Mendocino LAFCO adopts Potter Valley Irrigation District MSR and affirms existing sphere of influence

The Mendocino County Local Agency Formation Commission on a recorded vote adopted a municipal service review (MSR) and affirmed the existing sphere of influence for the Potter Valley Irrigation District, approving a staff-recommended notice of exemption under the California Environmental Quality Act and a resolution transmitted in the staff report.

The action implements staff recommendations to find the MSR and sphere update exempt from CEQA and to adopt the accompanying notice of exemption, and was moved by Commissioner Marty Roden and seconded by Commissioner Gonzales. The roll call vote recorded Commissioners Ward, Klein, Gonzales, Horsley, Mahoney, Roden and Chair Mulhern as voting in favor.

The MSR and sphere update packet, prepared by Executive Officer Uma Henman, describes the Potter Valley Irrigation District (PVID) as a single-service irrigation provider formed in April 1924 that serves roughly 275 customers within about 7,000 acres and diverts water from the Eel River through the Potter Valley project. Henman told the commission the draft includes MSR determinations (staff noted they appear on pages 65 and 73 of the report) and that staff had worked with the district to incorporate comments from a February workshop. Staff also noted that the 21-day public hearing notice was published, posted and distributed on March 9 and that no public comments had been received prior to the hearing included in the packet.

Janet Polly, speaking as president of the Potter Valley Irrigation District board, told the commission she has served on the district board since 1988 and that the district is beginning to plan for possible rate increases because of expected changes to the Potter Valley Project. Polly described ongoing negotiations between project partners and PG&E and said the Federal Energy Regulatory Commission (FERC) will have a role once PG&E files a final license surrender plan; she warned the commission the timing of FERC action is uncertain. "We're not sure how soon FERC will address this and actually prepare an order for how things might change at this project," Polly said, and added that if FERC's process results in PG&E decommissioning facilities, partners expect a multi-step process that could take years.

Polly also described regional planning efforts tied to the project. She said local partners have formed a joint powers authority, the Eel Russian Project Authority, to act as the prospective owner/operator of any new diversion facility and that project partners are working on a memorandum of understanding and later a formal water diversion agreement. She said the Round Valley Tribe would take a senior water-rights role under the partnership arrangements and that partner entities are exploring funding sources and storage options to sustain summer deliveries.

Commissioners pressed on the district's finances and governance. Commissioner Ward asked about the district's financial statements, noting audits are several years behind for some districts and asking how apportionment fees are calculated when financial reports lag. Ward also cited a reserve figure in the packet of roughly $291,000 and said the MSR's evaluation that PVID was "doing really well" appeared inconsistent with uncertainties around future revenue if the project's operations change. Henman answered that the MSR used the most recent available information and that staff had been provided updated materials during the MSR update process.

Commissioner Horsley asked staff to correct a textual error in the draft referencing the storage tank useful life; staff agreed the "15 years" useful-life statement was an error for a tank installed in the 1970s and said it would be corrected. Commissioners also asked that the MSR append or link to the Potter Valley Project memorandum of understanding so the public record includes that document; Henman said staff had provided a link in the packet and could attach the MOU as an appendix.

The staff report recommended the commission find the MSR and the sphere of influence update exempt from CEQA, approve the notice of exemption for filing and adopt "resolution number 20 20 four-twenty five-eleven" approving the MSR and sphere update, language appearing in the staff report. Henman thanked district superintendents Don Brown and Steven Elliott for their assistance in preparing the study.

After the hearing and discussion, Commissioner Roden moved the recommended action; Commissioner Gonzales seconded. The motion carried with the seven commissioners recorded as voting yes on the roll call.

The commission did not adopt any operational changes to the district; the approved action updates LAFCO's MSR and sphere of influence findings and documents staff and district concerns about financial stability and the long-term uncertainty tied to PG&E's pending decommissioning and FERC's review. Staff and the district indicated they will continue to monitor federal filings, the development of partner agreements and potential funding needs for storage and diversion facilities.

Votes at a glance: Motion to approve CEQA notice of exemption and adopt the Potter Valley Irrigation District MSR and sphere of influence update; mover: Commissioner Marty Roden; seconder: Commissioner Gonzales; roll call recorded yes votes by Commissioners Ward, Klein, Gonzales, Horsley, Mahoney, Roden and Chair Mulhern; outcome: approved.

Looking ahead, staff said any changes in the Potter Valley Project prompted by PG&E's final license surrender filing and FERC's subsequent orders could affect service and finances over time; the MSR update documents current governance, assets and financial positions as a baseline for future reviews.