Contra Costa Water District

CONTRA COSTA WATER DISTRICT

BOARD OF DIRECTORS

REGULAR MEETING

February 6, 2008

MINUTES

CALL TO ORDER

President Campbell called to order a regular meeting of the Board of Directors of the Contra Costa Water District at 6:32 p.m., at 1331 Concord Avenue, Concord, the regular meeting place of the Board.

ROLL CALL

Directors Present: Joseph L. Campbell, President

Elizabeth R. Anello, Vice President

John A. Burgh

Bette Boatmun

Karl L. Wandry

General Manager: Walter J. Bishop

Legal Counsel: Robert B. Maddow

District Secretary: Sharon L. Burris

PLEDGE OF ALLEGIANCE

Engineering Manager Dan Owre led the Pledge of Allegiance.

ADOPTION OF AGENDA

Mr. Bishop reported that there was a memo before the Board revising Agenda Item No. 1. a. Future Services – January.

PUBLIC COMMENT

President Campbell asked if there were any public comments. There were no public comments.

CONSENT

1. Approve Directors’ Services/Business and Travel Expenses

a. Future Services – February

b. Expenses – January

c. Compensation – January

2. Approve the following minutes:

a. December 5, 2007

b. December 19, 2007

3. Approve the warrant register dated February 7, 2008.

4 Amended Agreements for the Advanced Treatment Research Project

a. Adopt Resolution No. 08-05 authorizing execution of an agreement to accept the revised funding amount under The Water Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002 (Proposition 50);

b. Authorize a grant agreement with the State Department of Water Resources to conduct the Advanced Treatment Research Project in an amended amount not to exceed $673,000; and

c. Authorize an amended contract with Carollo Engineers to provide consultant services for the Advanced Treatment Research Project for a total cost not to exceed $560,000.

President Campbell reminded the Board that adoption of the consent calendar would include the revised Agenda Item No. 1.a.

MOTION: Boatmun/Anello moved to approve the consent calendar. The motion carried by a unanimous voice vote.

ACTION

5. Adopt Resolution No. 08-06 authorizing execution of an eighth amendment to the agreement with the California Department of Water Resources for the Los Vaqueros Reservoir Expansion Project for an additional amount not to exceed $1,135,000 for an agreement total not to exceed $16,635,000.

Mr. Bishop reported that this was the eighth amendment to the agreement with the California Department of Water Resources (DWR) for the Los Vaqueros Reservoir Expansion Project. All District costs, including overhead, would be offset by payments from DWR under this amended agreement. Board approval of the amendment would increase the total funding from DWR to $16,635,000. The item was placed on the action calendar due to the amount of the amendment.

President Campbell asked if anyone in the public would like to comment on the item. There were no comments.

MOTION: Wandry/Burgh to adopt Resolution No. 08-06 authorizing execution of an eighth amendment to the agreement with the California Department of Water Resources for the Los Vaqueros Reservoir Expansion Project for an additional amount not to exceed $1,135,000 for an agreement total not to exceed $16,635,000. The motion carried by a unanimous voice vote.

DISCUSSION AND INFORMATION

6. Review and comment on the Draft Ten-Year Capital Improvement Program and Financial Plan for Fiscal Years 2009-2018.

Mr. Bishop advised that Assistant General Manager of Planning/Operations and Maintenance Jerry Brown and Director of Finance Brice Bledsoe would be presenting the Draft Ten-Year Capital Improvement Program and Financial Plan (CIP) for fiscal years 2009-2018. The plan prioritized District investments and estimated ten-year revenue projections.

Mr. Brown reported that the item was before the Board for review and no action was required at this meeting. He emphasized three key messages in the CIP: the accelerated schedule for the Alternative Intake Project (AIP); the completion of Los Vaqueros Reservoir Expansion Project environmental and planning studies; and, financial consistency with the Board’s rate and reserve policies.

Mr. Brown reviewed the projects in the CIP and advised that the funded projects were Priority Level 1 & 2 projects. The unfunded projects were identified as Priority Level 3 projects. The $22 million increase in total CIP cost is the net result of inflation, adding new projects and new project estimates. The funded level decreased by $4.4 million reflecting the completion of projects.

Using a table, Mr. Brown reviewed the project funding sources. Comparing the 2007 CIP with the 2008 CIP he reported that a significant difference was the funding for the AIP. He reported that commercial paper was being used as a short-term cash flow tool. Another change was the decrease in the debt funding for the Brentwood Water Treatment Plant (WTP). He advised that the City of Brentwood would be financing the WTP. The increase in the Funded by Others category was attributed to the Canal Replacement Project and the recent authorization in the Water Resources Development Act (WRDA) 2007 bill.

President Campbell commented positively on the table used and appreciated how the Funding by Others had been broken out separately.

Mr. Brown used a table to reflect the total CIP costs for all priority level projects. He reported that CIP funding totaled $525 million over a ten-year period and included ten programs. He defined the projects in each of the program categories, compared those funding levels to the funding levels in the 2007 CIP and identified ongoing and completed projects. He identified the programs as: Administrative Support Facilities; Delta Projects; Equipment and Capital Purchases; Expansion of Services; Future Water Supplies; Los Vaqueros Watershed and Recreation; Treated Water Distribution and Storage; Untreated Water Supply and Transport; Water Demand Reduction; and Water Treatment Facilities. He advised that two of the largest changes were in the areas of the Expansion of Services and the Untreated Water Supply and Transport Program.

Mr. Bishop explained the benefits of using commercial paper rather than reserves to fund the AIP’s acceleration.

Mr. Brown reported that operating costs were projected over the ten-year period using a 4% inflation factor and were based on the FY08 budget. Operating impacts for new projects were factored into the analysis for the full ten-year period. He advised that water costs historically had been estimated at twice the rate of inflation. The 2009-2018 CIP had included a 10.5% escalation factor to account for impacts of charges for Delta water diversions being considered at the present time.

Responding to a question from Director Boatmun concerning how much this would equate to in fee increases, Mr. Bishop responded that it would be approximately .5% for the outlying years.

Mr. Brown reviewed the incremental operating impacts of the CIP for priority level 1 & 2 projects. He identified projects with significant impacts as: the Brentwood WTP; the AIP; and the East Bay Municipal Utility District Intertie.

Responding to a question from Director Wandry concerning financing of the Los Vaqueros Reservoir Expansion Project and if the District would consider financing with commercial paper, Mr. Bishop replied, yes.

President Campbell asked if the Board had questions on this portion of the presentation, or if they would prefer to hold questions until Mr. Bledsoe had presented. There were no questions.

Director Burgh commented on the positive outcome of accelerating large capital investment projects. He commended staff on construction of projects being completed ahead of schedule.

Mr. Bledsoe reported on the District’s Ten-Year Financial Plan and indicated that all priority level 1 and 2 projects in the Draft CIP were funded. The annual revenue increases were below the assumed 4% rate of inflation. He reviewed key elements in the Financial Plan and identified them as positive financial results; $18 million additional water costs associated with the anticipated added expense of diverting water from the Delta; and full utilization of commercial paper to optimize cash flows and maximize earnings on reserves.

Using a chart, Mr. Bledsoe summarized the revenue increases necessary over the ten-year financial plan period. He advised that revenue increases for the ten-year period were all below the 4% rate of inflation. He reviewed the reserve drawdown and advised that drawdowns in earlier years were due to AIP expenditures, but never dropped below the minimum reserve requirements.

Mr. Bledsoe reported that the financial plan totaled $1.7 billion. He reviewed the expenditure categories and identified them as operating, capital, and debt service. He also reviewed the source of funds and advised that outside funding totaled $268 million.

Director Wandry asked about the increase on the reserve balances chart shown in the year 2011. Mr. Bishop responded that it was the untreated water portion of the treated water rate kept in the treated water balance.

Mr. Bledsoe reviewed the CIP schedule and advised that the item would be brought back to the Board for consideration at the Board meeting on February 20, 2008. Mr. Bledsoe acknowledged the CIP team and identified them as Principal Planner Fran Garland, Principal Engineer Jeff Quimby, Rate and Financial Analyst Wayne Niehus, and Project Controls Manager Lars Sandberg.

President Campbell asked if there were any questions for the presenter. There were no questions.

President Campbell asked if there were any public comments concerning the item. There were no comments.

President Campbell commented that by serving on the Operations and Engineering Committee he was familiar with the projects in the Draft CIP and Ten-Year Financial Plan. He noted that he was pleased with the presentation and with the document.

Director Burgh commented positively on the prudence and forethought from staff concerning future increases in water costs.

It was the consensus of the Board to bring the Draft CIP and Ten-Year Financial Plan for fiscal years 2009-2018 to the Board meeting on February 20 for consideration of adoption.

REPORTS FOR DISCUSSION

7. Committee Report(s)

a. Bay Area Water Forum Water and Land Use Subcommittee Post-Meeting Report (1/23/08)

b. Bay Area Water Forum Post-Meeting Report (1/28/08)

President Campbell asked if there were any comments on the committee reports. There were no comments.

8. Schedule Future Meeting Dates and Times

Mr. Bishop reminded the Board of the Mayors’ Conference on February 7, in Walnut Creek.

REPORTS

9. General Manager

Mr. Bishop reported that the vacant positions created by the resignation of the Director of Operations and Maintenance had been filled. The new Director of Operations and Maintenance would be Pete Schoemann, currently the Director of Construction. Engineering Manager Dan Owre would be replacing Mr. Schoemann as Director of Construction, and a new employee, Rachel Lenci would be replacing Mr. Owre as Engineering Manager. President Campbell commented positively on the appointments.

Mr. Bishop reported that he had testified at the Oversight Hearing before the House Resources Subcommittee on Water and Power in Washington, D.C. on January 29. The testimony concerned the immediate federal and state role in addressing uncertain water deliveries for California and the impacts on California communities. He commented that Congressman George Miller was very supportive at that hearing. He advised that a follow-up hearing would be held in Sacramento at a later date.

10. Legal Counsel

Mr. Maddow did not have a report.

11. Board Members

Director Burgh reported that the Bay Area Water Forum’s April meeting would be a field trip to the state water pumps. The trip would include a visit to Old River to view the District’s fish screens.

Director Boatmun reported that she had received an application for the Association of California Water Agencies (ACWA) Claire A. Hill Award and noted if there was nothing to submit for this year that the District could work on something for next year. Mr. Bishop acknowledged that he was aware of the application and that certain criteria needed to be met to apply for the award. She also advised that ACWA’s Health Benefit Authority would be promoting a Wellness Program and indicated that the District might be able to offer ideas to help promote the program.

Vice President Anello did not have a report.

Director Wandry did not have a report.

President Campbell reported that he and other Directors attended the Contra Costa USA 2008 on January 24. He also reported that he attended the Mayors’ State of the City Addresses in Concord on January 29 and Walnut Creek on February 5. He commented positively on the CIP presentation and thanked staff.

ADJOURNMENT

At 7:17 p.m., President Campbell adjourned the meeting to the next regular meeting of the Board of Directors scheduled for February 20, 2008 commencing at 6:30 p.m.

Joseph L. Campbell, President

ATTEST:

Sharon L. Burris

District Secretary