HomeMy WebLinkAbout2003-03-17 City Council (2)City of Palo Alto
C ty Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:MARCH 17, 2003 CMR:173:03
SUBJECT:ADOPTION OF A RESOLUTION OF THE COUNCIL OF THE
CITY OF PALO ALTO TO FORM AND BECOME A MEMBER OF
THE BAY AREA WATER SUPPLY AND CONSERVATION
AGENCY
RECOMMENDATION
Staff and the Utilities Advisory C ommission (UAC) recommend that the City C ouncil
adopt a resolution to form and become a member of the Bay Area Water Supply and
Conservation Agency (BAWSCA).
BACKGROUND
On February 3, 2002, the City Council approved Resolution No. 8265 (CMR:120:03)
fixing the time and place of a public hearing on March 17, to consider whether to form
and become a member of BAWSCA. The attached January 15, 2002 report to the UAC
provides the back~ound and context to the recommendations to implement 1 egislation
pertaining to water that became law on January 1, 2003. Palo Alto, and the other 27
members of the Bay Area Water Users Association (BAWUA), will benefit from the
implementation of the legislation.
Assemblyman Louis Papan’s bill, Assembly Bill 2058, allows the BAWUA agencies to
create an agency with broad water planning and financial authorities. The fundamental
purpose of BAWSCA is to help ensure the health, safety, and well being of residents and
businesses through delivery of safe and reliable water to its member communities. The
Legislature stated its purpose in enabling the formation of BAWSCA in Section 81301:
CMR: 173:03 Page 1 of 3
It is the intent of the Legislature to enable local governments responsible
for water distribution in the three counties to establish a multi-count3.,
agency authorized to plan for and acquire supplemental water supplies,
to encourage water conservation and use of recycled water on a regional
basis, and to assist in the j?nancing of essential repairs and
improvements to the San Francisco regional water system, including
seismic strengthening.
BAWSCA is intended to be an effective way for the San Francisco Public Utilities
Commission’s (SFPUC’s) wholesale customers to act, independently if necessary, to
meet their common interests. Of course, the directors of BAWSCA will determine what
the new agency will actually do once it is formed. Its statutory authority will allow them
to undertake activities such as the following:
Seek out and secure new water supplies, including dry year water transfers.
Coordinate and implement strategies for water conservation and the use of recycled
water among member agencies, to avoid long-term water shortages.
Prepare financing plans, and associated financing a~eements with San Francisco, to
build the projects needed to ensure reliable water supply and delivery.
Monitor progress on the SFPUC’s multi-billion dollar capital improvement
program, adherence to agreements, and compliance with the various duties and
deadlines established by AB 1823.
Provide a strong organization for water agencies in Alameda, San Mateo and Santa
Clara Counties to negotiate effectively with San Francisco on a new supply contract
and other water issues important tc their customers, such as rationing during
droughts.
Assist general-purpose agencies, such as cities and counties, in planning to cope
with the community impact of an extended water outage following an earthquake.
Represent its members’ interests in the Legislature and before regulatory agencies,
such as the California Department of Health Services, on regional issues not
otherwise handled by the League of Cities or the Association of California Water
Agencies.
Other benefits that have been identified include:
If all eligible agencies participate, BAWSCA will be the largest public water
agency in northern California. Membership in it will enhance each agency’s
influence beyond what it could accomplish acting on its own.
The board of BAWSCA will have the authority to provide priority service to its
members, and to consider differential pricing of services to members and non-
members.
If an agency does not join in the first round as a charter member, there is no
guarantee that it will be admitted later.
CMR: 173:03 Page 2 of 3
DISCUSSION
In accordance with the procedures set forth in AB 2058, the first step in the creation
process occurred when the Board of Directors of the Alameda County Water District
(ACWD) moved to form BAWSCA on January 9, 2003. ACWD then informed the other
eligible public agencies, including Palo Alto, that it had taken that step. According to AB
2058, each eligible public agency had 60 days from ACWD’s action to schedule a public
hearing on the question of forming BAWSCA. Palo Alto took that step on February 3,
2003. The next step is for the eligible public agencies, including Palo Alto, to hold the
public hearing and declare their intention to form and join BAWSCA. \Vhen BAWSCA
is formed (expected by June), Palo Alto will select a director to the BAWSCA Board.
BOARD/COMMISSION REVIEW AND RECOMMENDATIONS
The UAC reviewed this recommendation and approved it unanimously at its January 15,
2003 meeting. In addition, the UAC noted its supportive role in the development of the
legislation and its subsequent passage in the state legislature.
ATTACHMENTS
A. Resolution of the Council of the City of Palo Alto to Form and Become A
Member of the Bay Area Water Supply and Conservation Agency
B.January 15, 2003 report to the UAC: Implementation of Water Legislation
C.Minutes excerpt from UAC Meeting January 15, 2003
PREPARED BY:
DEPARTMENT HEAD:
-JANE RATCHYE
Senior Resource Planner
CITY MANAGER APPROVAL:
Assistant City Manager
CMR:173:03 Page 3 of 3
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO FINDING THAT THE CITY SHALL FORM AND JOIN
THE BAY AREA WATER SUPPLY AND
CONSERVATION AGENCY
WHEREAS, in 2002, the California Legislature enacted the
Bay Area Water Supply and Conservation Agency Act ("Act")
(AB 2058 [Water Code sections 81300, et seq.]), finding and
determining that the regiona! water system operated by the City
and County of San Francisco is vulnerable to catastrophic damage
during a severe earthquake, and susceptible to severe water
shortages during droughts; and
WHEREAS, the California Legislature further found and
declared that residents in the Counties of Alameda, San Mateo,
and Santa Clara have no right to vote in San Francisco elections
and are not represented on the San Francisco commission that
oversees operation of the regiona! system; and
WHEREAS, the Act establishes the Legislature’s intent to
enable eligible !oca! governments to establish a multi-county
agency with authority to plan for and acquire supplementa! water
supplies; to encourage water conservation and use of recycled
water on a regiona! basis, and to assist in the financing of
essentia! repairs and improvements to the San Francisco regional
water system, including seismic strengthening; and
WHEREAS, the Act in Water Code section 81305 establishes
the City of Palo Alto as an "eligible public entity" with
authority to participate under the Act; and
WHEREAS, on January 9, 2003, the Alameda County Water
District adopted a Resolution of intention to form the Bay Area
Water Supply and Conservation Agency ("BAWSCA") and become a
member of that agency; and
WHEREAS, under the Act, each proposed member of BAWSCA
must adopt a resolution fixing the time and place of a public
hearing on whether to form and become a member of BAWSCA; and
WHEREAS, the City Council adopted Resolution No. 8265,
fixing March 17, 2003 as the time and place of a public hearing
on whether to form and become a member of BAWSCA; and
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WHEREAS, on March 17, 2003, a public hearing was
conducted at which testimony and other evidence on this subject
was received and considered by the City Counci!; and
WHEREAS, the City Council finds that the need for
coordinated ~!anning and implementation of strategies for water
supply, water conservation, water recycling, and repair and
improvement of the San Francisco regional water system warrants
the formation of BAWSCA.
NOW, THEREFORE, the Council of the City of Palo Alto
does hereby RESOLVE as fol!ows:
SECTION i. The City Council hereby finds, based upon the
foregoing recitals and the testimony and evidence received
during the public hearing, that the City of Palo Alto shall form
the Bay Area Water Supply and Conservation Agency and become a
member.
SECTION 2. The City Clerk is directed to deliver a
certified copy of this resolution to the Board of Supervisors of
San Mateo County within ten (i0) days after the date of adoption
of this resolution.
SECTION 3. Pursuant to Water Code section 81318,
adoption of this resolution does not ~onstitute a project under
the California Environmental Quality Act, and therefore no
environmental assessment is required.
SECTION 4.Pursuant to Water Code section 81318 and
the Charter of the City of Pa!o Alto, this Resolution shall be
deemed a legislative action subject to referendum.
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030312 srn 0053226
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SECTION 5.This Resolution shall become effective on
the 31st day fol!owing its adoption in order to permit the
exercise of referendum rights.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
City Attorney City Manager
Director of Utilities
Director of Administrazive
Services
030312 sm 0053226
1
MEMORANDUM
TO:UTILITIES ADVISORY COMMISSION
FROM:UTILITIES DEPARTMENT
DATE:JANUARY 15, 2003
SUBJECT: IMPLEMENTATION OF WATER LEGISLATION
REQUEST
Staff recommends that the Utilities Advisory Commission recommend to the City Council
that:
1.The City Council appoint a member of the City" Council as a director of the San
Francisco Bay Area Regional Water System Financing Authority;
The City" of Palo Alto form and become a member of the Bay Area Water Supply
and Conservation Agency; and
If the Bay Area Water Supply and Conservation Agency is formed, the City
Council appoint the same member of the City Council as it appointed to the San
Francisco Bay Area Regional Water System Financing Authority as a director to
the Bay Area Water Supply and Conservation Agency.
BACKGROUND
The City of Palo Alto, along with 27 other agencies that purchase water on a wholesale
basis from the City and County of San Francisco, is a member of the Bay Area Water
Users Association (BAWUA). BAW-IJA was organized to represent the agencies’
collective interests in their interactions with the San Francisco Public Utilities
Commission (SFPUC), the San Francisco City department that manages the regional
water system that serves each BAWUA agency.
On March 22, 2000, the City Council received an information report on water supply
reliability issues (CMR: 170:00). Attached was a BAWUA report titled "The Future of
Our Water Supplies." The report provided elected officials with the status of
concerns about the SFPUC’s performance in its role as the owner and operator of the
regional water system. In February 2000, the California State Auditor issued a report
finding that the regional water system was in need of sig-nificant repair and up~ades and
that the SFPUC had made little pro~ess, although deficiencies had been known about for
at least a decade.
The SFPUC’s own report, released in January 2000, indicated that, inthe event of a major
earthquake, water supplies could be cut off to its customers, including Palo Alto, for up to
60 days. Concerns about the risks to the region’s water supplies and the lack of response
from SFPUC prompted BA\VUA to apply its members’ political resources to the
problem. On July 10, 2000, the Palo Alto City Council adopted a resolution
recommending that the SFPUC take prompt action to improve regional water supply
reliability and quality (CMR:311:00).
The members ofBAWUA - the SFPUC’s customers in San Mateo, Santa Clara, and
Alameda counties - have never had the ability to make decisions about the SFPUC system
they rely on. San Franciscans alone have a voice in the system’s management and
operation even though the BAWUA agencies pay for and use two-thirds of the system’s
water. Although representatives of BAWUA and its member agencies have repeatedly
urged the SFPUC to act to fix the regional system, the lack of representation in the
governance of the regional system has stymied those efforts.
At the urging of BA~Cf_JA, SFPUC staffbegan to develop long-term strategic, financial,
and capital improvement pro~am (CIP) plans in the spring and summer of 2000.
BAWUA offered considerable constructive input into the development of these plans and
provided support to SFPUC staff’s efforts at meetings of its commission. The
commission was set to adopt the plans in late July 2001.
On June 21,2001, then-Mayor Eakins sent a letter to San Francisco Mayor Brown urging
the conm~ission to ~adopt plans and make commitments by the end of July 2001 to repair
and upgrade the regional system," noting that ~we are willing to raise our customer rates
to support theses projects so that the risks will be reduced." At the SFPUC meeting of
July 24, 2001, Mayor Eakins and a number of other elected officials representing
BA\VUA agencies urged the commission to adopt and implement the plans its staff
developed. However, when the expected action came before the commission, it chose to
indefinitely delay adopting the plans. Mayor Eakins requested a meeting with Mayor
Brown to discuss the situation and to ask him to urge the commission to adopt the plans
as soon as possible.
On August 14, 2001, Mayor Brown pulled the CIP plan from consideration by the SFPUC
just before it was expected to approve it. On August 27, 2001, Mayor Brown met with
Mayor Eakins and elected officials from four other BAVCUA agencies. A letter from
those officials to Mayor Brown on September memorialized that meeting and re-
emphasized the BAWUA agencies’ support for adopting and implementing the SFPUC’s
CIP. At the meeting, Mayor Brown recommended: 1) a meeting between financial
experts from San Francisco and the BAWUA agencies; 2) that the BAWUA agencies’
leaders should address the San Francisco Mayor’s Infrastructure Task Force; and 3) that
BA\VUA should join San Francisco to meet with federal and state elected officials to
explore funding opportunities.
Following up on one of Mayor Brown’s requests, on September 28, 2001, Mayor Eakins
and other elected officials testified at a meeting of the San Francisco Mayor’s
Infrastructure Task Force that the task force should urge the commission to adopt the CIP
plan for the regional system and begin needed repair work as soon as possible. In
addition, finance experts from BAWUA agencies met with San Francisco representatives
on October 9 to discuss any financing obstacles San Francisco may be facing. Mayor
Eakins then sent another letter to May.or Brown on October 24,2001, attaching her
testimony at the task force meeting and expressing her disappointment that the task force
voted to send the CIP back to the SFPUC for revisions, causing further delays.
tn late 2001, a group of elected officials began to organize themselves into the Committee
for Regional Water Reliability. Palo Alto Council Member Bern Beecham was a member
of the group, which was led by Redwood City Council Member Ira Ruskin. On
December 28, 2001, Ruskin sent a letter to Mayor Brown advising him that the committee
was meeting with State Senators and Assembly Members to "discuss alternative methods
to fix and govern the regional system".
Meanwhile, Assemblyman Louis Papan was pursuing ways to address the lack of
progress by San Francisco in addressing the ris~ to the regional system upon which his
constituents depend. On May 26, 1999, Assemblyman Papan requested the State Auditor
review the "SFPUC to determine if it is appropriately initiating, planning and completing
necessary capital projects on the Hetch Hetchy water delivery system to assure an
adequate long term reliable water supply...". The California State Auditor’s report of
February 17, 2000 was highly critical of the SFPUC and concluded "that the commission
has been slow to assess and upgrade its water delivery system to enable it to survive
catastrophic events such as earthquakes, fires, or floods. The commission has also. been
slow to estimate the amount of water it will need to meet demand in the future and to seek
additional sources of water. As a result, the nearly 2.4 million customers...who rely on
the commission for their drinking water are at ~eater risk of disruptions...". One of the
State Auditor’s recommendations was to "complete the capital improvement plans...and
seek formal adoption from the commissioners."
Assemblyman Papan continued his pursuit of alternatives and, on Januav 13, 2000, he
requested that the Legislative Council provide ~an opinion on 1) what legal hurdles, given
the Raker Act and State law, one would face in changing the governance of Hetch Hetchy
to any and all of the proposed structures and 2) what is the legal process one would need
to follow to implement such ~i change." After completing the evaluation, on April 26,
2000, the Legislative Counsel concluded "that the Legislature may validly enact a statute
facilitating the formation of a single authority between any of the voluntarily participating
29 local water agencies and the City and County of San Francisco to provide for the
governance and mutual capitalization of the regional Hetch Hetchy water delivery system,
as a special district or as a water district under the Metropolitan Water District Act."
In October 2000, Assemblyman Papan proposed an examination of possible alternatives
to the existing arrangement for governance of the regional system and requested the
California Policy Research Center (CPRC) to undertake a review. The CPRC
commissioned the University of California at Los Angeles to complete the requested
study. UCLA’s study, released in the Spring of 2001, concluded that the problems that
beset the SFPUC’s stewardship of its system would not be solved without sig-nificant
reform in how the system is governed. Two alternatives were proposed: a joint powers
authority (JPA) or a special district.
In the fall of 2001, Assembl)q-nan Papan organized a series of town hall meetings in San
Mateo, Santa Clara and Alameda counties to discuss regional water system governance
alternatives. One of the meetings was held in Palo Alto’s Council Chambers on October
30, 2001.
In December 2001, Mayor Brown appointed Pat Martel as the SFPUC’s General
Manager, and charged her with getting the CIP plans adopted and implemented. The
commission finally adopted the long-term strategic, financial, and CIP plans on May 28,
2002. However, delays continue and capital projects planned to be completed in this and
last year’s budget are still not done.
As a final response to the risk of failure of the regional water system and the lack of
action by the SFPUC, BAWUA undertook a legislative campai~o-n at the beginning of
2002. BAWUA sponsored three bills - two carried by Assemblyman Papan and one by
Senator Jackie Speier. Mayor Ojakian sent a letter expressing Palo Alto’s support of one
of Papan’s bills (Assembly Bill 18__~). On April 1 2002, the Council adopted
Resolutions 8135 and 8136 (CMR:192:02) in support of Papan’s other bill (Assembly Bill
2058) and Speier’s bill (Senate Bill 1870). By the end of August 2002, the legislature
passed all three bills. The governor signed each bill into law on September 24, 2002 and
they became effective on January 1, 2003. At this time, the implementation stage has
started.
DISCUSSION
Each of the three bills provides value to the BAW-UA agencies. Senator Speier’s bill, SB
4
1870, creates a financing agency to allow the BAWUA agencies to finance their share of
the SFPUC’s CIP to improve the reliability of the regional system. Assemblyman
Papan’s bill, AB 1823, requires SFPUC to complete certain key projects in its CIP.
Papan’s other bill, AB 2058, allows the BAWUA agencies to create an agency with broad
water planning and financial authorities
SB 1870 - "Create Financing Authority"
Senate Bill Number 1870, the San Francisco Bay Area Regional Water System Financing
Authority Act,.creates on January 1, 2003 an entity with the authority to issue revenue
bonds to improve the reliability of the regional water system. There is no limit in the Act
as to the amount of bonds the authority could issue, but if it is used to finance the
wholesalers’ "share" of the costs of SFPUC’s CIP, it could be as high as $2 billion.
The authority’s Board of Directors will consist of appointees from the 26 public entities
which purchase water from San Francisco, plus a resident of the Stanford University
service area and a resident of the California Water Service Company service area, each
appointed by the appropriate county board of supervisors. San Francisco voters passed
Proposition A, the $1.6 billion bond measure, which may result in San Francisco
eventually becoming a voting member of the authority’s board.
The governing bodies of the eligible public entities and the Boards of Supervisors of San
Mateo and Santa Clara Counties (for CalWater and Stanford University) must make
initial appointments to the authority’s board prior to March 1, 2003. Terms on the board
are four years, except for hal f of the initial appointees, who shall have two-year terms
initially. As soon as possible after initial appointments, the Board shall hold its first
meeting and elect a chair and vice-chair.
Each director is granted one vote on any ordinance, resolution, or motion. An affirmative
vote of a majority of directors is sufficient to carry any motion, resolution, or ordinance,
except for issuance of debt. The authority may borrow money and issue notes and bonds,
including revenue bonds, without the approval of voters. It may issue revenue bonds
upon the adoption of an ordinance by a two-thirds vote of the directors. The proceeds of
the revenue bonds can be used only on projects to improve the reliability of the regional
water system. Under specified conditions, the authority shall provide the proceeds of the
revenue bonds directly to San Francisco.
The bill requires that, on September 1 of each year, San Francisco submit a report to the
Joint Legislative Audit Committee (JLAC) describing progress on each of the projects
that are funded by the Authority and on all other projects in the CIP, regardless of funding
source. December 31, 2020 is the last day that the Authority can issue revenue bonds.
Under the law, the City Council must appoint a representative to the authority’s board of
directors prior to March 1, 2003. Although the only requirement to be appointed to the
board is that the appointee be a re~stered voter residing within the boundaries of the
member public entity whose governing board appoints him or her, staff recommends that
Palo Alto’s appointee be a City Council Member. It is expected that many, if not all, of
the other directors on the authority’s board will be elected officials, and the issues before
the authority would be of a policy nature: 1) how best to finance a large stream of capital
projects over an extended period of time; 2) whether to accept a particular agreement
between the authority and San Francisco for the use and management of the funds; 3)
how the costs of projects should be split with San Francisco; and 4) whether to enter into
binding fiscal obligations with bond buyers. All of these questions are matters of policy
affecting 1-.6 million residents and businesses outside of San Francisco.
AB 1823 -"Fix the System"
Assembly Bill Number 1823, the Wholesale Regional Water System Security and
Reliability Act requires that San Francisco adopt a CIP and an emergency response plan.
The bill requires the State Department of Health Services (DHS) to conduct an audit of
maintenance practices for the regional system and San Francisco to prepare various
reports in connection with its operation of the system to the DHS. The bill lists 9 key
projects and requires that they be included in the CIP. The bill allows San Francisco to
modify the CIP in any manner it deems appropriate. If San Francisco deletes or defers
projects, it must inform the DHS and the California Seismic Safety Commission (CSSC),
and those entities must issue a written report within 90 days stating whether the deletions
or deferrals create a potential significant threat to public health and safety.
Key timelines stemming from AB 1823 include:
February 1 of every year starting in 2003 - San Francisco must submit a report to the
JLAC and DHS describing its progress in securing supplemental supplies to aug-ment
existing supplies for dry years.
o February 1, 2003 - San Francisco must adopt a CIP.
e March 1, 2003 - San Francisco must submit CIP to DHS.
e July 1, 2003 - San Francisco must submit a draft emergency response plan to the
Office of Emergency Services (OES) that it has prepared in consultation with
BAWUA and the offices of emergency services of Alameda, San Mateo, and Santa
Clara counties.
September 1, 2003 - San Francisco must adopt an emergency response plan and
submit it to the State OES.
September 1 of every year starting in 2003 - San Francisco submit a report outlining
its progress towards completion of the CIP to DHS, JLAC, and the CSSC.
July 1, 2004 - DHS to complete an audit of SFPUC’s maintenance program of the
regional water system.
January 1, 2005 - DHS will submit a report on its audit findings to JLAC and CSSC.
Sunset: the bill becomes inactive on the earlier of the date DHS notifies the State
le~slature that San Francisco has awarded construction contracts on the nine critical
projects listed in the bill; or December 31, 2010.
AB 2058 - "Create Regional Water Supply and Conservation Agency"
Assembly Bill Number 2058 allows the formation of BAWSCA, the Bay Area Water
Supply and Conservation Agency. BAWSCA will be able acquire water and water rights;
develop, store and transport water; provide, deliver, and sell water at wholesale to certain
entities; and acquire, construct, operate and maintain works and facilities to carry out the
agency’s purposes. It will also be able to exercise the right of eminent domain and issue
revenue bonds to finance the construction, reconstruction, or improvement of any works
carried out by the agency.
The formation process requires that a single agency take the first step: adopt a resolution
announcing its intention to form BAWSCA. The Alameda County Water District
(ACWD) will be the agency to take that step. After adopting the required ordinance
(which is on the ACWD Board of Director’s agenda for January 9, 2003), AC~VD must
notify the other eligible agencies and hold a public hearing. Then, other agencies must
hold public hearings on whether to form, and become a member of, BAWSCA. Within
60 days of the public hearings, the governing body of each public entity shall adopt a
resolution declaring its decision on whether to form, and become a member of,
BAWSCA.
The bill assigns the San Mateo County Board of Supervisors the administrative task of
determining whether there are sufficient public agencies that wish to form BAWSCA (at
least 15 entities representing 60% of the water). If so, the Supervisors will declare
BAWSCA formed and will forward the list of agencies to the Secretary of State for
certification and declaration that the agency has been formed in accordance with the law.
BAWSCA can be created as early as April 2003 if all the required steps are completed on
a fast track. If all allowed time were taken, it would take until August 2003 to go through
the formation process. After BAWSCA is created, BA\VUA will likely transfer its staff,
resources, and operations and essentially become BAWSCA, although the new BAWSCA
Board will make that ultimate decision.
The governing bodies of the public entities who decide to form and join BAWSCA must
make initial appointments to the agency’s board. Appointees from public entities must be
registered voters residing within the boundaries of the member public entity whose
governing board appoints him or her. The Boards of Supervisors of San Mateo and Santa
Clara Counties (for CalWater and Stanford University) must appoint the representatives
from the respective private agencies once BAWSCA has been formed by action of the
public agencies. Terms on the board are four years, except for half of the initial
appointees, who shall have two-year terms initially. San Francisco may apply to become
a member of BAWSCA, subject to approval by BAWSCA’s board.
Each director is wanted one vote on any ordinance, resolution, or motion. An affirmative
vote of a majority of directors is sufficient to carry any motion, resolution, or ordinance,
except when weighted voting is called for. Any director may call for weighted voting on
any item, which is based on the average deliveries of water during the 2000-01 fiscal
year. When weighted voting is in effect, the affirmative vote of directors representing
both (1) the majority 0fthe members of the board present and voting, and (2) a majority
of the weighted vote sha!l be necessary to carry any motion, resolution, or ordinance.
This is different from the voting protocols for the financing authority (SB 1870) where
each director is wanted one vote and a majority of members is required to pass any
ordinance, resolution, or motion.
BAWSCA may borrow money and issue notes and bonds, including revenue bonds,
without the approval of voters. It may issue revenue bonds upon the adoption of an
ordinance by a two-thirds vote of the directors present and voting which also represents at
least 51% under the weighted voting method. The proceeds of the revenue bonds can be
used for the construction, reconstruction, or improvement of facilities or public works,
including facilities of the San Francisco regional system, subject to mutually satisfactory
a~eement.
To become a member of BAWSCA, the City Council must first adopt a resolution to hold
a public hearing on the matter of joining BAWSCA. It is expected that this will be done
in early February 2003. If BAWSCA is created, the City Council must appoint a
representative to its Board of Directors. That representative can be (and staff recommends
that it be) the same representative as Council appoints to the financing authority created
by SB 1870. The timeline of actions that must be taken by the City Council and others is
described in the "Next Steps" section of this report.
Questions
Specific questions that may arise when contemplating whether Palo Alto should join
BAWSCA are discussed below.
1. Why did the legislation set up z~vo agencies that canJinance capital projects?
The bills were desig-ned to accomplish different things, and during the legislative process,
it was unclear which, if any, of the bills might become law. The new water agency,
BAWSCA, would create direct decision making participation with a broad range of
authorities that permit the cities, water districts and private utilities to address their
current and future needs for water reliability, water supply, and other matters of mutual
interest. One of those authorities is to finance public works of many possible types for
the good of the participating agencies. The financing authority is not a new agency, but a
financing mechanism, not unlike an improvement district or a JPA established solely for
the purpose of financing projects. Further, the financing authority is limited to funding
only those projects that are improvements to the San Francisco regional water system.
The bill creating the financing authority also contains requirements for the necessary
a~eements between the financing authorits~ and San Francisco for the use of any funds
provided.
2.What are the overall differences between the Financing Authority and BA WSCA ?
Creation
process
Action
required by
City Council
I Financing Authoriq" (SB 1870)
No process - the authority is created by the
Board of
Directors
state as of January 1, 2003
Must appoint a director to the Finar~cing
Authority by March 1, 2003
Appointees from the governing bodies of
the 26 public entities who purchase water
from San Francisco.
San Mateo County Board of Supervisors "
appoints a resident of the Cal Water
service area that is not an employee
San Clara County Board of Super~,isors
appoints a resident of the Stanford service
area that is not an employee
San Francisco to be a member - director to
be appointed by SF Board of Super%sots.
SF is a non-voting member unless or until
BAWSCA (AB 2058)
ACWD informs Palo Alto that it intends to
take the initial creation action required by
the enabling legislation, that being to act
by resolution to indicate a desire to fomn
the agency.
Each of the other public entities must
consider whether to form and become a
member
San Mateo County Board of Supervisors
will declare that the agency has been
formed upon determining that 15 of the
public entities representing at least 60% of
their total water purchases have set
certified copies of resolutions to form and
become a member
Within 60 days of receiving ACWD’s
resolution, must adopt a resolution to hold
a public hearing
Must hold a public hearing to consider
whether to form and become a member
e If decide to join, must adopt an resolution
to that effect
If the agency is created, must appoint a
director to agency
Appointees from the governing bodies of
the 26 public entities who purchase water
from San Francisco.
o San Mateo County Board of Supervisors
appoints an officer or employee of Cal
Water
San Clara County Board of Supervisors
appoints an officer or employee of
Stanford
o San Francisco may apply to be a member.
Membership would be uanted if the
BAWSCA Board consents
9
Voting on
ordinances,
resolutions,
and motions
Issue
revenue
bonds
Powers to
finance
Authority to
issue debt
General
powers
Water
management
powers
Financing Authority (SB 1870)
certain requirements satisfied
BAWSCA (AB 2058)
Each director is granted one vote
Majority of directors can approve
2/3 vote of directors must approve
o Authority to provide the proceeds of the
revenue bonds directly to San Francisco to
improve the reliability of the regional
water system under specified conditions:
through a mutually satisfactory, agreement;
identifying specific projects and proposed
completion dates; having authority to
oversee and audit disposition of the funds;
inspecting construction of projects; and
having access to information on the
expenditure of bond funds
e The authority may not issue revenue bonds
after December 31, 2020
Can borroxv money and issue notes and bonds,
approval
Each director is granted one vote
Majority of directors present can approve,
except when weighted voting is called for.
Any director may call for weighed voting
on any item - if so, BOTH a majority of
directors present and a majority of the
weighted vote are required to approve.
*Weighting factors are stated in the
legislation and are based on the average
deliveries of water during FY 00-01
2,/~ of the directors present AND voting of at
least 51% using the weighted voting method
must approve
May use proceeds of bonds for the
construction, reconstruction, or
improvement of facilities of public works.
Possible uses could include construction of
facilities of the San Francisco regional
water system, subject to a mutually
satisfactory, agreement with San Francisco.
including revenue bonds without voter
May make contracts of any nature and contract with the United States, the state, a public or
private entity or person.
May apply for and receive state and federal financial assistance
e May plan, finance, acquire, construct,
maintain, and operate facilities for the
collection transmission, treatment,
reclamation, reuse and conservation of
water
May support or implement water
conservation and water reclamation
programs and projects
May acquire water and water rights;
develop, store, and transport water
May provide, deliver and sell water on a
wholesale basis within its botindaries. The
10
Financing Authority (SB 1870)BAWSCA (AB 2058)
agency does not have the power to provide
retail service
3.What is the difference between the financing authoriO~ and BA WSCA regarding
financing? ~tV would you choose one over the other?
BA~A is cu~ently undertaking an in-depth evaluation of this question. Possible
reasons to fired capital projects with the financing authority mechanism may include the
provisions in SB 1870 for elements that must be contained in the aueements be~een the
authofiU and San Francisco. However, this question is best answered in the furore, after
approp~ate evaluations can be made, rather than now, in the absence of such evaluations.
Premature evaluations could preclude valuable options for the CiU of Palo Alto.
4.I’~Tzat is the visio~z for how the agenqv alzd the authoriO~ will work together? Will
there be two staffs? ~l’Tzat #ill happen to BA
How they will work together will not be known until both entities have been established.
Practically, the entities may function in a manner analogous to a city council and an
improvement district. The BAWSCA Board could meet to address that agency’s policy
actions. During that session, BAWSCA could adjourn and reconvene, with the addition of
San Francisco, to conduct business as the financing authority to finance projects for the
regional system. Details can only be defined once participation in BAWSCA is known
and the two entities begin to meet.
BAWUA will essentially transform into BAWSCA. There will not be duplicate staffs.
The current BAWUA staff will become the BAWSCA staff and will also provide support
for the financing authority. BAWSCA is envisioned as an agency that can do jointly
beneficial projects such as purchase water for drought-time use for all of a part of the
BAWSCA member agencies. Regional conservation program planning and
implementation is also likely to be a significant BAWSCA activity. Recycled water may
also be a pro~am in which certain BAWSCA member agencies want to collaborate.
5.If an agency did not join BA WSCA and the BA WSCA Board voted to issue revenue
bonds, would the non-member agencies be obligated for bond debt service and
repayment?
No, non-member agencies would not be obligated to pay for projects funded by
BAWSCA. Although it is expected that all current BAWUA member agencies will
become members of BAWSCA, that may not be the case. IfBAWSCA financed a
project, it could arrange for non-BAWSCA members to pay to use the project through a
contract, or could attempt to design the project so that benefits flowed only to agencies
that participated in cost sharing. Such details would be negotiated if the situation arose so
non-member agencies would not benefit at the expense of member agencies.
tl
What are the benefits to Palo Alto of joining BA WSCA ?
Being a member allows the City to influence the actions BAWSCA takes or does not
take. With weighted voting, Palo Alto wil! be a significant player--the third largest
in terms of weighted votes.
These activities are potentially important to Palo Alto and regionally:
e Dry year supplies/wheeling
o Regional conservation
e Recycling
Members will presumably get priority’ for services/benefit (or exclusive right to them),
as well as lower cost than non-members.
BAWSCA will probably evolve into the vehicle for interacting collectively with San
Francisco on water supply, rates and the CIP, much as BAWUA does now.
If an entity doesn’t join in the first round, there is no guarantee it could get in later.
With all eligible agencies participating, BAWSCA would be the largest public water
entity in northern California.
7.~I’Tzat are the risks of joining BA WSCA ? Are there a~o: downsides of joining
BA WSCA ?
None are identified at this time. Participation ensures a direct voice in critical regional
decision making affecting water reliability. The alternative is the status quo.
The terms for both the Authorib~ and BA WSCA are four years. If the Council
initially appoints someone for the Boards, can it change the appointee mid-term?
}I’Tzat if the appointee is no longer o~z the Council in the middle of his or her term
on the Boards?
Once appointed, directors serve for their assigned terms. Changes in directors can occur
if the individual is no longer a resident registered voter or voluntarily resigns.
9.[f Palo Alto joins YA I.VSCA and subsequently changes its mi~d, is there any way to
leave BA WSCA ?
Since BAWSCA, if fornaed, will be a special district, its organization can be changed by
LAFCO reorganization action.
l O.Should the appointee be an elected member of the City Council? Should the same
person be appointed to the boards of both theJ~nancing authority and BA WSCA ?
The Council can decide who to appoint to each agency, but staff recommends that the
appointee be a member of the City Council since elected officials will give the new
agencies greater stature in their dealings with San Francisco, regulatory agencies, and
legislators. In addition, the new agencies will consider policy matters, with which elected
officials are experienced. Staff also recommends that the appointee to the boards be the
12
same person since the entities will be addressing similar policy issues.
The following table lists factors for the city councils and boards of directors of the 26
BAWUA public agency members to consider when appointing directors to the boards of
the two agencies.
Who appoints directors?
Qualifications for directors?
Must appointee be a member of
city council/board of directors?
May appointee be a member of
tits,’ council/board of directors?
Term
By when must appointment be
made?
Compensation provided by new
agency?
Financing Authority
(SB 1870)
City councils/boards of
directors of the 26
BAWUA public agency
members*
Resident of and registered
voter in city/district
No
4 years (after initial terms
of 2 or 4 years, determined
by lot)
March 1, 2003
None, if appointee is
officer or employee of your
city/district
Yes
BAWSCA (AB 2058)
City councils/boards of
directors of those public
agencies that join*
Resident of and registered
voter in city/district
No
Yes
4 years (after initial terms of
2 or 4 years, determined by
lot)
Within 60 day’s of when the
Secretary of State certifies
BAWSCA is formed
(probably Spring 2003)
$100 per meeting of the
Board, up to $400 per month
Expenses reimbursed by new Yes
agency?
* The San Mateo County Board of Supervisors makes appointments on behalf of the
California Water Service Company and the Santa Clara County Board of Supervisors
does so on behalf of Stanford University.
POLICY IMPLICATIONS
Joining BAWSCA and appointing representatives to BAWSCA and the financing
authority are consistent with City policies and directives. The recommended action is
consistent with the Utilities legislative priorities (CMR: 122:02):
"Advocate for regional system governance that enhances the reliability of water
supplies for Palo Alto citizens.
t3
Work...to speed completion of needed improvements and change governance as
necessary for more effective regional system management.
Support the development of a regional crisis management plan since fixes to the
regional system will take years to implement and there are ~eat risks in the
intervening time."
The recommended action supports the Utilities Strategic Plan (USP) Objective 2: Invest
in utility infrastructure to deliver reliable service. It also supports several of the USP
strategies:
Strategy 1 - Operate distribution systems in a cost effective manner (accelerate the
capital improvement pro~am to reduce maintenance costs in later years when
competition will become more intense); and
Strategy 2 - Preserve a supply cost advantage compared to the market price (work
through partner agencies such as BAWUA...to become a more effective voice for
our mutual benefit).
RESOURCE IMPACT
Joining BAWSCA and appointing directors for BAWSCA and the financing authority do
not have staff resource impacts as existing staff that monitors SFPUC and BAWUA
activities and serves on the Board of Directors of BAWUA will continue to perform
similar functions. Increased involvement by the City Council will likely be required if the
Council chooses to appoint a council member as the appointed member of the Board of
Directors for BAWSCA and the financing authority. Additional support for the appointee
may be required in the short-term as that director is educated in the issues facing
BAWSCA and the SFPUC.
If BAWSCA is formed, there are likely to be higher costs in the short-run (next 1 to 2
years) as BAWUA is transformed to BAWSCA and new resources (e.g. organizational
expertise) are needed for the transition. In addition, expertise such as financial advice for
the financing authority and BAWSCA in preparation for being able to finance projects
will be necessary. However, the SFPUC’s long-term CIP and financial plans do not
indicate a need for significant capital funds from the authority or BAWSCA until 2005 or
later. At this time, BAWUA staff is preparing preliminary budgets to propose to the new
board of directors of BAWSCA if and when it forms.
NEXT STEPS
14
The timeline for implementing SB 1870, which creates the financing authority, requires
that the City Council appoint a director to the authority prior to March 1, 2003. Staff
plans to request that Council take that action on February 3, 2003.
Implementation of AB 2058, which enables the creation of BAWSCA, requires a long
series of steps that each BAWUA public agency must complete. The first step is for a
single public agency to adopt a resolution of intention to form BAWSCA. The Alameda
County Water District (ACW-D) is expected to take that step on January 9, 2003. The
remaining steps are listed below:
February 3:Council adopts Resolution #1 scheduling a public hearing on whether to
form and join BAWSCA (must be done prior to March 10 - within 60 days
of ACWD’s action).
March 10:Council: 1) holds the public hearing that was scheduled by Resolution #!;
and 2) adopts Resolution #2 to declare Palo Alto’s intention to form and
join BAWSCA. The public hearing must be held no earlier than 30 days
and no later than 60 days after the date that Council adopted Resolution #1.
March 17:A certified copy of Resolution #2 forwarded to the San Mateo County
Board of Supervisors within 10 days of its adoption.
Feb. - June:All BAWUA public agencies adopt resolutions as to whether they will fom~
and join BAWSCA and forward certified copies of their resolutions to the
San Mateo County Board of Supervisors
Up to 60 days later: The San Mateo County Board of Supervisors detemaines whether or
not resolutions to form and join BAWSCA have been adopted by enough
entities. If so, within 10 days the Clerk of the San Mateo County Board of
Supervisors certifies to the Secretary of State that there are sufficient
agencies to form BAWSCA.
Up to 10 days later: The Secretary of State certifies that BAWSCA is formed.
Up to 60 days later: The governing body of each member public entity appoints a
member to the BAWSCA Board. Timing for the Counci! date to adopt
Resolution #3 to appoint a director to BAWSCA is not known at this time.
It could occur as early as April 2003 or as late as October 2003 - a
reasonable guess is May or June 2003.
15
ATTACHMENTS
Senate Bill 1870
Assembly Bill 1823
Assembly Bill 2058
PREPARED BY:
REVIEWED BY:
DEPARTI IENT HEAD:
Jane Ratchye, Senior Resource Planner / ]~---
Girish Balachandran
Assistant Director of Utilities, Resource Management
DIyCTOR OF UTILITIES
15
Senate Bill No. 1870
CHA_PTEK 849
A-~ act to add Division 31.7 (commencing with section 81600) to the
Water Code, relating to water.
[Approved by Governor September 24, 2002. Filed
with Secretary of State September 24, 2002.]
LEGISLATWE COUNSEL’S DIGEST
SB 1870, Speier. San Francisco Bay Area Regional Water System
Financing Authority.
(1) Under existing law, the City and County of San Francisco (San
Francisco) operates the Hetch Hetchy Project as a regional water
delivery system, supplying water to persons and entities in San
Francisco and the Counties of Ala_meda, San Mateo, and Santa Cl~xa.
This bill would enact the San Francisco Bay Area Regional Water
System Financing Authority Act. The bill would create the San
Francisco Bay Area P~egional Water System Financing Authority,
consisting of San Francisco, certain public entities that purchase water
from San Francisco, Stanf6rd University, and the .California Water
Service Company.
The bill would require the governing body of each member public
entity of the authority, other tkan San Francisco, and the Boards of
Supervisors of San Mateo and Santa Clara Counties, to appoint one
voting member to the board, and would require the governing body of
San Francisco to appoint one nonvoting member, to a 4-year term on the
board. The bill would require San Francisco to become a voting member
of the authority if a certain requirement is met. The bill would allow each
director who is not an officer or employee of an appointing entity to
receive compensation prescribed by the board, and would provide for the
reimbursement of reasonable expenses incurred in the performance of
duties. The bill would grant each voting director one vote on any
ordinance, resolution, or motion.
The bill would authorize the auflaority to issue re~,enue bonds until
December 31, 2020, pursuant to certain procedures, to improve the
reliability of San Francisco’s reg-ional water system. The bill would
require the bond proceeds to be made available upon terms and
conditions that include San Francisco’s entering contracts with the
authority that, among other things, require San Francisco, on behalf of
the authority, to impose a surcharge to generate revenue to pay the debt
service on the revenue bonds issued by the authority and the operating
91
Ch. 849
expenses of the authority. The bill would require San Francisco to submit
an annual report to the Joint Legislative Audit Committee describing the
¯ progress made on projects financed by the authority and on the
implementation by the capital improvement program for the regional
water system.
The bill would require the authority to dissolve upon the repayment
o~" allrevenue bonds issued by the authority and the satisfaction of all
other debts and obligations of the authority.
The various requirements established by the bill for local public
entities in co~.nection with the formation and operation of the authority
would impose a state-mandated local program.
(2) The California Constitution requires the state to reimburse local
agencies and sclaool districts for certain costs mandated by the state¯
Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this act
for a specified reason.
The people of the State of California do enact as follows.
SECTION 1. Division 31.7 (commencing with Seotion 81600) is
added to the Water Code, to read:
DI~rISION 31.7- SAN FRANCISCO BAY AREA REGIONAL
WATER SYSTEiVl FINANCING AUTHORITY
CHAPTER GENERAL PROVISIONS AND DEFINITIONS
Article 1 General Provisions
8!600. This division shall be known and may be cited as the San
Francisco Bay Area Regional Water System Financing Authority Act.
81601. The Legislature finds and declares all of the following:
(a) The City and Count, of San Francisco has acquired or constructed
a system of reservoirs, pipelines and runnels, and treatment plants that
provides water to 2.4 millSon Californians who Live in San Francisco and
in nei~boring communities in Alameda, San Mateo, and Santa Clara
Counties.
(b) Over two-thirds of the Californians who rely on San Francisco’s
regional water system, approximately 1.6 million persons, live outside
San Francisco. A substantial majoriu of industrial, commercial,
institutional, and governmental users are also located in neighboring
communities rather than in San Francisco itself.
91
-- 3 --Ch. 849
(c) The reliability of this water infrastructure system is of vital
importance to the health, welfare, safer)’, and economy of the region
which it supplies.
(d) In turn, this region is of vital importance to the entire State of
California, because of the resident industries, universities, and
commercial enterprises that employ mitlions of Californians and
generate billions of dollars in exports and tax revenues to the state.
(e) The regional water system is old, designed to outdated seismic
safety standards, and either crosses or is located on, or adjacent to, three
major active earthquake faults, the Calaveras Fault, the San Andreas
Fault, and the Hayward Fault. En~eering investigations have disclosed
that the system is at risk of catastrophic failure in a major earthquake.
Many areas in all four counties now served, in the event of a major
earthquake, face possible interruptions in their supplies of potable water
for up to 30 days, and some areas could be without water for as !ong as
60 days.
(f) Interruptions in water supply of this magnitude and duration to a
densely populated metropolitan region could be disastrous for public
health and safety and for the regional and state economy. In addition,
uncontrolled releases of waterfrom pipelines, tumaels, and reservoirs
could create severe flood damage and environmental harm to fish and
wild!ife habitat in the communities in which those facilities are located.
(g) Pursuant to the terms of the master water sales contract between
the City and County of San Francisco and its wholesale customers, the
retail water customers of the City and County of San. Francisco provide
the initial financing for the construction of improvements to the regional
water system, and the wholesale customers do not pay for those
improvements until those improvements are placed into service.
(h) Many separate cities, special districts, and public utilities are
responsible for the distribution of water in portions of the bay area
served, on a wholesale basis, by the San Francisco regional water supply
system. The distribution of responsibility among many agencies
impedes coordinated regional actions, including financing, to respond
to the crisis.
(i) It is the intent of the Legislature to enable the City and County of
San Francisco, and the entities in AI. ameda, San Mateo, and Santa Clam
Counties that rely. on the Sam Francisco regional water system, acting
collectively, to secure funds necessary to implement the prompt
construction and reconstruction of the San Francisco regional water
system, and to make those funds available to the City and County of San
Francisco for projects designed and intended in substantial part to
improve the reliability of the regional water system, including, but not
91
Ch. 849
limited to, stxengthe~mg the system’s ability to ~vithstand seismic
events.
(j) tt is not the intent of the Legislature to change the governance
structure, operatidnal control, or existing ownership of San Francisco’s
regional water system.
Article 2. Definitions
81602. Unless the context otherwise requires, the definitions in this
article govern the construction of this division.
81603. "Authority" means the San Francisco Bay Area Regional
Water System Financing Authority.
81604. "Board" means the board of directors of the authority.
81606. "Master water sales contract" means the document entitled
"Settlement Agreement and Master Water Sales Contract between the
City and County of San Francisco and Certain Suburban Purchasers in
San Mateo County, Santa Clara County, and Alameda County," dated
July 1, 1984.
81608. "Project" means a work and all of the activities related to,
or necessary for, the acquisition, construction, operation, and
maintenance of a work including, but not limited to, plaun~g, design,
financing, contracting, project management, and administration.
81608.5. "Public e~atities" means San Francisco and the public’
entities in the Counties of Alameda, San Mateo, and Santa Clara that
purchase water from San Francisco pursuant to the master water sales
contract, that include Alameda County Water District, City of Brisbane,
City of Burlingame, Coastside County Water District, City of Daly City,
City of East Palo Alto, Estero Municipal Improvement District,
Guadalupe Valley Municipal Improvement District, City of Hayward,
Town of Hillsborough, Los Trancos County Water District, City of
Menlo Park, Mid-Peninsula Water District, City of Millbrae, City of
Milpitas, City of Mountain View, North Coast County Water District,
City of Palo Alto, Purissima Hills Water District, City of Redwood City,
City of San Bruno, City of San Jose, City of Santa Clara, Skyline County
\Vater District, City of Sunnyvale, and Westborough Water District.
81609. "Regional water system" means facilities for thestorage,
treatment, and transmission of water operated and maintained by San
Francisco located in ~e Counties ofTuolum~e, Stanislaus, San Joaquin,
Alameda, Santa Clara, San Mateo, and three terminal reservoirs in San
Francisco. ¯
81610. "San Francisco" means the City and County of San
Francisco.
91
_ ~__Ch. 849
CHA2T~a 2. CREATION OF AIYlXqORITY
81615. (a) The San Francisco Bay Area Regional Water System
Financing Authority is hereby create&
Co) The members of the authority include the public entities identified
in Se.ction 81608.5, Stanford University, and the California Water
Service Company.
CHAFFER 3. GOVERNMENT OF AIrrHORITY
Article Board of Directors
81628. The authority shall be governed by a board of directors.
81629. (a) The governing body of each member public entity, other
than San Francisco, shall appoint one. voting member to the board of the
authority. Subject to Section 81673, the governing body of San
Francisco shall appoint one nonvoting member to the board of the
authority. Each director shall be a registered voter and reside within the
boundaries of the member public entity whose governing board appoints
him or her.
Co) For the purposes of subdivision (a), the governing body of a
member public entity may appoint one of its own members to the board
if the person otherwise meets the requirements of that subdivision.
(c) (1) The Board of Supervisors of San Mateo County shall appoint
one voting member to the board who is a resident of San Mateo County,
receives water fi-om the California Water Service Company, and is not
an officer’or employee of the California Water Service Company.
(2) The Board of Supervisors of Santa Clara County shall appoint one
voting member to the board who is a resident of Santa Clara County,
receives water from Stanford University, and is not an officer or
employee of Stanford University.
(d) If a person appointed pursuant to this section ceases to possess the
qualifications for this office set forth in this section, the office shall
become vacant and the vacancy shall be filled pursuant to subdivision
(c) of Section 81631.
(e) No incompatibility of office shall result from an elected official
serving on the board of the authority and on the governing board of a
member public emit?,.
(f) The initial appointments shall be made not later than March 1,
2003.
81630. Each director, before entering upon the duties of his or her
office, shall take the oath of office as provided for in the Constitution and
laws of the state.
91
Ch. 849
81631. (a) Each director shall serve for a term of four years.
Co) Notwithstanding subdivision (a), the directors initially appointed
to the board shall determine, by lot, that one-half plus one of their
number shall serve for four years and the remaining directors shall serve
for two years. Thereafter, each appointing authority shall appoint a
persq.n to replace its respective director or may reappoint its director for
an unlimited number of terms.
(e) A vacancy on the board shall be f:dled by the respective appointing
authority not later than 90 days from the date of the occurrence of the
vacancy.
81632. Each director who is not an officer or employee of an
appointing entity may receive compensation in an amount prescribed by
the.board, not to exceed one hundred dollars ($100) per day for each
day’s atthndance at meetings of the board, not to exceed four meetings
in any calendar month. In addition, each director may be reimbursed for
actual, necessary, and reasonable expenses incurred in the performance
of duties performed at the request of the board. The compensation of
directors may be increased pursuant to Chapter 2 (corn.mencing with
Section 20200) of Division 10.
81633. A majority of the voting members of the board constitutes
a quorum for the transaction of business. The board may act only by
ordinance, resolution, or motion.
81634. The board shall hold its first meeting as soon as possible
after the appointment of the initial directors. At its first meeting, and at
its first meeting in January each year thereafter, the board shah elect a
chairperson and a vice-chairperson from among its members.
81635. The board shall provide for the time and place of holding its
regular meetings. All meetings of the board shall be called arid held in
accordance with the Ralph M. Brown Act (Chapfer 9 (commencing with
Section 54950) of Part 1 of Division 2 of Title 5 of the Government
Code).
81636. Each voting director has one vote on any ordinance,
resolution, or motion before the board. Except as provided in Section
81653, the aft’re’native vote of a majority of all voting members of the
board is necessary and sufficient to carry any motion, resolution, or
ordinance.
81637. (a) On all ordinances and resolutions, the roll shall be called
and ayes and noes recorded in the minutes of the proceedings of the
board.
(’b) Motions may be adopted by voice vote, except that the roll shall
be called at the request of any director.
9!
Ch. 849
Article 2. Officers and Employees
81640. The board shall appoint a general manager, a financial
officer, and a secretary. The board may establish other offices that may
be necessary or convenient. The board shall appoint, and prescribe the
duties, compensafionz and terms and conditions of employment of, all
officers.
81641. The board may employ other employees that the board
determines axe necessary or convenient and may delegate to the general
manager the authority to employ or contract for the services of additional
assistants or employees that the general manager determines to be
necessary or convenient to operate the authority.
81642. The board may require, and establish the mount of, official
bonds of officers and employees that are necessary for the protection of
the funds and property of the authority.
81643. (a) Article 4 (commencing with Section 1090) of Chapter
1 of Division 4 of Tire 1 of the Government Code applies to all officers
and employees of the authority, except that a director may vote ona
contract between the authority and the public entity that appointed him
or her to the authority’s board. Notwithstanding the membership on the
board of the members appointed pursuant to subdivision (c) of Section
81629, a contract between the authority and the California Water Service
Company or between the authority and Stanford University does not
violate Section 1090 of the Government Code, nor is that contract void
or voidable under Section 1092 of the Government Code.
(b) The authority is a "local government agency" for purposes of the
Political Reform Act of 1974 (’title 9 (commencing with Section 81000)
of the Government Code).
Article Powers
81645. The authority may exercise the powers that are expressly
granted by this division, together with other powers that are reasonably
implied from those expressed powers, and powers necessary and proper
to carry out this division.
81646. (a) The authority may make contracts of any nature,
including, but not limited to, contracts to employ labor, to indemnify and
hold harmless, and to do al! acts necessary or convenient for the full
exercise of its powers.
Co) The authority may contract with any department or agency ofthe
United States or the state, or with any public or private entity, or person.
91
CIr. 849
81647. The authority may take by grant, purchase, bequest, devise,
or lease and may hold, enjoy, lease, sell, or otherwise dispose of real and
personal property of any kind, within or outside the boundaries of the
authority.
81648. The authority may apply for and receive state and federal
grant~, loans, and other financial assistance.
81649. Nothing in this division changes the governance, control, or
ownership of the regional water ’system.
Article 2. Financial Matters
81650. The board shall adopt a budget for each fiscal year.
8165 h The accounts of the authority shall be audited annually in
accordance with generally accepted auditing standards by independent
certified public accountants with experience in auditing the accounts of
local public entities.
81652. The authority may borrow money, incur indebtedness, and
issue notes and bonds as provided in this division, or as otherwise
authorized by law.
81653. (a) The authority may issue revenue bonds upon the
adoption of an ordinance by a two-thirds vote of all of the voting
members of the board, after notice and public hearing. For the purposes
of issuing bonds pursuant to this subdivision, the authority need not
conduct an election or otherwise secure the approval of the voters within
the boundaries of the authority.
(b) The authority shall publish a notice in a newspaper of general
circulation at least 15 days before the date of the meeting at which the
issuance of revenue bonds is to be considered and shah provide an
opportunity for public comments during that meeting and before the
directors vote on the issuance of those bonds.
(c) The authority may not issue any revenue bonds after December
31, 2020.
8 t 654. The authority may issue bonds for the purpose of refanding
any revenue bonds of the authority., whether due or not due.
81655. The authority may issue negotiable promissory notes to
acquire funds for any authority propose. The notes shall have a term not
to exceed five years. The total amount of notes issued pursuant to this
section that may be outstanding at any one time may not exceed one
million dolIars ($1,000,000).
81656. Bonds and other evidences of indebtedness issued by the
authority are legal investments for all trust funds and for funds of all
insurers, commercial and savings banks, trust companies, and state
schools. Funds that may be invested in bonds of cities, cities and
91
-- 9--Ch. 849
counties, counties, school districts, or other loc~ entities may also be
invested in bonds and other evidences of indebtedaess of the authority.
81658. (a) The proceeds of revenue bonds issued by the authority
in accordance with this division may be used only on projects designed
and intended in substantial part to improve the reliability of the regional
water system, including, but not limited to, strengthening the system’s
abili~ to withstand seismic events.
(b) The proceeds shall be made availablefor the purposes set forth in
subdivision (a) upon terms and conditions that the board determines
necessary and appropriate. The terms and conditions shall include, but
are not limited to, San Francisco’s entering into one or more legally
binding contracts with the authority that, at a minimum, do all of the
following:
(1) Identify specific projects and proposed completion dates, subject
to reasonable delays, for which the proceeds are to be used.
(2) G-rant to the authority the authority to oversee and audit the
disposition of proceeds to third party consultants, suppliers, and
contractors.
(3) Grant to the authority the authority to determine the procedure by
which contracts are awarded to consultants, suppliers, and contractors,
consistent with the requirements of San Francisco’s charter and
ordinances.
(4) Grant to the authority the authority to inspect the construction of
projects on which bond proceeds are expended.
(5) Require San Francisco to provide complete, accurate, and timely
information to the authority on the expenditure of the bond proceeds.
(6) (A) (i) Require San Francisco, on behalf of the authority, to
impose a surcharge on Stamford University, the California Water Service
Company, and each of the public entities identified in Section 81608.5,
other than San Francisco, in an amount that will generate stdticient
revenue to pay the debt service on bonds issued by the authority and the
operating expenses of the authority.
(i.i) The surcharge shah be calculated armually by the authority as a
uniform percentage of each entity’s water bill.
(B) Require San Francisco to iml~ose the surcharge described in
ctause (i) of subparagraph (A) on ~its retail water customers upon the
occurrence of either of the fo!lowing events:
(i) The voters of San Francisco approve a ballot measure authorizing
retail water rates to be increased to pay for the retail water customer’s
share of the debt service on bonds issued by the atithority and the
operating expenses of the authority.
9t
Ch. 849 -,- 10 --
(ii) The restrictions hn water rate increases set forth in ’~Proposition
H~" adopted by the voters of San Francisco on June 2, 1998, are not in
effect.
(7) RequireSan Francisco to transmit the proceeds of the surcharge
collected by San Francisco to the authority in the manner determined by
the a~thority.
(8) Provide that, for the purposes of the master water sales contract,
the revenue generated by the surcharge imposed pursuant to paragraph
(6) does not constitute revenue of the re~onal water system or revenue
as defined in San Francisco’s indenture of mast relating to its revenue
bonds.
(9) Provide that the facilities constructed with the proceedsof bonds
issued by the authority shah not be included in the wholesale system rate
base.
(10) Provide for the continuation of the surcharge imposed pursuant
to paragaph (6) after the expiration of the master water sales contract in
2009.
(11) Provide that the ownership and operational control of
improvements to the regional water system that are financed in any part
by the authority shall remain with San l~rancisco, unless San Francisco
a~ees to a change in that ownership or operational control.
(c) San Francisco may require the authority to reimburse San
Francisco for the direct and reasonable costs San Francisco actually
incurs in implementing the requirements of para~aphs (6) and (7) of
subdivision (b).
(d) The authority may not take any action that results in an affu-mative
or defacto pledge of an5’ facilities of, or improvements to, the regional
water system. The authority may not take any action that results in a
pledge of revenue collected by San Francisco, other than revenue.
generated by the imposition of the surcharge described in paragraph (6)
of subdivision (b).
Article 3. Controversies
81660. The authority may sue and be sued in all actions and
proceedings and in all courts and tribunals of competent jurisdiction.
81661. All claims for money 6r damages against the authority are
governed by Part 3 (commencing with Section 900) and Part 4
(commencing with Section 940) of Division 3.6 of Title 1 of the
Government Code.
81662. An action to determine the validity of any contract, bond;
note, or other evidence of indebtedness may be brought pursuant to
91
-- 11--Ch. 849
Chapter 9 (commencing with Section 860) of Title i0 of Part 2 of the
Code of Civil Procedure.
CHAPTER 5. h4!SCELLANEOUS
81670. Membership of any public entity in the authority does not
affect the identity or legal existence, nor impair the powers, of that public
entity.
81671. San Francisco shall provide the authority with prompt
access to any public records requested .by the authority unless those
records are exempt from disclosure pursuant to Section 6254 of the
Government Code. San Francisco may not withhold public records fi-om
the authority pursuant to a balancing of the public interest in accordance
with Section 6255 of the Government Code.
8 ! 671.5. If the proceeds of bonds issued by the authority are made
available for use on projects described in subdivision (a) of Section
81658, with the agreement and consent of San Francisco as required by
subdivision Ca) of Section 81658, San Francisco may not, for as long as
those bonds are outstanding, sell, lease, or othenvise transfer title to, or
control over, any facility used for the storage, transmission, or ~reatment
of water to any private person or corporation_
81671.6. This division does not modify the provisions of the master
water sales contract.
81671.7. The authority shall dissolve upon the repayment of all
revenue bonds issued pursuant to this division and the satisfaction of all
other debts and obligations of the authority.
81672. This division shall be liberally construed to carry out its
purposes.
81673. San Francisco shall become a voting member of the
authority if the surcharge is imposed on San Francisco’s retail water
customers in accordance with subpara~aph 03) of paragraph (6) of
subdivision (b) of Section 81658.
81674. (a) San Francisco shall submit a report.to the Joint
Legislative Audit Committee on or before September. i of each year
describing the progress made on projects financed by the authority and
on the implementation of the capital improvement program for the
regional water system.
(b) With regard to the projects fmanced by the authority, San
Francisco shall include in the report, to the degree feasible, all of the
following information:
(1) The expenditure of the bond proceeds.
(2) The expenditure on each project relative to budget and schedule.
91
Ch. 849 12
(3) A description of the physical portion of each project completed
compared to schedule.
(4) Significant revisions to a budget or schedule, including the reason
for the change and the plan or effort taken to complete the project in
accordance with the original budget and schedule.
(5) A description of potential service impacts of schedul~ delays and
measures plarmed or being taken to reduce the risks of long-term service
interruptions.
(6) The plan for work remaining, including projected schedule and
cost for each project completion relative to original budget and schedule.
(c) With regard to the implementation of the regional water system’s
capital improvement program, San Francisco shall include in the report
all of the following information:
(1) The status of current projects, without regard to the source of
financing.
(2) Modifications to the capital improvement program relative to the
capital improvement program adopted by the San.Francisco Public
Utilities Commission in May 2002, noting the significance of any
change in schedule and project completion dates that decrease or
increase the risk of long-term service interruptions to the customers of
the regional water system.
(3) A description of measures planned or taken to reduce risk if a
project is delayed.
SEC. 2. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given effect
without the invalid provision or application.
SEC. 3. The Legislature finds and declares that the act adding this
section, which is applicable only to the San Francisco Bay Area
Regional Water System Financing Authority, is necessary because of the
unique and special water supply problems prevailing in the geographic
area that may be included in the bomadaries of the authority. It is,
therefore, hereby declared that a general law within the meaning of
Section 16 of Article IV of the California Constitution cannot be made
applicable to the authority and the enactment of this special law is
necessary for the conservation, development, control, and use of water
supplied to that geographic area ftr the punic good.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because a local
agency or school district has the authority to few service charges, fees,
or assessments sufficient to pay for the program or level of service
91
-- 13--C1~. 849
mandated by this act, within the meaning of Section .7556 of the
Government Code.
9!
Assembly Bill No. 1823
CHAPTER 841
An act to add and repeal Division 20.5 (cormnencing with Section
73500) of the Water Code, relating to regional water systems.
[Approved by Governor September 24, 2002. Filed
with Secretary. of State September 24, 2002.]
LEGISLATI\"E COL.rNSEL’S DIGEST
AB 18~..~, Papan. Regional water systems.
(1) Under existing law, the City and County of San Francisco (city)
operates the Hetch Hetchy Project as a regional water delivery system
(bay area regional water system), supplying water to persons and entities
in (he city and the Counties of Alameda, San Mateo, and Santa Clara.
This bill would enact the Wholesale Regional Water System Security.
and Reliability Act, which would impose various requirements on
wholesale regional water systems, as defined, thereby imposing a
state-mandated program. The bill would require the city., by February. 1,
2003, to adopt a capital improvement program. The bill would require
the city. in consultation with other entities, to adopt an emergency
response plan by September 1, 2003. The bill would require a regional
wholesale water supplier, as defined, to distribute available water during
any interruption to all customers on an equitable basis, to the extent
feasible. The bill would require the city to continue its practice of
operating reservoirs in the Counties of Tuolunme and Stanislaus in a
mariner that ensures that the generation of hydroelectric power will not
cause any reasonably anticipated adverse impact on water service. The
bill would require the city to assign higher priority to water delivery to
the bay area than to electric power generation, unless the Secretary of the
Interior notifies the city of a violation of federal law.
The bill would require the State Department of Health Services to
conduct an audit relating to the bay area regional water system and an
audit of other regional water systems. If the city and the bay area
wholesale customers that are public ag.encies form a special distt-ict with
authority to own, operate, and manage the bay area regional water
system, the bill would impose the requirements of the act on that district
instead of the city. The bill would require the State Depm--m’~ent of Health
Services to ensure that the bay area regional water system is operated in
compliance with the California Safe Drinldng Water Act and certain
federal guidelines.
9O
Ch. 841 -- 2 --
The bill would reqube the city to prepare various reports in connection
with its operation of the bay area regional water system. The new
requirements established by the bill for the city would impose a
state-mandated loca! program. The bill would require a regional
wholesale water supplier to reimburse the State Department of Health
Services and the Seismic Safety Cormnission for costs incun’ed in
connection with implementing the requirements imposed by the act. The
bill would require the bay area wholesale customers to reimburse the city
for their share of costs. The bill would require wholesale customers of
other regional wholesale ~vater suppliers to be responsible for
reimbursing the regional wholesale water supplier for the proportional
share of costs through the imposition of water charges.
The bill would make these provisions inoperative on the earlier of two
specified dates and would repeal these provisions on January 1
immediately following that earlier date.
(2) The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
StamtoO, provisions establish procedures for ma’~ng that
reimbursement.
This bill would provide that no reimbursement is required by this act
for a specified reason.
The people ojthe State of California do e~mct as fo!lows:
SECTION 1. The Legislature hereby finds and declares as follows:
(a) The City and County of San Francisco has acquired or constructed
a system of reservoirs, pipelines and tunnels, and treatment plants that
provides water to 2.4 million Californians who live in San Francisco and
in neighboring communities in the Counties of Alameda, San Mateo,
and Santa Clara.
(b) Over two-thirds of the Californians who rely on San Francisco’s
regiona! water system, approximately 1.6 mitlion persons, live outside
San Francisco. A substantial majority of industrial, commercial,
institutional, and governmental users are also located outside San
Francisco.
(c) The reliability of this water infrastructure system is of vital
importance to the health, welfare, safety, and economy of the region that
it supplies.
(d) In ram, this region is of vital importance to the entire State of
California, because of the resident industries, universities, and
commercial enterprises that employ millions of Californians and
generate billions of dollars in exports and tax revenues to the state.
90
Ch. 841
(e) The reNonal water system is old, and designed to outdated seismic
safety standards. The system either crosses, is located on, or is adjacent
to, three major active earthquake faults, including the Calaveras fault,
the San Andreas fault and the Hayward fault. Engineering investigations
have disclosed that the system is at risk of catastrophic failure in a major
earthquake. Many areas in all four counties served by the system face
interruptions in their supplies of potable water for up to 30 days, m~d
some areas could be without water for as long as 60 days.
(f) Interruptions in water supply of this magnitude and duration to a
densely populated metropolitan region would be disastrous for public
health and safety and for the regional and state economy. In addition,
uncontrolled releases of water from pipelines, tunnels, and reservoirs
could create severe flood damage and environmental harm to fish and
wildlife habitat in the communities in which water facilities are located.
(g) Californians in neighboring counties, including those
Californians outside the immediate service area of the regional water
system, will benefit from the implementation of the act adding this
s~ctionl Access to a reliable supply of water is an in~portant component
of the infrastructure necessary to a prosperous metropolitan economy.
(h) The state has concerns for the health, safety, and the economic
strength of the region that warrant requiring San Francisco to take
prudent steps to upgrade the regional water system in a timely manner.
SEC. 2. Division 20.5 (commencing with Section 73500) is added
to the Water Code, to read:
DIVISION 20.5. WHOLESALE REGIONAL WATER SYSTEM
SECURITY AND P,,_ELIABILITY ACT
73500. This division shall be known as and may be cited as the
Wholesale Regional Water System Security and Reliability Act.
73501. (a) Unless the context otherwise requires, the definitions set
forth in this section govern the construction of this division.
(b) "Association’’ means the San Francisco Bay Area Water Users
Association.
(c) "Bay area regional water system" means the facilities for the
storage, treatment, and transmission of water located in the Counties of
Tuolunme, Stanislaus, San Joaquin, Alameda, Santa Clara, mad San
Mateo, together with three termina! reservoirs in the city.
(d) "Bay area wholesale customers" means the 26 public agencies in
the Counties of San Mateo, Alameda, and Santa Clara that purchase
water from the city pursuant to the master water sales contract, including
the Alameda County Water District, the City of Brisbane, the City of
Burlinganae, the Coastside County Water District, the City ofDaly Cit.w,
9O
Ch. 841
the City of East Palo Alto, the Estero Mm~icipal Improvement District,
Guadalupe Valley Municipal Improvement District, City of Hayward,
the Town of Hillsborough, the Los Trancos County Water District, the
City of Menlo Park, the Mid-Peninsula Water District, the City of
Miltbrael the City of Milpitas, the City of Mountain View, the North
Coast Cotmty Water District, the City of Palo Alto, the Purissima Hills
Water District, the City of Redwood City, the City of San Bruno, the City
of San Jose, the City of Santa Clara, the Skyline County Water District,
the City of Sunnyvale, and the Westborough Water District, Stanford
University, the California Water Service Company, and the Cordilleras
Mutual Water Association.
(e) "City" means the City and County of San Francisco.
(f) "Master water sales contract", means the a~eement entitled
"’Settlement Agreement and Master Water Sales Contract bet~veen the
City and County of San Francisco and Certain Suburban Purchasers"
entered into in 1984 by the city and the wholesale customers.
(g) ~Regional water system" means facilities for the storage,
treatment, and transmission of water owhed and operated by a regional
wholesale water supplier, other than the city.
(h) "~Regional wholesale water supplier" means any city, county, or
city and COtLnty, including the city’, that operates a regional water system,
and furnishes water on a wholesale basis to local government agencies
and public ntilities that, in turn, supply water to a combined population
of 1.5 million or more residents of geographic areas outside the
boundary of the regional wholesale water supplier.
(i) ~Wholesale customers" means local government agencies and
public utilities, including, but not lin~_ited to, the bay area wholesale
customers, thht purchase water from a regional wholesale water supplier
and distribute that water to retail customers in their respective service
areas.
¯ 73502. (a) The city, on or before February 1, 2003, shall adopt the
program of capital improvement projects designed to restore and
improve the bay area regional water system that are described in the
capital improvement program report prepared by the San Francisco
Public Utilities Commission dated February" 25, 2002. A’ copy of the
program shal! be submitted, on or before March 1, 2003, to the State
Department of Health Sen, ices. The progam shall include a schedule for
the completion of design and award of contract, and commencement and
completion of construction of each described project. The schedule shall
require that projects representing 50 percent of the total program cost be
completed on or before 2010 and that projects representing 100 percent
of the total program cost be completed on or before 2015. The program
shall also contain a financing plan. The city. shall review and update the
9O
-- 5--Ch. 841
pro~am, as necessary, based on changes in the schedule set forth in the
plan adopted pursuant to subdivision (d).
(b) The plan shall require completion of the following projects:
Project Location Project
Identification
Number
1. Irvington Tunnel Alternative Alameda/Santa 9970
Clara Counties
2. Cwstal Springs Pump Station San Marco Count5 201671
& Pipeline
3. BDPL I & 2-Repai~ of Alameda/San 99
Caissons/Pipe Bridge Mateo Counties
4. BDPL Pipeline Up~ades at Alameda County.!28
Hayward Fault
5. Calaveras Fault Crossing Alameda CounD,9897
Upgrade
6. Cry. stal Springs Bypass San Mateo Count5,9891
Pipeline
7. BDPL Cross Connections 3 &Alameda/Santa 202339
4 Clara Counties
8. Conveyance Capacity West of Alameda/Santa 201441
Ir~,ington Tunnel Clara/San Mateo
Counties
Alameda County.9. Calaveras Dam Seismic
Improvements
202135
(c) The city shall submit a report to the Joint Legislative Audit
Corranittee, the Seismic Safety Commission, and the State Department
of Health Services, on or before September 1 of each year, describing the
progress made on the implementation of the capital improvement
program for the bay area re~onal water system dm-ing the previous fiscal
year.
(d) (1) The city may determine that completion dates for projects
contained in the capital improvement program adopted pursuant to
subdivision (a), including those projects described in subdivision (b),
should be delayed or that different projects should be constructed.
(2) The city shall provide written notice, not less than 30 days prior
to the date of a meeting of the ciU agency responsible for management
of the bay area regional water system, that a change in the program is to
9O
Ch. 841 6
be considered. The notice shall include informatioh about the reason for
the proposed change and the availability, of materials related to the
proposed change. All bay area wholesale customers shall be permit-ted
to testify or otherwise submit conv-nents at the meeting.
(3) If the city adopts a change in the program that deletes one or more
projects from the pro~am, or postpones the scheduled completion dates,
the city shall promptly furnish a copy of that change and the reasons for
that change to the State Department of Health Services and the Seismic
Safety Commission. The State Department of Health Services and the
Seismic Safety, Commission shall each submit written comments with
regard to the significance of that change with respect to public health and
safety to the city and the Joint Legislative Audit Committee not later
than 90 days after the date on which those entities received notice of that
change.
73503. (a) The city, in consultation with the association and the
offices of emergency services in Alameda County, Santa Clara County,
and San Mateo County, shall prepare an emergency response plan
describing how water service will be restored to the area served by the
bay area regional water system after an interruption caused by
earthquake or other natural or manmade catastrophe. A draft of the plan
shall be submitted to the Office of Emergency Sere’ices on or before July
I, 2003, for comment and shall be adopted by the city on or before
September t, 2003, and thereafter shal! be implemented.
(b) During any interruption in supply caused by ea_rthquake, or other
natural or manmade catastrophe, a regional wholesale water supplier
shall distribute water to customers on an equitable basis, to the extent
feasible given physical damage to the regional water system, without
preference or discrimination based on a customer’s geographic location
within or outside the boundary of the regional wholesale water supplier.
73504. (a) Commencing in 2003, a regional wholesale water
supplier shall submit a report to the Legislatme and the State Department
of Health Serxdces, on or before February 1 of each year, describing the
progress made during the previous calendar year on securing
supplemental sources of water to augment existing supplies during dry
years.
(b) In order to supply adequately, dcpendably, and safely the
requirements of all users of water, the city shall continue its practice of
operating the reservoirs in the Counties of Tuolumne and Stanislaus in
a manner that ensures that the generation of hydroelectric power will not
cause any reasonably anticipated adverse impact on water service. The
city shall assign higher priority to deliverF., of water to the bay area than
to the generation of electric power, unless the Secretary of the Interior,
in writing, notifies the city that doing so ~ould violate the Raker Act (63
9O
Ch. 841
P.L. 41). The city shall make available to the public, on request, its plans
of operations (rule curves) for these reservoirs.
(c) The city shall be deemed to be a local public agency for the
purposes of Article 4 (commencing with Section 1810) of Chapter 11 of
Part 2 of Division 2.
73505. The State Department of Health Services shall conduct an
audit, or arrange for an audit to be perfomaed by contract, of the city’s
program of maintenance of the bay area regional water system prior to
July 1, 2004. The audit shall include both of the following:
(a) A review of the adequacy of the city’s procedures and resources
for all of the following:
(1) Identifying needed maintenance.
(2) Planning, budgeting, scheduling, and completing maintenance.
(3) Recordkeeping of maintenance activities.
(b) A field investigation of the maj or facilities of the bay area regional
water system to determine the general condition of those facilities and
the adequacy of existing maintenance effo~s.
(c) The State Department of Health Ser~,ices shall submit a report to
the city, the Joint Legislative Audit Committee, and the Seismic Safety
Commission on its findings and recommendations based on the audit on
or before January 1, 2005.
73506. The State Department of Health Ser~,ices shall conduct an
audit of the regional water systems operated by all regional wholesale
water suppliers, other than the city, subject to this division and shall
submit to the Legislature a report thereon on or before February 1,2006.
73508. If the city and the bay area wholesale customers that are
public agencies form 9 special district with authority and responsibility
to own, operate, and manage the bay area regional water system and
whose governing board’s composition reflects the proportionate use of
water delivered by the bay area regional water system within the city and
within the aggregate geographic area served by the bay area wholesale
customers, the obligations imposed on the city by this division shall be
applicable to that district. The city shall be relieved of all obligations
under this division at the time the ownership and control of the bay area
regional water system are transferred to that district.
73510. Notwithstanding Section 116500 of the Health and Safety
Code, the State Department of Health Services shall ensure that the bay
area regional water system is operated in compliance with the California
Safe D~tking Water Act (Chapter 4 (commencing with Section 116275)
of Part !2 of Division 104 of the Health and Safety Code) and the
guidelines established by the United States Environ_mental Protection
Agency for the purposes of administering the comparable provisions of
the federal Safe Drinking Water Act (42 U.S.C. Sec. 300f et seq.).
9O
Ch. 841 -- 8--
73511. A special district composed of some or all of the bay area
wholesale customers may receive state funds for the purpose of
protecting the bay area regional water system against seismic risk,
without regard to whether the city is a member of that district.
73512. A regional wholesale water supplier shall reimburse the state
for all costs incurred by the State Department of Health Services or the
Seismic Safety Conmaission in carrying out the duties imposed by this
division. The bay area wholesale customers shall reimburse the city for
their share of those costs as provided in the master water sales contract.
The wholesale customers of regional wholesale water suppliers other
than the city are responsible for reimbursing the regiona! wholesale
water supplier for their proportionate share of those costs, through the
imposition of water charges.
73513. Nothing in this division affects the rights and obligations of
the city, the Modesto Irrigation District, or the Turlock Irrigation
District, as between themselves, whether arising from statute or contract.
73513.5. Nothing in this division changes the governance, control,
or ownership of the bay area regional water system.
73514. This division shall become inoperative on the earlier of
either of the following dates, and on January 1 inm~ediately following
that earlier date, is repealed:
(a) The date on which the State Director of Health Services notifies,
in writing, the Chairperson of the Joint Legislative Audit Committee and
certifies that the city has awarded contracts for construction of each of
the projects described in subdivision (b) of Section 73502.
(b) December 3!, 2010.
SEC. 3. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given effect
without the invalid provision or application.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article X~II B of the California Constitution because a local
agency or school district has the authority to levy service charges, fees,
or assessments sufficient to pay for the program or level of service
mandated by this act, within the meaning of Section 17556 of the
Government Code.
9O
Assembly Bill No. 2058
CFLh_PTER 844
An act to add Division 31 (conzmencing with Section 81300) to the
Water Code, relating to water.
[Approved by Governor September 24, 2002. Filed
with Secretary of State September 24, 2002.]
LEGISLATIVE COUNSEL’S DIGEST
AB 2058, Papan. Bay Area Water Supply and Conservation
Agency.
(!) Under existing law, the City and County of San Francisco (San
Francisco) operates the Hetch Hetchy Project as a regional water
deliver), system, supplying water to persons and entities in San
Francisco and the Counties of Alameda, San Mateo, and Santa Clara.
This bill would enact the Bay Area Water Supply and Conservation
Agency Act. The bill would provide for the formation of the Bay Area
Water Supply and Conser~,ation Agency by 26 public entities that
p.urchase water from San Francisco. The bill would provide for the
adoption of resolutions by those public agencies as to whether to form
and join the agency. The bil! would require the Board of Supervisors of
San Mateo County to determine whether or not resolutions to form and
join the agency have been adopted by at least 15 of those public entities
representing collectively at least 60°/; of certain water deliveries. If so,
the bill would require the clerk of that board of supervisors to file a
certificate with the Secretary of State and would require the secretary to
issue a certificate of formation. The bill would thereafter authorize
certain public entities, including San Francisco, to become members of
the agency, subject to certain procedures.
The bill would require each member of the agency to appoint one
member to the board, and would require the Boards of Supervisors of
San Mateo County and Santa Clara County to each appoint one member,
to a 4-year term on the board. The bill would allow each director to
receive compensation prescribed by the board, and would provide for the
reimbursement of reasonable expenses incurred in the performance of
duties. The bill would grant each director one vote on any ordinance,
resolution, or motion, but would also provide for weighted voting.
The bill would authorize the agency to acquire water and water rights
within or outside the state; develop, store, and transport water; provide,
deliver, and sell water at wholesale for municipal, domestic, and
industrial purposes to certain entities; and acquire, construct, operate,
9I
Ch. 844 -- 2 --
and maintain wor "ks and facilities to carry out the agency’s purposes. The
bill would authorize the agency to provide, sell, or deliver surplus water
for beneficial uses. The bill would authorize the agency to exercise the
right of eminent domain, except that the bill would prohibit the agency
from acquiring by eminent domain, or exercising any control over, any
water distribution facility owned and operated by any city, city and
county, local public entity, or public utility without that entity’s consent.
The bill would authorize the agency to issue revenue bonds, pursuant
to certain procedures, to finance the construction, reconstruction, or
improvement of any works carried out by the agency. The bill would
authorize the agency, to impose reasonable rates, fees, and charges on
Stanford University, the California Water Service Company, its member
public entities, and certain other entities that are sufficient to generate
revenue to pay the principa! and interest on any bonds issued by the
agency.
The various requirements established by the bil! for local public
entities in connection with the formation and operation of the agency
would impose a state-mandated local program.
(2) The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this act
for a specified reason.
The people of the State ojCa!!fornia do enact as follows:
SECTION 1. Division 31 (commencing with Section 81300) is
added to the Water Code, to read:
DIVISION 31. BAY AREA WATER SUPPLY" AND
CON SER-~qh.TION AGENCY
CHAPTER 1. GENER.-LL PROVISIONS AND DEF12,AITIONS
Article 1. Genera! Provisions
81300. This division shall be known and may be cited as the Bay
Area Water Supply and C6nservation Agency Act.
81301. The Legislature finds and declares all of the following:
(a) Many separate cities, districts, and public utilities are responsible
for distribution of water in portions of the Bay Area served by the
regional system operated by the City and County of San Francisco.
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Residents in the Counties of Alameda, San Mateo, and Santa Clara who
depend on the water made available on a wholesale basis by the regional
system have no right to vote in elections in the City and County of San
Francisco and are not represented on the San Francisco commission that
oversees operation of the regional system.
(b) The San Francisco regional system is vnlnerable to catastrophic
damage in a severe earthquake, ~vhich could result in San Francisco and
neighboring conmaurfities being ~vithout potable water for up to 60 days.
The San Francisco regional system is also susceptible to severe water
shortages during periods of below average precipitation because of
insufficient storage and the absence of contractual anangements for
alternative dr?’ year supplies.
(c) The lack of a local, intergovernmental, cooperative governance
structure for the San Francisco regional system prevents a systematic,
rational, cost-effective program of water supply, water conservation and
recycling from being developed, funded, and implemented.
(d) It is the intent of the Legislature to enable local governments
responsible fo, water distribution in the three counties to establish a
multicounty agency authorized to plan for and acquire supplemental
water supplies, to encourage water conservation and use of recycled
water on a regional basis, and to assist in the financing of essential
repairs and improvements to the San Francisco regional water system,
including seismic strengthening.
(e) The need for coordinated plauning and implementation of
strategies for water supply, water conservation, water recycling, and
repair and improvement of the San Francisco regional system may
appropriately lead to the establishment of the Bay Area Vv’ater Planning
and Conservation Agency.
Article 2. Definitions
81302. Unless the context otherwise requires, the definitions in this
article govern the construction of this division.
81303. ~Agency" means the Bay Area Water Supply and
Conservation Agency.
81304. ~Board" means the board of directors of the agency.
8!.305. ~Eligible public entities" means the 26 public entities in
San Mateo County, Alameda County, and Santa Clara County that
purchase water from San Francisco pursuant to the Master Water Sales
Contract, that include Alameda County Water District, City of Brisbane,
City of Burtingame, Coastside County Water District, City of Daly City,
City of East Palo Alto, Estero Municipal Improvement District,
Guadalupe "valley Municipal Improvement District, City of Hayward,
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Ch. 844 4
Town of Hillsborough, Los Trancos County Water District, City of
Menlo Park, Mid-Peninsula ~Vater District, City of Millbrae, City of
Milpitas, City of Mountain View, North Coast-County Water District,
City of Palo Alto, Purissima Hills Water District, City of Redwood City,
City of San Bruno, City of San Jose, City of Santa Clara, Skyline County
~Vater District, City of Suunyvate, and Westborough Water District.
81306. "Project" means a work and all of the activities related to,
or necessav for, the acquisition, construction, operation and
maintenance of a work, including, but not limited to, planning, design,
financing, contracting, project management, and administration.
81307. °°Regional water system" means facilities for the storage,
treatment, and transmission of water operated by San Francisco located
in the Counties ofTnolumne, Stanislaus, San Joaquin, Alameda, Santa
Clara, San Marco, and three terminal reservoirs in San Francisco.
81307.5."San Francisco" means the City and County of San
Francisco.
81308. ~Work" or ~works~’ include, but is not limited to,
reservoirs~ water treatment plants, facilities for the transmission of
water, water conservation measures and programs, facilities for the
conjunctive use of surface water and groundwater, and facilities for the
transmission of recycled water.
81309. ~Zone" means an improvement district, assessment district,
or area benefiting from a project.
CHAPTER 2.FOKMATION OF AGENCY
.Article 1.Resolution of Intention
81315. (a) The governing body of a public entity identified in
Section 8 ! 305, by a majority vote of a!l of its members, may declare the
intention of that entity to form the agency with all of the other public
entities identified in that section.
(b) The resolution sha!l meet all of the following requirements:
(1) Identif.v the name of the public entity adopting the resolution.
(2) Identify the name of each public entity proposed to be a member
of the agency, which shall include all public entities identified in Section
81305.
(3) Fix the time and place within the boundaries of the public entity
adopting the resolution at which a hearing wilt be held by its governing
body to determine whether to forn~ the agency and whether to become
a member of the agency. The date of the hearing may not be less than 30
days, nor more than 60 days, from the date of the adoption of the
resolution.
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Ch. 844
(4) Direct publication of the resolution one time in a newspaper of
general circulation within the boundaries of the public entity, adopting
the resolution at least two wee’ks prior to the date set foi: the hearing.
81316. The governing board of the public entity adopting the
resolution pursuant to Section 81315, not later than 10 days after the date
of the adoption of the resolution, shall mail a certified copy of the
resolution to the governing body of each public entity identified in the
resolution as a proposed member of the agency. The governing body of
each proposed member, not later than 60 days after the date of the
adoption of the resolution described in Section 81315, shall adopt a
resolution fixing the time and place within the boundaries of that public
entity at which a hearing will be held to determine whether to form the
agency and whether to become a member. The date of the hearing shall
be not less than 30 days, nor more than 60 days, from the date of the
adoption of the resolution by that public entity. The resolution shall be
published one time in a newspaper of general circulation within the
botmda~-ies of that public entity at least two weeks prior to the date set
for the public hearing.
Article 2. Formation Hearings
81317. At the times and places specified in the resolutions adopted
pursuant to Section 81315 or 81316, the governing body of each public
entity shall hold a public hearing on the question of whether to form, and
become a member of, the agency.
8t318. As soon as practicable after the completion of the public
hearing described in Section 81317, and in any event not later than 60
days thereafter, the governing body of each public entity shall adopt a
resolution that declares the finding of the governing body as to whether
to form and become a member of the agency. The adoption of the
resolution, whether affwmative or negative, is Subject to referendum
pursuant to Division 9 (commencing with Section 9000) of the Elections
Code, but shall not be a "project~’ for the purposes of the California
Environmental Quality Act (Division 13 (commencing with Section
21000) of the Public Resources Code).
81319. Not later than 10 days after the date of the adoption of the
resolution required by Section 81318, the governing body of each public
entity shall cause a certified copy of the resolution to be forwarded to the
Board of Supervisors of San Mateo County.
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Ch. 844 6
Artict4 3. Establishment of Agency
81325. Not later than 60 days from the date of the receipt of the
resolutions pursuant to Section 81319, the Board of Supervisors of San
Mateo County shall determine whether or not resolutions to form and
join the agency have been adopted by at least 15 public entities
representing collectively at least 60 percent of the total water deliveries
of all the public entities identified in Section 81305. In m ~aking that
determination, the board of supervisors shall use the water delivery
quantities set forth in subdivision (b) of Section 81460. If 15 or more
public entities representing collectively 60 percent or more of those
water deliveries have adopted those resolutions, the board of
supervisors, by order entered in its minutes, shall declare that the agency
has been formed and list each public entity that is a member of the
agency.
81325.5. In making the determination required by Section 81325,
the board of supervisors shall include all resolutions received by the
county at least 10 days before the date of the public meeting at which the
determination is made.
81325.7. If the board of supervisors determines that the resolutions
snbmitted are insufficient to form the agency, the eligible public entities
may again undertake the process described in Sections 81315 to 81319,
inclusive, at any time. In addition, resolutions adopted that approve
formation of the agency may remain in effect for the time specified in
those resolutions, unless those resolutions are otherwise repealed.
81326. The Clerk of the Board of Supervisors of San Mateo County,
not later than 10 days from the date of entry of an order described in
Section 81325, shall file a certificate with the Secretary of State
identifying the name of the agency and the names of each public entity
that is a member of the agency. The board of supervisors shall include
a map showing the boundaries of the agency, with reference to the
boundaries of each member public entity.
81327. The Secretary of State, not later than 10 days from the date
of the receipt of the certificate described in Section 81326, shall issue a
certificate of formation reciting that the agency has been formed
pursuant to this division and identifying the public entities of which the
agency is comprised. The Secretary of State shall transmit a copy of the
certificate to each public entity that is a member of the agency.
81328. The formation of the agency shall be effective on the date of
the issuance of the Secretary of State’s certificate.
81329. No invalidity or irregularity in any proceeding that does not
substantially and adversely affect the interests of any public entity
91
Ch. 844
identified in Section 81305 may be held to invalidate the formation of
the agency.
81330. .Any action or proceeding in which the validity of the
formation of the agency, or any of the proceedings in relation thereto, is
contested, questioned, or challenged shall be commenced not later than
60 days from the date of the Secretacy of State’s certificate of formation.
In the absence of that action or proceeding, the formation and legal
existence of the agency, and all proceedings in relation thereto, shall be
held to be in every respect valid, legal, and incontestable.
81331. The formation of the agency, proceedings to increase its
membership pursuant to Section 81456 or 81456.5, or the estat~lishment
or modification of any zone or inaprovement district is not subject to the
Cortese-Knox-Hertzberg Local Government Reorganization Act of
2000 (Division 3 (commencing with Section 56000) of Title 5 of the
Government Code).
CHAPTER 3.GOVERNMENT OF AGENCY
Article 1. Board of Directors
81335. The agency shall be governed by a board of directors.
81336. (a) The governing body of each member public entity shall
appoint one member to the board of the agency. Each director shall be
a registered voter and reside within the bo~mdacies of the member public
entity whose governing board appoints him or her.
(b) For the purposes of subdivision (a), the governing body may
appoint one of its own members to the board if that person otherwise
meets the requirements of that subdivision.
(c) (1) The Board of Supervisors of San Mateo County shall appoint
one member to the board who is an officer or employee of the California
Water Service Company.
(2) The Board of Supervisors of Santa Clara County shall appoint one
member to the board who is an of~cer or employee of Stanford
University.
(d) The initial appointments shall be made not later than 60 days after
the date of the issuance of the certificate of formation pursuant to Section
81327.
81336.5. (a) No incompatibility of office shall result from an
elected ot~cial setwing on the board of the agency and on the governing
board of a member public entity. A board member may vote on contracts
or other matters involving the member punic entity he or she represents.
(b) The agency may enter into a contract with California Water
Service Company only if both of the following requirements are met:
91
(1) The director appointed by the Board of Supervisors of San Mateo
County does not participate in a vote on the contract.
(2) The contract is approved by the affirmative vote of a majority of
a!] members of the board other than the director appointed by the Board
of Supervisors of San Mateo County.
(c) The agency may enter into a contract with Stanford University
only if both of the following requirements are met:
(1) The director appointed by the Board of Supervisors of Santa Clara
County does not participate in a vote on the contract.
(2) The contract is approved by the affirmative vote of a majority of
a!l members of the board other than the director appointed by the Board
of Supe~’isors of Santa Clara County.
(d) A contract approved pursuant to the requirements of this division
does not constitute a violation of Section 1090 or 1097 of the
Government Code, nor is it void or voidable pursuant to Section 1092
of the Government Code.
81337. Each director, before entering upon the duties of his or her
office, shall take the oath of office as provided for in the California
Constitution and taws of the state.
81338. (a) Each director shall serve a term of four years.
(b) Notwithstanding subdivision (a), the directors initially appointed
to the board shall determine, by lot, that one-half plus one of their
number shall serve for fern- years and the remaining directors shall serve
for two years. Thereafter, each appointing authority shall appoint a
person to replace its respective director or may reappoint its director for
an unlimited number of terms.
(.c) A vacancy on the board shall be filled by the respective appointing
authority not later than 90 days from the date of the occurrence of the
vacancy.
81339. Each director may receive compensation in an amount
prescribed by the board, not to exceed one hundred dollars ($100) per
clay for each day’s attendance a[ meetings of the board, not to exceed four
meetings in any calendar month. In addition, each director may be
reimbursed for actual, nccessaO, and reasonable expenses incurred in
the performance of duties performed at the request of the board. The
compensation of directors may be increased pursuant to Chapter 2
(commencing with Section 20200) of Division 10.
81400. A majority of the members of the board constitutes a quorum
for the transaction of business. The board shall act only by ordinance,
resolution, or motion.
81401. The board shall hold its first meeting as soon as possible
after the appointment of the initial directors. At its first meeting, and at
91
Ch. 844
its fLrst meeting in Janua12¢ each year thereafter, the board shall elect a
chairperson and a vice-chairperson from among its members.
81402. The board shall provide for the time m-~d place of holding its
regular meetings. All meetings of the board shall be called and held in
accordance with the Ralph M. Brown Act (Chapter 9 (commencing with
Section 54950) of Part 1 of Division 2 of Title 5 of the Government
Code).
81403. Subject to Section 81405, each director has one vote. The
afSrmative vote of a majority of the total membership of the board is
necessary and suf-ficient to carry any motion, resolution, or ordinance,
except when weighted voting is in effect pursuant to Section 81404 or
as otherwise provided by this division.
81404. Before the vote on.any motion, resolution, or ordinance is
taken, any director may call for weighted voting. Upon such a call,
Section 81405 shall apply as to that motion, resolution, or ordinance.
81405. (a) Weighted voting shall be based on the average deliveries
of water during the 2000-01 fiscal year, as set forth in Section 81460.
(b) When weighted voting is in effect, there shall be a total of 100
possible votes. The allocation of these votes among the directors shall
be determined as follows:
(!) The water deliveries to each member public entity, California
Water Service Company, and Stanford University, as set forth in Section
81460, shall be totaled.
(2) Each director representing a member public entity whose
individual ~vater delivery’ is less than 1.5 percent of the total amount
calculated pursuant to paragraph (1) shall be assigned one vote.
(3) The water deliveries to all member public entities assigned one
vote pursuant to paragraph (2) shall be totaled and that sum shall be
subtracted from the total amount calculated pursuant to paragraph (1).
(4) The ratio of individual water deliveries to each remaining member
public entity, California Water Service Company, and Stanford
University to the total water deliveries calculated pursuant to paragraph
(3) shall be determined and expressed as a fraction.
(5) The total number of votes assigned to directors pu~suant to
paragraph (2) shall be subtracted from 100.
(6) The mLmber resulting from the calculation described in paragraph
(5) shal! be multiplied by the fractions calculated pursuant to paragraph
(4), and the products of that multiplication shall be rounded to the nearest
whole number. Each director, other than those assigned one vote
pursuant to paragraph (2), shall be assigned the number of votes
resulting from this calculation.
(c) When weighted voting is in effect, the affirmative vote of directors
representing both (!) a majority of the members of the board present and
91
Ch. 844 --10--
voting, and (2) a majority of the number of votes, determined pursuant
to this section, represented by directors present and voting shall be
necessary to carry any motion, resoIution, or ordinance.
(d) Notwithstanding any other provision of this division, the board
may establish alternative procedures and methods for weighted voting,
including a lhnitation on the .types of measares to which it applies, by
a vote of (1) at least two-thirds of all the directors of the board, each
director having one vote on the question, and (2) at least 51 votes,
determined pursuant to this section.
81406. (a) On all ordinances and resolutions, and on all questions
to be decided by weighted voting, the roll shall be called and ayes and
noes recorded in the minutes of the proceedings of the board.
(b) Motions, other than motions to be decided by weighted voting,
may be adopted by voice vote, except that the roll shall be called at the
request of any director.
Article 2, Officers and Employees
81407. The bo£rd shall appoint a general manager, a financial
officer, and a secretary. The board may establish other offices that may
be necessary or convenient. The board shall appoint, and prescribe the
duties, compensation, and terms and conditions of employment of, all
officers.
81408. The board may employ other employees that the board
determines are necessary, or convenient and may delegate to the general
manager the authority to employ or contract for the services of additional
assistants or employees that the general manager determines necessary
or convenient to operate the agency. The board shall extend offers of
employment on terms comparable to those applicable to the employees
of the Bay Area Water Users Association on January 1, 2003, as
determined by the board.
81409. The board may require, and establish the amount of, official
bonds of officers and employees that are necessar), for the protection of
the funds and property of the agency.
81410. (a) Article 4 (commencing with Section t090) of Chapter
! of Division 4 of Title 1 of the GovmTnnent Code applies to all officers
and employees of the agency.
(b) The agency is a "local govermnent agency" for the purposes of
the Political Reform Act of 1974 (Title 9 (con~mencing with Section
81000) of the Government Code).
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CHAPTER 4.POWERS AND FUNCTIONS OF AGENCY
Article 1. Powers
81415. The agency may exercise the powers that are expressly
granted by this division, together with other powers that are reasonably
implied from those express powers, and powers necessary m~d proper to
carry out this division.
81416.The agency may adopt a sea! and alter it at pleasure.
814 ! 7.The agency may adopt regulations to carD, out this division.
81418.(a) The agency may make contracts of any nature,
including, but not limited to, contracts to employ labor, to indemnify and
hold harmless, and to do all acts necessacy or convenient for the fu!l
exercise of its powers.
(b) The agency may contract with any department or agency of the
United States, the state, a public or private entity, or person.
81419. The agency may take by grant, purchase, bequest, devise,
lease, or eminent domain, and may hold, enjoy, !ease, sell, or otherwise
dispose of real and personal property of any ~nd, within or outside the
boundaries of the agency.
81420. The agency may plan, finance, acquire, construct, maintain,
and operate facilities for the collection, transmission, treatment,
reclamation, reuse, and conservation of water. The agency may carD’ out
any project or work.
81421. The agency may disseminate information concerning its
activities.
81422. The agency may apply for and receive state and federal
grants, loans, and other financial assistance.
Article 2. Financial Matters
81425. The board shall adopt a budget for each fiscal year.
81426. The accounts of the agency shall be audited annually in
accordance with generally accepted auditing standards by independent
certified public accountants with experience in auditing the accounts of
local public entities.
81427. The agency may borrow money, incur indebtedness, and
issue notes and bonds, as provided in this division or as otherwise
authorized by law.
81428. (a) The agency may issue revenue bonds upon the adoption
of an ordinance by a two-thizds vote of all of the members of the board
present and voting which also represents at least 51 votes determined
pursuant to Section 81405. For the purposes of issuing bonds pursuant
9I
Ch. 844 -- 12--
to this subdivision, the agency need not conduct an election or otherwise
secure the approval of the voters within the boundaries of the agency.
(b) The agency shall publish a notice in a newspaper of general
circulation at least 15 days before the meeting at which issuance of
revenue bonds is to be considered and shall provide an oppo1~un_ity for
public cormnents duhng that meeting and before the dh’ectors vote on
the issuance of those bonds.
81429. The agency may issue bonds for the purpose of refunding
any revenue bonds of the agency, whether due or not due.
81430.. The agency may issue negotiable promissory notes to
acquire funds for any agency purpose. The notes shall have a term not
to exceed five years. The total amount of notes issued pm-suant to this
section that may be outstanding at any one time may not exceed one
million dollars ($1,000,000).
81431. The authority granted pursuant to the Improvement Act of
1911 (Division 7 (commencing with Section 5000) of the Streets and
High~),ays Code), the Municipal Improvement Act of 1913 (Division t2
(cormnencing with Section 10000) of the Streets and Highways Code),
the Improvement Bond Act of 1915 (Division 10 (commencing with
Section 8500) of the Streets and Highways Code), and the Mello-Roos
Commm~ity Facilities Act of 1982 (Chapter 2.5 (cormnencing with
Section 53311) of Part 1 of Division 2 of Title 5 of the Government
Code) may be exercised by the agency to carry out this division.
81432. Bonds and other evidences of indebtedness issued by the
agency are legal investments for all trust funds and for funds of all
insurers, commercial and savings banks, trust companies, and state
schools. Funds that may be invested in bonds of cities, cities and
counties, counties, school districts, or other local agencies may also be
invested in bonds and other evidences of indebtedness of the agency.
81433. The board may impose assessments sufficient to pay the
operating expenses included in the budget, which shali be an obligation
of each member public entity, the California Water Service Company,
and Stanford University. The assessments shall be based on, and
proportional to, water delivery amounts described in Section 81460.
81434. The agency may use proceeds of bonds authorized by this
division for the construction, reconstruction, or improvement of any
works carried out by the agency. The agency may also make proceeds of
bonds authorized by this division available to other local public agencies
on mutually satisfactory terms and conditions to assist in the
construction, reconstruction, or improvement of works designed and
intended in whole or in part to furnish water to the members of the
agency, whether those works are carried out jointly by the agency and
other local public agencies, or solely by those other public agencies.
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81435. The agency’ may impose reasonable rates, fees, and charges
on Stanford University, the California Water Service Company, and the
agency’s member punic entities for any program or service provided or
work performed by the agency. The agency may also impose reasonable
rates, fees, and charges on any other public or private entity that enters
into a contract with the agency for use of any program or service
provided or work performed by the agency. These rates, fees, and
charges shall be at least sufficient to generate revenue to pay the principal
and interest on any bonds issued by the agency to carry out the work. The
agency shall be solely responsible for servicing the debt on any bonds
it issues and the State of California has no responsibility for those bonds.
Article 3. Controversies
81440. The agency may sue and be sued in all actions and
proceedings and in all courts and tribunals of competent jurisdiction.
81441. All claims for money or damages against the agency are
governed by Part 3 (commenciag with Section 900) and Part 4
(commencing with Section 940) of Division 3.6 of Title 1 of the
Government Code.
81442. An action to determine the validity of any contract, or any
bond, note, or other evidence of indebtedness, may be brought pursuant
to Chapter 9 (commencing with Section 860) of Titte 10 of Part 2 of the
Code of Civil Procedure.
CHAPTER 5. "~VA’I’EI,~ SUPPLY
81445. The agency may do all of the following:
(a) Acquh-e water and water rights within or outside the state.
(b) Develop, store, and transport water.
(c) Provide, deliver, and sell water at wholesale for municipal,
domestic, and industrial purposes to any city, county, district, other local
public entity,, public utility,, or mutual water company located within the
boundaries of the agency,’, and to Stanford University.
(d) Acquire, construct, operate, and maintain any and all works,
facilities, improvements, and property within or outside the boundaries
of the agency necessary or convenient to carry out this division.
81446. The agency may conduct studies of the water supplies
available to its members, and their current and future demand for water.
The agency may develop plans for projects and pro~ams that can assist
its members to meet those future water needs.
81447. The agency may provide, deliver, and sell water not needed
for municipal, domestic, or industrial uses within the boundaries of the
91
Ch. 844 -- 14--
agency for beneficial purposes but shall Nve preference to users within
the agency. The supply of stuphis water shall in every case be subject to
the paramount right of the agency to discontinue that supply in_ who!e or
in part upon one year’s notice to the purchaser or user of that sin-plus
water.
81448. The agency may not seI1 water to any retail user within the
boundaries of the agency. Sales to Stalfford University shall not be
deemed sales to a retail user.
81449. Except as provided in Section 81452, the agency may
exercise the right of eminent domain in the manner provided by law to
acquire any property, within or outside the boundaries of the agency,
necessary or convenient to carry out this division.
81450. The agency is entitled to the benefit of any reservation or
grant, in all cases, where any right has been reserved or granted to the
state, or any agency or political subdivision thereof, or any public
corporation, to construct or maintain water-related facilities in, under, or
over any public or private lands. Nothing in this section authorizes the
agency to construct facilities on lands owned or controlled by San
Francisco without the consent of San Francisco.
81451. The agency may construct and operate works and facilities
in, under, over, across, or along any street or public highway or over any
of the lands which are the prope~-ty of the state to the same extent that
those rights and privileges are granted to cities within the state.
81452. The agency may not acquire by eminent domain, interfere
with, or exercise any control over, any water distribution facility owned
and operated by any city, city and county, local public entity, or public
utility without the consent of, and upon those terms that are mutually
agreed to by, that city, city and county, local public agency, or public
utility.
CHAPTER 6. CHANGES IN ORGANIZATION
81455. .Any territory annexed to, or detached from, a member public
entity, upon completion of the annexation or detachment, shall be
deemed annexed to, or detached from, the agency.
81456. (a) A public entity identified in Section 81305 that is not a
member at the time the agency is formed pursuant to Section 81328 may
thereafterjoin the agency, with the approval of the board of the agency
and subject to those terms and conditions that the board determines are
necessary to ensure that the new member pays an equitable share of the
costs previously incurred by the agency.
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-- 15--Ch. 844
(b) The new member shall appoint one director and, for the put-poses
of this division, the new member shall be subject to the water delivev
amounts described in Section 81460 that apply to that new member.
81456.5. San Francisco may become a member of the agency
pursuant to Section 81456.
81456.7. Not later than 10 days after the date on which any new
member is admitted, the agency shall notify in writing the Secretary of
State with regard to the name of the new member and the date of its
admission.
CHAPTER 7.MISCELLANEOUS
81457. Membership of a public entity in the agency does not affect
the identity or. legal existence, nor impair the powers, of that public
entity.
81459. This division shall be liberally construed to carry out its
purposes.
81460. (a) The water delivery quantities set forth in subdivision (b)
describe, for the purposes of this division, the average daily deliveries
of water fi’om San Francisco to the identified entities during the 2000-01
fiscal year.
(b) The water delivery quantities are as follows:
.Average Daily Deliver-
ies in Hundred Cubic
Feet
Alameda County Water District 15,709
California Water Service Company 49,223
City of Brisbane 489
City of Budingame 6,503
City of Daly City 6,070
City of East Palo Alto 2,864
City of Hayward 24,546
Town of Hillsborough 5,099
City of Menlo Park 4,616
City of Millbrae 3,669
City of Miipitas 9,437
City of Mountain View 14,860
City of Palo Alto 18,438
City of Redwood City 15,753
91
Ch. 844 -- 16--
City of San Bruno
City of San Jose
Cit), of Santa Clara
City of Sunn?~wale
Coastside Counb Water District
Estero Municipal Improvement District
Guadalupe Valley Municipal Irnprovernent District
Los Trancos County Water District
Mid-Peninsula Water District
North Coast County Water District
Purissima Hitls Water District
Skyline Counb’ Water District
Stanford Universit2,..’
Westborough Water District
3,266
6,436
5,473
13,1!2
2,070
7,873
611
161
4,789
4,594
2,921
226
3,604
1,352
(c) If San Francisco becomes a member of the agency, the average
daily deliver), of water to San Francisco during the 2000-01 fiscal year,
for the purposes of this division, shal! be determined to be 118,973
hundred cubic feet.
81461. Nothing in this act changes the govenmnce, control, or
ownership of the regional water system.
SEC. 2. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given effect
without the invalid provision or application.
SEC. 3. The Legislature finds and declares that this act, which is
applicable only to the Bay ’Area Water Supply and Conser~,ation Agency,
is necessary, because of the unique and special water supply problems
prevailing in the geographic area that may be included in the boundaries
of the agency. It is, therefore, hereby declared that a general law within
the meaning of Section 16 of Article IV of the California Constitution
cannot be made applicable to the agency and the enactment of this
special law is necessary for the conservation, development, control, and
use of water supplied to that geographic area for the public good.
SEC. 4. No reimbursement is required by this act pursuant to
Section6 of A~-ticle XIIt B of the California Constitution because a local
agency or school district has the authority to levy service charges, fees,
or assessments sufficient to pay for the program or level of service
mandated by this act, within the meaning of Section 17556 of the
Goverrunent Code.
91
exist? Or what have you or NCPA and associated folks are doing on the other side. How is that
working?
Ulrich: I have to be careful on using words in the legal sense because I am not an attorney. But
the Ba ~nkruptcy Court Judge has decided to set aside several days to hear testimony from parties
about the Stanislaus commitment and that’s what I am defining as a ’trial’.
Dawes: Does that mean our position or NCPA’s position is that it is in effect a pern~anent
ongoing situation, and is not a contractual thing that ends in a particular year? So that if we in
effect win on that, this is a win for all time if you will, and one that has as you mentioned that
dollar-discounted value. I would guess that goes over quite a long time horizon.
Ulrich: Yes. And whether it goes to infinity or I cannot tell you. But it is a long period of time.
Daxves: Is the price differential to us similar to 50 percent? When you talked about transmission
rates it was 5 bucks versus $2.50 or something. Is that what we are looking at if we lose this?
Ulrich: the simplest terna would be that we and other members simply have rights tt=ough this
Stanislaus commitnaent for moving our load across transmission lines without additional charge.
That capacity has been set aside or should be set aside for us to move our energy.
Dawes: I understand that. I was just trying to get at the economic. If we lose or NCPA loses it’s
like 5 bucks and if we win it is like $2.50. Is it that 50 percent spread that you mentioned?
Ulrich: I do not have that number. It is because the calculation is also done for other members.
That’s how we got to the billion dollars.
Daxves: It’s in that order of magnitude - Thank you.
Carlson: Any more questions? I believe we do not have any unfinished business, so let’s go
ahead to the first new item - Implementation of the Water Legislation.
Water Implementation
Ulrich: Thank you. Before I do that, since you have to go through a number of pages to get to
that item, it is indicative of the amount of time and effort that’s put into getting together the
summary, the minutes and also the Study Session on Fiber to the Home. All of that material is
here..4 lot of time, effort and work went into putting that together. I want to thank everybody
including Mr. Ferguson for his time spent to do the editing.
The report this evening -- I would hope you had an opportunity to read it. This evening is a good
opportunity to ask questions about how the implementation of this Water Legislation would take
place. I am pleased that Art Jensen who is in charge of BAWUA is here this evening. He is one
of the people that we would look at as a hero. His staff and others in the City and around the
State have gone forward to make this all happen. Now he gets the interesting opportunity to help
implement it and to see this all be put together. Art is here this evening to give you his insights,
from his studies, looking at this feedback from attorneys and from legislators on how this will
APPROVED 2/12/03 Page 6 of 22
take place. We should be able to relate that to what ~ve are going to do here in Palo Alto. So we
welcome your questions. Or if you’d like to do it some other way Mr. Chairman, we would be
glad to do that.
Carlson: Let’s split it t~vo ways and just start with questions and discussions on everything
except the Board membership issue.
Do we have any questions? Should we join or should we not join? What it means to join or how
it is implemented? Go ahead, George.
Bechtel: Actually I do have one question. But I want to compliment Jane and the others who put
this together because I went back -- since December was a long time ago -- and flipped through
the minutes of the last meeting and this one. The answers in the Q&A at the back was very
really helpful. It appears that you took our questions and put them in there, too. So it is a good
document to go forward to the Council with, and that’s all I have to say.
Ulrich: Thank you for that comment and I will tell Jane who is on vacanon today. But I too
went through in detail, reading it and quizzing her on this. I do think she has covered those areas
that you brought up before. It is an excellent document and we appreciate some feedback,
because we are going to be moving this to the Finance Committee and then of course the Council
for approval. The decisions we are going to made are far reaching. We have a good perspective
on what’s here.
Bechtel: I do have a question. On one of the tables in the back where is a comparison of the
Financing Authority and again the prospective BAWSCA. Where is the Table?
Ulrich: What page are you?
Fer~uson: Page 9.
Bechtel: Page 9 -- the Board of Directors. Seems to me the Board of Directors BAWSCA
would only come from the members. The way it is written here that the appointees could come
from the 26 public entities. Well, that is a total pool, is that not right? And that the Board of
Directors would only be appointed by those people who actually elect to join BAWSCA. So
there is a distinction between the Board of Directors of the Financing authority and BASWCA--
potentially a difference in membership.
Jensen: That’s correct. It can be anyone other than someone from those appointed by the 26
entities, but it would be the ones that elected to join.
Beecham: I would suggest that they ought to read together that there are no differences. It’s
unlikely the same organization would appoint someone to represent them to vote at the Financing
Authority and not the same for the other organization.
Ulrich: Did that answer your question?
Bechtel: It did answer the question that I had. I do not have any other questions.
APPROVED 2/12/03 Page 7 of 22
Carlson: I have got a technical question just brought up. I did not read it that closely initially,
but by the Board of Directors it says "Appointees from". I think it should be "Appointees by".
Am I correct?
Ulrich: Where are you? Be specific.
Carlson: I see I am correct. Dexter, go ahead.
Dawes: I too would like to echo Commissioner Bechtel’s con~atulations to the staff-- and Jane
specifically as the author here -- for a very lucid presentation of the evolution and the policy
issues that these bills give only the agencies. Just having that back~ound is an excellent way to
lay it out. As I went through it one of the comments I noted: are there any reasons not to vote to
join BAWSCA? Lots of very positive reasons for it. The one that I am a little bit fuzzy about --
and I will just digess a little bit on it -- is "following the money." It is unclear whether or not
the funds are actually the bonds the Financing Authority are passing through BAWSCA. I guess
the basic improvement bonds are going to be through the Financing Authority. Any new sources
or so forth will be BAWSCA. But it is laid out that if people do not elect to join BAWSCA that
they will not in effect be liable for bond repayment. I assume that the repayment will actually
flow through some sort of billing arrangement for the water itself. So that if the people are
getting the water from resources that were put in place through a bond issue which they are not
technically liable for, they in fact would still pay through the water purchase process. But it
certainly has its implications for ratings of the various cities that Palo Alto was a very significant
player. If many others chose not to be, we ~vould have a much larger penalty, I guess, put on by
Moody’s and others for our larger proportional share -- even though others would pay through
the ratemaking process. That was one area of concern that I’d like Art or John to address.
Jensen: Thank you. First I will respond to those questions. They are good questions. You
would pleased to know that you have some options. Nobody gets away free.
I would like to start, though, by complimenting you folks for your sig-nificant support of the
effort we went through. By you I mean both the Staff. Management, Commission and the
Council. From the very beginning you were there, your Mayor was there pressing for the
adoption of the capital improvement progam which is the basic first step for getting anything
done, including the legislation and now its implementation. I thank you again for your kind
words at the begirming John. Thank you. You thought of myself as a superhero. So I will take
that home and I will purchase a cake.
With respect to Commissioner Dawes’s questions, there were many comments. I will try to go
back and try to reconstruct. One of the comments/questions was that it appears that the
Financing Authority would finance the capital projects if they relate to reconstruction of the
existing system and the BAWSCA would take on financing of other types of improvements or
endeavors. It is not required. Again if you look back at the history of the legislation, we didn’t
know which if either bill would survive. It is your election of these future elected boards which
controls the mechanism you want to choose to finance the improvements to the San Francisco
system. Certainly the Reform Financing Authority has some advantages to it. But as the staff
report suggests, trying to make that determination now would be something premature,
something for the deliberation for the board and appropriate analysis.
APPROVED 2/12/03 Page 8 of 22
With respect to who pays. There is a distinction between who pays, depending upon which
mechanism is used. First of all for the Financing Authority: everyone is a member. There is no
election. By law if it is to use bonds to finance projects on the regiona! system then the bills go
out and everyone pays. There is no opting out of that. There is of course a decision as to
whether you want to fund a project, or programs of projects. But there is no escaping repayment.
With the BAWSCA however, non-members, public agencies that elect not to join could not be
forced to pay. Although if they were to receive benefits surely the attempt will be made to
negotiate a contract with them to pay for their share of the benefits. If they could be excluded
from benefits, then the negotiation process would be that much better. If they cannot be excluded
from benefits, it would be harder. But those are the basic repayment obligations. Again the
important thing is that the Financing Authority is an outstanding mechanism, at your disposal to
decide to use. One of the advantages of it is that all beneficiaries pay. I hope I have been
responsive to your questions.
Dawes: The first one was, are there any reasons not to join?
Jensen: I can’t think of one.
Dawes: Neither could I. But I wanted to know if anybody else could.
Jensen: Honestly, if I could think of one, I would suggest one. Basically, if there is an
opportunity to be a part of the decision making process, it would outplace anything else.
Carlson: Commissioner Ferguson.
Ferguson: Thanks again. I commend Jane on the briefing document here. We have seen some
really nice briefing documents in the last year or two. I have commented on that work from the
staff before. It is just temfic. It is A-plus. This one has a particularly articulate omission,
though, the dog that didn’t bark. In the long recitation of how we got here, there is no mention
of the UAC. The only acronym that has capital letters U, A, and C together is "UCLA"-- we
give credit to the UCLA researcher for his report but not the UAC. Since you plan to distribute
the document -- I mean, Dexter and I were here in 1999, we’ve kicked this around officially as
an Agenda item probably 8 or 10 times, and unofficiallv another 6. We did make a few
contributions along the way -- you might splice in a line or two about the UAC.
Carlson: Art, I want to add to the kudos. As I recall the legislative history, if a number of
members of the legislature had followed through on their promises on what would happen if this
passed there would be substantial mortality in the legislature. So con~atulations. But what you
just said for the first time the in my mind the difference between the two.
BAWSCA has broader authority to directly build and operate projects, but less authority to force
sporadic sharing of expenditures. Is that the fundamental difference here?
Jensen: First of all, with respect to cost sharing by members those agencies that elect to join.
Once the critical mass of public agencies join, then it will be formed. Then the two counties will
necessary name representatives for Cal Water and Stanford. Cal Water being a large purchaser
of water from San Francisco, you certainly have a significant percentage of the agencies
[measuredl by water use. It will be a substantial organization once formed. With respect to
allocation of cost, the legislation has in it the ratios for apportioning operating costs, if you
APPROVED 2/12/03 Page 9 of 22
would, administrative overhead, or in any other programs that the agency elects to undertake --
unless it chooses to make them a menu-driven cafeteria pro~am. With respect to capital
financing, again it gets back to the question -- if you are not a member you can obtain the
benefits through a contract, so you consider that a weakness. BAWSCA is like a special district.
It lives until it would dissolve itself in the maimer any other special district might dissolve,
which is not an automatic process. The financing authority exists for the one purpose only. It
would dissolve after a certain period of time, could issue no more bonds after a certain period of
time. It is 20/20. It ceases to exists all together after the bonds are paid off.
Carlson: Any more questions? Mr. Bechtel.
Bechtel: Art, you triggered some thought about the financing authority. You said the legislation
sets down how each pays. Particularly in repaying the bonds with something like this -- and this
perhaps is part of the implementation later on -- but I am curious. Is each entity who is a
member given a monthly invoice, a quarterly invoice annual payment or what they are to do?
Are there guarantees that they will pay on time and so on so? That the flows are equal between
all of the entities that are there? Is there an administrative rule to be set up that govern how the
cash flows?
Jensen: First of all to clarify: it is for BAWSCA the new agency that the overhead and operating
costs are provided/allocated by provisions in the law. The capital costs for repayment of bonds -
- that forn~ula is not specified and that could be done on a basis selected by the governing body.
So the allocation of costs for the capital projects is made is at your future election. With respect
to guarantees of people, how the process will be done, is it monthly billing and or quarterly
billing. That would be at the election of the body. I suspect that they would bill monthly so they
would control the flow and make more interest. With respect to an obligation to pay, it’s the
agencies that are billed that have an obligation under state law to pay the bills. In that sense it
would be no different than their tendency to pay San Francisco their water bills which is a pretty
routine and regular function. I wouldn’t suspect an issue. The legislation does not deal with
what if they don’t, and I don’t believe in H2 -- I think that’s handled elsewhere in law.
Bechtel: Thank you.
Carlson: Mr. Ferguson, ready for a motion?
Fer~uson: Exactly. I move that the UAC recommend staff recommendation number 2, namely,
that the City of Palo Alto forn~ and become a member of the Bay Area Water Supply and
Conservation Agency.
Dawes: Second.
Carlson: Any discussion of this motion. With no discussion, all of in favor say Aye.
Ulrich: Excuse me. I may have not heard it well. Did you say form and join both?
Ferguson: The staff recommendation about joining anything is only on item 2. Items 1 and 3
relate to board membership. The Finance Authority is automatically formed.
APPROVED 2/12/03 Page 10 of 22
Carlson: Any more discussion on the motion. All in favor. Opposition: None. Okay,
unanimously carried.
Now, we are automatically in one, and we recommend joining the other. I guess we now get
down to the representation issue where we had the begim~ing of discussion at our last meeting.
Who wants to start.? Thanks, Commissioner Ferguson.
Ferguson: Look, let me just complete my comments from last time. I understand completely,
I’m sympathetic, and I am happy to accept the staff recommendations about appointing a
Council member. I get it.
It just seems to me that that is Grade-C among the 3 options that this Commission can deal with
it. We can do better, as a Commission action. Appointing a Council member or an elected
official is kind of the NCPA model, what we usually do with a regional organization. It is the
same old same old. We’re faced with a March 1 deadline. Might as well pick someone that we
are already comfortable with. Lots of political reasons for doing that -- it is a passable option.
The Grade-B option is an acknowledgement by the UAC that we are not a political body. The
decision to use a political character with political skills and spend political currency is a decision
for the elected body. It is a little bit cowardly -- but it is more appropriate -- for this tectmo-
economic Commission to take a pass on that. My Grade-B option is to say, thanks but no thanks,
let’s just put this in the hands of the Council.
The right thing to do is the Grade-A option. It is for us to have a meaningful conversation --
particularly with Art here tonight -- about what the characteristics of board members of this 4-
billion-dollar project operator are going to be. This is a four-billion-dollar construction project.
It is a difficult joint venture created by the legislature starting out, and it is overlaid on a
continuing operating water-supply agency. It presents fascinating institutional design questions.
I know we have a March 1 deadline for the Finance Authority, and it is awfully convenient to
have the same character serve both those roles. But this is an interesting desi~ question, and
x~e’ve got some people here on this panel that have some relevant experience, one way or
another.
My oxvn obser~’ation, as a student of technology policy and things, is that political governance is
ahnost always a bad thing for big technology projects. I remember BART in the early 70’s, as a
young engineer. We hired some people from Westinghouse who had just left the BART project
team. They regaled us with stories about how they wasted two years kludging together
demonstration projects for the political board membership -- instead of just finishing BART. It
took another two years after BART started framing for them to disassemble all the kludges, and
build the system that was so supposed to be there. Not because they were bad engineers, or bad
politicians. It was the wrong institutional design, looking back on it. The decision that launched
the Challenger was a decision driven by short-term political pressures, and commentary by Dan
Rather. It was just the wrong kind of pressure brought to bear on a technical project.
We could go on and on about that. But since we have done so well in getting the legislation in
place, we have played the political game as correctly as any human being can, it just breaks my
heart -- now, at the inception -- to miss an opportunity to recommend the correct institutional
design to run this wonderful creature. I would like to kick around what those characteristics are,
APPROVED 2/12/03 Page 11 of 22
and deliver to the Council that list of characteristics, the UAC’s Top-Ten recommendations.
Being a politician may not disqualify you -- although if you read the papers lately, you might
think maybe it does. I just think we have some more things to say about that. I understand
completely all the arguments for putting the elected officials to work. I get it. But I don’t think
that they are the only people that can sell a bond issue. I don’t think they are the only people to
conduct a successful negotiation with San Francisco. And, to extract one correct lesson from our
recent local dust-ups, it may just be that an elected member of the Palo Alto City Council or the
Redwood City Council has a Brown Act limitation -- on the number of council members he or
she can lobby on one of these issues -- that a person from the outside doesn’t have. A person
from the outside is lobbying up. A person from the outside can talk to all 9 Council members
without a serious violation of the Brown Act. This is our little windo~v here to kick this around.
Maybe the staff decision is correct, and it is a political, elected-official appointment. Or maybe
we can add some additional qualifications to the criteria.
Carlson: Thank you, Commissioner Ferguson. I would be very interested in starting out from
hearing from Art whether you think it makes much difference. Or John, or both.
Ulrich: Actually I would just reach over and recommend to Art that we let all of you discuss and
debate this a little bit, as opposed to getting his opinion. \Vhat you are talking about is what you
prefer to do in Palo Alto -- which may not be something Art would want, to be able to second
guess what it is you guys want to do. I will let him speak, but that was my suggestion to him at
this point.
Carlson: Mr. Dawes
Dawes: Actually, I \xould be very interested to hear from Commissioner Rosenbaum on this
issue. He has been a Council elected politician on the NCPA Board, knows the ins- and-outs of
being an elected politician on a Regional Board, is a sitting UAC member, and is very
knowledgeable about utility situations. Rick’s point is well taken, to debate what are the
characteristics of an idea! Board .Member here. It’s very appropriate and I think we have maybe
one of the world’s experts right here.
Rosenbaum: Well, I will be hesitant to say that. While listening to Rick I was reminded of the
statement generally attributed to Winston Churchill when he said that our form of government is
probably the worst -- except for all the rest. I think the model that NCPA uses with the elected
official supported by staff-- that’s really the key -- is as good a model as any. You mentioned
BART and the political difficulties. There were decisions to be made there that favored one
community or another. It was understandably going to be a political situation. I do not know
anv other way to handle that except the way it was done. I don’t except those problems with
water. So I really don’t see any reason not to go along with the staff recommendation.
Carlson: Any more discussion? Conm~issioner Bechtel.
Bechtel: I was prepared to go along with the staff recommendation that our representative be a
City Council member. But I think Rick has brought up a good point, and triggered some
thoughts about what the process might be. It seems to me that a representative would be really
focused on a spending plan to be submitted by the City of San Francisco. Is that correct, Art?
That’s basically it -- or xvould there be a debate over the approach taken by the city, city staff,
APPROVED 2/! 2/03 Page 12 of 22
engineers they hire about a project? Would you or I as a member of this body be able to have
some input as to exactly how and who they hired? Or how particular subproject of the overall
refurbisbanent would be done?
Jensen: I would say that the breadth and depth of that conversation is open to creation. There is
nothing that obligates you to fund a plan that San Francisco puts before you -- without question.
As a matter of fact the a~eement between either entity and San Francisco -- for the use of the
funds that you might indebt yourself to bondholders for -- has got to be something that is
satisfactory to you. And we fully expect that you’ll want to have some assurance from technical
experts that the projects proposed for particular funding at a particular time are in your interests
are good projects, good solutions to the problems -- and that you should put your money into
them. So to that extent that discussion ~vith San Francisco could be as short as this is a no-
brainer. Let’s get down to the business of who pays how much. Or it could be a discussion of
"we are not so sure those are the projects we want to form, so let us have a broader discussion."
Again that is to take form over time, and it will reflect in large part the quality of the product that
San Francisco delivers to you. They are certainly employing the people to generate those
recommendations. Is that responsive to you?
Bechtel: Yes. Let me probe a little bit deeper then, or at least put out a leading question.
Therefore someone who might be in the business of building water systems -- let’s say they are
well-experienced at founding a company or -- and these are all "ors"-- are well-experienced in
finance matters. Actually that might be an advantage over a City Council member who has none
of those experiences?
Jensen: I am going to tread softly here. But I will articulate as best I can. I have been employed
by a number of policy boards of elected officials -- both water districts, cities, appointed
commissions. They are generally lay people that find themselves in those positions because they
get elected or appointed. Sometimes they brought with them experience from the outside world
that establishes their portfolio before the electric or before the mayor who appointed them. But
there were no requirements under law. In general what I found is, I serve a very diverse lay
board. There are advantages and disadvantages to that. I suppose one could argue that on one
hand they know nothing about the business that they are in. On the other hand, they were elected
to represent the people and to make sure that the people with their expertise were offered up in
such manner that they can be understood. And then create as a matter of policy implementation.
So I could argue that, yes it is ~eat to 1,mow what you are dealing with. On the other hand I
could argue that is not the task the electorate asked you to perform. It is the matter of policy
issues in seiwing the public. Again I am not going to advocate any particular position for you.
But you posed a question, and I tried to provide the greatest possible interpretation of that.
Bechtel: You are doing a ~eat job of answering the question as I posed it. One other question,
one final question. One other point that was raised, that was used as an argument for appointing
a member of a city council, was their stature and so on. They could speak for the city. Now.: this
is definitely true. They clearly, by being elected, have demonstrated that they represent a good
portion -- if not all -- of the city. What about their stature, as between small cities and large
cities? In working with your "lay board," have you found that the large cities -- the more
important politicians if you will -- dominated the meetings? Or were they some where a lesser,
smaller size perhaps had more weight and so on? Any issues along those lines?
APPROVED 2/12/03 Page 13 of 22
Jensen: In terms of who dominates meetings, it is really a matter of personality and not where
they grew up or where they are from. My o~vn personal experience -- I worked for San
Francisco and I worked for Contra Costa Water District. I went from one of the largest entities,
organizations in the Bay Area -- that is literally known around the world by people in back
woods -- to an organization that most of the people in Bay Area never heard about. I found that
being the only difference in the quality that you are going to get out there. The theatre was
different. The quality was extremely high in small organizations. So there are differences about
the quality.
Bechtel: Thank you.
Carlson: Commissioner Dawes.
Dawes: A query on longevity and turnover. Elected officials turn over more rapidly than let’s
say, a citizen who might be appointed and in effect make a career out of it. This may be good or
may be bad, but certainly builds a lot of backgound and familiarity with the issues. Any
comments on that score, Art?
Jensen: It is an interesting question. The legislation attempted to deal in the way it typically can
in situations with longevity, by having a provision to stagger the ternas. That does not provide
longevity, but it provides some ~eater continuity as time goes on. Beyond that, the term is only
four years. So longevity would come from repeat appointments of whoever that is. One of the
things also that is very important to say is, Palo Alto is unique amongst the potential members of
BAWSCA and amongst all but one of the members of the Financing Authority -- and that is, you
have an appointed [Utilities] Commission. The other entities don’t function the same way. The
only other one that does it is San Francisco. I am not sure at this point who they may appoint or
who they may elect to appoint to the Finance Authority. But you are unique. So I respect the
fact that the considerations that you and your Council have will be different from those of other
agencies.
Some of the same concerns will exist as you know. How does that appointed individual relate to
the council? In what way are they accountable if not directly answerable, but at least politically
or otherwise accountable, to the entity that appoints them. That is perhaps one of the vital
considerations for you. It is possible, as the legislation is written, for an individual to continue
on the board of BAWSCA even if they are no longer an elected official, an appointee, an
employee. They need to be a resident and a registered voter [and not] someone convicted of
felony. [But they] can no longer attend those meetings if they move out of the area, or if they
pass away, or if they resi~. Those are the processes for turnover, in the legislation as written.
Carlson: Go ahead, Commissioner Rosenbaum.
Rosenbaum: I just wanted to have some discussion with Rick. I made the point that staff
support -- of the City Council member or the Council-appointed person -- is very important. I
think you have the idea of an outside expert, somebody who is quite knowledgeable. Would you
see them being dependent on the staff, or exercising more of their own judgment?
APPROVED 2/12/03 Page 14 of 22
Fer~uson: Actually, I see the city staff supporting the elected member in the same way that the
city staff supports us Commissioners as appointees. It works very well. The definition of the
task is there. It is as available to one person as it is to the next, and the staff would come
tt~ough.
I do want to come back to this question about the terms of the electeds. Let’s accept the premise
for the moment that the magical qualities of being elected really are the right prescription for the
job here. Again, it is not a disqualifier to me at all. I am just looking to see if~ve have optimized
this or not.
If we take that-as a giyen -- we have a mix of electeds on this board, and these electeds in turn
have their own, effectively staggered, terms. Some of them will be term-limited out over the
course of their four years on the BAWSCA Board. Some of them will lose elections. Some of
them will get caught up in difficult election fights based on the peculiarities of the politics in
each of their cities. I am concerned that either (a) they lose their political qualifications
sometimes in an embarrassing way and become less-than-average reps because they are elected -
- rather than the expected level for their job. Or (b) in the course of retaining their political roles
over the course of this four-year term they get held as political hostage in their local campaigns.
Strange things happen. I want to be honest about it now, because we have seen how that unfolds.
We have seen how good people get pasted because of political events. We’ve come so close to
getting this big new creature formed. I just want to be sure that we are not stepping into that,
without having thought through the potential. We are talking about something like 15 maybe as
many as 26 -- well, minus the Stanford and the Cal Water -- something on the order of 15 to 20
people. All of which have a political life which may end in a year, or which might be tortured in
the course of a four-year tenn. How are we going to deal with that risk?
tEspecially in the formative years of this thing. NCPA has been here for a long time. NCPA has
a practiced procedure. People know the rules. Perhaps with the exception of Commissioner
Rosenbaum, we were not around in the late fifties when [NCPA] was first cobbled together and
the first WAPA contracts were signed in the sixties. Perhaps there were a couple of difficult
brushes with death early in NCPA history. I am just trying to get this one right; we are so close.
Carlson: An~hing else? Mr. Bechtel.
Bechtel: Yes. I would like to get some clarifications on the questions that are being asked here.
As I read Recommendation #1, we appoint a member of the City Council as a Director, etc. As I
read this, it does not say necessarily that we are recommending City Council appoint someone --
or do you have to be a member of the City Council to fill Palo Alto’s position -- forever?
Ulrich: No. Since staff wrote this and thought it through, our recommendation on #1 is that
Utilities Advisory Commission recommend through your actions that you ask the City Council to
appoint a member of the Council as Director of the San Francisco Bay .area Regional Water
System Financing Authority. Our recommendation is that you recommend to the City Council
that they select one of their own members for that position and then also under #3 that same
appointed member also become a Director of the Bay Areas Water Supply and Conservation
Agency.
APPROVED 2/12/03 Page 15 of 22
Bechtel: I don’t think you have answered my question. I am saying that as I read this either they
are recommending City Council appoint a member of the Council. But it doesn’t say anything
about that’s the only person that could be appointed. For example ~vhat I am coming around to
is, make a recommendation for the Palo Alto initial term. It be recommended to the City Council
one of its own members to be Pa!o Alto’s representative, and that in the future for example it
could be revisited, that it could change their mind and appoint someone else, and so on. But I am
gathering that the intent here is that when we make this recommendation that the Palo Alto
representative will always be a member of the City Council. Is that the intent?
Ulrich: No, I didn’t say that. I said our recommendation articulated at this point is the Council
appoint one of its own current members to this particular Director. I did not, xve did not, foresee
that they would make a different kind of a decision later on for some succeeding Director. We
did not attempt to go that far. Lots of things could change and make recommendation for
somebody subsequent to the first Director somebody different.
Bechtel: OK. Thank you, John.
Carlson: Commissioner Rosenbaum.
Rosenbaum: I do think that’s the wrong way to look at it. I think the policy issue is whether the
appointee to this body should always be a City Council member. That’s what you ought to be
asking us. Do you really see it differently?
Ulrich: Well, you can give that feedback to us. I was just trying clari~ that our brains didn’t
move as far along as you are suggesting. I am not saying that we are in disagreement with that.
I just want to be honest and say that when we wrote that we were talking about this [initial] time.
You haven’t asked the opinion for further clarification from staff. I would say, that would be our
philosophical intent not only now, but later on. Not for the reason of the individual, but for the
fact the person is an elected individual, elected by the residents, voters of Palo Alto in the area.
The reason we are making this recommendation at this point is that, that’s the closest person to
the people that elected them, to put them into that position. This particular person that votes is
going to commit all the residents of Palo Alto, through their rates, to pay for something. So it has
always been my opinion -- since I have been now a member of Municipal Utility and not in the
Private Sector -- that the body that makes the decision about what utility customers make are not
only made in public but it is based on this elected organization. Nobody higher, nobody lower in
the organization. That’s really some substance of our reason for this -- not trying to get in that
there may be somebody better to do it, but I don’t think that’s really the argument. I think they
are in the position to represent the elected, the people that elected them into that position.
They would get the same staff support regardless of who was that Director. But I think there is a
check-and-balance there. Just like when I come to you. I know what your role is, and what you
are able to recommend to the City Council. I would look at a Council member as a role they
have to play.
Carlson: Commissioner Ferguson.
APPROVED 2/12/03 Page 16 of 22
Fer~uson: Just to address that one point. One of the lessons that we have learned lately in Palo
Alto -- and our local experience is more relevant to our decision -- is that one Council member
doesn’t "bind" the city. One Council member never binds the city. It is a no-no. We are not
supposed to do that. One Council member "represents" us as a member in a discussion and in a
decision. And the Council member is presumed to have discussed it behind the scenes with no
more than three compatriots and in front of the scenes with the entire Council..And then he goes
into the meeting and conducts discussions within the negotiating parameters, brings back the
decision -- and there is a discussion in public by 9 people. Then it’s "binding" on the city.
Ulrich: Well, w-e are moving into an area where I’m hardly a scholar in the local government
process. However, I can tell you and I think you will a~ee with me, that the person I describe
while maybe not bound by everybody, has a fiduciary responsibility back to the people that
elected that person, and has to come back and describe their actions to the rest of the Council. If
you took it the other way and you had somebody that didn’t have that kind of position, what you
have is the staff making recommendation to that individual they go the way they want. Who are
they beholden to or who do they really work for? I’ve probably not articulated the way a
goverlm~ent or local government scholar would do, but that seems more logical to me, that xvay.
Fer~uson: The point I was making is that when it comes to the calculus of who can actually bind
the city, the formality is, either human being suffers the same limitations. An elected can’t bind.
Jensen: Again, this case is not an authority that is being established, at least in BAWSCA. tn
fact, the access established by the legislation is the same for the Financing Authority. The
individual is appointed by the governing body of the city or water district and they are the
representatives and they vote. They are not charged to come back and see that it’s OK. They
have the authority to vote their own mind. They take an oath of office and that establishes their
credentials and portfolios under that organization. We ~vould certainly expect that they are
voting the conscience of the entity. But they can’t "bind" the city in the sense that if they vote
for bond measure then the city must pay its portion of the bonds. I say that, in that the issue it
raises might raise concerns. Your baseline for comparison is the status quo where you have no
representations, issues are never brought to you, and you don’t have representation of any kind.
One thought I felt I would share, because Commissioner Ferguson has raised some interesting
and appropriate questions, who is providing the expertise? Also he raised questions about the
changeability of political climate and so forth. On the matter of the expertise, it is important that
the body however it is composed attain for itself expertise in which it has confidence. When it
loses its confidence then it gets different expertise. As someone would like to see the job
through and leave this organization, I don’t relish at all the idea of sitting before a board of 26
experts -- because their job is not to provide their expertise, their job is to make policy level
decisions on behalf of their communities that appoint them. What I would expect them to do is
to demand of me -- if I am so honored -- to provide expertise that they approve of, and also to go
back and ground-test things at their home base. For instance, I would expect these large issues to
come back before this Commission and you folks with your expertise review those things or
contractual matters, the funding matters, financial issues to financial plans and so forth and have
that linkage, that liaison, through the representative for Palo Alto. Some people have asked me
how sane I am to want to sit before a panel of 26 elected officials. But without going there, I
would say that actually, personally I envisioned that as a simpler process than tr,ving to serx~e 26
experts. Said another way if one wanted to bring expertise into the process one would not
APPROVED 2/12/03 Page 17 of 22
establish a committee of 26 experts. One would ensure that the expertise was there and the best
financial and other expertise you could get without question. Very important aspect to get the
job done.
Fer~uson: I don’t mean to imply that an elected official has no technical expertise, nor do I
mean to imply that technical expertise is the primary qualification here. All I am suggesting is
that there is a Top-Ten list of things that all of us would like to see at the governance level of this
wonderful new creature. I would like to see that Top-Ten list presented to the Counci! -- with
the caveat that political experience is not a disqualification. That’s all.
Jensen: I like that concept. What are the criteria that you would want for your participant?
Carlson: Councihnan Beecham had a comment on this.
Beecham: I have to step into this very gingerly. But I do want to provide some information,
responses to some of the issues that you have raised. I am now going to work kind of backwards
on time here. Rick, you raised a question about whether whoever the director would be, whether
they can bind the city. The Director I presume when he casts a vote, or she casts a vote, casts a
binding vote. That vote cannot be rescinded later on, based on whatever the Council or any other
body might say -- "we didn’t mean to go that way." So the vote casts are in fact binding. There
had been a recent discussion in Council about the ability of the city’s appointed commissioners
to make votes based on their assessment of what ought to be done. Questions have been raised
about whether or not commissioners need to come back as representatives and get the approval
or clarification of the Council. The city attorney’s advice on that point was, that would be
geatly dysfunctional [since it is important that the representative ] to the city have an effective
voice on the various bodies. That is, to have your representative go there and find out who is
taking a vote this week or next week and say "I have got to go back and talk to my folks and I
will let you know in a month" or whenever you can get it agendized. So the city attorney
strongly advised that was not appropriate, to have an active voice on this organization.
You also talked earlier about this is a forn~ative time for this organization coming up in water,
and that NCPA is well established and it is bad not to have not necessarily expertise, or whatever
in your opinion that ought to be. I would remind you of the fact that early on NCPA had
significant difficulties and it was an elected shopkeeper Fred Eyerly who stepped in, and took
control of the agency, ran the agency and helped turn it into what it is today, which I think in fact
is quite successful.
The third factor I would just like to bring up, I guess it is in terms of accountability. And this
perhaps goes to what the public expects of who represents it and who makes decisions for the
public. About two years ago, there had been a modest Measure in front of our citizens to give a
bit more authority to our Planning and Transportation Commission, to let them have a little more
voice and decision making. I was in support of that. I had been on the Planning Commission
before and I thought it was a reasonable thing to do. Nonetheless, the public decided that they
wanted their elected officials to make even that modest level of decision.
Carlson: Mr. Rosenbaum.
APPROVED 2/12/03 Page 18 of 22
Rosenbaum: Yeah, I am ready to make a motion but before that I did want to make one
comment. Rick mentioned the short political careers of elected officials and I do remember, I
think it was 1993 at NCPA. They used to at their September meeting elect a new Chair and a
Vice Chair and they did that. And in November both of these people would be up for election.
Following my theory that working on utility matters is really not good for your political career,
they were both defeated. The organization was forced to find a new Chair and Vice Chair, which
they were able to do. But that all worked out. So what I would like make a motion that the UAC
recommend to the City Council that (1) Palo Alto’s Director of the Financing Authority be a
Council member and (2) if the Bay Area Water Supply and Conversation Agency is formed, the
City Council appoint the same member as the Director of that Agency.
Carlson: Dawes seconds. Is there some more discussion of the motion? I certainly want to, but
go ahead George.
Bechtel: I just have a question of Dick. Are you recommending the wording as we say here or
because I did not hear it the same way as it is written here.
Rosenbaum: No, it’s different. I am making it clear that we recommend to the Council the
Director be a City Council member, and that is intended to be for all times.
Bechtel: Thamk you.
Carlson: Let me put my two bits in here. I guess I am bending towards giving the Council more
flexibility on this for two reasons. (1) This is going to be by far the most time-consuming
assignment that any Council member representative will have -- much more so than NCPA or
any of the others. So I at least would allow them to consider to be merciful upon themselves and
let somebody else do this for a while. And the other thing (2) is that I remember the
Constitutional Convention where the Constitution basically passed with a strong presidency
because it was chaired by George Washington. Everybody knew that was the person who was
going to be the President, and they could trust him to be the President. And you know, we can
all envision people, Council members or forn~er Council members, with the capabilities and
dedication of Commissioner Rosenbaum and Council Member Beecham.
That’s a lot of depth on this specific type of subject that is not necessarily always going to be
there. I spent a very substantial chunk of my professional life picking up the pieces of a situation
where that depth was not there. It was the great WPPS disaster, where there was a board -- my
!ord, I think it was 30 or 40 people -- completely snookered by some very powerful staff people
into the worst investment ever made by state or local government in the history of local
government. They blew 25 billion dollars, most of which was paid for by the federal taxpayer.
But a big chunk of it was paid by the local ratepayer. I l~ow how badlythings can go on this
kind of project. That is why my feeling is, at least keep the question open, both currently and in
the future.
So any more comments or should we go ahead and have a vote? Mr. Ferguson.
Ker~uson: I will not support the motion, and will be happy to come back with an alternative.
But I just want to be clear -- I want to be sure to depersonalize this. I am a fan of Bern’s. I
would love to see Bern do this job. Let’s be clear about that. I am not going to apply for it, and
APPROVED 2/12/03 Page 19 of 22
if drafted, I will run to Canada. (everybody laughs) So let’s be clear about the personalities
here.
This is an opportunity to get the institutional design correct. It is going to be a decision by the
Council -- I don’t see where we have the correct kind of wisdom here to narrow it down to a
member of the Council. At least we should leave it open, and I’ll make a motion to that effect
unless this one passes. Thanks.
Carlson: .Any more comments? Or should we go ahead and vote? All in favor of this one. [Aye
- 3 in favor]. Opposed. [Nay- 2] So it passes three to two, and I will go ahead on this basis.
Thank you, and we have one more Agenda Item.
Utifities Legislative Priorities
Ulrich: Thank you very much for the debate and ultimately the approval of our recommendation.
We will get back to Chairman Carlson about the date and time when this will go to the Finance
Committee. We appreciate your assistance and support when we go there, and your ~.vailability
to answer questions. I am not sure if Art will be willing to come to that meeting but we will ask
him. I do thank you very much Art for your time for this evening. Item #2 I believe is self
explanatory and for those that don’t have a copy in front or for the people in the audience (1) this
is available and can be looked at on the website. This is the Utilities Legislative Priorities for
2003. Mr. Kabat has joined me, and as appropriate, Girish Balachandran will participate in the
discussion if you have questions about these priorities. We have broken them into water, gas,
electric and have looked at what are the important issues that we will be following through the
year.
We are members as you know of BAUWA, members of NCPA, we monitor things with Western
and we’re also members of the California Municipal Utilities Association and members of the
American Public Power Association. This is an attempt to reflect our support for priorities that
each of these agencies, organizations, and associations that we belong -- where we believe they
are in the best interest of Palo Alto to support. And to help either get them passed or to keep
them from going too far. You’ve probably had a chance to look over them. Feel free to ask
some questions or give us some comments. Thank you.
Carlson: Any questions on these items? Comments, whatever?
Ferguson: Two recommendations. First I see a global legislative priority that I couldn’t even
find between the lines here, and it is important. We have got this monster state budget shortfall,
and something similar at the Federal level. As a legislative theme to pursue over the coming
year -- for all purposes, water, gas and electric -- we may want to monitor and deter efforts to
divert utility revenues directly or indirectly to cover somebody else’s budget shortfall. This is
going to take many different shapes and forms. But I can see a number of games played in the
legislature and regulatory agencies. It’s the idea that we detect competition by the giant sucking
sounds coming from other pro~ams and budgets, and protect ourselves and our utilities against
that.
APPROVED 2/12/03 Page 20 of 22