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Mr. Roush indicated the Alameda County Local Agency Formation Commission would the agency to approve the annexation. Ms. Mohr asked if a contract for out of area service were negotiated, could a surcharge be applied? Mr. Rossman indicated a surcharge could be imposed, but if the area is annexed, it would be treated equal to any other area in the district. Ms. Dennis asked why the East Bay Municipal Utility District required the developers to negotiate with DSRSD and Zone 7 prior to agreeing to provide service to Dougherty Valley in the year 2002. Mr. Rossman indicated EBMUD decided not to extend service because it felt it did not have the resources to meet existing customers' needs and provide service to the new area. A compromise was reached in which it agreed to be a supplier of last resort. Jim Dixon, representing Zone 7, indicated EBMUD was concerned about water quality and did not want to receive state water through the delta. EBMUD felt it would compromise its existing water quality. Margaret Traey, 1262 Madison Avenue, Livermore, presented three points: 1) The environmental impact report indicated this is the beginning of water transfer for eight projects in three counties that could add 375,000 people to this area. She felt there would be impacts on traffic and air quality and there was no governmental mechanism to look at these impacts. Each step to open the door for this transfer should be considered carefully. 2) She was concerned about the Zone 7 groundwater management program and the use of the basin. How does this new proposal impact the present groundwater policies of Zone 77 3) Is there a guarantee of replacement water for this basin? Ms. Dennis asked how the contract could be negotiated to include assessing costs? Mr. Lum indicated the Zone 7 Board would be requested to conduct studies to determine the avoidance costs of service to Dougherty Valley and use that information when negotiating the contract. The costs could include costs for separate facilities, if necessary, and what the developer has to do to comply with Option 1. There could be costs for more water, and check points in the agreement to confirm water reliability every so many years, etc. Mr. Tarver felt there were three things the Zone 7 Board should consider: 1 ) legal issues surrounding service outside its service area and issues of annexation; 2) the concern of Pleasanton having some ability to agree to the contracts that are entered into for this area; and 3) the fact that "first come, first served" should not be part of this contract as he did not feel that was appropriate groundwater management practices. He wanted to see a groundwater 06104196 -5-