G R a N D J U R Y R E P O R T

Conclusions 17

• CL1
  Plumas County Flood Control District - Treatment Plant
• CL2
  Department of Fish and Game - Poisoning of Lake Davis
• CL3
  Portola: The First Fifty Years 1909-1959 by Ray Donnenwirth
• CL4
  State Water Project http://www.water.ca.gov/swp/history.cfm 20 APPENDIX A Proposition 218 More than 30 years ago California voters approved Proposition 13, which imposed severe restrictions on local governing bodies’ ability to increase property taxes, their most important source of revenue. Subsequently, many cities and counties began to rely on other revenue sources such as assessments, fees related to property, and general purpose taxes on business licenses, hotel occupancy, and utility users. Increases in these revenue sources were not subject to voter approval. Over the next 18 years, opposition to steady increases in these taxes and fees led to voter approval of Proposition 218, which makes it much more difficult for local governments to increase revenue, and forbids the use of property- related fees for general government services. Proposition 218 shifted powers over taxation and revenue to residents and property owners, and away from local governing bodies. Elected officials found themselves in the difficult position of being responsible for spending, but with extremely limited authority to raise funds. Some local governing boards solved their dilemma by looking the other way. They simply ignored the constraints imposed by Proposition 218. In the years since Proposition 218 was enacted, a number of lawsuits have been brought against local governments for failure to comply with its requirements. Decisions have generally favored the plaintiffs. 21 APPENDIX B Enterprise Fund An enterprise fund establishes a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for goods or services. Under enterprise accounting, the revenues in expenditures of services are separated into separate funds with its own financial statements, rather than commingled with the revenues and expenses of all other government activities. Enterprise funds may be established, "for a utility, health care, recreational transportation facility." Examples of which include the following: • Public utilities - water, sewer, trash disposal • Health-care - ambulance service, nursing homes • Recreation - skating rinks, pools, golf courses • Transportation – airports, dock and wharf facilities The community may not establish enterprise funds for normal government operations or services such as building rentals, inspectional services or cemeteries. Establishing an enterprise fund does not create a separate or autonomous entity from the municipal government operation. The municipal department operating the enterprise service continues to fulfill financial and managerial reporting requirements like every other department. Financial transactions are reported using standards similar to private sector accounting. Revenues are recognized when earned and expenses are recognized when incurred, under a full actual basis of accounting. 22 APPENDIX C Lake Davis and Water Treatment Plant Chronology • December 1963 – Flood Control District enters 75-year contract with the State to purchase water from Lake Davis (to 2038). • 1968 – U.S. Economic Development Administration provides $426,000 for a water treatment plant. • 1968 – Flood Control District and State of California enter into contract to build Grizzly Valley Pipeline from Lake Davis to the City of Portola. • 1969 – Flood Control District and City of Portola enter long-term contract for municipal water supply – Portola contracts for 25% of Lake Davis water supply and 25% of cost of facilities. • 1979 – Portola increases its stake in the water supply and facilities to 28.7%. • 1997 – Department of Fish & Game attempts first pike eradication – use of water treatment plant suspended. • May 2000 – City of Portola conducts a town hall meeting to inform the public that the City is considering going back on the Lake Davis water supply. County estimate is $800,000 to repair and upgrade water treatment plant. The City estimates the cost will exceed $1 million. • July 2000 – The City urges the County to pursue funding to upgrade or replace the water treatment plant. • 2001 – The California Department of Health Services determines the existing water treatment plant is beyond repair. • July 2002 – Portola Water System Master Plan identifies need for additional water supplies. The City requests an option to purchase additional water from Lake Davis. • May 2003 – The City asks the County to fund and construct a new water treatment plant. One reason cited is the 2006 arsenic standard which will inhibit Portola’s future use of well water. The City asks for assurance that it will not be required to make any contribution to the construction cost. The City says the “need to go back to Lake Davis as a main source of water supply continues to escalate.” • July 2003 – State Revolving Fund accepts application for $2.4 million loan for WTP construction. • August 2003 – Negotiations continue with the Board of Supervisors without any conclusion. Efforts are focused on securing outside funding. • August 2004 – Efforts to obtain federal funding in the 2005 fiscal year are unsuccessful. • September 2004 – The City emphasizes it is imperative that Portola begin receiving Lake Davis water in 2005 because Portola’s economic future and well-being are dependent on the City’s long term reliance on Lake Davis as its main water supply. The Flood Control District continues preliminary design work and environmental review while pursuing funding for construction. Disagreement continues over interpretation of the Plumas-Portola contract and financial responsibility for constructing a new water treatment plant. 23 • October 2004 – The City offers to contribute $100,000 to the construction of a new water treatment plant. • January 2005 – Project cost for a new water treatment plant is estimated at $3.7 million. • May 2005 – Portola emphasizes that it is imperative that it begin receiving Lake Davis water. • June 2005 – The Flood Control District has assembled $1.1 million toward the project and proposes to continue to pursue federal funding or for Portola and GLRID to accept a $2.6 million zero-interest loan from the State Revolving Fund. The City expresses a willingness to contribute to the construction cost if it can obtain ultimate ownership of the water treatment plant. • July 2005 – Portola offers to contribute $1 million to the construction cost. • August 2005 - $1 million grant from the State Revolving Fund becomes part of the financing. Portola reiterates that it is willing to become the owner /operator after construction. • November 2005 – Congress appropriates $2.5 million to the Army Corps of Engineers to construct new water treatment plant. • January 2006 – The City recognizes that Federal funding and project coordination with the Army Corps of Engineers will create significant delays in the construction schedule. • September 2006 – Project Coordination Agreement finalized with Army Corps of Engineers. • April 2007 – Flood Control District and City enter settlement agreement regarding financing and construction of water treatment plant. The total project cost with Corps of Engineers is $5 million. • August 2007 - Lowest construction bid exceeds engineer’s estimate by more than $1 million. • November 2007 – Flood Control District and City amend settlement agreement to meet new project budget of $6.3 million. • June 2008 – Demolition of old water treatment plant begins. • November 2009 – Flood Control District and City enter agreement for City to operate and maintain the water treatment plant until transfer of ownership. • December 2009 – Army Corps of Engineers accepts beneficial occupancy of project. • January 2010 – Freeze damage discovered in external facilities. Army Corps of Engineers begins work on change order for repairs. • October 2010 – Punch-list walk-through still shows finish work to be done. • March 2011 – Flood Control District and City execute addendum to 2007 settlement agreement to add work to refurbish water tank and extend the deadline for the Flood Control District to repay $165,000 loan until December 31, 2015. • June 2011 – The City begins work to refurbish finished water storage tank. • September 2011 – Project engineer certifies the project is complete and requests final inspection by Department of Public Health. • October 2011 – Department of Public Health completes final inspection. (cid:2) 24 APPENDIX D Portola Water Utility Chronology • February 14, 1955 City purchases water system form Portola Water Company, Inc. • 1955 to 1975 City’s water delivered to City via pipeline from spring vault at Golden Springs. • 1956 City establishes additional water resource through a series of springs and pipes the spring water to a pond and treatment & delivery facility off Lake Davis Road to the North of C. Roy Carmichael School. School did not exist at this time. • 1964 State of California establishes a series of dams through State Bonds known as the State Water Project. One of the bonded Projects included the construction of a dam creating a man- made water storage lake along Grizzly Creek. The lake was named after then Portola Congressman, Pauline Davis. • 1968 City of Portola officials enter into a contract with Plumas County Flood Control District (who purchases State Water Project water) to purchase and deliver water based on the purchase of 62 acre feet and annually increasing allotment of water to 675 acre feet in 2016 to the City via the newly constructed Lake Davis Water Treatment Plant (County owned) and Lake Davis 3-miles 14-inch pipeline, 2-miles 12-inch pipe, and 2-miles of 10-inch pipe (State DWR owned) to a series of valves located on the North side of Joy Street at intersection with Gulling Street. • 1970 City receives its first deliveries of water from Lake Davis. • 1975 North side million gallon storage tanks constructed. 1978 2 storage tanks (1-500,000 gallon and 1-250,000 gallon) constructed on South side of City above Portola High School. • 1968 to 1997 City Council establishes a policy of using Willow Springs water until usage demand exceeds spring’s capacity and then uses treated Lake Davis water in spring, summer and fall (usually April through October). • 1994 Northern Pike a predatory fish were discovered in Lake Davis. California DFG determines that this species, if allowed to escape Lake Davis, is a threat to the Bay Area Delta Waterways and salmon and steelhead populations, with temporary water resources and no redundancy. • 1996 City officials apply for low interest loan from USDA Rural Development for construction improvements to City water infrastructure. USDA requirements are that as a condition of the $1.173 million loan that the City installs water meters for all utility customers. Prior to water meter installation residents were permitted to use unlimited quantities of water for a single set price. Installation of water meters caused increased conservation and permitted the City to survive the Lake Davis Water Treatment Plant crisis. • 1996 as a mitigation to the proposed Northern Pike Eradication Project CA DFG funds the construction and development of a potable water well at the City Corporation Yard as a temporary drinking water supply for Portola residents. 25 • September 1997 DFG, CA DHS and CA DWR order the pipeline from Lake Davis to the Lake Davis Water Treatment Plant severed until DHS re-certifies Lake Davis water as safe to consume. Expected to be two to three months as described in the Project EIR. Plumas County abandons the Water Treatment Plant without winterizing, decommissioning process later to be reported by a DHS report as being left in “deplorable” condition. • October 1997 City of Portola reconfigures City water rates based on actual usage as supported by water meter readings. • October 15, 1997 Lake Davis is treated with chemical, Nustn-Noxfish, to eradicate Northern Pike from the Lake’s waters. Nustn-Noxfish is a chemical formula of Rotenone with several Proposition 65 prohibited chemical dispersants reported by the EPA as carcinogenic. • January 1998 Lake Davis still remains uncertified by CA DHS as a potable water supply. City is worried about entering the summer months and our ability to meet peak day demands with current temporary water system. City Council directs City Manager and City Attorney to file legal action against the State of California. • February 4, 1998 Portola City Council retains Law Firm of Ellison & Schneider to represent Portola in matters involving DFG and Portola’s Water Utility. Attorney Barbara Brenner becomes lead attorney and hires Engineering Firm Luhdorff and Scalmanini to conduct a comprehensive study with regard to water resources available to City. • April 11, 1998 City of Portola files legal claim for damages against State of California and DFG. • May 13, 1998 Portola City Council votes to dispense with bidding and hires well driller to construct a new City well and the corner of Commercial and Gulling. At the finish of the Project it is determined that the arsenic level in the well, like the Corporation Yard well, exceeds the new Federal EPA arsenic standard. • August 26, 1998 a Settlement Agreement is reached and approved by the Portola City Council. • May 1999 California DFG reported to the Lake Davis Steering Committee that the species Northern Pike have been re-discovered in the waters of Lake Davis. This announcement led to concerns about the future use of Lake Davis as a potable water supply. • September 18, 1999 City and County settle potential law suit with the State of California. Special Legislation is passed by the State Legislature providing the funds described in the settlement agreement. $2.8 million City of Portola; $2.2 million Plumas County; $4 million in a special fund to settle private and business claims against the State; $250,000 Plumas County Director of Public Works Director’s estimate to re-model and bring Lake Davis Water Treatment Plant up to new Safe Drinking Water Act standards. • May 24, 2000 Portola City Council directs staff to prepare a survey and mail to each Water Utility customer asking about their willingness to return to Lake Davis Water as the primary source for the City. 26 • June 14, 2000 City Council holds a public meeting in the All Purpose Room at C Roy Carmichael School to discuss with the public the City’s return to Lake Davis as our primary water supply. PhD. Doctor David Spath, Director of the Drinking Water Division California State Department of Health Services is asked by a participant for his professional and personal opinion about the possibility of remaining chemicals in Lake Davis Water or in the sediment at the bottom and shorelines of the Lake states; “I think Lake Davis is one of the most tested bodies of water in the United States and I would certainly drink it rather than water with legal levels of arsenic.” • January 22, 2001 The EPA adopted a new standard for arsenic in drinking water at 10 parts per billion (ppb), replacing the old standard of 50 ppb set by the EPA in 1975. The new standard became effective on February 22, 2002. The date by which systems must comply with the new 10 ppb standard was January 23, 2006. Portola’s city wells were reporting 23 ppb and 26 ppb. City begins notification to utility customers and orders Sauers Engineering to research the cost of Arsenic Well Head Treatment. • December 2001 Plumas County retained Engineer, Sig Hansen, submits preliminary Water Treatment Plant design for State Revolving Loan/Grant Fund application through Department of Water Resources. State won’t commit as to whether we are eligible for loan or grant. State RLF eventually grants City/County $1 million for Project. • February 13, 2002 Portola City Council directs City Staff to prepare and send a letter to Plumas County informing them of the City’s intent to purchase Lake Davis Water and to begin using Lake Davis Water Treatment Plant water in April 2002. • February - December 2002 City staff works with County Supervisor. BJ Pearson to determine funding and to finalize special Federal Funding (identified during Supervisor Bill Powers’ term) sponsored by Congressman Tom Doolittle ($2 Million). • March 2002 Sig Hansen submits LD WTP design specification to Plumas County and City. • April 9, 2003 City and County formally enact the agreement to work together on the Lake Davis Water Treatment Plan – City Council Resolution 1765. • January 25, 2006 Portola City Council frustrated by the lack of progress with Plumas County regarding the Lake Davis Water Treatment Plant directs City staff to prepare a letter to the Plumas County Board of Supervisors encapsulating the City’s desire and need to receive Lake Davis water and instructing the staff to send it every week until the County displays more activity in attempting to resolve their responsibility for the Lake Davis Treatment Plan. • May 10, 2006 City hires well drilling contractor to drill another temporary well at 6th and Pacific using water mitigation funds provided by the State of California DFG as part of the proposed 2007 Northern Pike Eradication Project EIR. This location was identified as one of the seven test wells drilled throughout the City attempting to locate and identify additional water resources. 27 • August 17, 2006 City and County officials met with the Army Corps of Engineers regarding their Project Management Responsibilities for the construction of the Lake Davis Water Treatment Plant. At this meeting we learned that the “lions share” of the Federal Money awarded would be paid to the ACE’s for their work. • February 28, 2007 the City of Portola and Plumas County began negotiating a Settlement Agreement regarding each agency’s share in the cost of the Lake Davis Water Treatment Plant re-construction and further agreed that ownership of the WTP would convert to the City of Portola once the Project was completed and the City determined that all systems were operational. • June 13, 2007 the Portola City Council approved loans to Plumas County to be used for the LD WTP in the amount of $765,000. • December 12, 2007 the above negotiated Settlement Agreement was finalized by Plumas County and the City of Portola. • October 28, 2008 the City of Portola and Plumas County entered into an Operations and Maintenance Agreement permitting the City to be the primary operators of the LD WTP. • October 2009 LD WTP was declared substantially complete. City and County agree that final punch list work is not complete and instruct the Army Corps of Engineers to re-mobilize the Contractor to complete the additional work identified as inadequate. • December 2009 hard winter freeze damages portions of LD WTP and City and County notify ACE’s of inadequate winterization for our High Sierra environment. • April 7, 2010 Grizzly Lake Resort Improvement District sends City a certified letter informing the City that it does not intend to use or participate as a user of the LD WTP. • August 25, 2010 City of Portola contracts with HDR Engineering, Shawn Koorn, Associate Vice President, to complete a Rate Study Analysis as required and described by State law. • October 2010 LD WTP Contractors re-mobilize to complete “punch list.” • February 2011 LD WTP Contractors work is pending final approval by Army Corps of Engineers. • Water revenues increased 11.6% over this time period while expenses increased 22.9%. Testing costs increased 189%. While the testing dollar amount is not large it is indicative of what the City has to deal with. • The City’s antiquated water storage system had never been the subject of scheduled maintenance since construction of the facilities in the 1970’s and this resulted in $313,000 in (cid:2) repairs to both water storage tanks in 2009. (cid:2) (cid:2) 28 GLOSSARY OF TERMS • DFG – Department of Fish and Game The Department of Fish and Game maintains native fish, wildlife, plant species and natural communities for their intrinsic and ecological value and their benefits to people. This includes habitat protection and maintenance in a sufficient amount and quality to ensure the survival of all species and natural communities. The department is also responsible for the diversified use of fish and wildlife including recreational, commercial, scientific and educational uses. • USACOE – United States Army Core of Engineers The United States Army Corps of Engineers (USACE, also sometimes shortened to CoE) is a federal agency and a major Army command made up of some 38,000 civilian and military personnel,[3] making it the world's largest public engineering, design and construction management agency. Although generally associated with dams, canals and flood protection in the United States, USACE is involved in a wide range of public works support to the nation and the Department of Defense throughout the world. The Corps of Engineers provides outdoor recreation opportunities to the public, and provides 24% of U.S. hydropower capacity. The Corps' mission is to provide vital public engineering services in peace and war to strengthen the nation's security, energize the economy, and reduce risks from disasters. • USFS – United States Forest Service The United States Forest Service is an agency of the United States Department of Agriculture that administers the nation's 155 national forests and 20 national grasslands, which encompass 193 million acres (780,000 km2). Major divisions of the agency include the National Forest System, State and Private Forestry, and the Research and Development branch. • PCPW – Plumas County Public Works Department The Public Works Department maintains approximately 680 miles of roadways, including over 500 bridges and drainage structures and more than 5,000 road signs. • PCFCWCD – Plumas County Flood Control and Water Conservation District The Plumas County Flood Control and Water Conservation District is a special act water district established by the State Legislature and governed by the Plumas County Board of Supervisors. The Flood Control District delivers municipal and irrigation water supplies from the State Water Project and promotes watershed restoration and management in the Upper Feather River region. 29 GLOSSARY OF TERMS – Continued • NONFEASANCE (non•fea•sance) (*) Noun Law The omission of some act that ought to have been performed. • MISFEASANCE (mis•fea•sance) (*) Noun Law
• CL5
  State of California Water Board - Treatment Plant
• CL6
  To comply with the California Penal Code
• CL7
  To comply with the consent decree in Pederson v. County of Plumas, United States District Court for the Eastern District of California, No. CIV S-89-1659 JFM P signed in 1992. SUMMARY OF INVESTIGATION The annual Grand Jury jail inspection took place on September 28, 2011. The Grand Jury was accompanied by the on-duty jail supervisor and his staff. Based on the findings of this inspection, a follow-up inspection was conducted to determine that previously discovered deficiencies had been corrected. During the initial jail inspection the Grand Jury confirmed the existence of the active Federal Consent Decree. The Grand Jury interviewed the Sheriff and several members of his staff, each member of the Plumas County Board of Supervisors, the Plumas County Administrative Officer, the Plumas County Counsel and the Director of Facilities/Airport concerning jail operations and the Federal Consent Decree. With the exception of the Sheriff and some members of his staff no other elected or appointed County officials or employees were aware of the Federal Consent Decree. 1 County Counsel is now in the process of attempting to terminate the Federal Consent Decree, in the belief the conditions at the jail that led to the Federal Consent Decree have long since been corrected and the jail is currently compliant with Corrections Standards Authority (CSA) standards.
• CL8
  The text of Proposition 218, Articles XIIIC and XIIID of the California State Constitution.
• CL9
  Proposition 218: Local Agency Guidelines for Compliance, Association of California Water Agencies, 2007.
• CL10
  Howard Jarvis Taxpayers Association v City of Fresno, 127 Cal. App. 4th 914 (2005) (March 23, 2005).
• CL11
  Bighorn-Desert View Water Agency v Verjil, 120 Cal. App. 4th 890 (2006), California Supreme Court S127535 (July 24, 2006).
• CL12
  Summary of Utility Services Costs Relevant to Proposition 218, [Consultant’s] Draft Report, May 2008, 44p.
• CL13
  Portola Municipal Code 2.04.040 Duties of the Mayor
• CL14
  The National League of Cities City Manager Duties http://nlc.org Portola City Municipal Code 2.08.10 Duties of the City Manager
• CL15
  Gallina LLP Audit Company Audit report 2010-2011 Clean Audit
• CL16
  HDR Engineering report 2011 Water rate study
• CL17
  Better business Bureau report HDR Engineering rating of A+