PEBBLE BEACH COMMUNITY SERVICES DISTRICT

BOARD OF DIRECTORS

Regular Meeting of July 29, 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 July 29, 2005. Board President Gary D. Hornbuckle called the meeting to order at 9:34 a.m.

ROLL CALL

Present: Directors Jeffrey Froke, 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, Legal Counsel

Suha Kilic, Finance Officer

Michael Niccum, District Engineer

John T. Rethke, Engineering & Maintenance Assistant

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")

Mark Verbonich, Vice President, Community Affairs, Pebble Beach Company

("PBCo")

Spencer Thompson, PBCSD resident

Robert Kohn, President, Board of Directors, Carmel Area Wastewater District

(“CAWD”)

Ray Van Dohren, General Manager, CAWD

John Tormey, Pebble Beach resident

APPEARANCES AND ORDER OF BUSINESS

Mr. Andrews introduced new staff member John T. (“JT”) Rethke, Engineering and Maintenance Assistant, hired in early June. His position was created as part of a Maintenance Department reorganization, which abolished the District Maintenance Manager position and created another position that could provide support to both the maintenance and engineering functions. Mr. Niccum stated one of Mr. Rethke priority objectives is to identify the operations and maintenance requirements for Forest Lake reservoir so as to be fully operational upon project completion. Additionally, Mr. Rethke provides plan checks, assists the maintenance department in specifying capital equipment needs, and is involved in safety program standard operating procedures for lock-out/tag-out procedures.

There were no additions or changes to the Agenda.

MINUTES

Director McCullough asked if, upon development of the Quick Response Vehicle (“QRV”) program, there had been a Board vote on the national standard established for QRV response. Mr. Andrews stated that it was negotiated under the QRV contract and supported by a majority of the directors, but was not voted on specifically.

MOTION 07-05-01

Moved by Director Laska, seconded by Director Froke, and unanimously carried, to approve the minutes of the regular Board meeting held June 24, 2005.

FINANCIAL MATTERS

Statement of Receipts and Disbursements

Warrants Register

The Board received and reviewed the Statement of Receipts and Disbursements and the Warrants Register for June 2005. There was discussion of the cash basis financial statement not reflecting the outstanding obligations at the end of each report period. Director Laska inquired whether the District earthquake insurance policy covers all of the underground assets. Mr. Kilic stated that only four of the District’s underground wastewater pump stations are covered by the policy: P-2, P-3, P-6, and P-7. Two of the reclamation project assets are also covered: Viscaino Road storage tank/pump station and Poppy Hills pump station. A seismic hazard map published by the Monterey County Planning Department shows a fault line under the four wastewater pump stations. However, the map does not indicate the degree of the hazard. Director Verbanec inquired as to whether there has been any assessment of the extent of a risk area emanating from a fault line event. Mr. Kilic said there has not been any such assessment and recalled initial discussions of coverage and policy decision being based on covering only the four major pump stations within the fault area. Referring to the June policy premium, Mr. Kilic stated that of the $12,000 payment, approximately $3,300 will be reimbursed to the District by the reclamation project. He said underground wastewater and reclaimed water lines are not eligible for coverage. Director Froke inquired whether the State Department of Water Resources Division of Safety of Dams (“DSOD”) would require earthquake insurance coverage for the Forest Lake Reservoir. Mr. Kilic was not aware of such a requirement by DSOD and stated that obtaining that type of coverage would be a policy decision of the reclamation project management committee and the District Board. In response to Director Laska’s question, Mr. Kilic indicated that damages to pump stations and equipment from spills may be covered by other types of insurance carried by the District.

MOTION 07-05-02

Moved by Director Verbanec, seconded by Director McCullough, and unanimously carried, to approve the Warrants Register for June 2005.

Treasurer’s Report

Mr. Kilic reviewed the submitted Monterey County Treasurer’s Investment Report for the quarter ended 6/30/05. In addition to the submitted report, Mr. Kilic commented that on June 21, 2005, he attended the final meeting of the Monterey County Treasury Oversight Committee (“TOC”) of which he has been a member since establishment pursuant to state legislation following the Orange County bankruptcy. In late 2004, new State legislation removed a number of mandated committees and commissions, including TOCs. The Monterey County TOC will be dissolved on August 16, 2005. The TOC was tasked with 1) insuring that the treasurer has an investment policy in compliance with state law and 2) investments are in compliance with the policy. Both the policy and investments are now available at the County web site. The investment portfolio will continue to be audited annually by an outside audit firm, the treasurer will continue to provide quarterly reports to pool participants, and Mr. Kilic will continue to present the reports to the Board. The Treasurer has offered to attend the Board meetings of any pool participants and this can be arranged for the District if the Board desires. Mr. Kilic responded to questions from the board.

Concurrent Public Hearings Re: PBCSD Final Budget for FY 2005-06

At 9:54 a.m. President Hornbuckle opened concurrent public hearings to consider comments and/or protests regarding proposed services and adoption of related charges for fiscal year 2005-06 (7/1/05 through 6/30/06) and to consider comments, requests for clarification and adoption of the Final Budget of the District for fiscal year 2005-06. Finance Officer Kilic gave a slide presentation regarding the budget. In response to Director Laska’s question, Mr. Kilic stated that actual sewer service cost per residence is approximately $700, or four times what is charged to the property owner, the balance being subsidized by property tax proceeds. He said the amount of property taxes used to provide each service are separately reported to the State after the end of the fiscal year. A list of all budgeted capital outlays and descriptions for major items has been mailed to property owners and has been posted on the District web site. Mr. Kilic responded to questions from the Board. Director McCullough commended Mr. Kilic on the new clearer format of the budget. Mr. Kilic commended District staff for the team effort in preparing the budget.

John Tormey, Pebble Beach resident, submitted public comment in the form of 1) a briefing report regarding the budget, 2) budget observations, and 3) budget questions. On his first item, Mr. Tormey presented slides depicting his version of the final budget for fiscal year 2005-06 in a comprehensive, condensed flowchart format. In reference to his second item, Mr. Tormey observed the 5% contingency consistently listed in the budget, and that expenditures are consistently lower than projected. Mr. Tormey expressed his support of the $15,000 for upgrades to the Boardroom sound system and noted that funds for purchase of boardroom furniture during the previous fiscal year were carried over to the current fiscal year. Further, Mr. Tormey noted favorably the CAWD pursuit of the purchase of a used forklift, and the addition of the PBCSD position of Engineering and Maintenance Assistant. He questioned the carryover of wastewater maintenance funds. Mr. Niccum stated that filling the Engineering and Maintenance Assistant position will allow more of the funded maintenance work to be completed. Finally, with approximately $800,000 in expenditures incurred as of November 2005 for the Quick Response Vehicle (“QRV”) program, Mr. Tormey requested that the Board reconsider the benefit of the program in light of its costs. Director Hornbuckle pointed out that the program may be changing direction with the imminent changeover to a new ambulance service provider within the County. Mr. Tormey commended the Board and District staff on the quality of the budget document.

MOTION 07-05-03

Moved by Director Laska, seconded by Director Froke, and unanimously carried, to adopt Resolution No. 05-15 approving FY 2005-06 service charges and special assessment for:

· Garbage and Refuse Collection and Disposal Services: increasing the rate for basic residential garbage service by 1.4% from $167.40/year (or $13.95 per month) to $169.80/year (or $14.15 per month).

· Sanitary Sewer Treatment & Disposal Services: No change proposed in the annual residential rate of $175.44/year.

· Fire Protection Services: No change is proposed in the annual special assessment of $51.20/residence and $25.60/unimproved parcel.

MOTION 07-05-04

Moved by Director Laska, seconded by Director McCullough, and unanimously carried, to adopt Resolution No. 05-16 certifying compliance with state law for levying of general and special taxes, assessments and property-related fees and charges.

MOTION 07-05-05

Moved by Director Froke, seconded by Director McCullough, and unanimously carried, to adopt Resolution No. 05-17 approving the Final Budget for FY 2005-06.

MOTION 07-05-06

Moved by Director Verbanec, seconded by Director Laska, and unanimously carried, to adopt Resolution No. 05-18 approving sewer connection fee for FY 2005-06.

President Hornbuckle announced the concurrent public hearings were closed at 10:30 a.m.

Financial Services Agreement

Mr. Kilic reviewed orally his submitted Finance Officer’s Report regarding banking services with a recommendation for First National Bank to handle the District’s banking needs. He responded to questions from the Board.

MOTION 07-05-07

Moved by Director McCullough, seconded by Director Verbanec, and unanimously carried, to approve the Financial Services Agreement with First National Bank of California and to authorize the Board President and General Manager/Secretary to execute the agreement.

FIRE PROTECTION

Fire Chief’s Monthly Report

The Board received and reviewed the monthly fire department operations report for June 2005. Operations Battalion Chief Scoggins had nothing to add to the report. Regarding the QRV program, Director Verbanec asked if there is any information available as to improved outcomes of patients as it relates to QRV response. Assistant Unit Chief Haines stated that Chief Mazza was working with staff to present that information to the Board as soon as possible at a scheduled meeting.

Monterey County Emergency Ambulance Service Contract Status

Chief Haines reviewed his submitted Staff Report regarding the Monterey County Ambulance Service Contract and its expected impact on the District’s QRV program. Chief Haines also participated in discussion with the Board regarding anticipated ambulance placement throughout the area and use of vehicle locator and geographic positioning systems to facilitate more timely service. In response to Director Laska, Chief Haines indicated he was not aware of any impediments to the new company, WestMed, continuing the QRV contractual services from the expiration of the QRV contract on November 1, 2005, through January 1, 2006 when Westmed takes over as County ambulance service provider. Chief Haines initially felt that with the inception of Westmed ambulance services that response times into Pebble Beach might improve substantially to the degree that PBCSD’s QRV program would not be needed. Subsequent meetings with Westmed and a better understanding of its management’s for-profit emphasis has made him less optimistic that there will be significant change in response times from the current contracted provider. Further Board discussion ensued regarding Westmed’s interest in entering into a QRV contract with the District, the benefits of a combined fire department/QRV response to incidents, and a request that QRV performance information be presented to the directors at the August Board meeting rather than the September meeting to allow more time for the Board to consider program direction and alternatives prior to the January 1, 2006 change to Westmed County services.

Fire Safety Day and Open House

The Fire Chief reported that the PBCSD Fire Safety Day and Open House on July 23, 2005 was a success. Forty District staff participated in the event, 675 meals were provided, 18 out of 24 exhibitors were present, and approximately 200 fire extinguishers were serviced. Mr. Andrews felt that the children’s activities were better organized and the fire extinguisher area foot traffic flowed better. Chief Carreiro welcomed any input directors might have to offer for next year’s event. Director McCullough suggested that maintenance department garage bays be opened for exhibit of vehicles and equipment at the next open house event.

Director McCullough asked the status of the grass cutting vegetation management effort throughout the forest. Chief Carreiro stated that staff is making an intense effort and that some areas, prioritized by traffic flow, have been cut two to three times. Final notice has been mailed to vacant lot owners that have not met vegetation clearance requirements; 48 remain to be addressed out of 169 total. Areas of most challenge are the preservation / conservation areas. Crews have been working in the Los Altos/Costania overlook areas and are progressing 200 to 250 feet down from the top. It is scheduled for goats to be placed in the area adjacent to Del Monte Park in the next few weeks; 10 acres worth of clearing is anticipated.

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 6/16/05 – 7/20/05. Mr. Niccum stated that the June wastewater flow rate was based on historical data because the PBCSD flow meter at Carmel Way was determined to be significantly over-measuring flow during a recent calibration.

PBCSD Capital Improvement Projects

The Board received and reviewed the District Engineer's monthly status report on capital improvement projects. Mr. Andrews called the Board’s attention to the submitted correspondence from Sunset Lane resident, John Peterson thanking the District for completing the Pescadero Fire Road extension project. Director McCullough informed District staff that the gate at the bottom of Pescadero Fire Road had been left unlocked in the evening hours for one to three weeks. In response to Director Laska’s question, Mr. Niccum stated that the Engineering and Maintenance Assistant will be performing field inspections, assist in developing pump station capital improvement programs, and that the larger capital projects will continue to be designed by engineering firms under contracts with the District.

Forest Lake Reservoir

The Board received District Engineer Niccum’s memorandum and a slide presentation regarding construction progress of the Forest Lake Reservoir Project. Mr. Niccum provided the Board samples of the 5-layered reservoir liner. During discussion concerning staff’s proposal to increase the General Manager’s discretionary authority regarding project change orders Mr. Andrews reminded the Board that under the agreement between PBCo and PBCSD for construction of the project, it is a requirement that PBCo review change orders over $550,000 before they are approved. He said the District has some discretion in aggregate change orders up to $550,000, but PBCo is still involved in the review process. If there is a dispute between the District and PBCo regarding a change order, the District may proceed with the change order work, but assumes the financial liability of the work if the dispute is not ultimately resolved. He said the process is set up with a strong inducement to obtain PBCo concurrence on change orders. The California Division of Safety of Dams (“DSOD”) approved the stability analysis prepared by District engineering consultants for the proposed north embankment buttress reconstruction. A request to increase the operating capacity of the reservoir by reducing the freeboard requirement has been withdrawn from consideration by DSOD until construction of the Forest Lake project is completed. Mr. Niccum also presented slides of Forest Lake reservoir construction in progress.

Mark Verbonich commented on the PBCo’s efforts to secure private funding for the expanded reclamation project, stating that there continues to be ongoing public interest in water purchases at a higher rate.

MOTION 07-05-08

Moved by Director Laska, seconded by Director McCullough, and unanimously carried, to approve Change Orders no. 1 and 2 totaling $200,531, increasing the value of the construction contract with Anderson Pacific Construction, Inc. to $11,136,531 and, further, authorizing the General Manager to approve future change orders for the Forest Lake Reservoir Project within an aggregate limit of 5% or $550,000, of the original contract sum of $10,936,000.

Wastewater Reclamation Management Committee meeting

Director Hornbuckle reported that he and Director Verbanec attended the CAWD/PBCSD Wastewater Reclamation Management Committee meeting held on July8. He indicated that it was reported at the meeting that the micro-filtration/reverse osmosis (“MF/RO”) testing pilot project is being continued, and that the cost estimate for that component of the Expanded Reclamation Project has not been reduced significantly. CAWD General Manager, Ray Von Dohren stated that project scope is currently being revised with project completion scheduled for the fall of 2007.

CAWD Board Meeting

Director Froke attended the Carmel Area Wastewater District Board meeting held July 21, 2005 and made a brief oral report. It was reported that the intent of the pilot MF/RO project continuation is to gain more operating data needed for the full-scale project. Also, it was reported that a marine contractor is standing by for further work on the outfall line when ocean conditions allow. Mr. Andrews also referenced the CAWD General Manager’s report on the District’s participation in the CClean pollution study (“Central Coast Long-term Environmental Assessment Network”). The findings of the study concluded that pollution sources are not from point sources but primarily from the Salinas and Pajaro Rivers. For the next study phase an attempt will be made to get more private sector participation. It was found that effluent endosulfins measured in the Carmel Bay are at a higher level than any of the other study areas and the source in the Carmel Valley is unknown. The CAWD Board also plans to hold strategic planning workshops, the first tentatively scheduled for October 13^th to include management transition strategies in anticipation of a significant turnover in staff in the next five to ten years. Other workshop topics will include preventative maintenance, environmental issues, solids handling, budgeting, technical issues, information systems sharing, and an update on the Brown Act. Mr. Andrews will attempt to attend the workshops and encouraged PBCSD Board members to attend as well. CAWD’s discussion regarding lack of participation in the Monterey County Special Districts Association prompted Mr. Andrews to encourage PBCSD directors to also consider participation in the Association’s quarterly meetings for which he will send out notices. Observing how informative his CAWD treatment plant tour had been for him as a new member of the Board, Director Verbanec suggested that arrangements be made for Director Froke to tour the CAWD facilities.

CAWD Meeting Assignment

Director Laska accepted the assignment to attend the CAWD regular Board meeting on Thursday, August 18, 2005 at 1:30 p.m. in the CAWD Boardroom at 3945 Rio Road, Carmel.

SOLID WASTE MANAGEMENT

Director Laska submitted a written report regarding the meeting of the Monterey Regional Waste Management District (“MRWMD”) held on July 15, 2005. Director Laska indicated that the MRWMD had hired a new Assistant General Manager, Tim Flanagan, who has substantial experience and expertise in the solid waste management industry.

GENERAL GOVERNMENT

Progress report regarding supplemental law enforcement services

The Board received and reviewed the General Manager’s informational report which summarized DMFPO’s efforts since the Board’s last meeting regarding its review of law enforcement issues. Mr. Andrews reviewed the report orally, and discussion ensued relating to the volunteer status of the Monterey County Sheriff’s Office Motor Squad, CHP heightened patrol, and analysis of raw data and other information about the incidence of police activity. As to the DMFPO Traffic Committee’s interest in requiring security passes for more contractors’ employees, Mr. Verbonich expressed the opinion that PBCo Security has achieved a balance that maintains a flow of vehicles through the gates with an appropriate level of screening.

Vantagecare Retirement Health Savings Program

The Board reviewed the submitted Finance Officer’s Report regarding implementation of an employee’s retirement health savings plan. Mr. Kilic reconfirmed that the plan is 100% employee funded.

MOTION 07-05-09

Moved by Director Froke, seconded by Director Verbanec, and unanimously carried, to approve and adopt an employee funded “Vantagecare Retirement Health Savings Program,” administered by the International City Managers Association Retirement Corporation.

Current and/or potential state legislation affecting the District

Mr. Andrews reported that Senate Bill 135 (Kehoe), the rewrite of the Community Services District Act, has passed the Senate, is awaiting action on the Assembly floor and will most likely pass. Before the Bill passed the Senate an amendment was requested by the League of California Cities that gives cities legal authority to approve or disapprove any latent powers that a community services district might want to implement within a city. He said this is because there are some districts that overlap cities. Assembly Bill 1234 (Salinas), referred to as the “sunshine in local government” bill, passed the Assembly and two policy committees on the Senate side and will undergo one more hearing before going to the Senate floor where it will most likely pass also.

Mr. Andrews reported that Resolution 05-20 adopted by the Board in April 2005, which called for a District general election in November 2005, included an error relating to the term of one position of director. He said that a resolution had been prepared for the Board’s consideration that would correct the error.

MOTION 07-05-10

Moved by Director Laska, seconded by Director McCullough, and unanimously carried, to adopt Resolution 05-20 amending Resolution 05-10 calling and providing for a general District election within the District on November 8, 2005 by correcting the term of office specified for the seat held by Director Verbanec from four years to two years.

Director Hornbuckle recommended appointing Mr. Peter McKee as Trustee for PBCSD employee pension plans and to serve as a member of the investment committee. Mr. McKee resides within Pebble Beach, is a retired chief financial officer of a large public company, and has a master’s degree in finance.

MOTION 07-05-11

Moved by Director Froke, seconded by Director Laska, and unanimously carried, to appoint Mr. Peter McKee as Trustee for PBCSD employee pension plans and to serve as a member of the investment committee.

MISCELLANEOUS INFORMATION AND COMMUNICATIONS

Oral reports from General Manager

The General Manager had no report.

Questions from Directors or staff seeking clarification of matters within the purview of the District

There were no questions from directors or staff.

Oral reports or announcements from Board President, directors or staff

Director McCullough suggested Board members should all attend the Special District and Local Government Institute programs in Sacramento, which she said she had attended in the past and that Director Verbanec had recently attended. Director Verbanec indicated that in the future he hoped to provide a synopsis of the 4-day program to the Board. He said also that he had been advised that if local participation in the institute programs by organizations such as the Monterey County Special District Association or the General Managers’ Association approaches 20 participants, the Institute will offer the programs locally.

CLOSED SESSION

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

ADJOURNMENT

There being no further business at 12:15 p.m. a motion was made to adjourn. 

MOTION 07-05-12

M/S/C (unanimous) to adjourn to the next regular Board meeting to be held on Friday, August 26, 2005 at 9:30 a.m. in the District Boardroom at Forest Lake and Lopez Roads.

(s) Richard Andrews, Secretary