Zone 7 Meeting - February 3, 2021

3. Call Meeting to Order

4. Public Comment

5. State Water Contractors Briefing Presentation

6. Establishment of an IRS Section 115 Trust for Funding Pension Liabilities and Initial Funding Strategies for the Trust Presentation

7. Endowment Agreement for Scarlett Drive Mitigation Area Presentation

8. Reports - Directors

9. Items for Future Agenda - Directors

10. Adjournment





February 3, 2021

The following were present:



















Item 1 - Closed Session

The Board went into Closed Session at 6:30 p.m. and came out at 7:07 p.m.

a. Conference with Labor Negotiators pursuant to Government Code section 54954.5:

Agency Negotiator: Valerie Pryor/Osborn Solitei

Employee Organizations: Alameda County Management Employees Association; Alameda County Building and Construction Trades Council, Local 342, AFL-CIO; International Federation of Professional and Technical Engineers, Local 21, AFL-CIO; Local 1021 of the Service Employees International Union, CTW; Unrepresented Management

b. Conference with Legal Counsel - Existing litigation pursuant to Gov't Code section 54956.9(d) (1): (1) City and County of San Francisco v. County of Alameda (Contra Costa County Superior Court Action No. MSN18-0928), (2) County of Butte v. California Department of Water Resources (California Supreme Court No. S258574), (3) State Water Contractors v. California Department of Fish & Wildlife (Fresno County Superior Court, filed April 29, 2020), (4) Thomason v. Morrow (Alameda County Superior Court No. 18918041)

c. Conference with Legal Counsel - Potential initiation of litigation pursuant to Gov't Code section 54956.9(d) (4): 3 cases

d. Conference with Legal Counsel - Anticipated litigation pursuant to Gov't Code section 54956.9(d) (2): 2 cases

Item 2 - Open Session and Report Out of Closed Session

President Sanwong stated that there was nothing to report out of closed session.

Item 3 -

3. Call Meeting to Order

President Sanwong called the meeting to order at 7:17 p.m. Roll call was taken, and all Board members were present.

Item 4 -

4. Public Comment

Mr. David Lunn, a resident of Livermore, commented on the remarks reported in the January 28th Independent, which stated that a staff member said that Los Vaqueros would provide redundancy that does not exist in the Zone 7 system today. He said that the Delta is at risk of a seismic event, which would turn the Delta salty, making all Los Vaqueros inlets salty. He didn't think this is a type of redundancy that we need to spend money on. The Delta conveyance project will provide the needed conveyance alternative, and much better water quality.

President Sanwong thanked Mr. Lunn, stating that we don't typically reply or comment on public comments but asked Ms. Pryor if she wanted to take a moment to comment.

Ms. Pryor replied that we are still evaluating the potential uses of Los Vaqueros reservoir expansion or any other project and haven't made any final decisions yet. How they might be used and what benefits they might provide to Zone 7 are something that we'll be working on over the next few years.

Item 5 -

5. State Water Contractors Briefing Presentation

Ms. Valerie Pryor, General Manager, introduced the presenter, Jennifer Pierre, the General Manager of the State Water Contractors organization.

Ms. Jennifer Pierre presented an overview of the State Water Project, who the State Water Contractors are, and how Zone 7 relates to that. She discussed the future of the State Water Project and the priorities of the State Water Contractors, including the voluntary agreements.

Director Palmer remarked that ACWA has got quite a bit of information about voluntary agreements that's representing over 400 agencies throughout the state, so additional information can be found there.

Director Smith McDonald asked for more information about energy costs in order to give the public a strong understanding of how much energy is required to move water and why we're seeing those costs go up.

Ms. Pierre said that the farther down in the system you are, the more expensive energy is. Because you're closer to the Delta, you probably aren't experiencing the same sorts of energy impacts as other state water contractors such as the Metropolitan Water District area, San Bernardino, and the Empire areas who are experiencing pretty high rising costs for the water that is pumped over the Tehachapi Mountains. Energy is about 10% of the total cost of the whole State Water Project Contractors' bill, which is about a hundred million dollars a year; and it is rising quickly. One of the reasons that is happening is because we are the single largest user of energy, which is about 3% of PG&E's whole portfolio. As PG&E makes investments and upgrades, we're the biggest payer of those things. Because we are such a large component, as certain things that benefit the state overall are being implemented, we are disproportionately paying for those costs. Another issue is that although Oroville provides, on average, about 60% of the State Water Project's energy, we are carbon neutral in that regard. Some California policies don't count large hydro so DWR is being forced to overinvest in other green energies that we then pay for. Energy companies, for example, are wanting to come in and do pump storage or other large projects. These are good for the state's grid. But it means that the State Water Project Contractors are having to pick up a large portion of that, even though we're not necessarily benefiting from it. Energy and water are becoming more and more intertwined, so we have to pay attention to that issue.

Director Gambs asked about the contractors' working relationship with the Department of Water Resources and where she thought it was going.

Ms. Pierre responded that their approach is really about collaboration. In terms, specifically, of the Delta conveyance facility, she felt that the team that DWR has in place is by far the best team that they've ever had on an iteration of this project. With that team on board, she feels that the project can be successful. She said that as with any topic related to the State Water Project, we want DWR to understand our perspective, but they are the decision maker and that's always how it's going to be on the State Water Project. She said she feels very good about how we communicate and about the leadership that they have in place on this project from both an engineering and planning perspective, and at the executive level. There's going to be twists and turns, citing the governor's announcement regarding a single tunnel as a bit shocking. But since that announcement, there's been a commitment from this administration and the department for this project. It's getting more difficult for people to not understand how critical it is to make the investment in a conveyance project. Having more evidence before people's eyes is going to only help make sure this project gets done.

Director Ramirez Holmes asked about the various energy savings plans. Are those mostly happening on the individual organization level or are there some things that the water contractors or water project is working on as a group in terms of energy savings or solar or other things?

Ms. Pierre said that because DWR owns and operates the State Water Project, in terms of the energy consumption, it is at the State Water Project level. It's not something that an individual contractor could step in and provide. But some of the things that she wants to investigate are, for example, how solar panels might be used on fallowed land in the Valley that could tie into the State Water Project in a way that now solar is directly linked to it, so that where there's pumping through the Valley, you're not only creating an economic driver on land that may be getting fallowed under SGMA, but you're able to reduce costs for the users of the State Water Project through those sorts of investments. We're looking at a lot of different avenues to both expedite our reduced reliance on the broader grid, and in doing so, invest more in renewable resources. We are working with DWR to figure out what's a politically feasible and affordable way for the State Water Project to stabilize its rates around energy, but also meet clean energy goals.

Director Green asked if Ms. Pierre had any thoughts on storage and how that's complementing some of these efforts.

Ms. Pierre replied that in 2017, the wettest year on record, in February, there was tons of water in the Delta, but the pumps were almost off because there was nowhere to put the water. There will be more instances in the future where we will be storage limited and can expect much more extreme wet conditions and extreme dry conditions. So, storage is a critical factor in our vision for moving and storing water when it's really wet and then relying on that stored water when it's dryer. DWR isn't currently pursuing any storage projects for the State Water Project, but a number of storage projects being pursued under Prop One, including Los Vaqueros, Sites Reservoir, and a number of groundwater banking programs could be integrated into State Water Project operations, not necessarily as a State Water Project facility, but using that flexibility. There's a lot of evidence to support the need for storage. With SGMA and its implementation, it's going to be really important to look at groundwater storage opportunities. The State Water Contractors and the Water Management Tools Amendment will hopefully allow for better exchanges and transfers of water among the state contractors so that we can put available storage to its best use across the whole State Water Project, even if it's not necessarily in your region. There's enough evidence to suggest that strategic storage in the state is going to be critical to being climate resilient. And it's already started to demonstrate that with the storage that's been built.

President Sanwong reiterated that the single tunnel in the Delta is highly political. She said that Zone 7 spent a lot of money planning for the twin tunnels. The San Francisco Chronicle states that $280 million has been spent planning for Governor Brown's twin tunnels. Then Gavin Newsom comes into office and shockingly announces a single tunnel. Right now, the planning estimates for that are about $340 million. She asked, considering how everything takes forever with water and there is a lot of planning involved, if there is confidence that these large projects are going to continue and not be at the whims of whoever is the next governor.

Ms. Pierre responded saying that there were a number of contractors who voted just to provide planning funding for the next two years, because in two years we will know who will be governor for the following four years, as well as where we stand on the public draft EIR. We are trying to better align the planning dollars and commitments with major decision points that, hopefully, people can continue to assess as confidence grows in the value of the project. And that's in part why the planning funding that was just approved was articulated and broken up the way it was. There's no guarantee that the project will move forward, but there are also a lot of lessons learned in the last 15 years between DHCCP, BDCP, and Water Fix. Obviously, the governor felt that was one tunnel instead of two. There's still opposition to a single tunnel, but there have been a lot of lessons learned and that translates into how you model the project, how you create the operational scenarios, and how you look at mitigation.

There are no guarantees, but every time we do this, we get better. But it's going to be more and more challenging for anyone to say we don't need this, because the impacts of not doing it are literally occurring before our very eyes. So, in two years it will be even more obvious how needed this project is. The question we're never really asking is are we going to have a viable State Water Project in the next hundred years or not? That's the question and all the things we're doing, the conveyance project, the water management tools, the aqueduct subsidence repairs, anything that we're advocating for is trying to make sure the project is still functioning in the future.

Item 6 -

6. Establishment of an IRS Section 115 Trust for Funding Pension Liabilities and Initial Funding Strategies for the Trust Presentation

Mr. Osborn Solitei, Treasurer/Assistant General Manager, Finance, gave a presentation about the establishment of an IRS Section 115 trust funding pension liabilities and initial funding strategies for the trust. He summarized the background of this effort, the initial funding and ongoing contribution, and some of the items in the proposed policy.

Director Ramirez Holmes commented that the whole point of the trust is to make sure that the promise to our employees is met so that we have the money to pay the pensions that we've negotiated. We currently have a shortfall through the ACERA program.

Director Gambs said that what we're doing is taking or putting money that would be in reserves and invested in the Alameda County's pool into another fund that the IRS allows, Section 115 Trust. He asked for a ballpark range of what the interest or the investment differences would be for the rate of return. Mr. Solitei replied that he could not give him that number because it's invested in fixed income and other high earning vehicles. However, it will earn more money than what we normally earn in their money market fund. He said that the investment reports that he'll be bringing to the Finance Committee later this month will show probably 0.298% as our earnings, but that can't be guaranteed. Director Gambs said that he is not asking for a guarantee. He wondered if there is a range. We practically get nothing in the County pool, right? Mr. Solitei answered that we get zero point something right now. For ACERA, 7.25% is the annualized rate. Anything above that goes to fund OPEB. It's around that range, but it fluctuates a lot. Director Gambs responded that he just wanted to establish why we are doing this. It's not just giving some stability but we're also getting a better rate of return.

President Sanwong commented that she was under the impression that this was also less risky. Mr. Solitei replied that there is not much of a guarantee in the market, but we strive to be conservative and invest, not in risky, but in more moderate investments. President Sanwong expressed that she prefers that we do not invest in risky investments. Mr. Solitei said that's the goal. President Sanwong responded that it may not result in as high of a return or projected high of return, but it's best to be risk averse with the money. Director Green added that the Finance Committee asked for sort of a moderately conservative approach. They didn't want this to be too risky but, instead, protected to some degree.

Director Ramirez Holmes clarified a couple of things. One, is that asset allocation strategies go from conservative, moderately conservative, moderate, balanced, and capital appreciation. So, from less risky to most risky. The Finance Committee wanted to go conservative or moderately conservative. The Investment Policy Statement is separate and is not in the agenda packet. That is a separate policy document that states the actual investment policy for this fund. She wants to see it come back to the Board and wants to amend the eventual motion to include that. She also stated that this does not stop our contributions to the County. So, it's an additional investment. Our County employer contributions will continue as well as our participation in ACERA. This is an extra step as an investment, a savings, a reserve, if you will, that starts to pay down the liability that we have on the books. This is not an exit or anything like that. It is something that we will control that's going to start the process of collecting the money that we will eventually need. President Sanwong added that the City of Pleasanton and East Bay Regional Parks have recently started similar programs.

Mr. Solitei commented that if the Board approves the policy or this item, Highmark will provide us with an investment guideline document. And that investment guideline document is what will be provided to the Board. On an annual basis, we'll be reporting how much our investments will be and where they are invested.

President Sanwong stated that she wanted to make sure that we're using the public's money wisely and not getting into any of these risky investments that seem to be at the top of the news right now. Mr. Solitei replied that we will not.

Director Gambs asked for a little more background on the public agency retirement system as to what they provide, their purposes, and why we chose them. Mr. Solitei replied that the agency that will set up this Trust 115 has over 300 entities they do the same thing for, like us. That's what they normally do, manage trusts and pension investments, and OPEB investments too, although ours is strictly just a pension. So, they are a big player in this market. He offered to send the Board more information about the entity. Director Ramirez Holmes added that they were very impressive. The Finance Committee asked them a lot of questions and they came to three presentations.

Director Ramirez Holmes moved to approve Item 6 with the additional request that the Investment Policy Statement comes back to the Board. Director Green seconded the motion. Item 6 was approved by a roll call vote of 7-0.

Resolution No. 21-05 Establishment of an IRS Section 115 Trust for Funding Pension Liabilities (Item No. 6)

Item 7 -

7. Endowment Agreement for Scarlett Drive Mitigation Area Presentation

Mr. Jeff Tang, Associate Civil Engineer with the Flood Protection Engineering Section, gave a presentation on the Endowment Agreement for the Scarlett Drive Mitigation Area. He discussed the purpose behind this agreement, talked about its background and the Scarlett Drive improvements in Dublin, as well as how the endowment amount was determined. Finally, he discussed some of the responsibilities associated with the endowment and gave recommendations to the Board.

President Sanwong asked what happens to that land when we lose this mitigation. She noted that it's a little bit piecemeal on the map and wondered about the implications of it being piecemeal. Mr. Tang replied that we've already agreed to accept the entire reach of Line G-2. We're not piecemealing by accepting just a small portion of the reach. Instead, we are accepting responsibility for the entire channel reach for flood protection purposes. President Sanwong asked if the City of Dublin was taking responsibility for the pink piecemeal portions shown on the map. Mr. Tang replied that the City of Dublin is responsible for providing the mitigation to the Scarlett Drive improvements. Part of the mitigation work is restoring some of the channel. There are concrete structures in there that they are going to be removing, and they will put in new vegetation, remove invasive vegetation, and maintain the habitat value. It will be the responsibility of the developer, as well as the city, since it's their mitigation, to have that responsibility for the next 10 years until it's been accepted by the regulatory agencies. President Sanwong asked if it would later move over to our agency. Mr. Tang replied that our responsibility would be to make sure no invasive species pop up and to maintain it as a regular channel.

President Sanwong asked where the water flow is coming from and where it is going. Mr. Tang answered that there's not a lot of water coming down that canal, so we don't expect a lot of harmful flooding along that reach. Instead, the water is coming from the North offsite of Camp Parks. President Sanwong asked where the water goes. Mr. Tang replied that it drains down the canal and then into the storm drain system. Eventually it drains into Chabot Creek in Pleasanton, which ties into the Arroyo Mocho. Most of the drainage, however, is not coming from the canal. It comes from Chabot Creek. And with the regional detention basin that's being put in, that's going to be minimized as well since it will reduce the outflow coming out of that area.

Director Smith McDonald commented that the development that's happening on the opposite side of the property is the future Don Biddle park. Mr. Tang noted that we're involved with the park because we will eventually own the creek and it's going to be a multi-use area. The City of Dublin is going to be responsible for trash removal and recreational activities that occur around the new facilities. Director Smith McDonald asked if that will be the same with the Scarlett Drive areas as well. Mr. Tang responded that Scarlett Drive is where the Iron Horse Trail is going to be running. The trail will be extended underneath Bart, and then they're going to build a bridge over Dublin Boulevard and run the trail along Scarlett Drive. Director Palmer commented that with that canal running along the eastern portion, it will be less piecemeal than it was before. Mr. Tang pointed out the area where Zone 7 will be getting the entire reach and where the mitigation work will be occurring. He said that whether it was piecemealed or not, if Scarlett Drive wasn't happening, that area would be open for us to use for mitigation use if we needed it.

Director Palmer asked if the City of Dublin will take care of the trash and homeless issues in the canal region. Mr. Tang replied, yes, because of trails earmarked along the canal, they would be ultimately responsible for any sort of recreation activity.

Director Gambs commented that it seems like what we're trying to do is work with the cities to perform something that the regulatory agencies thought we should. It looks like there was a decision to play the role of an owner and mitigation partner that would enter into an agreement. He asked if we are going to have an agreement with regulatory agencies. Mr. Tang replied that we won't have an agreement with the regulatory agencies, but we'll have an agreement between the developer and the city. We are telling them that we're taking on this responsibility as the land manager and conservator in perpetuity to make sure that any new maintenance that we're taking on is funded, and this was one way to get the necessary funding to maintain the habitat. Director Gambs stated that it looks like the city could have been the owner and operator of this channel if the regulatory agency bought onto them. Mr. Tang replied he didn't think the regulatory agencies felt comfortable with that and they knew that Zone 7 had done this before where we were granted an easement for an area and they provided funding to maintain that area. So, we've had experience.

Director Palmer made a motion to approve Item 7 and Director Ramirez Holmes seconded the motion. Item 7 was approved by a roll call vote of 7-0.

Resolution No. 21-06 Endowment Agreement for Scarlett Drive Mitigation Area (Item No. 7)

Item 8 -

8. Reports - Directors

President Sanwong commented we have a lot of Flood Ready Freddy fans out there, particularly amongst our student population. She said she's received some outreach from students who want to start creating videos related to Flood Ready Freddy. She thought that it might be helpful to have some hashtags that we can use to encourage students in the area who want to do videos related to Flood Ready Freddy. This will help us take advantage of and foster some of that enthusiasm that's out there.

Director Ramirez Holmes attended the Sites Reservoir town hall meeting. They reported hiring a new executive director, Jerry Brown from CCWD, and completing a comprehensive organizational strategic plan. They brought on two new project participants, but the most important change was that Sites Reservoir was named in the state's water resilience portfolio as a project that contributes to a resilient water future. There were only two projects that were in that report by the governor. DWR had a representative that said, "The state is working hard to advance the project, and that is a very important thing." They emphasized that it be affordable, permittable, and buildable. They've cut the project a bit, including $2 billion from the original project proposal. It adds 1.5 million-acre feet of water into the statewide system, capturing excess flows from the Sacramento River up to 600 to 700-acre feet with full operation by 2030. So, things are moving along, particularly with the new organizational component of the Sites Reservoir project team. Also, state commitment was strong, and that has not necessarily been clearly stated in the past.

Director Ramirez Holmes attended the Pleasanton Chamber of Commerce Government Affairs Committee Meeting. Cemex gave a presentation on their reclamation permit amendment. The EIR on that project has since come out, and she recommended linking the EIR on Cemex's reclamation permit amendment on our website. They have announced that the EIR scoping session for the community will be held on February 26, which is a Friday night. She suggested that Zone 7 think of sending a letter from the agency to the county project administer, also copying Supervisors Miley and Halbert, indicating that a Friday night meeting is not optimal for community engagement and that we would like to see the meeting day changed.

Director Ramirez Holmes also attended the Pleasanton City Council Meeting where the potable reuse task order was discussed. She stated that despite some comments by President Sanwong and herself regarding negotiating in good faith, being a good regional partner, and making sure to have a seat at the table for the potable reuse studies, they voted down the task order three to two.

Director Palmer attended several meetings:

. She said that at the Sites Reservoir meeting the subject of problems with metals was brought up and will be addressed in the EIR.

. At the Women in Water Conference, a representative from Southern California, the Eastern Municipal Water District, presented a case study of their supply and demand gap and their efforts in trying to minimize their reliance on imported water.

. The Climate Registry Webinar discussed the energy water nexus.

. Coming up on March 24, the Groundwater Resources Association of California, is doing a law and legislation forum, and they're going to be talking about building California resilience for climate change and how groundwater water and groundwater legislation, including SEMA updates fit into that.

. One workgroup she attended addressed getting together a water system approval fact sheet for small water systems that want to establish themselves with development.

. The PFAS workgroup, was attended by both Mr. Jarnail Chahal and Director Green as well. Things are still up in the air with when the MCLs and public health goals are going to come out. Basically, we're waiting to hear when the Office of Environmental Health Hazard Assessment (OEHHA) is going to be making their decisions and then we will probably follow EPA guidelines. However, the California EPA may or may not follow the Federal EPA guidelines.

Director Green also attended the Site's Reservoir townhall and the PFAS working groups. She said that the EPA has issued some guidance with regards to disposal for PFAS, but it's incomplete. There's a lot of work left to be done on that, especially with regards to incineration. Right now, they're just setting a deep subsurface injection and appropriate landfilling. The other thing discussed had to do with wastewater, having PFAS, and how we are going to handle that.

President Sanwong commented on the Pleasanton City Council Meeting, stating that Zone 7 really wants to collaborate with all of our regional partners; our local partners; the cities of Dublin, Pleasanton, Livermore, and San Ramon; special districts like Dublin-San Ramon Services District; as well as Cal Water, one of our other retailers. But collaboration is a two-way street, and the rejection of the task order speak volumes in terms of not wanting to collaborate. But for residents of Pleasanton and the Tri-Valley, there are seven of us on the Zone 7 Board and we represent the entire Tri-Valley region. There are three of us who live in Pleasanton. So, while the City of Pleasanton has chosen not to want to participate in this, residents of Pleasanton can still feel confident that there are folks here on this Board who will have that perspective.

Item 9 -

9. Items for Future Agenda - Directors

Director Smith McDonald stated that there had been previous talks about a Zone 7 101 presentation for our newly-elected Board members; and a couple of new members expressed wanting to have a better understanding about the relationships between wholesaler and retailers, what Zone 7 does, and what the priority issues are. She asked what the status was of that effort. Ms. Pryor replied that this has been scheduled for March 30.

Director Ramirez Holmes reminded staff about the letter regarding the date of the EIR scoping session. Ms. Pryor replied that staff will take care of that letter right away. Director Ramirez Holmes reiterated to copy Supervisors Miley and Haubert on that.

Item 10 -

10. Adjournment

President Sanwong adjourned the meeting at 9:13 p.m.