Zone 7 Meeting - October 20, 2021

3. Open Session and Report Out of Closed Session

4. Report Out of Closed Session

5. Public Comment

6. Minutes

7. Consent Calendar

8. Cost of Service Study for Untreated Water Rates and Proposed Untreated Rates for CY 2022

9. Proposed Calendar Year 2022 Municipal & Industrial Water Connection Fees

10. Proposed Dougherty Valley Facility Use Fee

11. Hopyard Well No. 7 and Hopyard Wellfield Pipeline Project Implementation Options

12. Award of On-Call Construction and Emergency Services Contract

13. Los Vaqueros Reservoir Expansion: Multi-Party Agreement Amendment No. 3

14. Committees

15. Reports - Directors

16. Items for Future Agenda - Directors

17. Staff Reports

18. Adjournment





October 20, 2021

The following were present:



LAURENE GREEN (joined at 9:07 p.m.)
















Item 1 - Call Meeting to Order

Item 2 - Closed Session

The Board went into Closed Session at 6:16 p.m. and came out at 6:44 p.m.

Item 3 -

3. Open Session, Roll Call and Pledge of Allegiance

President Ramirez Holmes called the meeting to order at 7:08 p.m., roll call was taken, and Director Green was absent.

Item 4 -

4. Report Out of Closed Session - no report

Item 5 -

5. Public Comment

Public comment was received from Gary Sears, Pleasanton resident.

Item 6 -

6. Minutes

Director Palmer stated that there was a typo in the minutes from the meeting of September 1. The word underwater should be two words, under water. Director Palmer stated that there were two typos in the minutes from the meeting of September 15. The words inner tie should be inter tie and where it is stated "might that be formed," should be "might be formed." Director Palmer moved to approve both sets of minutes as amended and Director Smith McDonald seconded the motion. The amended minutes passed by a voice vote of 6-0 with Director Green absent.

Item 7 -

7. Consent Calendar

Director Palmer moved to approve Items 7a through 7f and Director Sanwong seconded the motion. The Consent Calendar was approved by a roll call vote of 6-0 with Director Green absent.

Resolution No. 21-71 California Flood Preparedness Week: October 23-30, 2021

Resolution No. 21-72 Agreement with the City of Pleasanton for Annual Storm Outfall Repairs - Task Order

Resolution No. 21-73 Second Amendment to the MOA to Participate in the Bay Area Regional Reliability Plan

Resolution No. 21-74 Additional Funding Request for Water Quality Analysis Equipment Replacement Purchase

Resolution No. 21-75 Award of Contract for Landfill Disposal Services

Resolution No. 21-76 State Legislative Advocacy Services

Item 8 -

8. Cost of Service Study for Untreated Water Rates and Proposed Untreated Rates for CY 2022

Lizzie Foss, Financial Analyst, presented the cost to service study for untreated water rates, and the proposed untreated rate for calendar year 2022.

Director Sanwong pointed out that in terms of the allocations, there are several different proxies that can be used to determine what percentage of costs are to be assigned to untreated water customers. The amount of water used was reviewed to develop percentages that could be applied to the cost. Ms. Foss agreed and added that the 2022 planned water usage was reviewed and it was the allocation and treated customers versus untreated customers that determined the cost.

Director Sanwong thought that the comparison across the different agencies on page five of the packet could be helpful. She clarified that those numbers factored in any credit that was issued when the final rate was determined. Ms. Foss agreed and said that the credit began in the 2020 rate.

Director Gambs discussed the three options and pointed out that they provide different amounts each year, but the total cost collected would be the same, regardless of which option. It just looked like option three was an easier finance option for entry users. Ms. Foss replied that the point of option three was to just provide something that could smooth the rate shock. The cost will not go away, but it could be pushed out to 2023 to try to smooth it in.

President Ramirez Holmes noted that option one most accurately reflected the actual cost of service. Ms. Foss confirmed that was correct.

Mark Triska, owner of Triska Crane Ridge Vineyards in Livermore, and Laura Antrim, Executive Director of Tri Valley Conservancy, both commented, stating that they preferred option three.

Vin Pohray, a resident of Pleasanton, provided comment. Kelly Abreu, a Fremont resident, also provided comment.

President Ramirez Holmes asked if her assumptions regarding the proxy being 14.9% multiplied by projected costs for 2022 were correct. Ms. Foss confirmed. Director Sanwong commented that the historical distribution of costs could be slightly different because there could have been a different proxy that was used in the past, a different methodology, versus what is being used today. Osborn Solitei, Treasurer/Assistant General Manager, Finance, added that the projected demand has always been used, but the components could change over the years.

Director Sanwong asked for confirmation that untreated water users were only charged for what they use and not for their planned usage. Mr. Solitei confirmed that she was correct.

Director Sanwong discussed the UC Davis research regarding vineyards. She wondered if it was something local wineries in the Tri Valley could review. She felt that some of the research was important in terms of being able to grow grapes with less water. She added that she is leaning towards option three, which she felt was a good balance between all the different impacts.

Director Gambs noted that there was some question about the pricing methodology. He felt that it would be good if staff cleared it up and explained the process or the theory practice in terms of recovering cost when calculating the numbers. He mentioned the suggestion of using the market as a methodology for determining rates. Valerie Pryor, General Manager, replied that by law, the agency is required to base costs on the cost of service, not market rates.

Director Gambs thought that the UC Davis study was a few months off. President Ramirez Holmes responded that the study was complete. She added that Lori Souza from the Tri-Valley Conservancy would give a presentation at the Finance Committee, potentially in November. She would keep them posted and the whole Board will receive the study.

Director Gambs stated his preference for option three, explaining that was easier for untreated water customers to finance or fund their untreated rates. He asked if staff could discuss how overhead is calculated. Ms. Foss explained that total indirect costs, which are the total overhead costs, are just over six million. Flood protection receives $750,000 of that. And the remaining $5.25 million goes to water operations, which untreated customers fall under. And of that $5.25 million, untreated customers are charged about $75,000 of overhead.

Director Gambs asked how the difference between treated and untreated was estimated. Ms. Foss explained that this is all outlined in Attachment C but it was a step-by-step process. The overhead is allocated based on the direct labor costs, which are water supply management staff costs. That was the best indicator on how overhead could be allocated.

Director Sanwong asked if overhead has been charged to untreated water customers previously. Ms. Foss confirmed that it has not. Director Sanwong asked if overhead was paid by treated water customers. Ms. Foss replied yes.

Director Smith McDonald stated that it is a fair assessment to make on the untreated customers based on the proportion, and she supported the overhead cost if it was calculated at the right percentage. She said that she is in favor of option three.

Director Palmer stated that she also supported option three.

President Ramirez Holmes asked about labor going up and down. Ms. Foss replied that the reason for the increase is due to staff time and the increase of hours in the areas of water supply management and the water supply portfolio to meet demands due to the drought. The decreases were because groundwater and local water rights were included in general staff costs. Those were removed so costs have declined in that area.

Director Palmer moved to approve option three and Director Gambs seconded the motion. Option three was approved by a roll call vote of 6-0 with Director Green absent.

Resolution No. 21-77 Adoption of Untreated Water Rates for Calendar Year 2022

Item 9 -

9. Proposed Calendar Year 2022 Municipal & Industrial Water Connection Fees

Mr. Solitei gave background information on the yearly review of water connection fees. The Municipal Industrial Connection Fee program began in 1972. Based on the Board policy, the fee is updated annually based on the construction index at the rate of inflation. It is used primarily for expansion projects related to additional water demands for new development. The last connection fee study was done in 2017, and the next study will take place in 2022. It was brought to the Finance Committee on May 28th and the committee agreed to staff's recommendation, which was based on the construction index from September 2020 to September 2021. Inflation has increased by 8.4%, so staff recommended to increase the fees in Alameda County from $29,440 to $31,910 and Dougherty Valley from $28,250 to $30,620. He noted that there was no increase in the rate from 2019 through 2021.

Director Sanwong asked about what would be done in a comprehensive review next year. Mr. Solitei explained that a comprehensive review is done every five years to look at demand for the Valley and connection fees for the next phase or build out which would be around 2040. The study would be received and updated again to match the projected increase or decrease of connections already built out.

President Ramirez Holmes said over the last couple of years, the agency was unable to complete all the projects to match its original amount. She felt the increase in fees stifles economic development. She was pleased that Zone 7 was able to freeze last year's rates but said 8% was a large percentage. This fee was originally created so the agency could follow through on projects and she felt strongly about completing them. She asked if there could be a ceiling on the fee, as it makes the cost of doing business in the Valley expensive for new meters to come online. She stressed the importance of being cognizant of the direct impact of continuing to increase connection fee costs.

Director Gambs moved to approve Item 9 and Director Palmer seconded the motion. The motion passed by a roll call vote of 6-0 with Director Green absent.

Resolution No. 21-78 Calendar Year 2022 Municipal & Industrial Water Connection Fees

Item 10 -

10. Proposed Dougherty Valley Facility Use Fee

Mr. Solitei gave a brief report on the Dougherty Valley Facility Use Fee stating that this fee was started in 2000 when Zone 7 started serving the Dougherty Valley. At that time the fee was around $1,850, and it was agreed that the fee would be adjusted every five years using the construction cost index. The last increase was in 2017 and it was around $3,300. A review of the construction index was done and the fee will now be $3,940. This was presented to the Finance Committee in September and the committee agreed with staff's recommendation to bring the report to the full Board for adoption.

Director Gambs moved to approve Item 10 and Director Figuers seconded the motion. The item was approved by a roll call vote of 6-0 with Director Green absent.

Resolution No. 21-79 Dougherty Valley Facility Use Fee

The Board took a 10-minute break.

Item 11 -

11. Hopyard Well No. 7 and Hopyard Wellfield Pipeline Project Implementation Options

Rhett Alzona, Principal Engineer, presented the Hopyard Well No. 7 and Hopyard Wellfield Pipeline Project as a potential drought emergency project. Mr. Alzona stated that staff provided three options for the Board to consider. Option 1 would be to move forward with the project; option 2 would be to prepare a basis of design and mitigated negative declaration first, and then come back to the Board; and option 3 would be to not go forward with the project.

Director Smith McDonald asked about anticipated disruption to the Pleasanton Sports Grounds. Mr. Alzona replied that because of the existing pipeline from Hopyard 7 to 9, there will be no disruption from having to install a new pipeline. There will be a little bit of noise at the well site itself coming from constructing the facility. Some traffic control and noise control mitigation will be needed when the conduit trenches are dug. She then asked about the length of time for the project and if parking would be disrupted. Mr. Alzona replied that a segment of line would take approximately three weeks to a month, and he didn't anticipate parking being disrupted. Director Smith McDonald also asked whether the project was considered a nice-to-have or a need-to-have. Mr. Alzona replied that the well is not needed regular, normal day demands, but is for drought and other emergencies.

Director Sanwong asked why we have summer demands and if they could be reduced with conservation efforts or more conservation messaging. Mr. Alzona replied that we could do those types of things, but this project is really for the drought. She then asked if Hop 9 was currently in use. Mr. Alzona replied that Hop 9 is in use but because there are no chemical facilities at that site, it is not a preferred well to bring online. Director Sanwong then asked if the water goes directly to distribution or does it end up at the Mocho Demin facility. Mr. Alzona replied that it goes directly into distribution.

Director Ramirez Holmes asked why the project was shelved in 1997. Mr. Alzona replied that the public had concerns about arsenic levels. She then asked if the arsenic has gone away. Mr. Alzona was unsure. Director Ramirez Holmes asked what amount of arsenic is safe for humans. Director Palmer replied that it is less than 10 MCLs. Director Ramirez Holmes felt that the safe amount is zero.

Director Ramirez Holmes, noting the staff report on page three that says there is a potential for arsenic levels to increase or decrease with sustained pumping from Hop 7, asked for an explanation. Mr. Alzona replied that they don't know how much arsenic is in the groundwater basin below Hop 7 and whether more pumping would increase or decrease it, but based on the sensitivity analysis, there was a little bit of deviation before it affected the blending scenario where it was a concern at the 80% target MCL. Director Ramirez Holmes stated that we wouldn't know until we built the $8 million well. Mr. Alzona confirmed that. Director Ramirez Holmes asked if blending gets rid of the arsenic. Mr. Alzona replied no.

Director Ramirez Holmes pointed out that there was a reason the project was shelved in 1997 and those concerns are still there today. She said that she cannot knowingly choose an option with high levels of arsenic and two other contaminants. It concerns her to spend $8 million on a new well that has issues from the get-go. She said she is not willing to take that gamble with people's money or health. As far as using the well only for emergencies-there's no guarantee that choice would be honored by a future Board. She said that there are too many unknowns to take a risk and she cannot support this project.

Director Ramirez Holmes asked what the funding source for the project is. Mr. Alzona replied that some of it would come from some drought project money that was approved in the mid cycle budget adjustment last year. The rest would come from other projects or debt financing.

Director Figuers noted that there is a geologic reason for arsenic in Hop 7. He said unfortunately the well was drilled in the wrong place. He felt that we would be throwing good money after bad if we drilled in that area. He suggested getting an idea of what is going on down there so we could avoid it and then drill in another location that has a better probability for getting decent water.

Director Smith McDonald felt that the project wasn't worth pursuing. It would be disruptive to the park and recreation, don't have the money to pay for it, and it has possible significant safety issues.

Director Gambs stated that he does not feel good about approving this. He asked what the timeframe would be to get another well going. Ms. Pryor replied that our current CIP is pretty much set and staff are not actively working on new wells.

Director Green admitted to being on the border when she came here today because we need the water. But she is not convinced that we won't use it in the future for reasons other than an emergency if it's available. She would rather get a different new well and wondered if money can be found for a new well. Ms. Pryor replied that much of the drought money hasn't been appropriated yet.

It was agreed upon by a majority of the Board not to proceed with the project due to the uncertainty of the arsenic levels, other notable contaminants, and funding sources. A voice vote of 6-1 passed to not go forward with the project, with Director Palmer opposed.

Item 12 -

12. Award of On-Call Construction and Emergency Services Contract

Rhett Alzona presented the staff report on awarding a contract for on-call construction emergency services for roughly $5,250,000 over a five-year period. Mr. Alzona stated that the low bidder was Garney Pacific, Inc. at $3,294,150, and that staff was recommending an agreement with Garney Pacific, Inc. for $3,294,150, renewable for up to two years at approximately $980,000 per year.

After a brief discussion, Director Gambs made a motion to approve the contact and Director Palmer seconded the motion. The item passed by a roll call vote of 7-0.

Resolution No. 21-80 Award of On-Call Construction and Emergency Services Contract

Item 13 -

13. Los Vaqueros Reservoir Expansion: Multi-Party Agreement Amendment No. 3

Amparo Flores, Ph.D., presented the Los Vaqueros Reservoir Expansion Project, and in particular, the latest amendment to the multi-party agreement. This amendment would continue the main tasks, such as project management, continued environmental planning, and engineering feasibility analysis for the project, including continued financial analysis so the ultimate costs to Zone 7 and other agencies can be reviewed, as well as the potential benefits of the project from an operational perspective.

After a brief discussion, Director Palmer made a motion to approve the Amendment and Director Sanwong seconded the motion. The item was unanimously approved by a roll call vote of 7-0.

Resolution No. 21-81 Los Vaqueros Reservoir Expansion: Multi-Party Agreement Amendment No. 3

Item 14 -

14. Committees - notes

Item 15 -

15. Reports - Directors

President Ramirez Holmes attended a town hall on the drought by Assemblymember Rebecca Bauer-Kahan stating it was particularly well done. The continued engagement with the elected officials is crucial for all the grant opportunities and to provide a better understanding of the agency's perspective regarding supply. The inaugural meeting of the Legislative Committee was held last Thursday. A legislative framework was planned for a later discussion. Governor Newsom declared a drought emergency for the entire state, but not a mandatory conservation.

Director Sanwong reported that on Monday, President Biden's administration announced that they were prioritizing and asking the Environmental Protection Agency to really look at PFAS holistically, not just in drinking water, but also in the products that it might be included in and coming up with a plan in terms of regulations and monitoring. Director Sanwong recalled the issue of PFAS in the groundwater basin was a result of it being in a variety of products used by consumers and industry, as mentioned at a previous Board meeting. Director Sanwong shared that McDonald's made an announcement a couple of months ago stating that they would phase out the use of PFAS in their packaging by around 2025. This gave a sense of how pervasive these chemicals are in everyday products. She stated that she would share some of the links to the articles. Director Sanwong further informed that Governor Newsom signed a protection act about saving Tesla Park. It was an effort that she has personally been involved in and signed letters about. It affected two watersheds, the agency's as well as the Delta watershed.

Director Palmer had been taking part in the development of comment letters coming from ACWA regarding various legislations. There was a public workshop by ACWA on PFOA where they presented some of the direct human health effects and serum clearances, referencing that serum clearances and health effects with rodents and people are quite different. There was a joint groundwater management and drinking water working group from ACWA where they provided comments on the draft groundwater management principles and strategies to monitor and analyze and minimize impact to drinking water wells. She attended a University of North Carolina water and health conference which discussed addressing public health issues regarding access to clean water and hygiene and sanitation in disadvantaged communities and developing countries.

Director Palmer provided a presentation to the Dublin Rotary Club on the Delta Conveyance. The Delta stakeholders' engagement committee, which was put into place to make sure those who were directly affected and may not agree with the project were given an opportunity to provide input, would be terminated in December.

Director Figuers attended two ACWA webinars, one on the update on SGMA and the other on PFAS.

Director Green attended a virtual tour for the Valley Water plant to learn about what they are doing regarding potable reuse. She had been helping to form a committee called Tri-Valley Air Quality Community Alliance, which started last year, at which time they had a survey. The committee was announcing the second annual survey to get an understanding of how the public is encountering air pollution and similar issues in the Tri-Valley area. The survey could be found at, and everyone is invited to take the survey.

Item 16 -

16. Items for Future Agenda - Directors

Director Gambs asked that the study by UC Davis on the Wine Growers Association that would be presented to the Finance Committee be brought to the full Board. President Ramirez Holmes stated that the Finance Committee will preview it and decide if it was an appropriate presentation for the entire Board, adding the report will be circulated to the Board.

Item 17 -

17. Staff Reports

Ms. Pryor highlighted a few items from her report including the drought emergency, the Flood Management Plan, the Delta Conveyance Project and outreach and engagement.

President Ramirez Holmes surveyed the Board to get interest in a Sites Reservoir tour and asked Ms. Pryor to facilitate.

Item 18 -

18. Adjournment
President Ramirez Holmes adjourned the meeting at 9:35 p.m.