Meeting Agenda Package 27 March 2019

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The documents following this page support the meeting agenda to be held on this date.

Board of Directors Meeting

Minutes

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Thursday, February21, 2019– Sea Pines Meeting Room 6:30 pm

Meeting Minutes (Draft)

1. Welcome, determination of a quorum and introductions

2. The meeting was brought to order at 6:31 pm. All directors were present.

Directors Present Absent

McAdon x

Garner x

Syfan x

Rittenhouse x

Cote x

Sandy Farber x

John Goetz x

Shareholders present at the meeting introduced themselves:

Shareholders Address

Wayne Peoples

Mary Skylar

3. Accept minutes of last meeting

The minutes from the last meeting were approved.

Directors Yes No

McAdon x

Garner x

Syfan x

Rittenhouse x

Board of Directors Meeting

Minutes

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Cote x

4. Financial reports

The financial report was approved.

Directors Yes No

McAdon x

Garner x

Syfan x

Rittenhouse x

Cote x

a. Discussion: how are director meeting stipends requested?

The board agreed that stipends for meetings would be requested by individual expense reports filed by Officers.

5. Updates on company projects:

a. Basin Management Committee (BMC)

b. Operations

i. Report: New revision (interpretation) of nitrate trend for well 5

ii. Report: Recent vehicle collision with GSW hydrant at Monarch and Glenn

6. Action items. For each action item(1) Board members discuss and debate each item after presentation. (2) Shareholders and public may make comments and suggestions. (3) Board members make motions and votes.

a. Report: S&T options when new metered service is requested

b. Proposal: Process for adding a new service and calculating new meter installation costs

Board of Directors Meeting

Minutes

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A motion was made and seconded to

1) John Goetz and Charlie Cote will be a committee to perform the following tasks and report back at the next board meeting with a progress report.

2) S&T will tell the current shareholder applicant that S&T is working to determine our requirements.

3) Ask a cognizant person at the CDWR to explain the S&T obligations and options regarding the provision of a new metered service.

4) ask an attorney to answer a list of specific questions regarding new metered service.

Directors Yes No

McAdon x

Garner x

Syfan x

Rittenhouse x

Cote x

c. Proposal: late fees and service discontinuation Resolution

This agenda item was moved to the next meeting because of the time and lack of urgency.

7. Shareholder and Public comments for items not on agenda

8. Board member comments. Board members may make brief comments, provide project status updates, or communicate with other directors, staff, or the public regarding non-agenda topics and discuss items for future meetings.

MEMO

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TO: S&T Mutual Water Co., Board of Directors and Officers Copies: FROM: Charlie Cote – Director / Treasurer / Certified System Operator DATE: 17 February 2019 SUBJECT: 4a: Report on Basin Management (Rev 1)

Basin Management Committee (BMC) meetings are scheduled to occur on the 3rd Wednesday of every month. Meeting notices, agendas and agenda packages can be found at the BMC web site at: https://slocountywater.org/site/Water%20Resources/LosOsos/

A. Recent BMC Meeting – some highlights

• There was a BMC meeting on 20Mar2019. The agenda package was 91 pages.

• The BMC Directors voted to accept the latest revision to the report on Los Osos Basin Plan Metric Trends Review and Infrastructure Program C Evaluation (AKA Adaptive Management Plan document). This final revision was the third revision of this 25-page document.

• The BMC board voted to approve the final parts of the 2019 budget (S&T voted to approve also).

o The S&T share of this budget will be $13,848 which is more than the $12,000 that the S&T board approved for its 2019 budget in this spending category.

o I mentioned (as directed by the S&T board at the last meeting) that the S&T board questioned whether the BMC was investing enough money in grant proposal writing efforts for the proposed creek discharge and stormwater capture projects. The board debated this and decided to keep the current budget for this spending category.

• The BMC board voted to accept the draft “executive director qualifications” document that will be used in the search for a new BMC executive director (Rob Miller wants to leave this post before the end of 2019).

• A report concerning the pros and cons of forming a Joint Powers Authority (JPA) between the 3 Los Osos water purveyors was delivered and debated by the board.

o The results of this discussion were inconclusive. More information will be provided by BMC staff at the next meeting.

• There was a lively discussion concerning the contracts for delivery of recycled water to 4dryland farmers representing 10% of annual recycled water produced by the WWTP.

MEMO

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o The county (represented by Bruce Gibson) is holding firm on delivering recycled water to

• During recycled water delivery discussions, the BMC Director representing Golden State Water challenged the boundary of the S&T service area regarding the Sea Pines Golf Course.

B. BMC projects update

• A survey company has been engaged in a contract to survey the locations and elevations of 17 LO water basin wells. These wells include 3 of the S&T wells. The survey information will provide better information concerning well head elevations above sea level for use in improving the analysis of static water level data.

• A report on the nitrate concentration trends in lower aquifer wells will be delivered to the BMC board at the May 2019 meeting.

• Recruitment and interviews for a new Executive Director will be occurring during he 2nd and 3rd quarters of 2019.

MEMO

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TO: S&T Mutual Water Co., Board of Directors Copies: Sandy Farber; Bookkeeper / Secretary FROM: Charlie Cote – Director / Treasurer / Certified System Operator DATE: 22 Feb 2019 SUBJECT: 4b: Report from Operations (Rev 1)

A. Current operating parameters

• The meters were last read on 28Feb2019.

o This was the first metering data using the new 2019 water rates. Water revenue was $3,719 higher with these rates than it would have been using the 2018 rates. This represents a 30% increase in revenue for this first metering period of 2019.

o Shareholder water use continues to be generally conservative with the median water use pf 7,654 gallons. The median water user paid $21 more than that user would have paid with the 2018 rates (a 25% increase for that user).

o S&T continues to have the lowest water rates in Los Osos.

o Water production was 1.28 Million gallons during this first 2-month metering period of 2019

o S&T produced 3,778 more gallons than was metered for revenue (0.3% of produced water)

o The two S&T water storage tanks hold 10 days of water at this current use rate.

• Well production and chlorine injection systems are operating within normal parameters.

o Residual Chlorine measurements for March are at 0.47 ppm

MEMO

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MEMO

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B. Customer service and outreach

• Since our last meeting on 17 January there have been 5 water leak investigations and one request for a new metered service for a vacant lot.

• So far, during 2019 Operations has handled 16 incidents of customer requests or other service requirements.

C. Maintenance work

o Water Treatment:

▪ March 2019 residual chlorine is at 0.47 ppm. California requires residuals between 0.2 and 4.0 ppm.

o Monarch HOA sewer connection

▪ Excavation begins on Thursday at the corner of Inyo and Monarch.

▪ Construction company will cut off, plug, and abandon an unnecessary S&T mainline dead end that currently runs south on Inyo street.

D. Projects

• Tank level control system upgrade project o S&T is completing the control system definition with a

control system hardware vendor. o Procurement of parts and the beginning of work will begin

after we purchase the logic controller. • Meter endpoint upgrade project

o Sample meter box hardware has been ordered. o We will begin testing our ability to bore 2” core holes in the

existing meter boxes for the installation of the new cellular antennas.

▪ If core hole modification of existing lids is not successful we will design and order new lid castings.

o We will begin ordering meter hardware after we understand how we will modify the meter box lids.

• Water tank drain pipe project o This project will begin after substantial progress has been

made on the meter endpoint project.

TO: S&T Mutual Water Co., Board of DirectorsCopies: S&T non-voting officers

FROM: Meg Syfan

DATE: 03-27-19

SUBJECT: Sandwich Board

A. ProposalPurchase a two sided sandwich board for the purpose of informing

shareholders of the date, time and location of meetings.

B. Purpose (background)It is required to notify all shareholders of meetings before the meeting

date by regular mail, email, or a notice at the location of the meeting. Using a sandwich board seems the best solution as regular mail creates waste and has a cost associated with it and not all shareholders use email or don’t wish to share their email. Sign would have a lamenated area to write in date and time so it can be changed accordingly. 1 – 1 ½ weeks completion.

C. Financial consequences of this proposal

1. Initial cost would be approximately $275.00 for Plasticade and design2. Estimated annual maintenance expenses: None3. New work tasks associated with proposal: Coordinating with the sign

company to have it made

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TO: S&T Mutual Water Co., Officers Copies: FROM: Charlie Cote, Treasurer and Chief Operator DATE: 25 March 2019 SUBJECT: S&T choices and obligations for new metered service requests (Revision Draft C)

A. Revision Control

Document

Designation

Description and Status of Revision Revision by Rev Date

REP1901

First draft as presented to Board. Cote A 25Jan2019

Rep1901 Added a reference to Corp §14303 regarding

liens and revocation of stock share for failure to pay.

Cote B 21Feb2019

Rep1901 Added results of interviews and future

demands on infrastructure at buildout

Cote C 25Mar2019

B. Contents

A. Revision Control ........................................................................................ 1

C. Proposed action ........................................................................................ 2

D. Background ........................................................................................... 2

E. Executive Summary .................................................................................. 2

F. S&T shareholders ...................................................................................... 4

G. How do the other Los Osos water purveyors handle requests for new metered water service? ................................................................................... 5

H. Law and obligations for the water company ............................................. 5

I. S&T Articles of Incorporation ..................................................................... 6

J. S&T bylaws .............................................................................................. 6

K. Revoking a Mutual Water Company Stock Share for failure to pay ................ 8

L. Water demand effects on distribution system and water quality ................... 9

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C. Proposed action

This report is being provided for information and discussion only. During discussions the board can ask for revisions, changes or additional research. When the Board approves this report, it will be filed with a revision designation for future reference as accepted by the Board on the approval date. It is possible that the Board may want to seek professional legal opinions on some of the issues raised in this report.

D. Background

A shareholder has requested the installation of a water meter for the vacant lot owned by that shareholder. As far as I know, S&T has not had such a request since the meters were installed in 2011. This memo contains research and information regarding the options and obligations of S&T regarding the installation of a new metered service and the pricing for such a new meter installation.

E. Executive Summary

There are presently 22 undeveloped lots within the S&T services area which are owned by current S&T Shareholders. The S&T Articles of Incorporation (AOI) and Bylaws both contain wording that require S&T to supply water service to the owners (shareholders) of the 22 undeveloped lots within the S&T service area. The wording in the S&T AOI and Bylaws is reflective of similar requirements in California law that defines the operations of California Mutual Water Companies. It is for this reason that S&T has had a policy of supplying a “Service Continuation Letter” in place of requested “Will Serve Letters” when shareholders with existing service apply to the county for building permits. Neither of the other two water purveyors in Los Osos provide a new metered service for the owner of a vacant lot who does not have a building permit for that lot. An attorney traditionally hired by S&T has not replied to provide a legal opinion for the defensible options for S&T in this situation. We have also not discussed this with the County Building and Planning Department or the State

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Division of Water Resources (the entity that is enforcing the Los Osos building moratorium). These is also a development proposal for 100 new houses in the open fields between Pecho Rd and Del Norte St. There is currently a shareholder who is receiving water service for a single lot on this proposed development area. The Articles of Incorporation indicates that the Board of Directors is not obligated to provide new water service to any new development that would require an extension of existing water distribution mainline piping. Serving water to 100 new homes in this proposed development would require the extension of existing distribution mainline piping. A refusal by S&T Mutual Water company to serve such a new development within its service area is likely to result in another Los Osos water company supplying that water instead.

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F. S&T shareholders

S&T has issued 200 stock shares representing 200 developed and undeveloped lots within its service area At this writing, S&T has the following shareholders situations: Table 1: S&T shareholders situations by category

Type Description Qty Comment

A Shareholders with metered service on developed lots

178 These shareholders include the Sea Pines Clubhouse and the single lot on Pecho Rd (Anastasi)

B Shareholders with metered service on undeveloped lots (Lots without houses).

1 A + B indicate that S&T currently has a total of 179 metered services.

C Shareholders with unmetered undeveloped lots who HAVE pre-paid for water meters in 2011

13

D Shareholders with unmetered undeveloped lots who have NOT pre-paid for water meters in 2011

8 C + D indicates that there are presently 21 unmetered lots owned by shareholders within the S&T service are that have service laterals, but no meters installed. B+ C + D indicate that S&T has a total of 22 undeveloped lots (refer to Note: 1)

Total number of S&T stock shares

200 A+B+C+D

Note 1: The metered use history for the vacant lot described in (B) is, on average, higher than the average metered household. Therefore, it could be assumed that the addition of a permitted house on this lot would not increase the S&T production demand.

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G. How do the other Los Osos water purveyors handle requests for new metered water service?

Los Osos has two other water purveyors; Golden State Water Company (GSW) and the Los Osos CSD (CSD).

• The CSD has a moratorium on new metered water service. They are not granting any new water meters until there is an indication that the LO Water Basin is being operated in a sustainable fashion, or until the building moratorium is lifted.

• GSW is providing new metered water services for applicants who have a county building permit. GSW does not provide new metered water services to vacant lot owners who do not have a building permit.

H. Law and obligations for the water company

As a California Mutual Water Company, S&T is subject to regulation by: • The SLO County Department of Environmental Health (S&T’s primacy

agency). S&T operates under a Domestic Water Supply Permit issued by this agency.

• Relevant California state law. • The California Department of Public Health (because S&T is defined as a

California Public Water System1) • The California State Water Resources Control Board for issues related to

water rights. • Definitions and obligations provided in the S&T Articles of Incorporation2. • Definitions and obligations provided in the S&T Bylaws3.

The state of California defines a Mutual Water Company in CCR Title1, Div2, Part7, 14300-14301 as a corporation

• organized for distributing and selling water only to owners of its shares, • and those shares shall be appurtenant to certain lands as described on the

certificate issued.

1 In California a water delivery system is considered a Public Water System if it provides water for

human consumption to more than 15 service connections [Ref: CA Health And Safety Code §116275(h)] 2 The S&T Articles of Incorporation can be amended, within the boundaries of the law, by the

rules provided in California Law [Ref: CA Corp Code: §900-911, and CA Corp Code §14301] 3 The S&T Bylaws may be changed by the rules provided in California law [Ref: CA Corp Code

§7150-7153]

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• The purpose of the Mutual Water Company shall be to supply water to its members at actual cost, plus necessary expenses.

o This last requirement of supplying water at ‘cost, plus necessary expenses’ is also mentioned in the California Public Utility Code and becomes one of the requirements that keeps a Municipal Water Company from becoming a Public Utility regulated by the Public Utilities Commission (CPUC) [Ref: Safe Harbor Rule, CPUC Code §2705].

I. S&T Articles of Incorporation

The third article of the S&T articles of incorporation (AOI) indicates that S&T certifies that all water produced, procured or owned by S&T shall be “appurtenant” to the land owned by the shareholders of the corporation. A reasonable person could interpret this “appurtenance” to mean that the shareholders of the corporation own the water that is produced or procured by S&T [Ref: AOI, 3rd Article, Figure 1].

Figure 1: 3rd article of incorporation

J. S&T bylaws

The S&T current policy for providing “Will Serve Letters” to Shareholders with existing water service has been governed by the current S&T bylaws Article III section 1 - 4 [Ref: Figure 2].

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Figure 2: Screenshot of the 2017 revision of Bylaws Article IV Article IV, Section 1 is the reason why it has been S&T policy to not provide Will Serve Letters to shareholders who are applying for a building permit. Instead of a Will Serve Letter, S&T provides a letter explaining that we are “obligated to supply water service to any shareholder with a metered water service”. Article IV, Section 2 would appear to allow S&T to deny water service to any new development inside the S&T service area that would require the extension of mainline water pipes. Interestingly, the AOI indicates that the total number of corporate shares is 1500 [Ref: AOI, 6th article], while the bylaws indicate that there are only 198 shares of stock authorized [Ref: Bylaws, Art 5, Sec. 1, Figure 3].

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Figure 3: Art. 5, Sec. 1 of the Bylaws S&T presently has 200 stock shares. The fact that there are 200 existing stock shares in S&T seems to violate Article 5, Section 1 of the Bylaws.

Figure 2: Example of a share certificate issued by S&T as described in Article IV of the Bylaws

K. Revoking a Mutual Water Company Stock Share for failure to pay

AB 240 adopted new rules that allow a Mutual Water Company to record a notice of lien against the real property of a Shareholder to secure the collection of rates, charges and assessments owed to the company [Ref: Corp §14303]. “If any shares of the corporation that have been made appurtenant to any land as provided in this chapter, become delinquent in the payment of

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assessments, the right to receive water or dividends thereon may be denied,

and they may be sold and transferred without those lands as if not appurtenant thereto, and the purchaser shall acquire the right to receive

water as provided in the articles or bylaws of the corporation, or they may be

forfeited to the corporation.” It is not clear from the reading of this code if denial of water could be made permanent condition even for new owners of a vacant lot.

L. Water demand effects on distribution system and water quality

Increases in demand equate to requirements for increasing water production. S&T water production demand has been relatively steady since 2015 after a steady decline in production that began in 2007 due to a trend for conservation by shareholders. Average annual production demand between 2015 and today is about 10 million gallons per year (roughly 28k gallons per day). Metering trends indicate that there is a peak seasonal demand during the dry season metering periods from May to September where the S&T demand for water averages 950k gallons per month or 32k gallons per day. This 32k gallons per day represents an average use between the 178 metered services as 178 gallons per metered service per day during these peak demand months.

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S&T stores water in two tanks that hold a total of 235.8k gallons at the pump shut-off (full) water level. During the average peak use-months the water storage can be calculated as about 7.4 days of water storage. The plot indicates the reduction in days of water storage as new services are added approaching the build-out of 21 vacant lots that presently are not served with metered water service.

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TO: S&T Mutual Water Co., Board of Directors Copies: S&T Officers

FROM: Charlie Cote – Treasurer / Chief Operator

DATE: 16 Feb 2019

SUBJECT: Proposed Board Resolution for calculating cost of a new metered service connection

Proposal The text for this proposed Board Resolution begins on the next page. The Board should read this proposal and discuss it at the next Board meeting. After discussions, debate and edits, the Board of Directors should adopt a policy for setting prices for new metered water service that can be filed as a Board Resolution.

Purpose (background) There have not been any requests for new metered water service since the water meters were installed in 2011. The text of this proposed resolution comes partly from text written in the S&T Operating Procedures Manual that was never formally adopted by an S&T Board of Directors.

Financial consequences of this proposal A careful identification of the various costs of time and materials for the installation of a new metered service can have the advantage of identifying which of those costs are born by the shareholder of the new water service and which of those costs, if any are born by all the shareholders as a group.

1. Initial cost: administrative cost of policy creation 2. Estimated annual maintenance expenses: None anticipated 3. New work tasks associated with proposal: This policy attempts to identify these tasks and costs

and determine who will be responsible for them.

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TO: S&T Mutual Water Co., Board of Directors Copies: Sandy Farber; Bookkeeper / Secretary

FROM: Charlie Cote

DATE: 10 Feb 2019

SUBJECT: Proposed Board Resolution for late fees and service terminations (Revision Draft 1)

Proposal The proposed text for this Board Resolution begins on the next page. The proposal text reflects the current procedure as written in the S&T Policies and Procedures Manual. In the interest of keeping billing procedures in one location, I have added the Priority Placed on Partial Payments list that was previously approved by a vote of the board at the 19 Jan 2018 board meeting.

Purpose (background) S&T has been abiding by a policy for assessing fees for late payments and for the termination of service for late payments for (at least) the past several years. This policy is recorded in the S&T Policy and Procedures Manual, but it is not clear if any S&T board of directors had ever formally adopted the current procedures. This proposal provides an opportunity for the present S&T board to understand the existing processes, make changes if desired, and adopt the resulting policy as a board resolution.

Financial consequences of this proposal Any financial consequences from this proposal will result from changes to the existing policy.

1. Initial cost: None 2. Estimated annual maintenance expenses: None 3. New work tasks associated with proposal: TBD

Board Resolution 2019-1

Late fee and service termination policy

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By a majority vote of a quorum of the S&T Mutual Board of Directors at a regular meeting held on {** Enter Date**}, we hereby resolve that:

{** The following text reflects the current procedure as written in the S&T Policies and Procedures Manual. Text in Red indicates areas for Board attention during discussions. **}

Late payments: A payment received more than 30 days after the invoice date will be subject to a $25 per moth late payment fee. {** The board should be aware that the invoices arrive a few days after the invoice date because of postal delivery time and postal holidays. Should we define the late payment date differently? **}

Priority placed on partial payments: {** approved by board at the 15Jan2018 board meeting **} Partial payments of S&T invoices should be applied to the outstanding invoice in this order of priorities:

1. Assessments 2. Late fees 3. Fines and penalties 4. Water use

Returned Checks Policy: A charge of $25 in addition to applicable late charges will be assessed to any checks returned by the bank. Delinquency Procedures: When a water or assessment invoice becomes past due by 60 days the account will be considered delinquent. The policy for delinquent accounts is: 1. A Notice of Delinquency door hanger indicating the total amount due (including current charges and

all late fees) and the date that water service will be terminated (10-days from delivery of the door hanger notice) will be placed on the front door. In the case of a rental property, 2nd home, or vacation home an additional photocopy of the notice will be mailed to the property owner and/or property manager.

2. All amounts due (overdue invoices, accumulated late charges and current invoices) must be immediately paid.

3. If the full amount indicated on the hanger is not received by the due date, water will be shut off, the meter reading will be recorded, and a lock will be placed on the meter.

4. To re-establish water service, the property owner must pay in full the amount indicated on the door hanger plus; a. Any additional late charges or costs associated with collection. b. A $100 reconnect fee c. Any additional costs that are incurred by S&T Mutual Water Company deemed necessary for the

collection of the invoice.

This resolution can only be changed, amended or revoked by a majority vote of a quorum at a future regular Board of Director meeting.

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I hereby certify that this resolution was passed by a majority of a voting Board of Director’s quorum

Signed:

Title:

Signature Date:

Board Resolution {**Year-Sequential# **}

{** Title of the resolution **}

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By a majority vote of a quorum of the S&T Mutual Board of Directors at a regular meeting held on {** Enter Date**}, we hereby resolve that:

The costs for a new metered service that will be paid by the Shareholder associated with that new service shall be as follows:

Table 1: Costs for establishing a new metered water service

Item Description of costs to be born by the Shareholder of the new or updated service

$ amount Notes

1 The present value cost of any unpaid remainder for the 2011 lateral connection made by S&T.

TBD (Note 1)

2 The time and material cost for S&T to install a water meter, water meter box and piping hardware which would complete a metered water access point for the Shareholder’s private water pipe. These T&M costs will include any cost of time and materials to bring existing components and infrastructure to the present S&T standards.

TBD (Note 2)

3 The present value of all assessments that have been levied on metered Shareholders that have not been paid by the Shareholder requesting the new service.

TBD (Note 3)

Notes for Table 1

1 S&T water meter lateral connections, meter boxes and water meters were installed for the Shareholders who had existing water service in 2011. At that time, each of these shareholders paid $1,850 for this new meter connection. In addition to those Shareholders who had existing water service some Shareholder owners of vacant (undeveloped) lots also paid all, some, or none of these $1,850 meter connection charge. In fairness to the Shareholders who paid for these connections in 2011, and as a method for determining a present day cost for a new S&T water meter connection, Shareholders receiving a new metered water connection shall pay the present value of any unpaid portion of that original $1,850 connection cost.

2 The time and material cost for supplying an S&T water meter and meter associated hardware which corresponds to the current S&T design standards will be determined by the unique situation for that new or updated water service. This cost is the sum of the costs for all meter box, meter box plumbing and associated hardware necessary to create a connection for the Shareholder’s private water pipe at the end of the water meter discharge ball valve.

3 In May of 2016 S&T began collecting a monthly assessment of $10/month for building a capital reserve fund. Shareholders receiving a new water S&T water service shall pay the present

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value of all assessments paid by Shareholders that have not been paid by the Shareholder of that new service.

4 The interest rate used for calculation of present value shall be the US Federal Reserve Prime Rate as reported by the Wall Street Journal at the time of the request for new metered service.

5 All plumbing parts leading to the water meter, water meters and meter box hardware will be owned and maintained by S&T Mutual Water Company once installed.

This resolution can only be changed, amended or revoked by a majority vote of a quorum at a future regular Board of Director meeting.

I hereby certify that this resolution was passed by a majority of a voting Board of Director’s quorum

Signed:

Title:

Signature Date: