M I N U TE S MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA) Special Meeting 6:00 PM, Monday, December 10, 2012 FEW

MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None Monterey Assistant City Manager, Legal Counsel Freeman, Legal Counsel McLaughlin, Monterey City Attorney, Clerk to the Authority

ROLL CALL PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF Director Burnett reported on pursuit of County of Monterey participation in the MPRWA and indicated the County Council's office sent a letter to the State of California Attorney General on October 30, 2012 seeking a legal opinion on compatibility of offices. The Assistant Attorney General estimated an advice letter by the end of the year but a full process letter could take up to 1 year. Director Burnett was hopeful an advice letter would be adequate to allow the County of Monterey participation which would allow the Authority to speak with one voice. Director Burnett also updated the Authority on the Governance and Finance committee. They provided a counter proposal to California American Water (Cal Am) on October 1, 2012 which was codified in the agreement with the County of Monterey. He indicated another meeting scheduled for December 11, 2012 where he will continue to work toward achieving the governance the Board has directed, and best financing in the best interest of the ratepayers. Director Rubio requested to agendize discussion of an addendum to the CPUC application expanding the comments regarding desalination facility sizing and the EIR process and requirements. Legal Counsel Freeman introduced Russ McLaughlin, contract Legal Counsel to the Authority. PUBLIC COMMENTS President Della Sala opened the floor for public comments for items not on the agenda. Having no requests to speak, closed public comment. AGENDA ITEMS 1. Consideration of a Resolution Approving a Conflict of Interest Waiver for the City Attorney Regarding Providing Legal Services for the Monterey Peninsula Regional Water Authority (MPRWA) Action: Passed Resolution 2012-06

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City of Monterey City Attorney Davi introduced the item and explained the requirement of the State of California bar rules of professional conduct indicating when an attorney is representing multiple parties on the same issue, there is a required written waiver of the conflict of interest. If Mr. Freeman takes on the services of the Authority, three clients would have overlapping services, which is justification for the waiver. The agenda packet included written consent from the overlapping jurisdictions. Mrs. Davi indicated that this item is reviewing the rules and the waivers and approving the conflict, and if approved, at the December 13, 2012 meeting the MPRWA will vote on Mr. Freemans contract. Director Edelen questioned Mr. Freemans participation at Watermaster meetings to which Legal Counsel McLaughlin clarified that Mr. Freeman provides legal services for the City of Seaside and makes comments at the meeting representing the City of Seaside therefore there is no conflict. The Watermaster does not have independent legal counsel. President Della Sala opened public comment on the item and having no requests to speak closed public comment. On a motion by President Della Sala, seconded by Directors Edelen and Burnett, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the Resolution Approving a Conflict of Interest Waiver for the City Attorney Regarding Providing Legal Services for the Monterey Peninsula Regional Water Authority AYES: NOES: ABSENT: ABSTAIN: RECUSED: 2. 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Review Recommendations from Technical Advisory Committee for California Public Utilities Commission Cost Model Workshop on December 11 - 13, 2012, Provide Direction and Designated Representative to Communicate Key Topics of Concern Action: Received Recommendation and Provided Direction to Staff Director Burnett referred to the memo in the agenda packet which included the recommendations the TAC encouraged the Authority to present at the CPUC Cost model workshop and then gave details of the pending workshop format. He indicated that the included basic cost model will be the model used at the Workshop, which will allow the Authority representatives to request the CPUC and Cal Am to address during the Workshop. Director Burnett pointed out that most are financial models but some issues include cost of debt and explained how the level and cost of debt that Cal Am carries will impact to ratepayers. Director Burnett then recommended looking at varying surcharge amounts, the possible charge on water bills in advance of a desalination facility coming on line, and the effect of public contribution on funds lowers the amount of debt and equity Cal Am would need to put into the project. He then requested feedback from the Directors and the public about the presented TAC recommendations so appointed representatives will be able to speak on behalf of the MPRWA at the Workshop. Director Burnett answered questions from the Board. Monterey Peninsula Regional Water Authority Special Meeting Minutes - Monday, December 10, 2012 2

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On question, Director Burnett indicated that Cal Am has been provided with the discussed recommendations prior to the Workshop and should be prepared to respond. Director Kampe then questioned if the repayment of public funds is included as part of the model to which Director Burnett responded that public funds would be put forward by the Water Management District and the cost would be the tax exempt debt based on the public credit rating. A blended debt equity rate is somewhere in the range of 9% where the cost of the tax exempt public debt is in the range of 3.7% so by putting in more at 3.7% and taking out at 9%, the public would come out ahead. President Della Sala opened the item to public comment. Nelson Vega questioned the modeling formula and who would own the plant at the end if public funds were used as contributions. With no other requests to speak, President Della Sala closed public comment. Legal Counsel McLaughlin spoke to Mr. Vegas question about the modeling formula indicating Cal Am has authorization from the CPUC for 9.9% interest rate and a cost of debt (debt to capital ratio) approved as part of a multi utility approval. President Della Sala recommended providing direction to communicate with the CPUC regarding information that was presented in the packet. On motion by Director Edelen and Seconded by Director Kampe to support the recommendation, as presented by the Technical Advisory Committee. Discussion on the motion. Director Rubio agreed to the primary recommendations but questioned secondary recommendations to which Director Burnett responded to questions on the secondary recommendations. Director Kampe agreed that with the different scenarios, a few of the scenarios will fall out as non optimal, as opposed to prime alternatives. On a motion by Director Edelen, seconded by Director Kampe, carried by the following vote, the Monterey Peninsula Regional Water Authority approved the recommendations as presented by the Technical Advisory Committee to present at the California Public Utilities Commission Cost Model Workshop on December 11 - 13, 2012 and designated Director Burnett and TAC Member Dave Stoldt to attend as representatives of the Authority. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 3. 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Appointment of Vice President and Secretary for the Monterey Peninsula Regional Water Authority Action: Approved Appointment of Director Burnett as Vice President and Director Rubio Secretary

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President Della Sala introduced the item and indicated that the previously approved Vice President and Secretary were not re-elected to their jurisdictions and have been replaced by the new Mayors Kampe and Rubio. President Della Sala then nominated Director Burnett to serve as Vice President and Director Rubio to serve as Secretary to the Authority. He then invited other nominations from the Board. Director Edelen expressed support for the nominations. President Della Sala opened the item to the public and with no requests to speak closed public comment. On a motion by President Della Sala and seconded by Director Edelen, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the appointment of Director Burnett to serve as Vice President and Director Rubio to serve as Secretary to the Authority. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4. 6 0 0 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala None None None None

Authorize Change to Scope of Work for SPI Consultants and Allocate Additional Funding Director Burnett introduced the item and presented a brief synopsis of the included staff report. He recommended the Authority authorize changing the scope of work for the SPI Consultants and Independent consultant Kris Helm to include additional information and clarifications requested by the public and the Authority Board to be included in the final report. Director Burnett then answered questions from the Board. President Della Sala opened the item for public comment. Nelson Vega questioned the cost differences listed in the reports for electricity charges and also questioned if allocation of additional funds would have a drastic change on the content of the report. He then encouraged the Authority to make a recommendation to support a specific project. Tom Rowley welcomed the new Directors and encouraged going forward with the additional funding, and thanked the Authority for seeking a project that is feasible and cost effective. With no further requests to speak President Della Sala closed public comment and responded to Mr. Vegas question about the costs of electricity. He indicated that different sources of power and the distance the energy must travel to get to the facility both will impact the unit costs. He then brought the discussion back to the board. Director Rubio motioned and seconded by Director Kampe ta Authorize the change to the scope of work for SPI Consultants and to allocate additional funding for inclusion and modification of additional information. President Della Sala invited discussion on the motion. Director Kampe indicated support to include cost modeling and financial feasibility to be able to compare all projects.

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Director Burnett questioned incorporation into the scope of work, the financial ability of each project applicant to carry their project through completion. The motion was amended by Director Rubio and Director Kampe agreed to the modified motion. Director Burnett commented that previous information excluded confidential information which impacted the results of the study and hoped this would relieve that issue. Legal Counsel Freeman indicated that this analysis was specifically excluded from the scope of work and report and inclusion would necessitate additional costs. After discussion, Director Kampe withdrew his second due to inconsistency between desired strategy and the budget. The motion died for lack of a second. ADJOURNMENT With no further business to come before the board, the meeting was adjourned.

ATTEST:

Lesley Milton, Clerk to the Authority

MPRWA President

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