Monte September 23, 2019 Honorable Michael J. Carrozzo, Presiding Judge Santa Barbara County Superior Court*

R1

— That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, pursue the upcoming 2020 contract negotiations as an opportunity to create a completely new contract. This recommendation will not be implemented. The Master Contract for the Cachuma Project is a water supply agreement establishing water rights for the Member Units and the associated terms of repayment of Project related costs. Addressing future water management problems such as climate and other rapid environmental changes are more appropriately suited for an Operations Plan and/or other Montecito Water District water supply planning documents. For example, water supply management problems related to climate and other rapid environmental changes are incorporated into the Montecito Water District Urban Water Management Plan. The terms of the Master Contract are determined by USBR using contract language previously developed and adopted by USBR as its standard water related contract articles. Revisions of these standard contracting articles will likely be limited. The terms of the existing Master Contract contemplate future contract renewals rather than entirely new contracts, as recommended by the Grand Jury. Negotiating a completely new contract in lieu of a Contract renewal would add unnecessary complexity, challenges and cost to an already arduous process. It is the Montecito Water District’s understanding that USBR is currently working towards a renewal of the Master Contract for the Cachuma Project, which the Montecito Water District supports. The District intends on working closely with the County and USBR on a Contract renewal meeting the needs of the Member Units.

R2

- That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, require that key terms in the new Contract are defined clearly and used in a consistent manner. While the Montecito Water District supports the Grand Jury recommendation, the decision to implement the recommendation is ultimately subject to the determination of the contracting parties during the contract renewal process. As previously noted, much of the language included in federal water supply contracts like the Master Contract for the Cachuma Project, including definitions of key contracting terms, has been standardized by USBR and made a part of its standard water related contract articles. Revisions of these standard contracting articles, including the definition of key terms and their use, will likely be limited.

R3

— That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, ensure their roles and responsibilities are clearly defined in the new Contract. While the Montecito Water District supports the Grand Jury recommendation, the decision to implement the recommendation is ultimately subject to the determination of the contracting parties during the contract renewal process. The Montecito Water District believes that the roles and responsibilities of both the County and Member Units pertaining to the roles and responsibilities under the Master Contract are clearly defined in the existing Master Contract, as well as in other existing contractual arrangements such as the Member Unit Contract between the Montecito Water District and the County. The contracting parties and Member Units may choose to revisit these roles and responsibilities during the contract renewal process and may consider refining or improving them in the updated contract. 3 0f7 Montecito Water District RESPONSE TO GRAND JURY REPORT - The CACHUMA PROJECT CONTRACT AND MANAGEMENT

R4

— That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, strongly urge in negotiations for the new Cachuma Project Contract that the Water Year should run from May I to April 30, or a similar period, to allow diversion requests to be made soon after the usual winter rain period. The Montecito Water District will not implement this recommendation. Section 3(a) of the Master contract requires that three months prior to the beginning of each Water Year, the County provide USBR with a copy of the Member Units’ allocation request for the quantity of available supply to be delivered for the next Water Year. If the Water Year begins May 1, this will require the County and Member Units to deliver an allocation request to USBR by February 1. This is problematic in that the typical annual rainy season runs from January through April. From a water supply and management standpoint, the allocation request is most effectively made after the rainy season has concluded. With the Water Year beginning October 1, the Member Units allocation request is made in late spring or early summer when the impacts from the previous rainy season are fully known. If during the next Water Year, the rainy season results in a change to the available supply, the Master Contract allows for mid-year adjustments. Additionally, the current October 1 Water Year is commonly used in other water supply related contracts and agreements. Changing the Water Year for the Cachuma Project Master Contract could have supply and management implications as related to those contractual arrangements.

R5

- That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, propose to the Bureau of Reclamation that the new Cachuma Project Contract require a meeting between them and the Bureau every five years, with a public agenda, to consider changes to Contract provisions which have become outdated. This recommendation will not be implemented. The Montecito Water District's response to this recommendation is similar to that of Finding and Recommendation 1. The Master Contract for the Cachuma Project is a water supply agreement establishing water rights for the Member Units and the associated terms of repayment of Project related costs. Changed conditions such as rapid climate change are more appropriately suited for an Operations Plan and/or other Montecito Water 4 of 7 Montecito Water District RESPONSE TO GRAND JURY REPORT - The CACHUMA PROJECT CONTRACT AND MANAGEMENT District water supply planning documents. Changed conditions are also addressed in the Montecito Water District's Urban Water Management Plan which is updated every five years and projects water supply availability for a twenty years period. The Montecito Water District favors a long-term contract over a short-term (5-year) contract for a variety of reason. Long term contracts provide increased certainty for water supply planning. Renegotiating a water supply contract every five years would add unnecessary complexity, challenges and cost to an already arduous process. In addition, short term contracts would result in increased uncertainty in Montecito Water District long term water supply planning efforts and would likely subject the Cachuma Project to increased environmental review, adding cost, time and uncertainty. The Montecito Water District is currently negotiating a water supply contract with the City of Santa Barbara to participate in its Charles E. Meyer Desalination Facility. Similar to the Cachuma Project contact, the Montecito Water District desires a long-term contact with the City, 50 years, to ensure water supply reliability and certainty into the future.

R6

- That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, propose to the Bureau of Reclamation that the required five-year meetings allow changes to the operations of the new Contract, including increased diversions, provided they are consistent with Federal law, State law, and Project Water Rights, and do not negatively affect the environment or the groundwater quality downstream of Bradbury Dam. The recommendation will not be implemented. A review of Article 9g of the Master Contract demonstrates that the provision does not use the term "increased water diversion to Member Units". However, the provision does require that after any 5-year meeting that changes in operations must be consistent with Federal law, State law, Project Water Rights, and this contract, and do not reduce the Available Supply in any Water Year.

R7

— That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, establish a format for quantitative decision-making under uncertainty; and seek to narrow their differences on such components as probabilities of future rainfall patterns and criteria for desirable outcomes. 5 of7 Montecito Water District RESPONSE TO GRAND JURY REPORT - The CACHUMA PROJECT CONTRACT AND MANAGEMENT The Montecito Water District will not implement this recommendation. A format for quantitative decision-making under uncertainty already exists. Water supply planning experts from both the County and Member Units meet on a regular basis and utilize technical analyses and computerized system modeling to facilitate quantitative decision making on a variety of contractual matters. For example, the County and Member Units developed and used a revised evaporation model during the recent drought after the lake dropped below a level not contemplated in the existing Contract provisions. The District will look to enhance this process in the future in concert with the County and other Member Units.

R9

— That the Directors of the Member Units and the Santa Barbara County Board of Supervisors, acting as Directors of the SBCWA, set up and maintain a specific website for detailed information on the Cachuma Project's history, structure, governance, and operations, with links to additional historical documents and records. The Montecito Water District will not implement this recommendation. In May, 2019, the District implemented a new website providing a better user experience, enhancing security and accessibility, and supporting more efficient internal operations. The District continues to maintain a dedicated section of its website for information related to its water sources, including the Cachuma Project. This section will be enhanced to include additional background information about the Cachuma Project as well as additional links to relevant documents and other websites. The District will continue to make additional information not found on its website available upon request. 7 of 7