stabilization and enhancement of Kimball Reservoir which shall be for the purpose of flood protection and water supply*

Construction of the Mt. Washington water storage tank is a build out of the City's water infrastructure. It supports growth and will store NBA water, both of which are counter to the letter and spirit of Measure A. Response, County Counsel: County Counsel disagrees with this finding. Under Section 8 of Measure A, one of the approved projects for the City of Calistoga is the "stabilization and enhancement of Kimball Reservoir which shall be for the purpose of flood protection and water supply reliability." The Mt. Washington storage tank constitutes an infrastructure improvement which increases the reliability of Kimball Reservoir as a continued source of municipal water supply for the City's residents. The improvements enhance the operational abilities of Kimball Reservoir and allow for increased bypass flows from the Reservoir during certain key times of the year to improve the downstream habitat of Kimball Creek, with water retained in the storage tank remaining available for use by City residents. Measure A does not include any spatial or locational limitations on approved projects' measures to enhance water supply reliability, only that the project actually enhances reliability. The water storage tank project was reviewed by City, Flood Authority, and County engineers and found to be a qualified approved project, a project which in fact enhanced the water supply reliability of Kimball Reservoir as required by Measure A. Only after those expert determinations were made by qualified staff did the Flood Authority Board approve the project at a publicly noticed meeting. The mere fact that the water storage tank may incidentally represent a build out of the City's water infrastructure does not mean the improvement in any way is a violation of the letter and spirit of Measure A. Under the prefatory clause of Section 8 of Measure A, it is stated with respect to approved projects for jurisdictions other than the City of Napa "...are designed to protect against flooding, improve water quality, preserve the integrity of ground water resources and/or stabilize water supply reliability for the existing Napa County population as of the effective date of this Ordinance. None of these projects are intended or designed to expand water capacity for growth and new development." The water storage tank fits within the parameters of stabilizing water supply reliability of Kimball Reservoir. The additional storage of Kimball Reservoir water provided by the water storage tank allows the City the ability to perform necessary maintenance and repairs on the Reservoir and still provide Kimball Reservoir water to the City's citizens. That the water storage tank may provide incidental benefits to the City's water supply infrastructure as a whole is not prohibitory of its qualification as an explicitly approved project for the City of Calistoga. Measure A's prohibition on projects storing North Bay Acqueduct ("NBA") water are found later in Section 8 and apply only to projects which jurisdictions put forth as "replacement" projects. As the water storage tank falls within the express provisions of "approved" projects for the City of Calistoga, the "replacement" project's prohibitory requirements are not applicable. 1 . . ٠, Response, Flood Protection and Water Improvement Authority (Board of Supervisors): The Flood Protection and Water Improvement Authority (FPWIA) disagree with this finding and incorporates by reference the response and explanation of County Counsel.

Construction of the Mt. Washington water storage tank should have been listed in the 1998 Ordinance as an "approved project" or should have gone through the "replacement project" process. Response, County Counsel: Although no Response was requested or is required, County Counsel notes the following: Respondents disagree with this finding. As noted in Response to Finding 1, the water storage tank falls within the approved project parameter of "[s]stabilization and enhancement of Kimball Reservoir which shall be for the purpose of flood protection and water supply reliability." As a project fitting within the specific approved projects for the City of Calistoga, there was no need to invoke the "replacement" project procedures and requirements. A brief review of the approved projects for the various jurisdictions of Napa County show that generic descriptions of approved projects was intentional on the part of the drafters of Measure A, as well it should be to take into account unknown circumstances or technologies that might affect flood protection or water supply reliability. This purposeful generic categorization is notable for approved projects in, e.g.,: St. Helena ("[S]tabilization and enhancement of Bell Canyon Reservoir, or other existing reservoirs...); City of American Canyon ("[R]estore wetlands by replacing the existing wastewater treatment facility."); Community of Angwin/Deer Park ("[S]tabilzation and enhancement of existing water reservoirs . . ."). While it is debatable whether Measure A as passed by the voters should have included more restrictive language with respect to approved projects requirements, the measure as written and approved by the voters did not do so, and the water storage tank was properly treated as an approved project.

Solage Resort Drainage Project should not have been paid with Measure A funds as the City of Calistoga had no duty to pay that $600,000 cost. Response, County Counsel: County Counsel disagrees with this finding to the extent it implies the so-called "Solage Resort Drainage Project" was not an approved project entitled to reimbursement with Measure A funds. The improvements being questioned are more accurately referred to as "Drainage Improvements in Southeastern Calistoga," which is the project approved by the Flood Authority. This project qualifies as a Measure A, Section 8(C)(2) approved project for the City of Calistoga as "[F]lood protection and drainage improvements in the Grant Street area and other critical areas to protect residents and businesses from flooding" (emphasis added). Three specific drainage improvements were constructed as part of this project: 1) Installation of a bypass culvert to reduce flooding in a mobile home park, 2) widening and stabilizing the slopes of a drainage ditch, and 3) replacement of two 48-inch diameter culverts with a wider bridge. The construction of these improvements was performed as part of the Solage Resort development project under an agreement between the City and the developer but Measure A funding was only sought for the drainage improvements. 2 . . . . . . . . . . . . . . . . . . . . The Grand Jury claims that the City of Calistoga had no duty to pay Solage for the drainage improvements that Solage had constructed. Neither Measure A or the Joint Powers Agreement Regarding the Use and Equitable Distribution of Flood Protection Sales Tax Revenues contain any "duty to pay" requirement for a qualifying jurisdiction to receive Measure A funds, and the Grand Jury report correctly does not state the documents so require. In fact, Measure A, Section 5, providing for distribution of funds, is silent on any such requirement. It simply provides the tax revenues are to be used for qualifying flood protection projects. That section provides: "The portion of the distributions representing the share of the revenues allocated to the unincorporated area may be used to assist in paying for the flood protection projects involving incorporated areas that are described in this Ordinance" (emphasis added). The language does not require the City itself to have either constructed or paid for the improvements, as long as the improvements are made and they qualify as approved projects. The payment also does not violate applicable provisions of the Joint Powers Agreement. Section (9)(c) of that Agreement simply requires a jurisdiction requesting access to Measure A funds "submit to the Authority a request for disbursement in a form acceptable to the Authority, which, at a minimum, shall state the amount of funds requested, describe the project for which the funds are sought and specify how the proposed project is a permissible use of Flood Protection Sales Tax revenues". Calistoga's request for funds was in compliance with those requirements. However, the agreement between the City of Calistoga and Solage is clear that there was a "duty to pay" obligation to Solage by the City of Calistoga. The clear intent from of the language in the City of Calistoga and Solage agreement is that the City was to make "good faith efforts to obtain funds for the reimbursement of the Drainage Improvements" from its share of Measure A funds and, only after the City has made such efforts and did not receive Measure A fund was it relieved of reimbursing Solage for the cost of the drainage improvements. The City made such a request, and, because the project fit within Section 8(C)(2) of Measure A, the Authority approved the request. Once the request was approved, the City had a duty to reimburse Solage for the drainage improvements. Response, Director of Public Works: The Director of Public Works disagrees with this finding and incorporates by reference the responses and explanations of County Counsel. Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding and incorporates by reference the responses and explanations of County Counsel and the Director of Public Works.

As the defense of a lawsuit by a municipality is a general governmental function, the legal fees paid by the City of Calistoga for the Kimball Creek Bypass litigation was an improper use of Measure A funds. Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding. The blanket assertion, without any supporting authority, that defense of lawsuits always constitute a general governmental function is incorrect. The nature of the distinction actually lies in the difference between a "special" tax and a "general" tax. A special tax is one levied to fund a specific governmental project or program, such as the Measure A tax. Expenditures from that tax are specifically limited to those areas of flood protection and water reliability as authorized by the 3 * C. C. 14 measure. This is in contradistinction to a "general" tax, which is levied for general governmental. purposes, i.e., ordinary day to day governmental activities. Measure A funds clearly could not be used to fund City litigation associated with slip and fall tort actions, district attorney criminal prosecutions, or welfare fraud prosecutions, because the basic nature of those actions flow from general tax fund, or general governmental function, activities. It is not the mere fact of litigation that is determinative, but rather whether the underlying basis of the lawsuit impacts the specific governmental project or program which is the subject of the special tax. Defense of the lawsuit was necessary to insure the continued availability of Kimball Reservoir water as a water supply for the City, as it was when Measure A was enacted. If the plaintiff in that lawsuit had prevailed, the continued viability of Kimball Reservoir water as source of supply for city residents could have been severely jeopardized. The legal expenditures were made in furtherance of Measure A objectives, that is ensuring the water supply reliability of Kimball Reservoir. As such, the legal expenditures were proper.

The invoices for the fees paid by the City of Calistoga for the Kimball Creek Bypass litigation provided inadequate information to allow the FPWIA to make an informed determination as whether the billings were reasonable and appropriate. See Response of the County Auditor-Controller previously submitted to the Grand Jury and set forth herein for convenience: The Auditor-Controller disagrees with this finding. The invoices submitted by the City of Calistoga for the Kimball Creek Bypass project followed all required procedures and had all the appropriate and required approvals to allow for payment. Billing records between the City of Calistoga and its attorneys identifying the specific legal tasks performed are subject to the attorney client privilege, and such specific identifying information is appropriately redacted. The Auditor-Controller and FPWIA are entitled to rely on the representations of City that the attorney fees were an appropriate reimbursable expense. Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding and incorporates by reference the response and explanation of the Auditor-Controller.

The City of Calistoga should have acknowledged its breach of public trust much earlier in the bypass litigation. Response: No response is required.

The Measure A Ordinance did not explicitly describe how the approval process should operate and as a result the Organizational Chart was arbitrarily drawn. To the degree the chart is used as a schematic model for Measure A projects, its flaws are transferred into the approval process. <b>Response:</b> No Response is required.

The County Public Works Director improperly certified the legality of several Calistoga Measure A projects. 4 , , , , , , Response, Director of Public Works: The Director of Public Works disagrees with this finding and incorporates by reference the responses and explanations of County Counsel to Findings 1, 2 and 3.

County Counsel is on the Flood Protection Funding Flow Chart to put agreements into proper form, but has no formal role reviewing proposals for compliance with Measure A. In practice County Counsel sometimes reviews proposals but does not review all proposals, and even as to reviewed proposals, County Counsel renders no formal opinion as to compliance with Measure A. Response, County Counsel: County Counsel disagrees partially with this finding. County Counsel agrees that under the referenced flowchart County Counsel has no formal project approval review role, other than to prepare the necessary funding agreement between the requesting entity and the FPWIA. However, County Counsel review is available upon request throughout the process to provide legal review if requested, and a review is performed at the time each funding agreement is approved. Respondents do not believe any more formal review role for County Counsel is necessary. Response, FPWIA/Board of Supervisors: The FPWIA disagrees partially with this finding and incorporates by reference the response and explanation of County Counsel.

The approval process is ineffective since the Flood Protection Water Improvement Authority (Board of Supervisors) has approved projects that lack compliance to Measure A requirements. Greater care should be taken to examine in reasonable detail the compliance of projects and their expenses. Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding. Respondents believe the approval process in place is appropriate and effective, and no projects have been approved in violation of Measure A's requirements. The approval process in place contains sufficient safeguards to insure compliance with Measure A. Requesting jurisdictions on their own first determine a proposed project's eligibility under Measure A. That determination and request are then reviewed by Flood District personnel and the County Director of Public Works to make an independent determination of eligibility. Finally, the request is presented to the Flood Authority Board, which in approving or denying the request makes its own determination of eligibility. Also see Responses to Findings 1, 2, 3 and 9.

The Financial Oversight Committee exemplifies the disability of the system by being placed at the end of the approval process. The Ordinance intended the Financial Oversight Committee to "Ensure ongoing community input in the finalization of all projects..." (Emphasis added.) Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding. There is no disability of the system with respect to Measure A project approval process. All projects are subject to review and oversight by qualified engineers, including the Flood Authority and County Public Works Department. As set forth in Measure A itself, the role of the FOC with respect to approving projects is limited to making a recommendation on proposed replacement projects. 5 1. . . . . . . . . . . . See Measure A, Section 8, concluding paragraph. Section 9(A)(2) of Measure A sets forth the ٠, responsibilities of the FOC, and, other than its role in replacement projects, the FOC has no listed responsibility for approving projects. The Grand Jury's quote with respect to the intent of the FOC is misplaced. That quotation is from Section 3, entitled Purpose and Intent, was drafted with respect to the Napa County Flood Protection and Watershed Improvement Expenditure Plan as a whole, not the specific role of the FOC.

The Financial Oversight Committee is the community "watchdog" for Measure A projects and should constantly monitor the projects in all stages, instead of only after the termination of those projects. Response, FPWIA/Board of Supervisors: The FPWIA disagrees partially with this finding. The FPWIA agrees that the FOC's role could be construed as a community "watchdog" with respect to the expenditure of Measure A tax funds, as Section 9 states the FOC's "purpose and charge is to inform the public regarding the expenditure of the Flood Protection Sales Tax proceeds that will be generated as a result of the approval of this Ordinance by the Authority and the electorate." The FPWIA disagrees the FOC should constantly monitor projects in all stages. FOC members have neither time nor expertise to fulfill roles currently performed by qualified engineers of the Flood Authority and County Public Works Department. Note that under Section 9 of Measure, there is no mention of engineering expertise as a qualification for FOC members. Such technical expertise is assigned to the Technical Advisory Panel. FOC members are community volunteers and serve without compensation. The FOC's role is to monitor the expenditures tax proceeds, not monitor actual project design and construction.

The Financial Oversight Committee is improperly constituted and has passively performed its role. Response, FPWIA/Board of Supervisors: The FPWIA disagrees with this finding. The FOC is properly constituted in accordance with the membership requirements of Measure A, Section 9(A)(3). The fact that there are vacant Committee positions does not mean the Committee is improperly constituted. The FPWIA also disagrees the FOC has performed its role passively. The FOC has complied with its financial oversight duties as set forth in Section 9 of Measure A.