SLVWD Board Meeting Summary

September 3, 2026

Prepared by Mark Dolson for FSLVW

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

Highlights:

  • Rate Structure

  • Contract Award and Vendor Selection Policy

  • Purchase of a Utility Truck, a Pickup Truck, and Tools for the Two Trucks

  • Santa Margarita Groundwater Agency Update

  • Next Board meeting will be at 6:30 PM on September 3, 2026

Preliminaries

All five directors were present.

No reportable actions were taken in the just-concluded Closed Session.

There were no changes to the agenda.

There were no public comments.  General Manager Jason Lillion requested a minute of silence for Johnnie Madriaga, a member of the CCC who lost his life earlier this week in a tragic work-related tree-trimming accident.

 

Unfinished Business

None.

 

New Business

Rate Structure

General Manager Jason Lillion introduced this agenda item.   He said this item was brought forward by Director Fultz who wanted an opportunity to discuss the possible future implications of ongoing legal developments relating to the District’s tiered rate structure.

In 2023, the District contracted with Raftelis Financial Consultants (Raftelis) to conduct a Water and Wastewater Rate Study, including a five-year schedule of water and wastewater rates. Raftelis is a national public-sector consulting firm specializing in water and wastewater utility rate setting.  Raftelis worked closely with District staff, the Budget and Finance Committee, and the Board of Directors throughout the process. Following proper notice and a public hearing on February 15, 2024, as required by Proposition 218, the Board approved the resulting rate study and rate schedule by a vote of 4-1, with Director Fultz casting the dissenting vote, and the FY 2024 water and wastewater rates took effect March 1, 2024.

As part of the study, Raftelis restructured the District's water rates to include three residential tiers. The three tiers were not set arbitrarily.   Raftelis analyzed the District's actual residential monthly demand patterns to establish the tier breakpoints (below 5 CCF and above 8 CCF, where 1 CCF is 748 gallons) based on the District's lowest average winter usage and highest average summer usage. Raftelis then calculated max-day and max-hour peaking factors for each tier from actual usage data and used those factors, together with the base, conservation, and capital cost components identified in its cost-of-service analysis, to derive a distinct, cost-based volumetric rate for each tier. This approach follows the cost-of-service methodology set out in the AWWA Manual M1 and ties each tier's rate to the incremental cost that usage at that tier places on the water system.

The Board Packet for this item included summaries of two cases, Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano (2015) and Patz v. City of San Diego (2025), in which California courts invalidated tiered water rate structures because the agencies could not demonstrate that each tier reflected the actual, calculated cost of providing service at that level of usage. More recently, in Dreher v. City of Los Angeles Department of Water and Power (2025), a different Court of Appeal panel upheld a tiered rate structure supported by calculated, usage-based cost data, declining to follow the stricter interpretation applied in Patz. The California Supreme Court has since granted review to resolve the resulting split between Patz and Dreher, so this area of law should be considered unsettled pending that decision.  The District's rate-setting record reflects the type of cost-based approach more closely aligned with Patz.

Separately, the District's current tiered rate methodology has emerging legislative support. The California Legislature is also considering AB 2180 (Ward), a bill sponsored by the Association of California Water Agencies that would interpret Proposition 218 to state that agencies may use reasonable methodologies – including historic, estimated, or projected data and systemwide peaking factors – to demonstrate that a fee or charge does not exceed the proportional cost of service, and may establish tiered rates based on shared customer characteristics.  AB 2180 passed the Legislature on August 19, 2026, and is pending before the Governor.  If signed, it would provide further legislative support for the type of peaking-factor-based methodology Raftelis used to develop the District's tiers.

Legal Counsel Gage Marchini said a number of things are up in the air.  The Governor can sign the bill which will clarify the standard and/or the Supreme Court may provide guidance [which will be definitive].  He said the wisest thing to do is likely to see how these two issues resolve.  The Governor’s decision should come fairly soon.  Oral arguments for Supreme Court are scheduled for 9/9/26, but an opinion is not likely until sometime in 2027.

Director Fultz’s view was this issue is not complicated, though people have tried to make it complicated.  He said consultants and other interested parties have muddied the legal waters by saying that “cost” can mean a lot of different things.  The court will have to assess this.  His view was that moving from an objective cost standard to a subjective one will open the door for lots of mischief, and Prop. 218 will be effectively gutted.  He said the governor's signature will be moot if the court rules the way it should (i.e., decides in favor of Patz).

Director Fultz went on to say that many people, including himself, would say that tiered rates are desirable.  However, the proper approach would be to put this question (of whether qualitative factors should be part of rate determination) to voters.  In response to a question from President Russ, he agreed that there is nothing to be done at present, but he said the Board should be thinking ahead.   He objected to the Dreher decision and said one of the reasons he voted against the rate structure is that the Raftelis consultants did not have a satisfactory response to his request for them to quantify the costs of the next unit over 4 CCF.  He said the District simply used a legal excuse to get the outcome it wanted.

Director Fultz further argued that the Supreme Court should have ruled a long time ago in favor of Patz.  He said if the Court eventually does so, then the District will face a moral and ethical question.  The District’s current rate structure is legally protected by a legislatively-imposed 120-day deadline for litigating a Prop. 218 outcome.  However, Director Fultz argued that the “right thing to do” would be for the District to go through a new Prop. 218 process immediately following the Court decision.  He said he just wanted the future Board to be attentive to this.  He said it was wrong to hire consultants just to have them tell the District what it wanted to hear.

Director Smolley said he agreed with waiting to see how things turn out.  He said the current rate structure wasn’t perfect, but he was on record as having supported it, and the District will begin developing a new rate structure in 2028 in any event.

Director Layng said the 64% voter rejection of Measure U in 2025 was a strong indication that the public supports the current rate structure.  She moved to bring this matter back to the Board for further discussion when there is more information from the Supreme Court.

Director Largay seconded this motion.  He said he had no interest in encouraging the District to do anything other than follow the law.  It therefore makes sense to attend to this when the law becomes clear.

Director Fultz suggested that if tiered rates are allowed, but a quantitative assessment is required to justify them, Staff may want to install appropriate instrumentation.

There was no public comment.  The motion passed 4-0 with Director Fultz abstaining.

Contract Award and Vendor Selection Policy

General Manager Jason Lillion introduced this agenda item.   His memo stated that Staff has developed a proposed Contract Award and Vendor Selection Policy establishing a comprehensive, legally compliant framework for all District contracts and purchases.

The policy addresses three methodologies and all contract types across the District’s operations:

  • Low Bid Method – for public works construction, including compliance with the California Uniform Public Construction Cost Accounting Act (CUPCCAA)

  • Qualifications-Based Selection (QBS) – mandatory for engineering, architecture, land surveying, environmental, and construction project management services under California Government Code §4525 et. seq. (Mini-Brooks Act)

  • Ranked Selection Method (RSM) – for legal, financial, administrative, IT, and other general consulting services not subject to the Mini- Brooks Act

Key features of the policy include:

  • Bidding thresholds reflecting AB 2192 and the District’s General Manager approval threshold under the Procurement Policy (currently $30,000): force account/GM approval at or below that threshold; informal bid/Board approval above that threshold up to $220,000; formal bid/Board approval above $220,000349

  • Rebalanced RSM cost weighting to 60%

  • General Manager approval threshold cross-referenced to the District’s Procurement Policy throughout the Policy, rather than stated as a fixed dollar figure, so the two policies remain aligned as the Procurement Policy is amended

  • Standardized QBS and RSM evaluation criteria scoring matrices, detailing weighted criteria and scoring guidance for evaluators

  • Formal bid protest procedure with defined timelines for bidder challenges and GM/Board review, citing Public Contract Code §20103.55

  • Conflict of interest and ethics provisions

  • Detailed evaluation panel requirements for solicitations exceeding the GM Approval Threshold

  • Emergency and sole-source procurement procedures with written justification and Board notification requirements

  • Contract administration provisions including required contract terms, change order thresholds, and records retention requirements

  • Comprehensive approval authority matrix establishing GM and Board authorization levels by contract type and dollar threshold

  • Goods and equipment procurement procedures for purchases not covered by CUPCCAA or the Mini-Brooks Act

Director Largay said he really liked this and was enthusiastic about the structured system packaged into a straightforward consistent evaluation procedure which will lead to good decision making and transparency for all.

Director Layng thanked Staff for this and being responsive to feedback. She said it looks really great.  Everyone will be judged the same.

Director Smolley corrected a minor discrepancy.

Director Fultz praised the professionalism and leadership brought to the table by the District’s new senior staff.  He said the District has needed this policy for a long time.  He sought clarifications on a few details and was satisfied with Jason’s responses.

President Russ agreed with the other Directors’ positive sentiments.  He particularly appreciated the weightings.

Director Smolley moved to adopt the policy, and his motion was quickly seconded.

There was no public comment.  The motion passed 5-0.

 

Purchase of a Utility Truck, a Pickup Truck, and Tools for the Two Trucks

Operations Manager Jesse Guiver introduced this agenda item.  His memo stated that the purchase of two 3/4-ton utility trucks was approved by the Board of Directors in the FY 2026-27 CIP Budget, with a total budgeted amount of $130,000. During development of the bid specifications, staff determined that replacing one of the planned utility trucks with a pickup truck would better meet the District's operational needs.

A Notice Inviting Bids was emailed to 13 dealerships on July 2, 2026. The dealerships included Watsonville Ford, North Bay Ford, Salinas Valley Ford, Capitola Ford, Morgan Hill Ford, Frontier Ford, Fremont Ford, Mission Valley Ford, Serramonte Ford, San Leandro Ford, Livermore Ford, Towne Ford, and Sacramento Ford. Watsonville Ford, Salinas Valley Ford, and Towne Ford were the only dealerships to submit responsive bids meeting the specifications in the bid packet.

Based on the bid results, staff recommends purchasing the 3/4-ton utility truck from Watsonville Ford for $73,068 and the F-150 pickup from Towne Ford for $52,770, as they submitted the lowest responsive bids for each vehicle.

The addition of the F-150 pickup will allow one of the District’s older utility trucks to be reassigned to the Distribution Department. Combined with the purchase of the new utility truck, the Distribution Department will receive a total of two utility trucks. Both trucks will need to be equipped with tools at an estimated cost of $10,250 per truck, for a total of approximately $20,500.

Jesse noted that the total cost exceeds the approved budgeted amount by roughly $16,000.

Director Smolley asked if the package bid precluded the District from doing the split that Staff is recommending.  Jesse said the District could freely pick and choose from what’s available.  Director Smolley also wanted to know if there was a corresponding planned increase in the size of District Staff.  Jesse said the District is in the process of hiring two more temporary operators.

Director Fultz praised the Staff for doing good work and recommended that the Board increase the budget by $20,000 to provide some margin.

Directors Layng and Largay were fine with the Staff recommendation.  President Russ approved of this as well.

There was no public comment.

President Smolley moved to direct the GM to purchase one utility truck from Watsonville Ford and one F150 pickup truck from Towne Ford and tools and to increase the budget.  President Russ seconded.  The motion passed 5-0.

 

Santa Margarita Groundwater Agency Update

President Russ introduced this agenda item.  The memo in the Board Packet noted that SLVWD is a member agency of the Santa Margarita Groundwater Agency (SMGWA), the groundwater sustainability agency responsible for managing the Santa Margarita groundwater basin.  Two SLVWD Board directors (Director Largay and President Russ) serve as the District’s representatives to the SMGWA Board.

President Russ reported the following highlights from the most recent SMGWA Board meeting (8/27/26):

  • Department of Water Resources (DWR) is in the final stages of making $3.5 million in grants to small GWAs to help defray compliance costs.  Grant amounts would likely be in range of $100,000 to $230,000.

  • SMGWA’s budget (FY 2026-2027) includes Expenses of $504,000 and Revenues of $320,000 plus use of Reserves, have also begun earning 3.7% interest on cash.  SLVWD’s contribution is approximately $140,000 (40%).

  • The SMGWA Board approved Investment Policy (very similar to SLVWD as dictated by CA’s public entity financial regulations).

  • The SMGWA Board approved agreement with SLVWD to begin monitoring two wells (Oly 1 & Estrella) at installed cost of $16,000 (paid for by SMGWA).

  • The SMGWA Board approved amended Conflict of Interest Code (requiring directors to file directly with CA FPPC rather than County).

  • Considerable work was performed updating/running hydrology model scenarios for the basin under SMGWA’s Groundwater Sustainability Plan (GSP).

  • Four scenarios were run: historical, current, future with climate change, and future using historical data.  Historically, the basin was becoming overdrawn at usages of 4,500 acre-feet/year prior to 2010.

  • Includes City of Santa Cruz recently approved Habitat Conservation Plan (9/2025) which now limits their water intake at their Tait station (which accounts for 60% of surface water use).

    • According to time of year and correspondence with fish life-cycle (e.g. rearing, migration, and spawning).

    • And according to that month’s total flowrates (e.g. driest, dry, normal, wet, very wet).

    • Limits agreed to range from minimum flows of 8 CFS for low flow periods to 18.5 CFS for more abundant wet periods.

    • Allows Santa Cruz to ‘take’ any amounts of water above these minimum flow thresholds (e.g. 5–15 CFS during average water years Jul-Sept).

  • The climate change model dataset indicated that basin could lose 700 acre-feet/year (but only under very severe assumptions and nothing actionable).

  • The model using historical data indicates that basin would be effectively in balance at 2600–2800 acre-feet/year draws (a great result!).

  • SMGWA model assumes continued conjunctive use by SLVWD and supports this approach.

  • SMGWA submissions and conclusions do not place any constraints on SLVWD’s surface takes and actually encourage conjunctive use.

  • Establishes new proposed minimum thresholds (MTs) and measurable thresholds (MO) using running 5-year flow averages.  MT of 700 acre-feet/year for ‘unconfined’ aquifer (i.e. SLVWD) and 1900 acre-feet/year for ‘confined’ aquifer (i.e. SV use of Butano/Lompico aquifer).

  • Adds reporting to County on several water quality thresholds (e.g. arsenic, nitrates, TDS, etc.).

  • Secondary basin projects include conjunctive use between SVWD and Santa Cruz and direct basin recharge using recycled water.

  • Overall, these proposed changes provide the basin both more flexibility (to avoid inadvertent violations) & more robustness and are more cost-effective.

President Russ reported that Bryan, Jason, and he attended the last SMGWA Board meeting.  He said there is always a concern about SLVWD’s $140,000 annual membership, but he was feeling pretty comfortable with the value the District was deriving.  The District is required by the state to meet this obligation.  Overall, he said SMGWA is doing good work, and the state is finalizing a $3.5 million grant program for some number of the 30 small agencies like ours (so between $100,000 and $230,000 may be available for SMGWA).  He said SMGWA is staying out of trouble by making sure that our minimum threshold requirements are based on averaging over multiple wells (which insulates it from the negative effect of an anomalous reading).  The current modeling includes a super-drought scenario with almost no wet years for 50 years which produces only a minimal deficit.  The conditions of the past 50 years project to no deficit.  Over the last two decades, our combined withdrawal from the basin has been cut by almost half, and the aquifers have been stabilizing.

President Russ said these model runs assumed the District’s conjunctive use policy to be in effect, and this is an important contributor.  He added that Director Largay put a lot of effort into rewriting SMGWA’s sustainability plan.  The only SMGWA projects going forward will be for SLVWD’s conjunctive use and for water quality assessment.

Director Largay said the top implementation recommendation in the updated plan is for SLVWD to reestablish its surface water infrastructure.  This is the only recommendation for the basin.  This positions us well.  DWR is releasing grant program guidelines at the end of September with more than $300 million to fund infrastructure repair across the state.  Scotts Valley and the City of Santa Cruz have helpfully stepped aside in terms of putting projects on this list,

Director Fultz said he was more interested in the strategic implications of SMGWA.  The key, for him, is getting the District’s water rights set so that it can do conjunctive use on a permanent basis. This requires the City of Santa Cruz (and Fish & Wildlife) to stand down on their legal interference of 2022.  He said the objective should be for the County (except Soquel Creek) to be completely on surface water for 6-7 months per year.  Director Fultz asked if the District was working on its water rights.

Jason said they met with the state and met twice with the City of Santa Cruz.  He said everyone seems to be on the same page.  The District will make sure the City of Santa Cruz signs off on conjunctive use before proceeding.  Director Smolley observed that the District’s conjunctive use is empirically not impacting the river flow.  Director Fultz agreed, saying SLVWD is only taking about 1% of total average annual flow in the San Lorenzo River.  He asked how much money the District could save by negotiating a settlement that would avoid the need for an Environmental Impact Report (EIR).  He estimated that this might be between $500,000 and a million dollars.

Director Largay said one of the reasons an EIR has been called for involves uncertainties, but a big source of uncertainty was settled a few months ago when the City of Santa Cruz negotiated its own Habitat Conservation Plan (HCP) with both California Fish and Wildlife and the National Marine Fisheries Service.  This provides clarity on what the river needs to carry.  It was going through Big Trees with plenty of water and then running dry below the City of Santa Cruz intakes at Tait in drought years.  Settling this provides a clear framework for SLVWD’s impact and should help to avoid an EIR.  President Russ said they can now track day-by-day and adjust based on cumulative water flows and the current fish life-cycle.   Director Largay said SLVWD’s freshwater withdrawals are now likely to be successful with the agencies.

Director Fultz asked if the newly installed intertie between Scotts Valley and the City of Santa Cruz was being used to sell water to Scotts Valley.  The answer was: not yet.  He also asked if injection wells were now off the table for SMGWA.  The answer: they are no longer in the plan.  President Russ said Scotts Valley’s wells have been designed to be two-way with steel casings so they can be used to provide basin recharging in the future (but there are no current plans).

Director Fultz said getting rid of all this stuff was a big win for SLVWD.  He said we just want to maximize our surface water use during wet months. He was glad to see SMGWA returning to a simpler plan, and he hoped this might lead to lower SMGWA costs.

President Russ reiterated that he now felt very comfortable about where we are with this.

Director Smolley urged the District to get the conjunctive use permit revision in place before it reactivates the Peavine pipeline.  Reactivation could lead someone to argue for terminating the District’s current emergency-use exception.  Secondly, he pressed for attention to possible future cost reductions.  He asked, given the presented scenarios showing minimal impact to the aquifer, how long do we need to continue the monitoring?  He said he just wanted everyone to be thinking about this in the years ahead.  He said we can keep the monitoring network in place, but we should ask what the endpoint is.  The data substantiates that things are going OK.  He noted that SMGWA's current budget is $500,000 per year ($350,000 contributions and $150,000 from reserves).  He asked:  why do the analysis if there is no plan for how to use the results?   President Russ asked if there would ever be a way to terminate this.  He noted that administrative costs are about half of SMGWA’s budget, and outside technical consultants (e.g. Montgomery) represent another 25%.  SMWGA’s future budget is projected to have lower costs for both administrative and technical services.

Director Largay said the two models assumed full implementation of the plan as written.  He added that the current trend is to increase the number of monitoring points because this lessens the potential for needing to take dramatic steps by including more sampling points and averaging them.  This protects against a false positive.  He said monitoring is comparatively cheap vs. other interventions.  He also said Rob Schwartz of SMGWA is quite optimistic that at some point, we are on trend to get back into the state’s good graces.

Director Fultz suggested that it should eventually be possible to pick the most reliable wells and monitor only these.  President Russ added that hydrological modeling is expensive, so he hoped SMGWA could reduce the need for this.  Director Smolley said he was concerned about the costs of generating reports.  Director Largay said he encouraged Management Analyst Jen Torres to track DWR grant opportunities.  The $300 million is for groundwater agencies and their districts.  Getting 1% of this would be pretty cool.

There was no public comment.

 

Consent Agenda

There was one item on the Consent Agenda:

a.      Board Meeting Minutes 8.20.26

There was a minor spelling correction.  The 8.20.26 Board Meeting Minutes were approved by unanimous consent.

 

The meeting was adjourned at 7:50 PM.