[0:00] The analysis of costs and outcomes with direct well intake. What about reuse, reclamation alternatives? Have serious studies measured the possibility of these alternatives with far lower carbon footprints? So yes, they have been considered. In fact, as you may or may not know, that South Coast Water District does have a brackish groundwater well and treatment plant. And we are permitted.

[0:28] to pull up to 1300 acre feet a year from the San Juan Basin, which is a subterranean stream,

[0:36] not a full groundwater aquifer. So that's why we're limited to 1300 acre feet a year.

[0:43] We already have the capacity and have pulled about approximately 1150 acre feet a year.

[0:52] So we've gotten pretty close to that.

[0:55] We've looked at additional brackish groundwater wells through the EIR process that was adopted

[1:01] in 2019.

[1:03] We also looked at this in the slant well workshop and our South Coast Water District Integrated

[1:10] Water Resources Plan.

[1:15] We've considered all of, or we've considered these alternatives in passport meetings and

[1:20] workshops, but tonight we're going to dedicate this to the financial analysis. But you're welcome

[1:31] and we can provide the links to the information that I referenced above. In addition, on water

[1:39] reuse and reclamation alternatives, this district has been a leader in water recycling since

[1:46] since the 1980s, and in fact, we're recycling about 900 acre feet a year with a goal, a target,

[1:55] to recycle 1,300 acre feet a year in the future.

[2:01] So that, along with practice groundwater and conservation, has been the foundation of

[2:09] South Coast Water District prior to looking for these new water supplies such as diesel.

[2:14] So, I'm going to go on to number 8.

[2:17] Have alternatives to experimental slant wells been adequately considered?

[2:21] Why are only slant wells being considered?

[2:23] Has there been an independent peer review from someone not also selling slant well technology?

[2:30] Am I the only one who feels a little nervous about a new technology that has yet to be tested

[2:35] in full production mode, even in Monterey?

[2:38] It doesn't seek to require projects to consider alternatives, including a no-build,

[2:46] the build diesel with slant wells and see something else, like direct well diesel or reduced reclamation.

[2:53] My understanding is that the brackish groundwater, or brackish water pulled from an inland site,

[2:59] has far less salinity than ocean water and will have significantly less waste.

[3:04] Has this alternative been seriously considered?

[3:06] I'm no expert, but doesn't it make sense to draw water from a source closer to the plant,

[3:12] where natural materials will be filtering the water and desal should be far less costly?

[3:20] The district's response is that this has been fully vetted by district staff,

[3:26] I'm sorry, presented to the board, and I did cover a lot of this in the earlier response to

[3:34] I'm sorry to do number seven, question number seven above.

[3:38] So I'm going to move on to number eight.

[3:40] What about impacts on an eroding

[3:41] coastline affected by sea level rise?

[3:44] Anyone who has visited the Haney Beach recently

[3:47] can attest to the severe impacts of the sea level rise

[3:50] and coastal erosion.

[3:51] Is it a good idea to be tampering with an already fragile

[3:55] coastline where when it may be possible to use direct wells

[3:59] closer to the plant?

[4:01] The response is this was addressed

[4:04] in the 2019 EIR. In fact, as part of that, after staff has gone through this fully comprehensive

[4:12] analysis, the wells at the county park that we're looking at, and that's the one for those of you

[4:17] who are familiar out here that has been newsworthy in terms of the erosion happening there. We reprioritized

[4:25] those wells to a much lower priority, obviously, from that. These concepts will also be

[4:33] further vetted during the project's Coastal Commission permitting process.

[4:40] So moving on to number 10, what about coastal access to a public beach?

[4:45] Is it a good idea to be installing slant wells on a public beach at all?

[4:49] What happens when a well gets clogged and maintenance is required at the height of the summer season,

[4:54] impacting coastal access and enjoyment?

[4:57] The response is that planned routine maintenance of the wells will be completed during the off season.

[5:03] Maintenance is not anticipated to affect access to the beach at any time, and the well sites

[5:08] will be located fully below ground inland from the sandy beach areas.

[5:15] Number 11, what about environmental impacts from Brian and chemicals?

[5:20] In terms of the Brian and Waste produced by the diesel plant, have sufficient studies

[5:24] been done to ensure the Brian plus chemicals used to neutralize acidity, will not in any

[5:30] way damaged to prolific sea mammals and fish that populate our coastal waters.

[5:35] As they say, dilution is still pollution.

[5:38] This is another reason to carefully consider direct inland wells, which will not only protect

[5:45] our coastline but produce far less waste and have a lower carbon footprint.

[5:53] So the response to that is we are ensuring that we comply with all of the California ocean plan

[5:59] requirements and that's it's one sentence there but there's a lot of studies that have gone on

[6:05] into that to make sure that we are not causing harm to these mammals and fish that are referenced

[6:12] in here and that is covered throughout our permitting documents and that will all be public information

[6:22] as well. So that consists of our direct responses to the 11 questions. I'm sorry I went, took a long time to answer that, but I appreciate everyone's patience over.

[6:37] President Irkanov, we also have, I believe Tony Nelson is on the phone. I believe Roger Buto is available now, and we have a third request to speak from Wendy Ritterbush.

[6:50] Okay, well let's stay with Ms. Nelson. Glad to have her on the phone. Hopefully she caught most of the responses to her written questions.

[7:06] Ms. Nelson, you have three minutes to address the board. And if you missed anybody coming on the call now or on this meeting,

[7:16] I mean, we determined that Jody will give you a 30-second notice when you have 30 seconds

[7:23] left and then when you reach your three minutes, please wrap up your final thought and we'll

[7:32] stay with that protocol.

[7:33] Thank you.

[7:39] Ms. Nelson.

[7:40] Can you hear me?

[7:41] Yeah, there you go.

[7:42] Can you hear me?

[7:43] Yes.

[7:43] Okay.

[7:44] I hate this ring thing.

[7:45] Just don't start the timer yet, but this ring thing does not work.

[7:48] I tried to open it up on my computer and it doesn't accept computer audio from my Mac.

[7:54] I can't see anybody, I can't see any of the materials, it's just annoying, but just put

[8:00] that aside.

[8:02] I probably need a lot more than three minutes to respond to everything that you said, but

[8:09] let me just use my time to focus on two major issues.

[8:13] The first one is, I really have concerns about the huge debt that we're taking on.

[8:19] We are a little tiny district.

[8:22] It's mainly people in Dana Point.

[8:24] We are a small town.

[8:26] We are all very, very much aware of what happened when there is a much larger project

[8:33] that you are all familiar with, which is the TCA Transportation Corridor Agency.

[8:37] And at the time when that was contemplated, there were all these wonderful projections that

[8:44] talked about how, you know, there would be so many people riding those toll roads that

[8:50] they would pay off that debt in 30 years and we turned off the huge debt.

[8:54] And we turned, oh no, I'm hearing myself,

[8:58] there's something wrong with the audio.

[9:00] You sound perfectly good.

[9:01] I'll try again.

[9:02] No, you sound perfect.

[9:03] I'm just hearing myself in the audience, sorry, give me a little bit more time.

[9:08] Anyway, my point on the TCA is that they had these wonderful projections.

[9:14] Everyone thought the debt would be repaid in 30 years.

[9:17] Well, now we're looking at some 50 years for that debt to be repaid.

[9:21] And debt that has tripled from what they anticipated in the beginning, they ended up not being able

[9:27] to pay their interest.

[9:28] They had to capitalize their interest.

[9:30] They had to issue these bonds that basically accreted interest onto the principal and made

[9:37] made this huge debt for everybody, for the taxpayers of California.

[9:42] So, seeing what happened there, I just want the board to be extremely careful.

[9:48] You're taking on a huge, huge debt on behalf of all of us, and you'd better be really sure

[9:54] that those numbers are correct, that you're not going to come up with all kinds of operational

[9:59] problems because that debt service will keep ticking while problems are occurring.

[10:06] you're going to have to pay the debt and you can issue revenue bonds, you can use your line of

[10:11] credit, but eventually you have to pay the Piper and it's going to, and it's us, you're doing this on

[10:16] our behalf. So I want to state just on the record that as a rate payer, as a community advocate, I am so

[10:24] extremely uncomfortable with South Coast going alone on this. I really think the project should be

[10:31] abandoned, unless you can do it at the regional project, that's my main

[10:36] opinion. And then number two on the coast. Okay, I appreciate that you abandoned the

[10:43] idea of putting slant wells on tapesterno beach because God knows there's no

[10:49] many seconds left. But if you take a walk down Don Haney, especially in the south

[10:55] parking lot. The same thing's happening there. It's all one coast, and I'm very, very uncomfortable,

[11:01] and I think the Coastal Commission will be uncomfortable, and serve riders should be uncomfortable,

[11:06] about doing anything on this beach. If there's any alternative, if there's any other way

[11:12] to get that water somewhere else, you know, or in some other method away from the beach, I recommend

[11:17] that you do that. I don't know the science behind it, but I just don't like the idea of you digging

[11:23] him to our beach. So that's fine at that. Thank you.

[11:30] Thank you very much for your comments.

[11:33] I saw our general manager taking notes, so I know that we will address those issues if not tonight

[11:40] at a further time. All right, Jody, you mentioned two other speakers. I believe Roger Boutot was one

[11:50] of the names, is that correct?

[11:52] That's correct.

[11:54] Okay.

[11:54] Mr. Boutot, you have three minutes to address the board.

[12:07] I see him on the call.

[12:09] Okay.

[12:09] How can you hear me?

[12:10] Now we can hear you. Go ahead and start.

[12:13] First, I want to ask a question for my time starts.

[12:15] Why is it that you put Mr. Nelson's PDF

[12:19] up on the screen and not clean water now?

[12:25] I'll address that.

[12:27] Well, we had a staff meeting with our consultants

[12:30] and her letter came to the board and came to our general manager.

[12:38] And I personally felt that those were relevant questions.

[12:41] I know you did submit something.

[12:44] Unfortunately, that meeting had started,

[12:45] and we didn't have time to address your laundry list of concerns.

[12:50] Although they will be in for the record, and we will sift through your letter

[12:58] and address that internally, and that is the reason why we addressed her concerns,

[13:07] because she made some relevant points that are relevant for this meeting, and that is the

[13:14] reasoning. We'll start your three minutes.

[13:18] Okay, am I doing fur by that, Mr. Chair, that Claymore and I was comments were not relevant,

[13:23] and secondly, could I ask when, when is South Coast Water

[13:27] just going to reply to my written comments?

[13:32] There's no information that we're not inferring

[13:35] that your comments are not valid or your questions are not valid.

[13:39] I'm just simply saying that we had a meeting schedule.

[13:45] The questions that Miss Nelson supplied to the board

[13:50] and to staff in my opinion we're relevant to tonight's meeting and we had

[13:55] time to address those. Okay, I can move on. I know when I'm being

[14:00] danced. I'm a Marine. I'm a Vietnam veteran. I know when I'm getting

[14:04] danced. Okay, once again Roger butto founder and executive director of Clean

[14:09] Water Now. We are an NGO watchdog in our 23rd year. The first thing I'd like to

[14:21] On this particular conference, I would defy you to please give me one other NGO that

[14:28] it has as closely tracked this project since inception 20 years ago.

[14:34] There isn't one.

[14:35] Clean water now has been a constant, including coming to your board members, your board meetings

[14:40] when they were alive.

[14:43] So I don't come and I am myself a professional consultant.

[14:47] I am also a veteran of the Orange County Water District citizens desalination oversight committee and I did serve on your sustainability committee.

[15:00] And let me set the record straight right now. Clean water now, myself, never in spite of what

[15:06] your reproductive work is. We never signed off on this desalination project as proposed.

[15:14] That we were purported, that we were portrayed as being not only participants on your committee,

[15:19] but also supportive of your desalination is false. We are supportive of desalination, but

[15:26] that as this board and anyone listening knows,

[15:29] there's ocean desalination and there's upstream

[15:32] or brackish water desalination.

[15:34] Moving on, clean water now would like to state

[15:37] for the record that it is ironic that the chair

[15:41] who represents the South County Chapter of Surfrider,

[15:44] it has been Surfrider's constant at Surfrider corporate,

[15:48] their constant position, that desalination is unnecessary

[15:53] And clean water now occurs as did coast keepers the only reason your project received any

[16:00] acclaim by coast keeper or serve writer was because instead of an open ocean intake you

[16:07] have a subterranean or slant well intake.

[16:10] Your intake system is just a lesser of evils and as I've already pointed out that slant

[16:15] well technology and geosciences advisory work are in a conflict of interest and I'll leave

[16:22] you with this, if Surfrider, which was once committed to respecting the beach, truly wanted

[16:28] this project, Surfrider corporate, they would chastise or at least restrain this chair from

[16:35] supporting this project because this is your 30th second morning.

[16:39] Thank you, thank you, Jody. Thank you very much. Thank you for island of civility. So once

[16:44] again in conclusion, those listening in on this, we're actually concurring with Coastkeeper

[16:49] and serve writer, which is no small irony. That is their corporate positions. We believe

[16:54] that a combination of indirect and direct photo-reuse and regional supply, as we put in our submission

[17:01] or a paid submission today, suffices, that you went down this cul-de-sac and can't get

[17:07] turned around, is your problem, not clean water now. And we will kill this at every point,

[17:20] kill

[17:21] A real quick question for Mr. Bhutto.

[17:25] Clean water now is an NGO.

[17:28] What is your EIN number?

[17:31] Oh, come on.

[17:32] Don't ask me around again.

[17:33] Clean water now has never purported or portrayed itself as a non-profit.

[17:38] That is a false narrative.

[17:40] We are an unincorporated association.

[17:42] We never, let me repeat.

[17:44] We never told anyone.

[17:45] You will not find any literature that we portrayed ourselves as a non-profit.

[17:50] it. That is gas lighting. No, it's not gas lighting. It's simply asking a question. And

[17:57] you've answered the question before you asked it. I simply asked a question if you have

[18:03] an EIN number that's all there is if you don't, you don't, and that's fine. I just want

[18:08] that for the record. Is that less than our credibility in your estimation?

[18:13] Mr. Butteau, this is not a time for a debate or a dialogue.

[18:18] I be feeling well and unarmed band anyway, thank you.

[18:23] So thank you for your comments.

[18:27] With regard to my position in the Surfrider Foundation, I currently am the vice chairman

[18:33] as volunteer.

[18:34] here. Long before I was ever elected, spoke with the folks at Surfrider Global Headquarters.

[18:42] They said there's absolutely no conflict of interest. At our EIR, for this project,

[18:48] a Surfrider headquarters was present. And as was the other organization that you spoke about,

[18:55] Both of those organizations did not put up any pushback for this 5MGD project for the record.

[19:06] Jody, you mentioned that there was another person wishing to address the board.

[19:11] The last request to speak comes from Wendy Ritterbush.

[19:17] All right. Mr. Ritterbush, can you unmute and you have three minutes to address the board?

[19:25] Can you hear me?

[19:26] Yes, I can and I believe the rest of the meeting can as well. Thank you.

[19:31] Good evening Mr. President and members of the South Coast Water District Board.

[19:36] I'm Wendy Ritterbush on Executive Director of CalD South,

[19:39] where statewide organization that educates and communicates the benefits of the increased use of both

[19:46] brackish and sea water desalination and salinity management in California.

[19:51] We believe that the Doheny Project represents a critical component of Southern California's

[19:57] Water Resilience Portfolio to locally diversify to secure and to protect against interruptions

[20:03] or hardships in water supply delivery like earthquakes and stubborn droughts.

[20:08] Governor Newsom's Water Resilience Portfolio lays out the foundational structure of utilizing

[20:14] all the tools in the water supply toolbox including increased conservation and efficiency,

[20:20] water and storm water recycling, above ground and groundwater storage, direct

[20:26] potable reuse, and desalination. We don't have the luxury of choosing one

[20:32] or other types of water supply. It's imperative that it's all of the above where

[20:37] locally feasible. And we just like to take a moment to say congratulations to the

[20:42] South Coast Water District's Board of Directors, really for demonstrating local

[20:46] and regional leadership by being long-term visionaries of the Dohemie Project.

[20:52] Now we find ourselves in a difficult and uncomfortable time again with this huge route,

[20:57] along with the increasing effects of climate change.

[21:00] You have proved exceptionally thoughtful in your analysis and plans for improving

[21:05] the water diversification in South Orange County.

[21:08] All your local legislators and congressmen support this project and we are proud to join them

[21:14] and support the Ford movement of the Duhini project.

[21:17] Thank you.

[21:21] All right, thank you for your comments, Ms. Ritterbush,

[21:26] and turning back to our clerk, Ms. Brennan.

[21:32] Do we have anybody else wishing to speak

[21:35] or have we received any other correspondence

[21:37] from the public regarding tonight's meeting?

[21:40] No, the only request to speak

[21:42] and no other correspondence.

[21:44] Okay. Thank you for that. So that concludes our item C. Oral Communications Public

[21:52] Comments. Now we'll move into our new business item, our only item, which is characterized

[22:00] in the staff report, which will be delivered by our General Manager, Mr. Rick Chintaka,

[22:06] Rick, the floor cheers. All right. Thank you, Mr. President, members

[22:10] of the board. And thanks everybody. I'm looking at a lot of faces and names who attended this meeting.

[22:16] We really appreciate you spending your valuable time with us tonight. I'll try to get through

[22:23] our, my side of the presentation really quickly, but I'm just going to intro the topic. And

[22:29] for any of you interested partners or actually everybody, everyone's concerned about diesel and water

[22:37] here. There's a good reason why I'm wearing a low husher instead of a suit tonight. One because

[22:43] I was lazy to go to my dry cleaner, but more importantly is that I am not a salesman.

[22:50] I was one of the worst door-to-door salesmen when I played Little League, you know, selling

[22:57] whatever I needed to sell, and my parents could tell you that, and that is why they pointed

[23:02] me in the engineering plans and specs direction, but I can tell you one thing when a product

[23:10] sells itself, and I'll tell you a quick story. There was a Hawaiian back in the day, a

[23:16] Hawaiian Chinese man, who Mr. Ching actually had the best Hawaiian imu kalopig recipe ever

[23:24] where we would dig the imu in his backyard, and we would sell that for little league kalopig.

[23:30] and that product sold itself. So that was the one time in history. I was a decent salesman.

[23:35] So I am not going to stand here and tell you all these glorious things about the project.

[23:42] What we're going to do is tell you the facts and some financial options that you're going to see tonight,

[23:46] along with the impacts to rate pairs. So, Jody, next slide please. Actually, I don't see the

[23:53] here it comes,

[23:57] next slide please.

[24:03] So this is agenda for tonight's meeting. Basically

[24:06] I'm going to give the executive summary and then David Moore, who you heard earlier

[24:10] from Clean Energy Capital, will be describing the water cost analysis that he and his firm

[24:17] conducted for us. And HF and H who are our financial consultants did look at the impact on

[24:26] rates with the results of the water cost analysis.

[24:30] So I'm going to go through, my part is basically the need for the project and then the project

[24:36] want.

[24:37] We're going to cover the rate payer survey that we did.

[24:41] And then I'll briefly touch on the financial impacts to the rate payers.

[24:45] So next slide please.

[24:52] So the first thing we're going to start out is with water reliability and need.

[24:56] And I touched on this on my earlier comments.

[24:58] The district didn't go straight into ocean water diesel.

[25:02] The district since the 1980s had really invested in recycled water here at our district.

[25:08] And we actually have a full scale recycle water system that serves the majority of our service area.

[25:17] We also invested quite a bit in conservation and we can't take the full credit.

[25:21] It's our customers who saved close to 30% during the last drought and have sustained that savings level through today.

[25:33] We also are proud of our water loss factor.

[25:37] So we have, you know, in the older terms, we're using the 2 to 3% water loss for our district.

[25:45] I know they have different terms nowadays, but 2 to 3% loss from our pipes.

[25:49] and that's one of the better numbers in the region and it's done on purpose.

[25:53] We make the right investments, we have a really solid operations team that identifies issues

[25:59] and upcoming issues and we're proud of that.

[26:02] We also invested in brackish groundwater as we talked about a little earlier and through

[26:08] our groundwater recovery plant and our well at the Stonehill area.

[26:15] So I'm going to next slide please.

[26:17] I wanted to talk about that because this slide looks, doesn't look all that great in terms

[26:24] of our current drinking water supplies.

[26:26] You're only going to see two slices of the pie there.

[26:29] And for our drinking water, we're roughly 85 to 100 percent dependent on metropolitan water

[26:35] on a year-to-year basis, 85 percent when the San Juan subterranean stream is robust in terms

[26:44] the hydrology, then we can fully pump the stone hill well and treat that and put that into the

[26:50] drinking water supply. However, in dry hydrologies that could go all the way to 0% pumping from that

[26:58] groundwater well and where we're 100% dependent on metropolitan. Next slide please.

[27:07] So all of you are aware

[27:09] in the news right now that we have in the worst negative way the perfect storm. So we have a drought

[27:16] throughout the state of California.

[27:17] Primarily focused in Northern California because of Southern California's investments in conservation and recycling.

[27:26] That's been very helpful along the way, but we have a statewide drought for sure.

[27:30] We also have the first shortage declared in the Colorado River Basin, and that happened last month in August.

[27:39] And we do have the effect of climate change that we're seeing.

[27:42] where the added stress from climate change is resulting in quicker snowfall or snowpack

[27:49] melts where more water is wasted and goes out to the ocean rather than conserved.

[27:55] So if you have a dense snowpack that melts at a normal level, then you're able to capture

[28:00] that water, but we're seeing the effects of climate change recently.

[28:04] And I know people talk about the Colorado River basin pretty trivially, but those of us

[28:10] in water as all of you on the call here, we know that that has been the overall capacity

[28:18] to the Colorado River basin is enormous and we can see that that percentage of storage

[28:23] has gone down over the years and it's only going in one direction and that's the wrong

[28:27] direction.

[28:28] So, something had to be done and they reached a shortage level and here we are, we're in

[28:34] the first ever shortage declaration there, next slide please.

[28:39] So,

[28:42] this defines one of the major reasons why we're embarking, we as the district and

[28:47] the board embarking in this ocean water diesel project.

[28:52] The figure you see to the left shows the state and the orange x's that you see are the potential

[28:59] earthquake, significant earthquake locations, and you've all heard of the risk of Delta-Levy

[29:04] failures.

[29:04] But basically, the bottom line is metropolitan water district who again serves us approximately 90% of our supply relies on the Northern California water.

[29:16] So through the state water project, along with the Colorado River Aqueduct to serve their service area.

[29:23] And the water from Northern California provides approximately 50% of their supply.

[29:29] So you can imagine if we had a large earthquake and we had Delta failures, we would have a significant reduction in our supply for metropolitan.

[29:38] So that's a big risk.

[29:40] And we're talking about six months a year, even more, that if something major happened, we would have a significantly reduced supply.

[29:47] The exhibit on the right is the more worrisome exhibit to us locally.

[29:55] So, I apologize, it's pretty small on the screen, but what you're seeing at the top of the

[30:00] Number one, if you will, is the DMR treatment plan. And that's metropolitan's plant in your

[30:07] Belinda. And that is basically the treatment plant that serves all of southern Orange County,

[30:15] and basically Orange County, but southern Orange County is dependent on the water from the

[30:21] DMR treatment plan. And it comes through a couple of feeders to this area. Now, you see the red

[30:28] exes in that exhibit. There's basically five significant fault lines between that treatment plant

[30:34] and South Orange County. And if one of those treatment or those faults were to sever,

[30:41] then we would need to be prepared to serve water in a complete met outage for 60 days.

[30:49] And that's the number that I talked about earlier in responding to that question that we in South

[30:55] coast water district have about 11 days.

[30:57] Most of South Orange County is between 10 and 20 days

[31:02] of emergency storage.

[31:04] So we're all looking towards solutions.

[31:07] And from my standpoint, my personal standpoint,

[31:09] I think we're obligated.

[31:11] And then we're obligated to look for a solution

[31:13] as your water purveyor in this area,

[31:17] to make sure that you have a reliable supply

[31:21] during an emergency situation.

[31:23] And I'll go into a little bit more of that in the next few slides here.

[31:28] Next slide, please.

[31:33] One back, please.

[31:37] Okay.

[31:38] So there's a vast difference between North Orange County and South Orange County.

[31:43] And I just so happen to be a water manager in both there.

[31:47] So I had the privilege of being an engineering manager at the City of Anaheim for 15 years

[31:53] before I came here, and I know very well that we had, we basically were reliant on that

[32:01] groundwater basin for 75% of our supplies, so they have a very large aquifer and they're

[32:07] able to provide about 75% on a year to year, excuse me,

[32:16] on a year to year basis to their agencies.

[32:19] And that's basically everywhere in Orange County from the north side to Irvine.

[32:28] In fact, we have one in our area and that's called the San Juan groundwater basin, which is not even characterized as a groundwater basin, but it's subterranean stream, so it has significantly less capacity than our North Orange County neighbors.

[32:46] So much so that we are 90% dependent on metropolitan water while they are 25% dependent on metropolitan water.

[32:57] Next slide please.

[33:01] So I'm going to talk a little bit about the project here.

[33:07] Next slide, sorry.

[33:09] So for those who haven't seen this before, here's an aerial view of the project site along with the slant well pod locations.

[33:17] This shaded, I guess it's a rectangle in the middle of the screen, is the 10 acre footprint

[33:26] that is owned by the district and slated for the full scale decel plan.

[33:33] And that's the up to 15 million gallon per day decel plan.

[33:38] And that's the one for the future.

[33:40] That's more of the regional project that's the one that I talked about being approved by

[33:45] the programmatic EIR. But we would also house a 5MGD project there as well. So it's

[33:52] a significant area that we have dedicated for that. Even to the point where we have

[33:57] some of the area reserved for alternative energy and R&D research and development as

[34:03] well.

[34:06] Excuse me. At this site, we also are located fortunately next to the joint regional

[34:15] water supply system. So this is the regional water system, and it's roughly 35 miles of large

[34:23] diameter transmission main along with two large storage reservoirs that serve the area of

[34:30] serve metropolitan water throughout Irvine, from the Irvine area, I'm sorry, through the northern

[34:40] So a number of us agencies in South Orange County can't have turnouts from this joint

[34:47] regional water supply system and it just so happens that it is adjacent to our site here.

[34:53] So we're able to find a regional solution by putting water there.

[34:58] Another positive aspect of this location is the geology, the sand beneath the ocean where you see the blue lines.

[35:11] Those are the projected well locations.

[35:16] Let me back up real quick.

[35:17] You see on this figure five different pods.

[35:21] For example, the pod on the right has two blue lines coming out of it.

[35:25] And so those would be actual wells, two 1,000 foot wells.

[35:29] It come out from a single pod location, and for the 5MGD project, we do not need all of those blue lines we need about four of them.

[35:39] Well, the geology in this area is fantastic.

[35:42] And that's another positive aspect of this site.

[35:46] You see the red line on the picture.

[35:48] that is the SOCWA outfall pipe coming from J.B. Latham.

[35:52] So the J.B. Latham treatment plant is located to the left of the shaded area on the figure

[36:00] and in regards to discharging our salt brine into that outfall, that is the environmental

[36:09] and regulatory preferred method to get rid of your brine, your brine waste from a diesel project.

[36:16] And so is the wells, the slant wells that you see in the picture.

[36:21] And these are fully submerged slant wells for those who aren't familiar with it.

[36:25] It goes at about a 10 to 12 degree angle beneath the ocean floor.

[36:30] So it's fully submerged, it never breaches the surface.

[36:34] And these wells are also the environmental and regulatory preferred approach.

[36:40] which this site also is adjacent to the electrical infrastructure that we need to fully serve the treatment plant and the wells and a high pressure gas lines located nearby if we were to go to an energy alternative such as fuel cells, if you will.

[36:59] Next slide, please.

[37:06] So I'm not going to read through all of this, but due diligence was a key component of

[37:14] the planning process here, and our board has really took a responsible stance on this

[37:19] and collaboratively the board and staff have developed a number of studies and adjacent agencies

[37:25] and concerned rate peers have chimed in.

[37:30] And this is a list of due diligence that we pursued

[37:36] looking at construction costs again, delivery method assessment.

[37:41] So that's a big deal.

[37:43] And we launched our short, we settled on design build operate.

[37:47] And that is the delivery mechanism that we feel provides the,

[37:51] minimizes the risk to our rate peers.

[37:54] And in fact, we've had to go through a legislative fix, SB 1752, a couple of years ago now allowed us to do a design bill to operate delivery and keep state funding.

[38:10] And that was authored by Petri Norris here.

[38:14] So, that was successful and it allowed us to keep our $10 million from the state and

[38:20] allow us to apply for a drinking water state revolving fund loan.

[38:26] Slantwell risk workshops, so that was brought up to us and we really wanted to look further into the risks of slantwells.

[38:32] We've done that, we conducted a rate payer survey, I'm going to cover that in a little bit.

[38:38] I'm looking at alternative power solutions, power solutions that would provide reliability

[38:43] at the site and would also provide a cost effective long-term power for this project.

[38:53] We looked at the hydrogeology, theoretically you're sinking wells and 93% of that water

[39:00] will be taken from the ocean, 7% of that water in theory will be taken from the adjacent

[39:05] sound one groundwater basin and there are impacts on that and there are impacts on potential

[39:12] projects that other agencies will be pursuing. So we've been working collaboratively with

[39:16] the Santa Margarita water district on that and hired a series of or team, I should say, hydrogeologic

[39:24] experts to help us through that process. We as I indicated earlier, we contracted with DUDEC

[39:33] who's working with the University of Southern California and

[39:37] trustal technologies on completing a concept study,

[39:41] the feasibility study, looking at the pros and cons and concerns.

[39:46] And other things we would need to know as we embark in a future phase,

[39:51] which could be blended direct potable reuse and ocean water diesel project.

[39:57] We looked at configuration options, so

[40:00] So that's a fancy word for, you know, this is what's actually during the pandemic.

[40:04] Are there cheaper options to this?

[40:07] Can we start in a different phased approach?

[40:09] So we completed that study and presented that to the board.

[40:14] And last but not least was the Integrated Water Resources Plan.

[40:18] So that's our roadmap for the future.

[40:21] And our board, we went through a number of workshops, over half a dozen workshops with our board.

[40:27] and we ended up with the Integrated Water Resources Plan Portfolio, or D-SAL, or 2MGD of a D-SAL project was

[40:37] incorporated in that, and I'll go through that as well. So, next slide.

[40:45] Speaking of which, so I'm

[40:46] going to go through the Portfolio now. What you're seeing here is a pie chart of our total water

[40:52] portfolio. So, this total means drinking water and recycled water. The big blue slice of the pie,

[41:00] 75% of our total water supply is metropolitan.

[41:06] The orange slice, 11% is our groundwater recovery, our brackish groundwater that we

[41:11] treat, would reverse osmosis and put directly into our drinking water supply.

[41:16] The 14% purple is the recycled water that we treat at our advanced water treatment facility

[41:23] and serve throughout our service area.

[41:26] So that's our current water portfolio.

[41:27] Now, if you drilled that down into a drinking water portfolio, it's basically only the blue and the orange.

[41:35] So, it's metropolitan water and local groundwater, and I'm sending that up for the next set of slides.

[41:44] That's what we're dependent on, but going back to what I was saying, we are 85% to 100% reliant on metropolitan water for drinking water.

[41:54] So, it doesn't take an advanced planner to know that we cannot conserve that amount.

[42:00] If we were cut off from metropolitan for 60 days, we cannot conserve that amount and

[42:07] still live in our houses and our businesses, et cetera, in this service era.

[42:12] So, that is why, that was a call for us to do something, next slide.

[42:20] So, this is directly from our Integrated Water Resources Plan.

[42:24] So in year 2027, this is where we like our portfolio to look like if we follow this path.

[42:33] So metropolitan, you can see all of a sudden it goes down to 36% of this pie of our total

[42:41] water supply portfolio.

[42:43] Now in terms of drinking water, that would bring metropolitan to roughly 44% of our drinking

[42:48] water.

[42:49] So during an extreme emergency, if we were fully cut off from metropolitan, to cut 44% is possible.

[42:59] It is possible. Like I explained earlier, if everybody turned off their irrigation, everybody, then we could cut 50% from our supply and theory.

[43:11] So, this makes us feel a lot better, and this is where you see the Doheny Ocean DCL

[43:18] satisfy a portion of our local needs, and that's 37%.

[43:22] Local groundwater is still in the picture at 11%, recycled water.

[43:27] We upped the acre feet per year, and it upped the percentage to 15%, that's part of our targets

[43:33] to maximize recycled water, and you see new water conservation.

[43:39] So we're not going to rest on our laurels, we're going to keep pushing conservation and our board has directed us to do so in terms of landscape, turf programs,

[43:50] other type of landscape problems and I'm sorry, landscape rebates and indoor rebates as well.

[43:57] So next slide.

[44:02] So this is what our portfolio looks like in year 2035.

[44:06] And the main difference you see in here is we added the green potential IPR DPR.

[44:11] So our board has been looking at a partnering with Santa Margarita Water District in their upstream projects.

[44:21] And one of them that they're really looking at is indirect potable reuse in the San Juan Creek area.

[44:27] So we're very, very interested in that.

[44:29] So we wanted to reserve a slice of the pie for that, along with DPR.

[44:33] And DPR, as I explained earlier, could be used in future phases of this project as a blended direct potable reuse ocean water diesel project.

[44:43] Next slide, please.

[44:46] And by the way, that you don't have to go back to it, but by the way, that brings the metropolitan percentage of drinking water supplies down to 30%.

[44:55] So it's 25% of our total water, 30% of our drinking water.

[45:00] And we all know that we can conserve that in an emergency. So, that's why we are looking at the diesel project in a nutshell.

[45:09] So, the 2020 ratepayers survey findings, and I give our board credit manner staff that during June of 2020, you might recall that this pandemic really started in March of 2020. So, a few months after, we put out a ratepayers survey on this diesel

[45:29] and we surveyed knowing that we're really in a tense time in uncertain period and people would give us

[45:37] a very honest feedback during the time.

[45:43] Excuse me.

[45:44] So we surveyed 400 rate peers throughout the service area.

[45:51] Developed third-party questions without board and staff input. That was important.

[45:56] We didn't want to bias this survey.

[46:00] And next slide please,

[46:05] and this was, this included, this was part of the results here.

[46:09] And you see the total, this was, as you can see on the subject title, the sentiment about

[46:16] doheny decel.

[46:17] That's a context it was asked in.

[46:19] So, 74% favored a doheny decel.

[46:23] 15% opposed it, and 11% didn't know.

[46:27] And it was significant to get this feedback because it was during the pandemic, as I said,

[46:33] and it was before this drought that we're talking about.

[46:36] So we didn't have the drought there as a trigger for diesel in these lines of questions.

[46:42] So next slide, please.

[46:47] This is a summary, and why I took the time to put this slide in here is, first let me

[46:54] situate you, on the top row, you see the three different categories.

[46:58] One was we asked them how they feel about decal or dohini decal with a brief project description only.

[47:07] Then the second column is after we further educated them of the key components of the dohini ocean decal project, you know, how did they fill there?

[47:16] And then we injected some critical statements and let me just read some excerpts from the critical statements.

[47:25] We made an economic argument and therein told them, look, this would lead to increases in your water bill.

[47:33] You're in the midst of a coronavirus epidemic, which could lead to the long-term economic recession.

[47:41] This could make it harder for seniors on a fixed income, depending what that increase in the water bill would be.

[47:47] the middle cap would make it tough for a middle class families and local small business owners.

[47:53] And by the way, the district could also crack down more on water wasteers and wasteful spending.

[48:02] So we were putting a lot of these statements to cast doubt on the project, whether we feel it was true for or not.

[48:10] We wanted to put it out there because there's a lot of things on there that we know we're already doing.

[48:15] We're already cracking down on the water wasteers.

[48:17] We're already looking, looking at cost effectiveness of our spending and so on.

[48:24] We also threw on environmental aspects there and

[48:27] we put in rather than building a whole new decel facility,

[48:30] the districts should look at other more reliable environmentally friendly water sources that do not impact our coastal waters such as increasing the use of recycled water for landscaping or just asking residents to be more efficient with their water use.

[48:43] So we really wanted to interject critical statements and we asked the consultant to come up with with these types of critical statements.

[48:50] So with the project description, we had a 74% favor rating after more education, it became a 80% and after those critical statements,

[49:01] it went down to 72% but still in that 70 plus percent range. Next slide, please.

[49:07] So,

[49:12] the second main category of questions we asked was willingness to pay, and you can

[49:17] see here from top to bottom, 78% were willing to pay $5 more per month, 76% to pay $7 or

[49:24] more, 69% to pay $10 or more per month, and 63% were willing to pay $15 or more,

[49:33] $50

[49:38] is if we do a partnered project, and this is the 5MGD project, and I'm going to define that right now for the audience.

[49:46] You're going to see this throughout, this pepper throughout the presentations of 5MGD project.

[49:52] Well, that's a total 5MGD project so that we can take advantage of the economies of scale.

[49:59] But what that means is still South Coast is only going to sign up for 2MGD of that.

[50:04] So 40% shareholders, if you will, of a 5-MGD project.

[50:09] So if we took 2-MGD of this partnered project, then our rate impact you're going to see is

[50:16] slightly more than $2 per month for the average residents.

[50:21] The second, the lower box that you see there is the 2-MGD standalone project.

[50:28] So, if we didn't partner and built a 2MGD standalone project for ourselves, the impact

[50:34] for an average residence would be $7 more per month.

[50:39] Next slide please.

[50:42] So, now I'm going to talk about what David Moore and John Farncock are going to talk more

[50:48] about in terms of the two cost studies.

[50:51] And one is to evaluate the cost of water and one is to evaluate the rate impacts.

[50:56] Next slide please.

[50:59] So you're going to see this in David Moore's presentation, so I'm not going to take too

[51:03] long with this.

[51:04] Again, this is a 5-MGD project with South Coast taking a 2-MGD share versus Met Costs.

[51:13] So what you're seeing on the X-axis are the years.

[51:20] So we're starting out from year 2021 all the way to 2056 on your figure.

[51:26] Here, on the Y-axis is your unit cost, your dollar per acre foot cost.

[51:34] And as David will explain, this project is, we're assuming this project goes online during

[51:40] fiscal year 2627, so you see a dotted line until project start date.

[51:46] So in year 2021 dollars, I know he'll explain why we're doing it in 2021 dollars and why

[51:53] John's looking at it in 20, $27, $26, $27, but in year 2021, you're going to see the

[52:00] project cost at $14.79 per acre foot, and the metropolitan cost during that same time

[52:08] at $12.07 per acre foot.

[52:12] You're going to see two orange met lines, as you see here, one is a met high forecast, which

[52:18] which is 5% per year, assuming that MET increases at 5% per year, and a MET medium forecast,

[52:26] which assumes MET increases at 4.2% per year.

[52:31] And to put this in perspective, MET has been over the last 20 years, increasing at roughly

[52:36] 5.5 or 5.6% per year.

[52:39] So, we're using between 4.2 and 5% as the comparison met future forecasts, because as many

[52:50] of you know, this water, this project water would directly replace that amount of metropolitan

[52:56] water.

[52:57] So, if we're signed up for 2MGD, that would replace 2MGD of our met cost.

[53:03] So it would be the total unit cost as you see in here 14.79 per acre foot minus 12.07 per acre foot.

[53:13] And that's the additional amount that we're paying for this new reliable water supply.

[53:19] Next slide please.

[53:22] So this is as 2mgd stand alone and you can see the economies of scale there.

[53:26] You see the gap widens and David is going to talk a lot more about that during his presentation.

[53:31] Next slide please.

[53:32] So, the water cost analysis findings that David will present, and you'll see here, and again, this is in 2021 dollars, and the first one is for the five MGD project and South Coast Water Districts 2 MGD share.

[53:48] So, we're just looking at it from the South Coast Water District lens and how it affects us.

[53:54] You'll see that there's a difference of $181 to $214 per acre foot.

[54:01] So the difference between the project cost and the met cost is roughly $200 per acre foot there.

[54:09] Another way to look at it is it's roughly $385,000 to $460,000 more expensive per year than metropolitan.

[54:19] If we did a 2MGD standalone project, we're looking at numbers of roughly $650 per acre

[54:26] foot higher compared with the roughly $200 more for the partner project.

[54:33] And the other way to look at is about 1.3, 1.35 million more expensive as a 2MGD project

[54:40] per year than metropolitan water.

[54:42] So you can see right here the economies of scale that you're seeing next slide please.

[54:50] So key considerations are put this slide on here for our board mainly to think about

[54:56] and when you're evaluating as everybody knows that it's important to look at it from

[55:04] You know, a few lenses and two of these include does does the I'm sorry, it is water supply verification, including emergency supplies and local control, you know, the benefits of this project is that does that have value to the district and then the second part is

[55:32] This is this rate impact of this new water supply acceptable to district rate peers.

[55:40] And those are two good questions that the public and the boards should be asking themselves

[55:45] when looking at a project to make a unbiased determination whether to move forward or not.

[55:52] Next slide, please.

[55:57] Next slide.

[55:58] So this is the rate impacts that I'll quickly go over.

[56:01] And this is what John Farnkov is going to present along with the details.

[56:04] But I wanted to give you a preview of what the results are going to be.

[56:08] So this is for an average resident, an average homeowner here, real numbers.

[56:17] First full year of operation in fiscal year 2627.

[56:22] Their additional monthly cost would be $2.38 for that 5MGD project if South Coast takes a 2MGD share.

[56:32] So it's roughly 2% addition to our overall revenue requirements, and John will get into that.

[56:40] So the second part of this is the 2MGD standalone project which would be $7.20 more to that average

[56:46] residence.

[56:47] Next slide please.

[56:51] And these are the impacts for small commercial.

[56:54] So the small commercial retail at a strict mall that uses about five billing units per

[57:01] per month would pay an additional $1.54 under the partner project or 466 average restaurant

[57:07] using about 100 billing units per month would pay 17 and 52 respectively and a medium-sized

[57:15] hotel using about 1,000 billing units per month would pay 166 and $500 respectively next

[57:22] slide please.

[57:26] And I'm going to turn it over to David Moore from Clean Energy Capital to provide his analysis.

[57:32] Thank you.

[57:37] Great. Good evening, everyone. Next slide, please. So I'm going to go through our analysis and

[57:46] but before I start, I just I wanted to congratulate the board on its staff that's working on this.

[57:54] Rick Shintaku could easily give my presentation, and also the next presentation, as could Mark

[58:02] Serna, as could Pamela, Ron's came.

[58:04] Your staff is deeply involved in this project, and as Rick says, looking at it to find the

[58:12] right answers.

[58:13] So it's been a real pleasure to work with that team.

[58:17] Next slide, please.

[58:21] So my firm is Clean Energy Capital.

[58:23] We're a registered municipal advisor that means we're licensed with the Municipal Securities

[58:29] Rulemaking Board and the SEC.

[58:32] We specialize in water utility project finance in California.

[58:37] We concentrate on public finance, public private partnerships and regional projects.

[58:43] I talked briefly about three diesel projects where we served as financial advisor in addition

[58:49] and to South Coast, they're listed here.

[58:53] We've shown a set of our representative clients,

[58:55] mostly their county water districts,

[58:58] many of them doing multi-district regional projects.

[59:02] I'm David Moore, I'm the firm's founder

[59:05] and it's managing director, next slide, please.

[59:12] So we were engaged in January of last year

[59:16] to do a cost study for the Dohenny D. Sal project.

[59:20] and our scope included performing cost due diligence.

[59:26] So we looked critically at each of the inputs,

[59:29] the economic drivers.

[59:33] And as I go through my presentation,

[59:35] I think you'll get a feel for how we've vetted the numbers.

[59:40] And then what we've also did is we put the numbers

[59:43] into a pro forma financial model.

[59:45] And that model models the construction period,

[59:48] it models. The operating period shows the dead amortization, shows the full length of the project.

[59:53] It's that performer model that generated those line graphs that Rick showed.

[1:00:00] And then also our scope included evaluating a project alternative. And I'll get into that just

[1:00:06] in one with the two main alternatives being a 2MGD project that would just serve the district

[1:00:12] and a 5MGD project that would be a regional project. And there's financial and organizational

[1:00:17] differences between those as well as economies of scale. The objective of our report is to

[1:00:26] develop a cost projection for the proposed project. Rick has already shown that now. I'll be really

[1:00:33] explaining kind of what's behind it. And to outline potential financial implementation strategies,

[1:00:39] this is especially for the five MGD project, which would be a partnering opportunity for the

[1:00:45] district. And then it's really to support the district decision making regarding next steps.

[1:00:54] So that's

[1:00:56] So

[1:01:00] you've seen these slides on the left-hand side of the 5MGD project and on the right side is the 2MGD project.

[1:01:11] The net water avoided cost projections are the same.

[1:01:15] So those are just repeated for reference in the 5MGD graph and the 2MGD graph.

[1:01:19] And I'll explain later what went into those avoided cost projections.

[1:01:26] And then the blue lines are the project cost.

[1:01:29] And you can see at the beginning of the blue line there's a little dotted line.

[1:01:34] We modeled the project as commencing operations in on January 1, 2026.

[1:01:40] So it's really the calendar year ending 2027.

[1:01:43] That's the first year that the plant is in operations.

[1:01:46] We've shown dotted, a dotted blue line going to the left in order to bring that first year of operations cost back to 2021 dollars is written described in that 2021 dollar amount is a 1,479

[1:02:04] dollars per acre foot for the five MGD and a higher number of $1,928 per acre foot.

[1:02:11] We put also in the orange text where that stands with Matt Waters cost, the cost that you're

[1:02:21] paying now for the water binds.

[1:02:24] So if you could go to the next slide, please.

[1:02:28] So this is what I'll be going through.

[1:02:32] So I have, I think, one slide for each of these.

[1:02:34] So, I'll talk about the project alternatives, the capital cost, the financing and debt

[1:02:41] service assumptions that went into our modeling, how we look at electricity costs, how we

[1:02:46] look at O&M's operations and maintenance, R&R's renewal and replacement, we'll describe

[1:02:53] it at a high level our assumptions there.

[1:02:55] We'll talk about the local resources program or LRP subsidy that Matt Water provides.

[1:03:02] We'll talk about the avoided cost projection, we'll touch on regional considerations that

[1:03:10] are specific to the five MGD project, and then we'll say our findings and conclusions.

[1:03:15] I've included in the board materials, disclaimers on forward looking statements, and I'll leave

[1:03:23] those for you to read, and don't feel any need to present those.

[1:03:26] Next slide, please.

[1:03:31] So this is a really foundational to the cost study.

[1:03:37] So we look at a five-MGD project and a two-MGD project and in each case we see the district

[1:03:43] is taking two-MGD, two-MGD for the district's diversification of its supply portfolio.

[1:03:52] 2MGD is a material volume of water.

[1:03:59] The 5MGD project would produce more water

[1:04:02] than the district would itself take.

[1:04:05] And so the 5MGD project has excess capacity,

[1:04:08] excess capacity requires partners.

[1:04:12] And the partners would take 3MGD out of the five.

[1:04:16] The 2MGD project is a burden in the hand.

[1:04:19] It's more expensive because there's the economy

[1:04:22] the scale aren't as great, but that would be sized to the district's demand itself without

[1:04:29] partners.

[1:04:31] In terms of the mode of implementation, the 5MGD project could be done on balance sheet

[1:04:39] by a South Coast water district, meaning that South Coast water district would own the plant,

[1:04:43] issue bonds, and then sell water to a partner, or it could be done through a newly formed municipal

[1:04:51] joint powers authority and that JPA structure we would think is the more typical mode of implementation.

[1:04:58] This would be a board decision whether to do it on your own balance sheet or do it through

[1:05:03] a JPA. The JPA would in that scenario would be a municipal entity. It would just have one

[1:05:09] business and that's Doheni DeSal and it would issue the bonds and it would have you as a customer

[1:05:15] and it would have your regional partners a customer.

[1:05:19] So the 5MGD project just to continue down that column,

[1:05:24] the project owner could be you, or could be a JPA,

[1:05:28] and the purchaser of access capacity would be identified

[1:05:34] where the 2MGD project you would own it,

[1:05:38] and there would be no purchaser of access capacity.

[1:05:41] It's size for your own capacity.

[1:05:44] Next slide, please.

[1:05:50] So excuse the density of the slide, there's a lot of information here and I'd like to

[1:05:56] go through it.

[1:05:57] So it shows two columns, the five MGD column and the two MGD column and there's an asterisk

[1:06:05] on the five MGD column and that asterisk is that 40% of these costs would be yours, where

[1:06:11] on the two MGD, all of them would be yours.

[1:06:13] So, just as an example, if you look at the total capitalized cost, the bottom line 111 million,

[1:06:18] that's the amount of bonds that need to be issued or with your loan or SRF loan or

[1:06:25] combination.

[1:06:26] So, that 111 million is a bigger number, but you would have 40% of that or 44 million in

[1:06:35] rough numbers.

[1:06:35] So, we look at the dead burden in terms of total capitalized cost as 44 million for a piece

[1:06:43] of a larger project or 55 million for all of the two MGD projects.

[1:06:49] So let me move up to the top and just and walk through these.

[1:06:52] So the construction cost estimate is 118 million for the five MGD project.

[1:06:59] That number has in it a 15 to 20 percent contingency.

[1:07:04] And that number is a consensus between GHD who you engaged to do preliminary cost estimate

[1:07:11] for Dogey-Nigu-Sal, and then California-American water up in Monterey who are doing a similar project.

[1:07:20] They did a peer review of the GHD numbers. They informed their review with actual bid results

[1:07:27] from their projects, and so the 118 million is a hybrid, as is the 66 million. And just as an

[1:07:35] example of our due diligence. We looked at the two studies, we also looked at other benchmarks,

[1:07:42] and then we organized a series of conference calls with the CalAM team, with the GHD team,

[1:07:47] and so these are really consensus estimates. In both cases, our model of Brazil's

[1:07:57] a construction and commencement date of January 1, 2023, so we've escalated the cost

[1:08:06] for which is a point of financing, there's a little noise, it went away, and so the construction

[1:08:16] cost, the next line is the construction cost per million gallons, so the five MGD project

[1:08:22] is $25 million per million gallons.

[1:08:26] The smaller project is $35 million,

[1:08:29] and that's one of the dis-economies of scale.

[1:08:31] That, and I'll make that same point

[1:08:33] on the non-electricity operating costs.

[1:08:37] Those are the sort of dis-economies of scale associated

[1:08:40] with the two MGD project,

[1:08:42] and that's why the cost of water is higher on that project.

[1:08:46] In each case, construction costs are offset by grants,

[1:08:51] and staff has been, your staff has been a successful,

[1:08:56] they've done a great job getting 28 million in grant money.

[1:09:00] It's a little bit more, but some of it's already been spent

[1:09:01] on development costs for the five MGD.

[1:09:05] It would be a lesser grant amount, 26 million on the 2MGD.

[1:09:09] That's because the USBR grant bureau has a 25% max.

[1:09:15] So there's some little grant money left on the table

[1:09:17] in the 2MGD configuration.

[1:09:20] So the construction costs minus the grants and then there's other items which we've added

[1:09:25] in to project the amount of debt.

[1:09:28] First is remaining development costs of the district.

[1:09:33] These would be capitalized and repaid on financial closing.

[1:09:38] There's capitalized interest.

[1:09:40] This would carry the debt service through construction and to commercial operations.

[1:09:48] We put in $5 million of owner's cost during construction.

[1:09:52] These would be costs of the district to manage the construction program.

[1:09:55] These would be costs that the builder that you engage does not assume.

[1:09:59] But you pay to monitor the building and take care of reporting and compliance responsibilities that aren't transferred to the builder.

[1:10:10] And then we added a line item RTS transition charges.

[1:10:14] And Metropolitan has a four-year ramp down in the RTS components of their charge.

[1:10:23] And so, in the first year of operations, you would pay all of that RTS charge.

[1:10:28] In the second year, you'd pay three quarters, and third year, you'd pay half.

[1:10:31] It went us down, and we've added it as a cost of the project and put it into the bond issuance

[1:10:40] in order to to amortize that cost of transitioning away from metropolitan into our cost projection and

[1:10:48] then the last item is financing costs. So there's a significant line item of other costs that's

[1:10:57] typical in these infrastructure projects and that brings us to the total capitalized costs that's

[1:11:02] shown on the bottom of this slide. And I should maybe pause here and ask the board president would you

[1:11:09] like me just to bull on through or do you want to pause for board questions as we go through these?

[1:11:16] What's your preference? Thank you for that. You know what let's let's just do a quick round the

[1:11:23] horn with the board to see if there's any questions up into this point. Generally board members will

[1:11:32] ask a question, you know, as they see fit during a presentation. So we'll start

[1:11:38] with Director Goldman because I see you're up here on the top of the screen

[1:11:44] here. Good evening, Scott. Do you have any questions of David at this time?

[1:11:50] Yeah, Rick. Thank you, David. Very good presentation and I'm not having an

[1:11:54] opportunity to go through this with Rick yesterday. And so he answered

[1:12:01] most of my questions. So no, it's very, I shouldn't say very clear, but I understand what you're

[1:12:07] presenting and interested to see as you go forward. So thank you for that. We'll move to Director

[1:12:16] Green, Bill. Any questions or comments at this point? Thank you, Mr. Chairman. Yes, David. Thank you

[1:12:26] for all your work here.

[1:12:29] I appreciate it.

[1:12:30] It's good to find the bottom line.

[1:12:31] I always like to go to the bottom line

[1:12:33] as well as our ratepayers.

[1:12:35] You know, a question I'd have is you talk about

[1:12:39] some alternatives.

[1:12:41] Have you evaluated the, or have you made an allowances?

[1:12:45] You said 15, 20% I think it was contingencies.

[1:12:49] However, what if we have started replacing slant wells

[1:12:53] and membranes?

[1:12:53] Is that calculated in and what would? Yeah, that's a great question, Director Green. The 5MGD project,

[1:13:05] the capital cost, these costs are the first four slant wells and for the 2MGD project, two slant

[1:13:12] wells. We have in the renewal and replacement budgets, replacement over the 30 year term of all

[1:13:20] of the slant wells. So that's replacement of all four slant wells in the 5MGD and

[1:13:25] of two slant wells in the 2MGD. And so we've assumed that cost is born as an R&R expense

[1:13:36] meaning that the district would make a contribution to a renewal and replacement account and we've

[1:13:50] A general manager should talk, we'll mention we have redundant wells that styled into the cost, the extra wells, I guess, in case one goes out.

[1:14:03] Yeah, as I understand it in the 5MGD configuration, the fourth well is redundant well. Three wells in operations would provide the intake water with the fourth well and sort of stand by mode.

[1:14:18] So, if we wanted to go that, if we were to go the 2MG MDG, we'd almost have to build

[1:14:24] the extra third well, and that may not be in the cost perhaps, and that would increase

[1:14:29] the cost of the two, if I'm looking at it right.

[1:14:32] Can I interrupt real quick, sorry, David, and thank you, Director Green, and I'll invite

[1:14:38] Mark Donovan to talk about it, but the capacity is such that you would still have standby capacity

[1:14:44] for the 2MGD, I believe.

[1:14:45] So I would ask Mark Donovan to please confirm that the

[1:14:54] modeling that geosciences that predicts a little over 4mgd

[1:15:14] All

[1:15:17] right, we'll move to Director Wayne Rayfield. Wayne, any comments or questions at this point?

[1:15:23] Thank you, Rick, none of this time over.

[1:15:28] All right, and we'll move to Mr. Erdman.

[1:15:32] And I don't see him on my list right now.

[1:15:35] I'm here.

[1:15:36] Oh, there you are.

[1:15:36] Good.

[1:15:37] Yeah, I have no questions this time over.

[1:15:40] OK, thank you.

[1:15:41] I have one quick question.

[1:15:45] Hopefully this won't derail, and you

[1:15:46] don't have to spend a lot of time on it.

[1:15:48] But one of our members of the public

[1:15:51] spoke about the transportation corridor agency, the TCA and how I'll use

[1:15:58] upon off the rails they got with their financials. Is there anything that you

[1:16:03] can compare real kind of high-level between this potential project and the

[1:16:08] TCA and the differences in the financials and why and how this project

[1:16:14] most likely wouldn't get off the rails and the scale that the TCA got off the

[1:16:21] Yeah, well, I'm not an expert in TCA, but as I understand their revenue model, it

[1:16:26] depended on drivers using the route and paying tolls.

[1:16:31] This project would have a different driver.

[1:16:33] It would be your decision as a water district to operate the plant.

[1:16:40] What's typical in ocean water diesel plants, this is the way the Carlsbad plant is running.

[1:16:47] It's really run as a base load facility.

[1:16:48] So because of its capital cost, it's run as much as it can operate.

[1:16:54] And so the kind of the marginal cost of this plan is the electricity cost.

[1:17:03] It's conceivable that you would want to save the electricity cost and put the plant

[1:17:07] into a standby mode, but that would, you're paying the capital cost, whether it's standby

[1:17:15] or not.

[1:17:16] And so that kind of that marginal cost of operations typically would result in a decision to operate the plant in order to get the water output.

[1:17:26] So the kind of economic drivers for the plant is such that you would very likely operate it and incorporate that water supply into your portfolio.

[1:17:39] Fair enough, good. Thanks for that. All right, we'll continue on and great job so far. I just want to put that in there. It's a lot, but it is very detailed and thank you so far. So continue.

[1:17:56] Thank you.

[1:17:56] Good.

[1:17:56] Thank you.

[1:17:57] Next slide, please.

[1:18:03] So the capital cost then results in financing and debt service.

[1:18:10] And we've worked very carefully on this with the district finance director and also the

[1:18:16] fieldman role app, your debt financial advisors.

[1:18:21] We have used a weighted average cost of capital that assumes borrowing that's shown here.

[1:18:27] And the first is the EPA, this is the federal WIFI alone program.

[1:18:32] It's a subsidized loan program up to 49% and WIFI has invited the district

[1:18:39] to move forward with a specific application for financing on DOHINI diesel.

[1:18:45] We've assumed that that's 49% of the capital raise.

[1:18:51] WIFIIR requires a match, 51% match.

[1:18:53] we've assumed that that matches split 50-50 between the California SRF loan

[1:18:59] program that's another subsidized governmental lending program it has the

[1:19:03] lowest capital cost which is shown in this table is 1.67% and that then we've

[1:19:12] assumed also issuance of municipal revenue bonds despite the districts very high

[1:19:17] credit rating those we see as the highest capital cost and these interest rates

[1:19:22] are themselves an average of historical interest rates and we've taken an approach that weights

[1:19:27] more heavily the most recent couple of years where interest rates have been super low but also

[1:19:34] looks back 10 years for kind of to balance those two long-term history and a short-term history

[1:19:41] to come up with these interest rates forecasts. The table below shows the assumed amortization

[1:19:49] of the borrowing, so the amortization is such that the annual debt service increases 2.5% per year.

[1:19:58] And this would be a decision for the board or this project was a regional project for the board and also your partners.

[1:20:09] The bar graph here shows in gold the principal repayment and then in green the interest on that.

[1:20:17] It's a very favorable environment because interest rates are so low to defer loan repayment.

[1:20:23] This is deferring loan repayment to the extent that's shown in the graph.

[1:20:28] The objective here is to ramp in costs so the front end costs are lower.

[1:20:33] And that comes obviously at the expenses of back end costs being somewhat higher.

[1:20:40] The total interest cost differential between this and if you were just to do a level debt service

[1:20:45] It's only like three or four million dollars in interest over the 30 years.

[1:20:49] So it's, again, that's because interest rates are so low.

[1:20:54] This mode of financing is intentional in order to have the cost curve kind of follow the

[1:21:01] projected met water cost curve.

[1:21:04] We think that regional partners would prefer this mode of financing because it's better for

[1:21:10] their repairs, and we think that the same for the district, but this is obviously would

[1:21:16] be your choice. And then I comment further that this offered sloping debt service profile

[1:21:24] served for all the jargon, but I think you know what I mean at a high level. This is how

[1:21:30] the San Diego County Water Authority determined to finance the Karlsbad desalination project

[1:21:36] for the exact same reasons that I'm describing.

[1:21:40] Next slide, please.

[1:21:46] So, we did a lot of work on electricity costs,

[1:21:50] and we know that that's been a real concern

[1:21:52] of the district and correctly.

[1:21:55] So, it's the largest,

[1:21:58] it's the lion's share of the operating costs

[1:22:00] for a diesel project.

[1:22:02] So, we start with the power consumption,

[1:22:05] and this is numbers for the five MGD project,

[1:22:08] the 2MGDs is obviously a lesser amount. So this project is takes five megawatt hours

[1:22:18] per acre foot of production capacity, or 27,000 megawatt hours per annum, and that's we

[1:22:26] looked at on the right. We benchmarked the power consumption of this project with the

[1:22:32] series of other sources, five other sources. You can see the doheny, diesel, energy consumption,

[1:22:39] per acre foot of water production. It's right in the middle of the road, so this is a GHD, CalAM

[1:22:47] result, and we just benchmarked. Again, this is illustrative of the due diligence that our firm did

[1:22:54] in reviewing these numbers.

[1:22:58] The second element is how much does that electricity cost?

[1:23:01] And our firm has developed a model of SDG&E's ALTOU-slash EECC tariff.

[1:23:11] That's the large industrial tariff.

[1:23:14] It's not the only electricity option, but it is the common option.

[1:23:22] This SDG&E ALTOU EECC tariff, this is what Carlsbad decalination runs.

[1:23:28] This is where we're working for East County Advanced Water Purification.

[1:23:33] They're doing an indirect potable reuse project in East County San Diego.

[1:23:38] This is their tariff for that.

[1:23:41] And we have an Excel model that models all the complexity of the tariff in order to calculate the sense per kilowatt hour.

[1:23:51] The results from time of use and holidays and summer months and winter months.

[1:23:55] That's shown in this in this table here. So the winter rate is

[1:23:59] 15.45 cents the summer is 1875 and for a project that's operating throughout the year the the the weighted average of those is 16.83

[1:24:10] cents

[1:24:10] That's that the 2021 if this project were online now that would be the electricity bill and

[1:24:18] Then in terms of escalation we we did a a study of studies

[1:24:23] So, we found credible 10-year studies, incredible 40-year studies, and we just, we took the average

[1:24:32] of their escalation rates, this would be from 2021 going forward, and that was a higher

[1:24:39] escalation rate, 3.0, 2% for 10 years, and then a lower escalation rate for 40 years, 2.0

[1:24:46] for 4%.

[1:24:47] That 2% is also really over a historic 40 years.

[1:24:52] That's the number and so you guys know the electricity actually.

[1:24:58] There's no rate increase and then a rate increase than none.

[1:25:01] It's a choppy and difficult project but we found the average of the expert projections.

[1:25:12] And so those are the three pieces that will go into our electricity cost projection on the project.

[1:25:19] Next slide, please.

[1:25:20] David, before we leave that, I have a question.

[1:25:22] Sure.

[1:25:23] Just to confirm, at a previous, well, a number of meetings, we, you know, we were confirmed that SDG&E said that they could supply the energy without any new infrastructure or, you know, anything further.

[1:25:41] further than what's already online.

[1:25:43] Is that still the case?

[1:25:45] And if you don't know that answer,

[1:25:46] maybe somebody on staff could answer it for me, please.

[1:25:52] Yeah, let me do that.

[1:25:54] And then I want it also to make another comment.

[1:25:56] But why don't I,

[1:25:58] Rick, I think the questions,

[1:26:00] whether a sub-dation is needed.

[1:26:04] Okay, thank you.

[1:26:05] Yes, thank you, Mr. President.

[1:26:07] It is.

[1:26:08] So we do have the,

[1:26:09] that we did confirm with SDG&E,

[1:26:12] that we have the electric infrastructure in place

[1:26:15] to serve the first phase, the five up to five MGD,

[1:26:19] which we're talking about today, a project over.

[1:26:27] Thank you.

[1:26:28] The other point I wanted to make on SDG&E,

[1:26:32] just before I leave the slide is that the SDG&E

[1:26:36] has a renewable energy content that is lower than the content

[1:26:41] that's targeted for the plants, and so we've added it as a non-electricity,

[1:26:47] O&M expense, purchasing renewable energy credits to bring the energy supply up to 100 percent

[1:26:56] green. So as an example, in the first year, that 60 percent of the electricity supply,

[1:27:02] the district would purchase renewable energy credits or RECS for, and then as SDG&E's energy content

[1:27:09] becomes more green as they green up their supply portfolio that rent cost falls away. So that's

[1:27:19] the, obviously, you think about the reliability of supply, but also the green content, the renewable

[1:27:26] energy content.

[1:27:30] During our final EIR, we committed this project, if and when it goes to be a carbon neutral

[1:27:38] project, so I believe that's that cost that's baked in there.

[1:27:43] Right, right.

[1:27:44] Thank you.

[1:27:48] Next slide, please.

[1:27:57] All right.

[1:27:57] So this slide shows the O&M cost and the R&R cost.

[1:28:03] And so we had a capital budget for chemicals, membrane

[1:28:09] replacements.

[1:28:10] So the membrane replacement is an operations and maintenance expense.

[1:28:14] It's not R&R. R&R is things like replacing pumps and replacing relining pipes and the membrane

[1:28:24] replacement assumes a continual expense to replace the membranes which have a shorter

[1:28:34] life than the other major capital equipment.

[1:28:37] And then the biggest non-electricity item is labor and miscellaneous.

[1:28:45] We took these numbers and the total for the non-electricity portion of O&M is 2.1 million

[1:28:52] for the 5MGD plants, 1.4 million for the 2MGD and then again we put those on a unit basis.

[1:29:01] So, per MGD, the larger plant is cheaper than the smaller plant.

[1:29:07] You can see that in the 421,000 per year.

[1:29:10] These are annual O&M expense versus 726 for the smaller plant with its dissociative

[1:29:20] dis-economies of scale.

[1:29:23] We took these numbers from 2017 and escalated them at 2.93%, and again, we used an average

[1:29:30] of statistical forecasts for CPI, CPI's consumer price index, which we use to measure these

[1:29:39] non-electricity costs. And then as I put in in the last little sub bullet that we included

[1:29:46] the cost of purchasing RACs into the ONM budget.

[1:29:52] In terms of renewal and replacement, as I mentioned before, the budget provides

[1:30:00] For complete replacement of the slant wells, over the 30-year projection, and then on top of that and a cruel of 1% of construction costs and so that 1% would be for a renewal and replacement of other items besides the slant wells. We've taken that R&R cost and we've deferred it for the first five years of operations. This is, we find typical for a large new project.

[1:30:29] We phased it in in year six through 10, so it's the same dollars, but it's incurred.

[1:30:38] It's backended somewhat over the operating period of the project.

[1:30:44] And the reason for that is that in the first five years that's really a break-in period for the project

[1:30:49] where R&R expenses would typically be warranty coverage or the brand new equipment that does not require

[1:30:58] R&R and as I mentioned, membranes are not in the R&R line item, they're up in the O&M line item,

[1:31:06] so membrane replacement starts in year one, but these kind of bigger replacement of the capital

[1:31:14] assets starts in year five.

[1:31:18] Next slide, please.

[1:31:23] So the project is modeled as receiving the LRP subsidy,

[1:31:28] and as the board knows, this is subsidy from metropolitan for districts that develop

[1:31:39] local water projects. We have modeled this, assuming the $475 per acre foot, 15-year program,

[1:31:48] they have different prices in terms. This is the one that has the highest value and present value

[1:31:56] to the district. So we've we've modeled the the it's

[1:42:24] 1013. Let folks get back tuned into the

[1:42:30] medium. We'll start in just about a minute. Yeah, it looks like actually 713. Pardon?

[1:42:36] Actually 713. Oh, 713. Yeah, sorry, I'm stuck on this East Coast time zone. And we do have a

[1:42:46] director that's in Hawaii so yeah we're we're spanning the globe here will partially part of the

[1:42:55] globe but all loud and clear here it looks good yeah and I'm you can still hear me and I'm clear

[1:43:07] yes sir yes I'll I'll take it away at your invitation all right uh

[1:43:16] Well, T minus 15 seconds will stick right on schedule now.

[1:43:22] We took our 15-minute break and let David get back at it.

[1:43:31] And David, the the floor is yours once again.

[1:43:34] Mr. Chair, I have a question related to the last slide or two before we move on.

[1:43:39] Go ahead, Mr. Green.

[1:43:42] Thank you.

[1:43:43] Yeah.

[1:43:44] If we were to go back to the slide 35,

[1:43:48] is the Lithia loan and the SRF and the bonds.

[1:43:52] Thank you.

[1:43:53] You had 49, 25 and 25%.

[1:43:57] If we were able to get 50, 50 on the two loans,

[1:44:04] would we not need the bonds any longer?

[1:44:07] That's a question.

[1:44:08] than if the debt would be more like 2.2 would be the effective rate. Is that true? I was

[1:44:15] understanding we might be getting more on the SRF.

[1:44:22] Yeah. Your math serves you well. The average weighted cost of capital would decline.

[1:44:31] It also would decline if we were to close exactly this capital financing in the near future.

[1:44:36] interest rates are currently lower for each of the pieces and the municipal revenue bonds being

[1:44:43] the most expensive component. If that were eliminated with the SRF loan, that would be favourable.

[1:44:51] And the availability of SRF loan depends a little bit on the scenario too. So with the two MGD project

[1:45:00] Well, that's just 55 million. That's 55 million split, basically 50% between the EPA and SRF. If it's the 5MGD project, it's a little bit more SRF. The EPA has capacity for either project. SRF is, there's scarcity in that program relative to demand. But I consider this a conservative interest rate assumption.

[1:45:30] given the possibility of crowding out the municipal revenue bonds with SRF.

[1:45:36] That answers that question fair enough. I get it. Thank you very much.

[1:45:40] Next question is, next slide.

[1:45:43] I believe is our power numbers.

[1:45:47] And we're showing roughly, I'm going to say all these are number 17 census of 2021 average for bugging SDG&E.

[1:45:56] and I know that I may be a bit of a broken record, but I know in the solar

[1:46:03] world there's an ability to reduce that and you know I don't know the exact

[1:46:10] numbers. I think we should check with our neighbors. Sam Arterita is using some

[1:46:16] solar on their at a much reduced cost. I don't know the exact number. I also heard

[1:46:25] from, as we were on our break, I called one of the directors of Eastern

[1:46:29] Minister of Water District, and on their last night agenda, they had on

[1:46:34] agreement with a PPA Power Purchase Agreement, and over a seven year program, they'll

[1:46:43] be able to save millions of dollars. I don't know to the extent of the agreement. I

[1:46:48] don't know how much power they're taking. Apparently, they did their first

[1:46:53] three ms first make first three megawatts they purchased outright and I think

[1:47:00] they've they're still paying that off obviously but he didn't have the

[1:47:05] numbers on that anyway I think that's just something our staff that we look at

[1:47:09] at least look at the eastern staff report from last night hearing they're they're

[1:47:16] hearing they're going to save a lot of money over the first seven years he didn't

[1:47:20] and now the exact number of what it would be on the kilowatt hour, so in the top of this

[1:47:25] hill. But those are my plummets, thank you.

[1:47:29] Hey guys, this is Wayne and I want to chime in with two quickies. First of all, I think

[1:47:39] to Bill's point, the SDG and E numbers are worst case, the way that's the way I read.

[1:47:52] And second, Jody Horrickson-Taku, I heard from a couple of our customers,

[1:48:03] and could you repeat now how they might ask a question as a member of the

[1:48:16] public or make a comment and thank you all. That's all I have over.

[1:48:24] Sure, let me address that real quick. Director Rapeel, they can email me a

[1:48:29] public comment to my email address, J. Brennan, B-R-E-N-N-A-N, at scwd.org. I

[1:48:41] will also put it in the chat right now.

[1:48:46] Thank you, Jordy. Sure.

[1:48:53] Great. Let's

[1:48:55] let's go to the next slide, please.

[1:49:00] All right. So this slide and

[1:49:05] sets forth our, how we've thought about matte water, and we've done this, these cost

[1:49:12] projections together with, with some of the folks from Modoc to get their expertise and

[1:49:19] perspective, and so on the right-hand side, we have three projection curves, a matte high,

[1:49:25] matte medium, and a matte low, and these are all projections of matte tier one rate plus

[1:49:32] RTS and capacity charges, the low case takes Matt's published a 10-year-rate projection

[1:49:40] and then just extrapolates it at 3%.

[1:49:44] So there's no new Matt projects included in that, and those projects aren't included

[1:49:49] because the Metropolitan Board hasn't approved the project.

[1:49:53] They're just outside of the rate case as if they will not happen.

[1:49:59] We consider and we meaning district staff, my firm, Modoc, the low case to be an unlikely

[1:50:06] case. Instead, one or both of these major new supply projects will be, we'll move forward

[1:50:16] and be included in that's rates. Also, the low case has, in our view, less than reliability

[1:50:26] So it's less of a comparable for a desalination project with its high reliability.

[1:50:31] So we've used the low case, but really, you see in our comparator,

[1:50:36] we're using the medium and the high projections as the avoided cost projections in the kind of our summary.

[1:50:43] The high case has escalation at 5% annually beginning in 2025.

[1:50:48] So starting in 2025, we depart from Matt's published 10-year rate projection

[1:50:53] and begin escalating it at 5% and that 5% creates additional cost recovery for the Delta

[1:51:02] conveyance project where a met water would be a significant payer participant in that

[1:51:10] project and then also the Carson Water Reuse project.

[1:51:13] So both of those are in the met high projection and that's a high projection at 5% and then

[1:51:20] And the medium case, which is really an average of the two, is escalates at 4.2 percent.

[1:51:26] And that assumes that one but not both of the Metwater projects proceed.

[1:51:34] And as Rick Shantaku said in his opening comments, all of these forecasts are lower than

[1:51:42] and Matt's historic five-year escalation rate,

[1:51:46] which was 566 as recorded and reported to us by Modoc.

[1:51:54] So these are the projections you see in the avoided cost

[1:51:59] and the thinking behind them.

[1:52:03] Next slide, please.

[1:52:08] So a couple of considerations for the Regional 5MGD project

[1:52:13] and the first is I think really interesting

[1:52:16] and, uh, well, uh, I think they're both interesting, but I like this kind of stuff.

[1:52:22] The first one is that the district has been shouldering this project alone.

[1:52:26] So you have spent and expense significant development costs.

[1:52:31] They've been born by your ratepayers, and that's part of the district dispatching its obligation

[1:52:37] to your ratepayers to bring reliable supply and plan for the future.

[1:52:42] The district also would contribute land to this project, the site is district land.

[1:52:50] If you were to find one or more partners to take 60% of the project benefits, it would

[1:52:58] be equitable and customary for that regional partner or partners to pay 60% of these costs.

[1:53:03] This would be reimbursement to the district of a portion of the development costs and a

[1:53:09] large portion, a 60% portion in respect of the volume of project benefits that would

[1:53:16] flow to new partners. Our estimate of that 60% is between 8 and 10 million and that's

[1:53:25] 60% of the value of the land and 60% of the development expenses of the district has

[1:53:32] has incurred to date.

[1:53:34] We haven't put those into the rate forecast.

[1:53:38] We, in our simplified pro-former model,

[1:53:41] that would be kind of an up front buy-in

[1:53:44] from the JPA or from a regional partner.

[1:53:47] So that would be cash paid over to the district.

[1:53:52] And it's significant benefit.

[1:53:53] And obviously there's other ways to kind of monetize that

[1:53:56] or think about that.

[1:53:57] But we wanted to put forward that in the regional

[1:54:02] project there would be a sharing of these contributed costs of the district.

[1:54:08] The second point I touched on this, I don't want to dwell on this, this would be an important

[1:54:13] decision for the district and for your partners in the regional project, would be the use of

[1:54:18] a joint powers authority.

[1:54:20] We've done significant work on recent regional projects setting up joint powers authorities.

[1:54:26] They're set up by an agreement among the municipal participants.

[1:54:31] We imagine that the JPA, if you went this way, it would have a board and that board would

[1:54:37] take key decisions on the project such as issuance of debt.

[1:54:41] We imagine that the JPA would engage South Coast Water District as its manager so that

[1:54:49] you're a kind of practical role in managing continued development, construction, operations

[1:54:54] would stay with the district, but again, that would be a decision by the JPA board.

[1:55:00] There's very significant benefits to a JPA from the district's perspective and those

[1:55:09] really arise from the the finance and this JPA would be primarily a financing entity

[1:55:16] and as the JPA issuing that with the district really being just a 40% customer, that would

[1:55:23] be off your balance sheet. It would be the JPA's death. You would record it as an operating expense

[1:55:31] and it would not create the sort of debt service coverage. It would be different than if you

[1:55:37] wish you your own bonds and beneficial. So that's a topic to explore as a regional partnership emerges

[1:55:46] obviously in the joint powers authority. You're doing something in partnership with your regional

[1:55:52] partners and so their preference as well would matter, but we really, in our

[1:55:58] pro forma model, we model a JPA because that's the way we typically see these

[1:56:04] multi-agency projects occurring or unfolding.

[1:56:12] Next slide, please.

[1:56:16] So this is my second to last slide and I think Rick already covered this so I can be

[1:56:24] pretty pretty brief. We're measuring first year cost of water, first full year of operations,

[1:56:30] and then we're present valuing that back to today's dollars. And we're comparing that to

[1:56:35] MetWater avoided cost again in 2021 dollars today's dollars. So we see the 5MGD project is 181

[1:56:44] to $214 per acre foot, higher than matte water,

[1:56:49] that's 385,000 to $460,000 higher annual first year cost.

[1:56:55] You saw the graph.

[1:56:56] There are different costs in different years,

[1:56:58] but we see quite typically these projects

[1:57:00] kind of boiled down to that first full year of operations.

[1:57:04] It's kind of the sticker price, if you will.

[1:57:09] The 2MGD project is more expensive for the regions,

[1:57:12] reasons that I've discussed. That would be $630 to $664 per foot higher than the

[1:57:21] MET water of what it costs. Again, depending on whether you're comparing it to

[1:57:24] the EDM or the high projection. And that's 1.3 to 1.4 million of additional

[1:57:30] annual expenses by the district to bring in the Doheny diesel versus our projections

[1:57:39] of map water rates. And again, the cost of differentials change over time. You've seen that in the line,

[1:57:46] those line graphs. Next slide, please.

[1:57:51] Rick, so I'll ask a quick question back on the previous slide.

[1:58:00] And I don't know if it's a question or

[1:58:02] comment. I guess these avoided costs, I understand how you've developed them based on projected rate

[1:58:09] increases, but they also assume that the rate structure it met doesn't change in the future.

[1:58:16] And as more and more agencies are rolling off met and developing more local projects,

[1:58:23] I heard that some time over the next, and it may take them 10 years to do, but that they're

[1:58:30] contemplating putting more on a fixed charge, and not as much on the commodity rate, which could

[1:58:38] impact to this and so I didn't know if you had considered that or heard much about that or any comments.

[1:58:47] Or

[1:58:51] Rick do you want to answer that or July?

[1:58:56] Well actually I was going to see if there's

[1:58:59] anybody on MODOC staff or board you know they would be the best prepared to answer a question like

[1:59:07] that, and then we could provide a response on based on what we think over.

[1:59:17] I know I did see Megan

[1:59:20] and I also saw Carl Seckel and there are a number of other, so any of our Modoc directors would

[1:59:31] like to respond to that, start to put you on the hot seat, but feel free to speak up at this moment.

[1:59:39] And if not, we can circle back around.

[1:59:41] I'm sure we can get a detailed answer.

[1:59:45] Yeah, I don't know.

[1:59:46] Did I get unmuted?

[1:59:48] Yeah, Carl, we could hear you loud, Claire.

[1:59:50] So there's a couple of folks that can respond to that

[1:59:53] on the call and what else I'll say is this.

[1:59:56] I think that's always a possibility.

[1:59:58] It's uncertain what.

[2:00:00] Met's rate structure format will be in the future, so it is something to be aware of and then also how those charges would be passed on from Metropolitan Nemodoc and then how Modoc passes that on to its retail agencies. So the combination of all that would have to be sorted out to determine which costs would be avoidable or not. Right now there's, we don't know enough to

[2:00:29] make any assumptions on that, but it is something that I think to pay attention to, and we'll just have to keep track of that as we move forward.

[2:00:37] So that's probably about the best we can do for right now would be my guess.

[2:00:43] If anybody else from Otock wants to chime in, feel free.

[2:00:49] Thank you for that, Carl.

[2:00:51] Can I, Rick, should I talk to our general manager, maybe wants to make a comment regarding

[2:00:57] that?

[2:00:58] Thanks, Mr. President.

[2:00:59] Since we're lucky enough to have Director Seco online, would it be fair to say that

[2:01:06] so MET has two components of its fixed charge right now?

[2:01:10] It one is a readiness to serve charge, and that's based on a rolling average of what you're

[2:01:14] actually taking from metropolitan, the second one being the capacity charge which is based

[2:01:21] on your highest day CFS use and that's charged to you over a period of three years.

[2:01:30] So both of them are dependent on what you actually use or on an annual basis or on a daily

[2:01:36] peak.

[2:01:37] Are they talking about a structure that's similar to that because if it was, there would

[2:01:43] be a benefit to this project, or any local water supply project that offsets your metwater

[2:01:49] use since your overall rolling average with theoretically go down.

[2:01:53] Not sure about the daily peak that depends on your system, but at least your annual use

[2:02:00] would go down in theory over.

[2:02:03] Right, so Rick, everything you said is correct.

[2:02:06] So the current, the way the RTS and the capacity charge are charged by Met to Modoc and Modoc to you, it is on an average basis.

[2:02:18] So you can roll off of those.

[2:02:19] What we're talking about is a speculation of some change Met might make in the future.

[2:02:26] And the theory brought up by Director Goldman and it's a good one with everybody looking at rolling off a Met.

[2:02:33] the question is, how does MET maintain its financial integrity? And there is some talk about

[2:02:42] them going to more of a fixed charge or the other option is a contract basis. But there's no

[2:02:50] work that's really been done on that. It's a work that I don't think will roll out until

[2:02:56] So sometime in 2022, possibly even later, if I had to guess it's going to depend on

[2:03:03] what the IRP says and how metropolitan judges, what its future market will be for water

[2:03:14] sales.

[2:03:15] But I think Met is concerned about its financial integrity.

[2:03:18] I think we're all concerned about their financial integrity.

[2:03:21] So something needs to be done to bolster that.

[2:03:25] and it's just uncertain right now how that will happen.

[2:03:29] I appreciate that, Carl, and yeah, I want to ask the question.

[2:03:34] I wasn't sure how we could respond.

[2:03:36] I don't know if maybe there's some sensitivity analysis

[2:03:41] that could be done on, again, you know, I know it's very

[2:03:46] premature, but if it takes, I mean, we're talking about a project

[2:03:50] that wouldn't even come online for six years.

[2:03:53] and I would expect that if that makes that kind of a change, they're going to have to place it in

[2:04:00] lowly so it doesn't have a dramatic impact on its agencies but cost of water is getting

[2:04:10] such that everybody is projects are more cost effective locally because that water's going up so

[2:04:16] So they still have to get the revenue to pay for everything.

[2:04:21] So anyway, I just wanted to ask the question.

[2:04:23] So we at least aren't blinded to these numbers

[2:04:27] that they're locked in for next 30 or 40 years.

[2:04:30] Yeah, I think it's a good note.

[2:04:33] And let's toss it back to the Met staff.

[2:04:35] I'm a Monoc staff to see where Met is in that.

[2:04:39] I'm not been in any of those discussions recently.

[2:04:42] So but I think it's good to circle back with them

[2:04:46] and get some comments, we did make an assumption in the 2018 reliability study because that was

[2:04:53] something that was brought up then and we did make an assumption in that and I don't

[2:04:59] offhand recall what it was but we did test sensitivity so there is a way of doing that but it's

[2:05:05] pretty speculative but it can be done.

[2:05:12] Great thank you for that Carl off the cuff and a great question

[2:05:17] Director Bowman. All right, we'll continue on. We're almost to the end of this portion.

[2:05:24] I do have a question that's a couple slides back, but I'll wait until we get to the end here.

[2:05:30] So, carry on, Mr. Moore.

[2:05:33] Great. Yes. Thank you. So, Rick already put these forth as the key considerations. I think we have

[2:05:43] a pretty good idea of what don't need costs and how that costs compares to to met water

[2:05:50] and so obviously this isn't it's cheaper. It's a diversification play. It spreads your

[2:06:00] risk. A question over how Matt rates will unfold over the next five years and ten years and

[2:06:06] in 20 years, well, you're one step more detached from that

[2:06:12] through a diversified supply.

[2:06:15] It's a finding and strength professional.

[2:06:19] I like the benefits of diversification typically.

[2:06:23] The second question is, is the rate impact acceptable

[2:06:26] to district ratepayers?

[2:06:28] And as part of the team, we've been working

[2:06:32] with John Farncoff and his firm on a rate forecast

[2:06:35] and I'll pause here maybe before I pass the baton over to John and see if there's more

[2:06:42] questions on this portion, but John I think has got a great answer to question 2 and Rick

[2:06:51] obviously has covered the survey results, but from my perspective these are the two big decision points

[2:06:58] for the board that I have the pleasure of addressing.

[2:07:04] Let me that kind of wraps up my section and maybe I'll just pause for questions before passing the microphone.

[2:07:13] Great. Thank you for that. We'll go around the horn. Scott just asked a question. Do you have any other questions you'd like to direct towards Dave and Mark this time?

[2:07:24] Yeah, one more question. The graphs that Rick showed them with the

[2:07:32] projected cost of the water was that based on the assumption of the deferred

[2:07:37] loan repayment approach. Yes, that was the deferred loan repayment approach.

[2:07:44] Okay, because I guess as a comment I would like to see what you know the even

[2:07:50] approach would look like in comparison. I don't know if you've done that or not

[2:07:54] And it doesn't need to be tonight, but something eventually.

[2:07:57] Well, we've, we've, we've tried to prepare for this.

[2:08:03] Director Goldman.

[2:08:05] And so the.

[2:08:08] A level debt service.

[2:08:12] As opposed to that upward sloping debt service, I think you were asking for the impact of that.

[2:08:17] The impact in the first year.

[2:08:20] Water cost.

[2:08:22] would be to increase it by $240 to $300 per acre foot, $240 to $300. Depending on the

[2:08:31] 2MGD or the 5MGD scenario, but that's kind of the order of magnitude. So it's a significant

[2:08:35] increase. That would be something like $2.40 more in monthly rates. So if you look at

[2:08:43] an average residential customer bill, it would be something like $2.40 to $3 in additional

[2:08:51] rates. If that was done in conjunction with all SRF loan as an example and you know interest rates

[2:08:58] move down and then it would be less but just if I take that upward curve and make it flat it's

[2:09:05] something like $2.40 a month higher cost to $3 per month higher cost on your average residential bill.

[2:09:14] Okay, and then I assume it would be lower as you move out in time.

[2:09:19] Absolutely, in the later years, cheaper and in cumulative less interest, but we calculated,

[2:09:29] we looked at those two different curves.

[2:09:31] It's only three or four million, and when I say that only, I mean, over 30 years on a project

[2:09:36] of the size, the interest cost differential over 30 years is really quite negligible, and

[2:09:42] The reason for that is the interest rates are so low.

[2:09:45] The low level of interest rates is a good market if the districts were interested in

[2:09:51] doing this upward slope and that's kind of a deferral of paying back.

[2:09:55] The debt interest rates are really low now.

[2:09:59] With the EPA program especially is completely agnostic on how quickly you advertise the loan

[2:10:07] provided it's amortized within the useful life of the project, but that kind

[2:10:12] of deferral doesn't have much interest cost and it does have this front end

[2:10:19] benefit and taking away would increase the front end cost. And the one other

[2:10:23] comment I'd make, I know that level debt services is familiar, but if you look

[2:10:30] at real dollars with inflation, level debt services actually front-end it,

[2:10:35] meaning that if you pay the same amount every year for 30 years, you feel that the most

[2:10:40] in the first year, in 30 years, kind of money is cheaper. So there's that shaping upwards

[2:10:49] and the reason that at least the San Diego County Water Authority did that on their diesel

[2:10:54] project was just that they wanted to kind of spread the cost over time a little bit more

[2:11:01] or thoughtfully than a level debt service.

[2:11:04] Okay, thank you, you know that?

[2:11:05] That answered my question and it was a good explanation.

[2:11:09] Probably as much as I can handle at the moment.

[2:11:11] So, no, thanks for it.

[2:11:14] I'll stop my mouth on that.

[2:11:17] Thank you for your patience.

[2:11:19] All right, we'll move to Director Rayfield.

[2:11:22] Wayne, any questions or comments at this time?

[2:11:25] Or I do have a comment.

[2:11:28] Thank you, Rick.

[2:11:28] And I want to reinforce something that David said, that there is a value in diversification.

[2:11:45] And he was talking, I think, in that context about diversifying our water supply portfolio.

[2:11:53] and I totally agree with that comment and I wanted to point out that actually it may be easier to

[2:12:13] forecast that do any decal costs that met costs 10 years out, because we don't have

[2:12:26] any idea or control for that matter over what met might do. How much they'll

[2:12:35] invest in the Bay Delta, for example, the tunnel.

[2:12:42] And I do agree with something else, David said,

[2:12:46] that money is really cheaper over time. And in fact, in 20 years,

[2:12:54] we have that debt. We will be paying far less than that debt is worth today.

[2:13:02] And we look at the cost of money, so I have no questions, but I'm glad you made that point, David, about

[2:13:14] diversification, because that is a point that I hadn't thought about before, certainly.

[2:13:22] So thank you for that. Over.

[2:13:25] All right, thank you for that, Director Rayfield. We'll move on to Director Green, Bill.

[2:13:30] Well, any comments or questions at this time?

[2:13:33] Thank you, Mr. Director.

[2:13:36] I also heard a comment that people were basically trying

[2:13:41] to get off of that.

[2:13:43] I don't think that's our intention.

[2:13:46] Our intention is to reduce our reliability on that,

[2:13:51] especially in the event of disaster or emergency.

[2:13:54] In fact, I think as our general manager pointed out, our water portfolio, even as we're

[2:14:03] fully subscribed to Doheny, we're still 36 percent met, plus our groundwater.

[2:14:13] So that gives us roughly almost half of our supply between our groundwater and met.

[2:14:19] In the event that's something that ever happened, there was a power failure or something

[2:14:24] that the south didn't work. So we are covered and then also we also talked about

[2:14:30] an event that something didn't go quite right and that could be a lever of water and we did

[2:14:35] cover down water facility. We wouldn't be losing out of, well we could we could consider

[2:14:43] my turning off our landscaping and things of that nature. So I just don't want to give everybody

[2:14:49] any impression that we're off of Matt and that's not the case over.

[2:14:55] Right, thank you for that. We'll move to Director Erdman Doug.

[2:15:00] Any comments or questions for David Moore? Is David done with this presentation? Is this the final slide or? Yeah, and then we're going to move into the other portion of the tonight's agenda, the item C, which is the doheny decal rate impacts. Okay, I have no questions this time. Okay. Thank you. Whoever's controlling the screen, could we move back to page 40? I think it's too bad.

[2:15:29] All right. And then the second bullet point, we talk about potential implementation through a joint powers authority.

[2:15:41] I'm going to give this question to our general manager. I think a lot of folks already know the answer to this, but I just want you to really illuminate the fact that one, our agency already produces water.

[2:15:55] but that we effectively run the joint regional water supply system, the JRWSS,

[2:16:02] and kind of illuminate how, you know, folks in the public's talk about us being

[2:16:07] this little water district and doing our own thing, but, you know, just give a 30,000

[2:16:12] foot view of what the JRWSS is and how beneficial it is that effectively our crews are

[2:16:22] are running that system and that that's adjacent to our property.

[2:16:26] Sure.

[2:16:27] Thank you, Mr. President.

[2:16:29] Quickly, the joint regional water supply system extends 35 miles from the Irvine area,

[2:16:35] all the way down to Camp Pendleton and State Parks in the San Diego County Northern section there.

[2:16:43] We do have two large reservoirs and

[2:16:45] And South Coast Water District was a selected operator back in about 20 years.

[2:16:55] Let's see.

[2:16:57] Well, we're the selected operator, somebody could correct me on that time frame there.

[2:17:02] And what that means is we put our best and brightest out there to operate the system.

[2:17:08] So doing the repairs, replacements, and the capital projects.

[2:17:13] So, we have an engineering staff that does that, and the board approves all of these expenses

[2:17:18] our board.

[2:17:19] So, we have a lot of experience in a joint powers authority arrangement, and it's been

[2:17:26] very successful, and it's, we have a number of member agencies as part of that JPA, and

[2:17:36] these agencies have all contributed, we have quarterly meetings, and it really does work

[2:17:42] out nicely to keep that system running in the best possible format through the joint

[2:17:49] arrangement there. So I'm not sure if that answers the question.

[2:17:54] I just want to get on the record that folks can understand that effectively our board

[2:18:00] and our crews operate this crucial system that supplies water to South Orange County including

[2:18:06] doing, you know, other agencies and other cities and that, you know, we're fully capable

[2:18:14] of being in this type of an arrangement. This isn't some outline or kind of exotic type

[2:18:21] of implementation, but that our agency has been working for decades and supplying, you know,

[2:18:30] the vast majority of the water to South Orange County. But I just think that that's a really

[2:18:35] important part of this that, again, folks in the public and otherwise would kind of say

[2:18:41] we're this small agency and we're going in it alone when the reality is we're working

[2:18:47] diligently and very hard. And like you said, we have some of our brightest and best employees working

[2:18:54] on supply and water to South Orange County. Again, thank you very much, David. Obviously,

[2:19:02] You're an expert in this and we're glad to have you on board as part of our team.

[2:19:09] And I know we'll see much more of you in the future here.

[2:19:14] It looks like Rick, you want to make a comment, or Mr. President, sorry about that lapse.

[2:19:18] I just verified it is 20 years since 2000, so basically 20, 21 years.

[2:19:24] And the member agencies, the water purveyors, I'll just name the City of San Clemente, San

[2:19:29] San Juan Capastrano, El Toro, and Santa Margarita

[2:19:34] through this transition with San Juan Capastrano.

[2:19:36] Irvine Ranch Water, Moltenegel, us,

[2:19:39] and we have three San Diego customers.

[2:19:43] They're Southern County Edison through the songs,

[2:19:46] State Parks, and Camp Pendleton.

[2:19:48] And that's been operating since 2021 years,

[2:19:52] successfully over.

[2:19:55] Good, thank you for that.

[2:19:57] Again, I know that's pretty repetitive

[2:19:59] for most folks, but just want to get that on to the record.

[2:20:02] Looks like, Joe, do you want to make a comment?

[2:20:05] I received a public comment that I was going to read.

[2:20:09] It's from El Netterhood who says, and this is quoting Al,

[2:20:13] speaking only as an individual, not as a Modac Board member.

[2:20:18] Clearly, this project will be significantly enhanced

[2:20:21] by having more partners beyond SCWD.

[2:20:24] What will it take to get other local water districts

[2:20:27] to actively participate in this project.

[2:20:30] And that was the end of his comment.

[2:20:34] Great, thank you for that.

[2:20:35] Thank you.

[2:20:36] I saw your name on the list

[2:20:37] and I would like to be able to go through all the names,

[2:20:40] but that would have probably been about a 15 minute exercise.

[2:20:43] Well, maybe out that long,

[2:20:44] but we do appreciate everybody

[2:20:47] that's attending this meeting

[2:20:50] and feel free to communicate with our click

[2:20:54] of the board, Jody, Brennan, with a message and she'll get any of your comments or questions

[2:21:01] read.

[2:21:03] Alright, so I believe we got to the point of that was attachment B and now we're

[2:21:12] going to move to attachment C if I'm on the same page. And there we go. Okay, I've got

[2:21:23] My iPad and it is matching what's on our screen.

[2:21:29] So Rick, our general manager, do you want to tee this up at all?

[2:21:33] Or do you want to just kind of move directly in with our console?

[2:21:36] I'm just going to quickly hand it off to John Farnkoff, John, your floor.

[2:21:42] All right, Rick.

[2:21:44] President Erkinhof, members of the board,

[2:21:46] it's a pleasure to be here with you again.

[2:21:49] It was only two months ago that we finished the rate hearings.

[2:21:53] And we'll back here again with some heavy lifting for you.

[2:21:58] I'd like to echo David Moore's compliments about your staff.

[2:22:04] They make our work a lot easier. They're really great to work with and we appreciate it very much.

[2:22:11] This is the outline I have here. It's a presentation that's a little bit shorter than David Moore's.

[2:22:16] And I realize that we're coming up on three hours now for this session.

[2:22:22] and I'll try to move pretty quickly. Our results have already been previewed, but I'd like to

[2:22:27] provide some details that will help people appreciate the significance of those results.

[2:22:34] Brief introduction. And then we're going to talk about these cost impacts. And we're going to start

[2:22:39] by looking at the first full year of operations in fiscal year 2627. And I'd like to clarify that

[2:22:47] when I talk about the first full year of operations it's different from the first year

[2:22:51] that David Moore was talking about was he used fiscal year 2021 for preparing his cost

[2:22:58] estimates and casting his forecast in the future.

[2:23:03] We're using his work and picking up along the way to come up first with the impacts in

[2:23:12] the first four year of operations and then we're broadening it to the near term ten years

[2:23:17] So you can see how we get to the rates and revenue increases that are needed to fund the

[2:23:26] project at that point. And then we'll broaden it even more out past the year 2040, which

[2:23:34] is when the local resources program credits will have been completed from that. I also want to

[2:23:44] provide a little sensitivity analysis that focuses on electricity costs and then we'll present

[2:23:50] some of the rate-payer cost impacts for fiscal year 2627. Next slide please.

[2:23:57] This is just a brief description of the firm on the left side there you'll see

[2:24:00] you know the work that we do for publications these provide water waste water,

[2:24:04] storm water, and solid waste services. I focus on the water waste water, storm water,

[2:24:09] recycled water, just all the water services, and primarily in making, and primarily in California,

[2:24:17] although, you know, I've worked throughout the country and Canada. These analyses that we prepare

[2:24:22] for governments, cities, districts are all to help them figure out how to fund their enterprise

[2:24:29] and governmental activities. We have two offices. I'm in northern California office, we have a

[2:24:40] He has been assisting the district's CFO and the district for the last three years

[2:24:47] on assisting with updating the budget and also on the rate analysis.

[2:24:53] My background is in water resources engineering and Jeff is his background is in economics

[2:24:58] and finance.

[2:25:00] On the right there, you'll see just kind of a various Southern California clients we've

[2:25:05] done a variety of studies for to just give you a feel for the diversity of our financial

[2:25:11] analysis.

[2:25:12] Excellent.

[2:25:14] Just quickly, on our analytical approach here, we think it's significant, people keep

[2:25:20] in mind that these two projects both provide 2MGD for South Coast, a 5MGD project has 3MGD

[2:25:31] for other partners. In this water, it's when we do its reliance on that, it's going to

[2:25:40] replace 43% of that water. Almost half, it's a very significant amount. So when it comes

[2:25:45] to supply diversification, broadening the portfolio, this is not a drop in the bucket, so to

[2:25:56] Another part of our approach is that we're working off of the recently updated budget

[2:26:01] that we prepared for the district to have a, what we call, the no-desal baseline of

[2:26:10] revenue requirements to compare the incremental costs associated with the desalte projects.

[2:26:19] Next slide, please.

[2:26:21] So key assumptions, what we're going to be talking to you about tonight are the impacts

[2:26:30] that look at the, as you remember in David Moore's graphs of the cost of water, David had

[2:26:36] the medium and the high met projections.

[2:26:39] We're using the medium cost projections, which is a little more adverse economically that

[2:26:46] that lower cost has a bigger spread between the DFL cost estimates and the MET cost.

[2:26:56] The revenue increases that we'll be looking at are our estimates, our firms estimates.

[2:27:06] We've done our best to come up with a reasonable extrapolation of what we think the revenue requirements

[2:27:12] are going to be in the future based on this recently updated budget.

[2:27:16] But everybody should understand that these are our projections.

[2:27:21] There are some very significant factors that are unrelated to diesel

[2:27:26] that could affect these projections.

[2:27:28] That the district will be looking at closely in the next couple of years

[2:27:32] a possible revision of its reserves policy.

[2:27:36] Renewable replacement projects, other capital improvements that will come along.

[2:27:41] Additional costs related to water conservation recycling.

[2:27:44] Those are some examples.

[2:27:45] Those do not affect the incremental costs of desal that we'll be talking about, and we

[2:27:51] just want to make it clear that this, we're not trying to set rates right now, we're

[2:27:56] trying to look at what the incremental costs desal does, how it affects them, customers,

[2:28:04] and certainly all of this is subject to further extensive review by the board.

[2:28:10] I'm sorry to interrupt.

[2:28:13] Director Naderhood had a really good question that I was going to wait to the end to discuss,

[2:28:18] but I want to be respectful of times I'm going to interject and try to answer the question.

[2:28:23] His question was related to, you know, what do we do to get more partners?

[2:28:31] You know, I guess what are some of the mechanisms I'm assuming he's talking about?

[2:28:35] So that are actually our staff recommended board actions, you'll see, we have four of them.

[2:28:42] And number two is to initiate a public outreach program to our public and to the nearby agencies

[2:28:50] supporting the implementation of the project. And number four is to authorize the GM to develop a

[2:28:56] partnership marketing plan to pursue and secure delineating ocean diesel project partnerships by May

[2:29:03] of 2022 and we'll explain more why that's a magic date that's coming up fairly soon

[2:29:10] with local agencies and other potential water purveyors. So from the district standpoint that's

[2:29:16] where we'd like to broaden that outreach if the board does give us permission but I wanted to

[2:29:21] interject with that so that Mr. Naderhood wouldn't feel forced to stay throughout the entire meeting here.

[2:29:28] I'll stop there over.

[2:29:32] Okay, yes. Next slide here. All right, so now we're going to talk about the cost impact in fiscal year

[2:29:40] 2627. So we've moved up now from David Moore's first year in 2021.

[2:29:48] The projects are going to provide both the five in the game two and DG projects are going to

[2:29:53] provide 2,128 acre sheet water per year and now we're looking at a cost

[2:30:00] I would like to submit from David's projection that in 2627, it will be $1,561. And when you do the multiplication here, that much water would cost $3,321,000. If it's replaced, that's the avoided cost that we're looking at. And, you know, it's a significant amount. And it will largely offset the cost of this out of nation as we'll see. Next slide, please.

[2:30:31] And this is kind of a cramped slide, but what we have here are two boxes.

[2:30:37] The upper box is the 5-MGD diesel project and the lower box is the 2-MGD project.

[2:30:43] Starting first with the 5-MGD project, these are the costs that are associated with just

[2:30:48] the district's 40% share of those costs.

[2:30:52] And I wish we'd share on a little bit more of the math here.

[2:30:54] The cost that we're showing here for the 5-MGD project is that 2128 acre feet of water multiplied times the David's projected cost of diesel for the 5-MGD project, which is $1838, which is $277 higher than the Met cost 18% higher.

[2:31:19] When you met out, the MetaVoidy cost, the net cost of the 5-MGD project to see here

[2:31:26] in the first four-year operations is $590,000.

[2:31:32] When you compare that amount with the projected revenue requirement that we have for the no-d sell scenario,

[2:31:42] We have $30,723 and as I said, that amount is certainly going to change by the time we get to it.

[2:31:53] It's our best estimate right now, but that almost $600,000 net cost there roughly represents about 2% of that.

[2:32:03] That $30 million could go up substantially and the percent would still run, the 2%.

[2:32:10] It doesn't change very much.

[2:32:12] In the lower box for the 2MGD project, here we have a $5 million annual cost for water,

[2:32:23] and there the math is 2128 acre feet times $2,394 for the cost of diesel in the 2MGD project,

[2:32:36] which is $833 higher than the METS cost of water when you net out the MET avoided cost.

[2:32:47] Being will cost for the 2MGD project is $1733,000 per year.

[2:32:55] And that's about 6% on top of this projection we have of the revenue requirement.

[2:33:00] So this is some additional detail from where that 2% and 6% impact come from.

[2:33:05] And, and that percent is roughly going to remain constant until we get out to the point

[2:33:11] around 2040, where the, when the LRP ends, next slide, please.

[2:33:22] What I wanted to do with this table is give people an appreciation for the fact that D cell

[2:33:30] is, is not a major part of your cost.

[2:33:34] You have what we call here this base revenue requirement, which also includes the cost, producing, groundwater.

[2:33:41] That's about three quarters of the revenue requirement that rates have to cover.

[2:33:47] Water supply is about a quarter of it, and there are no diesel alternative.

[2:33:51] You see there what the net purchases would be.

[2:33:54] Again, this is a projection into the first year of operations.

[2:33:59] When you get to the 5MGD project,

[2:34:01] what we see here is the cost of diesel, that $3,911,000 cost, that's about 13% of the revenue

[2:34:15] requirements. So we've reduced the purchases of met, water down to 14% from 25%, and we're

[2:34:22] getting 13% now of the revenue requirement devoted to the cost of diesel. And looking

[2:34:30] a little bit more closely at this. If you look at the cost of electricity on Route 12,

[2:34:35] that's the single largest cost of the three debt service and other O&M in diesel.

[2:34:43] And for the five MGD project, that 2.1 million is about 55 percent of the total cost of

[2:34:49] diesel. It's 42 percent in the two MGD project.

[2:34:54] I know people are very sensitive to the cost of

[2:34:57] electricity and I'm just trying to help you get an idea for you know how it fits into the whole

[2:35:02] picture here because although it might be you know close to half of the cost of the cost of

[2:35:09] diesel it's about seven percent of the total revenue requirement that we project.

[2:35:17] We can have the next slide please. We prepared this slide again to focus on electricity and

[2:35:25] And creating an example here where we said, you know, what if there were a 10% increase

[2:35:30] in all of these costs, which is what we're showing here, what would that amount to as

[2:35:36] an ineffective dollar amount that you would have to increase rates to cover?

[2:35:42] And focusing on row 11 there, the electricity, if it should suddenly go up 10% overnight,

[2:35:49] It would be a $214,000 additional cost, 0.7% additional impact on the revenue requirement.

[2:36:02] We could have the next slide, please.

[2:36:05] All right.

[2:36:06] So now I've talked to you about the fiscal year 2026, 27 first full year of operations.

[2:36:13] which you can see here is the six bar set of three bars there from the left.

[2:36:24] It's inside that dashed black box.

[2:36:27] What we're trying to show you here is the period of time over which the revenue requirements

[2:36:32] will be increasing to the first full year of operations where we see that additional

[2:36:38] $580,000 cost for the 5-MGD project and the $1.77 million for the 2-MGD project.

[2:36:49] Working out from left to right, this is the current year, fiscal year 2122 is in the

[2:36:55] far left there.

[2:36:57] The rates for this year and next year were recently adopted back in July.

[2:37:03] Those have been set, there are no costs for diesel in them, so you'll see the tips of the

[2:37:10] three bars are all the same height.

[2:37:14] As we move into the dashed black box, we start to introduce increases in the revenue

[2:37:21] requirement first to cover the 2MGD project, and it's very hard to see, but if you look at

[2:37:27] that blue bar, the right most horizontally hatched bar,

[2:37:32] it's just tiny bit higher.

[2:37:34] That's a 1% increase.

[2:37:36] And then the next year in fiscal 2425,

[2:37:40] now it's 2% higher.

[2:37:42] And then in fiscal 2526,

[2:37:46] starts to see a 1% increase in the middle cross hatched,

[2:37:50] green bar, that's a 1% increase.

[2:37:54] Meanwhile, the blue bar has gone up another 2%, so you see, getting a little bit higher.

[2:38:00] And then when you finally get to the first full year of operations, the cream bar is up 2%,

[2:38:10] the blue bar now is up another 2%.

[2:38:15] After that, those increments will proportionately stay the same

[2:38:19] until we get to win the LRP payments and down in 2040,

[2:38:26] if we can have the next slide, please.

[2:38:29] This is a slide that really looks at the full span

[2:38:33] of time here from the current fiscal year,

[2:38:37] where you see those hyphens or those dashes,

[2:38:41] but that indicates that there has been no additional

[2:38:44] revenue increase to fund diesel.

[2:38:46] So in the first two years, the current year fiscal 21-22 and then 22-23, those rates that

[2:38:55] were recently adopted have no funding and then for the do-sound projects.

[2:39:00] And then you'll start to see the percentage increases that get us to the first full year

[2:39:05] of operations in fiscal year 26-27 and then there's the number of years there where there are

[2:39:12] no additional increments, incrementally rate increases for D-SAL.

[2:39:18] No doubt will be rate increases just because other costs will be going up.

[2:39:24] We don't know what those are going to be right now, but those dollar amounts

[2:39:29] for the cost of D-SAL we've converted into these percentages based on the best

[2:39:35] estimate that we can make right now for the no D-SAL alternative.

[2:39:39] When you finally get out of fiscal year 3940, you'll see there are a couple of years

[2:39:45] there of additional increases that will make up for the loss of the LRP payments.

[2:39:52] And then again, you will get back to where the revenue increases would be the same no

[2:39:58] matter what.

[2:39:59] There would be no additional incremental increases for diesel.

[2:40:04] Next slide, please.

[2:40:05] This is a table that gives you an idea of what these customer builds with how they would

[2:40:14] be impacted.

[2:40:15] You've already seen this for a single family customer here.

[2:40:19] We're seeing that $2.38 amount per month, just 2% over what we estimate the bill would

[2:40:26] be without DSL.

[2:40:28] And for the $2.2 project, it's that $7.20 amount, which is 6% more.

[2:40:35] And you can see it for the small commercial, you see the assumptions we've made there about the size of the meter and the amount of water used.

[2:40:43] You know, when I look at this, try to put myself in the shoes of a rate payer.

[2:40:48] And you know, I guess one way to look at this is that this is the cost of reliability, reliability from diesel.

[2:40:59] And it's a form of insurance and I think you can look at this and you can think if you're a residential customer that this is insurance maybe against the loss of landscape if there would be an interruption and irrigation water.

[2:41:16] And if you're a commercial customer, the interruption in your business for water uses that it might be affected by.

[2:41:25] Um, um, uh, rationing or, or, uh, curtailment of water, use, do we have the next slide, please?

[2:41:35] Uh, getting into the summary here, uh, you know, I talked about, you know, they, uh, we really

[2:41:40] have two periods of revenue increases. There's the first one that initially gets you up, uh, to the

[2:41:46] first full year of operation in fiscal 2617. And then there are a few more increases, uh, 15 years later

[2:41:54] out in 2040.

[2:41:57] By the first full year of operations we've seen here it's it's about 580 you know

[2:42:03] $600,000 dollars call it or 2% more than it would be without the decal. For the 2-inch

[2:42:09] UD project this 1.77 million 6% more and then there'll be those additional increases 15 years later.

[2:42:18] Just really hard to talk about frankly that's a long way to forecast projections.

[2:42:23] Next slide please.

[2:42:26] When we talk about the impact on customers, I'd like to make it clear that it's hard to

[2:42:32] talk about a customer build because customers receive two bills, they build monthly for

[2:42:38] the water use and they build annually for their service charge and their peak demand charge

[2:42:43] and what we've done is we've taken those annual charges and convert them into monthly amounts.

[2:42:48] customers don't actually get one bill for all of that spoken out. But again, you know,

[2:42:54] this gets back to that monthly cost impact for an average resident's $2.38. For commercial,

[2:43:02] for the five NGD project, it's 2 percent more. The dollar amount varies because commercial

[2:43:08] classes customers are a very heterogeneous group of customers. So the size of the meter and the water

[2:43:17] use can very considerably. It's hard to come up with a dollar amount for an average commercial

[2:43:21] customer. To MGD project, again, for average residential $7.20 cents, 6% more. Commercial

[2:43:29] will be 6% more whatever their cost is.

[2:43:34] I think that's it.

[2:43:36] All right. Thanks, John. I'm going to take the next several slides. But first of all, I wanted

[2:43:41] to thank David Moore, clean energy capital and John Farnclaw at HFNH and their staff for

[2:43:47] for the wonderful work, it was a lot,

[2:43:49] so I appreciate that effort.

[2:43:51] Next slide, please.

[2:43:54] So I'm just gonna close up and get

[2:43:55] towards our recommendation.

[2:43:57] So this is, as many of you know,

[2:43:59] we have broad-based support of this project

[2:44:02] from the elected officials, regulatory support,

[2:44:05] community support, stakeholder support,

[2:44:08] bipartisan from the elected officials include

[2:44:11] OC Supervisor Lisa Bartlett,

[2:44:13] Congressman Mike Levin,

[2:44:14] a state assembly person, Codipet, Petri Norris,

[2:44:18] it's instrumental in our legislative fix, regulatory support,

[2:44:24] including the slant wells and co-mingled discharge that I talked about earlier,

[2:44:27] community support through the public survey, water reliability, working group,

[2:44:32] that was assembled to help us road map what direction we go here,

[2:44:37] and the resorts have been supportive, including Monarch Beach,

[2:44:39] each speaking at one of our prior board meetings.

[2:44:43] Staycoater supports from the and the environmental community included Heal the Bay and OC and

[2:44:48] Coastkeeper.

[2:44:49] Just an example of some of the support next slide.

[2:44:54] I already talked about these beneficial project components and the interest of time I will

[2:44:58] not talk about it again but

[2:45:00] As you saw in the area of photo, our project is uniquely positioned there with a number of positive aspects to that site. Next slide, please.

[2:45:10] And I will also talk about the due diligence study. So, this is, this is one of the key milestones here, the financial study. We're also in parallel working on our hydrogeologic study, putting the final touches on our alternative power study.

[2:45:27] and also the blended direct potable reuse

[2:45:30] and ocean water diesel concept study

[2:45:33] that I spoke of earlier for future phases

[2:45:35] of this project.

[2:45:37] Next slide please.

[2:45:40] Excuse me.

[2:45:42] This is feasibility slide, but I'm just going

[2:45:44] to highlight permits.

[2:45:46] So we're in the midst of permits as many of you know.

[2:45:48] Our submittals, we provided submittals

[2:45:51] to the regional state water board.

[2:45:54] We were working with the state lands commission

[2:45:57] on a permit, actually at least, and the Coastal Commission as you're very aware, and that application has been the drafts have been submitted.

[2:46:07] So we're hoping that the permits will be completed by early summer of 2022, and hence that's why you see the May 22 milestone in the last slide on recommendations.

[2:46:23] Next slide, please.

[2:46:24] So, this is what we're asking the board for tonight, and I'll go on order.

[2:46:30] Number one is to accept the Doheny Ocean Decell Project Water Cost Analysis.

[2:46:34] So, that's this overarching analysis that you salt tonight, and it primarily consists

[2:46:40] of David Moore's study along with John Farncoff's rate-impact analysis.

[2:46:48] Number two, this goes to Director Nader-Hood's question and other questions that came up to initiate a public outreach program, and that would be focused on our public within our service boundary but also the public outside of our service boundary, the adjacent agencies that might want to know more and partner on the project and the general public who wants to know more about this project as well.

[2:47:15] and it extends well past our borders.

[2:47:17] We've had interest from in-line agencies.

[2:47:19] Of course, they'd have to go through

[2:47:21] some met act revisions to provide paper transfer water,

[2:47:25] but there has been interest from some in-line agencies as well.

[2:47:29] So number three would be to reengage Hawkins,

[2:47:32] Delafield and Wood, and that's attorney led by

[2:47:36] attorney Eric Peterson to develop the design

[2:47:40] build operate contract.

[2:47:42] We started on that, COVID hit, we wanted to be cognizant of the cost moving forward, so we put that on pause, so this is an ask to re-engage that contract.

[2:47:52] We have budgeted for it this year, and we would, with Hawkins and other task related consultants that would assist directly in that design bill operate contract development only.

[2:48:06] and this would be for the options of both a 2-MGD or a 5-MGD so that we can start getting

[2:48:15] out there in the market to really get to the RFQ process because the more qualified teams

[2:48:22] earlier we get out there theoretically the better project we're going to get to minimize

[2:48:26] risk and cost to our ratepayers.

[2:48:29] Number four is to authorize the general manager to develop a partnership marketing plan to pursue and secure the Delimini Ocean DSL project partnerships.

[2:48:41] So pursue and secure partnerships by May 2022 and with local agencies and or other water purveyors.

[2:48:49] and the key, or the reason why we put in that date, May 2022, is hopefully we're finishing

[2:48:57] up our permits at that point. But also, this is tied to WIFIA. As many of you know, we

[2:49:05] were invited back for WIFIA funding, and we have to provide them extensions, or request

[2:49:13] for extensions. And this is another milestone date and we really would like to get more secure

[2:49:20] on what path we're going to go toward so that we can keep these agencies, especially the funding

[2:49:25] agencies informed in all fairness to them. So those are the recommended actions from staff.

[2:49:32] And I, that concludes our collective presentation. Thank you for all of your patients, especially

[2:49:37] All of the folks who called in from the public and other agencies that really really appreciate

[2:49:43] you spending that time with us and I apologize for the technical glitch and for the time that

[2:49:48] this took, but thank you very much. I'll stop there over.

[2:49:53] Great. Thank you for that, Rick.

[2:49:57] So let me touch base with Jody. Do we have any additional comments or questions from the public

[2:50:06] or anybody on the? No, hold on here. We have a hand up. Yes.

[2:50:13] Huyin, if we'd like to speak.

[2:50:17] Okay. Hello, Huyin. We'll give you three minutes as all

[2:50:23] speakers get. So if you weren't on the column or on the meeting when we started, Jody will

[2:50:30] give you a cue when you have 30 seconds left and then when you get your three-minute

[2:50:38] mark and I've heard Hoian speak many times before and so I know she's got this down to

[2:50:44] science. So Hoian the floor is yours for three minutes.

[2:50:48] Thank you so much. This has been a pretty long evening. I'm always appreciative how diligent

[2:50:55] you guys are. And unfortunately, I'm such an expert. I really don't know what I'm not like the

[2:51:04] previous public commenters. So everything I'm saying is only my two cents. I'm not speaking on

[2:51:12] and on behalf of any organization or anybody else. I am just hoing it. The most important thing I want

[2:51:20] you say is that folks need to remember the cost of climate change. Over here, we're lucky that

[2:51:30] the weather is always good. We don't get a fire or the wildfire.

[2:51:35] Sea level rise while if you don't leave on beach roads, they're probably fine.

[2:51:40] But, you know, we are paying climate change, the fixes of climate change one way or another.

[2:51:51] Another thing is that many of you know that I have been working on single use

[2:51:58] plastic band for years. Everybody agrees. This is such a good idea. We need to

[2:52:03] do it. But why? I've been so alone. Year after year, week after week, maybe day

[2:52:12] after day. I am alone. So, you know, actually I often think about you guys that this

[2:52:19] This, though, hinted this out, sounds like a really good project, but why other districts have not you want you?

[2:52:27] So, you know, the guy doesn't pay you in the road in the dark, you just have to tough it up, you know.

[2:52:33] You just have to have to have face, you have to be strong, you just have to do it.

[2:52:39] And the other thing I have been saying is that water is too cheap.

[2:52:44] It's not like electricity. It's not like gasoline. So while as long as it's cheap, people think they can afford it. They tend to waste. They tend to use more than necessary. That really bothers me.

[2:53:03] Bottom line. I don't know much about this. I just want to say thank you guys so much for what you have been doing for years.

[2:53:13] You are an inspiration to me. Thank you. Bye.

[2:53:19] All right. Thank you for that.

[2:53:22] Yeah, I think we all share a lot of your same views.

[2:53:26] So maybe you're not alone.

[2:53:29] But thank you for that.

[2:53:33] Seeing nothing further will move to the board for

[2:53:38] any final comments or questions for perhaps a motion on this.

[2:53:44] and we'll start with the Director Golden Scott.

[2:53:48] Yeah, no, just thank everybody, it was a very thoughtful and detailed presentation and I'm very

[2:53:54] impressed with all the public that joined us and staff that joined the call and they're sticking

[2:54:00] with us at 8.30 after 3.5 hours. So it's very impressive for everybody that's still hanging in there.

[2:54:07] I don't really have any questions and I would make a motion to the board to adopt the staff recommendation.

[2:54:19] All right. Thank you for that. I'll assume that that's all four items.

[2:54:24] And I'll ask Jody, would you like us to vote on these individually or can we vote as a block on all four?

[2:54:30] You can vote as a block.

[2:54:32] Okay. Great. Thank you for that.

[2:54:34] All right, Scott. We'll move on to Wayne Rayfield.

[2:54:41] Wayne, we have a motion on the floor and we have the floor open to you for questions and comments.

[2:54:46] Okay. Thank you, President Erkinath. I have no additional questions, comments. I will

[2:54:59] a second Director Goldman's motion for the recommended action over.

[2:55:08] Great. Thank you for that. We'll move to Director Green, Bill, Floresier.

[2:55:13] of Aloha. Thank you very much, Mr. Chairman.

[2:55:18] You know, I do, I support the recommendation,

[2:55:22] but maybe with some consideration by the motionmaker

[2:55:26] as well as the seconder, that maybe item one

[2:55:31] also would include a little further investigation

[2:55:36] with other districts regarding,

[2:55:38] I know that we're coming up with a conservative approach

[2:55:41] But to really dig into the solar perspective, I remember GHG is told us every one penny we save on energy, we save $50 an acre foot.

[2:55:57] So I kept that and back went mine for the last five years. And so that is huge.

[2:56:02] but I'm good with item two. I would like to see item three, repriared toys. In other

[2:56:10] words, I'll be fine with getting on board with the RFP SOQ process, but I would like

[2:56:20] to kind of see a two number four first to make sure that everything is kind of

[2:56:27] up there. So those are my comments for further discussion and consideration over.

[2:56:35] Okay, thank you for that. Maybe I'll ask a question a little bit out of order because I was

[2:56:42] going to go last but to our general manager, I made the assumption that these are all happening

[2:56:48] kind of simultaneously and pretty much hitting the ground in a full sprint at this point in time.

[2:56:54] That's correct, that was the intention of this recommendation but that's a good point

[2:57:00] on number four.

[2:57:02] So I did want to comment about number one to Director Green.

[2:57:08] We could also, we haven't put the final stamp on the alternative energy study so we could

[2:57:14] weave that back in your comment into that study and that would revise accordingly this financial

[2:57:22] study in terms of the cost, if we could get some sort of, I guess, research that's solid

[2:57:29] on that.

[2:57:35] Question would be if item three was contingent on four, does that push us out too far or

[2:57:45] In other words, we don't have a 5MG project unless we have partners.

[2:57:54] And so, for my mind, having the RFP, it's going to be more attractive and get a better

[2:57:59] price if you can get a 5MG project, but I think that's why I'm putting the horse before

[2:58:07] the cart so it's big.

[2:58:12] All right.

[2:58:15] Let's let's move to or do you want to make a comment on that? Yeah, I'm sorry. Mr.

[2:58:21] President, I was thinking about that thought a little too long, but I'd like to ask Mark

[2:58:25] Sierna. I bet he has some words of wisdom here on that over.

[2:58:31] Sure.

[2:58:33] Thanks, Rick.

[2:58:34] Yes, everybody.

[2:58:34] Hear me again?

[2:58:35] Yes.

[2:58:36] I've been spoken very much this evening.

[2:58:39] Real quick.

[2:58:41] You're just, I made a couple of items here regarding the, also with the energy component, maybe

[2:58:49] first, just because I can speak to that.

[2:58:51] One of the next steps that we had envisioned for the electricity and the power cost analysis,

[2:58:57] which was an outcome of the kind of the recommendations or the findings from the alternative power solution study was to pursue further drill down further into the analysis of a power purchase agreement, the power purchase of a agreement opportunities that are out there looking at solar PV, looking at battery storage and microgrid systems that will absolutely directly apply to this project now that we know what that magnitude

[2:59:27] attitude could be and what kind of space we have out there and understanding the environment

[2:59:33] today with SDG and E-Rates and what are the various initiatives that are out there and

[2:59:40] incentives that are out there that are in the market and so we have actually spoken with

[2:59:45] consultants regarding that next stage so that could be one component which would absolutely

[2:59:50] look at refining those numbers and as David Moore said and others said that the cost of energy

[2:59:56] right now is a conservative estimate. We know what it is with SDG&A.

[3:00:00] And we have the numbers we've seen in the power cost solutions that were that there's several options that will lower that cost absolutely. So then it's just a matter of pursuing that and drilling down into the weeds of those numbers and we have consultants available to us who can perform that work. So that's the first comment.

[3:00:17] The other comment regarding the timing of the Delfield contract development is we went into

[3:00:32] discussions with Eric Peterson and others, the approach would be to go out and develop

[3:00:38] help these RFQ documents and ultimately RFP documents with the intent to have an either

[3:00:48] or approach, whether it's a two or a five MDD, and at someone along the line, we would

[3:00:53] be able to make a decision and ultimately direct those teams to which we would ultimately

[3:01:01] end up pursuing. As well, running concurrently will allow us to go out and pursue the contracts

[3:01:09] and the solicitations and reach out to those teams and get them started. In our discussions

[3:01:16] with the various teams that are out there, and there may be more, that would be the preferred

[3:01:21] alternative than they would consider both alternatives as a reasonable approach. And so we could do

[3:01:25] that can currently, while we're doing the partnership marketing plan and our outreach.

[3:01:31] So I can stop there and ask, ask for any questions over.

[3:01:36] Rick, sorry.

[3:01:36] If you don't mind, Rick, I could just add one thing to what works.

[3:01:41] Eric Peterson, as you know, he's he's fantastic and you know, I think he would be really good

[3:01:47] to get him engaged sooner rather than later because as we all know, he's a he's interested

[3:01:52] to advise your strategic counsel, you know, we're just not going to start putting pen to paper and writing

[3:01:57] SFQs and RFPs where he'll give us some really good guidance in this whole area, so

[3:02:01] I feel good about bringing him on, you know, sooner rather than later, over.

[3:02:07] Well, thank you. I appreciate that, Mr. Chairman. These comments that I do support

[3:02:14] the staff recommendation. I too, with Tony Nelson and others,

[3:02:19] So I think everybody on the board is concerned with cost, but I think we've just demonstrated

[3:02:24] this evening we're heading the right direction here.

[3:02:30] You know, it goes back to balancing cost with our reliability for our customers.

[3:02:37] And I know we've all, I know that visionaries like Mulholland with MWD a hundred years ago,

[3:02:45] So he was really criticized for bringing an aqueduct to Los Angeles area to the Southern

[3:02:54] California.

[3:02:55] But we have to be the visionaries here for our district and we have to watch out for

[3:03:00] our region and nothing against metropolitan, however, mother nature may have a different

[3:03:08] idea someday for metropolitan.

[3:03:10] Thank you.

[3:03:11] Those are my economics.

[3:03:12] Over.

[3:03:13] All right. Thank you for that. We'll move to Director Erdman.

[3:03:19] Thank you. This project is an enormous undertaking requiring a huge investment has taken years

[3:03:25] of pre-planning. The time to go looking for alternative water sources isn't when you're absolutely

[3:03:29] needed. It's the pre-planning for when you need it in the future. This process was started over 10

[3:03:35] years ago by a regional group of agencies who slowly dropped out until SCWD was the only one left.

[3:03:40] California and a large part of the Southwest United States is entering into the start of what

[3:03:44] appears to be a historic drought. Local water supply is going to become a necessity at some point

[3:03:49] in the near future. However, my opinion on this project is SCWD cannot shoulder the burden of this

[3:03:55] project alone in order to move forward the project needs partners. A primary goal of SCWD has been to

[3:04:01] meet the emergency 60-day supply recommended by our metropolitan water district.

[3:04:08] IRWD presented an option to SCWD to enter into an agreement with them to supply water

[3:04:15] from the Baker Water Treatment Plant in emergency to meet that 60-day supply.

[3:04:19] The cost we've been shown tonight show that a 2MGD is 50% more expensive than a 5MGD plant

[3:04:27] with partners compared to the 2MGD plant with SCWD funding it alone. I would like to see SCWD

[3:04:33] pursue the 60-day emergency supply agreement with IRWD and get the DSL to a point where we can

[3:04:39] press pause on the DSL project in order to take time to seek partners for that project to make

[3:04:43] it a truly regional project. I think that as California and the Southwest move further into what looks

[3:04:48] like a historic drought, SCWD may find other agencies interested and thankful that SCWD continue to

[3:04:54] lay the groundwork so as to not have to start back at square one to develop a regional

[3:04:58] local water supply.

[3:05:00] I'd also like to make a substitute motion to the recommended actions to recommend actions

[3:05:05] one, two, and four and seek an extension on the with the deadline of May 2022 and hold off

[3:05:11] on recommended action three to allow the power aspect to be further developed before moving

[3:05:16] ahead with developing the contracts and until there are other agencies on boarders partners.

[3:05:21] over.

[3:05:24] Okay, thank you for that. Before we entertain a second to your subsequent motion,

[3:05:31] it looks like Rich and Taco has this hand raised, our general manager. Thank you, Mr. President.

[3:05:36] Thank you, Director Erdman. Really good comments. I do want to respond to make sure that we're clear

[3:05:41] on the staff side. When we adopted the integrated water resources plan, we fully intended to move forward

[3:05:48] with discussions with Irvine Ranch Water District to work on terms and potentially an agreement to take Irvine Ranch Water, Baker Water, I should say, on an insurance plan as we discussed in previous meetings.

[3:06:07] So we we're continued with those meetings. We've had about I think three meetings so far with Irvine ranch staff. And so we are

[3:06:15] moving that process forward in strict accordance with their integrated resources plan. Just wanted to

[3:06:21] state that for clarity. And then the other part that you brought up in regards to the May 2022

[3:06:28] and seeking a WIFIA extension, I had to ask the same question to our consultant. So I'm not sure if our consultant is still on

[3:06:36] from Fieldman Rolab, and they could provide,

[3:06:39] so I guess some of the, not the pros and cons,

[3:06:42] but the concerns of asking for another extension.

[3:06:47] Robert, are you on by any chance?

[3:06:50] Yes, I'm still on.

[3:06:52] This is Robert Pore from Fieldman Rolab.

[3:06:56] Good evening, Mr. President, members of the board.

[3:06:59] We did obtain one extension from EPA,

[3:07:04] EPA who runs the WIFIA program.

[3:07:07] They currently gave us about a year extension

[3:07:10] to the end of this June, June of 22.

[3:07:14] We can go back to them and ask for a subsequent extension.

[3:07:18] I think it's doubtful, we'll be successful,

[3:07:20] but we can certainly ask.

[3:07:23] I apologize for my voice.

[3:07:26] I haven't been talking much tonight.

[3:07:29] All right, thank you for that.

[3:07:31] To follow up on some of that.

[3:07:33] But I think some of the pressure that's coming for moving forward on this is the emergency

[3:07:39] aspect of being able to meet that 60-day supply.

[3:07:43] And I appreciate staff moving forward with the Irvine Ranch Water Districts proposal

[3:07:47] of using Bakerwater.

[3:07:49] I think getting that secured takes a little bit of pressure off on moving as fast forward

[3:07:54] on the DeSAL project without getting partners on board and with this deadline.

[3:08:00] Also, with the federal government's huge push on infrastructure and they're still developing

[3:08:06] those programs, there could be significant grant money or other federal dollars that could

[3:08:12] go toward D-SAL, that if we're rushing into it and commit to a WIFI alone, when there's

[3:08:18] grant funds available from the federal government, we may be better off waiting.

[3:08:22] So I'd like to see us get to a point where we can put pause, not engage on the design build RFPs

[3:08:31] because I have a feeling the partners we bring on board would want to weigh in on those things.

[3:08:36] But I think moving forward on one, two, and four is something I can definitely support.

[3:08:41] But I can't support moving forward on item three right now over.

[3:08:46] So, Rick, I have a question, and I made the motion, but I want to make sure I understand

[3:08:52] what it means to accept the water cost analysis.

[3:08:56] I was looking at it more as a receiving file, and we weren't committing to a methodology

[3:09:03] of back loading or how we were basically approaching it, that we were going to have a lot more

[3:09:09] discussions on how the details of the financing plan, so I just wanted to get a clarification

[3:09:14] on what accepting the analysis means?

[3:09:21] Thank you, Director Goldman.

[3:09:23] Yes, you're clear on that.

[3:09:25] It's, I guess, it's one degree more than receive and file, where the board will definitely

[3:09:32] have the prerogative to go down certain option paths like you're talking about in terms of

[3:09:38] level debt financing, and we can do subsequent work on that.

[3:09:42] But this, the acceptance of the cost analysis allows, you know, items 2 and 4 to move forward.

[3:09:52] Because this is what agencies were looking for.

[3:09:54] You know, something tangible that they can run their own models on in terms of rate impacts.

[3:10:00] And it really takes an acceptance of this project water cost analysis to do so.

[3:10:06] And in their minds, I'm assuming that the board is behind this and has accepted this rather than is in complete disagreement on this and we're talking to them about partnerships. So I would interpret it exactly the way you've interpreted just now director Goldman on this anybody on my team disagrees with me.

[3:10:26] Okay, that helps me with item one, and then in response to Doug's comments, I completely agree with him that this needs to be a regional project.

[3:10:37] I don't see that I could support a project that was us going it alone.

[3:10:43] but I'm torn on item three and I'm also don't like the idea of the wiffy alone

[3:10:50] driving our schedule when we're making such a huge commitment and if we need

[3:10:57] more time to get partners especially if we're going to end up you know with

[3:11:01] the JPA option that David talked about I don't see how that's going to happen

[3:11:05] by May of 2022 to be able to move forward with all these financing agreements

[3:11:14] Thank you, Director Goldman. I did forget to respond on the, so on the WIFIA matter it may 2022 you're bringing up a good point because theoretically by then we'll be completed with permitting and once we finish permitting will be in the line for the drinking water SRF loan and that's going to make a significant difference if we're able to get 100% SRF.

[3:11:41] loan funding or that's just a 50-50 that we talked about earlier, 50 SRF and 50 bond or even

[3:11:51] with you if we're allowed to extend it. But we'll know a lot more by May 2022 on which paths we can

[3:11:59] take. The experts know that there's a risk of us asking for an extension, but they haven't set

[3:12:08] out right now. You know, obviously it's discouraged for us to extension to ask for another extension.

[3:12:13] So that's that issue. The issue in Hawkins, Delphill and Wood, I did not explain that very well,

[3:12:18] and Mark Cernan probably needs to help me out or possibly Pam, but I recall that we have that budgeted

[3:12:25] this year. So this is not an un-budgeted expense that we're asking for. We just put it on pause because

[3:12:31] we wanted to see what COVID had in store for us. And once we knew that we were financially stable,

[3:12:37] we wanted to bring this back on the table. So it is a budgeted cost and it has been incorporated

[3:12:42] into these cost analyses. But not to say I'm discounting the concerns about moving quickly

[3:12:49] on this. But I just wanted the board to have all of the data in front of them. And Mark,

[3:12:54] sir, am I correct on that? It is absolutely budgeted with the intent to begin those initial

[3:13:02] discussions are re-engaged with Hawkinsdale field to start beginning those contract development

[3:13:10] related documents.

[3:13:12] So I guess the question on item three would be how far are we going to say

[3:13:21] we're in discussions on partnerships but it takes a couple of years to develop those.

[3:13:27] Do we have the ability to adjust the timing on development of those contracts are going

[3:13:34] out for peace so we have a better understanding of how things are going to move forward?

[3:13:43] I can tell you my answer and then Mark can correct me and tell you guys the right answer

[3:13:47] here but you know what we're fishing for is what is our board's threshold on are you fully

[3:13:55] Okay, with two MGD or five MGD, so if the five MG doesn't, doesn't pan out with partners then are you okay going back to two MGD, if that was and that, that would be the marching orders we give to Eric Peterson to develop those contracts, knowing that we have a either or and that's a strong proposal to the market, to be honest with you, then at least the market knows that one of two projects are going forward, if we're just going forward with the five MGD, we're in a little bit of a quandary there where,

[3:14:26] We're still working on partnerships there, so to lead into the market with an RFQ and go into the RFP stages, that's a lot risky because the market knows that there's a big question mark whether this project is going to move forward or not.

[3:14:41] So, I see that as a major risk factor, you know, with, I guess I could have more firmly

[3:14:52] worded it to find out if the board is okay with both the two and the five, perhaps in

[3:14:57] the first

[3:15:00] There's an action here that, number one, but we didn't. But that's where it, that's the issue with item number three. So if we did go with just the five MGD, you have the risk with the market and we would probably, in a perfect world, time it, as Director Green said, to make sure we have some secured partnerships before we really go down the RFQ RFP stages. And Mark, Serena, or other team members, please feel free.

[3:15:29] to chime in on that.

[3:15:31] Yeah.

[3:15:33] Thank you.

[3:15:33] I can jump in and look on that related to the contracts.

[3:15:37] And the first step we would be looking at is developing an RFQ request

[3:15:41] for qualifications to pre-qualify some teams.

[3:15:44] So I think that's something that could be held off until we get further along

[3:15:48] in our maybe negotiations with partners.

[3:15:51] We could begin to, again, as we plan to develop those documents

[3:15:55] and have it ready to go and spend that money and invest somebody

[3:15:58] to have the RFQ component, but until we probably have our partners ready, and in place,

[3:16:04] we most likely wouldn't want to put a request for proposals, which is definitely a much

[3:16:10] more larger commitment for a team, a design-build team to come up and design-build, operate team

[3:16:18] to come up and propose unless we had a fairly definitive MGD.

[3:16:23] And we say up to five MGD, if it's possible in theory or theoretically we could get a four MGD

[3:16:32] project because we have two MGD of partners and two MGD for ourselves.

[3:16:36] We wanted to have that latitude there in the size and then of course they caught me a

[3:16:41] scale wouldn't be as good but it would still be very beneficial in terms of compared to

[3:16:47] a two MGD standalone project.

[3:16:49] So I think the concept was to move forward with contract development, get the RFQ at least

[3:16:56] prepared and ready to go and possibly even go on pursue the teams, and then which is

[3:17:02] a much more simpler and less costly process for those teams.

[3:17:08] And then when we're ready, put that RFP out with the specifics and hopefully partners

[3:17:14] in place.

[3:17:15] Mr. Chairman, as this is Wayne, Mr. Chairman.

[3:17:21] Mark Sarna just said what I was thinking.

[3:17:25] I am listening to Scott's comments and others.

[3:17:34] I don't see a need to go with step number three

[3:17:42] in the immediate future. And I was going to ask Rick and Taku, Rick, what is really a reasonable

[3:17:54] time period to do that? Are we looking in a month or first of the year or what over?

[3:18:04] Yeah, a great question, Director Rayfield, and good comments on it to compliment director

[3:18:12] Erdman on those comments too and thinking about this process.

[3:18:15] But if the board had made a solid decision on which way to go in terms of the contract

[3:18:21] development, then Eric Peterson, I believe, could finish up the work in six months.

[3:18:28] But with the either or going on here, that's a little trickier.

[3:18:33] And that, you know, as Mark Serna had talked about, that we'd have to be further along with the partnerships and define the project.

[3:18:45] I mean, it might drop to a 4MGD project.

[3:18:47] We might have two committed partners and then we have to change the scope of the project.

[3:18:51] So that starts to extend time onto Erick Peterson's development there.

[3:18:57] Mark, anything else to add?

[3:18:58] Mr. Chairman, I'd like to address this issue here.

[3:19:05] Absolutely.

[3:19:06] Yeah, let's move to Director Green prior to that.

[3:19:12] I've heard all the comments and where I was going from initially was I'm really comfortable with getting the Hawkins group moving on developing the documents.

[3:19:28] However, not pulling the trigger on the sending the SLQ out because it takes time to develop

[3:19:37] this stuff.

[3:19:38] We can't wait until, and I know that director Urban says we shouldn't have with you run this

[3:19:45] or somebody said that, but we have to get this thing lined up because we do have, hopefully

[3:19:53] there will be lots of grants and so forth, but we can't depend on those. We know as what we have

[3:19:59] today. We can't wait for two years in the future hoping for a grant. So I'm comfortable with getting

[3:20:06] Hawkins going on the docks, but not sending them out to the, we'll call it the concession teams

[3:20:13] or the development teams until we know how our partners are going to be 3, 4, 5 MGD type of situation.

[3:20:23] So, I support the initial motion and the second as is over.

[3:20:34] All right. Thank you for that. Looks like Director Irman has his hand raised.

[3:20:39] Yeah. I could support what Mark Surnit's suggestion was is developing the documents for the RFQ but not sending them out.

[3:20:48] I understand that they do take time. I think we need to wait for partners because I have a feeling they may want to weigh in on some of the comments for the RFP.

[3:20:58] I don't want us to put something completely together and then have partners come on board and have us have to go back three steps.

[3:21:05] But I do understand putting the RFQ together would take some time.

[3:21:10] So I could support item three as far as developing the documents for the RFQ, but not sending them out over.

[3:21:21] Great. Thanks for that. I mean, you know, when you break down item three, I mean effectively were, you know, just read it.

[3:21:28] We're re-engaging the team for tax-related consultants for development and solicitation. I mean, we're not necessarily pulling the trigger on the whole kit and caboodle.

[3:21:38] Well, I think relatively quickly we're going to understand if we're going to have partners

[3:21:47] or not, you know, we've been on this either or which I know we could get really deep into

[3:21:56] the weeds with, you know, blending less than five but more than two with, you know, with

[3:22:02] partners.

[3:22:03] You know, the five is the maximum.

[3:22:05] We already know that, you know, 15 is way over the horizon, but, you know, we know we're

[3:22:12] maxed out at five. So that's basically the full amount that we can, you know, work

[3:22:19] with within our EIR and with, you know, how we're permitting. So if it is less than that,

[3:22:25] you know, the partners will obviously drive this project. You know, I think that's loud

[3:22:32] clear from at least one or two directors, a third one being myself.

[3:22:40] You know, we're going to be

[3:22:42] arm in arm with whoever comes on board with us with this project and we want to have their input

[3:22:48] into, you know, how we put together this whole project. So I think that what's presented to us

[3:22:56] is, you know, it might seem like we're on a fast timeline while we are, but we have

[3:23:02] been working on this for, you know, got a better part of a decade.

[3:23:05] So, to me, I think that what's been presented to the board from the staff is realistic, although

[3:23:14] it is a full sprint, and, you know, I think in six months from now, we're going to know

[3:23:21] So I heck of a lot more about who's on board from other agencies and the volume and the

[3:23:29] quantities that we're going to be designing.

[3:23:32] So I support the original motion for all items 1 through 4.

[3:23:40] And with this expanded dialogue on item 3, I think that's really helped our staff and

[3:23:47] general manager, you know, kind of with the next path forward. Looks like Doug has his hand raised as

[3:23:53] does Wayne. We'll go with Doug. Yeah, I'd like to amend my amended substitute motion. I think

[3:24:02] if you took out solicitation from item three, have reengage Hawkins with for other and other consultants

[3:24:13] for the development of all necessary contract documents to implement but not

[3:24:18] had solicitation. That's something I could support. I still would like to see

[3:24:21] us not have it driven by the WIFI alone and seek to have that May 2022 deadline

[3:24:28] extended but that's my substitute motion over.

[3:24:33] All right, fair enough. I'll move to

[3:24:36] Wayne. Wayne, would you like to comment on that or something? Yes, I was. I actually

[3:24:41] Doug said what I was going to say. I wanted to take out solicitation as well. And then I think I

[3:24:52] would add the word begin development of necessary contract activities. But picking up on the comments

[3:25:03] We're not really ready to solicitate anything because we don't know yet what makes sense.

[3:25:17] And actually in thinking about it, I suggest one other change.

[3:25:23] And that's item four.

[3:25:26] I don't think we're developing a marketing plan, colleagues, what we are developing is an

[3:25:36] educational plan, and we said all along we weren't going to be in the business of marketing this.

[3:25:45] We're trying to get partners on board and the way to do that I think is through education.

[3:25:53] but not through what's implied by number 4 assails effort.

[3:26:01] And having said that, I will second Doug's substitute motion over.

[3:26:09] All right. Thank you for that.

[3:26:13] Any other directors would like to weigh in on this?

[3:26:16] Yes, Mr. Chair.

[3:26:19] Yeah, maybe it's a partnership solicitation plan, but I'm still I would still leave the date in there I wouldn't change the date over.

[3:26:31] Fair enough, you know, I think that staff and we all know that that that's a hard date.

[3:26:39] It's not a do or die date. It's not going to, you know, and as our general manager mentioned, you know, it's.

[3:26:47] And you know, when we start to get pushed up against that date, if and when we do, you

[3:26:54] know, hopefully they'll understand, you know, the situation that we're all in due to, you

[3:27:03] know, external forces and extend that extension.

[3:27:07] You know, again, I think that the current administration in Washington DC and, you know, it's bipartisan

[3:27:15] is really, you know, pro infrastructure.

[3:27:18] You know, let's hope that more money can come our way.

[3:27:22] You know, there's other things that can help extend that debt out.

[3:27:27] No guarantees been working on that, you know, within the state of California.

[3:27:33] So, you know, there's, again, a lot of flux, a lot of variables.

[3:27:38] We all know that.

[3:27:40] I don't think, you know, any director is going to.

[3:27:44] be hard and fast and come back to this, you know, item, you know, in six months from now and said,

[3:27:51] no, you know, we, we, we meant to say this or we meant to say that, you know, this is,

[3:27:57] this is kind of a broad, broad strokes, although, you know, we have to get moving in certain areas.

[3:28:04] So I do support, you know, removing that word solicitation on there. I do support keeping that date in

[3:28:11] there because that's something that we know is hard and fast and if we can get an extension,

[3:28:16] that'll be beneficial.

[3:28:19] So those are my thoughts and comments on the dialogue that's going forward.

[3:28:25] I saw Art, you popped your screen up.

[3:28:30] Did you have a comment to make for us, our esteemed?

[3:28:34] And I think I was just going to comment that in under Robert's rules of orders, the substitute

[3:28:42] motion to take precedence, and it needs to be what we're done first.

[3:28:50] Sure.

[3:28:51] Okay.

[3:28:51] That was going to be my plan of action.

[3:28:55] I'm going to call on the clerk of the board to make sure she's – I know she's been

[3:29:00] scribbling notes down and crossing things out.

[3:29:03] So, Jody, could you read what the substitute motion is, and I believe it's been seconded?

[3:29:10] It has been seconded, and the way I read it is the Board of Directors won, except the

[3:29:14] Doheny Ocean Desealination Project Water Cost Analysis to initiate a public outreach program

[3:29:21] supporting the implementation of the Doheny Ocean Desealination Project, three re-engage

[3:29:28] Hockins, Taylor Field and Wood and other task-related consultants for the development of necessary contract activities to implement a two-MGD or up to five-MGD Dohini Ocean D-Sownason project and for authorize the general manager to develop a and the maker of the motion didn't change it.

[3:29:53] It's so fun with it changing to a partnership solicitation.

[3:29:56] and partnership education.

[3:30:01] I think the term was education or solicitation. So whichever one is the purview of the board, but taking out the marketing, making it more of a education type thing. Okay. A partnership solicitation plan to pursue and secure dohenny, ocean desalination project partnerships by May 2022 with local agencies and or other water purveyors.

[3:30:29] I think my original motion had the date coming out of it over your substitute motion had the date coming out of it. Yeah, taking out just soliciting decolonization partners.

[3:30:43] particular partners.

[3:30:45] I'm not having the made up.

[3:30:47] Second Doug did not have the date coming out.

[3:30:52] Okay, that's my misunderstanding.

[3:30:54] Well, I miss not yours only.

[3:30:57] I did not hear that Doug wanted the date on.

[3:31:03] And I want, as the seconder, I want the date in there.

[3:31:10] Okay, so we have a motion but perhaps not a second anymore.

[3:31:15] Oh, can I complicate things a little more?

[3:31:19] Sure.

[3:31:21] Scott, the floor is yours.

[3:31:23] All right.

[3:31:23] Well, I like to substitute motion better than my original.

[3:31:26] So I was going to withdraw my original motion so that we're just working with one motion here.

[3:31:33] and I will second Doug's motion with the date gone.

[3:31:38] I'll make one comment, so perhaps Wayne,

[3:31:42] you'll be okay with it.

[3:31:44] That May 2022 date is, I mean, that's inked.

[3:31:49] I mean, we know that's coming.

[3:31:51] So I think that perhaps staff plugged that in

[3:31:55] so that we're all keenly aware of that

[3:31:58] and we have a timeline on there.

[3:32:00] and regardless, that date's going to come and go.

[3:32:06] And hopefully we will take the necessary steps

[3:32:10] to get an extension if need be.

[3:32:13] But to me, the date ultimately is kind of irrelevant

[3:32:16] because we know that we need to have

[3:32:20] a fair amount of work done by that date.

[3:32:23] Otherwise, we're going to need to get an extension.

[3:32:25] So those are my comments there.

[3:32:27] Rick, are General Manager, do you have any comments on that?

[3:32:31] That's exactly why we put it in.

[3:32:33] And not sure if the board had considered that you could add

[3:32:39] that, a recommendation for us to request an extension.

[3:32:43] I would like to add that if possible.

[3:32:49] What would you like to add, Doug?

[3:32:51] I'm sorry, I didn't.

[3:32:52] Asking Wiffie for an extension on the May 2022 deadline over.

[3:32:57] OK.

[3:33:01] So, just out of curiosity for staff, what is the timeline in which that extension process

[3:33:11] needs to start to happen?

[3:33:14] And what's the nature of, you know, how we go about asking for that and the reasons why one agency might get an extension in this regard?

[3:33:25] Yeah, good question. I actually asked the same line of questions and I'd rather either Robert poor or Brian for Beth answer that question.

[3:33:34] They've been in direct. They have direct experience with this.

[3:33:39] Sure.

[3:33:41] Robert and Brian, you want to go or you want me to go?

[3:33:44] Go ahead, Brian. Thanks.

[3:33:47] Yeah, I just think from from our experience, it's we haven't seen the second extension given.

[3:33:54] and it's uncertain whether or not you'll receive it.

[3:33:58] I mean, Robert, I don't know if you wanna expand upon that.

[3:34:02] You've got more experience directly.

[3:34:03] We're gonna get EPA than maybe I do.

[3:34:05] Yeah, this is the first time we did ask for the extension

[3:34:08] and typically EPA told us when they did grant

[3:34:13] the district a one-year extension almost

[3:34:16] that they typically only give six month extensions.

[3:34:19] So, you know, we're very lucky to get

[3:34:22] and extra six months out of them.

[3:34:24] The deadline's actually June 30th of 22.

[3:34:28] We're using May 22 as a kind of a target date

[3:34:32] to get everything, you know, amassed

[3:34:34] and finalized as best as we can.

[3:34:37] So I just want to clarify that point.

[3:34:40] But with respect to EPA,

[3:34:41] I think it's doubtful to get another extension,

[3:34:44] but we can certainly try.

[3:34:45] We can explain that, you know,

[3:34:47] the project is still being studied.

[3:34:49] We're looking for partners,

[3:34:50] as regional partners to participate in the project and see what they say.

[3:34:59] Hey Rick, President Rick, yes sir, you know what the recommended Moche has drafted

[3:35:12] by staff merely says pursue and secure partnerships by May 22. It's kind of we're setting ourselves

[3:35:26] a deadline and there's nothing in this motion at all that talks about with you even though

[3:35:38] So that might have been what was behind the minds or in the minds of our staff, but

[3:35:46] I think it's entirely reasonable to leave that date in there and set a goal for ourselves.

[3:35:54] That's the way the motion reads, at least to me.

[3:35:59] and I have to summon anyone else read it differently. Am I missing something here?

[3:36:10] I would support would director Rayfield just mention and I would hope the first and second or the motion in the second or would

[3:36:20] And a man there.

[3:36:24] Remember to include the date.

[3:36:27] Oh, my read on it was that the May 2022 date is the choice of are we going at a loan

[3:36:38] to MGD or are we going with partners?

[3:36:40] And if we don't have partners by May 2022, we're moving forward with a to MGD plant.

[3:36:46] And I cannot support that.

[3:36:49] I'm fine leaving the May 2022 deadline in item 4, but I do want to ask EPA for the WIFI extension because you can't get what you don't ask for.

[3:37:02] And this is a very key project in an area that is being impacted significantly by drought.

[3:37:11] the current federal administration is very up on infrastructure projects and I

[3:37:18] am a feeling that there may be some flexibility because if this project just dies

[3:37:24] because we can't get partners or because of Whiffie a deadline for a grant

[3:37:29] that they're giving that oh well we're gonna give the money to somebody else and

[3:37:34] put it somewhere else that's not going to look good for anyone so I think

[3:37:40] we need to have included in on this asking for that WIFI extension so we can get partners over.

[3:37:47] So my concern with the May 22 date is that where I understand we'll reach out to partners and

[3:38:00] they're going to have to go through their due diligence process internally before they're

[3:38:05] going to be willing to sign on or commit to the project and you know it I don't want to put a

[3:38:12] time too much of a time constraint on them to respond. I mean we've gone through a lot and

[3:38:20] you know I would imagine they're going to have to go through their own rating packs and so I

[3:38:27] I understand the WIFIA concern, and I agree with it.

[3:38:34] And I don't know if it really matters that much if it's in here.

[3:38:37] I just don't want to set a deadline on us for securing partnerships of May 2022

[3:38:43] for in the middle of discussions with some willing partners that are considering it.

[3:38:51] Mr. Chair.

[3:38:54] Yeah, it sounds like Director Green, you'd like to make a comment?

[3:38:57] Yeah, thank you. You know, following up on Scott's comment there is a valid point on the partners having time to do the deal. But, you know, when we get to May,

[3:39:11] this board can certainly amend if we've got partners, let's say, pursued and we've got letters of interest by those project partners.

[3:39:23] First, it seems to me we can call that on the line at that time to extend the dates or

[3:39:34] get what feelings.

[3:39:36] I don't think he can go ahead and get an extension of time this early because, well, as Doug

[3:39:46] knows, things like extension times on a subdivision, you do that within a short time before

[3:39:54] or you might do it in April, but not necessarily in September over.

[3:40:06] Well, good comments.

[3:40:09] I see there's a lot of thinking going on.

[3:40:12] Again, I think some of the good news is, there's quite a few of potential partners

[3:40:18] listening in on this.

[3:40:20] In the true sense of transparency, they get to watch us make sausage.

[3:40:28] and again, I can fully appreciate all the conversations and all the comments that have happened so far.

[3:40:36] You know, I personally like an idea of like having a deadline and maybe it's not hard and fast.

[3:40:44] Maybe we can't get an extension.

[3:40:47] But you know, this is going to put the fire to staff. It's going to put the fire to all of us.

[3:40:54] If we want to commit to this and up to five MGD, we're going to need partners.

[3:41:03] We already know that.

[3:41:04] Again, the partners are tuning in right now.

[3:41:06] We're going to do some formal presentations at all levels.

[3:41:11] I think in the next few months, we're going to have a good sense for if this is a partnership

[3:41:17] and a tight project, or if this is a go-to-lone.

[3:41:22] We've already heard from two directors that they don't feel like going it alone is even an option.

[3:41:32] But, you know, that's how boards operate. You know, we've got options and we've got a lot of variables.

[3:41:40] We've got a lot of balls in the air, but we need to move.

[3:41:44] You know, this is a crucial meeting that we've been waiting for.

[3:41:48] that everybody's been waiting for for quite some time and you know now we have a really

[3:41:53] good sense we have kind of a you know foundation or framework built around you know what we think

[3:42:00] this cost is going to be and yeah you know the negotiations and the project partners if they come

[3:42:10] on you know it's going to be a fair bit of work it's going to be potentially our board meeting with

[3:42:15] their boards and just that scheduling alone is going to take time so you know if we didn't

[3:42:21] have a hard and fast deadline with now it didn't sound very positive about getting an extension.

[3:42:29] Then you know yeah we could we could bake some more time into this whole process but you know I'm

[3:42:37] confident staff's ready to go. Our staff really dialogues with the other staff from the other agencies

[3:42:44] You know, again, that's kind of why illuminated the JRWSS, you know, these aren't strangers,

[3:42:49] you know, we're not, we're not talking about agencies we don't know.

[3:42:52] These are all known commodities.

[3:42:54] We know that the populations, we know their population growth.

[3:42:58] We know where the other agencies, you know, what projects they are in some cases were partnered

[3:43:05] with them.

[3:43:06] So, you know, there's not a big mystery here.

[3:43:09] it's just we need to move and we have a deadline and maybe that deadline can

[3:43:15] extend maybe it can. But I'm comfortable with the dialogue that's been, you know,

[3:43:23] batted around here. I will ask art. Now that we've had our original motion removed,

[3:43:31] hopefully that's been adequately done by the letter of Roberts rules. So we're

[3:43:40] just dealing with this motion that's on the table now. And let's check in with

[3:43:49] Jodie to see if she's got the latest iteration and where we're at just to

[3:43:53] double check with Director Erdman and I believe it was Director Rayfield that

[3:44:00] the second at that. No, it's director Erdman and direct a second by Scott Goldman and one was

[3:44:09] the same two was the same three we were taking out the word solicitation and four we were calling

[3:44:18] it a partnership solicitation plan instead of marketing plan and per director Erdman's substitute

[3:44:27] motion. We were removing May 2022. And that was a second that Scott director Goldman offered.

[3:44:37] Okay, so this is no longer a substitute motion. This is the motion that's on the table correct.

[3:44:44] That's correct. Okay. Can I just clarify clarification just because I don't want to miss this one.

[3:44:50] a directorate, director Raidfield, I believe suggested education plan, partnership education plan.

[3:45:00] And I did see, I don't recall the sequence of events, but I believe that was in the motion. So I just want to find with education over. Thank you. Marketing, partnership, changing, marketing, education plan, partnership, education plan over. Yes. And then just another clarification. Did you want to take out May 22 or leave it in?

[3:45:29] I'm in dog substitute motion is not part of the substitute motion.

[3:45:36] Yeah remove removal of May 2022 because I think we need to seek the WIFIA extension and we don't want to.

[3:45:44] Staff knows that we've been trying to get partners.

[3:45:46] We don't need to set a deadline for them.

[3:45:48] They've been diligent about trying to get partners for the last 10 years over.

[3:45:54] Okay, that because that was the motion that I had seconded without May in there. I think it's great to have an understanding with staff that we have that deadline, but I don't think we needed in the action.

[3:46:11] Okay, I think that's all clear.

[3:46:15] Is there any further dialogue?

[3:46:21] All right. Seeing none, we'll call for a roll call.

[3:46:25] Vote on this.

[3:46:27] Hey, President Rickerkin F.

[3:46:30] Aye.

[3:46:31] Vice President Bill Green or Director Doug Erdman.

[3:46:36] Aye.

[3:46:37] Director Scott Goldman.

[3:46:39] Aye.

[3:46:39] And Director Wayne Rayfield.

[3:46:42] Aye. And I just want to clarify something.

[3:46:45] I did not see the May 2020 to date as a deadline.

[3:46:53] I saw it as a goal for all of us, but I don't want to keep arguing

[3:47:02] over how many angels can dance on the head of the pin here over.

[3:47:09] All right, thank you for that, Lane.

[3:47:11] All right. Well, that's how sausage is made.

[3:47:19] Is anybody wanting it?

[3:47:21] Yeah.

[3:47:23] Well, I will have a for sale before May 2022.

[3:47:28] All right.

[3:47:29] Seeing nothing further, I would like to thank all of our consultants.

[3:47:34] Of course, all of our staff and the directors and the public.

[3:47:39] and all the folks that are still tuned in this late hour. Hopefully everybody can

[3:47:47] appreciate what when a board gets together and works and we don't know

[3:47:52] necessarily always agree but I think we get to a good place in time and good on

[3:47:59] the staff. I think they've got their marching orders and yep thumbs up. Thank you

[3:48:05] all and with that we moved to item E and that's the adjournment so everybody

[3:48:11] have a great night and yeah throwing down shock as Fab Bill catch away from

[3:48:15] me over there

[3:48:16] Well, it's 15 15. Oh gosh, I'm at 12

Special Board Meting - Doheny Desal Financial Assessment

Agenda

Transcript