6A 6B 6C 6D. December 1, Local Agency Formation Commission. Executive Officer Local Governmental Analyst

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1 December 1, 2008 TO: Local Agency Formation Commission 6A 6B 6C 6D FROM: SUBJECT: Executive Officer Local Governmental Analyst Proposed Consolidation of Borrego Water District & Borrego Springs Park Community Services District (DC08-23); Proposed Latent Sewer Power Area Expansion (Borrego Water District) (LP08-23a); Proposed Latent Powers Activation (Park and Recreation) (Borrego Water District) (LP08-23b); Proposed Latent Powers Activation (Solid Waste Collection and Disposal) (Borrego Water District) (LP08-23c) EXECUTIVE SUMMARY Proposed by substantially similar resolutions of the Borrego Water District (WD) and Borrego Springs Park Community Services District (CSD) is a consolidation that will unify the two separate districts into a single successor district (Borrego WD) (Map No. 1). The proposed consolidation is intended to eliminate the duplication of administrative services provided by the districts, provide efficiencies in the provision of water and sewer services, and enhance the Borrego WD s ability to provide groundwater management in the Borrego Valley. As the proposed successor agency to the Borrego Springs Park CSD, the Borrego WD will be responsible for the continued provision of all of the CSD s authorized services currently being provided within its service area; therefore, the proposed consolidation also involves the expansion of the Borrego WD Latent Sewer Power Area (Map No. 2), and activation of Borrego WD s latent powers for Park and Recreation, and Solid Waste Collection and Disposal services (Map No. 1). Expansion of the existing Borrego WD Latent Sewer Power Area will enable the continuation of the provision of sewer service to the former CSD service area. Activation of the 1

2 Borrego WD s latent powers for Park and Recreation and Solid Waste Collection and Disposal will allow the Borrego WD to continue the maintenance of the CSD s golf course and the collection/disposal of solid waste within the CSD service area. The two independent special districts were recently the subject of the Borrego Valley Municipal Service Review (MSR) and Sphere of Influence Update (MSR05-52; SR05-52[a] [b]). The Borrego Valley MSR and Sphere determinations identified several advantages offered by a potential consolidation between the Borrego Springs Park CSD and the Borrego WD including: increased local groundwater management oversight; more efficient municipal service provision within the CSD service area; resolution of the CSD s ongoing regulatory difficulties regarding its water storage infrastructure and provision of municipal services; as well as providing the Borrego WD with an additional groundwater well source. On October 1, 2007, San Diego LAFCO adopted a zero sphere designation for the Borrego Springs Park CSD in anticipation of a future consolidation proposal between the Borrego WD and the CSD; therefore, no sphere or municipal service review actions are required as part of this proposal. Consolidation Procedure Special district "consolidation" is defined by the Cortese/Knox/Hertzberg Local Government Reorganization Act of 2000 (California Government Code 56000, et seq.) as the uniting or joining of two or more districts into a single new successor district. The proposed consolidation was submitted to LAFCO by resolution of each of the independent special district s Board of Directors. Because at least a majority of the members of each of the governing boards adopted substantially similar resolutions of application, State Law requires LAFCO to approve, or conditionally approve, the proposal (Govt. Code 56853). An automatic election on the approved consolidation would not be held because both district boards have consented to the proposal. Following LAFCO approval, an election would be required if sufficient protest is filed at the noticed, public protest hearing (Govt. Code 57081). The threshold for a sufficient protest would be submittal of written protest from either 25% of the registered voters or 25% of the landowners who own at least 25% of the assessed value of land within the proposed consolidation territory. If 50% of the registered voters or landowners file protests, the consolidation would be terminated (Govt. Code 57078). The combined territory of the Borrego WD and the Borrego Springs Park CSD includes approximately 1,446 registered voters (approximately 1,337 registered WD voters and 109 CSD voters) that would be eligible to protest; accordingly more than 362 voter signatures would be required to prompt an election on consolidation. DESCRIPTION OF AFFECTED AGENCIES Background The Borrego Valley is located in the desert area of the far northeast corner of unincorporated San Diego County and is surrounded by the Anza-Borrego Desert State Park. Due to the Borrego Valley s geographic isolation and physical distance from existing imported water infrastructure, the local area is completely dependent on groundwater from the underlying Borrego Valley aquifer for all of its domestic and commercial water needs. 2

3 The two primary public agencies that provide potable water and sewer service to the Borrego Valley are the Borrego Water District (WD) and the Borrego Springs Park Community Services District (CSD). Borrego Water District (WD) The Borrego WD was formed in 1962 to protect the local groundwater supply from potential exportation. The Borrego WD currently provides potable water, sewer, flood control, and gnat abatement services to an estimated 2007 population of 2,456 people. The Borrego WD supplies groundwater from its local wells to the majority of the developed areas of the Borrego Valley, and provides sewer service to a LAFCO-designated portion of its service area. Since 1984, the Borrego WD has been recognized by the State of California Department of Water Resources as the local public agency responsible for groundwater management in the Borrego Valley. The current Borrego WD service area includes approximately 30,642 acres (48 square miles). The WD s service area covers about 2/3 of the Borrego Valley floor and is generally located in the developed western and southern sides of the valley. The Borrego WD service area is divided into four improvement districts (ID). The Borrego WD provides water, sewer, and flood control in ID-1; sewer service only in ID-2; water service only in ID- 3 and ID-4; and provides vector control district-wide. The proposed consolidation with the Borrego Springs Park CSD would create an additional Borrego WD improvement district (ID-5) that would encompass the former CSD service area. The Borrego WD s existing infrastructure includes: Eleven production wells for domestic service (including Well ID4-2 with limited production); a potable water transmission/distribution system; Two wells used for irrigation at the golf course formerly known as Rams Hill; Country Club Tank (a 1 million gallon water storage tank); Twin Tanks (two 220,000 gallon water storage tanks); Indian Head Tank (220,000 gallon water storage tanks); RH Tank 1 (1.25 million gallon water storage tank).; RH Tank 2 (a 0.44 million gallon water storage tank); 800 Tank (.75 million gallon water storage tank); Two reclaimed water tanks (totaling 1.25 million gallons storage); a sanitary sewer collection system and wastewater treatment facility with 250,000 gallon per day capacity. Water The Borrego WD provides water service to 1,923 residential and commercial customers within its service area. San Diego LAFCO originally adopted a coterminous sphere of influence for the Borrego WD in January The current Borrego WD sphere is greater than the district s service area, and covers an approximate total of 35,482 acres, or over 55 square miles. The Borrego WD sphere includes approximately 4,847 acres that are located outside of its current service area. Sewer Service Area In 1982, LAFCO approved the activation of the Borrego WD s latent sewer power for a smaller-than-district Latent Sewer Service Area. The Borrego WD s sewer service area sphere of influence was adopted by LAFCO in 1986 as a service-specific sphere. This sphere designation limits the district s provision of sewer service to a specific area within the district s service boundary. The current Borrego WD sewer service area sphere totals 3

4 approximately 12,214 acres, with 7,171 acres located outside of the current sewer service area. Borrego Springs Park Community Services District (CSD) The Borrego Springs Park CSD was formed in 1965 under the Community Services District Law to serve a 100-unit subdivision in the unincorporated community of Borrego Springs. The Borrego Springs Park CSD s sphere of influence was originally adopted by LAFCO in 1987 as coterminous with its boundary; no amendments to the CSD s sphere have been proposed since its adoption. A zero sphere designation for the CSD was adopted by San Diego LAFCO in 2007 in anticipation of a proposal for consolidation with the Borrego WD. The CSD service area consists of approximately 1, acres and constitutes an island area located entirely within the boundaries and the adopted sphere of influence of the Borrego WD. The CSD s 2007 service area population was estimated by SANDAG to be 304. The land uses within the proposal territory include a golf course, hotel/resort, and residential development. According to the County of San Diego Auditors report, the CSD is allocated a total of $41, in annual ad valorum-based property tax revenue within its service area that would be transferred to the Borrego WD following the proposed consolidation. The CSD s existing infrastructure includes: a potable water transmission/distribution system; a sanitary sewer collection system and wastewater treatment facility with 100,000 gallon per day capacity; and, Well No. 5, including a 200-horse power pump and producing 1,549 gallons per minute to a hydraulic grade of 723 feet. CSD Authorized Powers In addition to sewer and water services, the Borrego Springs Park CSD provides solid waste collection and disposal services by contract with a waste collection and disposal service. The CSD exercises its park and recreation service through the administration of the par 3 golf course, and its landscape maintenance services as part of its CSD resident fees. In LAFCO s 1965 resolution of approval for the Borrego Springs Park CSD s formation, its original powers were specified and limited to the following: 1. The collection or disposal of garbage or refuse matter; 2. Public recreation by means of parks (aquatic parks and recreational harbors, playgrounds, golf courses, swimming pools or recreation buildings); 3. Street lighting; 4. The opening, widening, extending, straightening, and surfacing, in whole part of any street in the district, subject to the consent of the County Board of Supervisors; 5. The construction and improvement of bridges, culverts, curbs, gutters, drains, and works incidental to the purposes specified in No. 4, subject to consent of the County Board of Supervisors; and 6. That no other powers be exercised by the CSD except with the prior approval of LAFCO. 4

5 In December 2005, the Borrego Springs Park CSD reported to LAFCO that it was currently providing the following governmental services within its service area: collection and disposal of sold waste; landscape maintenance; park and recreation; road improvement and maintenance; construction of public works incidental to road maintenance; street lighting maintenance; sewer; and water. The CSD stated at that time that its road improvement and maintenance, construction of public works incidental to road maintenance, and street lighting maintenance services were performed as necessary by sub-contractors; however, as recently confirmed by the CSD and the Borrego WD, these services have never been exercised by the CSD. The Borrego WD has indicated that it does not intend to retain the authorization for these unexercised powers following the proposed consolidation with the CSD. The County of San Diego Department of Public Works and the San Diego County Street Lighting District will continue to provide road improvement and maintenance, and street lighting maintenance, respectively, within the CSD service area; landscape maintenance is the responsibility of private property owners. Justification for Consolidation The Borrego Springs Park CSD service area is 100% surrounded by the Borrego WD service area and is completely within the Borrego WD sphere of influence. The CSD service area represents the largest island of developed territory in the Borrego Valley that is not within the Borrego WD. In 1965, the Borrego Springs Chamber of Commerce and the Borrego Springs Fire Protection District each submitted letters to San Diego LAFCO in opposition to the formation of the Borrego Springs Park CSD because of their concerns related to duplication of services and fragmentation of jurisdictional authority. In 1987, the LAFCO staff report for the establishment of Borrego Springs Park CSD s coterminous sphere stated: if for any reason the BSPCSD were unable to continue to provide sewer or water services, or if the district were to decide to discontinue providing these services, the most likely agency to assume the water and sewer services would be the Borrego WD. LAFCO also adopted a larger-than-agency sphere for the Borrego WD in 1987, which included the entire service area of the Borrego Springs Park CSD. This sphere designation history indicates that the WD was long been anticipated by San Diego LAFCO to eventually provide services to the CSD area. In 2007, the Borrego Valley Municipal Service Review and Sphere of Influence Update findings and determinations reflected that the CSD does not have the storage capacity necessary to meet the requirements mandated by the County Department of Environmental Health (DEH). The sphere determinations also identified several advantages offered by a potential consolidation between the Borrego Springs Park CSD and the Borrego WD including: increased local groundwater management oversight; more efficient municipal service provision within the CSD service area; and, resolution of the CSD s ongoing regulatory difficulties regarding its water storage infrastructure and provision of municipal services. Accordingly, a zero sphere designation for the CSD was adopted by San Diego LAFCO in 2007 in anticipation of a proposal for consolidation with the Borrego WD. 5

6 Historically, the Borrego Springs Park CSD s lack of ownership of its sewer treatment plant and groundwater source Well No. 5 presented an obstacle for consolidation of the districts. These water and sewer facilities were originally owned by a private landowner within the CSD, which resulted in several CSD citations and fines from the County Department of Environmental Health (DEH). In 2007, the Borrego Springs Park CSD completed negotiations with the owner of the facilities for the transfer of the titles for Well No. 5 and the sewer treatment plant to the CSD. The Borrego WD has stated its desire to obtain additional well capacity due to the recent loss of production at the WD s Well ID4-2. The WD has indicated that consolidation and subsequent construction of a system intertie would allow the WD to utilize the CSD Well No. 5 as a substitute, as well as to provide the CSD service area with access to the WD s existing water storage facilities. Previous consolidation discussions between the districts led to the Borrego WD requesting and receiving legislative changes to the California Water Code to allow the WD to continue providing the Park and Recreation services of the CSD that are not authorized by the WD s principal act. The California Department of Water Resources (DWR) has designated the Borrego WD as the primary Borrego Valley groundwater management agency. While the WD has developed and adopted a groundwater management program to preserve and protect the Borrego Valley Aquifer, its implementation has been largely incremental because of the inherent groundwater rights retained by local landowners. The private wells both outside and inside of the WD s boundary (such as the Borrego Springs Park CSD), all draw from the same groundwater source as the Borrego WD, but are not subject to the WD s groundwater management policies. The Borrego WD has indicated that the Borrego Springs Park CSD does not have a Groundwater Management Plan and that the CSD s present fee structure charges less for water use in excess of the basic allotment, which serves to discourage the conservation of groundwater. The two districts have adopted terms and conditions for the proposed consolidation that specify the retention of the current fee structure for all CSD-provided services to continue for a period of one year following the effective date of consolidation. All payments made by the Borrego WD on behalf of the CSD will be paid from the WD s general fund and, thereafter, will be reimbursed to the WD with funds collected from the ratepayers within the new ID-5. In accordance with Government Code 56653, the Borrego WD has submitted a plan for services regarding the continued provision of water; wastewater/sewer; trash collection/disposal; and, parks and recreation services to the former CSD service area. The actual plan for services is on file in the LAFCO office and is included within the district s application for consolidation. Terms and Conditions of Consolidation The Borrego WD has indicated that it is ready, willing and able to provide its full range of service to the CSD service area as the designated successor agency. The following discussion summarizes the terms and conditions for the proposed consolidation that have been adopted by resolutions of the affected districts: Upon the effective date of consolidation, the affected territory within the CSD service area will be designated as Borrego Water District Improvement District 5 (ID-5). The Borrego 6

7 WD will continue to provide water; wastewater/sewer; trash collection/disposal; and, parks and recreation services to the former CSD service area. The CSD Board of Directors will be dissolved and no changes to the existing Borrego WD Board of Director s membership or terms are proposed. The existing contract for the CSD General Manager will terminate as of the effective date of consolidation; the existing CSD maintenance employees will continue to provide golf course maintenance for at least one year from the effective date of consolidation. Following activation of its latent park powers by LAFCO, the WD will assume the management and operation of the CSD Golf Course. So long as the Course Owner has not cancelled or terminated the rental agreement for the Golf Course, the Borrego WD will operate the Golf Course for at least one year from the effective date of the consolidation. The Borrego WD will assume the contract between the CSD and Allied Waste for the provision of solid waster collection and disposal services within the CSD service area. The Borrego WD will charge the following fees and/or rates for services provided within ID-5: For not less than one year following the effective date of the consolidation, the fee for water service shall be same as the water service fee charged within ID-4 of the BWD, as the same may be revised from time to time. The fee for sewer service shall remain unchanged until such time as the Borrego WD has operated the sewage facilities long enough to determine the most effective method for the treatment and/or conveyance of the sewage generated within the CSD service area. The fee for trash service shall remain unchanged for at least one year following the effective date of the consolidation. Fees related to the golf course shall remain unchanged for not less than one year following the effective date of the consolidation. Any developer within the CSD service area who has a recorded tract map on file and has met the 1:1 mitigation ratio required by the County of San Diego will be charged 50% of the existing Borrego WD groundwater preservation fee (per dwelling unit constructed). All new land subdivisions within the former CSD service area will be subject to all current WD preservation fees and policies. Environmental Review The Board of Directors for the Borrego Water District, as lead agency for compliance with the California Environmental Quality Act (CEQA) has determined that the proposed consolidation is exempt from CEQA because it involves consolidation of two or more districts having identical powers where the geographic area in which previously existing powers are exercised will not change as a result of the consolidation (Government Code 15320(b)), and because consolidation does not have potential for causing a significant effect on the environment (Calif. Admin Code (b)(3)). LAFCO staff concurs with this environmental determination. 7

8 Conclusion and Recommendation San Diego LAFCO is empowered by the State Legislature with the responsibility for the logical formation and modification of the boundaries of local agencies, with a preference granted to accommodating additional growth within, or through the expansion of, the boundaries of those local agencies which can best accommodate and provide necessary governmental services. The Borrego Valley Municipal Service Review and Sphere of Influence Update determinations identified that the present need for public facilities and services has not been met by the Borrego Springs Park CSD because of its water storage deficit, well failure, and the associated regulatory citations from the County Department of Health in regards to water quality, contamination notification, and previous difficulties in obtaining ownership of its water and sewer facilities. Public services are not being provided in an adequate manner to the CSD service area due to the failure of its source well and the regulatory violation citations. The advantages of a consolidation between the Borrego WD and Borrego Springs Park CSD would be to promote public ownership of the CSD water and sewer facilities; to consolidate groundwater management in the Borrego Valley; to ensure a reliable water source for the CSD service area; to allow the registered voters in the CSD area to participate in the WD Board elections; and to integrate the CSD and WD infrastructure for storage and emergency purposes. Consolidation between the Borrego WD and Borrego Springs Park CSD could also provide efficiencies in water and sewer service provision to the CSD service area. The Borrego WD has indicated its willingness to create Improvement District 5 (ID-5), which would encompass the existing service area of the CSD. To facilitate a potential consolidation between the Borrego Springs Park CSD and the Borrego WD, the Commission has adopted a transitional sphere designation for the CSD referred to as a zero sphere, which indicates that a successor agency is expected to assume its service responsibilities in the future. As the Borrego Springs Park CSD is 100% surrounded by the Borrego WD, and is located within the WD s sphere of influence, it is likely that a potential consolidation would rectify the CSD s regulatory violations, provide adequate water storage to meet the County requirements, and fulfill LAFCO s role in encouraging the efficient provision of municipal services and streamlining local government. Therefore, it is RECOMMENDED: That your Commission 1. Concur in the determination by the Borrego Water District that the proposed consolidation is not subject to the environmental impact evaluation process because (a) it involves consolidation of two or more districts having identical powers where the geographic area in which previously existing powers are exercised will not change as a result of the consolidation (Government Code 15320(b)), and (b) because consolidation does not have potential for causing a significant effect on the environment (Calif. Admin Code (b)(3)) have been reviewed and considered; 8

9 2. Determine that the successor Borrego WD would be providing all services previously provided by the Borrego Springs Park CSD and determine therefore, that the property tax allocation of the Borrego WD and the Borrego Springs Park CSD shall be transferred to and become the base property tax for the successor district; and 3. Expand the existing Borrego WD Latent Powers Sewer Area to include the Borrego Springs Park CSD service area; and 4. Activation of the Borrego WD Latent Powers for Park and Recreation, and Solid Waste Collection and Disposal services and expansion of the Borrego WD Latent Powers Sewer Area will be conditioned on the completion of the proposed consolidation, effective on the date of recordation; and 5. Determine that modifications to the terms and conditions in Exhibit A are technical and not material; and 6. Approve the proposed consolidation subject to the terms and conditions of consolidation (Exhibit A) for the reasons set forth in the Executive Officer's Report, and delegating to the Executive Officer responsibility for holding conducting authority proceedings. Respectfully submitted, MICHAEL D. OTT Executive Officer ROBERT B. BARRY Local Governmental Analyst MDO:RB:tjc Attachments: Map 1: District Consolidation and Latent Powers Activation Area Map 2: Latent Sewer Power Expansion Area Exhibit A: Adopted Terms and Conditions for the Proposed Consolidation 9

10 BORREGO SPRINGS RD MAP 1 HENDERSON CANYON RD BORREGO SALTON SEAWA Borrego WD Borrego WD SOI YAQUI PASS RD Map Scale 1:150,000 ± DIAMOND BAR RD Borrego WD } 78 COUNTRY CLUB RD BORREGO SPRINGS RD DOUBLE O RD DI GIORGIO RD LOFTER DR BACK NINE DR Latent Powers Activation Area (Proposed) FOURSOME E DR BORREGO VALLEY RD TILTING T DR Map Scale 1:41,000 DC08-23 LP08-23b LP08-23c PROPOSED "CONSOLIDATION OF BORREGO WD & BORREGO SPRINGS PARK CSD" PROPOSED "LATENT POWERS ACTIVATION (PARK & RECREATION)" (BORREGO WATER DISTRICT) PROPOSED "LATENT POWERS ACTIVATION (SOLID WASTE COLLECTION & DISPOSAL)" (BORREGO WATER DISTRICT) SAN DIEGOLAFCO Proposal Area Borrego WD Borrego WD SOI SOI = Sphere of Influence This map is provided without warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability and fitness for a particular purpose. Copyright SanGIS. All Rights Reserved.This product may contain information from the SANDAG Regional Information System which cannot be reproduced without the written permission of SANDAG. This product may contain information which has been reproduced with permission granted by Thomas Brothers Maps. C:\GIS\projects\agendamaps2008\08-23_DC.mxd 8/25/08

11 BORREGO SPRINGS RD HENDERSON CANYON RD HENDERSON CANYON RD HENDERSON CANYON RD MAP 2 Borrego WD Sewer Service Area (Existing) PALM CANYON DR Latent Powers Sewer Expansion Area (Proposed) Borrego WD Sewer Service Area SOI BORREGO SPRINGS RD YAQUI PASS RD Borrego WD Sewer Service Area (Existing) Map Scale 1:150,000 ± LP08-23a PROPOSED "LATENT POWERS SEWER EXPANSION" (BORREGO WATER DISTRICT) SAN DIEGOLAFCO Proposal Area Borrego WD Sewer Service Area Borrego WD Sewer Service Area SOI SOI = Sphere of Influence This map is provided without warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability and fitness for a particular purpose. Copyright SanGIS. All Rights Reserved.This product may contain information from the SANDAG Regional Information System which cannot be reproduced without the written permission of SANDAG. This product may contain information which has been reproduced with permission granted by Thomas Brothers Maps. C:\GIS\projects\agendamaps2008\08-23_LP.mxd 8/26/08

12 TERMS AND CONDITIONS Consolidation of Borrego Water District & Borrego Springs Park Community Services District (DC08-23) 6A 6B 6C 6D 1) That on the effective date of the Consolidation (the Effective Date ), the CSD shall be dissolved, terminated, disincorporated, and extinguished, all of its corporate powers shall cease, and all of its territory shall become part of the Borrego District and designated as Borrego Water District Improvement District No. 5 ( ID-5 ); 2) That on the Effective Date, the Borrego Water District shall succeed, as successor agency to the CSD, to all rights, duties, properties (both real and personal), cash on hand, contracts, equipment, assets and liabilities, obligations and functions attributable to the CSD. The Borrego Water District shall assume ownership and maintenance responsibility of the CSD territory upon the Effective Date; 3) That on the Effective Date, all executory provisions, entitlements, permits, obligations and rights under which the CSD is beneficiary shall be transferred to or assigned to the Borrego Water District. The priorities of use, or right of use, of water, of sewer infrastructure, or of capacity right in any public improvement or facilities or any other property real or personal to which the CSD is entitled as of the Effective Date shall be transferred to the Borrego Water District, and shall be subject to the limitations set forth elsewhere in this Resolution. To the extent possible, the CSD shall, prior to the Effective Date, assist the Borrego Water District in securing any and all permits from regulatory agencies which cannot be assigned as a matter of law. Nothing herein shall be construed to modify priorities of use, or right to use water, or capacity rights in any public improvements or facilities that have been fixed and established by a court or an order of the State Water Resources Control Board; 4) That on the Effective Date, the Borrego Water District s Board of Directors shall be composed of the five (5) existing members of the District s Board of Directors. These Directors shall continue to serve and be subject to reelection pursuant to all applicable provisions of law, including, but not limited to, the Administrative Code of the District; 5) That on the Effective Date, all property, whether real or personal, including all monies (including cash on hand and monies due and uncollected) of the CSD shall be transferred to and vested in the Borrego Water District; EXHIBIT A

13 6) That for a period not less than twelve (12) months following the Effective Date, the Borrego Water District shall retain the two (2) CSD employees currently employed by the CSD on the same terms that exist as of the Effective Date, except, however, the Borrego Water District may terminate such employees for good cause during such twelve (12) month period; 7) That on the Effective Date, the Borrego Water District shall be authorized and entitled to continue to levy or fix and collect any special, extraordinary, or additional taxes, assessments, benefit fees, service charges, rentals or rates, or any combination of the above, previously approved and/or levied by the CSD. Additionally, upon the Effective Date, all available ad valorem-based property tax revenue levied and collected form properties located in the CSD, previously payable to the CSD, shall be the subject of negotiations initiated by the LAFCO and completed by the Borrego Water District and CSD in accordance with Section 99 of the California Revenue and Taxation Code. All of said ad valorem-based property tax revenues shall be transferred to the Borrego Water District upon the Effective Date; 8) That on the Effective Date, the Borrego Water District shall fund and accomplish all service operations of the CSD, including, but not limited to: a. Provision of potable water. The Borrego Water District shall allocate the cost of water services between ID-4 and ID-5 based on proportion of use; b. Provision of wastewater sewer services. The Borrego Water District shall allocate the cost of wastewater sewer services between ID-5 and other Improvement Districts located within the District based on proportion of use; c. Provision of Trash Services as described in condition (12) below; and d. Golf course maintenance and provision of golf course operations. 9) That payments made on behalf of the CSD be paid by the District from the District s general fund and, thereafter, be reimbursed to the Borrego Water District with funds collected from the ratepayers within ID-5; provided, however, that the Borrego Water District shall not impose any special assessment, charge, or any additional fee beyond those outlined in condition (15) below on ID-5 ratepayers to repay such payments. Such payments shall include, but shall not be limited to: a. Any and all hard and/or soft costs incurred to effect the physical connection of the water, sewer and/or other systems of the CSD and Borrego Water District, which costs shall include, but shall not 2

14 be limited to, construction, labor, materials, engineering, consulting attorney and all other costs and expenses of any kind or nature; provided however, that such costs shall not include Interim Intertie Costs as defined in the MOU or operation and maintenance costs for Intertie Facilities as outlined in the Intertie Agreement entered into by the Borrego Water District and the CSD on June 28, ) That prior to the Effective Date, the CSD shall obtain and provide to the Borrego Water District documented possessory and/or management rights over the Club Circle golf course ( Golf Course ) currently operated by the CSD, located on the property owned by Cameron Brothers Construction Co., L.P. ( Course Owner ); 11) That pursuant to Water Code section , subject to LAFCO approval, the Borrego Water District holds latent park powers for the purposes of providing park and recreational facilities and services pursuant to the Recreation and Park District Law, Chapter 4 (commencing with Section 5780) of Division 5 of the Public Resources Code, which powers shall automatically activate within the CSD territory on the Effective Date, so that on the Effective Date, the Borrego Water District will assume the management and operation of the Golf Course on terms mutually agreeable to the District, the CSD and the Course Owner; 12) That pursuant to Water Code section , the Borrego Water District holds latent powers for the collection or disposal of garbage or refuse matter ( Trash Services ), pursuant to the Community Services District Law, Division 3 (commencing with Section 61000) of Title 6 of the Government Code, which powers shall automatically activate within the CSD territory on the Effective Date, so that on the Effective Date, the Borrego Water District will assume the Trash Services previously provided by the CSD; 13) That the CSD will assign and the Borrego Water District will assume the contract between the CSD and Allied Waste for the provision of Trash Service within ID-5; 14) That prior to the Effective Date, the CSD shall record with the Recorder of the County of San Diego an easement conveying interests in certain real property known as Well 5; and 15) That on the Effective Date, the Borrego Water District shall charge the following fees and/or rates for services provided within ID-5; a. For not less than one (1) year following the Effective Date, the fee for potable water service shall be same as the water service fee 3

15 charged within ID-4 of the District, as the same may be revised from time to time; b. Subject to compliance with applicable provisions of law, the fee for sewer service shall remain unchanged for not less than one (1) year and until such time as the Borrego Water District has operated the sewage facilities long enough to determine (in the sole and absolute discretion of the District) the most effective method for the treatment and/or conveyance of such facilities; c. The fee for Trash Services shall remain unchanged for not less than one (1) year following the Effective Date; and d. Fees related to the golf course shall remain unchanged for not less than one (1) year following the Effective Date. Additionally, the golf course shall not close so long as sufficient revenues from fees and operations of the golf course exist to continue to pay for operation, maintenance and administration of the golf course; 16) That prior to the Effective Date, the CSD shall record with the Recorder of the County of San Diego that certain grant deed conveying fee title to that certain real property known as the Waster Water Treatment Plant; and 17) That the Borrego Water District shall be responsible for and pay any and all costs related to the Reorganization; provided, however, that upon the completion of the Consolidation, the Borrego Water District may use (1) any and all surplus funds in CSD and/or ID-5 accounts; and/or (2) any and all excess revenues received from ID-5, to reimburse the Borrego Water District an amount not to exceed fifty percent (50%) of the LAFCO and attorney fees required for the Consolidation; and 18) That the Borrego Water District shall, as part of the Consolidation application, ask LAFCO for approval and activation of its authority to exercise the powers of a recreation and park district pursuant to the Recreation and Park District Law, Chapter 4 (commencing with Section 5780) of Division 5 of the Public Resource Code for the purposes of providing park and recreational facilities and services, and a community service district pursuant to the Community Services District Law, Division 3 (commencing with Section 61000) of Title 6 of the Government Code for the purpose of providing Trash Services (collectively, the Latent Powers ); and 19) That prior to the Effective Date, and as part of its approval of the Consolidation, the Local Agency Formation Commission of San Diego County shall have approved the Borrego Water District s request for approval to exercise and activate its Latent Powers; and 4

16 20) That the Borrego Water District agrees to assume the CSD s rights, duties, and obligations set forth in that certain Wastewater Treatment Plant and Well Facilities Agreement recorded on May 30, 2007 as Document No as amended by the First Amendment to Waste Water Treatment Plan and Well Facilities Agreement recorded on July 13, 2007 as Document No : a. That the Borrego Water District agrees that any Developer within the CSD territory who has on file a recorded tract map and has met the 1:1 mitigation ratio required by the County of San Diego will be charged fifty percent (50%) of the existing preservation fee ( Preservation Fee ) per dwelling unit constructed. For new land subdivisions within CSD territory, any and all then existing BWD Preservation Fee and/or other policies and/or fees shall apply. 21) Activation of the Borrego Water District s Latent Powers for Park and Recreation, and Solid Waste Collection and Disposal services and expansion of the Borrego Water District s Latent Powers Sewer Area will be conditioned on the completion of the proposed Consolidation, effective on the date of the recordation. 5