Answers to Friends Questions of Prospective Sallal Board Members 

See Responses from Marcus Morrisette, Larry Costello and Rich Formisano below:

Marcus Morrisette:

1. Is there information you would like to share about yourself in addition to the short bios provided by Sallal in the voting information packet sent to members this week?

I have been an attorney, licensed in Washington State since May 1997. I have practiced in many different areas, and primarily focus on information security and privacy law. However, I have a strong background in corporate governance and risk management.

2. What is your current opinion of the current draft of the proposed Water Supply Contract ( see a copy here - https://sallal.com/wp-content/uploads/2023/02/2-7-23-Sallal-accepted-draft-water-supply-contract.pdf ) between Sallal and North Bend? If you were currently on the Board and the vote were today, how would you vote? 

I believe the current version of the water supply contract is flawed in many ways, and if the vote were today, I would vote against the contract. I think there is a future for Sallal that does not involve selling our soul to the City of North Bend.

One of my biggest concerns is the costs to Sallal that would be associate with the infrastructure that we would have to build in order to connect to North Bend’s water system. How much, who will pay, and how we will afford. Is it worth spending this much money? Where will we get this money? 

I am also concerned that the provision in the contract for the “instantaneous” exchange of water are unrealistic. The entire endeavor seems like paper water regime to me. We give water we apparently don’t have to North Bend so they can meet their mitigation obligation, while they give us water to serve the additional development that they approved in the UGA.  This just does not make sense to me and does not seem sustainable for Sallal or for the ecosystem.

I am also concerned on the impact that connecting the two systems would have on our system in terms of pressure, water quality, leaks, availability, etc.

Further, my biggest concern is that I still do not trust North Bend as a trustworthy partner. I think our entering into the contract, and the subsequent connections of the two systems is seen by North Bend as simply a precursor to their ultimate goal of a complete take-over of Sallal.

3. What are the critical pieces of information you would need to know in order to make a final decision on your vote?

I also am concerned about the potential conflict of interest with our consultants (G&O) also being consultants for the City. I would like to look into our contract with them to ensure that our best interests are being looked out for, and that there is no conflict or other improper information sharing taking place.

I would also like to improve the transparency, communication, and member involvement. I would like to expand the MAC to 10-12 members. 

I would also support a change to the by-laws to put the decision to enter into any sort of Water Supply Contract back with the members, and not in the hands of the Board.

4. Do you live inside or outside of the City of North Bend?  (Note: Sallal members inside vs outside the City may be facing differing issues in the next few months and years. This question is to determine if there will be Board representation from both groups.)

I live outside the City of North Bend.

5. Do you live inside or outside North Bend’s Urban Growth Area (UGA)? (Note: Sallal members inside vs outside the UGA may be facing differing issues in the next few months and years. This question is to determine if there will be Board representation from both groups.)

I live outside the UGA. 

6. Please list any potential conflicts of interest you might have with your position as a serving on the Sallal Water Association Board and how you would deal with them:

I do not believe I have any conflicts that would prevent me from serving on the Board. I am not a real estate developer, I do not own any commercial property, and I do not make a living off any decision that Sallal or the City might make or not make.

                                                                ***

Larry Costello

1. Is there any additional information you would like to share that was not included in the short bios provided by Sallal in the voter packet? 

I appreciate the opportunity to share my views on this platform arranged by the Friends. I would like to also clarify that my responses here are not to be construed as advocating for or against the Friends organization and any of its views, or any other organization. My comments are made solely on behalf of the Sallal Water Association, its members, and as a candidate for the Sallal Board of Trustees election 2023. 

a. I am dedicated to helping facilitate Sallal’s long term success, and to making sure that Sallal members will continue to receive safe, reliable, and plentiful water. My technical and business expertise have been invaluable to that end. 

b. I served as a MAC member before being appointed to the board in August 2019, and was then elected as a trustee in 2020. During this time, I have developed a deep understanding of our water system operation, maintenance practices, water supply management, regulatory requirements, financial status, and the challenges Sallal is facing. 

c. For the past 3-1/2 years while serving as a Sallal board member I have donated hundreds of hours of time helping to make sure that Sallal’s water system is operating effectively and with our member’s best interests always on point. Among the many contributions I have made are: 

• I performed detailed reviews of multiple iterations of the DRAFT Water Supply Agreement with North Bend to make sure Sallal members would not have their water availability negatively impacted. This work continues with the utmost importance. My comments under question 2 below provide more detail on this matter. 

• I led internal reviews of our Water System Plan update and coordinated with our engineering consultant to verify accuracy of the water system metrics, characteristics, and with a focus on the water use efficiency goals. 

• I provided technical review of the water capacity analysis that has been key to coming out of the recent moratorium. My early emphasis on calibrating the production meters proved fortuitous as that action identified and resolved much of the problem. 

 I provided project management and technical support during staff transitions in 2020 and 2021 to oversee the final design development, bidding, loan funding including coordination with USDA Rural Development, and contract execution for construction of the Well #4/Reservoir and New Office projects. 

• My attention to Sallal’s financial details identified over $1 million in revenue from new membership fees that Sallal was able to collect. 

• I have been instrumental in the development of balanced budgets since the 2020 fiscal year. 

• I led the board’s review and coordination with our consultant for development of our Rate Analysis. I have maintained a close eye on our budget status and have worked to minimize rate increases while assuring our O&M, Amortization, and Capital budgets are sound. 

I will continue to make good decisions and meaningful contributions on behalf of Sallal members if reelected for another term on the board of trustees. 

2. What is your current opinion of the current draft of the proposed Water Supply Contract between Sallal and North Bend? ( see a copy here - https://sallal.com/wp-content/uploads/2023/02/2-7-23-Sallalaccepted-draft-water-supply-contract.pdf ) Also, feel free to comment on the proposed edits to the contract made by two board members at 2023.02.06-Special-BOT-Minutes-with-Attachment_.pdf (sallal.com)  See Attachment A. 

a. I generally support the concept of a water supply agreement with North Bend providing the terms of any such agreement do not result in negative impacts to the availability of water for Sallal members. Members communicated this expectation very clearly in the 2018 Special Member Meeting. The current DRAFT as noted above fails to support that outcome, which is why I am opposed to the current DRAFT. 

b. As my comments in the Attachment A referenced above indicate, Sallal members may experience forced curtailments of their water use that they would not otherwise experience were it not for the agreement. No analysis has been done to demonstrate that outcome will not occur. But, the body of historical data from Hobo Springs, current Sallal and City water demands, and future demand projections indicate such negative impacts can occur. 

c. Sallal members need to understand that this risk was addressed in prior DRAFT versions of the contract but the protective measures have now been removed. I have opposed their removal. Importantly, Sallal does not need to accept these risks under terms of a water supply agreement. Sallal members need to be apprised of these circumstances in order to decide if the agreement is in their best interests or not. Without appropriate terms that protect Sallal members from negative impacts to their water availability I will not support the agreement. 

d. More than ever it is important that Sallal members have an informed advocate that is committed to making sure that their water availability is not negatively impacted by a water agreement with North Bend. 

e. Further, it is incorrect to assume that Sallal must accept potentially detrimental terms in a water agreement in order to avoid condemnation. The threat of condemnation does not go away if an agreement with the City is reached as the government’s power of eminent domain cannot be contracted away. As has been stated elsewhere on the Sallal website, Sallal does have viable defenses to a condemnation proceeding - with or without a water exchange contract. 

3. If you had to vote on the proposed contract today (the first one listed above at - https://sallal.com/wpcontent/uploads/2023/02/2-7-23-Sallal-accepted-draft-water-supply-contract.pdf) how would you vote? 

____ I’d vote for the contract as written 

__X__ I’d vote against the contract as written 

4. What critical pieces of information would you need to know in order to make a final decision on your vote? 

a. A comprehensive analysis of the combined Sallal and City water demand (both current and future demands) in relationship to the combined supply capacity of Sallal’s water right and the pumping capacity of Centennial Well subject to the variability of mitigation water supply from Hobo Springs. The purpose of the analysis will be to assess scenarios under terms of the agreement that could negatively impact the availability of water to Sallal members. No such analysis has been provided to date. 

b. Conceptual design including operating parameters of the Boxley Creek Intertie for defining the principles of operation for supply of mitigation water to the City. 

c. Conceptual design including operating parameters of the North Bend Intertie for defining the principles of operation for supply of municipal wholesale water to Sallal. 

d. An analysis that compares the projected Sallal water rate charges with an agreement and without an agreement. 

5. Do   you live inside or outside of the City of North Bend? (Note: Sallal members   inside vs. outside the City may be facing differing issues in the next few   months and years. This question is to determine if there will be board   representation from both groups.) 

____Inside 

__X__Outside   

6. Do   you live inside or outside North Bend's Urban Growth Area (UGA)? (Note:   Sallal members inside vs. outside the UGA may be   facing differing issues in the next few months and years. This question is to   determine if there will be board representation from both groups.) 

____Inside __X__Outside 

7. Please list any potential conflicts of interest you might have if you are elected to the Sallal Board, and address how you would deal with them (e.g., abstaining from certain votes). 

I have no potential conflicts of interest. 

Respectfully, 

Larry Costello, PE 

Sallal Trustee  

                                                           ***

Rich Formisano

Answers to Friends Questions for Prospective Sallal Board Members 

1. Is there any additional information you would like to share that was not included in the short bios provided by Sallal in the voter packet? 

Just to be clear, I am not seeking an endorsement by FOTSVTR, any other organization or individuals. My purpose in answering this questionnaire is to provide information in order to help Sallal members vote for the candidates that they think will serve them best. 

My candidate Bio explains the various Sallal projects I have worked on but doesn’t speak to the hundreds of hours I willingly provided to support those projects. 

Prior to being elected to the Board I served, at its inception, on Sallal’s Membership Advisory Committee (MAC). 

2. What is your current opinion of the current draft of the proposed Water Supply Contract between Sallal and North Bend? ( see a copy here - https://sallal.com/wp-content/uploads/2023/02/2-7-23-Sallalaccepted-draft-water-supply-contract.pdf ) Also, feel free to comment on the proposed edits to the contract made by two board members at 2023.02.06-Special-BOT-Minutes-with-Attachment_.pdf (sallal.com)  See Attachment A. 

Note there is a new draft contract 3-10-2023 that became available for Sallal Board review on Friday 317-2023. I have not had a chance to review this draft before answering Question #2. Therefore, my answer to Question #2 will be directed toward the 2-7-2023 and the earlier draft found in Attachment A referenced above. 

The Feb 7 draft has many of the same terms and conditions as the 1-23-2023 draft contract that Larry Costello and I objected to during the Feb 6 Special Board meeting. Larry Costello and I were the only two Board members that provided edits and comments to the draft Sallal-NB contract that was reviewed at the Feb 6 Special Board. Our edits & comments were independently developed. I added edits or comments whenever I thought that a Section in the draft Contract would adversely impact our members, or if language was misleading or could be interpreted in a way that would disadvantage 

Sallal. 

Let me clarify that I am not against a contract between Sallal and North Bend but, in my opinion, the current draft contract is not in Sallal members’ best interest. 

3. If you had to vote on the proposed contract today (the first one listed above at - https://sallal.com/wpcontent/uploads/2023/02/2-7-23-Sallal-accepted-draft-water-supply-contract.pdf) how would you vote? 

____ I’d vote for the contract as written 

_X_ I’d vote against the contract as written 

(page 1 of 2) 

4. What critical pieces of information would you need to know in order to make a final decision on your vote? 

At the 50,000 foot level: I would need facts, plus opinions & recommendations to help confirm that our members have safe and sufficient water at reasonable rates. This was a promise by the Board after the July 2018 Special Member Meeting and documented in Sallal newsletters. 

Here are a few examples of more detailed information needed prior to signing a contract with NB: 

1. The best alternative to a negotiated agreement with NB 

2. A Monte Carlo simulation to assist in assessing if a 40-year contract can support Sallal members and NB Citizens under all of the possible variations in demand for mitigation and drinking water without the need for curtailing water availability. If there is curtailment of water service what is the likely level and duration that will impact members. 

3. A financial rate study that analyzes member billing rates under two scenarios: Sallal membership growth is capped and a 40-year contract with North Bend. 

4. There are several more pieces of critical information needed with regard to the contract with North Bend. I encourage you to read the edits and comments I wrote that can be found in Attachment A (see the link provided in Question #2). 

5. Do   you live inside or outside of the City of North Bend? (Note: Sallal members   inside vs. outside the City may be facing differing issues in the next few   months and years. This question is to determine if there will be board   representation from both groups.) 

_X_Inside 

____Outside   

6. Do   you live inside or outside North Bend's Urban Growth Area (UGA)? (Note:   Sallal members inside vs. outside the UGA may be   facing differing issues in the next few months and years. This question is to   determine if there will be board representation from both groups.) 

This question doesn’t apply to me since I live inside the   North Bend City limits. 

7. Please list any potential conflicts of interest you might have if you are elected to the Sallal Board, and address how you would deal with them (e.g., abstaining from certain votes). 

_______________________________________________________________________________

In the last 3 years as a Board member I haven’t run into any conflicts of interest situations. Should there be a possible conflict of interest I would seek advice of Sallal’s legal counsel to ensure I do not cause a conflict of interest.