Special Meeting, March 14, 2005
MINUTES
A special meeting of the
Board of Directors of the Pebble Beach Community Services District was held in
the District Boardroom on March 14, 2005
President Gary D. Hornbuckle called the meeting to order at 3:00 p.m.
ROLL CALL
Present: Directors:
Dr. Gary D. Hornbuckle, Leo M. Laska, Nancy D. McCullough, Richard D.
Verbanec
Absent: Directors:
Richard Andrews, General
Manager/Board Secretary
Robert
Wellington, Legal Counsel
K.
Mark Verbonich, Vice
President, Community Affairs, Pebble Beach Company (“PBCo”)
One
visitor was present during this special meeting and he did not request to
address the Board.
After calling the meeting to order, President Hornbuckle
reviewed the purpose of the special meeting, indicating it is to provide an
opportunity for the Board to review and consider approving a revised agreement
between PBCSD and Pebble Beach Company (“PBCo”) to reimburse PBCSD for the
costs of constructing the Forest Lake Reservoir component of the Expanded
CAWD/PBCSD Wastewater Reclamation Project.
General Manager Andrews advised the Board that
Director, Jeffrey Froke, had indicated to him that although he would be out of
the District on a personal business trip at the time of the Board’s special
meeting, he would try to participate in the meeting telephonically. Because of the possibility that Mr. Froke
would be available to participate in the special meeting, Mr. Andrews said that
he had administered the oath of office to him on March 11th, rather
than waiting for the Board’s regular meeting on March 25th. Noting the issue might be moot, as Director
Froke had not yet checked in by telephone, Director Laska indicated that he had
been advised in the past by Legal Counsel representing another district on another
matter that if directors wish to participate telephonically in a board meeting
State law requires that the meeting agenda include information identifying the
director or directors and specifying the location from which they are
calling. District Legal Counsel, Robert
Wellington, indicated that he would probably concur with that interpretation of
law; however he would need to review the applicable statute to confirm that his
recollection was correct. In the absence
of receiving a telephone call from Director Froke, President Hornbuckle noted
that four out of five directors were physically present and it would therefore
be appropriate to move forward with the business listed on the agenda. He then asked General Manager Andrews to
review the proposed revised Forest Lake Reservoir construction reimbursement
agreement.
Mr. Andrews indicated that copies of the proposed
revised reimbursement agreement had been distributed via email attachments to
all directors prior to the meeting on March 11th and that printed
copies had been placed on each director’s desk in the PBCSD Boardroom. He said each director had been provided two
copies of the agreement: one a
“red-lined” version, which identified all additions and deletions; and, the
second version, a “clear” version that incorporated all changes in final
form. Mr. Andrews said the proposed
revised reimbursement agreement is in substantially the same form as an earlier
version approved by the PBCSD Board on January 25th, which had been
approved on condition that it also be approved by the PBCo. He indicated the PBCo had subsequently
decided not to approve the January 25th version of the reimbursement
agreement, and had requested certain modifications. Mr. Andrews indicated that District Legal
Counsel believed the changes that had been requested by the PBCo were
substantive, requiring approval of the PBCSD Board of Directors. Suggesting that directors follow along in the
red-lined version of the reimbursement agreement, Mr. Andrews identified the
two proposed changes that are considered substantive. He said that a construction contingency fund
of 5% or $546,800 had been deleted from paragraph 3-a and, instead, PBCo had
requested a provision that would require PBCo approval of any change orders
aggregating more than $50,000, but that PBCo’s approval “would not be
unreasonably withheld”. Mr. Andrews
expressed the opinion this change would be acceptable, as it was in PBCo’s
interests to support timely completion of a reliably constructed project. Also, he said the reimbursement agreement
would probably apply for only a limited period of time until PBCo issued its
supplemental financial commitment for the Expanded Reclamation Project.
Mr. Andrews said the second substantive change in
the reimbursement agreement requested by the PBCo was the addition of a
paragraph 9, which would give PBCo authority to terminate the reimbursement
agreement any time, whereupon its financial obligations would be limited to
reimbursing the District for all costs incurred by the contractor plus a
reasonable profit on the work completed.
Mr. Andrews said that the District’s construction agreement with the
contractor included similar provisions which allow PBCSD to terminate or
suspend the construction agreement.
Considering that the reimbursement agreement is intended to apply during
the period of time before the PBCo issues its formal financial commitment to
the Monterey Peninsula Water Management District to undertake the financing of
the complete Expanded Reclamation Project, Mr. Andrews said in his opinion it
would be appropriate to allow PBCo the right to terminate the reimbursement
agreement if something extraordinary were to occur that would create a
financial risk for PBCo. In addition,
Mr. Andrews noted that similar provisions had been included in previous
reimbursement agreements between PBCo and PBCSD relating to planning and
engineering design of the Forest Lake Reservoir Project.
In the ensuing discussion among directors and staff
it was noted that the main reason why the Board had approved and offered the
January 25th version of the reimbursement agreement to the PBCo was
to assist in keeping the Forest Lake Reservoir component of the expanded
reclamation project on a construction schedule that would offer reasonable
opportunity for the reservoir to be available for use in the 2006 irrigation
season. In that scenario, PBCSD
directors believed it appropriate for the District to enter into a temporary financing
“side agreement” with the PBCo that would apply until the PBCo was able to
raise sufficient funding through the sale of its water rights to fund both
components of the expanded reclamation project.
Therefore, it was the consensus of directors to further clarify that
intent by including a paragraph in the revised reimbursement agreement
indicating that it would remain in effect only through the date of the PBCo’s
formal financial commitment for the complete expanded reclamation project. Hearing no additional
questions or requests for further comments from directors, President Hornbuckle
asked if the Board was ready to act on the matter listed in the agenda.
It was moved by Director
Laska, seconded by Director Verbanec, and unanimously carried, to adopt Resolution
No. 05-07, approving and authorizing
execution of the revised Agreement for Financing Construction of the Forest
Lake Reservoir Project Between PBCSD and PBCo, subject to the addition of a
provision in the agreement to be drafted by District Legal Counsel indicating
that the agreement will be in effect until superseded by the PBCo’s formal Supplemental
Financial Commitment for the Expanded Reclamation Project, after which time
construction of the Forest Lake Reservoir component of the Expanded Project
will proceed under the terms of the Construction & Operation Agreement
that will become effective at that time.
There being no further
discussion or business to consider at 3:40 p.m., a motion was made to adjourn.
MOTION 03-05-2
M/S/C (unanimous) to adjourn to the next
regular Board meeting to be held on Friday, March 25, 2005 at 9:30 a.m. in the
District Boardroom at 3101 Forest Lake Road.
Richard Andrews, Secretary