M I N U T E S

MONTEREY PENINSULA WATER AUTHORITY (MPRWA)

TECHNICAL ADVISORY COMMITTEE (TAC)
TAC Regular Meeting
2:00 PM, Monday, November 19, 2012
CITY COUNCIL CHAMBER
FEW MEMORIAL HALL OF RECORDS
MONTEREY, CALIFORNIA

Members Present: Israel, Narigi, Riedl, Riley, Stoldt
Members Absent: Chair Burnett

Staff Present: Clerk of the Committee, Legal Counsel

CALL TO ORDER

ROLL CALL

Member Stoldt called the meeting to order at 2:04 p.m.

PLEDGE OF ALLEGIANCE

REPORTS FROM TAC MEMBERS

There were no reports from TAC members.

PUBLIC COMMENTS

Member Stoldt invited public comments for items that were not on the agenda. Donald Murphy
responded to George Rileys presentation during the Authority meeting on November 8, 2012
and expressed concern that Mr. Rileys affiliations may present a conflict with his ability to
participate impartially as a TAC Member. He expressed the position that the TAC should be a
an unbiased and non political group. With no further requests to speak, Mr. Stoldt closed public
comment.

APPROVAL OF MINUTES

1. September 17, 2012


On a motion by Member Israel, seconded by Member Riedl and carried by the following vote,
the MPRWA Technical Advisory Committee approved the September 17, 2012 minutes as
amended:

AYES: 4 MEMBERS: Stoldt, Riedl, Israel, Riley
NOES: 0 MEMBERS: None
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ABSENT: 1 MEMBERS: Burnett
ABSTAIN: 1 MEMBERS: Narigi
RECUSED: 0 MEMBERS: None

2. October 15, 2012

On a motion by Member Riedl, seconded by Member Israel and carried by the following vote,
the MPRWA Technical Advisory Committee approved the October 15, 2012 minutes as
amended:
AYES: 4 MEMBERS: Stoldt, Riedl, Israel, Riley
NOES: 0 MEMBERS: None
ABSENT: 1 MEMBERS: Burnett
ABSTAIN: 1 MEMBERS: Narigi
RECUSED: 0 MEMBERS: None

AGENDA ITEMS

3. Discuss MPWMD Financial Analysis of SPI Cost Comparisons Report

Member Stoldt introduced the item and made a presentation about the principals and
calculations for public financing and explained the economic analysis performed for recovery of
capital is very much like how public financing is done. He also explained how a capital recovery
factor is used to convert a single up front capital cost into an annual amount to be recovered as
if the money was to be repaid as a loan, based on an interest rate and time period.

Member Stoldt then discussed how public debts must include borrowed interest and during
construction, issuance costs and a reserve fund. How and when interest is calculated and
accrued and the benefits and draw backs to public funding. There was discussion from the TAC
over borrowing funding all at one time versus incrementally over the life of the project

Member Stoldt also clarified that Proposition 18 is a pay-as-you-go financing, increasing rates
to the ratepayers a few years before the project monies are needed. However calculations done
in the SPI Consultants report are based on a one time loan at a set rate.

Member Stoldt opened the item for comments or questions from the public. Having no requests
to speak, Member Stoldt closed public comment on this item and moved on to the next agenda
item.

4. Discuss Cal Am Requested Surcharge 2, Impacts to Ratepayers, and Provide Direction to Staff

Member Stoldt introduced the item and distributed a document outlining the scenario that zero's
out the proposed Cal Am surcharge 2, instead of including the surcharge of the proposed $99
million. Member Stoldt explained the surcharge and the effects of changes in different
scenarios and how it would impact the rate base. He also expressed that the fundamental
concern of the ratepayer is the idea that current ratepayers will have an unequal burden with
minimal benefits compared to future resident. The Authority Board will address their position on
this item in the near future. Member Stoldt opened the item for comments from the TAC who
requested clarification on specific calculations. Member Stoldt then opened the item for
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comments from the public.

Doug Wilhelm expressed his view that the Cal Am surcharge is equivalent to extortion and is
unequally charged and unfairly distributed.
Dale Haikus spoke representing the Peninsula Water Ratepayers Alliance clarifying the $99
million surcharge is currently a proposal before the CPUC and is not guaranteed however it
would be a gambling of ratepayer money. He urged the continuance of competition between the
three projects and expressed concern with the level of risk associated with the Cal Am project
which if failed, would leave rate payers with extensive stranded costs. He requested the
MPRWA to facilitate three things 1) ensure continuance of a fair playing field 2) advance
funding proposal would not go forward without providing rate payers an equity stake and 3)
encouraged the Mayors to protect the best interest of the community.
Safwat Malek questioned Cal Ams proposed budget figures and disagreed with supporting Cal
Am's proposed surcharge. Member Stoldt spoke to Mr. Malek's question and indicated that Cal
Am provided the $207 million discounted figure to the Consultants. With no further requests to
speak Member Stoldt brought the discussion back to the board.

The TAC discussed different rate and borrowing scenarios and possibilities as well as tried to
compile the direct message the TAC wants relayed to the Authority Board. With no further
discussion on the item, Member Stoldt closed discussion and moved to the next agenda item.

5. Review Cost Model and Discuss Strategy and Recommendation for CPUC Cost and Financial
Workshops December 11-13, 2012

Member Stoldt introduced the item and walked through the assumptions to discuss
inputs and alternatives. He indicated that the purpose of this item was to provide the Authority
any guidance of scenarios the TAC thinks should be evolved for the cost workshops or if there
are specific topics that should be presented to the Authority Board.

George Riley commented about instructions to recues himself over the surcharge, due to his
presentation at the November 13 Authority Board meeting which preempted his participation on
this item. He felt he should not participate in this discussion either because it was too closely
related therefore recuesed himself from this item as well.
Don freeman spoke to this comment and indicated that if a member advocates strongly for a
position representing an outside group, that it makes it very difficult for the public to understand
if that person is keeping an open mind. While there are no financial conflicts of interest, or
incompatibility of office in any way, Mr. Reily recuesing himself was a way to preserve the
integrity of the position and of the Authority. Mr. Reily is entitled to have his opinion, but if he
recuesed himself, he will be stepping down from all communication related to this item including
public comments.
Member Stoldt redirected the discussion back to preparing direction to present to the Authority.
Member Israel clarified the calculations of percentages on the worksheet as well as mitigation
allowance not being high enough to resolve. He requested it be higher figures for mitigation and
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lower figures for electricity and control systems. Member Narigi requested inclusion of a line
item factor for test wells and TAC members agreed to include under the plant assumptions.

Member Stoldt clarified that the default scenario of 2,500 cost per acre foot and pointed out that
under the cost of debt, financing area should be looking at authorized cost of debt, corporate
debt, and questioned what if corporate debt was tax exempt without credit support as well as
consider looking at it without backstop. State revolving fund debt should be looked at as a debt
and then moving it over as a surcharge.
Member Israel requested reconsideration of the cost of energy and any impacts of using
methane generated power from the Monterey Regional Waste Management District.
Member Riedl questioned turning off surcharge 2 and state revolving fund as an option, as it
was lumped together in the worksheet, and asked if they be equitable. You could make a public
contribution at no ownership, but it's a non starter.

The TAC agreed to indicate to the Authority that surcharge 2, although cheaper, has specific
issues such as is unequally charged and that ratepayers and businesses may suffer from "rate
shock" when implemented. The goal would be to determine how to get the benefits of the
surcharge without affecting the population.
Member Stoldt opened the item for questions from the public. Salfwat Malek questioned any
safeguards the ratepayers have if the project fails. Libby Downey expressed disagreement with
Legal Counsel Freeman, and encouraged the TAC to appear as if they are advising and not
advocating. Doug Wilhelm questioned the surcharge and assumptions on the key assumptions
page. Member Stoldt clarified the layout of the table under the Surcharge and Construction
Assumptions section of the Key Assumptions hand out.

The TAC agreed to write a memo about the assumptions and recommendations discussed to
provide for reference and inclusion to the CPUC Cost Workshop and for future discussion for
the Authority Board. Member Stoldt clarified that these are not the consultants numbers
presented today, but generated for the cost modeling workshop. With no further discussion or
items to come before the TAC, Member Stoldt adjourned the meeting at 4:13 p.m.

ADJOURNMENT

Respectfully Submitted, Approved,




Lesley Milton, Clerk to the Authority Director Burnett, TAC Chair
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