SLVWD Board Meeting Summary

June 26, 2025

Prepared by Mark Dolson for FSLVW

NOTE: Provided purely as a public service — NOT the official SLVWD Meeting Minutes.

Highlights:

  • Appointment to Fill Vacant Seat on the Board

  • Presentation of Proposed New Debt Financing

  • Bracken Brae and Forest Springs Consolidation Update

  • Next Board meeting will be at 6:30 PM on July 17, 2025

  

Preliminaries

All four directors attended.  Director Largay attended remotely.

There was nothing to report from the just-concluded Closed Session, but this session will resume at the end of the Open Session.

President Smolley explained that the motivation for this evening’s Special Meeting was that the Board had a mid-July deadline to fill the currently vacant Board seat, and it did not expect to have a quorum for its regularly-scheduled July 3rd meeting.

There were no public comments on non-agendized topics.

 

Unfinished Business

None.

 

New Business

Appointment to Fill Vacant Seat on the Board

Two candidates applied to fill the Board seat left vacant by the resignation of former Director Jeff Hill: Cheryl Adams (currently serving on the Administration Committee) and Bob Russ (currently serving on the Budget and Finance Committee).  The Board interviewed each of them in turn, with each Director posing a single question.

President Smolley clarified that Directors could pose different questions to different candidates.  There were no objections.

Director Layng reported that the published Zoom link for the meeting was not working.

Cheryl introduced herself as relatively new to the SLV and currently retired after a 33-year career in public service, most of it with the State of California.  She spent two decades in leadership roles focused on program administration, policy development, and fiscal oversight. For 21 of those years, Cheryl lived in the small mountain town of Grizzly Flats, and her home was one of 400 destroyed by the Caldor Fire in 2021.  She still owns a now-vacant lot in Grizzly Flats and pays a monthly water fee, not because she uses the water, but because she can afford it and believes it’s the right thing for her to do.  She described the water district’s survival as critical to the recovery and future of the town, and she said that experience gave her a deep appreciation for the importance of long-term financial planning and community support in sustaining essential services like water.

Director Largay asked about experience with key aspects of operating a public agency (e.g., grant-funding, union contracts, efficient delivery of goods and services to customers, etc.).  Cheryl detailed some of her experience leading a 20-person team, developing and delivering statewide staff training and presentations, developing policies to ensure alignment with current law and best practices, overseeing multi-million-dollar budgets, exercising responsibility for contracts, conducting program and financial reviews, and collaborating across departments including finance, contracts, administration, human resources, and field operations to implement programs and maintain regulatory integrity.

Director Fultz asked Cheryl what she saw as the three top current challenges for the District.  The two that immediately came to mind for her were fire recovery and staffing (both filling open positions and promoting internal development).  She also talked about more effectively informing the public about the good work that Staff is doing.

Director Layng asked Cheryl about her ability to commit the required amount of time.  Cheryl said she was retired, and her only other commitment was to the local radio station   She said she understood the workload and could handle it.

President Smolley asked about financial experience (e.g., cost controls, debt financing, etc.).  Cheryl said she worked with budget and finance people and was responsible for her own budget.  Her agency brought in money and dispersed it to contractors.  However, she said her primary career focus was on social service, so this area would involve a learning curve for her.

Bob Russ said he had been living in Felton for the past 5.5 years, having mostly retired from an engineering and management career over the hill.  He is a licensed mechanical engineer who started several companies, serving in roles as both CEO and CFO.  Following the CZU Fire, he added 35,000 gallons of water storage, 11 fire hydrants, and two pumps to his property, along with solar power.  He said the opportunity to serve on the Board was attractive to him partly because it would be for only 1.5 years and would give him an opportunity to assess the experience.  He described his general process as one of discussion, consensus-building, and seeking win-win outcomes. 

Director Layng asked Bob about his prior Board experience.  He said he had served on a number of boards for companies, sometimes as chair, but not on any public boards.  Hence, the Brown Act is a new constraint for him.  Bob said he also helped to start a nonprofit farm near Pogonip four or five years ago.

Director Fultz asked Bob how he assessed the District’s finances at this point relative to operating expenses.  Bob said he saw big challenges here, especially with the major delays in anticipated FEMA funding.  He said one of his concerns was about going out to public markets for $19 million of funding with the risk that the District would end up sitting on much of this money for multiple years as projects lagged behind schedule.  He said it was important to work with Engineering to chart out critical paths and interdependencies.  Another important open question involves the size of the District’s reserve fund based on its assessment of, and plans for maintaining, its physical assets.  However, he said the District’s greatest asset was its people, and he wanted to be attentive to morale and organizational development.

Director Largay said he had appreciated working with Bob on the Budget and Finance Committee.  He said Bob’s contributions had been invaluable.  His question was the same one he posed to Cheryl re: experience in the public sector.  Bob said he had no direct public-sector experience, but he had years of experience building companies, with varying degrees of success.  He said he had been involved in seeking dozens of grants, and he thought his private-sector experience would still apply (e.g., with regard to efficiency, delivering to customers, dealing with inventory, etc.).

President Smolley asked Bob about his view of the District’s engineering responsibilities.  Bob said his technical background was in fluids and heat flow.  He said he was very comfortable with staying on budget, on schedule, and achieving milestones.  As CEO, he said he had done a lot of recruiting (hundreds of people), and building the right team was critical.

President Smolley asked if there were any public comments.  Unfortunately, the Zoom access information in the Board packet was inaccurate, and multiple persons wishing to speak on behalf of Cheryl were unable to participate in the meeting.

Jim Mosher of Felton said he felt very fortunate to have these two well-qualified candidates, and he appreciated their willingness to serve.  The Board members echoed this sentiment.

Director Fultz moved to appoint Bob Russ to fill the currently vacant Board seat.   President Smolley seconded.  Director Largay said he wanted further discussion before the vote, but District Counsel Barbara Brenner advised that the only way to achieve this was for Directors Layng and Largay to abstain from the vote.  The resulting margin of 2-0 in favor of the motion was not sufficient for it to pass.

Director Largay explained that he was concerned about diverse representation on the Board, specifically a lack of government experience.  President Smolley said he also appreciated diversity, but he was prioritizing finance experience.  Director Fultz agreed, saying that the most important job for Board members is to focus on the numbers.   He said the thought both candidates would bring something to the Board, but he felt Bob Russ would bring more of what the Board is most in need of.

Director Layng said both candidates brought relevant finance experience.  She thought the next important budget discussion would take place entering the next election cycle, and she thought this would present a great opportunity for Bob.  Meanwhile, she argued, the incoming General Manager would need to focus on administration.  She said Cheryl had worked in government, and her perspective had already been invaluable on the Administration Committee.

Director Largay said he was principally interested in diversity stemming from background, and this led him to favor Cheryl.  He thought Bob would bring important expertise of his own.  Director Fultz argued that Directors Largay and Layng already provide the Board with substantial government-related backgrounds.  With a new General Manager about to join the District, he felt that it was more valuable to add a Board member who could lend support based on experience operating companies.  He saw finance and operations as the top priorities at this time.

President Smolley moved again to appoint Bob Russ to fill the currently vacant Board seat, and Director Fultz again seconded.  The Board voted 3-0 in favor of the motion with Director Layng abstaining.

The meeting was recessed for five minutes so that Bob Russ could be sworn in as a Director.

 

Presentation of Proposed New Debt Financing

Finance Consultant Heather Ippoliti introduced Ken Dieker (a Municipal Advisor with Del Rio Advisors), David Fama (a Bond Counsel with Jones Hall), and Nikki Tallman (an Underwriter with Oppenheimer Company).  Heather recommended that, if the District intended to follow through on its plan to borrow $19 million in 2025, these three individuals would be best suited to conduct a thorough analysis of the Districts’ current and projected financial condition and to analyze various methods of sale for Certificates of Participation (COP).  The goal of this evening’s presentation (by Ken Dieker) was to obtain Board approval for moving forward with this plan.

Ken began with some relevant background.  The Board approved updated water and wastewater service rates in February of 2024.  The associated financial model assumed the District would issue debt to generate $19 million in net proceeds in FY 2023-24 to fund capital projects.  In June of 2024 the Board directed the financing team to begin analyzing various debt financing solutions.  However, this activity had to be paused until after the defeat of Measure U in November of 2024 (because passage of this measure would have severely compromised the District’s anticipated revenue stream). 

Today, the District’s new 5-year Capital Improvement Plan lists $55 million in capital improvements that need to be funded through 2030.  While the $19 million in bond proceeds covers a substantial amount of the more immediate need, the rest of the projects could be covered by anticipated FEMA reimbursements or an additional bond issuance, likely in 2028.  It should also be noted that the District currently has six outstanding debt obligations.  The two most substantial of these are the 2019 Revenue Certificates of Participation (COP) in the amount of $14 million (with a remaining balance of $12,735,000) and the 2021 CoBank loan of $15 million (with a remaining balance of $12,543,674). 

Ken outlined three possible approaches to obtaining the targeted $19 million:

1.     In principle, the District could issue a Letter of Credit, but the District’s existing legal documents do not allow for an amortization of 20 to 30 years, so this is not a viable option.

2.     The District could pursue a Direct Placement Method of Sale, but most lenders require no more than a fifteen-year (or possibly a twenty-year) term.  This compresses the amortization, thereby increasing annual debt service and placing pressure on future debt service coverage and future rates.  In addition, most lenders will require relatively level debt service allowing very little structuring around existing debt. The interest rates in the direct placement market are higher than the public markets, but the costs of issuance are generally lower because there is no need to produce an official statement and apply for a bond rating.

3.     The District’s other option is the Sale of Bonds to primarily retail and institutional investors. The public sale requires an official statement used by the underwriter to market the bonds and it describes in detail the District and the credit.  In addition, the public market requires a bond rating. A public offering will allow for the ability to structure the 2025 COPs around existing debt with the goal of overall level debt service. In this scenario, the financing team would sell the District’s debt to the public market structured over a yet to be determined amortization period of up to 30 years.

Ken briefly shared a second presentation that was designed specifically to respond to questions submitted in advance by Director Fultz.  Ken said a very preliminary analysis (not considering the outcome of pending salary negotiations) suggested that a 20-year amortization would be sustainable with the District’s current rate structure.  In response to a question from Director Russ, he said this projection was also limited in the other expenses that it considered.

Director Largay noted that the individual projects on the CIP list were in the range of $1 million to $3 million, and he said it wasn’t at all clear that the District is ready to spend $19 million anytime soon.  This left him unclear on the motivation for borrowing such a large sum (with its associated large interest payments).   He understood that the set-up costs would be lower on a single loan, but he anticipated this savings being dwarfed by interest costs on money that the District wasn’t yet prepared to spend.  He requested tight coordination between Finance and Engineering to ensure that the District wouldn’t borrow more than it needed.

President Smolley agreed.  He said it continued to prove difficult to get a cash-flow analysis from the Engineering team.  He also asked Heather why she was recommending this particular financing team.  Heather said she had a lot of personal experience with this team, that they were very talented, that they really knew their stuff, and that they would look carefully at the entire portfolio.

Director Fultz requested that the presentations be posted on the website (ideally as part of the Board packet in advance of the meeting).

There was one public comment.  Bruce Holloway of Boulder Creek said he thought the 2019 COPs were associated with a specific list of projects, meaning that any snag with any project could prevent the money from being spent in a timely fashion.  He also wondered why a separate Bond Counsel was needed when the District already has one.  In addition, he questioned whether the financing team really had the District’s best interests at heart or whether they were just pushing for the biggest possible deal.  Lastly, he noted that inflation will cause the true value of the borrowed sum to depreciate each year (which is another reason not to borrow more than can be rapidly spent).

President Smolley asked Heather to respond.  She said Cameron Wiest prepares the District’s arbitrage report, but the size of his firm is not appropriate for the debt financing.  She also clarified that the restrictions on the COP and the loan that limited spending to certain projects were the result of a Board resolution, and she recommended that the Board not repeat this mistake.

Director Fultz (the Board member responsible for this) argued that this was done because the District had a history of shuffling projects (e.g., the long-deferred Felton Heights Tank), and the new Board in 2019 wanted to communicate to the community that the plan was not going to be changed without a Board resolution.

Director Fultz asked if there was a way to structure the financing in tranches (i.e., partitioning the loan into distinct pools that can be treated separately), and President Smolley said he wanted to keep this as a consideration.  Ken said this was not impossible but was not likely to be feasible.  Director Largay said that, in his experience, public works projects such as these have error bars on their timelines of plus or minus two years.  This is why he saw coordination between Engineering and Financing as so important.

Director Russ asked about the anticipated time range to initiate the financing.  Ken said a public bond might take four months.  The question will be when to kick this off.

President Smolley moved to direct the General Manager to initiate the process of debt financing, and Director Layng seconded.  The motion passed 5-0.

 

Bracken Brae and Forest Springs Consolidation Update

President Smolley’s memo in the Board packet concisely summarized the history of the District’s efforts to support the consolidation requests of Bracken Brae and Forest Springs.  Both these independent water systems suffered devastating damage in the August 2020 CZU Fire and turned to the District in response.  In November 2021, SLVWD received a $3.2 million grant from the Department of Water Resources (DWR) to assist with consolidation.  In 2023, the District completed the necessary environmental reviews for the Consolidation construction work and obtained the necessary permits.  Over the ensuing months, it became clear that the total cost would be many times greater than $3 million.  In May 2024, the District completed the majority of the necessary engineering design documents and proposed a phased approach for the overall construction.  In December 2024 the District awarded a contract to Anderson Pacific Engineering for the construction of Phase 1.

In January 2025, the Board formed an ad hoc committee of Directors Smolley and Fultz to evaluate the status of consolidations and engage representatives of Forest Springs and Bracken Brae in the process. Since that time, the ad hoc committee performed the following:

  • Conducted extended discussions with representatives of Forest Springs and Bracken Brae

  • Compiled detailed Cost Estimates for construction of Phase 2 and Phase 3

  • Contacted a non-profit origination, Moonshot Missions, to discuss potential funding sources for the construction work

  • Contacted the Department of Water Resources (DWR) to discuss potential additional grant funding

President Smolley’s memo detailed four phases of construction that are currently being pursued or contemplated:

  • Phase 1.  This involves installation of over 3000 feet of 12” pipeline and seven fire hydrants to replace the existing 4” pipeline in the West Park neighborhood.  Construction started in February 2025 and should be completed by the end of this year.  This work is partially funded by the $3.2 million DWR grant.

  •  Phase 1 Alternate.  This involves over 1900 feet of 10” and 12” pipeline and eight fire hydrants in Bracken Brae.  In November 2024, the District obtained bids for this work, and Anderson Pacific Engineering was the low bidder. The construction cost for this work is $2.2 million, which would be partially funded by grants of $1,400,000 obtained by Bracken Brae. The sources for the remaining $800,000 along with related District project management costs have not been identified.  The District is evaluating whether it can proceed with a portion of this work utilizing the grants obtained by Bracken Brae, with construction possibly beginning in 2025.  The ad hoc committee is working with Bracken Brae to confirm that the Bracken Brae grant can be used for this.

  • Phase 2.  This includes the installation of approximately 7,900 feet of 12” pipeline, 25 fire hydrants, two water tanks, and a pumping station.  This will provide the required water pressure and capacity to meet State mandated fire water service for Bracken Brae, part of the Forest Springs neighborhood, and existing District customers in the West Park neighborhood. The District obtained a pre-award from the EPA Community Grant program for $959,752 to support the water tanks construction.  Current construction costs are estimated at $17,240,000 ($12,500,000 for piping, $4,900,000 for tanks (partially funded by the EPA grant), and $800,000 for a pumping station).

  • Phase 3.  This includes finalizing the engineering design documents and construction of the infrastructure for the remaining portion of the Forest Springs neighborhood that will not have service laterals installed during the Phase 2 construction. This includes approximately 6,000 feet of pipeline and 15 fire hydrants. The engineering design is approximately 30% complete, and the District does not have any plans to complete the design until funding sources are identified.  Current construction costs are estimated at $7.3 million.

State law does not allow District funds to be used for the construction needed to improve infrastructure for water systems that would be consolidated. The Phase 2 construction components would benefit Forest Springs, Bracken Brae, and existing District customers. As such, it is anticipated that costs would be shared between these three entities, but a cost-sharing agreement has not been negotiated.  Phase 3 construction would benefit Forest Springs solely and those costs would need to be borne by Forest Springs residents, loans, or grants.

Based on the magnitude of the construction costs and the relatively small population in the Bracken Brae and Forest Springs neighborhoods, significant outside funding in the form of grants or loans (no-interest or low-interest) will be required to support this construction effort.  In an effort to identify outside funding, the ad hoc committee contacted Moonshot Missions and the California Department of Water Resources (DWR).

Moonshot Missions is a non-profit entity that is familiar with the San Lorenzo Valley area since they have previously engaged with the communities of Big Basin and Forest Springs.  After discussing the District’s Consolidation efforts and the need for outside funding, Moonshot Missions evaluated potential sources for grants and loans and the provided a Funding Options Report.  They were not able to identify potential sources for grants but they were able to identify various loans that could be obtained to support construction.  However, the ad hoc committee did not evaluate any of the potential loan options.

DWR was contacted in April 2025 to discuss the possibility of extending the current grant or obtaining a new grant to further the Consolidation efforts. DWR staff indicated that their source of State funds to provide grants is now exhausted and that they are not slated to get any new funding from the State for similar grants in the upcoming budget cycle.

The conclusion is that it is unlikely that the District will be able to proceed with the Phase 2 or Phase 3 construction in the near future. This is based on the large capital costs, the lack of available grants, and the low number of residents that could support the necessary loans.

President Smolley summarized by saying that, in retrospect, the District had seriously over-promised and under-delivered (because it couldn’t come anywhere close to accomplishing the consolidation with the available $3.2 million grant).   Director Fultz described the situation as heartbreaking, and he noted that costs have been skyrocketing.  He said Bracken Brae still has some FEMA funding, and it might be possible that a small number of people at lower elevations in Forest Springs could be served from the District’s existing Lyon Zone.  This has yet to be investigated, but he suggested that this be explored.  More generally, Director Fultz expressed grave concern about relying on grants for any of the District’s planned infrastructure improvement.

Director Fultz and President Smolley further commented that the District needed a documented formal process to guide its future consolidation discussions.  Director Fultz said he had begun developing a draft.  President Smolley pointed to a recent inquiry from River Grove, and he said this was sure to come up again.

Director Layng said it was unfortunate that incoming General Manager Jason Lillion wasn’t present to hear this.  She asked about conversations with Santa Cruz County.  This led to an extended exchange in which President Smolley and Director Fultz argued that their lack of engagement with the County was based on President Smolley’s previous negative experiences.

Director Largay characterized this update as important information and said he appreciated all the work that went into developing it.  He described the outcome of the analysis as breathtaking, heartbreaking, and troubling.  He said it unfortunately reflected the extraordinary challenge of water infrastructure in an extremely rugged landscape riddled with landslides and with very dispersed homes.   He said he didn’t have a solution, and he left open the possibility of private wells.

There were three public comments.  Karen Vitale of Forest Springs thanked the ad hoc committee for its work.  She described the discrepancy between the originally estimated $4 million and the current $25 million as staggering.  She said Forest Springs was continuing to seek grant funding, and the landscape was constantly shifting.  One point of contention is the State’s assertion that Forest Springs is not an economically disadvantaged community (because this is based on a much broader census tract).   She said she wanted to continue to monitor the situation and inform the Board at six-month intervals.  She added that her experience with the County was that it was not helpfully engaged.  In addition, Karen requested that the current Letter of Intent remain intact.  Lastly, she asked for a better understanding of the requirements driving the engineering plans.  Meanwhile, she said, Forest Springs was continuing to invest in its existing infrastructure to meet its immediate needs.

President Smolley said he was open to further conversation and was not recommending any changes to the current agreement.

Bruce Holloway of Boulder Creek commented on differences between the situation involving Bracken Brae and Forest Springs and that involving Felton twenty years ago.

Nicole Launder Berridge of Bracken Brae said they were now at risk of losing their FEMA money.   She described this as really disappointing and said it was hard to explain the rising costs and the suspension of regular meetings to her community.  She questioned why the District was requiring a completely rebuilt system to serve a community of only 24 households.

 

Consent Agenda

There was one item on the Consent Agenda:

a.     Board Minutes from 6.5.25

The Minutes for 6.5.25 were deemed to be adopted by unanimous vote.

 

District Reports

None.


Written Communications

None.

 

Board Comment

None.

 

The Open Session was adjourned at 8:55 PM.  The Board returned to Closed Session for an additional 30 minutes.  At the conclusion of the Closed Session, President Smolley reported that newly seated director Bob Russ had been appointed to join Alina Layng on the Ad Hoc Committee for Labor Relations, filling the position left vacant by former director Jeff Hill.