MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORSRUNNING SPRINGS WATER DISTRICT

COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIANOVEMBER 17, 2010

The Regular Meeting of the Board of Directors of the Running Springs Water District was heldon Wednesday, November 17,2010, at the hour of 10:00 A.M. at the District office located at31242 Hilltop Boulevard, Running Springs, California.

The following Directors were present:Ken Ayers, President -Kevin Kellems, Vice-PresidentPaul Shouse, DirectorPamella Bennett, DirectorMike Terry, Director

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Also present were the following:Sam Massey, General ManagerJoan Eaton, Secretary/Treasurer/Administration SupervisorTony Grabow, Fire ChiefRandy Bobroff, Water Division SupervisorTrevor Miller, Wastewater Treatment Division SupervisorIsaiah Hall, Collections Division SupervisorBrian Thomas, Engineer, Engineering ResourcesMike Riddell, Attorney, Best, Best & Krieger, LLP

Visitors present were:Scott Manno and Nancy O'Rafferty, Auditors, Rogers, Anderson, Malody and Scott, LLPGerhard Hilgenfeldt, District CustomerRichard Luczyski, District CustomerJoan Moseley, Mountain News Reporter

The meeting was c~Jl~4~P order art l 0:P4 A..~. py Presiden; Ayers. Called to Order

Director Shouse led the Assembly in the Pledge of Allegiance. Pledge of Allegiance

All visitors were introduced and Mr. Luczyski stated he had comments Visitorsfor the Board and staff that would be addressed later in the meeting.

President Ayers moved the meeting to Agenda Item DCA.

Scott Manno and Nancy O'Rafferty, Certified Public Accountants withRogers, Anderson, Malody and Scott, LLP (RAMS) presented the200912010 Audited Financial Statements ending June 30, 2010 andprovided documentation stating that they conducted their audit inaccordance wit?~PP~fipps~~~~~ generallya~c~pted in th~ UnitedStates of Amenca and the State Controller's Minimum AUQlt 'Requirement for California Special Districts.

Fiscal Year 2009110Financial AuditReport

MINUTES - NOVEMBER 17,2010PAGE TWO

Regular BoardMeeting MinutesOctober 20,2010

October 30,2010Expenditures

In their opinion, the financial statements referred to present fairly, in allmaterial respects, the respective financial position of the governmentalactivities, the business-type activities, and each major fund of theRunning Springs Water District as of June 30, 2010 and 2009, and therespective changes in financial position and where applicable, cash flows,thereof for the years then ended in conformity with accounting principlesgenerally accepted in the United States of America as well as accountingsystems prescribed by the State Controller's office and State regulationsgoverning Special Districts. (Unqualified Opinion) Mr. Manno stated thehighest level of assurance they could provide is an unqualified opinion.

The District Audit Report was presented to the Board in Power Pointformat by RAMS that included District wide balance sheet informationand individual departmental revenues and expenditures for the Fire, Waterand Wastewater Departments. The current assets to current liabilities ratiofor June 30, 2010 is 4.0:1 compared to 3.7:1 for June 30, 2009. Mr. Mannodiscussed cash and temporary investments, capital assets and long-termdebt for the District and stated that the debt to service ratio for the SewerDepartment ended at 2.49 and the debt to service ratio for the WaterDepartment ended at 2.52 with a 1.15 requirement. Mr. Manno stated thatthe District meets the debt service coverage requirements and is in goodfinancial standing.

Visitor Richard Luczyski asked the Auditors to provide the revenue receivedfrom customer late fees in Fiscal Year 2009/10 and it was reported to beapproximately $42,000. Mr. Manno concluded his report with review of theStatement of Auditing Standards No. 114, The Auditor's Communicationwith those charged with Governance. Supervisor Eaton stated the Districtbudgeted approximately $51,000 for the Fiscal Year 2009/10 Audit.

With no further information to report regarding the Fiscal Year 2009/10Financial Audit Report, President Ayers excused the auditors from themeeting.

Upon motion by Vice-President Kellems, second by Director Shouse andcarried by a 5 to °vote, the Fiscal Year 2009/10 Financial Audit preparedby the District's Independent Financial Auditor, was approved.

Upon motion by Director Terry, second by Vice-President Kellems, andcarried by a 5 to 0 vote, the Regular Board Meeting Minutes of October20,2010, were approved, ....

Upon motion by Vice-President Kellems, second by Director Bennett andcarried by a 5 to °vote, the expenditures of October 30, 2010, wereapproved. ..

MINUTES - OCTOBER 20,2010PAGE THREE

Supervisor Bobroff opened by reporting on the Harris well and stated thepump and motor were replaced on October 29,2010 and the well was placedback in service on November 3, 2010 at a rate of 31.5 gallons per minute.The Nob Hill generator is still out of service and being repaired by Bay CityElectric with the portable standby generator connected at the site.

Supervisor Bobroff then reported on one emergency service line replacementin downtown Running Springs. Discussion continued regarding replacementof the approximate 500 remaining downtown service lines that were originallyinstalled in the 1950's.

Supervisor Miller stated his department is working on the WastewaterTreatment Plant Expansion Project and more in depth information will beprovided later in the meeting.

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Supervisor Hall opened by reporting on the Fats, Oil and Grease (FOG)Disposal Program that begins on January 1,2011 and is mandated by theState of California. The program is a key component of the Sewer SystemManagement Plan that provides information on appropriate disposal of fats,oils and grease within food service establishments and residents and willprevent disposal of these elements into the sewer system. Engineer Thomasalso reported on the FOG program and stated that meetings have beenscheduled and a Public Outreach program will be implemented by theDistrict to inform all customers and residents.

Supervisor Hall reported on the Lift Station No. 1 Overflow Tank Projectand stated that the property has been surveyed and the appropriate tank siteis being determined. Meetings are being held with Engineering Resourcesand the project is expected to begin in the fall of2011.

OPERATIONALREPORTS(Water)

(Wastewater)

(Collections)

Chief Grabow stated in addition to his monthly written report, the Department (Fire)had an extrication drill on the Harris Property in conjunction with the USForest Service, Arrowbear and Green Valley Lake with vehicles donated byPick-A-Part. Battalion Chief Olsen also attended an auto extrication class thatprovided new auto extrication technology.

Chief Grabow reported on the Hazard Abatement Ordinance and statedthere were approximately two hundred and twenty (220) residents thatwere out of compliance and stated the low number W&S a result of publiceducation of the program. Discussion continued regarding-the HazardAbatement Program and Forest Service property which Chief Grabowstated was not included in the Hazard Abatement Program. Visitor RichardLuczyski suggested the Fire Department consider a link to the Forest Careprogram on the District website. District staff will follow up with regardsto updating the District website.

MINUTES - NOVEMBER 17,2010PAOEFOUR

(Administration)

(General Manager)

Ayers AcresGroundwaterDevelopment

Supervisor Eaton reported on the State Controller's Office Local GovernmentCompensation Reporting request and stated the District is in receipt ofGovernment Code (OC) Section 12463 that requires local governmentagencies provide financial information to the State Controller's office.Supervisor Eaton is compiling the information and will submit the reportelectronically by December 13,2010 to complete all filing requirements.

Supervisor Eaton announced that the District Board Meeting InformationPackets will now be available on the District website each month.

Manager Massey provided the Board with the General Manager's Reportand list of meeting recently attended. In addition, Manager Masseyreported on the Local Agency Formation Commission (LAFCO) meetingheld on November 4,2010 with Kathleen Rollings-McDonald and LAFCOstaff, Mike Sullin, General Manager, Arrowbear Park County Water Districtand staff and President Ken Ayers and District staff to discuss LAFCO'sMunicipal Service Review and possible consolidation. Manager Masseystated that LAFCO will ultimately recommend and support the process ofconsolidation between the Districts but they will not force consolidation.President Ayers reported on the Fire Department and ambulance benefitscurrently provided by the District to the upstream users. The ServiceReview is expected to be completed by March, 2011 and future meetingswill be held between the Districts and with LAFCO to discuss the benefitsand possibility of consolidation.

Regarding the Ayers Acres Groundwater Development Project, ManagerMassey explained that the District purchased property below Poplar andWillow Drive with the intention of drilling wells to produce water.Manager Massey stated the property has been analyzed to determine thebest site for the well. To obtain access to the property, the District isrequired to obtain three (3) separate easements from adjacent propertyowners. The easements have been appraised by an outside appraiser andthe value of the easements were communicated to the property owners.The District has secured one (1) easement document that will be presentedas an action item later in the Board meeting. Manager Massey hascommunicated with the two (2) other property owners regarding unresolvedlot line adjustments and Attorney Riddell is assisting with documentation.An environmental impact study has been completed on the property andEngineering Resources is designing the facility to include booster stationsfor pumping water. ManagerMassey stated theproject will provideadditional revenue tor the District when ~omple):e~

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MINUTES - NOVEMBER 17,2010PAGE FIVE

Supervisor Miller updated the Board regarding the Outfall Line Repairand stated a meeting was held on November 5, 2010 with the US ForestService, a representative from Tom Dodson and Associates, Dan Wagnerfrom Bacon Wagner and District staff to discuss the construction of atemporary route to the repair site to reinforce the temporary bypass linesupports for the winter. The District was informed that a temporary routecannot be completed until the US Forest Service reviews our CEQAdocuments as well as consults with the Governor's office due to the locationthat is an "Inventoried Roadless Area". The US Forest Service has advisedthe District that they would not be able to determine if a temporary routecould be installed until sometime in the spring. Supervisor Miller stated thatbecause a temporary route cannot be constructed, the existing bypass supportsmust be reinforced for winter or new supports will need to be constructed.The District is currently conferring with Engineering Resources to addressthe issue of supporting the temporary bypass line through the winter.Engineer Thomas stated a Water Quality Management Plan will not berequired for the project since everything will be restored to the originalcondition when complete. Manager Massey stated the projected completiondate is summer 2011.

Supervisor Miller reported on the Wastewater Treatment Plant Expansionproject that will be completed in two phases. Phase I will be the removalof the existing cassettes in the Membrane Bio Reactor (MBR) and installingthe new equipment into MBR 1. Phase II will be installing the old equipmentfrom MBR 1 into MBR 2. On November 16,2010, a representative fromEnviroquip made a site visit to perform a mechanical inspection of theequipment. Supervisor Miller noted that there were multiple delays andchanges to the project due to the recent inclement weather and equipmentissues. The clean water test has been rescheduled to November 19,2010and if the test is satisfactory, the integration is complete. With'the upgradeto MBR 1(new more efficient cassettes) and the unmodified MBR 2, theplant capacity will be approximately 750,000 gallons net per day. OncePhase II is complete, the capacity goes to 1,050,000 gallons per day.Supervisor Miller stated the MBR 1 is expected to be online byThanksgiving weekend.

Manager Massey commended Supervisor Miller and staff for doing a greatjob on the Wastewater Treatment Plant Expansion Project. ManagerMassey also thanked Supervisor Bobroff, Supervisor Hall and their stafffor the cooperation and support with the PfQ)C9t. ' . , .

The Local Agency Investment Fund Remittance Advice for quarter endingSeptember 30, 2010 was provided to th~Board for their review andinformation only. The' interestrate wasQ.51%. '

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Outfall Line RepairProject

Wastewater TreatmentPlant Expansion Project

Local AgencyInvestment FundRemittance Advice

MINUTES - NOVEMBER 17,2010PAGE SIX

Board WorkshopDates

Assessment District#102010/11 AnnualReport

Certificate ofAcceptance ofEasement - TaylorGrant of EasementParcel No.0328-291-34

Easement Quitclaimto Vacate ExistingSewer Easement onAssessor ParcelNo. 0328-291-34

The District conducts a workshop each year in January or February todiscuss the upcoming budgetary process between staff and the Boardof Directors. Manager Massey stated that due to timeframe ofProposition 218, the District would like to schedule the meeting afterJanuary 1,2011. The Board was provided with various dates inJanuary and asked to confirm with District staff regarding their datepreference.

In July 2003, Assessment District #10 was formed to finance a newwater pressure zone in the Rimwood Ranch area of Running Springs.The Assessment is administered by NBS who provides the Districtwith an annual report for the District's review. Supervisor Eatonstated an action item would be included later in the Board meetingregarding a recommendation to move funds in Assessment District # 10from the reserve account to the redemption fund. This report isavailable for review on the District website under the NovemberBoard packet.

Manager Massey reported on the Ayers Acres GroundwaterDevelopment Project easement for Taylor, Grant on Assessor ParcelNo. 0328-291-34. The Taylors have signed and notarized the Grantof Easement, granting the District an easement for public utilitiesdistribution and collections systems consisting of water and sewerservices and ingress and egress in, over and across the describedreal property. If the Board approves the Certificate of Acceptanceof Easement for the Taylor Grant of Easement, the documents willbe forwarded to the San Bernardino County Recorder's Office forrecordation. Upon motion by Director Shouse, second by PresidentAyers and carried by a 5 to 0 vote, the Certificate of Acceptance ofEasement for Taylor Grant of Easement on Assessor ParcelNo. 0328-291-34, was approved.

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Manager Massey continued by stating that during the course ofpreparing easement documents to acquire a water easement acrossParcel No. 0328-291-34 for Ayers Acres, it was apparent the existingroadway was outside the boundaries of the easement. It is necessaryto establish a new easement which matched the existing roadway.The District has proposed to abandon or vacate the existing easementin exchange for the property owners granting the District a new moreprecise easement that coincide with the current road placement. Aquitclaim is required to vacate the existing sewer easement onAssessor Parcel No. 0328-291-34. Upon motion by Director Shouse,second by Director Bennett and carried by a 5 to 0 vote, ExecutingEasement Quitclaim to Vacate Existing Sewer Easement on AssessorParcel No. 0328-291-34, was approved.

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MINUTES-NOVEMBER 17,2010PAGE SEVEN

Manager Massey stated that District staff has met with numeroustelecommunication companies regarding a new telephone system and havedetermined that a digital system would be the most reliable for the District.The Avaya system offered by Mergednet at a quote of$33,323 and thePanasonic system offered by Datafone at a quote of$33,993 provided allthe features the District required with the benefit of being competitivelypriced. Manager Massey stated District staff has reviewed both systemsand believe the Avaya digital phone system would be the best choice forthe District. Copies of both quotes were provided to the Board for theirreview and consideration. References for the Avaya system were checkedand the responses were positive. There will be no interruption to Districttelephone service during the implementation period and training will beprovided by Mergednet. Upon motion by Director Terry, second byDirector Shouse and carried by a 5 to 0 vote, the Avaya Digital DistrictTelephone System with Mergednet at the quoted price of $33,323.48,was approved.

Supervisor Eaton stated that on January 20, 2010 the Board approved andsecured membership in the SDRMA (Special District Risk ManagementAuthority) Workers' Compensation Insurance Program. At theJanuary 27,2010 Rescheduled Board Meeting, the Board adoptedResolution No. 02-10, Authorizing Application to the Director ofIndustrial Relations, State of California for a Certificate of Consent to

. Self-Insure Workers' Compensation Program. Resolution 02-10 and anapplication prepared by SDRMA for RSWD was submitted and an AffiliateCertificate of Consent to Self Insure No. 5806-0393 was issued to theDistrict but contained an error in the statement of allocation of claims. Anew application has been drafted by York Insurance to obtain a correctedorder transferring self-insurance authority and revoking the certificate toself-insure and adoption by Resolution is required. Upon motion by DirectorBennett, second by Vice-President Kellems and carried by a 5 to 0 vote,RESOLUTION NO. 21-10, AUTHORIZATION OF APPLICATION TOTHE DIRECTOR OF INDUSTRIAL RELATIONS STATE OFCALIFORNIA FOR A CERTIFICATE OF CONSENT TO SELF INSUREWORKERS' COMPENSATION LIABILITIES, was adopted. (ResolutionNo. 21-10 on file in the District office)

Manager Massey reported on the Running Springs School Road PavingProject that was awarded to Romans Construction at the September 15,2010Board Meeting not to exceed $41,993.50. The paving project was completedwithin the timeframe specified in the contract. Engineer Thomas stated thatan additional 50 tons of asphalt to fill approximately 900 feet of road to filllow spots created by tree roots was needed to complete the project whichnecessitated the approval ofa change order in the amount of$I,893.00.Unexpected construction issues increased the cost of Engineering Services by$739.05.

New DistrictTelephone System

Resolution No. 21-10Application to theDirector of IndustrialRelations, State ofCalifornia for aCertificate of Consentto Self Insure Workers'CompensationLiabilities

Running SpringsSchool Road PavingProject Change OrderNo.1

MINUTES - NOVEMBER 17,2010PAGE EIGHT

The Contract Change Order No. 1 was provided to the Board for theirreview and consideration. A typographical error was detected in the costfigures of the Change Order and will be corrected. Upon motion byVice-President Kellems, second by Director Terry and carried by a 5 to 0vote, Contract Change Order No. 1 to Running Spring School Road PavingProject in the amount of$I,893.00 and additional Engineering costs in theamount of$739.05 for a total of $2,632.05, as corrected was approved.

Notice of Completion Manager Massey provided the Notice of Completion for the RunningRunning Springs Springs School Road Paving Project Contract to the Board for theirSchool Road review and consideration. Upon motion by President Ayers, second byPaving Project Director Shouse and carried by a 5 to 0 vote, the Notice of Completion

for the Running Springs School Road Paving Project Contract wasapproved.

Notice of Completion Manager Massey reported on the Wastewater Treatment PlantINob HillWastewater Irrigation Project Contract that is replacing the irrigation systems thatTreatment Plant were destroyed in the Slide Fire. Engineer Thomas stated they replacedNob Hill Irrigation the system exactly as it was destroyed. The bid was awarded to BaconProject Contract Wagner Excavating and the project was completed in the timeframe

specified in the contract. Supervisor Bobroff stated the Nob Hill site willbe landscaped in the summer of 20 11. Upon motion by Director Shouse,second by Vice-President Kellems, and carried by a 5 to 0 vote, Notice ofCompletion for the Wastewater Treatment PlantINob Hill Irrigation ProjectContract, was approved.

Ordinance No. 34AmendingOrdinance No. 17Declaring a WaterShortage Emergencyand EstablishingA WaterConservationProgram

At the October 20,2010 Board Meeting, the Board approved OrdinanceNo. 32 establishing guidelines for the installation of residential meters forirrigation purposes on unimproved properties. Discussion ensued duringthe October meeting regarding the need to update the Water ConservationProgram to include a provision to suspend service to specific metersduring a declared water shortage emergency. Manager Massey reviewedOrdinance No. 17 and stated the most suitable section to include languagesuspending service to both residential water meters installed for irrigationpurposes on unimproved property and irrigation water meters should beincluded in Section 4, Phase II, Water Shortage. Ordinance No. 34 willamend Ordinance No. 17 regarding the suspension of water service toundeveloped property residential water meters and irrigation water meterswhen the Board has declared a Phase II (or higher) water shortage exists.A copy of Ordinance No. 34 was provided to the Board for their reviewand consideration. Upon motion by President Ayers, second byVice-President Kellems and carried by a 5 to 0 vote, Ordinance No. 34,Amending Ordinance No. 17 Water Conservation Program was approved.

[MINUTES -NOVEMBER 17, 2010PAGE NINE

Manager Massey stated that the District has had many customer requeststo pay water and sewer bills using a credit or debit card. District staffhas investigated a number of companies that contract with governmentalagencies allowing them to accept optional forms of payment and ManagerMassey stated that District staff believes that the Paymentus Corporationoffers the most advantages to the District. Paymentus offers this serviceat no cost to the District with a nominal service fee to the customer usingthe service. The service will be provided to our customers with the use ofthe internet through the District website or by telephone. Manager Masseystated there is a maximum payment amount of $300 that could be appliedtoward water/sewer utility or availability bills, with multiple paymentsapplied to a single account if required. The maximum payment that maybe applied toward an ambulance bill is $350 with the same option ofmultiple payments. District staffhas contacted Terisa Bonito, FirstMountain Bank to verify that the program would be compatible with ourfinancial institution. Paymentus customer payments will be postedmanually into our billing system daily. Manager Massey provided theBoard with a copy of the Paymentus Master Services Agreement whichhas an initial contractual period of three (3) years. At the end of the initialthree year term, the agreement would renew for successive one (1) yearperiods. The agreement has been reviewed by our legal counsel and therewere no suggested revisions to the contract. Manager Massey providedthe Board with a copy of the Master Agreement for their review andconsideration. Discussion continued regarding the program and ManagerMassey stated several references were contacted and they provided positivefeedback. The District ACH Debit Program with First Mountain Bank willnot change. The Paymentus program information will be provided to ourcustomers on our website and also delivered to District customers as aninformational insert in our billings. Upon motion by Vice-President Kellems,second by Director Terry and carried by a 5 to 0 vote, Executing a MasterServices Agreement with Paymentus Corporation to Accept Credit Cards,Debit Cards and E-Checks, was approved.

Manager Massey stated that on October 28, 2009, the Board adoptedOrdinance No. 31, establishing a residential irrigation meter service policyfor improved residential properties. The ordinance deferred amendingOrdinance No.8, Rules and Regulations for Water Service, until such timethat the District further amended Ordinance No. 8 at a future date. Itbecame clear after Ordinance No. 32 was adopted that Ordinance No. 31had not amended Ordinance No.8. The adoption of Ordinance No. 33 willincorporate the policy changes established in Ordinance No. 31 by amendingOrdinance No.8. Manager Massey stated there are no material changesbetween Ordinance No. 31 and Ordinance No. 33. Attorney Riddell madesome minor word changes to the document and suggested removing thedollar amounts of the rates in the ordinance to eliminate the need to revisethe ordinance when f~t,e~chilPg~~,: ..

Paymentus CorporationBill Payment CompanyMaster ServicesAgreement

Ordinance No. 33Amend OrdinanceNo.8 to Incorporatethe ResidentialLandscape IrrigationMeter Service Policy

MINUTES - NOVEMBER 17, 2010PAGE TEN

Customer Requestfor Water BillAdjustment

December RegularScheduled BoardMeeting Cancelled

Transfer of SurplusFundsAssessment District

Upon motion by Director Shouse, second by Vice-President Kellemsand carried by a 5 to 0 vote, Amend Ordinance No 8 to Incorporatethe Residential Landscape Irrigation Meter Service Policy by AdoptingOrdinance No. 33, was approved.

Manager Massey stated the District received a letter from customerVahagn Mkhikian asking for an adjustment to his September water bill.Mr. Mkhikian acknowledged that he recently visited his home but didnot observe any leaks during that time and that he turned off the waterin the bathroom when he left. The water meter was read onSeptember 12,2010 and was not observed to be running but was placedon the reread list due to the high reading and confirmed to be an accuratereading. The meter was read again October 12,2010 during the monthlyreading cycle and was observed to be running at approximately 50 cubicfeet per day. The meter was then turned off and the customer notified.On October 21, 2010 Mr. Mkhikian called to request that the District checkhis water meter for a possible leak. District staff confirmed that the meterwas still off and not leaking. Manager Massey stated the amount of waterin dispute is 8,534 cubic at $278.21 plus the sewer usage fee of $41.73 fora total of $319.94. District staff reported that an explanation for thecustomer's water loss could not be determined. Discussion continuedregarding optional meter reading equipment and Manager Massey statedan automated meter reading system was expensive and not financially viablefor the District. District staff discussed a payment arrangement option forthe customer fees in question. Upon motion by President Ayers, second byVice-President Kellems and carried by a 5 to 0 vote, the Customer Requestfor a Water/Sewer Bill Adjustment was denied.

fII\ .-

Manager Massey asked the Board to consider cancellation of the DecemberBoard Meeting due to the holidays. Upon motion by Director Bennett,second by Director Shouse and carried by a 5 to 0 vote, the December 15, 2010Regularly Scheduled Board Meeting was cancelled.

Supervisor Eaton stated the Running Springs Water District AssessmentDistrict No. 10 was formed and bonds were issued to finance a new waterpressure zone in Rimwood Ranch. Assessment District No.1 0 isadministered by NBS Local Government Solution and the levy consists ofthirty two (32) parcels. A copy of the Assessment District No. 102010/11Annual Report was provided to the Board for review. Supervisor Eatonmentioned that the report states that as of June 30, 2010 the Reserve Fundbalance of $136,385.43 held by the Bank of New York Mellon Trust exceedsthe reserve requirement amount of$117,900.00 by approximately $18,500.00.It is the recommendation ofNBS that the District transfer the surplus amountof$18,485.43 to the Redemption Fund in accordance with the District'sformation documents and use the surplus to ensure sufficient funds areavailable to make future debt service payments.

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I,MINUTES - NOVEMBER 17, 2010PAGE ELEVEN

Upon motion by President Ayers, second by Director Bennett and carriedby a 4 to 0 vote, with Director Terry abstaining, the Transfer of SurplusFunds in the amount of $18,485.43 from the Bank of New York AssessmentDistrict #10 Reserve Account to the Redemption Fund at the RecommendationofNBS, was approved.

Engineer Thomas reported on his previous discussion regarding the possibility Engineer's Reportof Hydro Kenetic Energy Source utilizing effluent from the Treatment Plantto provide generation. Engineer Thomas stated the Federal Energy RegulationCommission (FERC) permitting process requirement is onerous and expensiveand noted that the permitting process would not be streamlined and availableuntil possibly the year 2025.

Attorney Riddell opened by reporting on the impacts of Proposition 26 onLocal Agencies that was recently approved and stated that the propositionmade certain charges imposed by Public Agencies "special taxes" that wouldrequire approval by two thirds of the voters. Attorney Riddell stated that theproposition defmes "special taxes" as all charges not otherwise exempted andthen he continued by outlining some of the exclusions. Attorney Riddellstated Proposition 26 should not affect the District because of the types ofcharges that are imposed. A memorandum will be provided to the District byBest, Best & Krieger (BB&K) explaining the proposition in detail andAttorney Riddell asked the Board and staff to review the information andcontact him with any questions.

Attorney's Report

Attorney Riddell then reported on the water supply issue and stated therewas no Information from the Crestline Lake Arrowhead Water Agency(CLA WA) to provide. CLA WA will know the initial allocation inDecember, 2010 and Attorney Riddell stated if the allocation is low, thereshould be no concern because there is stored water available.

Attorney Riddell continued by reporting on the issues in the Delta andstated there is a Bay Delta Conservation Plan process that is puttingtogether a multi-species habitat conservation plan that should resolve allthe species issues and provide for construction of an alternate conveyancefacility through the Delta. Attorney Riddell stated the State Water Contractorsand Federal Contractors have advanced $140 million dollars to pay forpreparation of the plan. The Contractors are waiting for assurance from theFederal Regulatory Agencies before providing more funds for the plan andthe process is currently on hold. A Bay Delta Conservation Plan website isavailable with additional infcrmation tl1~lprovides the sffims pf me plan·

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Attorney Riddell closed by s~twg lUPfl;l ram. fspr9jQQt~qJpr-,th~Notthw~stthan the Southwest and if that holds true, vv~mt,lyhaYea. fel~t~wlY4ttwinter. ;, ., I," -, ",: ,',,!, ,,: ','.' . . ' .. ::,: .

MINUTES - NOVEMBER 17,2010PAGE TWELVE

Director's Business

Financial ConsultantProposal

Ethics TrainingRequirement

K Turbo Project

Zero LandscapeDemonstration

Bartle WellsFinancial MasterPlan

For the record, Director Bennett stated she has no relation to theBennett Excavating Company.

President Ayers stated the Finance Committee recently met withthe District auditors from Rogers, Anderson, Malody and Scott(RAMS) who have proposed taking a more proactive role inassisting management with accounting policies and state regulationsand the accounting/fmance functions of the District. RAMSbelieves that they can assist the District with a broader scope ofservices which were limited by them servicing as auditors.Manager Massey stated that because of their experience andrelationship with the District, staff believes that RAMS wouldprovide the highest level of expertise as our Financial Consultants.Manager Massey noted that if RAMS were to contract as ourFinancial Consultant, the District would be required to hire anoutside auditing firm to conduct the yearly audit. Discussioncontinued regarding accounting terminology and ManagerMassey closed by stating that the District budgeted $15,000 inFiscal Year 2010/11 to provide for a Financial Consultant. Thistopic will be discussed further in the upcoming Budget Workshopscheduled for January 12,2011.

Supervisor Eaton reminded the Board and staff of the Ethicstraining requirement for calendar year 2010.

Manager Massey explained the K Turbo project and stated blowerswere placed at the Treatment Plant that reduced the consumption ofelectricity. Southern California Edison has provided this Districtwith an incentive rebate program for purchasing energy efficientmachinery.

Chief Grabow clarified the zero landscaping demonstration recentlyheld in Big Bear that provided residents with information and ademonstration of maintenance free landscaping.

Manager Massey reported on the Bartle Wells Financial MasterPlan and stated the District hired Financial Consultants to prepare along term fmancial rate study that included infrastructure needsprojected over the next twenty years. The projects were broken intofive (5) year implementation terms and an accompanying rate studyproposed an approximate 4% to 5% rate increase per year over thenext twenty years, -President Ayers exph~!n(:'qthat through thedetailed study, the Pist!ici h~st4entif1e4v<mo4s9perational projectsthat require compleliPTnm4 ftm44l~pplip~s t~at include various loanopportunities. . . ..

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MINUTES - NOVEMBER 17,2010PAGE THIRTEEN

Discussion continued regarding fruition of the Financial Master Plan andexpenses associated with maintaining and upgrading District facilities.A simplified version of the Financial Master Plan will be posted on theDistrict website for customer information.

Director Shouse reported on using personal computers for company businessand stated District documentation on personal computers subjects the user tothe possibility of a discovery process. The only way to avoid the risk is toprovide Board members with individual computers dedicated to companypurpose. This issue will be discussed by the Board at a later date.

The meeting was adjourned at 1:17 P.M.

Respectfully Submitted,

President

Board MembersPersonal ComputersRisk of Discovery

Adjournment