The regular meeting of the Board of Commissioners of Public Utility District No. 1 of Whatcom County was called to order at 8:00 a.m. by Commissioner Jeff McClure. Said meeting was open to the public and notice thereof had been given as required by law. Those present included Commissioner Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Brian Walters, Director of Utility Operations; Barb Shosten, Director of Finance; Annette Smith, Assistant Finance Director; Fred Disch, Water Systems Supervisor; Paul Siegmund, Process and Control Engineer; Duane Holden, Director of Engineering and Project Development; Alec Strand, Project Manager; Rebecca Schlotterback, Water Resource Technician; and Lew Gaskill, Accountant 1. Public attending: Rick Maricle, ConocoPhillips and Tom Perry, MSA.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held May 24, 2011, and the following claims of June 14, 2011.

ACTION: Commissioner Murphy motioned to approve the minutes of the regular meeting held May 24, 2011, and the claims of June 14, 2011. Commissioner McClure second the motion. Motion passed unanimously.

The purpose of the Project is to enable the District to provide power to its Water Treatment Plant No. 1 entirely over District owned transmission facilities and reduce potential for outage to the PUD treatment plant.

Based on a District Request for Bid Proposals, four bids were received by the advertised deadline, 2:00 PM on Thursday, June 2, 2011. Upon review by District staff, it was determined that the Bid submitted by Potelco, Inc. is the Lowest Cost Responsive Bid. Potelco's Bid is a lump sum One Hundred Seventy-Two Thousand Four Hundred-Forty Dollars ($172,440.00), sales tax not included. With 8.5% sale tax, the total is $187,097.40. The Engineer's Estimate for the construction work, as specified, is $191,830.00, sales tax not included.

ACTION: Commissioner Murphy motioned to award the contract for the construction of the Imhoff Road 115 kV Transmission Line Project to Potelco, Inc. in the amount of $187,097.40 including sales tax and authorize the District's General Manager to sign and execute the contract. Commissioner McClure second the motion. Motion passed unanimously.

• Pacific Surveying & Engineering Work Order No. 6 - On Call Services
The District has determined that it may require surveying services from PSE that are not covered under Work Orders currently contracted between the District and PSE. District staff is asking approval of Work No 6 - On Call Services with PSE that will allow the District to use PSE's services on an as needed basis for work associated with both CIP projects and maintenance work. The District will assign costs first to Work Orders currently associated to CIP projects. The District's estimate for accomplishing Work Order No. 6 is a not to exceed amount of twenty thousand dollars ($20,000.00)

ACTION: Commissioner Murphy motioned to approve Work Order No. 6 between the District and Pacific Surveying & Engineering Inc. for On Call Services in an amount not to exceed of $20,000.00 and authorize the District's General Manager to sign and execute the work order. Commissioner McClure second the motion. Motion passed unanimously.

• Bellingham Technical College - Wind Turbine Equipment Loan
The PUD purchased a small wind turbine and associated equipment and allowed the use of that equipment by a Washington State Student to conduct feasibility study and wind availability analysis in Whatcom County. Since that study was completed the turbine and equipment has been inventoried at the PUD and is not currently used.

Bellingham Technical College (BTC) is expanding its renewable energy curriculum and has installed one wind turbine at the BTC campus in Bellingham. BTC is finding the need for additional teaching tools for this expanded program and has requested the use of the PUD turbine to integrate its use into the renewable energy program.

This is a recommendation to "loan" the turbine and equipment to BTC to be used in the renewable energy program. Utilization of the turbine and equipment for this purpose, education and specifically in the area of renewable energy is appropriate use of PUD funds and the equipment purchased, initially for that purpose.

The criteria for this "loan" would be that the equipment is utilized only for educational purposes; the equipment cannot be transferred to anyone else and must be returned to the PUD if BTC quits utilizing it for the stated purpose.

ACTION: Commissioner Murphy motioned to authorize the loan of the PUD wind turbine and associated equipment for the purposes of integrating its use into the BTC renewable energy program and authorize the General Manager to sign appropriate transfer documents. Commissioner McClure second the motion. Motion passed unanimously.

• Vehicle Purchase: 2011 Ford F 250 Crew Cab 4x4 Pickup Truck for Water System
District staff identified the need to purchase a new pick-up truck for water system operations to replace an existing 1990's vintage pick-up, purchased as a used vehicle under a State of Washington surplus sales program. The water utility vehicle is a capital purchase item identified in the District's 2011 budget as CIP RW-14.

The District currently is a member of the Washington State Purchasing Cooperative. As a public agency member, the District is eligible to purchase vehicles secured by the State under competitively bid contracts. In this manner the District can secure items at a competitive price without the need to issue its own request for bid.

The vehicle to be purchased is a 2011 Ford F-250 XL, heavy duty ¾ ton, crew cab pickup with 4-wheel drive. It is the intent of the District to surplus the water operations' red Dodge Ram pick-up once the purchase and delivery of the new vehicle is complete. This vehicle is reaching its useful life based on the amount of mileage and determined need for maintenance.

ACTION: Commissioner Murphy motioned to approve the purchase of the water utility vehicle from Columbia Ford Mercury Lincoln in Longview, Washington and authorize the District's General Manager to proceed with the purchase. Commissioner McClure second the motion. Motion passed unanimously.

• District Employee Handbook Update
The District Employee Handbook is provided to new and existing employees to inform them about District working conditions, employee benefits and some of the policies affecting employment at the District. Staff revised the Handbook to reflect updated federal and state employment law, and District employment policies, such as use of District-owned property like cell phones and vehicles.

Each District employee was presented with a draft version of the Handbook and asked to submit feedback for consideration before submitting the final draft version for Commission approval. After Commission approval, all employees will be asked to sign a receipt of acknowledgement that they received the updated Handbook, and as a component to the update, all employees will be asked to re-sign employment policies so that District employment records will reflect current content.

ACTION: Commissioner Murphy motioned to approve the revised and updated District Employee Handbook. Commissioner McClure second the motion. Motion passed unanimously.

• Mt. Baker Foothills Telecom - EDI Application
The PUD and the Port of Bellingham have been working with representatives of the Mt. Baker Foothills Chamber of Commerce for several years to develop a telecommunication service in the area of Glacier/Maple Falls and Silver Lake. This area is currently un-served or underserved with "broadband" or high speed telecommunication service. Because of this, residents, schools, businesses and public safety organizations are either without ways to communicate and access high speed data transmission service or very underserved in this area.

The Mt. Baker Foothills Chamber has had a volunteer group working on this without, up until recently, any remuneration. Over the years there have been several attempts to get private telecom companies to bring this service to this area. The attempt has been unsuccessful because the number of potential customers does not provide enough return on the investment for the private sector to build the basic infrastructure.

Currently there are federal grant funds available for development of these kinds of services to un-served or underserved rural areas. The funds are being channeled through NoaNet, the non-profit regional broadband organization. Under this program NoaNet is willing to build a system that would serve the Glacier/Silver Lake/Maple Falls area. NoaNet received a federal grant in the amount of just under $60 million dollars to fund projects throughout Washington State. The federal grant requires a local match to meet 100% of project costs. In this case NoaNet can access $270,000 of federal funds to meet an estimated total project cost of $351,000.

In order to access the federal funds and use them on this type of project, NoaNet has to either have the project built by a public utility such as the PUD who is authorized and capable of owning and operating the system or build the system themselves and have a local public utility prepared to take ownership of the system once it is operating financially in the black. The system can't be transferred to a private firm. As an example, this eliminates the option of NoaNet building it and transferring it to the Mt Baker Chamber of Commerce.

The PUD, as a public agency, can apply for County EDI funds as long as the public agency owns the infrastructure it uses the EDI funds for. PUD staff has met with County administration to discuss this idea. County Administration is advising that the PUD apply for a loan from the EDI program and base the payback for the loan ultimately on the project. Specifically, the EDI funds would come in the form of a loan but the PUD would not have to make any payments until the project is operating financially in the black and there would be net revenue available above the cost of operating the system.

NoaNet agrees with this arrangement and would build the system and operate it until the system is operating financially in the black and then turn it over to the PUD. The PUD would not have any financial liability for the project under this scenario and the Mt. Baker Foothills area would get a wireless, high speed telecom system.

NoaNet is currently working on the system design and will eventually commit to the construction phase. The EDI application needs to move forward so that when the local match is required we have the commitment from Whatcom County.

Commissioner McClure suggested that the EDI application includes a request for a no interest period on the loan. Jilk said that it is possible the EDI Board may approve the application as a grant rather than a loan. Commissioner Murphy said he had concerns as to whom this project really benefits. Jilk said that it will provide cellular service to a large area in the Northeast corner of Whatcom County that currently has no cell service or is underserved.

ACTION: Commissioner McClure motioned to authorize the application for an $81,000.00 loan from Whatcom County EDI fund to provide the local match to the Mt. Baker Foothills / NoaNet Wireless Broadband system, with the final terms of the EDI Loan subject to legal review and Commissioner approval. Commissioner Murphy second the motion. Motion passed unanimously.

• Water Supply Planning - EDI Application
The PUD has been working with other members of the WRIA1 Joint Board for some time on the development of an action plan to implement the Joint Board's Watershed Management Plan for WRIA1. This five year plan and associated budget that supports the completion of five elements of the plan was adopted by the Joint Board.

The elements, or Objectives, of the plan are:

1) Water Right Settlement Negotiations
2) Water Budget and Technical Support
3) Coordinated Water Supply Plan
4) Flow and Water Quality Monitoring
5) Implementation Tools

The Joint Board selected a "lead entity" to complete each of the five Objectives. The PUD was asked to complete the work for Objective No. 3.

Each of the Objectives also had a budget developed for the completion of the Objective and a designated source of those funds. In the case of Objective No. 3 the source of funds was identified as coming from the Whatcom County EDI fund.

In the early discussion of the five year plan it was suggested that Objective No. 3 should include the update to the County Coordinated Water System Plan. Following many discussions with County staff, Cities and water associations it was decided to broaden the scope of work under this Objective so the final product represented a "water supply plan" for all out of stream uses in the County (WRIA1).

These discussions have led to support from all the Cities and County administration for the work to be completed under Objective No. 3, the source of the funds to be used to complete that work, and that the PUD act as lead on the project. The estimated budget for the five year period for Objective No. 3 is just under $400,000.

The next step in this process is to submit a formal application to the Whatcom County EDI Board for the funding. County Executive Kremen has already gone on record supporting the use of the funds for this purpose. As lead entity for the project the PUD would make application for the funds.

ACTION: Commissioner Murphy motioned to approve the application for grant in amount of $397,000.00 from Whatcom County EDI fund to complete Objective No. 3 of the WRIA1 Joint Board five year action plan, Coordinated Water Supply Plan and authorize the General Manager to represent the PUD in this process. Commissioner McClure second the motion. Motion passed unanimously.

• Biogas Digester/Western Washington University - Feasibility Study
A group of interested parties have been meeting over the last two years to discuss the options for development of a digester that uses different organic waste streams as feedstock to produce methane gas and other products in the area around Lynden.

Both public and private parties have been represented in these discussions. The PUD, the City of Lynden and the Port of Bellingham, along with Washington State University, Western Washington University, Whatcom Conservation District and Bellingham Technical College are the public agencies represented and private sector parties have included LTI, Dairygold, berry growers and dairy farmers.

As a result of these discussions and in an interest to pursue the concept further the City of Lynden, the Port of Bellingham and the PUD entered into an Interlocal agreement to lead the completion of a feasibility study to determine if the project concept has merit. The Interlocal agreement calls out the PUD as contract administrator and project lead.

This Interlocal agreement also calls out project cost shares to be borne by the parties to the Interlocal agreement. Additionally, other parties to the discussion have committed to making contributions to the cost of the study.

The parties to the Interlocal agreement have developed a scope of work for the project and, in consultation with each other have asked the Center for Economic and Business Research (CEBR) and Western Washington University to consider a proposal to complete the study.

Dr. Hart Hodges, Director of CEBR, has been working with the parties to develop the final scope of work and budget. Dr. Hodges has submitted the proposal to the biogas/digester working group for final approval.

The entire budget for the feasibility study is not to exceed $75,000.00 and Dr. Hodges estimates that the CEBR scope could be funded for $35,000.00. Jilk said that a portion of the remaining funds may be needed for private consultant fees.

PUD staff recommends that the Commission accept the proposal and approve the work to be done as defined in the proposal and under the budget as proposed with Western Washington University and CEBR.

ACTION: Commissioner Murphy motioned to approve the proposal from Western Washington University and the CEBR to complete the feasibility study for a bio-gas digester for a cost not to exceed $35,000.00. Commissioner McClure second the motion. Motion passed unanimously.

• Manager's Report
No report.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 9:20 a.m.

President/Commissioner

Secretary/ Commissioner

Commissioner