MINUTES OF THE BOARD OF DIRECTORS
ZONE 7
ALAMEDA COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT

________________________________________________________________

REGULAR MEETING

September 19, 2018

The following were present:

DIRECTORS: SANDS FIGUERS

DENNIS GAMBS

SARAH PALMER

RICHARD QUIGLEY

ANGELA RAMIREZ HOLMES

OLIVIA SANWONG

DIRECTORS ABSENT: BILL STEVENS

ZONE 7 STAFF: VALERIE PRYOR, GENERAL MANAGER

OSBORN SOLITEI, TREASURER/ASSISTANT GENERAL MANAGER, FINANCE

COLTER ANDERSEN, PRODUCTION MANAGER

JARNAIL CHAHAL, ENGINEERING MANAGER

CAROL MAHONEY, INTEGRATED WATER RESOURCES MANAGER

ELKE RANK, ASSOCIATE WATER RESOURCES PLANNER

ATHENA WATSON, ASSOCIATE CIVIL ENGINEER

RHETT ALZONA, PRINCIPAL ENGINEER

NZINGA ARRINGTON, ACTING EXECUTIVE ASSISTANT

COUNSEL: MATT WEBER, DOWNEY BRAND

Item 1 - Call Meeting to Order

President Ramirez Holmes called the meeting to order at 7:00 p.m.

Item 2 - Closed Session - There was no closed session

(a) Conference with Labor Negotiators pursuant to Government Code section 54954.5:

Agency Negotiator: Valerie Pryor

Employee Organizations: Alameda County Management Employees Association; Alameda

County Building and Construction Trades Council, Local 342, AFL-CIO; International

Federation of Professional and Technical Engineers, Local 21, AFL-CIO; Local 1021 of the

Service Employees International Union, CTW; Unrepresented Management

(b) Conference with Legal Counsel - Existing litigation pursuant to Government Code §54956.9(d)(1): 1 case

(1) Edwin Belshe and Ginger Belshe v. Alameda County Flood Control and Water Conservation District, Zone 7,

et al., Alameda County Superior Court Case No. RG17868354

(c) Conference with Legal Counsel - Significant exposure to litigation pursuant to Gov't Code section 54956.9(d) (2):

3 cases

(d) Conference with Legal Counsel - Potential litigation pursuant to Gov't Code section 54956.9(d) (4): 2 cases

Item 3 -

OPEN SESSION AND PLEDGE OF ALLEGIANCE

President Ramirez Holmes led the Salute to the Flag.

Item 4 -

REPORT OUT OF CLOSED SESSION

President Ramirez Holmes reported that the Board did not meet for Closed Session.

Item 5 -

CITIZENS FORUM

Constance Kopps, citizen of Livermore, stated that she would like to know when Springtown transferred over to the City of Livermore. She also reported that she was concerned about raccoons that she has seen entering holes in the area and her Home Owners Association has not provided answers.

Dan McIntyre of Dublin San Ramon Services District stated that the Agency did a great job hosting the ACWA Region 5 event earlier this week. The history of the area given by Director Figuers was very interesting.

Item 6 -

MINUTES OF THE REGULAR BOARD MEETING OF AUGUST 15, SPECIAL MEETING OF AUGUST 28, 2018 AND REVISED MINUTES OF JULY 18, 2018

President Ramirez Holmes stated that the following correction needed to be made to the revised notes: the voice vote in Item 7 should read 3-0-2. Director Quigley moved to approve the revised minutes of July 18, 2018 and Director Sanwong seconded the motion. The minutes were approved by a voice vote of 5-0-1 with an abstention by Director Palmer and Director Stevens absent.

President Ramirez Holmes stated that two changes should be made to the August 15, 2018 minutes. Item 7 vote for the July 18, 2018 Minutes should reflect the one abstention in the vote to read 6-0-1. Item 13 should have the word "political" added to the sentence that reads "Director Stevens and President Ramirez Holmes stated that the Department has never taken a position on a ballot initiative." Lastly, Ms. Flores name should be corrected to Dr. Flores. Director Palmer moved to approve the minutes with changes and Director Quigley seconded the motion. The minutes were approved by a voice vote of 6-0 with Director Stevens absent.

President Ramirez Holmes stated that the Minutes of August 28, 2018 should be corrected to remove her first name in the sentence typed "President Ramirez Holmes Angela." Director Quigley moved to approve the minutes and Director Palmer seconded the motion. The minutes were approved by a voice vote of 6-0 with Director Stevens absent.

Item 7-

CONSENT CALENDAR

Director Figuers moved to approve Items 7a, b, and d - g. Director Quigley seconded the motion. The items passed with a voice vote of 6-0 with Director Stevens absent.

Director Palmer questioned the frequency of additional funds requested for the Liebert Cassidy Whitmore Contract. Ms. Pryor explained that Amendment 18-19 was for ongoing Human Resources work, such as the training sessions for managers. This new Amendment would be for FY 2018-19 and it would likely be an annual contract. Director Quigley moved to approve Item 7c and Director Figuers seconded the motion. The item passed with a voice vote of 6-0 with Director Stevens absent.

Item 8 -

STAFFING UPDATE

Item 8a Employee of the Month

Ms. Pryor announced that Joe Cerro has been selected as the Employee of the Month. Mr. Cerro joined Zone 7 as a Plant Mechanic in April 2002. In January 2018 he was promoted to Facilities Maintenance & Construction Supervisor. Mr. Cerro has shown great strides in maintaining fairness with his employees and successfully equipping them with the tools needed to get the job done right.

Item 9

WHOLESALE WATER RATE STUDY

President Ramirez Holmes reminded the public that the Board is considering water rates for 2019 and possibly beyond. There were several schedules of meetings for public input. She gave a recap of the meetings that have occurred thus far on the proposed water rates for 2019 and possibly beyond and informed the public that the Water Rates Workshop Meeting that was held on September 5, 2018 could be viewed on the Zone 7 website. The September 5, 2018 meeting was the first time the Board saw the proposed water rates and was able to discuss the four different scenarios presented by staff. Based on feedback from the public and the Board, tonight staff is presenting two scenarios. This is only the second time the Board gets to discuss the rates. They only speak to each other in front of the public to not violate the Brown Act. On Wednesday, October 17th the Board will meet to discuss any additional information, any refined scenarios, and ultimately vote on any water rates for 2019 and potentially beyond. The Board can be contacted on boardofdirectors@zone7water.com. The scenarios have a different line name to be clearer. Transfers from fund 100 (Water Enterprise fund) to fund 120 (Renewal & Replacement Fund) are capital funding of the Agency Capital Improvement Plan (CIP) as approved by the Board under the Asset Management Plan (AMP). The policy will be available at the October meeting and on-line. There were a lot of questions about the AMP. It is a Board policy which allows a specific amount of transfers from Fund 100 each Fiscal Year. The reserve policy is available here today as there were questions about the reserve policy as well.

Mr. Solitei presented a presentation on the wholesale water rate study. The presentation covered the following topics:

. The Agency public outreach on the rates

. The recent Agency cost efficiency measures to save cost;

. Key assumptions used in the rate study;

. Fixed cost recovery options;

. Water sales demand projections from the retailers;

. The three financial plan scenarios;

. Customer impacts on the three scenarios; and

. The capital improvement plan (CIP) for the Agency

Mr. Solitei presented a PowerPoint presentation for the following three scenarios on the rates and discussed the customer impact on all the scenarios:

. Scenario 1 - Base case: (only inflationary rate adjustments) and $9M funding for Water Supply Reliability Projects - previously presented;

. Scenario 2 - Funding three reserves at Target Levels (Operating, Emergency and Drought), and $9M funding for Water Supply Reliability Projects;

. Scenario 3 - Funding three reserves at Target Levels (Operating, Emergency and Drought), and $15.2M funding for Water Supply Reliability Projects; and

. All scenarios include gradually increasing the fixed charge component from 35% to 45% by CY 2022.

President Ramirez Holmes opened the discussion to the Board. Director Palmer asked if the customer rate impacts per month were based on a base rate or is that compounded each year. Mr. Solitei answered that it is an additional amount each year Director Figuers requested a copy of the 2014 article on "Why Water Agencies Need Reserves" as referenced in the Wholesale Water Rate Study. He also asked Mr. McIntyre of DSRSD to answer on behalf of retailers on how quickly can they respond to rate changes from Zone 7 with a fairly set change schedule for four years and if there was an emergency and the increase needed to be increased more than planned, how quickly could the rate be applied. Mr. McIntyre responded that for DSRSD it would probably take three to four months to incorporate the change. It would have to be absorbed by their reserves in the meantime. Director Figuers also asked what their internal limitation was. Mr. McIntyre responded that they would have to run a Proposition 218 notice to get approval from rate payers to approve the pass of the Zone 7 charge.

Director Sanwong asked Mr. McIntyre what are the different costs that may show up on a bill along with the Zone 7 charges. Mr. McIntyre stated that there are operating costs associated with billing and the water metering system, staff that operates the field system at the turnout from Zone 7, maintenance, water tanks, pump stations, electrical costs to lift the water up into various pressure zones, replacement and renewal system, $4 million in total aggregate cost in the water system is set aside for their Asset Management Plan.

Director Quigley asked if the amounts for the Water Supply Reliability Projects in each scenario are the best estimate. Mr. Solitei responded yes. Director Quigley stated that the amounts should show how much money has already been expended and the likely time that the projects will come to fruition as this would be helpful to the public. He would also like to see the unit rate that Zone 7 is paying to the Department of Water Resources as it would be helpful to the Board and public. Ms. Pryor responded that it could be included in the next report.

Director Sanwong asked for more information about increased cost of groundwater pumping during drought years. Mr. Solitei responded that if a lot of surface water is received there is not as much need to pump for groundwater which equals less energy costs and possibly less chemical costs. Director Sanwong asked if during the drought there was a need to pump more. Mr. Solitei responded yes. Director Sanwong stated that the water bill estimates for consumers, for example $3.18 for this calendar year. In her research, each of the retailers has its own method of how it will charge a variable and fixed rate. She asked for confirmation. Mr. Solitei responded that it is an estimate of how much should be Zone 7's charge. The retailers may choose to have it as a variable or fixed charge; it is their decision.

Director Gambs asked why the drought reserves were included in the reserves but not the rate stabilization, how much was shifted over. Ms. Pryor replied that the current reserve policy has four reserve categories with minimum, target and maximum levels. The Board Workshop on September 5, 2018, there was quite a bit of discussion that if the fixed cost recovery was going to be increased to 45% there would be less of a need for a rate stabilization fund, therefore the scenarios presented are not funding the rate stabilization fund, but funding the other three funds at the target level. The Board may want to revisit the Reserve Policy maybe next year and talk about the rate stabilization fund. Based on discussion staff decided to not propose funding that particular reserve. Director Gambs stated that he thinks it's a good idea to revisit the reserve policy later. He also asked about bonding the particular projects for water reliability such as potable reuse where we have facilities here, if its selected it might be a possibility, that's one of those things where that decision cannot be made now, but is that something we're considering. These projects spread themselves over ten or fifteen years. Ms. Pryor responded that Zone 7 has largely relied on pay-as-you-go. There is an Asset Management Plan and that is what the capital transfers were based on. The Board may want to take an in depth analysis of the capital needs, water reliability needs, and determine portion of debt funding in the mix. Staff will be happy to work with the Board and the Finance Committee. Director Gambs responded that its one of those things where you stabilize your rate increase rather than spike it.

President Ramirez Holmes stated that if there is no funding for the rate stabilization then we can assume that all the scenarios are getting to the target amounts. She asked if all three scenarios meet the target amounts for all three funds: Emergency, Operation, and Drought. Ms. Pryor confirmed yes, the middle target amount, not the low or high. President Ramirez Holmes asked for how much is really needed for the California Water Fix and when will it be needed. Ms. Pryor stated that the numbers from the September 5th meeting were used again and they are based on a reasonable projection of a project that is ramping up, issuing bonds, and starting preliminary construction work. Based on recent discussions and hearings with the State Legislator the project may be slowing down, but there is still need for funding. The Delta Conveyance Construction Authority is up and running. They have RFP's out for engineering design management, geotechnical work, and Right of Way. DWR will probably bill the Agency for some of these items over the next four years. President Ramirez Holmes asked if it would be reasonable to budget less than $9 million in a scenario and have adequate amounts for those four years. She also stated that the slides presented had a list that was shorter than the items in the CIP book and asked for clarification if the projects listed in the presentation were for one year or all four years. Ms. Pryor responded that the CIP book lists CIP projects in three different categories: Expansion, Renewal and Replacement, and System-Wide Improvements. Some of the projects are in two categories and the funding is divided accordingly. The list from the presentation is the most major projects that would be funded from cash or water rates. There are also a few smaller projects: paving projects, valve replacements, and chemical systems. President Ramirez Holmes asked whether it was safe to assume that all of the projects listed for FY 2019 and FY 2020 will not be completed. There are twenty projects for FY 2019 and in her experience on the Board not all of the projects are completed and the AMP policy is based on the amount of money needed in a certain year to get a certain number of projects done. Since the audited actuals for FY 2018 have not yet been seen and in reviewing the budget material for June, Fund 120 had projected reserves well above FY 2018-19 and FY 2019-20 in the amount of $20 million and asked where are the actual numbers. Ms. Pryor answered that the projects listed for FY 2019 are all still planned to happen. The Chain of Lakes and Well No. 1 Stabilization Project are definitely planned to go forward. Dougherty Reservoir recoating, will start in FY2019/2020. Routine project includes valve replacements and other such items. As of now, it is planned to go forward with all of the projects. After the fiscal emergency, projects were deferred that need to now go forward. President Ramirez Holmes asked if there was Board direction for additional debt funding for some of the items in the CIP in the ten year plan and would that change the amount that is needed in the AMP.

Mr. Solitei stated that could add debt financing. In the 2017 the AMP was going to be around $14 million which was reduced to $12.3 million so that the difference was going to pay for the debt service payment. There is a give and take not sure how much AMP would be reduced to cover debt service payment. Ms. Pryor said that it is something that could be looked at in the future. Staff would need to spend some time looking at a forecast for a CIP trying to determine if there is a certain class of projects that would be appropriate for debt financing or whether a certain percentage should be debt financed. Staff would work with the Finance Committee and the Board trying to develop a policy level program. President Ramirez Holmes stated that there has been some concern regarding the O&M rising despite water demands not back at the 2013 level and also the scenarios that were brought back did not reflect any reduction in cost and only made some modifications in reserves. She asked why cost reductions were not looked at for the updated scenarios. Ms. Pryor responded that in providing the original scenarios which were the same scenarios, staff tried to incorporate a number of cost efficiencies: no additional staff, no additional operating programs except for the chemicals and power for the ozone projects that were incorporated in the first scenario. President Ramirez Holmes stated that for FY 2019-20 from the budget, anticipated expenses were 10% higher. The reasons given at the time for the summary were: debt service payment, increased water costs of $1 million and unfreezing six positions, $500,000 more for AMP and inflation. A better explanation needs to be provided as to why the expenses have been so much greater when the water demand is not yet back to the usage level in 2013 as this is not due to WaterFix or Water reliability. Ms. Pryor stated that at the Agency's highest level, 65% of the cost is fixed and costs do not vary with the amount of water produced and sold. Those costs don't vary. As the system gets older there are increased maintenance costs. Less water supply reliability means more money is spent on water transfers which increases the water cost.

Director Sanwong stated that in her research she visited all of the retailers' websites. She wanted to thank DSRSD for a really great link to a California Public Policy piece on why drought makes water rates rise. She stated that it would be great to add to Zone 7's website. In terms of operations and maintenance costs, drought can degrade water quality so treatment costs may increase during those periods. Even though advocating for conservation continues, there is still a cost associated to bringing water to the faucet that may be more during drought periods. It also mentions aging infrastructure, increasing regulation, and scarcity as some of the costs.

Director Figuers stated that there are three emergency funds, emergency, drought, and rate stabilization. Emergency can be earthquake or a major fire at a water treatment plant which could have a long re-building time but the reoccurrence is extremely low. Drought contingency has a much higher reoccurrence. With fire, there is insurance, with an earthquake government funds would be available for large items. He asked if the emergency reserve has been used for small repairs. Mr. Solitei explained that the agency used $16 million in all categories during FY 14/15. Director Figuers stated he was referring to the emergency. President Ramirez Holmes stated that they are not boxed, they are all combined. Director Figuers stated that the reserves should be looked at backward. President Ramirez Holmes stated that the FEMA recommended amount for emergency reserves was 2%. The Agency has 2-3%, as receiving funds from FEMA can take a while.

President Ramirez Holmes opened the discussion to public comment.

Constance Kopps, citizen of Livermore, suggested educating the community on an annual basis on the water process and perhaps having a resource room dedicated to water education.

Alfred Exner, citizen of Pleasanton, stated that the aim for rates should be equitable and fair. Mr. Exner stated that he attended the Finance Committee on September 18th and he feels that the untreated water users are being undercharged and the cost is being floated over to the treated water users. Mr. Exner suggested that Management be held at a 2.5% increase per year which could be handled through head count reduction or head count shifting, as long as they hold it to 2.5% until the unfunded health and retirement is taken care of. He would like to see savings from the building put into a fund for unfunded retirement and health benefits. He would like to cap operating expenses at 4% per year. He would like the detail of the fixed costs and not just charged to the retail customers but to the untreated water customers as well. The overhead retail rates should be fair and reasonable by having inside legal staff review to see if the retail customers should be charged for the untreated water customers overhead.

Purnam Sheth, citizen of Pleasanton, stated that keeping water supply, reliability and sound fiscal management is important to keep in place. He encourages Zone 7 to look at how to decrease costs. He asked how could the fixed costs be lowered and why the CIP cannot go back to 8 1/2? The CIP book does not rank the projects by priority. He suggested reducing the water rate by 15%, by looking at the operational budget that has gone up over the past five years, lower the CIP budget, and put the reliability piece in the CIP budget.

Dan McIntyre of DSRSD, stated that the DSRSD board met and discussed this matter the previous night. In response to that DSRSD has provided a letter to Ms. Pryor this afternoon stating the District's position. In general they are supportive of many of the investments that are needed. They support investing for water supply reliability. They support the need to restore the reserves, however, they think there may be an opportunity to tweak the reserves a little to mitigate the cost. The operating costs seem in line. They are okay with the fixed charge change from 35% to 45% and they can accommodate that. They suggested that a part of the AMP be debt financed. Some of the retailers have been discussing this for about 15 years. This may mitigate the impact a little. Spreading the costs over a longer period of time also may help.

Vin Pohray, citizen of Pleasanton, stated that he was glad there was a lot of concern and interest from the Board looking into this. He further stated that this year has been a record revenue year and despite that he doesn't understand why additional increases are being proposed. He asked that they look into cost, and living within the current budget, and prioritizing needs.

Linda Kelly, citizen of Pleasanton, stated that the charts that are presented to the Board by the staff as justification for the rate increase proposal scenarios are not always in sync with the actuals in the Comprehensive Annual Financial Report (CAFR) presented by Mr. Alvey over the last couple of years. The CAFR suggests that water usage has nearly flat lined. These proposals all indicate massive increases in water required by retailers. The Table Allotment from the State Water Project is understood as a little more than 80,000 acre feet per year. Discussions with officials from Dublin, Pleasanton, and Livermore all indicated that even with reduced percentage of water requested, throughout the drought, they all had ample water. The cities historically request more than they need to be sure to meet the needs. It might be best in the interest of the public to estimate a little more closely. Mitigation has not been listed in any of the scenarios. There are several pending lawsuits from the storms of 2017. One in particular has been ongoing since February 2017. It isn't scheduled for another hearing until December 20, 2018. It's important for staff to look carefully at flood protection projections in known flood areas in order to avoid a repeat. The General Manager is authorized to approve contracts up to $50,000 without Board approval. There has been too little scrutiny in contractors' proposals which leads to questionable expenditures. A lower cap on her authorization would seem a prudent option to consider without hindering her ability to do her work efficiently. She thanked the Board and Staff for including the public on these discussions. Ms. Kelly stated that she attended the Finance Committee yesterday and appreciated the things being requested such as closer scrutiny by the Auditor of things not previously examined as this is an important key in the relationship between the Board and the public. Also the suggestion given for regular scheduled monthly meetings for the Finance Committee will improve things as well, and these workshops are a wonder. Ms. Kelly stated that rate payers stepped up to the plate when conservation was requested and it's now Zone 7's turn to step up to the plate.

Leland Drysdale, citizen of San Ramon and licensed California State Contractor, stated that in the construction industry things tend to bid lower and then raised later through Change Orders. This happens because the lowest bid wins. There needs to be an adequate amount of care to make sure these projects are handled correctly. He believes that there was a lot of care for the citizens and understands that the water rates need to be increased. He does feel that the voting is a little too soon and maybe there should be more scenarios. Maybe something has to be delayed.

Carol Atwood of DSRSD reiterated that the main issue isn't operations but water supply reliability which is very important. She has heard estimates that we could lose 25% of our water if any one of the projects does not go through. Strategic Planning needs to be done a long way out, to ensure water for the future. She suggested smoothing out the third and fourth year in the scenarios to help the rate payers especially when the retailers tack their increases on top of Zone 7's rates.

President Ramirez Holmes opened comment back to the Board. Director Palmer stated that she agreed with Ms. Atwood for the need to look ahead. Public health and water reliability have to be primary and the main goal. She also feels like the rates should be drawn out instead of ramping them up to make them more palatable for the rate payers. President Ramirez Holmes asked if she had a suggestion. Director Palmer responded that spreading the increase over five to six years if possible.

Director Gambs stated that having a reserve fund that matches this fixed cost is an important thing, if it can be done over more years. As far as the water supply reliability, there are projects that will be needed. At this point he would be inclined not to do one of the larger ones. There are a lot of guesstimates at this point. In a year or so that can be done a lot better and justify to the public. He further stated that he appreciates that people care about their water rates and have attended the workshops. Director Sanwong thanked everyone who has attended and contacted the Board. She stated that she has been researching water bills to understand the different retailers, and users. She explained that some areas have other items added such as sewer, etc. and water bill intervals of two months and these things should be kept in mind when comparing bills. She suggested that Linda Kelly's Facebook group provide a photo of the water bills that they are concerned about so that the details can be analyzed. She also stated that Zone 7 should link information to other websites.

Director Quigley stated that keeping costs down and water rates down has always been a concern of the Board. The solar project at DVWTP is saving the agency $50,000/year and that some of the projects that the Board approves saves the Agency money. The water bill is one of the lowest bills, compared to Netflix, Comcast, etc. The Board works diligently to try to save money and keep costs down which might be a good thing to showcase.

President Ramirez Holmes stated that she appreciated all of the comments and emails received and she replied to each one. The Board is doing their best to consider their options and ask appropriate questions and ultimately come to a decision that benefits the residents they serve. We all pay the same, we vote for a water rate, and everyone on the Board pays that as well. They do not get a discount. The Water industry is not for profit. Zone 7 has a contract with the State Water Project and the retailers work with us to get the need. She feels very much responded to from staff in the reports as far as things that were requested.

President Ramirez Holmes stated that she has been on the Finance Committee since she has been on the Board and we have come a long way and we are not there yet. During the drought some lessons were learned regarding our water supply and reliability. To ignore those lessons would be irresponsible. We learned some vulnerabilities of our system, such as when the pumps were shut off and the inability to get water that was paid for in Southern California as they come through the system. Now we have to look for local storage, which was a lesson from the drought. We learned that maybe supply from the State Water Project in drought years is not always going to be plentiful and as a result we did not have enough water and asked the public to conserve. She understands the frustration in using less and having to pay more. Regardless of whether the public uses it, getting it to the public is where the majority of the costs are from.

Last year there was an algae outbreak. This year staff spent a lot of time planning and stockpiling chemicals to stave off some of those concerns. This year we did not have that problem, but we still had all of that planning that the public did not see. That increased reliability is what is grappled with. Those are very expensive projects, such as pipelines. She asks tough questions about the CIP and to staff to make sure we are really getting to the priority projects because they reflect the water rates. We have to pay attention to the lessons of the drought. The increase of water reliability is going to be important and unfortunately we do not know what that looks like yet. She thinks that perhaps a lesser time for water rates is proposed until there is more information. The direction DWR is going is where we are stuck. Regardless of our opinion on Water Fix in which she wasn't a fan, we have to prepare for that and it's a very expensive project. The Board and staff spend a lot of time thinking about these issues, they do not want to raise the rates, they pay the same as well. The projects are expensive and we need to get a handle on what those looks like. From the Staff Report it was flushed out a bit more. Sites Reservoir would be funded from Expansion as that moves supply, so this is good information. Questions she asked about WaterFix is because she doesn't think its going anywhere quickly. She doesn't want money that is set aside to be spent on something else. She also wants a better number on what may be needed in the time needed. This is because this is responsible for the largest amount of increase that staff is asking for.

Zone 7 is now sixty-one years old and due to this the resiliency of the system has to be watched closer. There will be more maintenance, repair and replacement and also technological improvements about efficiency and delivery. As we continue to get water for build out, those are the things that we are looking for. Unless we can find a different supply of water that is going to give us 80% of our need, WaterFix is it, and it costs us 2% of whatever the total will be. She would like to see a scenario that reduces the number for WaterFix, as the Board needs to make a policy decision early next year as to how that will be paid for both construction and the O&M. She would like to see a more realistic number with that number coming down in the next four years and hopefully it will become clearer. She would like to also look at a two-year option for rates as the Board has so many decisions in the next six months regarding the water supply reliability projects. An investment on Phase one on a number of projects has already been done. Money is put in to see if it's feasible then you see which ones are affordable, a priority, which ones have Prop 1 funds and bond matching. A two-year cycle could help figure out what is really needed. She would also like WaterFix to be a more realistic level on all of the scenarios. She would also like to have Finance look at CIP and debt review options, a reserve policy given our increased fixed cost over our four-year proposal plan. She would like Finance to take up the pension trust fund to start funding that. Not fully funded, but start to make funding for that and have it as a line item. She would like to look at the future funding of water reliability in general to tighten things up a little bit.

Director Palmer stated that she understood proposing a two-year term. She further stated that the plan can be changed. For example, if a six-year plan is chosen and two years down the road new data is discovered, the plan can be changed. She thinks that it is beneficial to put something out there. She suggested italicizing some of the future projections so that people can keep in mind that these are potential projections and not something that we're nailing down for sure. She is in favor of looking at a longer term projection with the idea that we are only realistically able to look at things a year or two in advance but we should look at a longer-term projection just to get an idea and italicizing some things.

Director Figuers stated that he thinks going out six-years is a waste of staff time. Rate increases have been between 6.5 - 6.7% per year since 1970. Going out two years is a good way to go. Director Gambs concurred on the two-year plan as there are so many things changing and we do not know about the CIP. He would feel more comfortable revisiting a lot of these assumptions.

President Ramirez Holmes stated that there is a level of trust we need to get over as people are still not pleased with the last rate increase and when they see a lot of maybe's that causes them to have a lot of questions. She thinks we could be more firm about two-years. If we could show why we want to put money into Phase two of a project and provide a reason the public would be more accepting. There was some polling during the drought and people said "yes" as long as you can assure me that every time I go to my faucet water will come out of it, I am willing to pay a little more.

Director Gambs stated that he thinks the WaterFix may be the lowest cost alternative when it comes to the water supply reliability. The timing of the payments is a different issue to look at. As far as a project, is it the lowest cost for existing customers. Ms. Pryor stated that the water supply reliability funding could be for WaterFix that is the one we feel more certain that bills will be coming in. In the scenarios we are assuming that we move forward with one of the projects that is underway. Regardless of if it's a two year rate cycle or four year cycle, it would be prudent to start including some funds for water supply reliability that we look at. President Ramirez Holmes stated that there was also Fund 300 and Fund 310 and that there was over $7 million in those funds and they have been targeted for water reliability. She doesn't want to ignore those fund amounts for specific things like Chain of Lakes and some of those projects. Ms. Pryor stated that as these projects get underway, $7 million dollars wouldn't last long. President Ramirez Holmes stated that she wanted to have better information and data for the public. She would also like to see a scenario where the reserves are at a minimum funding for drought and target on the other two funds. President Ramirez Holmes closed the item and announced that a vote will probably be taken at the October 17th meeting.

Item 10

IS/MND CEQA Compliance for Patterson Pass Water Treatment Plant Upgrades and Ozonation Project

Elke Rank, of Integrated Planning reviewed the CEQA for the PPWTP Ozonation and Upgrades Project. The design is 95% complete and should be finished in October. The project will go out for bidding in October and November. The Proposal for Award of Construction will be brought back to the Board in December. Construction should begin in January with a three-year timeline. The project will be $95 million. Zone 7 is the lead agency under CEQA. The IS/MND was completed in July. The notice was widely distributed and posted in various locations as well as to land owners and businesses. There was one comment letter received, which was from the City of Livermore and it did not require any substantive changes to the document. A final IS/MND was made with a minor change to the product description had to be made as well as the addition of the Mitigation and Monitoring Plan. The Board is being requested to approve the final document. A notice of determination would need to be filed in five days after Board approval. The project description plan had to be adjusted as the draft mentioned a shallow area of groundwater on-site. The plan was to return the water to plant as the area was dewatered over the years but that is not the case. Instead, the water will be used for possibly on-site dust control, spray some on other upland areas where there is no environmental impact from doing so and finally might be able to send it down the existing sewer line. The consultant that prepared the document stated that the change did not change the key components in CEQA environmental impacts. There were no unavoidable significant impacts but there were some potentially significant impacts: air quality during construction period which will be mitigated with protection measures deemed appropriate by the Bay Area Air Quality Management District. Biological Resources will be mitigated by being cognizant to that as used in the Storm Water Pollution Plan. The neighboring lands to the Plant are a known habitat for the red-legged frog, and possibly tiger salamander, nesting birds, and mitigation will be in place especially for any protected species. There were not any cultural findings located, but a plan will be in place just in case. Potential to impact water quality will be mitigated by the Storm Water Pollution Plan. Hazards and Hazardous Materials as it relates to the workers, there will be a few plans in place to make sure the workers are not impacted. Hydrology and water quality, a lot of soil is being moved around; Storm Water Pollution Plan will be in place. Cultural resources did not identify any potential impacts but want to have a mitigation measure in the event something unanticipated arises. All of the environmental impacts of the project are either insignificant or they can be mitigated. The recommended actions are to receive public comment and to get a resolution to approve and adopt the final IS/MND and associated MMRP and direct staff to prepare a Notice of Determination within five days to complete the CEQA for the project. President Ramirez Holmes opened the item for discussion from the Board. She asked if the mitigation measures listed would all be implemented. Ms. Rank confirmed that they all would be implemented. There were no further questions and she opened the item for public hearing. There were not any comments from the public and the item was turned back to the Board. Director Sanwong requested that information regarding the project and its benefits be included on a slide going forward for new Board Members and the public that may not have background knowledge on the project. Director Palmer moved to approve Item 10 and Director Quigley seconded the motion.

Resolution No. 18-70 Adopting the Final Initial Study / Mitigated Negative Declaration and the Mitigation Monitoring and Reporting Program for the Patterson Pass Water Treatment Plant Upgrades and Ozonation Project

Item 11

Agreement in Principle for Amending SWP Water Supply Contract with the California Department of Water Resources for Water Management and Cost Allocation

Ms. Pryor stated that during 2018, the California Department of Water Resources (DWR) and the Public Water Agencies (PWAs) contracting for SWP water conducted a public negotiation process to amend the water supply contracts. The Agreement in Principle (AIP) describes in detail the provisions that provide enhanced water management flexibility and also excludes the five North Delta PWAs from CWF charges as those contractors are north of the Delta and will not receive water from the CWF. Jarnail Chahal was the lead representative for Zone 7. Specific contract amendment language will be brought to the Board. Director Gambs asked whether this would come to the Board with the contract extension as an example. Ms. Pryor stated no, this process will likely take longer. The contract extension negotiations were finished in 2014 and CEQA occurred. The contract language isn't completed and it will probably be ready for approval by the end of this year. The CEQA process is just now happening and the contract language may not have been drafted yet. Director Palmer asked if this would give the Agency more flexibility as opposed to being told what to do by DWR. Ms. Pryor responded that currently water transfers are done by the turnback water pool project; it would eliminate that language and allow for single and multi-year transfers. Director Quigley asked that if Zone 7 found out if another PWA had access could a plan be created to purchase water for a time from them. Ms. Pryor stated that it can be done currently but this allows us more flexible terms in the future. President Ramirez Holmes opened the item to public comment. There was not any public comment.

Item12

REPORTS - DIRECTORS President Ramirez Holmes stated that the 2-day ACWA, Region 5 event, in which Director Palmer serves on the Board, was hosted by Zone 7. She thanked Director Figuers for his presentation and staff who provided tours and organized the event. Five Zone 7 Board Members attended and they had a good time. Director Palmer thanked Director Figuers for his presentation on Del Valle and local history. She thanked Paul Benke of the Patterson Ranch for his presentation on the importance of cattle ranching, how it's managed, the water nexus, and the soil management. She thanked Colter Andersen and others who helped and organized tours.

Director Sanwong stated that the two-day program was perfect for her as a new Director. She suggested offering mini versions of the tour to the public as there is so much to learn that many may not know about in the area. Ms. Pryor stated that staff are looking into a program perhaps twice a year to provide tours. It will be hampered as the facilities are under construction, but they are looking into it.

Director Quigley stated that he also attended the ACWA event. He thanked Director Palmer, Mr. Andersen, Ms. Pryor and everyone else who made it a great success. Director Quigley stated that he has attended many of these conferences and has not seen as many Zone 7 Board members as he did this time. Water Agencies from all over the State shared their enthusiasm and thanks for Zone 7 putting on the event. He stated that there was a property he noticed by the DVWTP for sale during the bus tour that the Agency may want to consider purchasing.

Director Palmer stated that Retzlaff Vineyards Winery provided a nice venue for networking and many of the people really enjoyed it, and they gave a very nice presentation on organic farming techniques and the water nexus between the economic inputs of the wineries in the valley. President Ramirez Holmes stated that she learned so much and their appreciation of the groundwater, and various programs they discussed. Director Palmer provided a written report of recent water industry related activities she has taken part in. Director Palmer also provided information about the Climate Registry which she believes the agency is involved in. There is a meeting on October 11, 2018 at EBMUD in Oakland. This will be a public workshop on the water energy nexus registry. On August 16, 2018, Director Palmer was part of the Delta Conveyance Design and Construction Authority Meeting. www.dcdca.org can be visited to see the agendas and videos of the meetings. They have been setting up the bylaws, procedures, logos, and ethics, as well as getting reports on the finances.

Item 13

ITEMS FOR FUTURE AGENDA President Ramirez Holmes asked for items for future agendas, there were none.

Item 14

STAFF REPORTS Ms. Pryor highlighted that there were a lot of compliments on the ACWA 5 tour. She stated that late the Friday evening of the weekend of the event, a schedule change had to be made. Jarnail Chahal and Colter Andersen worked together to come up with a change. She thanked all of those that helped with the event. Ms. Pryor informed the Board on the status of the Medeiros Parkway project. There have been some working groups and Staff has spent a lot of time looking at the project, thinking about the community concerns, different scenarios, what the goals and objectives are, and the best course of action at this time is to divide it into two projects. The first project will be to lower the bike path and a future project as part of the SMMP Amendment process. President Ramirez Holmes stated that she appreciated staff taking another look after an out pouring of community concern. She would like for staff to reach out specifically to the community individuals that were the key spokesperson for the group. Ms. Pryor stated that they have been notified. Director Gambs stated that he appreciated that staff has listened to the public and reevaluated things. He asked for clarification regarding lowering the bike path and diverting water for flood retention benefits. Ms. Pryor responded yes. President Ramirez Holmes opened the floor to Constance Kopps, who had a speaker card for Item 14. Ms. Kopps stated that she was glad that the meetings were televised as the agency could receive more solutions as it's opened to a larger audience.

Item 15

ADJOURNMENT

President Ramirez Holmes adjourned the meeting at 9:54 p.m.