Director Palmer moved to approve the minutes of the special Board meeting held on September 4, 2024, with Director Narum seconding. The motion carried with a 7-0 voice vote.

Director Palmer also moved to approve the minutes of the regular Board meeting on September 18, 2024, seconded by Director Benson. The motion was approved by a 7-0 voice vote.

Item 8 -

8. Consent Calendar

Director Palmer moved to approve Items 8a through 8f and Director Green seconded the motion. The Consent Calendar was approved by a roll call vote of 7-0.

Item 9 -

9. Proposed Untreated Water Rates for Calendar Year 2025

Lizzie Foss, Financial Analyst, presented the proposed untreated water rates for the 2025 calendar year, aligning with the agency's strategic fiscal responsibility goals. The 2025 untreated water rate calculation adheres to Board policy guidelines outlined in Resolution 21-77, setting the base rate at $239 per acre-foot. The Finance Committee recommended reducing the reconciliation charge from $42 to $24 per acre-foot, bringing the total proposed rate to $263 per acre-foot, unchanged from the current rate. The recommended action was to adopt the Resolution, incorporating the Finance Committee's recommendation and setting the untreated water rates effective January 1, 2025.

Director Green questioned the rationale for reducing the reconciliation charge from $42 to $24, to which Ms. Foss responded that it was in response to public concerns, particularly from vineyard operators facing increased water needs and operational challenges. Director Green also expressed concerns about the future impact of a larger reconciliation charge in year five. Ms. Foss clarified that the adjustment allows the agency to maintain the five-year collection schedule without extending it.

Public comment included letters from Tri-Valley Conservancy's Scott Akin and Lisa Roberts, both supporting the Finance Committee's recommendation. Vineyard operator Ken Wong thanked the Committee for considering the financial challenges currently faced by the wine industry and acknowledged the cost burden associated with replanting vines.

Director Narum supported the Committee's decision to "pause" full collection this year, noting that inflation has often outpaced rate increases and that the Board can revisit the charge annually. Director Green; however, remained concerned that deferring charges might continue in future years, potentially creating an unsustainable burden later. Directors Benson and Palmer echoed support for a one-year pause, citing the importance of reallocation of funds for vineyard replanting. Ultimately, the Board approved the 2025 untreated water rate with a roll call vote of 6-1, with Director Green dissenting.

Item 10 -

10. Review of Treated Water Rates for Calendar Years 2025 and 2026

JaVia Green, Financial Analyst, presented the review of treated water rates for 2025 and 2026, noting alignment with the agency's strategic goals of water reliability and fiscal responsibility. She confirmed that, following a comprehensive review, the adopted rate increases, set at 5.5% annually per the Board's four-year rate plan, are sufficient to meet revenue requirements without additional adjustments. This review included updated projections for revenues, expenses, and reserve balances, along with recent budget and policy changes.

Ms. Green also highlighted sensitivity analysis results: a 5% annual reduction in water sales would reduce revenue by $3.6 million and lower reserves by $2.8 million below target by FY 2026, while pausing the Calendar Year 2025 rate increase would result in a greater revenue shortfall of $4.5 million. However, the review confirmed that current rate levels remain sufficient to achieve policy objectives, and no changes are recommended.

Director Green asked why Fund 120 - Water Enterprise Renewal/Replacement and System-Wide Improvements Fund (Fund 120) has no target or maximum reserve levels. Ms. Green explained that reserves are accumulated to cash-fund significant capital projects, managed through biennial budget reviews. Osborn Solitei, Treasurer/Assistant General Manager - Finance, added that project financing is balanced every year based on the capital improvement plan (CIP).

Director Palmer inquired about a sharp increase in expenses reflected in Fund 120, which Ms. Green attributed to major capital projects, including PFAS treatment facilities at Stoneridge and Chain of Lakes, and other well upgrades. Director Figuers raised a philosophical question about reserve levels amid fluctuating water sales, and Ms. Green clarified that only the Economic Uncertainties Reserve fluctuates with sales, as operating costs remain relatively fixed.

Director Narum asked if a sales dip could bring reserves below the minimum threshold. Ms. Green confirmed it would reduce reserves below target but still above minimum. President Gambs expressed support for maintaining the current rate structure to fund anticipated projects, particularly as estimates for the Mocho Wellfield PFAS project are refined. Directors Figuers and Benson noted that increased water usage would raise reserves but also increase operating costs, reinforcing the 5.5% annual rate adjustment as prudent. Director Palmer requested future reports include target and minimum reserve values for clarity.

The Board acknowledged the treated water rate review findings as informational.

Item 11 -

11. Proposed Municipal & Industrial Water Connection Fees for Calendar Year 2025

Mr. Solitei presented the proposed Municipal and Industrial Water Connection Fees for 2025. The Board policy mandates that connection fees be updated annually according to the engineering record construction cost index (measured each September), which rose by 1.1% from 2023 to 2024. This increase results in a fee adjustment of approximately $380 for the Alameda County service area, setting the new fee at $34,910, and around $360 for the Dougherty Valley, establishing a new fee of $33,490. Mr. Solitei noted that a comprehensive connection fee study, last conducted in 2017, is underway and will be presented to the Board next year.

Director Palmer moved to approve the item, seconded by Director Narum. The motion passed by a roll call vote of 7-0.

Item 12 -

12. Energy Project Prioritization Framework

James Carney, Senior Water Resources Planner, and Ricky Gutierrez, from Carollo Engineers, presented the Energy Project Prioritization Framework as part of the Zone 7 Energy Master Plan, supporting goals for operational efficiency and energy management strategy.

Projects were categorized into four priority levels: required, high, medium, and low. Required projects, like fleet electrification driven by CARB regulations, are mandated, while high-priority projects, such as converting the Stoneridge facility to PWRPA power and implementing solar projects, offer significant financial returns. Medium-priority projects, including the well pump efficiency study, show potential benefits but require further analysis. Low-priority projects were identified as viable for future consideration.

High-priority projects under review include the conversion of Stoneridge to PWRPA, which may provide substantial cost savings, a floating solar installation on Lake I, solar installation at Patterson Pass, and energy efficiency studies for groundwater wells and the Mocho Groundwater Demineralization Plant. Each project was evaluated for alignment with policy goals, potential savings, and associated risks. Staff will continue advancing required and high-priority projects and will integrate budget recommendations for the prioritized projects in early 2025.

Director Palmer inquired about Zone 7's ability to expand its usage of PWRPA for high-priority projects, given membership restrictions. Mr. Carney clarified that PWRPA assesses each facility on a case-by-case basis, allowing Zone 7 to include facilities where significant savings can be achieved. Mr. Carney confirmed that adding high-priority projects to PWRPA would not pose an issue.

Director Green asked about potential grants for project funding. Mr. Carney responded that while portions of Zone 7's service area may not qualify for certain federal grants, staff actively tracks funding opportunities for relevant infrastructure and vehicle incentives.

Director Narum asked about the Net Energy Metering (NEM) structure's impact on solar projects, particularly the transition from NEM 2.0 to NEM 3.0, which could affect project viability. Mr. Carney explained that NEM 2.0 economics favor Zone 7, that NEM 3.0 would likely not be as beneficial, and that any reversion from NEM 3.0 to NEM 2.0 would likely benefit planned solar projects.

President Gambs inquired about Power Purchase Agreements (PPAs), which allow Zone 7 to avoid capital costs while sharing savings with developers, and whether the existing solar facility at Del Valle Water Treatment Plant could benefit from PWRPA. Mr. Carney confirmed that Zone 7 currently benefits from a PPA at the Del Valle Water Treatment Plant, with its lease set to expire in the 2030s, at which point purchasing and transitioning it to PWRPA could be considered.

Item 13 -

13. 2023 Hazard Mitigation Plan Update

Kevin Padway, Associate Water Resources Planner, and Ryan Bray from Risk Management Professionals, presented the 2023 Hazard Mitigation Plan Update. The plan aims to identify long term strategies for risk reduction to Zone 7's assets and operations from specific hazards in support of Zone 7's strategic goals related to reliable water supply, safe water, flood protection, and effective operations. Hazard mitigation plans are required for certain federal pre-disaster funding eligibility. Zone 7 first participated in a multijurisdictional hazard mitigation plan in 2010, later adopting a single-jurisdiction plan in 2018, and is now considering a 2023 update consistent with a five year update cycle.

Mr. Bray explained that the 2023 update process involved a comprehensive review and alignment with new federal requirements, including an emphasis on climate change and vulnerable populations. A 14-member steering committee of Zone 7 staff and external stakeholders guided the update, focusing on enhancing emergency preparedness, protecting the environment, and fostering public awareness. Public engagement included workshops, a survey, and a comment period to meet Federal Emergency Management Agency (FEMA) requirements and gather community input.

The plan addresses nine hazards: flood, severe storms, drought, wildfire, earthquake, utility loss, infrastructure failure, water contamination, dam failure, and terrorism/adversarial events. Through a risk assessment and ranking exercise, Zone 7 identified flood and drought as moderate risks, with the others categorized as moderately low. Based on these findings, 25 conceptual mitigation actions were developed, however implementation of the specific actions would require additional evaluation and are contingent upon budget and staff resources.

The updated plan was reviewed by the Governor's Office of Emergency Services (Cal OES) and has obtained conditional approval from FEMA, pending Board adoption. This approval ensures Zone 7's eligibility for certain federal grant programs, such as the Hazard Mitigation Grant Program and BRIC, over the next five years.

Director Figuers acknowledged the comprehensive coverage of natural hazards in the plan and noted that the only recorded damage in the valley from the San Francisco earthquake was limited to liquefaction in the northeast corner. Director Benson expressed appreciation for Cal OES's collaboration and inquired about the exercises conducted to develop the plan's recommendations. Mr. Bray explained that hazard rankings were determined through a matrix-based exercise involving agency staff familiar with local hazards. The exercise evaluated the likelihood, severity, and consequences of hazards to assign each a score, producing a prioritized ranking.

Public comment was received from Kelly Abreu.

Director Narum moved to approve the Resolution, seconded by Director Palmer, and the item passed by a 7-0 roll call vote.

Item 14 -

Valerie Pryor, General Manager, introduced the recommendation for Zone 7's continued participation in the Delta Conveyance Project (DCP) for the 2026-2027 period, focusing on planning, permitting, and preconstruction work. Mr. Padway provided an overview of the DCP, highlighting its alignment with Zone 7's strategic goals, including reliable water supply and infrastructure resilience. The DCP aims to ensure State Water Project (SWP) water supply reliability by constructing a 45-mile long tunnel to divert existing State Water Project Water Supplies to Bethany Reservoir, which is the location of the South Bay Pumping Plant. The project's objectives are to address climate change impacts, enhance seismic resilience, increase water supply reliability, and provide operational flexibility.

Mr. Padway recounted several highlights from the August 21st DCP presentation from the Delta Conveyance Design and Construction Authority and the Department of Water Resources. Mr. Padway also reviewed the current status of the project, with DWR as the lead CEQA agency, and the current schedule contemplates construction beginning in 2029, targeting operational status by 2045. Historical data shows a decline in SWP reliability, currently at 53% and projected to drop further due to climate change and regulatory constraints. The DCP is expected to restore approximately 403,000 acre-feet of this lost SWP capacity, bringing SWP water supplies close to, but still below the current status quo. Zone 7's share of the water from DCP is estimated at 9,000 to 10,000 acre-feet on average. This would help mitigate decreasing reliability and the DCP would improve water reliability to seismic risks.

Zone 7's 2.2% share of DCP's $20.12 billion estimated capital cost equates to $443 million, translating to a projected cost of $3,200 per acre-foot once debt service and O&M costs are included. Mr. Padway noted additional benefits in water quality, including reduced salinity and lower boron, bromide, and chloride levels at Bethany Reservoir.

As a responsible agency, Zone 7 would need to adopt DWR's CEQA findings, including a statement of overriding considerations, to authorize preconstruction work. Continued participation will grant Zone 7 access to information, influence in the project's development, and the option to fully participate later. The proposed funding request is for up to $6.6 million for 2026 and 2027, covered in Fund 100. Mr. Padway clarified that this funding covers only preconstruction, with a final construction decision to be determined at a future date.

Director Narum clarified that Zone 7's 2.2% share in the Delta Conveyance Project (DCP) aligns with its State Water Project share, ensuring adequate capacity for Zone 7's water needs. Director Figuers questioned the seasonal salinity modeling, which Mr. Padway agreed to research further. President Gambs highlighted the need for agencies to invest in storage solutions to utilize increased water from Article 21 allocations, with Zone 7's Chain of Lakes providing potential storage capacity.

Public comments included letters opposing the DCP funding and oral statements from several community members. Director Benson inquired about current funding levels for similar projects like Los Vaqueros and Sites, with Ms. Pryor confirming the budgeted amounts and noting that other agencies are still in the process of voting on DCP participation.

Director Green supported the project's benefits for water quality, system reliability, and modernizing infrastructure, viewing the DCP as a strategic and necessary long-term investment despite potential environmental impacts. Director Palmer emphasized the project's importance for ensuring reliable water supplies amid climate change, and highlighted improvements made through collaboration with environmental and tribal stakeholders. President Gambs reiterated that the DCP aligns with Zone 7's water management goals, particularly given limitations with Los Vaqueros.

Directors Figuers and Benson underscored the historical importance of water engineering in California. Director Benson also noted the DCP's extensive stakeholder engagement. Director Palmer concluded with support for Zone 7's role as an early supporter, reflecting the agency's forward-thinking approach to water resource management.

Director Palmer moved to approve the Resolution, seconded by Director Green. The item passed with a roll call vote of 7-0.

Item 15 -

15. Award Regional Project Drilling and Consultant Contracts

Ms. Pryor presented a proposal to award contracts for the regional groundwater project, a collaboration between Zone 7 and the City of Pleasanton to explore the Bernal Subbasin for potential new groundwater wells. This joint project, intended to diversify groundwater sources and recover Pleasanton's pumping quota, aims to reduce costs for both agencies. The first phase involves drilling test wells and hiring a consultant to analyze feasibility and design. Nor-Cal Pump & Well Drilling was the lowest responsible bidder for the test wells, and Luhdorff & Scalmanini was selected as the consulting firm.

Director Figuers asked about the well depths, suggesting drilling one well to 1,000 feet to conduct heat flow testing to determine groundwater flow depth. Ms. Pryor agreed to explore the cost of such an amendment. Director Green expressed confidence in the project's thoughtful approach, while Director Narum emphasized the importance of timely progress due to drought concerns, highlighting groundwater's critical role during previous shortages.

Director Palmer and President Gambs reiterated that this phase is strictly exploratory, with President Gambs noting the flexibility required for change orders based on depth findings. Director Benson inquired about potential collaboration with UC Davis on groundwater research, which Ms. Pryor confirmed would be handled through separate initiatives, if pursued.

The Board expressed strong support for the project, noting the benefits of collaboration with the City of Pleasanton. Director Narum moved to adopt the first Resolution, seconded by Director Green. Director Palmer moved to accept the second Resolution, with Director Narum seconding. Both motions passed unanimously.

Item 16 -

16. Committees

There were no comments on the Committee notes.

Item 17 -

17. Reports - Directors

Director Palmer submitted a written report and Directors Narum and Palmer, and President Gambs gave verbal reports.

President Gambs reminded attendees of the Flood Open House scheduled for Saturday, October 19th, from 10:00 a.m. to 2:00 p.m., hosted at the Zone 7 headquarters.

Item 18 - Items for Future Agenda - Directors

There were no requests for future agenda items.

Item 19 -

19. Staff Reports

There were no comments on the staff reports.

Item 16 -

20. Adjournment

President Gambs adjourned the meeting at 10:32 p.m.

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Zone 7 Meeting - October 16, 2024

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