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PEBBLE BEACH CO. PROPOSAL TO SELL "ENTITLED" WATER

From the Monterey County Herald
Serving Monterey County and the Salinas Valley
Published Sunday, November 25, 2001

By THOM AKEMAN
takeman@montereyherald.com

The Pebble Beach Co. is proposing to give the Monterey Peninsula Water Management District enough water to provide for 180 average-size houses in exchange for permission to sell water to property owners within the Del Monte Forest at record prices.

The company is now refining the proposal it made recently in a letter to the water district, officials said Wednesday.

"We've been going back and forth just to streamline and try to make it easier for everybody," said Alan Williams of Carmel Development Co., who has been working with the Pebble Beach Co. on land-use plans.

"Things are evolving," said Darby Fuerst, senior hydrologist for the water district. "I guess you'd say it's a work in progress."

The company has been talking about selling water to finance an expansion of its water-recycling project for the past 18 months.

A letter from Pebble Beach Vice President Mark Stilwell to water district manager Ernest Avila outlined the latest proposal this way:

• The company would transfer 45 acre-feet of its 365-acre-foot entitlement to the water district, if the district would see that it is used only for residences on existing lots outside of Pebble Beach.

The district would also have to collect the normal connection fee - approximately $19,000 an acre-foot - and pass the money along to help cover the costs of expanding the Pebble Beach recycling project.

Since the average home within the Peninsula water district uses about a fourth of an acre-foot a year, that would be enough for 180 new houses, or many of the remodeling projects currently listed on governments' water-waiting lists.

• The company would sell 60 acre-feet to residential property owners within the Del Monte Forest at the rate of $169,185 an acre-foot, which would be a record price for water sales on the Peninsula.

Since the average Pebble Beach residence uses about half of an acre-foot a year, that would be enough for about 120 new houses in the forest.

• The money raised by the water district's municipal-rate sales - approximately $850,000 - along with the money raised by the Pebble Beach sales - $10,151,100 - would go to help pay for a $22 million expansion of a $34 million water-recycling project completed in 1994. The company would probably advance the money for the rest of the project, then get reimbursed from eventual water sales, Williams said.

• The company might eventually decide to sell more water in Pebble Beach than the 60 acre-feet contemplated now.

The company said it believes it can sell the 60 acre-feet of high-priced water within Pebble Beach in three months, getting enough money to start the construction for expanding the water-recycling program quickly.

The new equipment - including a desalination plant added to the Carmel Area Wastewater District's sewage-treatment plant and the renovation of the Forest Lake reservoir in Pebble Beach - could be operating by the summer of 2003, when the irrigation of the Pebble Beach golf courses is at its peak.

For its part, the Peninsula water board would have to agree to change the original contracts that restrict new water uses in Pebble Beach to particular parcels of land.

When the contracts were signed, the Pebble Beach Co. tied the water entitlement to parcels allowed to develop in the Del Monte Forest master plan. But the development plans have since changed, and the company now wants the geographic restrictions removed from the water uses.

The water entitlement was agreed to when the company guaranteed financing for the project.

It was designed to clean up sewage so it could be used to irrigate golf courses, and thus free up 800 acre-feet of California-American Water Co. tap water each year.

The company was guaranteed the right to reuse 365 acre-feet of that freed-up water in exchange for its financial commitment. Two other forest property owners who helped finance the project were given another 15 acre-feet. And the water district got the other 420 acre-feet for public benefit.

The recycling project has never worked up to its design capacity for a variety of reasons overlooked by the engineers who planned it.

It has produced 639 acre-feet in the past 12 months, according to reports to the water district. The world-famous golf courses at Pebble Beach have used all of that, plus 374 acre-feet of Cal-Am tap water for irrigation, the reports say.

A desalination plant and a reservoir to hold water when there's a surplus could expand the system beyond the 800 acre-foot capacity the original was designed for, the new designers have said.

When the Pebble Beach Co. first proposed the expansion 18 months ago, it proposed financing through a Mello-Roos bond, which would be paid off by sales of the water at high prices.

The Mello-Roos concept was dropped earlier this year in order to save financing costs, Williams said.

Finite numbers have since been attached to the volume of water for sale, the concept of sharing it at municipal rates added and prices set.