Carmel Area Wastewater District/Pebble
Beach Community Services District
Pebble Beach Company
WASTEWATER RECLAMATION
PROJECT
MANAGEMENT COMMITTEE
MINUTES
Meeting of September 16,
2005
Pebble Beach Community
Services District Boardroom
3101 Forest Lake Road,
Pebble Beach, CA
1. Call to Order
Richard Andrews, PBCSD General Manager,
serving as facilitator, called the meeting to order at 9:40 a.m. Members present were: Joyce S. Stevens and
Charlotte F. Townsend, Carmel Area Wastewater District Board of Directors
(CAWD); Richard D. Verbanec, Pebble Beach Community Services District Board of
Directors (PBCSD); and Mark Stilwell, Executive Vice President, Pebble Beach
Company (PBCo). Member Gary D.
Hornbuckle, PBCSD Board of Directors, was absent.
Others in attendance:
Michael Niccum, P.E., District Engineer, PBCSD
Barbara Buikema, Accountant/Controller, CAWD
Brent Reitz, P.E., Project Engineer, PBCo
Vinod Badani, Western Region Manager, E2 Consulting
Engineers
Charles Kemp,
Operations Manager, California-American Water (“Cal-Am”)
Michael Magretto,
Operations Supervisor, Cal-Am
Robert Hoffman, P.E., Advanced Treatment
Project Manager, Carollo Engineers
John Ryan, Pebble Beach resident
2. Visitors, public comment and/or changes
to the agenda:
There
were no comments from visitors, and no changes to the agenda were requested.
3. Minutes:
Addition of page numbers
was the only modification suggested to the draft Minutes of the
Reclamation Management Committee
meeting held on March 18, 2005. Joyce
Stevens
indicated she would abstain
because she had not attended the previous meeting.
It
was moved by Mark Stilwell, seconded by Charlotte Townsend, with Joyce Stevens
abstaining, and unanimously carried, to
approve the minutes of the Reclamation Management Committee meeting held on
July 8, 2005, as submitted, and with
the addition of page numbers.
4. Operations & Maintenance of the
Project:
4-A. Treatment Plant Operations & Maintenance
(“O&M”)
The Committee received a written report from
CAWD Treatment Plant Superintendent, Mark Scheiter, dated September 14, 2005
regarding treatment plant operations for the period of July and August 2005. It was reported that during the report period
the treatment plant had operated normally and there were no significant
maintenance issues.
Richard Verbanec asked how the substantial
number of alarms reported for the Micro-Filter/Reverse Osmosis (“MF/RO”) Pilot
Plant should be interpreted. Mark
Stilwell responded that the alarms were discussed in a recent advanced
treatment facilities planning workshop held at CAWD, and it was concluded that
they were all expected and not unusual in a pilot MR/RO plant. There were no other questions or comments
from Committee members.
The written report regarding Treatment Plant O & M for July
and August 2005 was received for information purposes
and no action was required or taken by the Committee.
4-B. Distribution System O&M
PBCSD District Engineer,
August was 12% below the
10-year average usage of 853 acre-feet, and potable water backup usage was 31%
lower than the 10-year average of 261 acre-feet for the same period. He noted that charts were attached to the written
report which included reclaimed and potable water used on a daily basis for the
report period as well as monthly usage for the 2004-05 water year and previous
ten water years. In reviewing the golf
course daily irrigation charts Mr. Stilwell observed there appeared to be a more
frequent number of days when backup potable water was used. He asked Mr. Niccum if, --- except for
periodic potable water flushing cycles ---, the number of potable water use
days would decline significantly when Forest Lake Reservoir comes on line, even
before the CAWD advanced treatment facilities are operational. Mr. Niccum said, yes, there would be fewer
days when potable water has to be used, primarily because there will be
adequate tertiary water in storage to meet peak summer irrigation demand during
periods of hot weather or when CAWD has to shut down the tertiary treatment
plant for maintenance. There were no other
questions or comments from Committee members.
The
Distribution System O & M Report for July and August 2005 was received for
information and no action was required
or taken by the Committee.
4-C. Operation and Maintenance Financial Reports
Ms. Buikema reviewed her
submitted financial statements for the period from July 2004 through June 2005.
She commented upon each of eight discussion points included in her memorandum
accompanying the financial statements.
Ms. Buikema said that for the first time the balance sheet included a
“Phase II Escrow Account”, with a balance of $15,385,827 on June 30, 2005. Ms. Stevens noted and Ms. Buikema confirmed
that the $16,920,730 identified in the equity section of the balance sheet as
“Water Entitlement Contributions” is revenue derived from PBCo water sales to
Del Monte Forest residential property owners.
In response to Mr. Stilwell’s question, she confirmed that with regard
to O&M revenues and expenses, the past fiscal year ended with a positive
variance of $385,650 net cash income. Ms.
Buikema indicated that to give the Management Committee a perspective of Phase
II expenditures, page 11 of the financial statements included a historical
summary of Phase II capital improvement expenditures from fiscal years
1999-2000 through the 2004-2005. In
response to questions from Committee members Mr. Stilwell clarified the purpose
of certain of the expenditures such as legal fees that had been paid for by the
PBCo, including $1.5 million for Phase II initial design.
Mr. Andrews commented
that from an historical perspective the Phase II CIP summary
did not include PBCSD’s
acquisition costs of the Forest Lake Reservoir property, which he said were approximately
$1.2 million ($87,000 of which was reimbursed by the Reclamation Project). Ms. Buikema noted the summary included only
costs that had been processed and recorded through CAWD’s financial
system. There were no further questions
or comments from Committee members.
It was moved by Joyce Stevens, seconded by Mark Stilwell,
and unanimously carried that the Financial Statements for the period of July 1, 2004 through June 30, 2005 be accepted as
submitted.
4-D. IRS Arbitrage Rebate and Yield Requirements
The Committee received and reviewed a copy of a letter dated August 24,
2005 to Rick Dickhaut, MPWMD Chief Financial Officer, from Arbitrage Compliance
Specialists Incorporated. The letter outlined
the reasons why the Internal Revenue Service still requires Reclamation Project
funds to be audited for compliance with federal arbitrage rebate yield
requirements even though all construction bond proceeds have been expended for
quite some time. The information was provided
by Mr. Dickhaut in response to the Committee’s request during its last meeting held
on July 8, 2005. Mr.
Andrews said that Mr. Dickhaut was not able to attend the Committee’s current
meeting but had offered to participate in a future meeting of the Committee if
members still had questions about arbitrage requirements.
Mr. Andrews said that his interpretation of the information supplied by
the consultants, arbitrage Compliance Specialists, is that the primary reason why
reclamation project funds must still be audited for arbitrage compliance
requirements is that project facilities financed from tax free certificates of
participation produce revenue derived from recycled
water irrigation users that is invested to produce income for the project. That income is then subject to IRS arbitrage
yield requirements, and any amount of income that exceeds the IRS yield
limitations must be rebated to the IRS.
Committee members indicated they concurred with that conclusion and
believed the consultant’s letter provided by Mr. Dickhaut sufficiently answered
the Committee’s questions.
5. Status reports concerning Phase II
(Expanded) Reclamation Project:
5-A. Advanced treatment facilities:
In the absence of Ray
von Dohren, Robert Hoffman, representing project engineering consultants, Carollo
Engineers, provided the Committee with an oral progress report regarding
engineering plans for the advanced treatment component of the Expanded Reclamation
Project. He said a tentative project
schedule had been prepared, and it was hoped that the next milestones,
completion of 30% design and negotiation of a guaranteed price, would be
achieved in December. Mr. Hoffman then
reviewed tentative dates for the other major project milestones. Mr. Stilwell commented that one issue that
keeps coming up, but which has not yet been resolved, is whether a connection
fee for the advanced treatment facilities is necessary or appropriate. Mr. Stilwell indicated that such a charge
would be a major issue with respect to the ability to finance the Advance
Treatment facility, as no such fee has ever been included in any project cost
estimates. As Mr. von Dohren was not
present, the matter was not further discussed.
There
were no further questions, comments or action taken by the Committee.
5-B. Forest Lake Reservoir:
The Committee received
and reviewed a written report, dated September 16, 2005 from PBCSD District
Engineer, Michael Niccum, regarding the status of construction of the Forest
Lake Reservoir component of the Expanded Reclamation Project. Mr. Niccum orally reviewed his report, also
providing slides that depicted various construction activities. He reported that Anderson Pacific Engineering
Construction’s progress included the following major items: completion of rough grading work on the interior
of the reservoir, installation of the concrete anchor for the lining system
along the perimeter of reservoir at the top of the embankment, tunnel jacking
of a 48-inch steel casing and 36-inch concrete pipe through the reservoir
embankment for the overflow outlet line, finished grading for the chemical
building pad, beginning of work on the mixer and outlet structures on the floor
of the reservoir, construction of 80 % of the of the exterior toe of the north
embankment improvements, installation of a 24-inch plastic overflow pipe and
pouring of the concrete energy dissipation structure located near Sawmill Gulch
creek and starting installation of the reservoir liner. He said fabrication of 75 % of the liner has been
completed off site. Mr. Niccum reported
that change orders totaling $200,531 have been approved to date, which is
within the $500,000 contingency limit established for the project. He noted
that to date the contractor had earned 44% of the $10.9 million construction
contract.
Mr. Niccum then reviewed
the construction schedule attached to his written report and responded to
questions from the Committee about the schedule.
There were no further questions, comments or action taken by the
Committee.
5-C. Implementing of Financial Plan
Mr. Stilwell provided an oral progress report regarding implementation of
the financing plan for the Expanded Reclamation Project (Phase II)
improvements. Overall, he said there was
not much more to report than the information provided to the Committee in its
July meeting. He indicated there had
been a number of additional closings of water sales totaling about $2.0
million, and even some more activity after the water price was raised to
$250,000 per acre-foot from $200,000 per acre-foot, following the escalation of
the cost estimate for advanced treatment facilities. Mr. Stilwell expressed the opinion that in
the future, water sales will probably mostly be related to remodeling projects
rather than new construction on existing residential lots. He said PBCo was also pleased that some
purchasers of water entitlements have already started using the water and that
there had been no indication of action on the potential Rosenthal legal
issue. To date, PBCo has sold 105
acre-feet of the 150 acre-feet water entitlement which the PBCo Board of
Directors has authorized be sold to finance the Expanded Reclamation
Project. Mr. Stilwell said PBCo is
hopeful water sales will finance all necessary construction and maybe allow for
reimbursement of some earlier project development costs, e.g. engineering,
legal and so forth.
There were no further
questions, comments or action taken by the Committee.
6. Miscellaneous Information or
Announcements from Members, Staff or Visitors:
Mr.
Stilwell asked if Cal-Am representatives could comment on CAWD General Manager,
Ray von Dohren’s letter requesting Cal-Am participate financially in the
construction of automated facilities at the CAWD treatment facility that would
allow more efficient and timely
discharge of surplus recycled water to the Carmel River Lagoon. Charles Kemp,
Cal-Am’s Operations Manager, responded that Steve Leonard, General Manager / Vice
President was away on vacation and when he returned he would respond to Mr. von
Dohren. Mr. Kemp said that, personally,
he thought the proposal was a good concept and that it would be seriously
considered by Cal-Am. Mr. Stilwell
advised Mr. Kemp that the PBCo has no objections to the CAWD proposal. Mr. Kemp reported, also, that Cal-Am is in
the process of revisiting the Carmel Valley main distribution line project to
determine if additional work or improvements may be indicated. In addition, he said Cal-Am’s current rate
case being considered by the State Public Utilities Commission is nearly
concluded. At one point he said there
were 11 interveners involved, but that the Commission now appears to be close
to a decision. Mr. Kemp said the rate
increase will probably be in the neighborhood of 30%, spread over three years
in 10% increments.
Mr. Stilwell reported to the Management
Committee that related to the increases that appear imminent in Cal-Am water
rates, Michael Bowhay, General Manager of Monterey Peninsula Country Club, had
contacted him on behalf of the Independent Reclaimed Water Users Group, to
inquire whether PBCo would consider modifying project agreements to decouple
the cost of reclaimed water from potable water rates. Mr. Stilwell said that he had advised Mr.
Bowhay that PBCo is very unlikely to be willing to consider the issue.
7. Closed Session: The Committee did not meet in a closed session.
8. Adjournment & Next Meeting Date:
There being no further business at 11:07 a.m., it was moved
by Joyce Stevens, seconded by Charlotte Townsend, and unanimously carried to adjourn to Friday, November 11, 2005
at 9:30 a.m. in the PBCSD Boardroom at 3101 Forest
Lake Road, Pebble Beach. (Note: due to the
Veterans Day holiday, the meeting date was subsequently changed to 11/10/05 at 1:30 p.m.)
Respectfully
submitted:
Richard
Andrews
Secretary
to the Committee