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FIRST AMENDMENT TO THE ANNEXATION AGREEMENT
BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND THE
SANTA MARGARITA WATER DISTRICT
This First Amendment to the Annexation Agreement between the City of San Juan
Capistrano and the Santa Margarita Water District, dated as of November 4, 2021, (this
“Amendment”), is entered into by and between the City of San Juan Capistrano, a municipal
corporation duly organized and existing under the laws of the State of California (the “City”), and
the Santa Margarita Water District, a water district duly organized and existing under the
California Water District Law (California Water Code Section 34000 et seq.) (“SMWD”). The
City and SMWD are, together, referred to in this Agreement as the “Parties” and, individually, as
a “Party.”
RECITALS
A.The City and SMWD entered into an Annexation Agreement, dated as of January 21, 2020,
to: (i) set forth certain key terms to be incorporated into a LAFCO Application, and (ii)
address how other matters pertaining to the Annexation and transfer of the City’s Utilities
Systems to SMWD will be carried out by the Parties. The Annexation Agreement defines
the “Annexation Effective Date” as “the date to be agreed upon in writing by the Parties
subject to the terms of the LAFCO Approval, as the date on which the Utilities Systems
will be transferred by the City to SMWD to consummate the Annexation.”
B.On August 19, 2021, LAFCO adopted LAFCO Resolution No. DA 20-01 approving the
Santa Margarita Water District annexation of the San Juan Capistrano water and
wastewater utilities (DA 20-01) subject to certain conditions. Paragraph “o” of Section 3
of LAFCO Resolution No. DA 20-01 provides that the effective date of the annexation may
be a date agreed to by the parties or the date of recordation of the LAFCO Certificate of
Completion, whichever is later.
C.Pursuant to the above-described provisions in the Annexation Agreement and LAFCO
Resolution No. DA 20-01, the Parties now desire to establish a date certain as the
Annexation Effective Date and make certain other amendments to the Annexation
Agreement as more specifically described herein.
D.The Parties find and determine that this Amendment is consistent with and is intended to
implement LAFCO Resolution No. DA 20-01, and that the modifications set forth in this
Amendment are appropriate and necessary to efficiently effectuate the Annexation.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
CONDITIONS CONTAINED HEREIN, AND OTHER VALUABLE CONSIDERATION,
THE ADEQUACY OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES
AGREE AS FOLLOWS:
1.RECITALS
The recitals set forth above are true and correct and are incorporated hereby this reference.
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2.DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this Amendment shall have the
meanings set forth in the Annexation Agreement.
3.ANNEXATION EFFECTIVE DATE
3.1.The term “Annexation Effective Date” in Exhibit A of the Annexation Agreement
is modified to read as set forth below:
“Annexation Effective Date” has the meaning set forth in Section 1.2 of this Annexation
Agreement.”
3.2.Section 1 of the Annexation Agreement is amended to read as follows:
“1. DEFINITIONS AND ANNEXATION EFFECTIVE DATE
1.1. Definitions in “Exhibit A.” Unless the context otherwise requires,
capitalized terms used in this Agreement shall have the meanings set forth in
Exhibit A.
1.2 Annexation Effective Date. The Utilities Systems will be transferred by
the City to SMWD to consummate the Annexation on the Annexation Effective
Date. The Annexation Effective Date shall be November 15, 2021, unless on or
before November 15, 2021, the City Manager and General Manager mutually agree
in writing to a later date.”
3.3.Paragraph (c) of Section 3.2 of the Annexation Agreement is deleted in its entirety
and paragraph (d) of Section 3.2 is hereby re-lettered as paragraph (c).
4.TRANSFER OF CERTAIN FUNDS
4.1.A new paragraph (e) is added to Section 6.2 of the Annexation Agreement to read as
follows:
“(e) Notwithstanding the preceding paragraphs of this Section 6.2, the Parties agree
that the City shall retain an amount of funds after the Annexation Effective Date, as
specified in the Assignment Agreement, in the accounts related to the Utility Systems
for the payment by the City of outstanding checks issued in connection with the
Utilities Systems and estimated accruals and interfund allocations in connection with
the Utilities Systems. An accounting of the disposition of the retained funds shall be
provided by the City to SMWD, along with any unexpended retained funds, within
90 days after the Annexation Effective Date. Nothing in this paragraph shall be
interpreted to alter or eliminate any obligation of SMWD to pay for, or reimburse the
City for costs and expenses as otherwise provided in this Agreement or any Collateral
Agreement.”
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4.2. Section 12.1 of the Annexation Agreement is amended to read as follows:
“12.1. Transfer of Unexpended Cash Balances. All unexpended cash balances in
the Water Fund and the Sewer Fund shall be transferred to SMWD on the Annexation
Effective Date, unless retained pursuant to Section 6.2.”
5.COSTS FOR ADJUSTING UTILITY FACILITIES
A new Section 7.5 is added to the Annexation Agreement to read as follows:
“7.5. SMWD’s shall pay for, or reimburse the City for, the cost of: (i) adjusting SMWD-
owned sewer manholes, water valve boxes and covers, water meter boxes, and other street
level utility structures within paved streets to the new pavement grade when the City
resurfaces the streets; or (ii) relocating or removing any SMWD owned sewer or water
facility within a public street right-of-way to accommodate any public improvement made
by the City, when made necessary by any lawful change of grade, alignment, or width of
any public street, way, alley, or place. For purposes of applying applicable law including
but not limited to Public Utility Code Section 12808, the Parties agree that the City’s public
streets, ways, alleys or places that existed on the Annexation Effective Date shall be treated
as first-in-time and prior-in-right to the Utilities Systems transferred in this Annexation
and accordingly, the Utilities Systems transferred in this Annexation shall be deemed
second-in-time under the applicable law.”
6.SCWD ADMINISTRATIVE COMPLAINT
Section 9.3 of the Annexation Agreement is amended to add the following sentence at the end of
that section:
“The Parties acknowledge the receipt of the “Report of Investigation (INV 7806) and
Notice of Violation Regarding Complaint Against San Juan Basin Authority Alleging
Violation of Permit Terms 17 and 23, San Juan Creek, Orange County” dated August 27,
2021, related to the SCWD Administrative Complaint, which shall be addressed and
resolved consistent with the terms of this Agreement.”
7.OCERS PAYMENT
Section 11.2 of the Annexation Agreement is amended to read as follows:
“11.2. Payment by CITY on Behalf of SMWD. To address this retained cost, the Parties
agree that the City shall, on behalf of SMWD, pay the OCERS Obligation in total on the
Annexation Effective Date from the Water Fund.”
8.CUSTOMER PAYMENT AT CITY HALL AFTER TRANSFER
Section 17 of the Annexation Agreement is amended to read as follows:
“17.1. Maintenance of Bill-Pay Presence at City Hall. SMWD and the City shall
cooperate to make available to the Customers a means to pay their water and wastewater
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bills at City Hall for a minimal transition period to be mutually agreed upon by SMWD
and the City, not to exceed two years from the Annexation Effective Date. SMWD and the
City shall cooperate in addressing SMWD concerns related to the transition of Customer
billing and use all efforts reasonably necessary to facilitate the transition of the billing
system. The City shall take all reasonable action requested by SMWD concerning the
transition of the billing system to SMWD including assisting SMWD, when requested,
with the dissemination of information related to the transition of customer billing to
SMWD.
17.2. SMWD to Provide Personnel at City Hall. SMWD shall provide personnel to
collect payments at City Hall for the minimal transition period described in Section 17.1.
17.3. SMWD to Reimburse City Costs and Expenses. SMWD shall reimburse the City
for reasonable costs and expenses, including costs and expenses of City employee time,
relating to the provision of Customer’s bill-paying access and assistance.”
9.PERSONNEL TRANSFER ON ANNEXATION EFFECTIVE DATE
A new Section 18.3 is added to the Annexation Agreement to read as follows:
“18.3. Personnel Transfer on Annexation Effective Date. Unless otherwise agreed to by
the Parties in writing, employees of the City that are hired by SMWD pursuant to this
Section 18 shall become employees of SMWD for all purposes, including compensation
and benefits, as of 12:01 a.m. on the Annexation Effective Date.”
10.CONTINUATION OF TERMS AND CONDITIONS OF THE ANNEXATION
AGREEMENT
Except as expressly set forth herein, all provisions of the Annexation Agreement shall remain in
full force and effect.
(Signatures on next page)
IN WITNESS WHEREOF,the Parties to this Amendment have caused the same to be
executed by each of their duly authorized officers as follows:
CITY OF SAN JUAN CAPISTRANO
By:
Benjamin Siegel,City Manager
ATTEST:
Maria Morris,City Clerk
APPROVED AS TO FORM:
Kevin G.Ennis,Special Counsel
SANTA MARGARITA WATER DISTRICT
f .By:
Charles T.Gibson,President of Board of
Directors
ATTEST:
Kelly Radvansky,Board Secretary
APPROVED AS TO FORM:
DeeAnne Gillick,Special Counsel
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