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 Paul Kenner. Said meeting was open to the public and notice thereof had been given as required by law. Those present included Commissioner Jeff McClure, Commissioner Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Brian Walters, Director of Utility Operations; Barb Shosten, Director of Finance; Annette Smith, Assistant Finance Director; Dennis Yabsley, Electric System Supervisor; Fred Disch, Water System Supervisor; Paul Siegmund, Process Engineer; Mike Macomber, IT/SCADA Technician; 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.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held August 23, 2011 and the following claims of September 13, 2011.

ACTION: Commissioner McClure motioned to approve the Minutes of August 9, 2011 and the claims of August 23, 2011. Commissioner Murphy second the motion. Motion passed unanimously.

• 2012 Budget Work Session
Jilk asked that the Commission begin to discuss their goals and objectives for the 2012 operating year. As the operating and capital budgets are developed, several issues need to be considered so they can be factored into the process. Shosten and other staff members have dedicated a lot of time thus far and the input from the Commission will assist in changes/modifications etc. for the first draft budget presentation in October. The continuing implementation of capital improvement projects and rebuilding program, maintenance issues that are backlogged, working with WWU and the City of Lynden on the North County Anerobic Digester project and the NoaNet/Foothills East County broadband service plans are a few of the items in the work plan.

Kenner is concerned about the loss of the City of Ferndale off the water system and inquired if there are other potential customers. Shosten has been working on a number of different scenarios for this situation and it appears that we may be able to keep the impact on other customers rates to a minimum amount of increase over what was projected last year due to Ferndale moving off the District's system. Some projects are under budget and some smaller projects won't need to be done. The prospect for new clients is unlikely with the exception of the west side of the river for irrigation water. A change of withdrawal to the City of Lynden may be possible in the longer term as the District is working with the water supply group and the State Dept. of Ecology (DOE) for transfer of water rights.

Murphy is concerned about the loss of other water customers such as Birch Bay Water and Sewer District and the drop in consumption by Alcoa and those impacts on the District's revenue. Jilk replied that the District will continue to identify opportunities for the PUD to use its water rights throughout the County by (1) assisting other utilities/cities/agriculture. It will be difficult to acquire new customers in the Cherry Point area as major businesses such as BP and Alcoa own most of the land, however, in the Cherry Point area the District can help in the development for water and electricity infrastructure that supports existing and potential businesses.

The possibility of expansion of potable water to City of Ferndale as well as the Lummis has been discussed by co-operating on a regional treatment plant. Jilk also discussed the issue of water rights pertaining to agriculture and especially in light of the topic of climate/temperature changes.

McClure indicated important items on his list are the capital improvement projects - to adequately serve customers, an emphasis on water planning, anerobic digester projects and planning in the Cherry Point area to see what areas (infrastructure) can be developed. To keep supplying irrigation and supporting agriculture are also important. Jilk said he appreciated the Commissioners comments and ideas. A draft budget using these comments and suggestions will be presented for consideration by the Commission in October.

ACTION: Information only. No requested action.

• Manager's Report
EDI Funding
The County Council Finance Committee will review the request for EDI funding today for the Water Supply Planing project and it is anticipated that the approval will be at tonight's County Council meeting.

Grandview Water System
A broken pipe and flooded warehouse was reported at Grandview on Sunday. There was no damage to the building or its contents. Walters gave an update about the situation and some history on the water system:

• Grandview was acquired in 1992, already designed and in place;
• No drawings were ever received;
• Piping is PVC, impossible to locate, there is no bedding, no sectionalizing of lines or valve in place for by-pass;
• Piping from existing buildings to new ones are difficult to support as well as assisting new customers;
• Broken line was tapped into the system without District knowledge, buried, and eventually cut and/or abandoned;
• No SCADA, there is metering of flow and pressure but cannot be read remotely; and,
• Fire pond system from Dakota Creek is filling in creating risk to clog the intakes and the clean up challenge is to get permits.

Although minor improvements have been made, issues involving investment and upgrades have been postponed. These costs would have a major impact on customers. There are about 40 connections and rates were raised three years ago but did not include reserve for improvements. Shosten added that the Grandview operating budget is only about $150,000 a year so costly improvements are extremely difficult to pass on to the existing customers. The District needs to develop a long-term system/solution as it is very likely we will continue to operate it. The challenge will be funding, perhaps a loan from the raw water system and but need to have the capability to keep rates affordable for our customers

For now, the number one priority is to locate the existing service lines and identify equipment such as pumps and tend to the fire pond issue. Building a new system, using potable water for fire suppression and creating storage, doing away with the pond, and different financing methods were also discussed. A capacity study to determine whether or not it is sufficient to provide potable water at Grandview was completed by Murray, Smith and Associates however; it did not address the fire pond issue. Jilk said staff will work on developing a plan to address the concerns.

Walters added his appreciation to Fred Disch and his staff for their quick and responsive action on Sunday afternoon to the incident.

Water Week
Schlotterback said the second annual Water Week kick off is this Saturday at the Bellingham Farmer's Market. Several events have been added and will take place throughout the week. The committee consists of Sue Blake from Whatcom County, Emily Resch from Birch Bay Water and Sewer District and the PUD. The event is slowly growing, there was a lot of good press this year and Schlotterback said they are hoping for funding to provide a full time staff person to coordinate the event in the future.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 8:55 a.m.

President/Commissioner

Secretary/Commissioner

Commissioner