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 Rich Davis. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Brian Walters, Director of Utility Operations; Barbara Shosten, Director of Finance; Annette Smith, Assistant Director of Finance; 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; and Lew Gaskill, Accountant 1. Public attending: Rick Maricle, ConocoPhillips; Tom Perry and Nate Hardy, Murray, Smith and Associates.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held October 11, 2011 and the following claims of October 25, 2011.

ACTION: Commissioner McClure motioned to approve the Minutes of October 11, 2011 and the claims of October 25, 2011. Commissioner Murphy second the motion. Motion passed unanimously.

• Approve Employee Recognition Program
Jilk presented, for Commission consideration an Employee Recognition Program policy. In the past there has been no Commission approved policy or program to recognize employees' achievements and years of service at the District. Staff researched other PUDs, who have recognition programs, and based on the collective information, he would like to see a similar recognition program implemented here. The District realizes that a stable and skilled workforce is beneficial to the District and our owners/customers.

The District's Employee Recognition Program is designed to recognize and reward employees for their achievements, to improve employee morale and to encourage consistent professional service in the following areas:
• Length of Service
• Exceptional/Noteworthy Performance
• Safety Performance

For the purpose of this policy, employee recognition means any reward, time in service, prize, meal, entertainment or event that is intended specifically to promote good will, foster a sense of pride in affiliation with the District, and promote safety, productivity, reliability, efficiency dedication, and longevity commitment to the community and/or cost savings for the District among the PUD employees.

Within the proposed policy the PUD or its individual departments may, subject to budgetary authority, expend funds for the purpose of employee recognition. This amount will be budgeted on an annual basis and may be adjusted annually on the recommendation of the General Manager. Once yearly, the District may have a District event for employee appreciation and recognition of the above awards. The maximum cost of this event is set at $2,000.00. The General Manager must authorize the expenditure of funds for the purpose of employee recognition. The dollar amount of the service work will have no fiscal impact on the District's Budget and will be funded out of the District's Operating Budget.

ACTION: Commissioner Murphy motioned to approve the Employee Recognition Program to establish procedures and guidelines under which District funds can be utilized for the purpose of employee recognition. Commissioner McClure second the motion. Motion passed unanimously.

• Approve Amendment No. 1 - Washington Department of Ecology Instream Flow Negotiation Support Grant No. G1200070
Background - In 2009 the Commission agreed to have the PUD administer Grant No. G000137 for the Ecology Instream Flow Negotiation support. The grant was completed and the term ended on June 30, 2011.

The Department of Ecology requested that the PUD continue to provide administration support for the Nooksack Basin instream flow negotiations for fiscal biennium years 2012-2013. The initial Grant No. G1200070 provided a budget of $9,000.00 with a term of July 1, 2011 to September 30, 2011 (first quarter 2012) until additional funding was confirmed by Washington State for the fiscal biennium. Because the budget amount was within the approval range for the General Manager, it was not necessary to seek Commission approval. No work occurred during the first quarter and no funds were expended.

Ecology notified the PUD that funding is now available for the remainder of the fiscal biennium and has again requested that the PUD continue to provide administration for the full fiscal biennium with a term ending on June 30, 2013. Ecology funding is currently at $145,000.00 with $25,000.00 in funds for fiscal year 2012 (July 1, 2011 to June 30, 2012) and $120,000.00 for fiscal year 2013 (July 1, 2012 to June 30, 2013). If the PUD accepts the grant, the PUD would administer the grant, hire consultants and pay for facilitation costs to support these ongoing negotiations. There would be no out-of-pocket expense incurred by the PUD in the administration of the grant period and the PUD would recover all administrative and overhead costs incurred in the administration of the grant.

ACTION: Commissioner McClure motioned to approve Amendment No. 1 for the Washington Department of Ecology Instream Flow Negotiation Support Grant No. No. G1200070 in the amount of $145,000.00 effective through June 30, 2013. Commissioner Murphy second the motion. Motion passed unanimously.

• Approve Amendment No. 1 - BPA Residential Exchange Program Settlement Agreement
Walters said the District's Commission previously approved the Residential Exchange Program ("REP") Settlement Agreement and authorized the General Manager to sign the Agreement prior to the signing deadline on June 3, 2011. Walters said Amendment No. 1 provides an opportunity for those entities that didn't sign the Agreement by the deadline to have a second chance. If Amendment No. 1 is ratified through approval by all the current signatories to the Settlement Agreement, then those entities who now want to sign will have until January 31, 2012 to do so. If even one current party to the Settlement Agreement does not sign the amendment document, then it will not be ratified.

Approval of Amendment No. 1 has no fiscal impact on the District. The amendment will not impact the future payments the District will receive under the Residential Exchange Program Settlement Agreement.

ACTION: Commissioner Murphy motioned to approve Amendment No. 1 to the BPA REP Settlement Agreement and authorize the District's General Manager to sign the amendment document. Commissioner McClure second the motion. Motion passed unanimously.

• Approve Water treatment Plant No. 1 Interim Improvement Project as Complete and Accept Project from Stouder Construction
Background: The District executed a contract with Stouder General Construction, LLC for interim improvements to Water Treatment Plant No. 1. These improvements are identified in the District's capital improvement program (CIP) as RW-3 & RW-18. Stouder Construction completed the Project within budget but after the contractually specified completion date. There were a few delays relating to trouble with the flocculaters and associated electrical work. Therefore, the final contract dollar amount to be paid out will be less than the original contract amount plus change orders.

Listed below is a summary of the contract amount additions and reductions for the project. The end result is a net reduction in the total project cost through completion.

ACTION: Commissioner Murphy motioned to approve Contractor (Stouder General Construction, LLC) Work on Water Treatment Plant No. 1 Interim Improvement Project as Complete on October 7, 2011(Completion Date) and Accept Project from Contractor. Commissioner McClure second the motion. Motion passed unanimously.

Plant 2 Improvements:
Final Design
• Permitting process near complete - Public Hearing is November 1.
• Concepts further defined for final design.
• District review comments have been received and preliminary plans and specifications are completed to 60%.
Existing Site Conditions
Hardy explained an overview map of the existing site and the proposed improvements:
• Intake Pump Station
- Improve power reliability with new underground power feed and 500 SF building addition for separate electrical room and new transformer.
-Improve mechanical reliability with piping and valve replacement.
- Improve operations access with an exterior catwalk
-Firm Capacity (mgd): Existing 15.0, Proposed 15.0

• Raw Water Transmission Main
- Increase transmission capacity with a 2,000 feet parallel 24-inch main.
-Redundant power feed and fiber optic connection.
-Firm Capacity (mgd): Existing 8.0, Proposed 18.1

• Pretreatment - Control Building
-Increase hydraulic capacity to accommodate two treatment trains with 500 SF building addition for flow splitting, chemical injection and flash mixing.
- Improve mechanical reliability with equipment replacement
-Improve operations access with improved control room layout, chemical storage safety/access improvements and add lavatory and showers.
- Firm Capacity (mgd): Existing 13.0, Proposed 16.5

• Treatment
Existing (West) Sedimentation Basins
- Improve treatment performance with vertical variable speed mixers, baffle walls and effluent weirs.
-Improve mechanical reliability with equipment replacement.
- Improve operations access with basin catwalks.

Proposed (East) Sedimentation Basins
-Two new high rate sedimentation basins with smaller footprint/higher capacity, tube settlers and automated sludge removal.
-Firm Capacity (mgd): Existing 6.0, Proposed 11.0

• High Head Pumping
-Screening room with Parshall flume and in-channel screen
-Pumping System with 4 pump system (5 pumps in future), two chamber clearwell and two distribution headers
- Electrical Room to house 5 KV distribution and secondary control room.
-Firm Capacity (mgd): Existing 9.4, Proposed 10.5

• Maintenance Facilities
-New 6,250 SF maintenance building with attached garage and shop to include workstations/staff offices, meeting/training room, restrooms, and 4-bay shop/garage.
-New 2,100 SF covered storage with multiple covered bays.
- Both are configured for future expansion.

• Site Improvements
-Standby generator, security fencing, paved parking, gravel lay down area, and stormwater facilities.

• Construction Cost Estimates
-Plant 2 Construction w/ sales tax plus 10% contingency: $16,537,000
- Standby Power subtotal w/sales tax plus 10% contingency: $1,331,000
-Trigg Road Maint. Facilities subtotal w/sales tax plus 10% contingency: $1,657,000

• Schedule
2011: Regulatory reviews in process; 60% design by 3rd Quarter; 90% by year end.
2012: Bid ready documents by 2nd Quarter; Construction permits by 3rd Quarter; Bidding and Award by 2nd Quarter; Construction phase to begin 3rd Quarter through midyear 2014.

• Next Steps
-Receive District comments on 60% plans and specifications
-Complete permitting process; public hearing on November 1
-Prepare 90% complete plans and specifications
-Prepare bid documents
- Define next phases of work: Bidding and contract award, construction permitting, construction support, start up and commissioning.

• Discussion
Commissioner McClure inquired if the cost estimates are lining up with the District budgets. Perry responded that estimates are done on today's pricing and the numbers of items incrementally increase with the price of construction. Contingency factor was decreased from 15 to ten percent. Kenner asked if the number of public agency jobs being constructed or going to bid is flattening out. Perry said there is now a lot of competition which weeds out smaller or inept contractors so now there is a smaller pool of more qualified to draw from. There are local contractors capable of this size project. Perry estimates about eight or so bidders for the project. Murphy asked if the project can be broken down into smaller projects to encourage local contractors to bid. Perry said that is an option to split between plant work and power work. He noted that typically smaller projects within are handled typically with local trades. Jilk said that might be the way to go especially if there are finance challenges, and as far as the project/budget comparison, District staff is taking a hard look at the capital projects.
• Manager's Report
Jilk requested an Executive Session to discuss water rights litigation, union contract negotiations and an update on a potential litigation. He expected the session to last about 15 minutes with no formal action to be taken afterwards. Legal Council was present. There being no further business for the regular meeting, the Commission adjourned at 9:10 a.m. to Executive Session. Commissioners came out of Executive Session at 9:30; and,

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 9:30 a.m.

President/Commissioner

Secretary/Commissioner

Commissioner