSD and CAWD, and one PBCo representative.

MOTION 01-05-04

Moved by Director Hendrick, seconded by Director Hornbuckle, and unanimously carried, to adopt Resolution 05-02 approving, subject to first being approved by the Pebble Beach Company, the draft form of agreement for financing construction of the Forest Lake Reservoir project between PBCSD and PBCo; and further, authorizing the General Manager and the District Legal Counsel to make non-substantive changes on behalf of the District, if necessary, and authorizing execution of the agreement by the Board President and Secretary, in a final form approved as to form by District Legal Counsel.

Construction of Forest Lake Reservoir

Mr. Niccum reported three of the eight pre-qualified contractors submitted bids for construction of the Forest Lake Reservoir Project component of the Expanded Reclamation Project. Differences between the three bids primarily related to grading costs. Director Verbanec inquired whether contractors might have misunderstood the scope of construction. Vinod Badani, Vice President, E2 Consulting Engineers, stated the contractor and grading subcontractor were contacted and advised of the Department of Water Resources Division of Safety of Dams scrutiny that would be involved during the construction, and those contractors were comfortable with the price and the terms of the work process. Past dealings with Anderson Pacific Engineering Construction by the project engineer and a check of references for similar projects indicate the apparent lowest bidder on the Forest Lake Reservoir project is more than capable of constructing the project per the requirements of the plans and specifications.

MOTION 01-05-05

Moved by Director Hendrick, seconded by Director Laska, and unanimously carried, to adopt Resolution 05-03 declaring the bid from Anderson Pacific Engineering Construction, Inc. as the lowest responsible bid and authorizing award of contract in the amount of $10,936,000 for the Forest Lake Reservoir project, subsequent to approval by the PBCo of the Agreement for Financing Construction of the Forest Lake Reservoir Project Between PBCSD and PBCo.

Forest Lake Reservoir Project Construction Management Services

In reference to construction management services, Mr. Andrews pointed out that, in the private sector, contractors retained by the owner generally carry out these services. In this instance District staff is proposing engineers carry out the services to provide more oversight for the District due to the involvement of the California Division of Safety of Dams, the California Department of Fish and Game, the U.S. Army Corps of Engineers and the Monterey County Building Department. Director Hornbuckle requested a “critical path” report be presented to the Board monthly for an overall view of the project including a technical schedule and cost summary. Discussion ensued regarding project oversight. Director Verbanec clarified that the project engineer’s construction management duty is to ensure on behalf of the District that the contractor follows construction specifications. Mr. Andrews noted the engineer’s role in also keeping the Reclamation Management Committee informed for coordination purposes, and to consider recommendations to the parties if any major issues or policy changes arise. Director Hendrick advised that the Reclamation Management Committee would probably be meeting every two months. Mr. Niccum confirmed that monthly construction project reports, including a project schedule and cost summary, would be presented to the Board. He stated further that subsequent to approval by PBCo of the Agreement for Financing Construction, the desired construction start date is March 1^st, in order to achieve sufficient construction progress so that the reservoir can begin to be filled next winter.

MOTION 01-05-06

Moved by Director Laska, seconded by Director Verbanec, and unanimously carried, to adopt Resolution 05-04 approving Project Assignment No. 8 to the Master Agreement with E2 Consulting Engineers (E2) to provide construction management engineering services for the Forest Lake Reservoir project with a budget limit of $978,500, subsequent to approval by the PBCo of the Agreement for Financing Construction of the Forest Lake Reservoir Project Between PBCSD and PBCo.

PBCSD Capital Improvement Projects

The Board received and reviewed the District Engineer's monthly status report on capital improvement projects. Director McCullough asked if the SCADA system could be integrated into the County or State system in support of fire prevention activities. Mr. Niccum stated that the only relation with fire prevention provided by the water and wastewater SCADA system is that water levels in California American Water storage tanks can be continuously monitored by the fire department.

Mr. Niccum reported that the sewer lines identified for replacement in 2005 are old clay or terra cotta pipes, some of which were installed over 50 years ago. He said these pipes are being replaced with plastic pipe with an estimated life span of 75-100 years. There are approximately 75 miles of pipelines in the District wastewater collection system and the proposed project addresses a little over one mile of the system.

MOTION 01-05-07

Moved by Director Laska, seconded by Director Verbanec, and unanimously carried, to adopt Resolution 05-05 approving Project Assignment No. 9 to the Master Agreement with E2 Consulting Engineers (E2) to provide engineering services required for the 2005 Sewer Line Replacement Project. The total estimated engineering cost is $90,000.

CAWD Board Meeting

Director Verbanec reported orally regarding the Carmel Area Wastewater District Board meeting held January 27, 2005. He highlighted the problem of wild pigs on CAWD property near the treatment plant and the 5-year eradication effort now in effect. On another topic, the project to clear out the CAWD outfall pipeline will continue when the weather improves.

Director McCullough reported orally regarding the CAWD Board meeting that she attended, which was held on November 18, 2004. She indicated that a CAWD director had asked a question regarding the propriety of District Counsel Wellington representing both CAWD and PBCSD. She said that Counsel had stated that if any conflict were to arise he would withdraw from his position. Director McCullough requested that this matter be placed on the PBCSD Board’s agenda for review. General Manager Andrews and counsel suggested, and the Board concurred, that a report of legal counsel functions and possible conflicts be presented at the next regular Board meeting.

Grease source control and a local news article regarding storm water discharge were also discussed.

CAWD Meeting Assignment

Director Hendrick accepted the assignment to attend the CAWD regular Board meeting on February 17, 2005 at 1:30 p.m. in the CAWD Boardroom at 3945 Rio Road, Carmel.

GENERAL GOVERNMENT

Mr. Andrews reviewed his written report regarding proposed changes to the District position classification and pay plan. He said the primary reasons for the changes were to ensure adequate staffing for the engineering function and to support the District Maintenance Department, particularly in some of the administrative tasks relating to the preventative maintenance program.

Mr. Andrews answered questions from the Board.

MOTION 01-05-08

Moved by Director Laska, seconded by Director Verbanec, and unanimously carried, to adopt Resolution 05-06 revising the District position classification and pay plan to: add a new position of “Engineering Maintenance Assistant,” with a 5-step annual pay range of $49,724 to $60,443; delete the position of “District Maintenance Manager”, with a current 5-step annual pay range of $62,316 to $75,744; change the title of the “Field Operations Supervisor” to “Field Maintenance Manager,” with no change in the current annual pay range of $56,460 to $68,628; and approve the proposed job description for the position of Engineering and Maintenance Assistant.

Directors’ Assignments

President Hornbuckle and the Board discussed annual assignments of directors to committees and agencies with whom PBCSD is affiliated and confirmed assignments as follows:

· CAWD/PBCSD Wastewater Reclamation Management Committee: Directors Verbanec and Hornbuckle, Director Laska as alternate member

· PBCSD Defined Benefit Pension Plan, and Supplemental Pension Plan Investment Committee Trustees: Directors Laska and Hendrick, with Mr. Hendrick continuing as an Outside Trustee after March 1, 2005

· Del Monte Forest Property Owners Traffic and Safety Advisory Committee: Director McCullough

· Pebble Beach Community Advisory Committee: Board President Hornbuckle

· MWRMD Board of Directors and MRWMD Finance Authority Board of Directors: Director Laska

· ACWA-JPIA Board of Directors: Director Verbanec, General Manager Andrews as alternate director

· Monterey County Special Districts Association – Director Hornbuckle, Director Verbanec as alternate

· CAWD Board of Directors Observer – Monthly rotation of directors

Director Resignation

The Board received and formally accepted the resignation of David R. Hendrick from the PBCSD Board of Directors, effective March 1, 2005. Following Board discussion, it was the consensus of directors to seek nominations publicly while attempting to contact specifically the two nominees from the last Board selection process in 2004 who had received votes from PBCSD directors during the balloting process. President Hornbuckle instructed staff to follow-up by publicly announcing the vacancy, sending letters to all residents inviting them to apply to be considered to fill the forthcoming Board vacancy and to develop a response timeline by the next regular Board meeting. It was determined also that the Board will decide whether to interview nominees in a separate Board meeting, or to conduct interviews and the election together in one meeting.

PBCSD Safety Committee

The Board received and reviewed the Safety Committee Meeting Minutes held December 28, 2004, as well as the ACWA Joint Powers Insurance Authority President’s Special Recognition Award presented to PBCSD for achieving a low ratio of “Paid Claims and Case Reserves” to “Deposit Premiums” in Workers’ Compensation and Liability Programs for three years respectively 2000 to 2003. Mr. Andrews noted the prevailing District workers’ compensation rates are a good indicator of staff safety levels.

The Board received the submitted correspondence from Anne McGowan, Carmel Valley Fire Protection District Board member, regarding the LAFCO special district election and her request for support in seeking re-election as the Independent Special District LAFCO Commissioner. Mr. Andrews advised the Board that each special district can vote for the Commissioner and Alternate Commissioner via their Board president. Peggy Shirrel, Moss Landing Harbor District Board member, intends to seek re-election as the Alternate Commissioner. Director Laska stated that he is comfortable with President Hornbuckle supporting both candidacies. Other directors concurred.

Oral reports from General Manager

General Manager Andrews stated that, in his absence while vacationing, Finance Officer Kilic and District Engineer Niccum are designated acting General Managers in matters relating to their own departmental responsibilities. If issues arise not related in that regard, they will consult and jointly determine a course of action to be taken in the General Manager’s stead.

Oral reports from Directors or staff

Director Verbanec inquired regarding the expensing and approval of new Board member training for $185 for one day in Sacramento. He indicated that he was seeking the Board’s advanced approval, if necessary. Finance Officer Kilic explained that review and approval by the Board can occur as an agenda item before the expense is incurred or, if the director is confident that his or her colleagues will support the expense, it can appear on the Warrants Register to be approved when the director seeks reimbursement for the expense.

Oral reports or announcements from Board President, directors or staff

President Hornbuckle requested that the prospect of reinstating the District newsletter to include current significant projects be submitted as an agenda item at the next regular Board meeting.

CLOSED SESSION

President Hornbuckle announced the Board would not need to meet in closed session.

ADJOURNMENT

There being no further business at 12:08 p.m. a motion was made to adjourn. 

MOTION 01-05-09

M/S/C (unanimous) to adjourn to the next regular Board meeting to be held on Friday, February 25, 2005 at 9:30 a.m. in the District Boardroom at Forest Lake and Lopez Roads.

                                              (s) Richard Andrews, Secretary