SOQUEL CREEK WATER DISTRICT

MEETING MINUTES

DECEMBER 5, 2017

President LaHue called the meeting to order at 6:00 pm at the Capitola City Council Chambers.

1. ROLL CALL

Board Members Present:

Dr. Thomas LaHue, President

Dr. Bruce Daniels, Vice-President

Dr. Bruce Jaffe

Carla Christensen

Rachél Lather

Board Members Absent:

None

Staff Members Present:

Ron Duncan, General Manager

Taj Dufour, Engineering Manager

Shelley Flock, Conservation and Customer Service Field Manager

Traci Hart, Human Resources Manager

Melanie Mow Schumacher, Special Projects-Communications Manager

Bob Bosso, District Counsel

Karen Reese, Executive Assistant/Board Clerk

Others Present:

3 members of the public (included members of the Water Rates Advisory Committee

Joe Martinez, John Dickinson, Hans Schermann)

Sanjay Gaur, Raftelis Financial Consultants, Inc.

2. WORKSHOP

2.1 Rate Alternatives Workshop with Raftelis Financial Consultants

Ms. Strohm reviewed the efforts of the Water Rates Advisory Committee and

introduced Mr. Sanjay Gauer who gave a presentation (Attached as Exhibit A) and

answered questions from the Board.

The Water Rates Advisory Committee was created to determine whether a rate

structure existed, or could be developed, that could meet the following objectives

better than the District’s existing tiered rate structure:

Promote fairness and equity between customer classes

Ensure rates are not difficult to implement

Reduce revenue volatility and promote financial sustainability

Encourage conservation and efficient use of water

Comply with all applicable laws

Public comment was heard from members of the Water Rates Advisory Committee.

Meeting Minutes

December 5, 2017

Page 2 of 4

Mr. Dickinson noted that the charges are not for volume, but for capacity.

Education about that will be important. He talked about what the rates would look

like and suggested a study showing the marginal cost of the capacity.

Mr. Martinez suggested a modification to overage charges based on volume.

Mr. Gaur noted that the next step is to write a report. He summarized the Board’s

suggestions.

Rate level would be determined by the highest of 6 months use

Customers can apply to get off the program after 3 months of showing reduced

water use

Plan width = 2 units (55 gallons per person per day)

If a customer goes over their plan, they are bumped into higher plan

The staff was provided guidance to continue to investigate the CustomerSelect rate

model as well as whether the objectives can be met with a tiered rate model. Board

suggestions will be taken back to the rate committee; there may be other nuances

that come back to the Board for discussion.

The leak adjustment policy will also need to be reviewed to go along with a new rate

model.

President LaHue thanked staff and committee members who worked on this rate

structure.

3. CONSENT AGENDA

Item 3.2 was pulled from the Consent Agenda.

MOTION: Director Daniels; Second; Director Jaffe: To approve Consent Agenda Item 3.1.

Motion passed unanimously.

3.1 Approval of Minutes – November 21, 2017

Action: Approved

3.2 Annual Reporting of Excess Real Property

Action: Removed from Consent; Discussed; Information only

Mr. Dufour answered questions about the Glenwood Reservoir site. Erosion control is

maintained, but no projected future use is planned at this time. Director Daniels noted

that on-stream riparian rights are held for that property.

4. ORAL COMMUNICATIONS (items not on the Agenda)

No public comments.

Meeting Minutes

December 5, 2017

Page 3 of 4

Director Christensen shared 3 publications. Two are linked: “Arctic ice loss could spell

more drought for California” and “A test of California’s commitment to groundwater

sustainability” and the third California Water Plan Enews is attach as Exhibit B. http://www.sfchronicle.com/bayarea/article/Arctic-ice-loss-could-spell-more-drought-for-

12405285.php?t=ec2d67461a

http://www.sfchronicle.com/opinion/openforum/article/A-test-of-California-s-commitment-to-

12405228.php?t=014262453d

Director Daniels reported on his attendance at the Association of California Water

Agencies (ACWA) conference groundwater committee and water-quality committee. He

noted that, for public records and cell phones, staff can inform the Board members what is

being requested, they can search their own device, and sign an affidavit if nothing is

found.

President LaHue reported that Local Agency Formation Commission LAFCO will be

conducting a sphere of influence and service review for the Pajaro Valley Water

Management Agency PVWMA and the reclamation district that runs College Lake.

5. REPORTS

5.1 Board Planning Calendar

No public comments.

Mr. Duncan announced upcoming meetings.

6. ADMINISTRATIVE BUSINESS

6.1 Will Serve Letters - None

6.2 Schedule and Discuss Planning Workshop

No public comments.

Possible dates are January 23rd or January 30th. Mr. Bosso noted he cannot attend

on January 23rd. A priority survey will be sent to the Board in advance of the

workshop. Topics should include what to do about the supply options moving

forward after the Draft EIR is received, and the future of the WDO program.

MOTION: Director Daniels; Second; Director Jaffe: For staff to select a date for a

Planning Workshop. Motion passed unanimously.

6.3 Proposal to Add a Residential Toilet Direct Installation Option as an Alternate

Pathway for Developers under the Water Demand Offset (WDO) Program

No public comments.

Ms. Flock reviewed the current program and the proposal for the addition of direct

install as an option (Attached as Exhibit C). 450 toilets rebates have been done in

the past 12 months since the current program started.

Meeting Minutes

December 5, 2017

Page 4 of 4

Discussion was held. Concern was expressed that having a developer direct install

program may cause the other options to dry up. Ms. Flock felt this would not be the

case; there are still enough small projects that can tap into friends and family to the

earmark toilet rebates for their projects.

MOTION: President LaHue; Second; Director Christensen: To approve the addition

of a direct installation option to the Water Demand Offset Program and bring back

for review in 6 months. Motion passed unanimously.

7. WRITTEN COMMUNICATIONS AND CORRESPONDENCE

7.1 Email from B. Steinbruner re Millsap house

Mr. Duncan noted that information in Ms. Steinbruner’s letter is incorrect. The

Pure Water Soquel project has not been identified as the final project. Therefore,

the homes were not demolished for that project, but because they were considered

an attractive nuisance.

One additional piece of written communication was submitted after the Board

packet deadline and was available to the public (Attached as Exhibit D).

8. CLOSED SESSION – None

9. ADJOURNMENT

President LaHue adjourned the meeting at 8:25pm to the next scheduled meeting on

Tuesday, December 19, 2017.

SUBMITTED BY: APPROVED BY:

____________________________ _____________________________

Karen Reese, Board Clerk Thomas R. LaHue, President

1

SOQUEL CREEK WATER DISTRICT

CustomerSelect Rate Structure Evaluation

BOARD WORKSHOP

December 5, 2017

2

AGENDA

» Goal of the Workshop » Project Schedule » Service versus Commodity » Legal Environment » What is a CustomerSelect Model? » CustomerSelect Policy Options » Goals of the District’s Rate Structure (Ranking) » Outcome of CustomerSelect Evaluation

3

GOAL OF WORKSHOP

» Understand what is a CustomerSelect Model » Policy options associated with a

CustomerSelect Model » Discuss Board and Rate Advisory Committee

rate objectives » Develop a CustomerSelect Model that meets

the identified rate objectives

4

SCHEDULE

Task Item Completion/Target

1 Staff Kickoff 10/30/17

2 Advisory Workshop #1 10/30/17

3 Advisory Workshop #2 11/13/17

4 Board Workshop 12/5/17

5 Study Report 1/10/18

6 Board Presentation 1/16/18

5

SERVICE VERSUS COMMODITY

» Water service viewed as commodity › 67% of revenue is based on commodity sales while

only 3% of costs are variable

» Majority of water costs are associated with the ability to use water, not water use › Water is more of a service rather than commodity

» CustomerSelect attempts to capture these attributes

LEGAL ENVIRONMENT

7

KEY LEGISLATION IN CALIFORNIA AFFECTING WATER RATES

» Cost of Service Requirements › Proposition 218 (Article XIIIC and XIIID of California

Constitution) › Proposition 26 › California Government Code 54999

» Water Conservation

› Article X of California Constitution › SB X7-7 – 20% reduction by 2020 › New SWRCB regulations call for each agency to self certify

that they have adequate supplies for three years assuming drought of 2012-2015 and set conservation standards equal to their projected supply shortage

8

CASE STUDY: SAN JUAN CAPISTRANO

» Recent Litigation: CTA vs. City of SJC › Rate payers (Capistrano Taxpayer Association, CTA) sued

the City of San Juan Capistrano over its tiered rate structure

» The Orange County Superior court ruled that the rates did not meet the nexus requirement in August 2013

» Key factors: › Lack of administrative record › City used multipliers to justify the tiered rates without

any administrative record of an underlying rationale

9

SAN JUAN CAPISTRANO RULING

» There needs to be a nexus between cost of providing services and rates

» This nexus needs to be clearly shown in the administrative record (report)

» Show your work

CUSTOMER SELECT RATE STRUCTURE

11

WHAT IS CUSTOMER SELECT?

› Water system is designed for the hottest day plus fire protection Capacity of the system is a major cost driver

› CustomerSelect allocates capacity to a customer

based on highest use The objective is to lock in customers bills based on

highest capacity use › Plan tier width can stabilize revenue › Flat charge for service (no commodity charges) but

includes conservation signal

12

CUSTOMER SELECT MODEL

› What does the model achieve? “The CustomerSelect Rate model has the potential to

stabilize utility rates by “locking” customers into plans.” –Defining a Resilient Business Model for Water Utilities, Page 154

“Customers would have an incentive to keep their consumption below the break-point of their plan and even to move down to a lower plan the next year.”

Defining a Resilient Business Model for Water Utilities, Page 154

13

CUSTOMER SELECT POLICIES

» Which customer classes is CustomerSelect appropriate for? Only Single Family Residential?

» Number of plans: the number of unique plans offered, each with a specific range of water allowable

» Plan size: the number of billing units available in a given plan; the range of units; how wide should the plan be?

Example: Plan B: 2-4 hcf » Overages: the charge and/or consequence of exceeding a plan

allocation Example: $/hcf penalty?

» Credit: the dividend or rebate associated with billed use below a plan’s maximum; the variable costs associated with groundwater production

» Plan switching: the ability and frequency of a customer to change from one plan to another

Example: Once per year; seasonally; monthly

14

CONVEYING INFORMATION

» How will a customer know that they are approaching or above their plan allocation? › Lack of information on usage › “If a utility has not invested in smart meter

technology it may have to – as customers are likely to demand real-time water use information so that they can track their consumption against their block.” Page 187 Will SqCWD develop and deploy a web or mobile application?

CUSTOMER SELECT POLICY OPTIONS

16

CUSTOMER CLASSES

» Which customer classes is CustomerSelect appropriate for? › Recommendation is to evaluate Single Family and

Multi-Family Similar demand and meter sizes Non-Residential may have larger meter for potential

capacity • Cabrillo College • Seascape Golf Course

Non-Residential would increase complexity of plans

17

PROPOSED CUSTOMER SELECT RATE STRUCTURE

› Recommend only CustomerSelect No meter charge

› Rebate to customers that stay within their allocation How do we determine this? From a cost of service perspective why does this occur?

• Power and chemicals?

18

PLAN OVERAGES

» What occurs when a customer goes over their plan? › Moved to higher plan corresponding to that

month’s use? Locked for specified time period?

› Tied to supplemental water supply projects and/or conservation program costs? Initial plan allocation needs to equal sustainable yield

› Penalty? What are they for?

19

WATER RATES ADVISORY COMMITTEE DECISIONS

» Residential evaluation only » Historical use for customer plan selection

District will suggest a plan Initial open enrollment for all customers

» Collapse rate structure into CustomerSelect rate » Plan Switching

Rotating open enrollment schedule (once per year) » Plan Credit/Rebate

Can be provided at the end of the year » Plan Overages

RFC suggests customers are moved into plan corresponding to metered use

Can re-select plan at open enrollment

GOALS OF THE RATE STRUCTURE

21

WATER RATES ADVISORY COMMITTEE GOALS

» Fairness and equity » Simplicity and administrative ease » Financial sustainability » Strong conservation » Defensibility

22

PRICING OBJECTIVES RESULTS WATER RATES ADVISORY COMMITTEE

Ranking Classifications Objectives Score

1 Most Important Fairness and Equity 18 2 Very Important Defensibility 19 3 Important Financial Sustainability 22 4 Somewhat Important Strong Conservation 25 5 Least Important Simplicity and Administrative Ease 28

Received eight responses to the pricing objectives exercise

23

DISTRICT BOARD OBJECTIVES

» Fairness and equity » Simplicity and administrative ease » Financial sustainability » Strong conservation » Defensibility » Water resources management » Affordability for essential use » Customer Understanding

24

PRICING OBJECTIVES RESULTS DISTRICT BOARD

Ranking Classifications Objectives Score

1 Most Important Fairness and Equity 14

2 Very Important Defensibility 17

3 More Important Water Resources Management 19

4 Important Financial Sustainability 26

5 Important Strong Conservation 28

6 Somewhat Important Customer Understanding 30

7 Less Important Affordability for Essential Use 36

8 Least Important Simplicity and Administrative Ease 39

Received five Director responses and General Manager

25

PRICING OBJECTIVES RESULTS COMPARISON

Ranking Classifications Objectives Board Score

WRAC Score

1 Most Important Fairness and Equity 14 18

2 Very Important Defensibility 17 19

3 More Important Water Resources Management 19 N/A

4 Important Financial Sustainability 26 22

5 Important Strong Conservation 28 25

6 Somewhat Important Customer Understanding 30 N/A

7 Less Important Affordability for Essential Use 36 N/A

8 Least Important Simplicity and Administrative Ease 39 28

26

DECISION ANALYSIS

Score Objective Number of Plans Plan Size Overages Credit

Plan Switching (Rolling Open Enrollment)

14 Fairness and Equity Many Narrow Auto Adjust Strong Strong

17 Defensibility Many Narrow - Strong -

19 Water Resources Management Many Narrow Auto Adjust Strong – Addtl. Credit? -

26 Financial Sustainability Fewer Wide Auto Adjust - Weak

28 Strong Conservation ? ? Auto Adjust Weak Weak

30 Customer Understanding Fewer Wide Incremental Cost Weak Strong

36 Affordability for Essential Use Many Narrow Incremental Cost - Strong

39 Simplicity and Administrative Ease Many Narrow Auto Adjust Strong Weak

27

KEY OBJECTIVES

» Fairness and Equity Many plans

• Tailored to individual needs

» Defensibility Narrow plan width

• Disconnect between potential capacity and capacity used with large widths

• Potentially problematic in cost of service analysis • Example: User selects plan 10 to 15 hcf, and consistently uses 11 hcf

• Is it defensible to charge them for 15 hcf of capacity when they actually only use 11?

» Outcome: Many and narrow plans meet both objectives

28

PLAN LOGIC

» Plan Logic: › How many plans should we have?

Individually tailored would be fairest and most defensible

› How wide should they be? Individually tailored would be fairest and most defensible

› How do you define them? Most fair and defensible approach is to either have

customer provide information or base upon actual use

29

OUTCOMES

» How many plans should we have? › Many discrete individualized plans › Based on actual use › Kicked in to higher plan (cannot go down)

Cannot go down unless based on appeals process Example include health issues / leaks

Rollout in summer based on actual use – each plan is an increment of 1 hcf and customers are locked in until open enrollment or appeal approval

30

Nov. 29, 2017

Save the date for an Alliance for Water Efficiency (AWE) webinar on the economic benefits of water conservation programs. It will be Thursday, Dec. 14. The agenda includes a report that examines the jobs, income, and savings generated by water efficiency investments. Webinar details will be posted on the AWE website.

Webinar will look at the benefits generated by water

conservation programs

The Union of Concerned Scientists has put together a guide and online toolkit to help with the development of a local groundwater sustainability plans. The plans are a requirement under California’s Sustainable Groundwater Management Act. The guide is also available in Spanish.

Guide and toolkit released to help develop groundwater

sustainability plans

With Microsoft serving as the host, Sustainable Silicon Valley has organized a water strategies event titled No Drop Left Behind. It will feature speakers from water districts, public utilities, tech companies, and more. The topics will cover water projects that range from small-scale installations to large municipal systems. The event will be Tuesday, Dec. 5, in Mountain View.

Silicon Valley event to promote the benefits of

No Drop Left Behind

A symposium exploring the relationship between homelessness and water management will be held Thursday, Dec. 7, in Fullerton. The event will focus on the Santa Ana Watershed. The agenda includes a panel discussion on creating partnerships between water managers and homelessness agencies.

Exploring the point where homelessness and water

management intersect

A geologic mapping project in the Great Lakes region will be presented during a webinar on Wednesday, Dec. 6. The project has developed 3D maps that can provide information for environmental decision and infrastructure projects. Less than one-third of the U.S. has been mapped at that level of detail.

How a geological mapping project can help

with planning decisions

The California Water and Environmental Modeling Forum is presenting a four-day workshop to present the new features of the U.S. Geological Survey’s One-Water Hydrologic Flow Model. It can be used to analyze the conjunctive use and sustainability of water resources. The workshop will be Dec. 5-8, in McClellan.

Four-day workshop will cover new features of hydrologic flow model

The Public Policy Institute of California has released two reports related to California’s freshwater species. Managing California’s Freshwater Ecosystems and A New Approach to Accounting for Environmental Water present reforms to improve freshwater ecosystems.

Two reports offer reforms for California’s freshwater ecosystems

Long-Term Offset Generating Projects 

 Total Offset 

½  ½ 

Enhanced Toilet Rebate Can get up to 0.5 AF per turn on waiting list 

Applicant gets back in line.

Applicant pays for & directly installs required toilets (Proposed)

Applicant finds their own offset generating project.

Alternate Pathways

Applicant finds rebate participants and earmarks applications.

How to fulfill your offset: 

1) Toilet rebate half 

DEFAULT pathway: 

Sit on the wait list un l you are number 1 on the wait list and enough rebates have come in for 

your project .  Purchase offsets within 21 days of no fica on by District.

ALTERNATE pathways: 

Find residen al customers in the District who want a new toilet and directly pay for and install 

the qualifying toilet in the residence un l you have enough to fulfill the requirement (proposed 

pathway).  Offset credits earned are counted toward offset requirement and do not need to be

purchased.

Find customers in the District who want to get the rebate and have them earmark their 

applica on for your project un l you have enough to fulfill the requirement.  Purchase offsets

within 21 days of no fica on by District.

Find a project in the District to save as much water as your offset requires. Upon Board 

approval, pay for and implement project.  Offset credits earned are counted toward offset

requirement and do not need to be purchased.

2) Long term half (no wait list) 

Once the toilet rebate half is met, applicant can purchase the remaining half of the offset 

requirement. 

WAIT LIST 12/5/2017

Spot on List Date put on list Project Address Development Type APN

Remaining total offset

(AF)

Total WDO cost

remaining

Rebate requirement

(Toilets) Remaining (AF) Notes

1 11/15/2016 9041 Soquel Drive Commercial 041-141-56 0.811 44,605$ 68.0 0.811

2 1/19/2017 313 Moosehead Tier I SFR 042-066-18 0.413 22,715$ 35.0 0.413

3 1/23/2017 7152 Mesa Drive Tier II SFR 039-072-90 0.826 45,430$ 69.0 0.826

4 1/23/2017 206 Shoreview Tier I SFR 042-202-36 0.413 22,715$ 35.0 0.413

5 3/3/2017 Vista Mar Ct. Tier I SFR+ADU 040-214-16 0.58 31,900$ 49.0 0.58

6 3/22/2017 "0" Putter Tier I SFR 037-033-15 0.302 16,610$ 26.0 0.302

7 4/3/2017 North Polo, Lot 1 Tier II SFR & ADU 041-191-44, -45 0.988 54,340$ 83.0 0.988

8 4/10/2017 3600 Via Flores Tier II SFR/ MLD 030-271-26 0.823 45,265$ 69.0 0.823

9 4/12/2017 North Polo, Lot 2 Tier I SFR 041-191-46 0.413 22,715$ 35.0 0.413

10 4/12/2017 North Polo, Lot 3 Tier II SFR 041-191-47,-48 0.826 45,430$ 69.0 0.826

11 4/12/2017 North Polo, Lot 4 Tier I SFR 041-191-49 0.413 22,715$ 35.0 0.413

12 5/24/2017 805 Rosedale ADU 036-055-12 0.248 13,640$ 21.0 0.248

13 6/1/2017 4201 Capitola Rd. MLD and 3 Tier I SFR 034-121-36 0.596 32,780$ 50.0 0.596

14 6/2/2017 "0" Main Street Tier II SFR 030-221-34 1.424 78,320$ 119.0 1.424

15 7/6/2017 2590 South Main Mixed Use 030-221-46 0.735 40,425$ 20.0 0.237

Total Offset = 1.233 AF. 0.5 AF of toilet

offsets purchased.

16 7/11/2017 309 Rio Del Mar Blvd. ADU <640 ft2 042-222-48 0.165 9,075$ 14.0 0.165

17 7/17/2017 312 Park Ave ADU <640 ft2 036-094-16 0.165 9,075$ 14.0 0.165

18 8/7/2017 Vista Del Mar Tier II SFR 053-131-30 0.516 28,380$ 43.0 0.516

19 8/8/2017 605 Capitola 2 condos 035-301-16 0.57 31,350$ 48.0 0.57

20 8/10/2017 2590 South Main

MLD with 4 Tier II SFR with

ADU 030-221-46 2.312 127,160$ 193.0 2.312

21 8/11/2017 3296 West Ledyard Way ADU <640 ft2 039-101-22 0.165 9,075$ 14.0 0.165

22 8/25/2017 4111 Nova Drive ADU <640 ft2 033-111-03 0.165 9,075$ 14.0 0.165

23 9/8/2017 2820 Rosedale Ave ADU <640 ft2 030-253-38 0.165 9,075$ 14.0 0.165

24 9/12/2017 201 Playa Blvd. ADU <640 ft2 045-183-07 0.165 9,075$ 14.0 0.165

25 9/26/2017 308 Arthur Ave ADU <640 ft2 044-192-38 0.165 9,075$ 14.0 0.165

26 10/2/2017 503 Capitola Ave SFR to Duplex 035-093-12 0.285 15,675$ 24.0 0.285

27 11/3/2017 195 Quail Run Rd ADU <640 ft2 040-232-40 0.165 9,075$ 14.0 0.165

28 11/9/2017

Rancho Del Mar Shopping

Center Commercial Change in Use

039-221-12,039-221-

11 0 -$ 0.0 0

Plans fluctuating. Proposed plans do

not require additional offset.

29 11/15/2017 3300 Maplethorpe Subdivision/Townhomes 032-121-60 2.72 149,600$ 227.0 2.72

30 11/17/2017 836 Bay Ave, Capitola Commercial carwash 036-011-17 0.848 46,640$ 71.0 0.848

31 12/4/2017 3355 Merrill Rd. ADU <640 ft2 037-141-17 0.165 9,075$ 14.0 0.165

3233

Total 18.547 1515 18.049

Legend

SFR = Single-family residential

MFR = Multi-family residential

MLD = Minor Land Division

ADU = Accessory Dwelling Unit

Tier I = SFR or ADU on lot <10,000 ft2

Tier II = SFR on lot >10,000 ft2 or commercial

Written communication rec'd via email after board packet deadline