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11-1216_SOUTH ORANGE COUNTY AGENCY WATER SUPPLIERS_Participation & Operations AgreementUpper Chiquita Emergency Storage Reservoir Participation and Operations Agreement South Orange County December 2011 City of San Clemente City of San Juan Capistrano Moulton Niguel Wafer District Santa Margarita Water District South Coast Water District December 16, 2011 Final D This Agreement is made this 16 day of ecce x•201')' (the "Agreement Date") and is entered into by and among the City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD"), hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Plan," dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities; and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an agreement entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement") providing for participation by MNWD in the funding the design, planning and construction of the reservoirs and establishing a capacity right of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoirs; and WHEREAS, the MNWD capacity rights defined in the MNWD Participation Agreement reservoirs may be revised based on participation by other agencies December 16, 2011 Final 2 and MNWD and SMWD are each willing to revise its respective capacity in order to provide capacity for the other Parties; and WHEREAS, SMWD completed the construction of the Upper Chiquita Domestic Water Emergency Storage Reservoir in Upper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and SMWD constructed the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies in addition to MNWD; and WHEREAS, SMWD completed construction of an inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station (together with the inletfoutlet pipeline, the "Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the Reservoir; and WHEREAS, the Parties take imported water from service connections to the SCP per the rules and regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase i and ll Operation (SCP Rules and Regulations), and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir and Pump Station (together the "Reservoir Project") under the terms of the SGP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir Project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows: SECTION 1. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations under this Agreement will incorporate MNWD's financial participation to date in the Reservoir Project, SECTION 2. CAPACITY RIGHTS Subject to the Capacity Rights as described herein, SMWD shall own and operate the Reservoir Project pursuant to the terms of this Agreement. The Parties shall own a Capacity Right in the Reservoir and Pump Station as set forth below in Table 1, which includes flow rates at the minimum specified cubic feet per second (CFS). As used herein, "Capacity Right" means a Party's undivided December 16, 2011 Final 3 percentage ownership interest in the capacity in each of the Reservoir Project facilities including all components. The total Capacity Rights in the Reservoir Project facilities shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the Capacity Right percentages shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal storage capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD systems or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of "variable costs" and "fixed operating costs", as further provided in Section 7 hereof. The following table summarizes the Capacity Rights allocated to each of the Parties TABLE 1 Summar of Ca acity Rights in Reservoir Pro'ect Facilities FA"encies Reservoir Capacity (AF) Capacity Right Percentage Pump Station Capacity CFS City of San Clemente 83.80 11.17% 5.59 City of San Juan Capistrano 50.00 6.67% 3.33 Moulton Niguel Water District 255.80 34.11% 17.05 Santa Margarita Water District 314.7 41.96% 20..98 South Coast Water District 45.70 16.09% 3.05 Total 1 750.00 100.00% . 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members, aid in the administration of this Agreement, and review and approve the other matters specified herein. Each Party reserves its full legislative discretion with respect to all applicable implementation decisions expressly December 16, 2011 Final 4 covered by this Agreement and decisions of the Project Committee do not override a Party's legislative determinations. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station and such other matters as provided herein. Decisions of the Project Committee shall require approval by a majority vote based on Capacity Right Percentages under Table 1 of the Project Participants ("Majority Vote" hereafter).. The Project Committee shall meet periodically as needed during implementation of the Reservoir Project operation to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir Project facilities and operation, and shall meet upon the request of three (3) Parties within a reasonable time after delivery of the request to the Parties. SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"), The foregoing notwithstanding, as of the Agreement Date, upon commencement of operation of the Reservoir Project, Project Committee approval shall be required for capital enhancements, repairs, or replacements for the Reservoir Project facilities (collectively, the "Project Enhancement") that either involves expenditures in excess of $30,000 per Project Enhancement, or that substantially alters the mode or method of operation of the project facilities, including but not limited to(7) the award of any contracts for environmental documentation, design or construction, (2) the issuance of any design contract or change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the contract amount for the Project Enhancement and (3) the issuance of any construction change order(s) that exceed the construction contingency approved by the Project Committee. Project Committee will review design and construction schedules for the Project Work. Any changes needed in the schedule will be subject to approval by the Project Committee. All subsequent Project Work contemplated under this Agreement shall meet applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the December 16, 2011 Final subsequent Project Work. The Parties shall provide any comments to SMWD or its designee within seven (7) working days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the subsequent Project Work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the subsequent Project Work. SMWD shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to design and construct the Reservoir and Pump Station. A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights percentage as shown in Table 1 under Section 2. SMWD or its designee will invoice the Parties for their respective shares of the completed Project Work in two parts. The first deposit installment will fund the Project cost for environmental, permitting, design and construction services identified in Exhibit A, an estimate of the total project costs. The second part will fund the remaining estimated Project Work. The first deposit shall be invoiced by SMWD upon execution of this Agreement by the parties or award of contract by SMWD Board of Directors. Progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule agreed to by the Project Committee. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. Funds paid in advance by SMWD for the benefit of any Party shall accrue interest at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity Right shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's December 16, 2011 Final 6 Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of the Project based on its Capacity Right percentage, including the cost attributable to the suspended Capacity Right percentage as reallocated by SMWD among the non -suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right. SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water then available. in the Reservoir Project is less than the amount specified in Table 1 in Section 2, then the available water will be allocated based on the Parties` respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election previously withdrew its water held under its Capacity Right. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate in an amount equal to or less than the Capacity Right percentage specified in Table 1. If a Party does not make a request, SMWD will continue to hold the Party's capacity in storage. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station, The cost of operating and maintaining each facility shall be determined on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of the SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the Reservoir Project through the SCP Service Connections, and variable costs that vary with the quantity of water delivered by the Reservoir Project as shown on Exhibit B. SECTION 7.2. Fixed Costs Annually, by February 15 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs items, as defined on Exhibit B, including the cost of facilities maintenance and repair, and chemicals if required for water quality recirculation, December 16, 2011 Final 7 shall be allocated among the Parties based on their Capacity Right percentages. The Project Committee shall review, amend, reallocate, add or deduct items, and approve Exhibit B annually based operational criteria then use it in the proposed budget. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. if and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach -Riverside]) Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each Party. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the applicable rate at the time water is delivered. The volume of water delivered to the Reservoir will be divided and billed to the Parties at their normal point of importation from the SCP system, based on their Capacity Right percentages, by an additive adjustment to the meter reads at the Participant's normal point of importation from the SCP system. The Parties will be credited with the volumetric amount purchased to a "Bank". When water is discharged from the Reservoir, the Parties receiving the discharged water will have the volumetric credit deducted from their Bank, and an equivalent volume deducted from their meter read at their normal point of importation from the SCP system. The water in the Bank is a cost accounting mechanism, and will not affect the available volume of water- ie Capacity Right percentage- for each Participant as defined in Section 2, Table 1. SECTION 7.4 Invoices Each Party shall pay its quarterly operations invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty-five (45)day period or portion thereof that the amount remains unpaid until said charges are paid in full. December 1.6, 2011 final SECTION 7.5 Overhead All design, construction and operation costs allocated to the Parties under Section 7 and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man-hours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5:00 pm on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) for non-exempt SMWD personnel will be charged at time and a half. The equipment rates effective upon the execution of this Agreement will be those established by the SMWD Board of Directors, or if the specific labor, equipment, or materials is not covered by SMWD's established rates, the current Caltrans published rates as periodically adjusted by the State of California as applicable which are incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices. The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.6% shall remain in effect through .lune 30, 2013, and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, December 16, 2011 Final 9 said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted accounting standards as part of SMWD's annual audit process. SECTION 7.7 Operating and Procedures Manual to Cover Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual") annually, which shall include, but not be limited to the following: A. Operational criteria including mode of operation. R. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery by SMWD. C. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. D. Criteria for compliance with water quality objectives. E. Developmentidescription of operating criteria including useful service life and criteria for replacement and refurbishment. F. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights not otherwise addressed under the terms of this Agreement. SECTION 8. TRANSFER OF CAPACITY RIGHTS AMONG PARTIES TO NOW PARTIES The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Right, prior to transfer of a Capacity Right to a non-party. The seller of capacity shall determine, in its sole discretion, the amount of capacity available and the purchaser if multiple Parties are interested in the Capacity Right. The Party acquiring the Capacity Right will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the Notice of Completion recordation date to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. In the event of transfers among the Parties, a revised Table 9 under Section 2 will be December 16, 2011 Final 10 prepared as a ministerial matter to show the revised Capacity Rights and percentages, without the need for an amendment to this Agreement. Terms for the transfer of all or a portion of a Party's Capacity Right to a non-party public agency (ies) shall be determined by the selling Party, and is subject to an amendment to this Agreement to add the public agency as a Party hereto and make corresponding revisions as required. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NOW PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties, subject to the rights of the Parties to sell or transfer Capacity Rights to one another, or to non-party public agencies, as provided under Section 8, Capacity Rights may be transferred among the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non- participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Right(s) available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non- participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use, 1/20 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water available to deliver to participants and non -participants in acre feet. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the Parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION; INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water December 16, 2011 Final deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued. With respect to operation of the Project, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the Reservoir Project as herein provided shall be included within each Party's share of fixed costs. SECTION '11. SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12. ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligations arising hereunder, or is required to defend such an action or proceeding, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIRE AGREEMENT- INTERPRETATION: GOVERNING LAW; EXECUTION IN COUNTERPARTS This Agreement and the Exhibits, as amended in writing from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394, This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. December 16, 2011 Final 12 SECTION 14. NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 16. SEVERABILITY If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Party(ies) in connection with a dispute shall be responsible for providing written notice to such other Party(ies) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Party(ies) that the informal dispute - resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding December 16, 2011 Final 13 shall be tolled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute -resolution and the notice terminating informal dispute -resolution. SECTION 18. NOT A JOINT POWERS AUTHORITY OR PARTNERSHIP The Parties hereby acknowledge this Agreement is not intended to create a joint powers authority pursuant to Government Code Section 0500 et seq. Additionally, this Agreement does not form a partnership, Parties are independent contracting Parties, and no Party is an agent of any other Party. SECTION 19. TERM This Agreement shall terminate by determination of a Majority Vote on the earliest of one of the following events: (1) continued maintenance and repair of the Reservoir Project facilities is physically or financially impractical; (2) upon the occurrence of a man-made or natural disaster that destroys or renders unusable the Reservoir Project facilities; (3) or, as a result of regulatory mandates with which SMWD cannot comply or which would require cost prohibitive changes to the Reservoir Project,. If a termination occurs, any expenditures or proceeds of insurance, proceeds from salvage value or expenditures or proceeds from alternative use of the Reservoir Project shall be divided according to the Capacity Right Percentages. Upon termination hereunder, all Reservoir Project lands and right-of-way shall be retained by SMWD as the owner. December 16, 2011 Final 14 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. SANTA MARGARITA WATER DISTRICT By President, Board of Directors Secretary to the Board MOULTON NIGUEL WATER DISTRICT By President, Board of Directors By Secretary to the Board CITY OF SAN JUAN CAPISTRANO By Mayor By City Attorney CITY OF SAN CLEMENTE By_ ,f `Mayor...... _.,�....� 21 11 TH COAST WATER DISTRICT President, Board of Directors Secretary to the Board December 16, 2011 Final 15 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. SANTA MARGARITA WATER DISTRICT President, Board of Directors By Secretar�� 6'the W6ard)"" MOULTON NIGUEL WATER DISTRICT By Presf6ent, Board�-df Directors to the Board Mayor B f' ` ^ ` ^YrJ tE n ' City Attone-y CITY OF SAN CLEMENTE By Mayor By City Attorney SOUTH COAST WATER DISTRICT By Presi 6nt, Board of dors By V� Secretary to the Board December 16, 2011 Final 15 Exhibit "A" Final Estimate of Capital Costs, 2011 Based on contracts encumbered to date, and including a contingency on uncompleted contracts or work, this estimate of the total projects costs may be subject to revision with the final accounting. December 16, 2011 Final 16 Expended Remaining Agencies 4AF:-%,,. Issued Purchase Through May Open Budget for Type Budget Orders 2011 Encumbrances Project Prelim Design $ 252,180,62 $ 252,180.62 $ 252,180,62 $ _ $ _ Moulton Ni uel Water District 255.8 34,11% $18,647,879 $1,152,46427 $17,495,414.36 [design $ 6,133,481.10 $ 5,933,481.10 $ 5,636,361.17 297,119.93 $ 200,000.00 South Coast Water District 45.7 6.09% $3,331,540$205 ,893.73 $3,125,646.74 Environmental $ 679,142.37 $ 679,142.37 $ 536,631.89 142,510.4$ _ Permit $ 245,451.03 $ 215,451.03 $ 204,822.53 $ 1.0,628.50 i $ 30,000.00 Construction $ 41,530,802.41 $39,440;802.41 $ 33,239,132.99 $ 6,201,669.42 $ 2,090,000.00 Mitigation $ 3,818,016.23 $ 3,318,016.23 $ 3,220,982.92 $ 97,033,31 $ 500,000.00 Site $ Acquisition $ 353,573.75 353,573.75 $ 353,573.75 $ _ $ - 1 Payroll and $ Burden $ 662,524.39 622,524.39 $ 622,524.39 $ $ 40,000.00 Grand Total $54,675,171.00 50,815,171.90 :$:4:�4,06�6,210-�26$ 6,748,961.64 $2,860,000.00 December 16, 2011 Final 16 Agency Agencies 4AF:-%,,. Responsibility Million $ Prop 50 Budget Potential Agency Reduced Costs ,,City of San Clemente 83.8 11.17%$377,546.93 $ 6,109,039 $5,731,492.27 Sity of San Juan Ca istrano 50.0 6.67% $3,645,011 $ 225,266.67 $3,419,744.79 Moulton Ni uel Water District 255.8 34,11% $18,647,879 $1,152,46427 $17,495,414.36 Santa Margarita Water District 314.7 41.96 $22,941,702 417,828.40 $21,523,873.73 South Coast Water District 45.7 6.09% $3,331,540$205 ,893.73 $3,125,646.74 Total 750 100.00% $54,675,171.90 $3,379,000.00 $51,296,171.90 December 16, 2011 Final 16 Exhibit "B" List of Fixed and Variable Costs 2011 Based on experience, changed conditions, and practical matters of operations and accounting, this list is to be revised annually by the Operations Committee. Fixed Costs Labor, parts and equipment for daily, weekly, quarterly, semi-yearly and yearly maintenance activity on equipment including but not limited to: o Pumps o Sump pumps o Generator o Cover and liner o Disinfection equipment o SCADA and security equipment ® Labor associated with Project Committee activities • Chemicals, power and labor associated with recirculation of the Reservoir, if any, for water quality Labor and laboratory charges for water quality testing Major repairs for equipment pipeline failure ® Annual permit fees including but not limited to Division of Safety of Dams, Public Health and AQMD Variable Costs • Chemicals and power associated with delivery of water Replacement of Ultraviolet lights based on operation mode of the Reservoir ® Labor associated with delivery of water • Replacement of water in the Reservoir December 16, 2011 Final 17 1117/2012 AGENDA REPORT D13 4 TO: Karen P. Brust, City Manager v FROM: Nasser Abbaszadeh, Public Works Director SUBJECT: Consideration of the Final Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement (City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, South Coast Water District) RECOMMENDATIONS: By motion, Approve the final Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement decreasing the City's participation in water volume from 76.1 acre-feet to 50 acre-feet in the total amount of $3,419,744.79 with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District. At its meeting of November 15, 2011 (See Attachment 4 — Minutes), the City Council took the following actions: 1. Approved the final conformed Upper Chiquita Emergency Storage Reservoir (UCR) Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; 2. Decreased the City participation in water volume from 76.1 acre-feet to 50 acre- feet; 3. Transferred $900,000 from Capital Improvement Project (CIP) 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); 4. Returned unused funds in the amount of $723,255 to the Water Capital Improvement Fund in consideration of critical programmed water capital projects; 5. Authorized minor numerical changes as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. Agenda Report Page 2 January'17, 2012 Attachment 1 shows the November 2011 Agreement as modified by the reduction in San Juan Capistrano participation from 76.1 acre-feet to 50 acre-feet. Since the City Council action on November 15, 2011, Santa Margarita Water District (SMWD) has gathered additional changes and comments from the project participants,. and prepared the December 2011 version of the Agreement (Attachment 2). Attachment 3 highlights all the changes between the November 15, 2011, and the December 2011, versions. The changes are minor, with the exception of the addition of section 19 that addresses termination. The City Attorney has advised that these changes represent a deviation from the version approved by the City Council, warranting a return of this Agreement to the City Council. Section 19 says: "SECTION 19. TERM This Agreement shall terminate on the earliest of the following events: (1) Upon date established by a majority vote of capacity shares of the Project Participants determining continued maintenance and repair of the Reservoir Project facilities is physically or financially impractical; (2) upon the occurrence of a man-made or natural disaster that destroys or renders unusable the Reservoir Project facilities, as determined by a majority vote of the capacity shares; (3) or, as a result of regulatory mandates with which SMWD cannot comply or which would require cost prohibitive changes to the Reservoir Project, as determined by a majority vote of the capacity shares. If a termination occurs, any proceeds of insurance, proceeds from salvage value or proceeds from alternative use of the Reservoir Project shall be divided according to the Capacity Right Percentages. Upon termination hereunder, all Reservoir project facilities, lands and right-of-way shall be retained by SMWD as the owner. At its meeting of January 13, 2012, the SMWD Board approved and signed the December 2011 agreement. (Attachment 2) Staff considers the added clarifications throughout the contract and the terms in Section 19 for ending the project in the distant future or in the event of major calamity as reasonable and recommends approving the Agreement with these changes. COMMISSIONIBOARD REVIEW AND RECOMMENDATIONS: The Utilities Commission reviewed this item at their meeting of December 16, 2011, and recommends approval. Agenda Report Page 3 January 17, 2012 The total cost of the project remains at $54,675,171.90; and San Juan Capistrano's reduced cost of participation remains at $3,419,744.79. These funds are on deposit in the City's Capital Improvement Fund. NOTIFICATIONS: City of San Clemente Moulton Niguel Water District Santa Margarita Water District South Coast Water District RECOMMENDATIONS: By motion, Approve the final Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement decreasing the City's participation in water volume from 76.1 acre-feet to 50 acre-feet in the total amount of $3,419,744.79 with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District. Respectfully submitted, Nasser Abbaszadeh, P.E. Public Works Director Prepared by,. Eric Bauman, P:E' Utilities Engineer Attachments: Respec ully submitted, 6 Keith Van D r Maaten, P.E. Utilities Director 1, UCR Participation Agreement November 2011 2. UCR Participation December 2011 Agreement, Signed January 2012 3. UCR Participation Agreement Comparison 4. City Council Minutes of November 15, 2011 Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement South Orange County November 2011 City of San Clemente City of San Juan Capistrano Moulton Niguel Water District Santa Margarita !Nater District South Coast Water District November 1 5, 2011 ATTACHMENT I This Agreement is made this day of 2091, (the "Agreement Date") and is entered into by and among the City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD'°), and South Coast Water District ("SCWD"), hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Plan, "dated .lune, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities; and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an agreement entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement") providing for participation by MNWD in the funding the design, planning and construction of the reservoirs and establishing a capacity right of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoirs; and WHEREAS, the MNWD capacity rights defined in the MNWD Participation Agreement reservoirs may be revised based on participation by other agencies and MNWD and SMWD are each willing to revise its respective capacity in order to provide capacity for the other Parties; and November 15, 2011 2 WHEREAS, SMWD is proceeding with construction of the Upper Chiquita Domestic Water Emergency Storage reservoir in Upper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and SMWD is constructing the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies in addition to MNWD; and WHEREAS, SMWD is proceeding with construction of an inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station (together with the inletloutlet pipeline, the "Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the Reservoir; and WHEREAS, the Parties take imported water from service connections to the SCP per the rules and Regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase 1 and 11 Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir and Pump Station (together the "Reservoir Project") under the. terms of the SCP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir Project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows. SECTION 1. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations will incorporate MNWD's participation to date in the Reservoir Project. SECTION 2. CAPACITY RIGHTS SMWD shall own and operate the Reservoir Project under the terms of this Agreement. The Parties shall have Capacity Rights in the Reservoir and Pump Station as set forth below in Table 1, which includes flow rates at the minimum specified cubic feet per second (CFS). As used herein, "Capacity Right' means a Party's undivided percentage ownership interest in the capacity in each of the Reservoir Project facilities including all components. The total November 15, 2011 3 Capacity Rights in the Reservoir Project facilities shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the percentage Capacity Rights shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal storage capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD system or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of capital costs and fixed operating costs, as further provided in Section 7 hereof. The following table summarizes the Capacity Rights allocated to each of the Parties. The parties agree the Capacity Rights percentages shown on the table shall be utilized to allocate Reservoir Project capital costs TABLE 1 Summary of Capacity Rights in Reservoir Proiect Farilitic-a Agencies Reservoir Capacity AF Capacity Right Percentage Pump Station Capacity (CFS) Citv of San Clemente 83.80 11.17% 5.59 -City of San Juan Capistrano 50 6.67% 3.33 Moulton Niguel Water District 255.80 34.11% 17.05 Santa Margarita Water District 314.7 41.96% 20.98 South Coast Water District 45.70 6.09% 3.05 Total 750.00 100.00% 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members, aid in the administration of this Agreement, and review and approve the other matters specified herein. Each Party reserves its full legislative discretion with respect to all applicable implementation decisions expressly November 15, 2011 4 covered by this Agreement and decisions of the Project Committee do not override. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project Committee representatives. The Project Committee shall meet periodically as needed during construction and implementation of the Reservoir Project operation to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir Project facilities and operation. SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement Date, Project Committee approval shall be required for (1) the award of any original contracts for environmental documentation, design and construction, (2) the issuance of any design contract or change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract bid amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract bid amount. Project Committee will review design and construction schedules for Project Work, Any changes needed in the schedule will be subject to approval by the Project Committee, All Project Work contemplated under this agreement shall meet applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the Project Work. The Parties shall provide any comments to SMWD or its designee within seven calendar or working days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the Project Work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the Project Work. November 15, 2011 SMWD shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts, within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to complete the Reservoir and Pump Station. A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8, The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights as shown in the table in Section 2, SMWD or its designee will invoice the Parties for their respective shares of the prospective Project Work in two parts. The first deposit installment will fund the Project cost for environmental, permitting, design and construction services identified in Exhibit A, an estimate of the total project costs. The second part will fund the remaining estimated Project Work. The first deposit shall be invoiced by SMWD upon execution of this agreement by the parties or award of contract by SMWD Board of Directors. Progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule agreed to by the Project Committee. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. Funds paid in advance by SMWD for the benefit of any Party shall accrue interest at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity Rights shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of the Project based on its Capacity Right, including the cost attributable to the suspended Capacity Right share as reallocated by SMWD among the non - suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right. November 15, 2011 6 SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water then available in the Reservoir Project is less than the amount specified in Table 1 in Section 2, then the available water will be allocated based on the Parties' respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election previously withdrew its water held under its Capacity Right. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate in an amount equal to or less than capacity specified in Table 1. If a Party does not make a request, SMWD will continue to hold the Party's capacity in storage. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station. The cost of operating and maintaining each facility shall be determined, on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of the SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the Reservoir Project through the SCP Service Connections, and variable costs that vary with the quantity of water delivered by the Reservoir Project as shown on Exhibit B SECTION 7.2. Fixed Costs Annually, by February 15 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs items, as defined on Exhibit B, including the cost of facilities maintenance and repair and chemicals if required for water quality recirculation, shall be allocated among the Parties based on their Capacity Rights. The Project Committee shall review, amend, reallocate, add or deduct items, and approve Exhibit B annually based operational criteria then use it in the proposed budget. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget November 15, 2011 7 year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach -Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. . SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each agency. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the applicable rate at the time water is delivered The volume of water delivered to the Reservoir will be divided and billed to the Parties at their normal point of importation from the SCP system, based on their participation percentages by an additive adjustment to the meter reads at the Participant's normal point of importation from the SCP system. The Parties will be credited with the volumetric amount purchased to a "Bank". When water is discharged from the Reservoir the Parties consuming the discharged water will have the volumetric credit deducted from their Bank, and an equivalent volume deducted from their meter read at their normal point of importation from the SCP system. The water in the Bank is a cost accounting mechanism, and will not affect the available volume of water for each Participant as defined in Section 2, Table 1 SECTION 7.4 Invoices Each Party shall pay its quarterly operations invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty -five-day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead. All design, construction and operation costs allocated to the Parties under this Section and Section 5 shall include the cost of SMWD labor and equipment, November 15, 2011 8 on a time and materials basis, using the actual number of man -Fours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5:00 pm on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) for non-exempt SMWD personnel will be charged at time and a half. The equipment rates effective upon the execution of this Agreement as established by the SMWD Board of Directors or if the specific labor, equipment, and or materials is not covered by the SMWD's established rates; the current Caltrans published rates as periodically adjusted by the State of California as applicable attached hereto and incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices. dv The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.6% shall remain in effect through June 30, .2013, and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted accounting standards as part of SMWD's annual audit process. November 15, 2011 9 SECTION 7.7 Operating and Procedures Manual to Cover Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual") annually, which shall include, but not be limited to the following: A. Operational criteria including mode of operation. B. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery, by SMWD. C. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. D. Criteria for compliance with water quality objectives. E. Development/description of operating criteria including useful service life and criteria for replacement and refurbishment. F. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights. SECTION 8. TRANSFER OF CAPACITY RIGHTS The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Rights. The seller of capacity shall determine the amount of capacity available and the purchaser if multiple Parties are interested in the Capacity Right. The Party acquiring the Capacity Rights will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the date of acceptance of the Project Work to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. An amendment to this Agreement reflecting the change shall be executed by all Parties. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NON- PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties. Capacity Rights may be transferred between the Parties as provided November 15, 2011 10 herein. The Parties shall have the first right of use of available Capacity Rights. If non -participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Rights available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non- participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: 1/20 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water available to deliver to participants and non -participants in acre feet. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the Parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION; INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued. With respect to operation of the Project, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such November 15, 2411 11 policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the Projects as herein provided shall be included within each Party's share of fixed costs. SECTION 11. SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12, ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligations arising hereunder, or is required to defend such an action or proceeding, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIRE AGREEMENT; INTERPRETATION; GOVERNING LAW, EXECUTION IN COUNTERPARTS This Agreement and the Exhibits, as amended in writing from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394. This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14. NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 15. SEVERABILITY If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, November 15, 2011 12 term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Parties) in connection with a dispute shall be responsible for providing written notice to such other Parties) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Part(ies) that the informal dispute - resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be tolled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute -resolution and the notice terminating informal dispute -resolution. The Parties hereby acknowledge this Agreement is not intended to create a joint powers authority pursuant to Government Code S6500 et seq. Additionally, this Agreement does not form a partnership, Parties are independent contracting Parties, and that no Party is an agent of any other Party. November 15, 2011 13 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. SANTA MARGARITA WATER DISTRICT By President, Board of Directors By Secretary to the Board MOULTON NIGUEL WATER DISTRICT By President, Board of Directors By Secretary to the Board CITY OF SAN JUAN CAPISTRANO By Mayor By City Attorney CITY OF SAN CLEMENTE By Mayor By City Attorney SOUTH COAST WATER DISTRICT By President, Board of Directors By Secretary to the Board November 15, 2011 14 Exhibit "A„ Final Estimate of Capita[ Costs, 2011 Based on contracts encumbered to date, and including a contingency on uncompleted contracts or work, this estimate of the total projects costs may be subject to revision with the final accounting. Type Budget Issued Purchase Orders Expended Through May 2011 Open Encumbrances Remaining Budget for Project Prelim Design $ 252,180.62 $ 252,180.62 $ 25.2,180.62 $ - $ - Design $ 6,133,481.10 $ 5,933,481.10 $ 5,636,361.1.7 $ 297,119.93 $ 200,000.00 Environmental $ 679,142.37 $ 679,142.37 $ 536,631.89 $ 142,510.48 $ - Permit $ 245,451.03 $ 215,451.03 $ 204,822.53 $ 10,628.50 $ 30,000.00 Construction $ 42,530,802.41 $39,440,802.41 $ 33,239,132.99 $ 6,201,669.42 $ 3,090,000.00 Mitigation $ 3,818,01.6.23 $ 3,318,016.23 $ 3,220,982.92 $ 97,033.31 $ 500,000.00 Site Acquisition $ 353,573.75 $ 353,573.75 $ 353,573.75 $ - $ - Payroll and Burden $ 662,524.39 $ 622,524.39 $ 622,524.39 $ - $ 40,000.00 $ Grand Total $54,675,171.00 50,815,171.90 $ 44,066,210.26E $ 6,748,961.64 $3,860,000.00 Agencies AF % Agency Responsibility Million §J__ Prop 50 Budget Potential Agency Reduced Costs City of San Clemente i 83.8 11.17% $ 6,109,039 $377,546.93 $5,731,492.27 City of San Juan Capistrano 50.0 6.67% $3,645,011 $ 225,266.67 $3,419,744.79 Moulton Ni uclWater District 255.8 34.11% $18,647,879 $1,152,464.27 $17,495,414.36 Santa Margarita Water District 314.7 41.96.$22,941,702 $ 1,417,828.40 $21,523,873.73 South Coast Water District 45.7 6.09%n $ 3,331,540 $205,893.73 $3,125,646.74 Total 1 750 100.00% $54,675,171.90 $3,379,000.00 $51,296,171.90 November 15, 2011 15 List of Fixed and Variable Costs 2011 Based on experience, changed conditions, and practical matters of operations and accounting, this list is to be revised annually by the Operations Committee. Fixed Costs * Labor, parts and equipment for daily, weekly, quarterly, semi-yearly and yearly maintenance activity on equipment including but not limited to: o Pumps o Sump pumps o Generator o Cover and liner o Disinfection equipment o SCADA and security equipment * Labor associated with Project Committee activities * Chemicals, power and labor associated with recirculation of the Reservoir, if any, for water quality * Labor and laboratory charges for water quality testing ® Major repairs for equipment pipeline failure * Annual permit fees including but not limited to Division of Safety of Dams, Public Health and AQMD Variable Costs ® Chemicals and power associated with delivery of water • Replacement of Ultraviolet lights based on operation mode of the Reservoir Labor associated with delivery of water ® Replacement of water in the Reservoir November 15, 2011 16 Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement South Orange County December 2011 City of San Clemente City of San Juan Capistrano Moulton Niguel Water District Santa Margarita Water District South Coast Water District This Agreement is made this day of , (the "Agreement Date") and is entered into by and among the City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD"), hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water. suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Pian," dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities; and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an agreement entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement") providing for participation by MNWD in the funding the design, planning and construction of the reservoirs and establishing a capacity right of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoirs; and WHEREAS, the MNWD capacity rights defined in the MNWD Participation Agreement reservoirs may be revised based on participation by other agencies 2 and MNWD and SMWD are each willing to revise its respective capacity in order to provide capacity for the other Parties; and WHEREAS, SMWD completed the construction of the Upper Chiquita Domestic Water Emergency Storage Reservoir in Upper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and SMWD constructed the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies in addition to MNWD; and WHEREAS, SMWD completed construction of an inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station (together with the inietloutlet pipeline, the "Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the Reservoir; and WHEREAS, the Parties take imported water from service connections to the SCP per the rules and regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase 1 and li Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir and Pump Station (together the "Reservoir Project") under the terms of the SCP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir Project described herein, NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows: SECTION I. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations under this Agreement will incorporate MNWD's financial participation to date in the Reservoir Project. SECTION 2. CAPACITY RIGHTS Subject to the Capacity Rights as described herein, SMWD shall own and operate the Reservoir Project pursuant to the terms of this Agreement. The Parties shall own a Capacity Right in the Reservoir and Pump Station as set forth below in Table 1, which includes flow rates at the minimum specified cubic feet per second (CFS). As used herein, "Capacity Right" means a Party's undivided 3 percentage ownership interest in the capacity in each of the Reservoir Project facilities including all components. The total Capacity Rights in the Reservoir Project facilities shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the Capacity Right percentages shall occur y reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal storage capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD systems or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of "variable costs" and "fixed operating costs", as further provided in Section 7 hereof. The following table summarizes the Capacity Rights allocated to each of the Parties TABLE 1 Summary of Capacity Rights in Reservoir Proiect Facilitipm Agencies Reservoir Capacity (AF Capacity Right Percentage Pump Station Capacity CFS City of San Clemente 83.80 11.17% 5.59 City of San Juan Capistrano 50.00 6.67% 3.33 Moulton Niguel Water District 255.80 34.11% 17.05 Santa Margarita Water District 314.7 41.96% 20.98 South Coast Water District 45.70 6.09% 3.05 Total 750.00 100.00% 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members, aid in the administration of this Agreement, and review and approve the other matters specified herein. Each Party reserves its full legislative discretion with respect to all applicable implementation decisions expressly 4 covered by this Agreement and decisions of the Project Committee do not override a Party's legislative determinations. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project Committee representatives. The Project Committee shall meet periodically as needed during implementation of the Reservoir Project operation to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir Project facilities and operation, and shall meet upon the request of three (3) Parties within a reasonable time after delivery of the request to the Parties. SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement Date, upon commencement of operation of the Reservoir Project, Project Committee approval shall be required for capital enhancements, repairs, or replacements for the Reservoir Project facilities that either involves expenditures in excess of $30,000 per project, or that substantially alters the mode or method of operation of the project facilities, including but not limited to(1) the award of any contracts for environmental documentation, design or construction, (2) the issuance of any design contract or change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract amount. Project Committee will review design and construction schedules for the project work. Any changes needed in the schedule will be subject to approval by the Project Committee. All subsequent project work contemplated under this Agreement shall meet applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the subsequent project work. The Parties shall provide any comments to SMWD or its designee within seven 5 (7) working days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the subsequent project work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the subsequent project work. SMWD shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to design and construct the Reservoir and Pump Station. A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights percentage as shown in Table 1 under Section 2. SMWD or its designee will invoice the Parties for their respective shares of the completed Project Work in two parts. The first deposit installment will fund the Project cost for environmental, permitting, design and construction services identified in Exhibit A, an estimate of the total project costs. The second part will fund the remaining estimated Project Work. The first deposit shall be invoiced by SMWD upon execution of this Agreement by the parties or award of contract by SMWD Board of Directors. Progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule agreed to by the Project Committee. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. Funds paid in advance by SMWD for the benefit of any Party shall accrue interest at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity Right shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its Cs� share of the Project based on its Capacity Right percentage, including the cost attributable to the suspended Capacity Right percentage as reallocated by SMWD among the non -suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right. SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water then available in the Reservoir Project is less than the amount specified in Table 1 in Section 2, then the available water will be allocated based on the Parties' respective Capacity Right percentage at the time the water. is made available, except in the case of a Party that through its own election previously withdrew its water held under its Capacity Right. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate in an amount equal to or less than the Capacity Right percentage specified in Table 1. If a Party does not make a request, SMWD will continue to hold the Party's capacity in storage. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station. The cost of operating and maintaining each facility shall be determined on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of the SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the Reservoir Project through the SCP Service Connections, and variable costs that vary with the quantity of water delivered by the Reservoir Project as shown on Exhibit B. SECTION 7.2. Fixed Costs Annually, by February 15 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs items, as defined on Exhibit B, including the cost of facilities maintenance and repair, and chemicals if required for water quality recirculation, shall be allocated among the Parties based on their Capacity Right percentages. The Project Committee shall review, amend, reallocate, add or deduct items, and 7 approve Exhibit B annually based operational criteria then use it in the proposed budget. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach -Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each Party. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the applicable rate at the time water is delivered. The volume of water delivered to the Reservoir will be divided and billed to the Parties at their normal point of importation from the SCP system, based on their Capacity Right percentages, by an additive adjustment to the meter reads at the Participant's normal point of importation from the SCP system. The Parties will be credited with the volumetric amount purchased to a "Bank". When water is discharged from the Reservoir, the Parties receiving the discharged water will have the volumetric credit deducted from their Bank, and an equivalent volume deducted from their meter read at their normal point of importation from the SCP system. The water in the Bank is a cost accounting mechanism, and will not affect the available volume of water- ie Capacity Right percentage- for each Participant as defined in Section 2, Table 1. SECTION 7.4 Invoices Each Party shall pay its quarterly operations invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty-five (45)day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead 91 ACI design, construction and operation costs allocated to the Parties under Section 7 and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man-hours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5;00 pm on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) for non-exempt SMWD personnel will be charged at time and a half. The equipment rates effective upon the execution of this Agreement will be those established by the SMWD Board of Directors, or if the specific labor, equipment, or materials is not covered by SMWD's established rates, the current Caltrans published rates as periodically adjusted by the State of California as applicable which are incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices. The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.6% shall remain in effect through June 30, 2013, and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified 9 public accounting firm appointed by SMWD pursuant to generally accepted accounting standards as part of SMWD's annual audit process. SECTION 7.7 Operating and Procedures Manual to Cover Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual") annually, which shall include, but not be limited to the following: A. Operational criteria including mode of operation. B. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery by SMWD. C. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. D. Criteria for compliance with water quality objectives. E. Development/description of operating criteria including useful service life and criteria for replacement and refurbishment. F. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights not otherwise addressed under the terms of this Agreement. SECTION 8, TRANSFER OF CAPACITY RIGHTS AMONG PARTIES TO NOW PARTIES The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Right, prior to transfer of a Capacity Right to a non-party. The seller of capacity shall determine, in its sole discretion, the amount of capacity available and the purchaser if multiple Parties are interested in the Capacity Right. The Party acquiring the Capacity Right will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the Notice of Completion recordation date to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. In the event of transfers among the Parties, a revised Table 1 under Section 2 will be prepared as a ministerial matter to show the revised Capacity Rights and 10 Percentages, without the need for an amendment to this Agreement. Terms for the transfer of all or a portion of a Party's Capacity Right to a non-party public agency (ies) shall be determined by the selling Party, and is subject to an amendment to this Agreement to add the public agency as a Party hereto and make corresponding revisions as required. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NOW PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties, subject to the rights of the Parties to sell or transfer Capacity Rights to one another, or to non-party public agencies, as provided under Section 8. Capacity Rights may be transferred among the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non- participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Right(s) available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non- participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: 1120 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water available to deliver to participants and non -participants in acre feet. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the Parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION,• INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD"s negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification 11 obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued. With respect to operation of the Project, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the Project as herein provided shall be included within each Party's share of fixed costs. SECTION 11. SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12. ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligations arising hereunder, or is required to defend such an action or proceeding, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIRE AGREEMENT,• INTERPRETATION• GOVERNING LAW,• EXECUTION IN COUNTERPARTS This Agreement and the Exhibits, as amended in writing from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394. This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12 SECTION 14. NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 15. SEVERABILITY If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Party(ies) in connection with a dispute shall be responsible for providing written notice to such other Party(ies) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Party(ies) that the informal dispute - resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be tolled for a period of days equal to the number of days that elapsed 13 between delivery of the notice initiating informal dispute -resolution and the notice terminating informal dispute -resolution. SECTION 18. NOT A, JOINT POWERS ,AUTHORITY OR PARTNERSHIP The Parties hereby acknowledge this Agreement is not intended to create a joint powers authority pursuant to Government Code Section 6500 of seq. Additionally, this Agreement does not form a partnership, Parties are independent contracting Parties, and no Party is an agent of any other Party. SECTION 19. TERM This Agreement shall terminate on the earliest of the following events: (1) Upon date established by a majority vote of capacity shares of the Project Participants determining continued maintenance and repair of the Reservoir Project facilities is physically or financially impractical (2) upon the occurrence of a man-made or natural disaster that destroys or renders unusable the Reservoir Project facilities, as determined by a majority vote of the capacity shares; (3) or, as a result of regulatory mandates with which SMWD cannot comply or which would require cost prohibitive changes to the Reservoir Project, as determined a majority vote of the capacity shares. If a termination occurs, any proceeds of insurance, proceeds from salvage value or proceeds from alternative use of the Reservoir Project shall be divided according to the Capacity Right Percentages. Upon termination hereunder, all Reservoir project facilities, lands and right-of- way shall be retained by SMWD as the owner. 14 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. December 16 2011 Final SANTA MARGARITA WATER DISTRICT By President, Board of Directors By LL . MOULTON NIGUEL WATER DISTRICT By By President, Board of Directors Secretary to the Board CITY OF SAN JUAN CAPISTRANO By— By Mayor )Owk City Attorney CITY OF SAN CLEMENTE By_ Mayor By City Attorney SOUTH COAST WATER DISTRICT By__,__ President, Board of Directors By� Secretary to the Board 15 Exhibit "A' Final Estimate of Capital Costs, 2011 Based on contracts encumbered to date, and including a contingency on uncompleted contracts or work, this estimate of the total projects costs may be subject to revision with the final accounting. Agencies AF % Expended Prop 50 Budget Remaining City of San Clemente 83.8 Issued Purchase Through May Open Budget for Type Budget Orders 2011 Encumbrances Project Prelim Design $ 252,180.62 $ 252,180.62 $ 252,180.62 $ - $ Design $ 6,133,481.10 $ 5,933,481.10 $ 5,636,361.17 $ 297,119.93 $ 200,000.00 Environmental $ 679,142.37 $ 679,14237 $ 536,631.89 $ 142,510.48 $ - Permit $ 245,451.03 $ 215,451.03 $ 204,822.53 $ 10,628.50 $ 30,000.00 Construction $ 42,530,802.41 $39,440,802.41 $ 33,239,132.99 $ 6,201,669.42 $ 3,090,000.00 Mitigation $ 3,818,01.6.23 $ 3,318,016.23 $ 3,220,982.92 $ 97,033.31 $ 500,000.00 Site Acquisition $ 353,573.75 $ 353,573.75 $ 353,573.75 $ - $ - Payroll and Burden $ 662,524.39 $ 622,524.39 $ 622,524.39 $ - $ 40,000.00 Grand Total $54,675,17.00 50,815,171.90 1 $ 44,066,210.26 $ 6,7480961.64 $3,860,000.00 Agencies AF % Agency Responsibility Million $ Prop 50 Budget Potential Agency Reduced Costs City of San Clemente 83.8 11.17% $ 6,109,039 $377,546.93 $5,731,492.27 City of San .luan Capistrano 50.0 6.67% $3,645,011 $ 225,266.67 $3,419,744.79 Moulton Niguel Water District 255.8 34.11% $18,647,879 $1,152,464.27 $17,495,414.36 Santa Margarita Water District 314.7 41.96% $22,941,702 $1,417,828.40 $21,523,873,73 South Coast Water District 45.7 6.09% $ 31331,540 $205,893.73 $3,125,646.74 Total 750 1 100.00% $54,675,171.90 $3,379,000.00 $51,296,171.90 ATITWInw. List of Fixed and Variable Costs 2011 Based on experience, changed conditions, and practical matters of operations and accounting, this list is to be revised annually by the Operations Committee. Fixed Costs • Labor, parts and equipment for daily, weekly, quarterly, semi-yearly and yearly maintenance activity on equipment including but not limited to: o Pumps o Sump pumps o Generator o Cover and liner o Disinfection equipment o SCADA and security equipment ® Labor associated with Project Committee activities ® Chemicals, power and labor associated with recirculation of the Reservoir, if any, for water quality + Labor and laboratory charges for water quality testing • Major repairs for equipment pipeline failure ® Annual permit fees including but not limited to Division of Safety of Dams, Public Health and AQMD Variable Costs • Chemicals and power associated with delivery of water • Replacement of Ultraviolet lights based on operation mode of the Reservoir • Labor associated with delivery of water • Replacement of water in the Reservoir 17 Upper Chiyuita Emergency Storage Reservoir Participation and Operations Agreement South Orange County -. GvemberDecember 2011 City of San Clemente City of San Juan Capistrano Moulton Niguel Water District Santa Margarita Water District South Coast Water District 'This Agreement is made this — day of ............... ..December 2011, (the- -- i Formatted: Justified "Agreement Date") and is entered into by and among the City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD"), hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the 'South Orange County Water Reliability Study Phase 2 System Reliability Plan," dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities; and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an agreement entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement") providing for participation by MNWD in the funding the design, planning and construction of the reservoirs and establishing a capacity right of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoirs; and WHEREAS, the MNWD capacity rights defined in the MNWD Participation Agreement reservoirs may be revised based on participation by other agencies and MNWD and SMWD are each willing to revise its respective capacity in order to provide capacity for the other Parties; and WHEREAS, SMWD is proceeding with q feted the construction of the Upper Chiquita Domestic Water Emergency Storage Reservoir in tipper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and SMWD �s-corrstruetingconstructed the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies in addition to MNWD; and WHEREAS, SMWD is proce ^^ Zvi corn feted construction of an inlettoutlet pipeline and the Lipper Chiquita Reservoir Pump Station (together with the inletfoutlet pipeline, the "Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the Reservoir; and WHEREAS, the Parties take imported water from service connections to the SCP per the rules and ' ', ;aregulatigns governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase 1 and 11 Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir and Pump Station (together the "Reservoir Project") under the terms of the SCP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir Project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows: SECTION 1. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations under this Actreement will incorporate MNWD's financial participation to date in the Reservoir Project. SECTION 2. CAPACITY RIGHTS Subject to the Ca acit Rights as described herein SMWD shall own and operate the Reservoir Project to the terms of this Agreement. The Parties shall haveown a Capacity Rig tsR g t in the Reservoir and Pump Station as set forth below in Table 1, which includes flow rates at the minimum specified cubic feet per second (CFS). As used herein, "Capacity Right" means a Party's undivided percentage ownership interest in the capacity in each of the Reservoir Project facilities including all components. The total Capacity Rights in the Reservoir Project facilities shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100°/x. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the pefeemage Capacity Ro. Right percentages shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal storage capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD "stems. or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of eat"variable costs" and "fixed operating costs,,-", as further provided in Section 7 hereof. The following table summarizes the Capacity Rights allocated to each of the Parties Tleaies a3re#d Cpacsty kats �entg �w the tab;e shalle- c#rznlloGate�Reseyer-�I�an+ nnzi"] GGGts TABLE 1 Summary of Capacity Rights in Reservoir Project Facilities A encies Reservoir Capacity AF Capacity Right Percentage Pump Station Capacity CFS City of San Clemente 83.80 11.17% 5.69 City of San Juan Capistrano 50 6.67% 3.33 ( Moulton Niguel Water District 256.80 34.11% 17.05 Santa Margarita Water DistrictW W 3141 41.96% 20.98 South Coast Water District 6.09% 3.05 _45.70 � Wu75Q.QQ Total 100.00% SQ.OQ__.._ SECTION 3. PROJECT COMMITTEE Fa€xnatted:7ustified A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the 4 members, aid in the administration of this Agreement, and review and approve the other matters specified herein. Each Party reserves its full legislative discretion with respect to all applicable implementation decisions expressly covered by this Agreement and decisions of the Project Committee do not override- a Fart 's 1e illative determinations. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project Committee representatives. The Project Committee shall meet periodically as needed during �tucie� implementation of the Reservoir Project operation to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir Project facilities and operation.-, and shall meet uPon_the Mge�u t pf three 3 Parties within a reasonable time after delivery of the request_ to the Parties. SECTION 4, PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement Date, upon commencement of operation of the Reservoir Proiect, Project Committee approval shall be required for coal enhancements repairs, or replacements for the Reservoir Project facilities that either involves expenditures_ in excess of $30,000 per proiect, or that substantially alters the mode or method of operation of the erect fad ities including but not limited to(1) the award of any o4giria---contracts for environmental documentation, design ander construction, (2) the issuance of any design contract or change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract tom -amount. Project Committee will review design and construction schedules -forI 'I he erect work. Any changes needed in the schedule will be subject to approval by the Praject Committee. All Rroject---. W-Grksubseguent proiect work contemplated under this agr-ee en AgEgernent shall meet applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the Project. -Work subsequent qro ect work. The Parties shall provide any comments to SMWD or its designee within seven caleRA --e LD working days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the €' snsubsequent project work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the pct--Worksubsequentpro t work. SMWD shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts; within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to comdetedesi n and canstruct the Reservoir and Pump Station, A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights percentage as shown in the4abL-4nTable 9 under Section 2. SMWD or its designee will invoice the Parties for their respective shares of the p pecW+ scomgleted Project Work in two parts. The first deposit installment will fund the Project cost for environmental, permitting, design and construction services identified in Exhibit A, an estimate of the total project costs. --The second part will fund the remaining estimated Project Work. The first deposit shall be invoiced by SMWD upon execution of this agreernentA rem_ _er ent by the parties or award of contract by SMWD Board of Directors. Progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule agreed to by the Project Committee. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. Funds paid in advance by SMWD for the benefit of any Party shall accrue interest at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity tatRtt shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of the Project based on its Capacity Right erc �niage, including the cost attributable to the suspended Capacity Right &a percentage as reallocated by SMWD among the non -suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right. SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water then available in the Reservoir Project is less than the amount specified in Table 1 in Section 2, then the available water will be allocated based on the Parties' respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election previously withdrew its water held under its Capacity Right. -During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Parry shall take action to prevent the delivery to another Party of its proportionate share of available water. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate in an amount equal to or less than capacit . he Capacity.Right. percentage specified in Table 1. If a Party does not make a request, SMWD will continue to hold the Party's capacity in storage. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station. The cost of operating and maintaining each facility shall be determined,- on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of the SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the Reservoir Project through the SCP Service Connections, and variable costs that vary with the quantity of water delivered by the Reservoir Project as shown on Exhibit B. SECTION 7.2. Fixed Costs Annually, by February 15 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs items, as defined on Exhibit B, including the cost of facilities maintenance and repair, and chemicals if required for water quality recirculation, shall be allocated among the Parties based on their Capacity Rights:Rigght percentages. The Project Committee shall review, amend, reallocate, add or deduct items, and approve Exhibit B annually based operational criteria then use it in the proposed budget. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach -Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. - SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power-, shall be allocated among the Parties based on the volume of water delivered to each ageaGyP_ arta. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the applicable rate at the time water is delivered. The volume of water delivered to the Reservoir will be divided and billed to the Parties at their normal point of importation from the SCP system, based on their paF#GipatiGrfCaoacity Right percentages, by an additive adjustment to the meter reads at the Participant's normal point of importation from the SCP system. The Parties will be credited with the volumetric amount purchased to a "Bank". When water is discharged from the Reservoir, the Parties consw P44greceiving the discharged water will have the volumetric credit deducted from their Bank, and an equivalent volume deducted from their meter read at their normal point of importation from the SCP system. The water in the Bank is a cost accounting mechanism, and will not affect the available volume of water- ie Cagacity F�igilt percenage- for each Participant as defined in Section 2, Table 1 - FnrEnatted:7ustifler7 SECTION 7.4 Invoices Each Party shall pay its quarterly operations invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty-five- 45 day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead. All design, construction and operation costs allocated to the Parties under this Section 7 and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man-hours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5:00 pm on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) for non-exempt SMWD personnel will be charged at time and a half. The equipment rates effective upon the execution of this Agreement aswill be those established by the SMWD Board of Directors, or if the specific labor, equipment, a4d-or materials is not covered by the.-SMWD's established rates,' the current Caltrans published rates as periodically adjusted by the State of California as applicablett�€fetc� andwhich are incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices. dv The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.5% shall remain in effect through .lune 30, 2013, and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted accounting standards as part of SMWD's annual audit process. SECTION 7.7 Operating and Procedures Manual to Cover Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an —Operating and Procedures Manual ('Manual") annually, which shall include, but not be limited to the following: A. Op erational criteria including mode of operation. B. M ethodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery, by SMWD. C. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. D. Criteria for compliance with water quality objectives. E. De velopmentldescription of operating criteria including useful service life and criteria for replacement and refurbishment. F. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights not otherwise addressed under the terms of this Agreement. SECTION 8. TRANSFER OF CAPACITY RIGHTS AMONG PARTIES TO NOW PARTIES The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Rig-hts: iglu prior to transfer of a C�aci..,..,.,.ty,..,.. ight to a non-party. The seller of capacity shall determine in its sale discretion the amount of capacity available and the purchaser if multiple Parties are interested in the Capacity Right. The Party acquiring the Capacity Rightsight will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the date;--ofNotice of Completion recordation date to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. An arraeradment to #k Agrees& reflecting change s,half e -e cid--by--a#-2a#tesin the event of transfers among the Parties, a revised Table 1 under Section 2 will be prepared as a ministerial matter to show the revised CapaciqyC;ights andep rcentages without the need for an amendment to this A reernt nt. Terms for the transfer of all or a ortion of a Pari 's Capacity Right to a non-partV Publicnon-part agency les small be determined by the selling Party, and is subject to an amendment to this Agreement to add the p as._a Partyhereto and make correspondingc revisions as required. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NON- PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties: subject to the rights of the Parties to sell or transfer Capacitv Rights to one another, or to non-party public agencies, asr� ed under Section 8. Capacity Rights may be transferred among the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non -participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Ra t5B hts available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non -participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: 1/20 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water available to deliver to participants and non -participants in acre feet. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the Parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION; INSURANCE 31 SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued. With respect to operation of the Project, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the ProjeGtsProiect as herein provided shall be included within each Party's share of fixed costs. SECTION 11, SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12, ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligations arising hereunder, or is required to defend such an action or proceeding, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIRE AGREEMENT: INTERPRETATION,• GOVERNING LAW; EXECUTION IN COUNTERPARTS 12 This Agreement and the Exhibits, as amended in writing from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394, This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14. NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 15. SEVERABILITY If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another tParty(ies) in connection 13 with a dispute shall be responsible for providing written notice to such other PartEgrty(ies) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Ra i'"rt (ies) that the informal dispute -resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be tolled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute - resolution and the notice terminating informal dispute -resolution. SECTION 18. NOT A JOINT POWERS AUTHORITY OR PARTNERSHIP The Parties hereby acknowledge this Agreement is not intended to create a joint powers authority pursuant to Government Code S6,148Section 6500 et Lturmaited Font: Italic seq. Additionally, this Agreement does not form a partnership, Parties are independent contracting Parties, and that -no Party is an agent of any other Party. SECTION 19. TESL This A reement shall terminate on the earliest of the followin events: j� Upon date established by a majoritv vete of capacity shares of the Project Participants determining continued maintenance and repair of the Reservoir [oqct facilities is physically or financially impractical {2) upon the occurrence of a man-made or natural disaster that destroys or renders unusable the Reservoir Proiect facilities. as determined bva maioritv vote of the capacity shares as a result of regulatory mandates with which SMWD cannot co I or which yvould reguire cost prohibitive changes to the Reservoir Pro[ect, as determined ma ma: ty vote of the capacity shares. .. If a termination occurs, n_pLo ce lls of insurance proceeds.from salvage.yWye or proceeds from alternative use of the Reservoir Proiect shall be divided accordn to the C.apacity Right Percentacles. Upon termination hereunder. all Reservoir project fapilities lands and ri ht-of- yjL y sha B_ a (qt ined by MWD as the opener_ 14 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective mate hereinabove written. SANTA MARGARITA WATER DISTRICT By President, Board of Directors By. Secretary to the Board MOULTON NIGUEL WATER DISTRICT am By President, Board of Directors Secretary to the Board CITY OF SAN JUAN CAPISTRANO By Mayor By City Attorney CITY OF SAN CLEMENTE By Mayor By City Attorney SOUTH COAST WATER DISTRICT In President, Board of Directors Secretary to the Board November 15, 2011 15 Exhibit "A" Final Estimate of Capital Costs, 2011 Based on contracts encumbered to date, and including a contingency on uncompleted contracts or work, this estimate of the total projects costs may be subject to revision with the final accounting. Type ( i Budget Issued Purchase Orders Expended Through May 2011 Open i Encurnbrances-Project Remaining Budget for Prelim Design t 252,180.62 $ 252,180.62 $ 252,180.62 I $ - 1 $ - Design $ 6,133,481.10 $ 5,933,481.10 $ 5,636,361.17 $ 297,119.93 ! $ 200,000.00 Environmental $ 679,142.37 $ 679,142.37 $ 536,631.89 $ 142,510.48 $ Moulton Niguel. Water District Permit $ 245,451.03 $ 215,451.03 $ 204,822.53 $ 10,628.50 $ 30,000,00 Construction $ 41,530,802.41 $39,440,802.42 $ 33,239,132.99 $ 6,201,669.42 $ 2,090,00.0.00 Mitigation $ 3,818,016-23 $ 3,318,016.23 $ 3,220,982.92 $ 97,033.31 $ 500,000.00 j Site Acquisition $ 353,573.75 $ 353,573.75 $ 353,573.75 $ $ Payroll and Burden $ 662,524.39 $ 622,524.39 $ 622,524.39 $ $ 40,00fl;00: Grand Total $54,675,171.00 50,815,171.90 $ 44,066,210.26 $ 6,748,961.64 $2,860,000..00 November 15, 2011 16 Agency Responsibility Prop 50 1 Potential Agency Aenctes AF % Million Budget Reduced Costs i City of San Clemente i 83.8 11,17% $ 6,109,039 $377,546.93 I $5,731,492.27 its of San Juan Capistrano 50.0 6.67% $3,645,011 $ 225,266.67 3 $3,419,744.79 Moulton Niguel. Water District i 255.8 34.11 %2,464.27 ! $17,495,414.36 Santa Margarita Water District j 314.7 41.96 ` $22,941,702 1,417,828.40 $21,523,873.73 South Coast Water District 45.7 6.09% $ 3,331,540 $205,893.73 i ! $3,125,646.74 [ Total 750 100.00%0, $,54,675,171.90 $3,379,000.00 $51,296,171-90 November 15, 2011 16 Exhibit "B" List of Fixed and Variable Costs 2011 Based on experience, changed conditions, and practical matters of operations and accounting, this list is to be revised annually by the Operations Committee. Fixed Costs • Labor, parts and equipment for daily, weekly, quarterly, semi-yearly and yearly maintenance activity on equipment including but not limited to: o Pumps o Sump pumps o Generator o Cover and liner o Disinfection equipment o SCADA and security equipment • Labor associated with Project Committee activities • Chemicals, power and labor associated with recirculation of the Reservoir, if any, for water quality • Labor and laboratory charges for water quality testing • Major repairs for equipment pipeline failure • Annual permit fees including but not limited to Division of Safety of Dams, Public Health and AQMD Variable Costs • Chemicals and power associated with delivery of water • Replacement of Ultraviolet lights based on operation mode of the Reservoir • Labor associated with delivery of water • Replacement of water in the Reservoir November 1.5, 2011 17 b. FINAL CONF(- 'MED UPPER CHIQUITA E" " RGENCY STORAGE RESERVOIR PArcTICIPATION AND OPERATIONS-.GREEMENT WITH THE CITY OF SAN CLEMENTE, MOULTON NIGUEL WATER DISTRICT, AND SOUTH COAST WATER DISTRICT RATIFIED; VOLUME OF PARTICIPATION DECREASED FROM 76.1 ACRE-FEET TO 50 ACRE-FEET; $900,000 TRANSFERRED FROM CIP 07808 TO A NEW CIP TO INSTALL EMERGENCY GENERATORS AT THE GROUND WATER RECOVERY PLANT (GWRP); UNUSED FUNDS IN THE AMOUNT OF $723,255 RETURNED TO THE WATER CAPITAL IMPROVEMENT FUND IN CONSIDERATION OF CRITICAL PROGRAMMED WATER CAPITAL PROJECTS; AND MINOR NUMERICAL CHANGES AUTHORIZED AS DETERMINED BY THE CITY MANAGER, OF LESS THAN 5% FROM THE ORIGINAL VALUE, IN THE FINAL DOCUMENT PRESENTED FOR SIGNATURE (600.50) Keith Van Der Maaten, Utilities Director, provided a PowerPoint presentation and responded to questions. John Schatz, General Manager, Santa Margarita Water District, responded to questions. Public Comments: • Richard Gardner, Capistrano Beach resident, expressed concern with spending public funds to purchase a back-up generator that will not be used much, and will be costly to maintain. Council Comments: • Felt that having a back-up generator (for the Groundwater Recovery Plant), and diesel fuel on site is important, especially during emergency situations. • Supported back-up generators, and having storage of fuel in order to be prepared in the event of an emergency; felt that the City should be cautious in investing further funds in the Emergency Operations Center (EOC) due to concerns that it's located in a floodplain. Council Action: Moved by Council Member Freese, seconded by Council Member Reeve, and carried 4-0 with Mayor Allevato absent to ratify a final conformed Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, and South Coast Water District; volume of participation decreased from 76.1 acre-feet to 50 acre-feet; $900,000 transferred from CIP 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); unused funds in the amount of $723,255 returned to the water capital improvement fund in consideration of critical programmed water capital projects; and minor numerical changes authorized as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. ROLL CAI -.L: AYES: COUNCIL MEMBER: Freese, Reeve, Taylor and Mayor pro tern Kramer NOES: COUNCIL MEMBER: None ABSENT: COUNCIL MEMBER: Allevato ORDINANCES: None 6 11/15/2011 Attachment 4 1111512011 SUPPLEMENTARY AGENDA REPORT G2b TO; Karen P. Brust, Cit an e FROM: Keith Van Der Maaten, Utilities Director SUBJECT; Consideration of Ratification of Conformed Agreement for the Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement, Reduction in Participation Volume, and Authorize a Transfer of Funds to Install Emergency Generators at the Ground Water Recovery Plant (GWRP) (City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, South Coast Water District) RECOMMENDATION By motion, 1) Ratify the final conformed Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Decrease the volume of participation from 76.1 acre-feet to 50 acre-feet; and, 3) Transfer $900,000 from CIP 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); and, 4) Return unused funds in the amount of $723,255 to the Water Capital Improvement Fund in consideration of critical programmed water capital projects; and, 5) Authorize minor numerical changes as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. SITUATION: During the review of the original agenda item, staff noticed an error in the production capacity value for the GWRP. Staff has amended Attachment 3 of the original agenda and has included it with this report (See Revised Attachment 3, Calculation of Conservation Levels). After the preparation of the original report, Santa Margarita Water District (SMWD) met with the City and agreed to waive the interest expenses if the City decides to reduce capacity to 50 AF. If the City decides to stay at the 76.1 AF level, SMWD agreed to reduce the interest rate to 1.22%, reducing interest expenses from $203,507 to $63,520. SMWD has confirmed that they will take the 26.1 AF of capacity if the City decides to reduce its participation level to 50 AF. Supplementary Agenda Report Page 2 November 15, 2011 Staff has updated the analysis and recommendation section of the original report as well as the financial consideration section to reflect the correction to the GWRP production value and to incorporate the updated interest expenses. While the revisions have changed the analysis results and funding numbers slightly, staff's recommendation remains the same. ANALYSIS AND RECOMMENDATION: Of particular concern is that the City's Ground Water Recovery Plant (GWRP) currently does not have any back-up power. Based on supply/demand analysis, the impact of losing water production from the GWRP has a far greater impact to our ability to meet demand than reduced storage in the UCR in the event the City loses its Metropolitan Water District (MWD) import supply. As displayed in the chart below, if the City's MWD supply was interrupted for a 15 -day period in August, we would need 36% conservation to meet demand with the GWRP on-line and 85% conservation without the GWRP, a 49% difference. As a comparison, for each 25 Acre Feet (AF) of additional storage in the UCR, the level of conservation is only reduced by 5%. Conservation % Change in %: 5% 10% 14% Adding the emergency back-up generators to the GWRP is an investment in a "supply source" while adding capacity at the UCR is an investment in "storage capacity." That difference is important because if demand could be curtailed sufficiently, we could supply enough water from the GWRP during an outage or emergency indefinitely. As a comparison, at that same curtailment level, the 76.1 AF of storage in the UCR would supply a maximum of 10 days of water before our storage is depleted. The GWRP is the primary source of reliable water for the City of San Juan Capistrano in the event of the loss of the MWD import supply. The UCR was intended as a supply reliability diversification in the event that the GWRP was not working or the demands created by the loss of MWD supply exceeded the capacity of the GWRP; however, the largest reliability concern currently is not insufficient diversification or storage, but rather that the GWRP is without a back-up power supply, For that reason, staff recommends reducing the participation in the UCR project to 50 AF and funding a program to install emergency power generation at the GWRP. After reducing capacity to the 50 AF level, the City will have a balance of $1,623,255 which will fund the cost of emergency generators for the GWRP estimated at $900,000. After allocating the necessary funds to the GWRP generators, there will be a remaining Current 25 AF 50 AF 75 AF With GWRP 36%n 32% 27% 23% Without GWRP 85% 80% 75% 71% Change in %: 5% 10% 14% Adding the emergency back-up generators to the GWRP is an investment in a "supply source" while adding capacity at the UCR is an investment in "storage capacity." That difference is important because if demand could be curtailed sufficiently, we could supply enough water from the GWRP during an outage or emergency indefinitely. As a comparison, at that same curtailment level, the 76.1 AF of storage in the UCR would supply a maximum of 10 days of water before our storage is depleted. The GWRP is the primary source of reliable water for the City of San Juan Capistrano in the event of the loss of the MWD import supply. The UCR was intended as a supply reliability diversification in the event that the GWRP was not working or the demands created by the loss of MWD supply exceeded the capacity of the GWRP; however, the largest reliability concern currently is not insufficient diversification or storage, but rather that the GWRP is without a back-up power supply, For that reason, staff recommends reducing the participation in the UCR project to 50 AF and funding a program to install emergency power generation at the GWRP. After reducing capacity to the 50 AF level, the City will have a balance of $1,623,255 which will fund the cost of emergency generators for the GWRP estimated at $900,000. After allocating the necessary funds to the GWRP generators, there will be a remaining Supplementary Agenda Report Page 3 November 15, 2011 balance of $723,255. Staff is recommending that this amount be returned to the water CIP fund and that staff return to the City Council with a recommendation for project appropriations after an evaluation can be made on how best to use these funds to further increase system reliability. There are currently several booster stations on the unfunded list in need of upgrades to the pumps or in need of stand-by power that are candidates for these funds Upon Council approval, the City will send a letter to the Santa Margarita Water District formally requesting a reduction in the capacity. The desire to reduce capacity in the project has been discussed with Santa Margarita Water District and they have confirmed that they will take the 26.1 AF. COMM ISSIONIBOARD REVIEW AND RECOMMENDATIONS: This item is scheduled for the November 15, 2011, Utilities Commission meeting for their review and recommendation to City Council. The Utilities Commission comments and recommendation will be provided verbally by staff at the City Council meeting. FINANCIAL CONSIDERATIONS: The total cost of the UCR project is $51,296,172 as of October 30, 2011. This includes all the change orders known, and assumptions that the Proposition 50 grant funds will be paid by the State of California for the UCR. The City's cost of participation, depending on whether it participates at the original 76.1 AF (10.15%) or reduces its participation to 50 AF (6.67%) is as follows: San Juan Capistrano`s Costs of Participation Original: Proposed: Percentage of the UCR 10.15% 6.67% Volume (AF) 76.125 50 Volume (Million Gallons) 24.8 16.3 Cost of Participation $5,206,561 $3,419,745 *Cost of Accrued Interest as of 10/30/2011 $63,520 $0 Other Costs $5,000 $8,000 Total Costs $5,278,081 $3,427,745 Available Budget $5,051,000 $5,051,000 Budget Adjustment/ (Credit) $227,081 ($1,623,255) The City would have to appropriate an additional $227,081 to fund participation at 76.1 AF level. At the 50 AF level, the City would have a credit of $1,623,255 to fund the emergency generator(s) for the GWRP and $723,255 to be returned to the water capital budget to be used for other reliability projects on booster stations. There is a one-time cost to the City to fill the reservoir in the amount of $45,045 which is currently included in the Fiscal Year 2011/12 operations budget. There will be an annual operations cost that has already been budgeted in the Utilities water operations * SMWD agreed to waive the interest expenses as part of the reduced capacity buy -in and agreed to an interest rate of 1.22% at the 76.1 AF level. fund in Fiscal Year 2011/2012 in the amount of $4,369 per quarter for fixed costs, and $7,420 per quarter for variable costs, for a total annual cost of participation of $47,200. If the participation is reduced the overpaid amount will be credited to the operations budget. The City issued the Certificates of Participation (COP), Series 2009 to fund the UCR and other projects. These COPS were issued on April 14, 2009, and the City has until April 14, 2012, to expend the funds or will need to request an extension for up to two additional years without affecting the tax status of the bonds. RECOMMENDATION By motion, 1) Ratify the final conformed Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Decrease the volume of participation from 76.1 acre-feet to 50 acre-feet; and, 3) Transfer $900,000 from CIP 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); and, 4) Return unused funds in the amount of $723,255 to the Water Capital Improvement Fund in consideration of critical programmed water capital projects; and, 5) Authorize minor numerical changes as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. Respectfully submitted, Keith Van Der Maaten Utilities Director Attachment: Prepared by, Eric P. Bauman, P.E. Utilities Engineer ® Revised Attachment 3, Calculation of Conservation Levels Avg Day Demand, cfs 11.384 Absolute Resv. Vol. (gal) 14,979,342 Usable Vol 86% 12,732,441 18,892,441 Fire Flow Volume (gal) 3,840,000 Available Volume (gal) Deimer & GWRP Lost Abs Vol Emerg Stor @ Emergency Stor Avail SMWD Upper Chiquita. 24,440,400 Usable Vol 90% 21,996,360 Avail Vol 21,996.3613 0 75 AF A 2010 1# 0 72 etmer Lost, (3VVRF c 0% 'Delmer Lost, GWRR iDeimer GWR. Los#, ner (cfs) 19.90 Working 7.29 0% Deimer & GWRP Lost Working, Emerg Star Emergency Stor Avail 7.29 f i'/sr Rem. Feb 1 Rem. I Rem, Rem. 5.58 RP (cfs) 7.95 (cfs) 9.57 1 (cfs) 1.62 1 (cfs) 9,57 1 (cfs) 1.62 Is (cfs) 1.62 5.58 ] 1 I 0OX wgecy Storage (N1.G.).1 46'10 . 9% '1a O% s Interruption 7 10 1s 7 10 -16--T-7 10 15 1 7 10 15 valent Resv. cfs 1.97 1.38 0.92 1 1,97 1.38 0,92 1 6.83 4.78 3.19 1 6.83 4,78 3.19 it DF 084 cfs demand / % conserviation required 7"I 7=9 cfs demand 1 % conserviation required ,.o c 0% t7olo . 9 0% 7.Z9 5"1 % . 7.29 %a: 7.29 i 05%. 7.29 0% 7.29 � 11/0 7.29 0 �% 7.29 �?®/o 7.29 f i'/sr 729 146 Feb 0.49 5:58 5.58 5.58 5,58 5.58 5.58 5.58 5.58 5.58 5.58 5.58 5.58 0% 0% 0OX 361/, 46'10 0% 9% '1a O% t7% 0% 14% Mar 0.56 x^1.36 6.38 6.38 6.38 6,38 6.38 6.38 6.38 6.38 6.38 6.38 6.38 0% 0% GO/0 44% 53% ,% 0% 0% 0% .0% 0°lea %s Apr 0.95 10.81 10.81 10.81 1 10.81 1€ ,81 10.31 1 10.851 107,81 10.81 1 10.81 107.81 10.131 0% 0% 3%1 670%:72%.:::::7,70/1 9a/a 0% 0%1 22% 41% 56% May 1.17 1132 13,32 13.321 13.32 13,3.2 13.321 13.32 13.32 13.321 13.32 13,32 13..32 13% 18°da 21 %1 7 % 0% 0%v 4%1 37% 52% 640YO Jun 1.29 14.39 14.69 14.69 1 14.69 14.69 14.691 14.69 14. 99 14.69 1 14.69 14.69 14.69 21% 25% 29% l��%e:: %a 1�v��a.: 0% °{ 13% 43% la Jul 1.35 15.37 15.37 15.37 15.37 15.37 15.37 15.37 15.37, 15.37 15.37 15.37 15.31 25`%a 29% 32�1a . 77% 81"ffila �/�a 0°I� 7%a ? % 45°l0 58%6a% Aug 1.45 "16.51 16.51 16.51 16.51 16.51 x6,51 16.61 '16.51 16.5` 16.51 16a 1 16.51 30%v 34% 36%a " 7x8% 82%m %' 1 % 13% 2T1% 49% Se 1.22 .13.89 13.89 13.89 13.89 13.89 13.89 13,2 9 13.83 13.89 13.89 13.89 13.89 11 % 21% 8%- 39°�'0 . 4%0 5 Oct 1.17 13.32 13.32 13.32 13.32 13.32 13.32 13, 32 13.32 13.32 13.32 13.32 13.32 13a/a 18% 21 °dn 73% 8%n 8 %, C3% D% 4% 3710 52% 64°/0 Nov 0.33 10.59 1€3.59 13.69 1 113.59 1`1,59 10,59 1 10.59 10.59 10.59 1 10'.59 10.59 10.59 0% 0% "ala:. ��r 72 a 757 0% 0% Q%1 20a'a 40% 55% Dec 0.79 8.99 8.90 8.991 8.99 8.99 8.991 8.99 8.99 8.991 8.99 13.99 8.99 Conservation Req (Legen 0% 10IIA 0% 20% 0 X 30alu 0% 4 %a 5:7% 5�.�/a 7T-1-61 60%- -0/o 70%a Oa/a Oa/o ��/o 8Qa1a ;9D% �9a/o 4.7% REMISED ATTACHMENT 3 Avg Day Demand, cfs 11.384 Absolute Resv. Vol. (gal) 14,979,342 Usable Vol 85% 12, 732,441 Fire Flow Volume (gal) 3,840,000 Available Volume (gal) 8,892,441 Abs Vol Emerg Stor @ orage SMWD Upper Chiquita, 16,293,600 Usable Vol 90% 14,664,240 Avail Vol 14,664,240 50 AF 2010 Da s Interruption Equivalent Resv. cfs 4 Event DF C .. 7 10 t5 7 10 15 5,21 3.64 2.43 1 5.21 3.6 , .. 4 2.43 cfs demand ! % conserviation required Jan 0.64 7.29 7.2 •aduct: aPacity Local 6tofa-ge n y oca orage 7.29 Delmer Lost, RP 7,29 1Delmer Lost, GWRP 1Deimer & GWRP Los -,imer (cfs) 19.90 Working ;Delmer & GW RP Lost Working, Emerg Stor Emergency Stor Avail Rem. Rem. Rem, Rem. NRP (cfs) 7.95 (cfs) 9.57 (cfs) 1.62 (cfs) 9.57 [ (cfs) 1.62 ells (cfs) 1.62 5.58 5.5°8 1 5..58 nergeicy Storage (MG) 5.561 5.55 5.58 5.513 Da s Interruption Equivalent Resv. cfs 4 Event DF A. 7 10 15 i 10 15 1,97 1.38 0.92 1.97 1,3 8 0.92 1 cfs demand / % conserviation required .. 7 10 t5 7 10 15 5,21 3.64 2.43 1 5.21 3.6 , .. 4 2.43 cfs demand ! % conserviation required Jan 0.64 7.29 7.2 7 2-3 7.29 7.23 7.29 7.29 7.29 7.23 7,29 7.29 7.29 0% 0% 0%1.51% 59`x'0 6511/0 i}% 0% 0°/a 60 28% 44% Feb 0.49 5.58 5.5°8 5-58 5..58 558 5.561 5.55 5.58 5.513 5.58 5,58 5.58 f1°lc, 0% O% :ifs%Q 46% . 55% 0% 0% O% 0"A 6%s 27% Mar 0.56 6.38 6,38 6.38 6..38 6.38 6.38 6.'38 6.38 6.38 6.38 6.38 6.38 G% 0% 0% 44% 53% 6�°Ire 0% �7% 0�/a C��% 17°/a 37% Apr 0.95 10.8'T 10.81 10,81 10.81 1U.F31 -,0,81 10.81 10.81 10.81 10.81 10.81 10.11 fele 0% 3%1' 67% 72% 7 �%a� 0% 0% 0%1 % 61%. 63% May 1.17 13..32 13.32 13,321 13.32 13.32 1.x.32 1 13.32 13.32 13,321 13.32 1;3-32 13.52 13% 18% 21 %1..:: . �'/u 1 i3°lc 4�3°Ic 6.°i �/c� �'✓t Jun 1.29 14.691 14,69 IZ69T 14,69 14M 14.69 1 14.69 14:69 14.69 1 14.69 14.69 14.69 21% 25% °/€ t 76%: ° . ... f °7 10% 18-7 4% 6.4% 72'1 Jul 1.35 15.37 15.37 15.37 15.37 15.37 15.37 -15.37 15.37 15.37 15.37 15.37 15,37 25%® 29% 32% 77%a. 40l° 1 I° 22%1. 55'% °!n °lo Aug1.45 16.51 16.51 16.51 10.51 1'6.51 16.51 16.51 16,61 16.51 1cs71 16.51 10.51 30% .. 34% 36% 7�°1�; )� �!� ��' 1 ?¢/0 20% �7% 59�'�� 6 °Iu Se2 1.22 33.89 13.80 13.83 j, 10.69 13.89 13.89 93.69 13.69 13.89 13.69} 13.89 1189 17°l 1G%G 4®f0 7 t g 4C ��� iCn l i s 3 7 62pffi Oct 1.17 13.32 13,32 1332 1 13-32 13.32 13,321 13.32 13-32 13.32 13.32 13.32 13.32 13 /fl 18°/n 10°I° 4% 61% 7% Nov 0.93 10.59 10.59 10.591 M591 10.59 10.591 10.59 10.59 10.691 10.59 10,59 10.59 00/0 0% 1 °/a1 66% 729% -::',::::'76%1 0% U°I° 0°I°1 36% 6(3%2�/0 Dec 0.79 8.99 8.99 8.991 8,99 8:99 6.991 8.99 8.99 8.491 8.99 8.99 8,99 Conservation Req (Leger 0°!a 10% 0% 20°I° 0% 34;%. 60% 40 In 67%° 50%A 72% 60%u 0% 79% 0°o G /r ?4'/0 42% 5°l0 v 2010 Avg Day Demand, cfs 11.384 Absolute Resv. Vol. (gal) 14,979,342 Usable Vol 85% 12.,732,441 Fire Flow Volume (gal) 3,840,000 Available Volume (gal) 8,892,441 Abs Vol Ernerg Stor @ 10 2.51 SMWD Upper Chiqita, 8,146,800 25 AF Usable Vol 90% 7,332,120 Avail Vol 7,332,120 Product. Capacity Reimer (cfs) 19.90 GWRP (cfs) 7.95 Wells (cfs) 1.62 Emergency.Storage (MQ,).: C I D Local btdrffg--e ni Y Reimer Lost, GWRP I Working Delmer & GWRP Lost Rem, I Rem. (cfs) 9.87 1 (cfs) 1.62 I 8,9 3.9 E 15cal & UCR-55rage 1Delmer Lost, G RP Working, Emerg Stor I Rem. 1 (cfs) 9.57 1 16,2 I F 1Delmer & GWRP Lost, Emergency Stor Avail I Rem. 1 (cfs) 1.62 1 16.2 Days lntreruption Equivalent Resv. cfs Event DF 7 1.97 10 1.38 15 1 7 0.92 1 1.97 cfs demand 10 1,38 15 0.92 1 7 13.59 10 2,51 15 1 7 1,67 1 3.59 cfs demand 10 2.51 15 1.67 Jan 0.64 7.29 7.29 7.29 7.29 7.29 7.29 1,29 7.29 7.29 7,29 7.29 7.29 00/, 0% 0% 51% 59% 66%, 0% 0% 0% 29% 3% 55% Feb 0.49 5,58 6.58 5.58 5.58 5,58 5 56 i 5.38 5.58 5.58 i 5.58 5.58 5,58 0% 0% 0%0% 461/6 55% 0% 0%/ 0�1n 41% Mar 0.66 6.386.y3fs 6.38 6.3f3 5 6,38 6.38 6.38/ 6.30 6.38 &38y 6.38 0% 0%O 0%] 44%O- �3y8 5ti3�/Cl. Ai -% 0% 0% 0% 18% v8. % 48% Apr 0-96 10.81 10.€31 10.81 1 10.81 10.81 10.31 1 10.81 10.81 10.81 1 10.81 113.81 16.81 0% 0%� 3%1 67%cs 7 % 7 �'/c�1 0% 0% 0%1 52°lcs 62%: 70�fc�; May 1.17 13.32 13.32 13.32 1 13.32 13.32 13,321 13.32 13.32 13 32 1 13.32 13.32 13.32'. 13 /0 18% 21 fu .. - 3 � 76 /a # `�/u; 1 % % `� 6 5 � % �J� 7 a�sr Jun 1.29 14.69// 14x.69!! 14.69 14.6+9 =4�y.69f 14.69 14.69 14.69 14.69 14.69 14.59 14:69 21%1 25% 29% � kA�/C �3 TJ#3 ��i : 1 iia 1 5��3 �/C ���6 Jul 1.35 15.37 i 5.37 15.x37 € 5.37 15.37 15.37 15.37 15..37 15.37 15.37 15.37 15.37 25% 29% 32�� 77��� ���'�� .. #�/� 14% 21% 2.7% 66�/� Aug1.45 16.51 15.51 16.51 16.51 16,51 16.51 16.51 16.51 15.51 1661 16.51 16.51" 30% 34%. 36% /: 76 ... % .... �/�: 20% 2.7% 32% . 66°l�. Se 1.22 13.89 13:89 13.89 13..39 13.89 €&89 13.39 13:89 13.89 13.89 13.89 13.89 17%� 211!c 24%. 74�1� 7 1) 8 '/ : 5% 13%19£l� 653°lfl' 73�/c� 1 °�'0 Oct 1.17 13.32 13. 32 13.32, 13.32 13.32 1.3.32 13, 32 13.32 13.32 13.32 13.32 13.32 13% 18 % 21 ,/o , 73% 7 %r ;3 i /m: a % 9% 16°la 61% 6911% 75%r Nov 0.93 10.59 1.0.59 10,591 10.59 10.59 10,591 10.59 10.59 1 10.59 I €0.59 10.59 10.59 0% 0% 1%1 66% 72% 0% 01/ 0%1 1% 61% ...69% Dec 0,791 8.99 1 8.93 8.991 8.99 8,.99 8.991 8.99 8.99 8.99 1 8.99 8.99 8.99 Conservation Req (Legen 0% 10°la 0% ZCi% 0% 30%. 60%x, 67% 2%/� 0% 0% 0%1.42% 54 /0 53% HM Karen P. Brust, City NO FROM: Keith Van Der Maaten, 11/15/2611 won SUBJECT: Consideration of Ratification of Conformed Agreement for the Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement, Reduction in Participation Volume, and Authorize a Transfer of Funds to Install Emergency Generators at the Ground Water Recovery Plant (GWRP) (City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, South Coast Water District) RECOMMENDATION: By motion, 1) Ratify the final conformed Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Decrease the volume of participation from 76.1 acre-feet to 50 acre-feet; and, 3) Transfer $900,000 from CIP 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); and, 4) Return unused funds in the amount of $589,543 to the Water Capital Improvement Fund in consideration of critical programmed water capital projects; and, 5) Authorize minor numerical changes as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. SITUATION: At its meeting of June 16, 2009, the City Council entered into the "Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement" (Attachment 1, UCR Agreement). The agreement was a joint project with Santa Margarita Water District (SMWD), Moulton Niguel Water District (MNWD), the City of San Clemente (CSC), and South Coast Water District (SCWD) to provide an additional source of water from the Upper Chiquita Reservoir (UCR) in the event of the loss of the Metropolitan Water District's (MWD) import supply. The City was to participate in 10.15% (76.1 Acre -Feet) of the project. The 2009 UCR Agreement was later modified jointly by the participants in 2011 and on July 22, 2011, the Utilities Commission recommended that the City Council ratify the Conformed Agreement (Attachment 2). Agenda Report Page 2 November 15, 2011 Since the July recommendation from the Utilities Commission, an issue arose over the amount of interest charges that Santa Margarita Water District was billing for the City's portion of the construction costs. The cost increase from the interest expenses as billed would exceed the current budget and require the appropriation of additional funds or a reduction in the amount of participation in the UCR to cover these costs. Additionally, the construction costs for the UCR came in over budget by $1,000,000. While the City's share of this cost increase is only a fraction of that amount, the cost increase would also exceed the current budget and require the appropriation of additional funds or a reduction in the amount of participation in the UCR to make available funds to pay for these costs. As a result, the Utilities Commission recommendation was not carried through to the City Council until the interest issue and the budgeting issues were resolved. Another item was discovered that needed to be addressed before settling on the final UCR agreement. The water CIP budget had been significantly reduced since the original decision was made to purchase the storage in the UCR which has created deferred (unfunded) reliability and infrastructure CIP projects that should be evaluated along with the UCR project to determine which projects provide the highest level of supply reliability. Since there are no other funds available in the current CIP and no funds expected to be available over the next few years, the only source of funds currently available for any new CIP projects would be those funds created by a reduction in the amount of participation in the UCR project. ANALYSIS AND RECOMMENDATION: Of particular concern is that the City's Ground Water Recovery Plant (GWRP) currently does not have any back-up power. Based on supply/demand analysis, the impact of losing water production from the GWRP has a far greater impact to our ability to meet demand than reduced storage in the UCR in the event the City loses its Metropolitan Water District (MWD) import supply. As displayed in the chart below, if the City's MWD supply was interrupted for a 15 -day period in August, we would need 27% conservation to meet demand with the GWRP on-line and 85% conservation without the GWRP, a 58% difference. As a comparison, for each 25 Acre Feet (AF) of additional storage in the UCR, the level of conservation is only reduced by 5%. Conservation Current 25 AF 50 AF 75 AF With GWRP 27% 22% 17% 13% Without GWRP 85% 80% E 75% 71% Change in %: 1 5% 10% 114% Adding the emergency back-up generators to the GWRP is an investment in a "supply source" while adding capacity at the UCR is an investment in "storage capacity." That Agenda Report Page 3 November 15, 2011 difference is important because if demand could be curtailed sufficiently, we could supply enough water from the GWRP during an outage or emergency indefinitely. As a comparison, at that same curtailment level, the 76.1 AF of storage in the UCR would supply a maximum of 10 days of water before our storage is depleted. The GWRP is the primary source of reliable water for the City of San Juan Capistrano in the event of the loss of the MWD import supply. The UCR was intended as a supply reliability diversification in the event that the GWRP was not working or the demands created by the loss of MWD supply exceeded the capacity of the GWRP; however, the largest reliability concern currently is not insufficient diversification or storage, but rather that the GWRP is without a back-up power supply. For that reason, staff recommends reducing the participation in the UCR project to 50 AF and funding a program to install emergency power generation at the GWRP. After reducing capacity to the 50 AF level, the City will have a balance of $1,489,543 (taking into account all the costs for the project, including the additional interest and construction costs) which will fund the cost of emergency generators for the GWRP estimated at $900,000. After allocating the necessary funds to the GWRP generators, there will be a remaining balance of $589,543. Staff is recommending that this amount be returned to the water CIP fund and that staff return to the City Council with a recommendation for project appropriations after an evaluation can be made on how best to use these funds to further increase system reliability. There are currently several booster stations on the unfunded list in need of upgrades to the pumps or in need of stand-by power that are candidates for these funds. According to the language of Section 5 of the UCR Conformed Agreement, "A party shall not reduce or increase its capacity right unless one or more other parties makes a corresponding increase or decrease in its/their capacity right(s), and the change is made in accordance with Section 8." Section 8 stipulates that the parties shall have the first right of refusal and describes how that transaction will. take place. Upon Council approval, the City will send a letter to the Santa Margarita Water District and the other parties to the agreement, formally requesting a reduction in the capacity, and requesting that any interested parties express their desire to purchase the City's reduced capacity rights. The desire to reduce capacity in the project has been discussed with the Santa Margarita Water District and the general feeling is that there will not be an issue finding a buyer for the City's reduced portion; however, should the City not find an interested party to purchase the reduced capacity, then staff will need to return to Council for further action. GWRP EMERGENCY GENERATOR ANALYSIS: In ,January 2004, the City of San Juan Capistrano entered into an agreement with Alexander Engineers Inc (AEI) to develop a feasibility study for stand-by power supply options for the GWRP. The objective of the effort was to investigate the means and associated costs of providing stand-by power to the GWRP and associated wells in the event of failure of the electrical utility system operated and maintained by San Diego Gas and Electric (SDG&E). Based on AEI's study, it was recommended that the City Agenda Report Page 4 November 15, 2011 power the entire treatment plant with a new, permanently placed, generator system located in the area behind the Dance Hal[. While design, specifications, and engineering work needs to be finalized before this can be bid for construction, the preliminary recommendations are to install two 600 KW, diesel fueled, generator units equipped with acoustic enclosures, hospital silencers, and a base mounted fuel storage tank to provide for a minimum of 24 hours continuous operations. The estimated construction cost in 2004 for the emergency generators for the GWRP and its wells was $571,000. Adding to this value 20% for plant expansion; 15% for design/permitting; and 20% for inflation, the recommended budget would be rounded to $900,000 for the GWRP Emergency Generator project. During the large SDGE power outage that occurred on September 2011, it was discovered by several of the local water agencies that the supply of fuel for emergency generators on critical water facilities is a significant issue if the duration of a power outage lasts for more than 24 hours. Through the Water Emergency Resources of Orange County (WEROC) group, discussions have begun to determine the best approach to ensuring ongoing supply of fuel for critical pumping facilities. The City will need to continue to work with WEROC to determine an effective solution to supply fuel for the generators. COMMISSION/BOARD REVIEW AND RECOMMENDATIONS: This item is scheduled for the November 15, 2011, Utilities Commission meeting for their review and recommendation to City Council. The Utilities Commission comments and recommendation will be provided verbally by staff at the City Council meeting. FINANCIAL CONSIDERATIONS: The total cost of the UCR project is $51,296,172 as of October 30, 2011. This includes all the change orders known, and assumptions that the Proposition 50 grant funds will be paid by the , State of California for the UCR, The City's cost of participation, depending on whether it participates at the original 76.1 AF (10.15%) or reduces its participation to 50 AF (6.67%) is as follows: San Juan Capistrano's Costs of Participation Original: Proposed: Percentage of the UCR 10.15% 6.67% Volume (AF) 76.125 50 Volume (Million Gallons) 24.8 16.3 Cost of Participation $5,206,561 $3,419,745 'Cost of Accrued Interest as of 10/30/2011 $203,507 $133,712 Other Costs $8,000 $8,000 Total Costs $5,418,138 $3,561,457 Available Budget $5,051,000 $5,051,000 Budget Adjustment/ (Credit) $367,138 ($1,489,543) * Accrued interest is still being negotiated with Santa Margarita Water District and reflects a not to exceed amount. Agenda Report Page 5 November 15, 2011 The City would have to appropriate an additional $367,188 to fund participation at 76.1 AF level. At the 50 AF level, the City would have a credit of $1,489,543 to fund the emergency generator(s) for the GWRP and $589,543 to be returned to the water capital budget to be used for other reliability projects on booster stations, There is a one-time cost to the City to fill the reservoir in the amount of $45,045 which is currently included in the Fiscal Year 2011112 Operations budget. There will be an annual operations cost that has already been budgeted in the Utilities Water Operations fund in Fiscal Year 2011- 2012, in the amount of $4,369 per quarter for fixed costs, and $7,420 per quarter for variable costs for a total annual cost of participation of $47,200. If the participation is reduced the overpaid amount will be credited to the operations budget. The City issued the Certificates of Participation (COP), Series 2009 to fund the UCR and other projects. These COPs were issued on April 14, 2009, and the City has until April 14, 2012, to expend the funds or will need to request an extension for up to two additional years without affecting the tax status of the bonds. NOTIFICATION: Santa Margarita Water District City of San Clemente Moulton Niguel Water District South Coast Water District RECOMMENDATION: By motion, 1) Ratify the final conformed Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Decrease the volume of participation from 76.1 acre-feet to 50 acre-feet; and, 3) Transfer $900,000 from CIP 07808 to a new CIP to install emergency generators at the Ground Water Recovery Plant (GWRP); and, 4) Return unused funds in the amount of $589,548 to the Water Capital Improvement Fund in consideration of critical programmed water capital projects, and, 5) Authorize minor numerical changes as determined by the City Manager, of less than 5% from the original value, in the final document presented for signature. Agenda Report Page 6 Respectfully submitted, Keith Van Der Maaten Utilities Director Attachments: 1. 2009 UCR Participation Agreement 2. 2011 UCR Participation Agreement 3. Calculation of Conservation Levels November 15, 2011 Prepared by, (X.� ' II Eric P. Bauman, P.E. Utilities Engineer Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement South Orange County April 2009 City of San Clemente City of San Juan Capistrano Moulton Niguel Water District Santa Margarita Water District South Coast Water District April 23, 2009 ATTACHMENT 1 This Agreement is made this day of 2009, (the "Effective Date") by and between City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD") hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) average days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Plan, "dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities, and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an memorandum of understanding entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement"); providing for participation by MNWD in the construction of the reservoirs and establishing a reserve capacity of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoir; and WHEREAS, MNWD Participation Agreement identified the allocation in the Reservoir may be revised based on participation by other agencies and April 23, 2009 2 MNWD and SMWD are willing to revise it's prorate capacity for the other Parties; and WHEREAS, SMWD is proceeding with plans to construct the Upper Chiquita Domestic Water Emergency Storage Reservoir in Upper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and willing to construct the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies; and WHEREAS, SMWD is proceeding with plans to construct an inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station ("Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the reservoir; and WHEREAS, the Parties, each or jointly, take imported water from Service Connections to the SCP per the rules and Regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase 1 and it Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir under the terms of the SCP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows SECTION 1. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations will incorporate MNWD's participation to date in the project. SMWD shall own and operate the Reservoir under the terms of this Agreement. The Parties shall have Capacity Rights in the Reservoir and Pump Stations. As used herein, "Capacity Right" means a Party's undivided percentage ownership interest in the capacity of the Reservoir. The total Capacity Rights in the Reservoir shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the percentage April 23, 2009 3 Capacity Rights shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD system or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of capital and common operating costs. The following table summarizes the Capacity Rights allocated to each of the Parties. The parties agree the Capacity Rights percentages shown on the table shall be utilized to allocate Project costs. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. Summary of Capacitv Rights in Upper Chiquita Reservoir and Pump Station Agencies Reservoir Capacity (AF) Percentage Pump Station Capacity (CFS City of San Clemente 83.80 11.17% 5.69 City of San Juan Capistrano F 76.10 10.15% , 5.07 _ Moulton Niguel Water District 255.80 E 34.'11 % 17.05 Santa Margarita Water District 288.60 38.48% 19.24 South Coast Water District 45.70. 6.09% ` 3.05 Total 750.00 100.00% 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members and aid in the administration of this Agreement. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station as defined herein and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project April 23, 2009 4 Committee representatives. The Project Committee shall meet periodically as needed during construction and implementation of the Reservoir to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir facilities and operation. April 23, 2009 5 SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement date, Project Committee approval shall be required for (1) the award of any original contracts for environmental documentation, design and construction, (2) the issuance of any design change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract bid amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract bid amount. A schedule of the Project Work is set forth in Exhibit "B," which exhibit is attached hereto and incorporated herein by this reference. Any changes needed in the schedule will be subject to approval by the Project Committee. All Project Work contemplated under this agreement shall meet the then applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the Project Work. The Parties shall provide any comments to SMWD or its designee within seven days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the Project Work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the Project Work. Each Party who contracts for Project Work shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts, within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION a. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to complete the Reservoir and Pump Station, estimated to be $54 million. A Party shall not reduce or increase its Capacity Right unless one or April 23, 2009 6 more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights as shown in the table in Section 2. SMWD or its designee will invoice the Parties for their respective shares of the prospective Project World in two parts. The first deposit installment will fund the project cost for environmental, permitting, design and construction services identified in Exhibit A. The second part will fund the remaining estimated Project Work, including construction based on progress payment plan in Exhibit B. The first deposit shall be invoiced by SMWD upon execution of this agreement by the parties. The progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity Rights shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of its Capacity Right share of cost, including the cost attributable to the suspended Capacity Right share as reallocated by SMWD among the non - suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right and Flow -Rate Reservation share. SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water made available by SMWD is less than the amount specified in the table in Section 2, then the available water will be allocated based on the Parties' respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election withdrew its water held under its Capacity Right. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate. In the event the flow rate, provided said flow rate is equal to or less than the capacity specified in the table in Section 2. If April 23, 2009 a Party does not make a request, SMWD will provide water at the flow rate specified in the table in Section 2 until the total available capacity for the Party is used. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station. The cost of operating and maintaining shall be determined for each facility, on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of its routine system SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenances repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the SCP system through the SCP Service Connections, and variable costs that vary with the quantity of water delivered. SECTION 7.2. Fixed Costs Annually, by March 1 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs, including the cost of facilities maintenance and repair, shall be allocated among the Parties based on their Capacity Rights. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach - Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. . SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each agency. Water delivered shall be deemed April 23, 2009 MWD imported water and shall be charged by MWDOC at the current applicable rate. SECTION 7.4 Invoices Each Party shall pay invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty -five-day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead. All design, construction and operation costs allocated to the Parties under this Section and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man -fours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5:00 pm on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) will be charged at time and a half. The equipment rates effective upon the execution of this Agreement are set forth in Exhibit "C", attached hereto and incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices, without the need for an amendment to this Agreement. The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.6% shall remain in effect through June 30, 2013, and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. April 23, 2009 9 SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee. annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted auditing standards as part of SMWD's annual audit process. SECTION 7.7 Operating and Procedures Manual to Cover Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual"), which shall include, but not be limited to the following: A. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery, by SMWD. B. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. C. Criteria for compliance with water quality objectives D. Development/description of operating criteria including useful service life and criteria for replacement and refurbishment. E. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights SECTION 8. TRANSFER OF CA►PA►CITY RIGHTS The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Rights. The Party acquiring the Capacity Rights will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the date of acceptance of the Project Work to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility April 23, 2009 10 or facilities. An amendment to this Agreement reflecting the change shall be executed by all Parties. SECTION 9, EMERGENCY USE OF CAPACITY RIGHTS BY NOW PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties. Capacity Rights may be transferred between the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non -participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Rights available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non- participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: 1120 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water to participants and non -participants in acre feet delivered. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION, INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Each Party who contracts for Project Work shall require each of the contractors and consultants retained by such Party for the Project Work to include all of the Parties and each of their officers, April 23, 2009 11 employees and agents as indemnified parties in the indemnification provisions of the respective contract. Each Party shall assume the defense of, indemnify and bold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, the negligent acts or omissions of the indemnifying Party in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of the indemnified Party. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued.. Each Party who contracts for Project Work shall require each of its contractors and design consultants to include the other Parties, their officers, agents and employees as additional insureds in the insurance coverages that the contracting Party requires such contractors and design consultants to obtain and maintain. With respect to operation of the Projects, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the Projects as herein provided shall be included within the fixed costs. SECTION 11. SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12. ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligation arising hereunder, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIREAGREEMENT• INTERPRETATION• GOVERNING LAW;_ EXECUTION IN COUNTERPARTS April 23, 2009 12 This Agreement and the Exhibits; as amended from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Grange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394. This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14, NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 15. SEVERABILITY If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the April 23, 2009 13 Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Part(ies) in connection with a dispute shall be responsible for providing written notice to such other Parties) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other.Part(ies) that the informal dispute - resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be toiled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute -resolution and the notice terminating informal dispute -resolution. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. President, Santa Margarita Water District Date 26111 Antonio Parkway P.O. Box 7005 Mission Viejo, CA 92690-7005 President, Moulton Niguel Water District Date 27500 La Paz. Road P.O. Box 30203 Laguna Niguel, CA 92607-0203 Mayor, City of San Clemente Date 100 Avenida Presidio San Clemente, CA 92672 Apri123, 2009 14 President, South Coast Water District Date 31592 West Street Laguna Beach, 92651 Mayor, City of San Juan Capistrano Date April 23, 2009 15 Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement South Orange County April 2011 City of San Clemente City of San Juan Capistrano Moulton Niguel Water District Santa Margarita Water District South Coast Water District April 25, 2011 ATTACHMENT 2 This Agreement is made this day of 2011, (the "Agreement Date") and is entered into by and among the City of San Clemente ("CSC"), City of San Juan Capistrano ("CSJC"), Moulton Niguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD"), hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) days of water supplies when imported water deliveries are curtailed during a planned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Plan, "dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities, and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD, that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an agreement entitled "Water Storage Reservoirs Participation Agreement," dated April 14, 2006 (the "MNWD Participation Agreement") providing for participation by MNWD in the funding the design, planning and construction of the reservoirs and establishing a capacity right of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoirs; and WHEREAS, the MNWD capacity rights defined in the MNWD Participation Agreement reservoirs may be revised based on participation by other agencies April. 25, 2011 2 and MNWD and SMWD are each willing to revise its respective capacity in order to provide capacity for the other Parties; and WHEREAS, SMWD is proceeding with construction of the Upper Chiquita Domestic Water Emergency Storage Reservoir in Upper Chiquita Canyon ("Reservoir") to address planned and emergency supply curtailment and SMWD is constructing the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies in addition to MNWD; and WHEREAS, SMWD is proceeding with construction of an inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station (together with the inlet/outlet pipeline, the "Pump Station") to the South County Pipeline ("SCP") as the source of imported ►.eater for the Reservoir; and WHEREAS, the Parties take imported water from service connections to the SCP per the rules and Regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase f and ll Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir and Pump Station (together the "Reservoir Project") under the terms of the SCP Rules and Regulations; and WHEREAS, the Parties desire to participate in the Reservoir Project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows: SECTION 1. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations will incorporate MNWD's participation to date in the Reservoir Project. SMWD shall own and operate the Reservoir Project under the terms of this Agreement. The Parties shall have Capacity Rights in the Reservoir and Pump Station as set forth below in Table 1, which includes flow rates at the minimum specified cubic feet per second (CFS). As used herein, "Capacity April 25, 2011 Right" means a Party's undivided percentage ownership interest in the capacity in each of the Reservoir Project facilities including all components. The total Capacity Rights in the Reservoir Project facilities shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the percentage Capacity Rights shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal storage capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right in other SMWD system or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation: of capital costs and fixed operating costs, as further provided in Section 7 hereof. The following table summarizes the Capacity Rights allocated to each of the Parties. The parties agree the Capacity Rights percentages shown on the table shall be utilized to allocate Reservoir Project capital costs TABLE 1 Summary of Capacity Rights in Reservoir Project Facilities Agencies Reservoir Capacity (AF) Capacity Right Percentage Pump Station Capacity (CFS) City of San Clemente 83.80 11.17% 5.69 City of San Juan Capistrano 76.10 1 10.15% 5.07 Moulton Niguel Water District 255.80 34,11% 17.05 Santa Margarita Water District 288.60 38.48% 19.24 South Coast Water District 45.70 6.09% € 3.06 Total . 750.00 '100.00% 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members, aid in the administration of this Agreement, and review and approve April 25, 2011 4 the other matters specified herein. Each Party reserves its full legislative discretion with respect to all applicable implementation decisions expressly covered by this Agreement and decisions of the Project Committee do not override. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project Committee representatives. The Project Committee shall meet periodically as needed during construction and implementation of the Reservoir Project operation to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir Project facilities and operation. SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of funding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement Date, Project Committee approval shall be required for (1) the award of any original contracts for environmental documentation, design and construction, (2) the issuance of any design contract or change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract bid amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract bid amount. Project Committee will review design and construction schedules for Project Work. Any changes needed in the schedule will be subject to approval by the Project Committee. All Project Work contemplated under this agreement shall meet applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the Project Work. The Parties shall provide any comments to SMWD or its designee within seven calendar or working days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to April 25, 2011 the Project Work, the Project Committee small meet and confer, and resolve such disputes prior to proceeding with the Project Work. SMWD shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts, within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to complete the Reservoir and Pump Station. A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section 8. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights as shown in the table in Section 2. SMWD or its designee will invoice the Parties for their respective shares of the prospective Project Work in two parts. The first deposit installment will fund the Project cost for environmental, permitting, design and construction services identified in Exhibit A, an estimate of the total project costs. The second part will fund the remaining estimated Project Work. The first deposit shall be invoiced by SMWD upon execution of this agreement by the parties or award of contract by SMWD Board of Directors. Progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule agreed to by the Project Committee. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. Funds paid in advance by SMWD for the benefit of any Party shall accrue interest at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not make timely payment(s) as invoiced, such Party's right to use its Capacity Rights shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of the Project based on its Capacity Right, including the cost attributable to the suspended Capacity Right share as reallocated by SMWD among the non - April 25, 2011 6 suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right, SECTION 6. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water then available in the Reservoir Project is less than the amount specified in Table 1 in Section 2, then the available water will be allocated based on the Parties' respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election previously withdrew its water held under its Capacity Right. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate in an amount equal to or less than capacity specified in Table 1. If a Party does not make a request, SMWD will continue to hold the Party's capacity in storage. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General SMWD shall operate and maintain the Reservoir and Pump Station. The cost of operating and maintaining each facility shall be determined, on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of the SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the Reservoir Project through the SCP Service Connections, and variable costs that vary with the quantity of water delivered by the Reservoir Project as shown on Exhibit B SECTION 7.2. Fixed Costs Annually, by February 15 of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July 1 — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs items, as defined on Exhibit B, including the cost of facilities maintenance and repair and chemicals if required for water quality recirculation, shall be allocated among the Parties based on their Capacity Rights. The Project Committee shall review, amend, reallocate, add or deduct items, and approve Exhibit B annually based operational criteria then use it in the proposed budget. Each Party's share of the budgeted fixed costs for the budget year shall be April 25, 2011 7 payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than Zero), in the Consumer Price Index (All Items) for the [[Anaheim -Lang, Beach -Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. . SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each agency. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the applicable rate at the time water is delivered The volume of water delivered to the Reservoir will be divided and billed to the Parties at their normal point of importation from the SCP system, based on their participation percentages by an additive adjustment to the meter reads at the Participant's normal point of importation from the SCP system. The Parties will be credited with the volumetric amount purchased to a ."Bank". When water is discharged from the Reservoir the Parties consuming the discharged water will have the volumetric credit deducted from their Bank, and an equivalent volume deducted from their meter read at their normal point of importation from the SCP system. The water in the Bank is a cost accounting mechanism, and will not affect the available volume of water for each Participant as defined in Section 2, Table 1. SECTION 7.4 Invoices Each Party shall pay its quarterly operations invoices presented to it within forty-five (45) days of receipt. In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall be assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty -five-day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead. April 25, 2011 8 All design, construction and operation costs allocated to the Parties under this Section and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man-hours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5.00 pm on a working day and 7;00 am on the next following working day, "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) for non-exempt SMWD personnel will be charged at time and a half. The equipment rates effective upon the execution of this Agreement as established by the SMWD Board of Directors or if the specific labor, equipment, and or materials is not covered by the SMWD's established rates; the current Caltrans published rates as periodically adjusted by the State of California as applicable attached hereto and incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices. dv The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 78.66/o shall remain in effect through June 30, 20'13, .and thereafter is subject to adjustment at five (5) year intervals. Such total benefits and contract burden rate shall be applied as follows for each crew member used. Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted accounting standards as part of SMWD's annual audit process. April 25, 2011 9 SECTION 7.7 Operating and Procedures Manual to Corer Other Matters Prior to operation of the Reservoir and Pump Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual") annually, which shall include, but not be limited to the following: A. Operational criteria including mode of operation. B. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery, by SMWD. C. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem -resolution activities. D. Criteria for compliance with water quality objectives. E. Development/description of operating criteria including useful service life and criteria for replacement and refurbishment. F. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights. SECTION 8. TRANSFER OF CAPACITY RIGHTS The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Rights. The seller of capacity shall determine the amount of capacity available and the purchaser if multiple Parties are interested in the Capacity Right. The Party acquiring the Capacity Rights will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the ENR Construction Cost Index for the Los Angeles area from the date of acceptance of the Project Work to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. An amendment to this Agreement reflecting the change shall be executed by all Parties. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NON- PARTICIPANTS April 25, 2011 10 The capacity in the Reservoir and Pump Station is reserved for the use of the Parties. Capacity Rights may be transferred between the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non -participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Rights available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non- participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: 1120 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non- participant in acre feet divided by the total volume of water available to deliver to participants and non -participants in acre feet. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the Parties willing to make their Capacity Rights available. SECTION 10. INDEMNIFICATION; INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued. Apri125, 201 1 11 With respect to operation of the Project, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD's cost of insurance relative to the operation of the Projects as herein provided shall be included within each Party's share of fixed costs. SECTION 11. SUCCESSORS AND ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12. ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligations arising hereunder, or is required to defend such an action or proceeding, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIRE AGREEMENT, INTERPRETATION, GOVERNING LAW; EXECUTION IN COUNTERPARTS This Agreement and the Exhibits, as amended in writing from time to time, constitutes the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394. This Agreement shall be construed as if prepared by all Parties hereto. The Agreement maybe executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14. NOTICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. SECTION 15. SEVERABILITY April 25, 2011 12 If any covenant, term, condition, or provision of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith. efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Parties) in connection with a dispute shall be responsible for providing written notice to such other Parties) and thereby initiating the informal dispute resolution efforts. Such informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Parties) that the informal dispute - resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be tolled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute -resolution and the notice terminating informal dispute -resolution. SECTION 18. NOT A JOINT POWERS AUTHORITY OR PARTNERSHIP The Parties hereby acknowledge this Agreement is not intended to create a joint powers authority pursuant to Government Code S6500 et seq. Additionally, this Agreement does not form a partnership, Parties are independent contracting Parties, and that no Party is an agent of any other Party. April 25, 2011 13 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. SANTA MARGARITA WATER DISTRICT By President, Board of Directors By Secretary to the Board MOULTON NIGUEL WATER DISTRICT By President, Board of Directors By Secretary to the Board CITY OF SAN JUAN CAPISTRANO By Mayor By City Attorney CITY OF SAN CEMENTE By Mayor By City Attorney SOUTH COAST WATER DISTRICT M - President, Board of Directors Secretary to the Board April 2S, 2011 14 Exhibit "A" Final Estimate of Capital Costs, 2011 Based on contracts encumbered to date, and including a contingency on uncompleted contracts or work, this estimate of the total projects costs may be subject to revision with the final accounting. Type Budget Issued Purchase Orders Expended Through May 2011 Open Encumbrances Remaining Budget for Project Prelim Design $ 252,180.62 $ 252,180.62 $ 252,180.62 $ - $ - Design $ 6,133,481.10 $ 5,933,481.10 $ 5,636,361.17 $ 297,119.93 $ 200,000.00 Environmental $ 679,142.37 $ 679,142.37 $ 536,631.89 $ 142,510.48 $ - Permit $ 245,451.03 $ 215,451.03 $ 204,822.53 $ 10,628.50 $ 30,000.00 Construction E $ 41,530,802.41 $39,440,802.41 $ 33,239,132.99 $ 6,201,669.42 $ 2,090,000.00 Mitigation $ 3,818,016.23 $ 3,318,016.23 $ 3,220,982.92 $ 97,033.31 $ 500,000.00 Site Acquisition $ 353,573.75 $ 353,573.75 $ 353,573.75 $ - $ - Payroll and Burden $ 662,524.39 $ 622,524.39 $ 622,524.39 $ - $ 40,000.00 1LGrand Total $ 53,675,171.90 50,815,171.90 _ $ 44,066,210.26 $ 6,748,961.64 $ 2,860,000.00 Agencies Al= % Agency Responsibility Million $ Prop 50 Potential Agency Budget Reduced Costs City of San Clemente 83.8 11.17% $ 5,997,127 $ 377,535.67 $ 5,619,591.29 City of San Juan Capistrano 76.1 10.15% $ 5,446,420 $ 342,867.13 $ 5,103,552.56 Moulton Niguel Water District 255.8 34.11% $ 18,306,991 $1,152,475.53 $17,154,515.35 Santa Margarita Water District 288.6 38.48% $ 20,654,206 $1,300,239.20 $19,353,966.95 South Coast Water District 45.7 6.09% $ 3,270,428 $ 205,882.47 $ 3,064,545.75 Total 750 100.00% $53,675,171.90 $3,379,000.00 $50,296,171.90 April 25, 2011 15 Exhibit "B" List of Fixed and Variable Costs 2011 Based on experience, changed conditions, and practical matters of operations and accounting, this list is to be revised annually by the Operations Committee. Fixed Costs • Labor, parts and equipment for daily, weekly, quarterly, semi-yearly and yearly maintenance activity on equipment including but not limited to: o Pumps o Sump pumps o Generator o Cover and liner o Disinfection equipment o SCADA and security equipment • Labor associated with Project Committee activities • Chemicals, power and labor associated with recirculation of the Reservoir, if any, for water quality • Labor and laboratory charges for water quality testing • Major repairs for equipment pipeline failure • Annual permit fees including but not limited to Division of Safety of Dams, Public Health and AQMD Variable Costs • Chemicals and power associated with delivery of water • Replacement of Ultraviolet lights based on operation mode of the Reservoir • Labor associated with delivery of water • Replacement of water in the Reservoir Apri125, 2011 16 vg Day Demand, cfs 1 11.38 bsolute Resv. Vol. (gal) 114,979,342 sable Vol 85% 12,732,441 Ire Flow Volume (gal) 3,840,000 vailable Volume (gal) 8.892,441 Abs Vol Emerg Stor @ 55A14 SMWD Upper Chiquita. 24,440,400 75 AF Usable Vol 90% 21,996,360 Avail Vol 21,996,360 I ATTACHMENT 3 Oeimer Lost, GVVKP 1 0% Deimer Lost, GWRP jDeimer & GWRP Lost, Deimer (cfs) 19.90 I Working 55A14 IlDeimer & GWRP Lost lWorking, Emerg Stor 1 Emergency Stor Avail 0% Rem. �. 34 I Rem, 0.49 I Rem. I Rem. GWRP (cfs) 9.59 (cfs) 11.21 (cfs) 1.62 1 (cfs) 11.21 (cfs) 1.62 Weils (cfs) 1.62 5.58 5.55 0% 0% 1Equivalent W/o 46%i 55%j 0% .30.9 0%1 Days Interruption 7 10 is 1 7 10 15 7 10 16 1 7 10 15 Resv. cfs 1,97 1.38 0,921 1,97 1.38 0,92 1 6.83 4:78 3.19 ! 6.83 4,78 3.19 I ATTACHMENT 3 1 0% 0%1 0%1 51A10 59°IA 55A14 0% O%j O%j 0% 12%1. �. 34 Feb 0.49 . 5,58 5,581 5.58 1 5M 5.58 6.581 5.58 5.58 5.581 5.58 5.58 5.55 0% 0% G%j W/o 46%i 55%j 0% 0% 0%1 0% 0% 14 Mar 0.56 6,38 6,38 6,381 6.38 6.38 6.381 6.38 6.38 &38 1 638 6.38 6-38% 0% 0% 00/4 �44 . ?16 53% . WD 0% 0% 0%1 0% 0% 25% Apr 0.95 10.81 %81 1R81 10,81 10.81 10.81 1 10.81 10.81 10,81 1 10.81 10.81 10.811 0% 0%, w J."', J 0% 0% 0%1 22% .4'10'/ � W14. May 1.17 13.32 13.321 13.32 13,32 13,32 13.32. 13.32 13.32 1132 13.32 13.32 1332 1% 6% 9%. 73 IS PA..' ZM . . . . . . . . . . 0% OW 0%! .37% 779�9 Jun 1.29 14.69 14.69 14.69, 14.69 14.69 14,69, 14.69 14.69 14.69, 14.69 14.69 14,69 10% 14% M 0% 0 2%1. 43% 564%7779 Jul 1.35 15.37 15.37 1537; 15,37 1537- 15.37 15,37 1537 15.37 1537 15.37 15-37 10. 143°/a 210/a/® �77 0 % 0% 6%- . 4 %°lA lis Aug 1,45 16.51 16.51 : 16.51 1 16.51 16.51 16.51 16,51 16.51 16-511 1&51 16,51 16.51 20% 24% 0% 3% 13%1 49%: 61% n 7777W, ' M Sep 1.22 13.89 13.89 13,89 1 13,89 13.39 13.89 1 13,89 13,89 11891 13.89 13,89 13,89 5% 9% 15°/4 4 /�s 0% 0%1 39% 54-/.777&W Oct 1.17 13,32 13,32 13,321 13.32 1332 13.321 13.32 1332 13.321 13.32 13.32 13.32 1% 0% 9%V. 0% 0/ 0% .:6 % Nov 0.93 10.59 10,59 10.69, 10,59 10,59 10.59 10.53 10,5 1 10.591 10,59 1.0,59 10,59. 0% 0% 01 11 . . .. . . ....... , j P'� & 0� 0%. 20% 40% 56%; Dec 0.791 8.99 8,99 1 8 92 8 99 8,99 8.99 8.99 8.991 8.99: 8.99 8-99 8.99 Conservation Req (Legenj 0% 10%] 0% 20%1 u)/l 30%j 7.11/04 0 1 /1. 00M 0%: '6% 29%, 47%1 I ATTACHMENT 3 Conservation Percentage Required for a 7, 10, 15 Day j i fr,&,*& 91-11ilil, - 9r 0 4. uAf'i r-% rill Akil vg Day Demand, cfs bsolute Resv. Vol. (gal) 111.38 14,979,342 sable Vol 85% 12,732,441 ire Flow Volume (gal) 3,840,000 vailable Volume (gal) 8,892,441 Abs Vol Emerg Stor @ 7.29 SMWD Upper Chiquita. 16,293,600 50 AF LlsabldVol 90% 14,664,240 Avail Vol 14,664.240 N w 1� "UnIjul I-U;5t, %,:ivvr-%r- i JUVITIMi LV;5L, is Delmer (cfs) 19,90 Working Delmer & GWRP Lost lWorking, Emet Rem. Rem. Rem, GWRP (cfs) 9,59 (cfs) 1121 (cfs) 1.62 j (cfs) 11.21 Wells (cfs) 1,62 - F I aWUM-STo-rage JRP Deimer & GWRP Lost, Stor ffmeLgenLy Stor Avail Rem, (cfs) 1.62 - -I - - -- - I--.-.. - -- - - Eq - uivalent Re sv. cfs 1 1.97 1,38 OL92 ! 1-97 1 �-38 0,92 ! 5,21 3.654 2.43 5.21 3,64 2.43 Event DF cfs demand 1 % conserviation required cfs demand I % conserviation required Jan 0.64 7.29 7.29 7.29 7.29 7.29 7.29 7.2-9 7.29 7.291 7,29 7.29 7.29 0% 0% 6MM 0% 0% 00/61 6% 28% 44"1 Feb 0.49 5.58 6.58 5:58 1 5.58 5.58 5.581 6.58 5.58 5,581 5-58 5.58 5.58 0% 0% 0%1 36% 461% ..55%1 0% 0% 0%1 0% 6% 279M Mar 0.56 6.38 6'38 6.381 6.38 6,38 6,381 6.38 6.38 6.38 6.38 6.38 6.38 0% O%l 0%1 : 44% 60%1 0% 0%1 0%1 0% 17% 370/4 Apr 0.95 10,81 10.81 111.81 16'81 10.81 10.81 1£1.81 10,8' 10811 10,81 1081 Mal 0% 0% 0%F:.:67%f:::,"' n 0% 0%, 0% 37% 64% 60% may 1.17 1132 1332 13.32 13.32 1132 13.32 13.32 13.32 13,32. 13.32 13,32 13,32 1% 6% 9%0:: 0% 0% 0%. 490% ION' Jun 1,29 14.69 14-69 14.69: 14,69 14,69 14,69. 14.69 14.69 14,69, 14,69 14.69 14.69 10% 14% 17 0% 011/0 540M Jul 1.35 15.37 15,37 15.37 15.37 15.37 15,371 15.37 15.77 15.3 ; 15.37 15.37 15.37 14% 18% 21 0% 3% 11%j. 66%� s6 7 774'� 4ug 1.45 16L51 16'51 16,,51/ 6,51 16'51 1&51 16.51 1 M51 16.51 M51 M51 16.51 16.51 20% 24%1 2% 7. 1% 10%1 17%1:��: 5 Sep 1,22 13 89 13,891 13.891 13.89 13,89 13,89 I 13,89 13-69 13.89 1 13.89 13.89 13.89 6% 90/41 13% 0% 0% 2%1 -51°1a. : 7 77 ;M !1 Y S Oct 1.17 13-32 13.32 13321 13,32 13,32 13,321 13.32 13.32 13.321 13.32 13.32 13.32 1% 6% 9%... 0% 0% 0%o -::.49% 61 10 Nlov 0,93 1069 10,69 10,591 10-59 10.59 10,59. JOL59 10,59 10'59 10'59 10.591 m59 0% 0% 0:7: . OO/C Dec 0.791 8.99 8.99 8.99: 8.99 8. 99 8.99 ' 8,991 8.991 8m &99 56-9T-8-99 Conservation Req (Legen Y,,] 30%j. 400/61 60%]... vg Day Demand, cfs 12-31 bsolute Resv. Vol. (gal) 14,979,342 sable Vol 85% 12,732,441 re Flow Volume (gal) 3,840,000 vailable Volume (gal) 8,892,441 Abs Vol Emerg Stor @ Lost SMWD Upper Chiqita. 8,146,800 25 AF Usable Vol 90% 7,332,120 Avail Vol 7,332,120 ar ueimer Lost, UVVKV I 1 0% 0%1 0% : IDeimer Lost, UVVRP iDelmer & UVVKI- Lost, Deimer (cfs) 19,90 Working 0% jDeimer & GWRP Lost lWorking, E me rg Stw 1 Emergency Sto r Avail Apr Rem. 11.69 I Rem, 11.69 Rem. 11.69 Rem. 11.691 111.69 GWRP (cfs) 9.59 (cfs) 11.21 I (cfs) 1.62 0% (cfs) 11.21 (cfs) -1.62 0% Wells (cfs) 1.62 .56% 5% May 1.17 14..40 14,40 14,40. 14,40 14,40 14,40 E in .9OL MG 14.40 14,40. 14.40 14.40 MAO 2.:. 13% 16%1 "7 -astorage, Days Intreruption 7 10 is 7 10 15 1 7 10 15 7 10 15 Equivalent Resv. cfs 1.97 1.38 0.92 1.97 1,38 0,92 3.59 2.51 1.67 9 3.59 2.51 1.637 Event DF 21% 24% I cfs; demand 7% 14% 1 . cfs demand Jul Jan 0.64 7,88 7.88 7.98 7.89 1.88 7.89 7,86 7.88 7,88 i 7,88 7,88 7,88 16.62 0% 0% 00 550/0 6 0% 0% O%i ..34% :.:48% .:.581 ,Feb 0.491 6 M 6M 1 6,031 6,031 6,03 6,031 6,03 6.03 603 1 6,03 6,03 6,03.. 1 1 0% 0%1 0%1 41%1 50%1 :.:58%i 0% O%j - 0%1 1T/�b . 3204 .4500 ar Conservation Req (Leges 10%1 20%1 30%j 40%1 50°/A 600/o '......T -----T-: 1 0% 0%1 0% : A.M. SrIa: 0% 0% 0%1 25% 40%]. . 52% Apr 0.951 11.69 11.69 I 11;691F-11.69 11.69 1! B9 11.69 11.69 11.691 111.69 11.69 11.69 0% 0% 0% I'M 00/0 0% 0%1 .56% 5% May 1.17 14..40 14,40 14,40. 14,40 14,40 14,40 14,40 14.40 14,40. 14.40 14.40 MAO 9% 13% 16%1 "7 0% 5% 11%1:: :64% Jun 1.29 15.88 15,88 15.88, 15.88 15.88 1588: 15,88 15.88 16.881 15.88 15,88 15.88, 17% 21% 24% I . . . . . . . . . . I , I % EM 7% 14% 1 . I � - . L2M� Jul 1.35 16.62 16.62 16.62 ; 16,62 16,6.2 16,621 16.62 16.62 16.62 16.62 16.62 16.62 21% 24% 27%j�::,,' � 2M 11% 17% ZEE Aug 1,45 17,85P 7,85 17.85 17.851 17.85 17.85 17.85 17.85 17.85 17.85 1 17.85 1736 17.85 26%: .29% 3 9 D%.7 7/o 23%. Sep 1,221 15.02 15.02 15.021 15.02 15.02 15.021 15.02 1502 15.02 1 15.02 15M 15.02 12% 16% 19% 1% 9%1 14% Oct 1.17 14.40 14,40 14,40 1 14.40 14.40 14.401 14,40 14,40 14.401 14,40 14,40 14,40 9% 18% 16%,:'.% - :VM -M 0 5% 11% Nov 0.93 11,45 11.45 11.45 11.45 11.45 11.45 11.45 11.45 11.45. 145 11.45 11.45 0% 0% 11 74. '4 .. . 1.;.,:.,.,..'' !04 0% OP/0 0%, SM.: 04 - Mol .,7.7a Dec 0.791 9.72 9.72 9,72 9.72 1 972 0.72 ' 9,72 --- 9,72 9.72 ' 972 912 1 9,72 Conservation Req (Leges 10%1 20%1 30%j 40%1 50°/A 600/o '......T -----T-: 2400 PASZQ ADS 5LANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 493-1053 FAx WWPi,sanj.ear�t, apisttano:o MEMBERS OF TETE CITY GOUNCiL &W AL EVA € LAURAFAEESE LARRY KRMAER. DEREK REE! JOHN rAYLOR NOTIFICATION OF MEETING OF POTENTIAL INTEREST OF THE SAN JUAN CAPISTRANO CITY COUNCIL The City Council of San Juan Capistrano will meet at 6:00 p.m. on Tuesday, November 15, 2011, in the City Council Chamber in City Hall, to consider: "Consideration of Ratification of Conformed Agreement for the Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement, Reduction in Participation Volume, and Authorize a Transfer of Funds to Install Emergency Generators at the Groundwater Recovery Plant (City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, South Coast Water District)" — Item Not G2b, If you have specific thoughts or concerns regarding this item, you are encouraged to participate in this decision making process. You can communicate with the City Council through correspondence addressed to the Council and/or by attending the meeting and speaking to the Council during the public meeting. Correspondence related to this item must be received at the City Clerk's office by 5:00 p.m. on Monday, November 14, 2011, to allow time for the Council to consider its content. If you would like to speak at the meeting, please complete a yellow "Request to Speak" form found inside the entrance to the Council Chamber. This form is turned in at the staff table, just in front of the Council dais. You will be called to speak by the Mayor when the item is considered. You have received this notice at the request of the City staff member Keith Van Der Maaten, Utilities Director. You may contact that staff member at (949) 443-6363 with any questions. The agenda, including agenda reports, is available to you on our web site: www.sanguancapistrano.org. If you would like to subscribe to receive a notice when agendas are posted to the web site, please make that request by sending an e-mail to: cityclerk@sanivancapistrano.orcg. Maria Morris, CMC City Clerk cc: City of San Clemente; Moulton Niguel Water District; Santa Margarita Water District; South Coast Water District San Juan CqphiranoY Pfvvervi%r the Pmt to Enhatie the �wu 6/16/2009 AGENDA REPORT Gla TO: Dave Adams, City Managery'A" FROM: Joe Tait, Acting Utilities Director SUBJECT: Consideration of Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement, and Appropriation of Funds. (City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, South Coast Water District) RECOMMENDATION: 1) Approve the Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Appropriate an additional $220,000 from the Water Capital budget to fully fund the City's share. 3) Authorize the Mayor to execute the Agreement. SITUATION: At its meeting of February 6, 2007, the City Council directed staff to pursue a joint project with Santa Margarita Water District (SMWD) and Moulton Niguel Water District (MNWD) on the development of the Upper Chiquita Reservoir (UCR); and, set aside the balance of funding projected for the 250S Reservoir for participation in the development of the Chiquita Reservoir. The reservoir is outside San Juan Capistrano, located northwest of the intersection of the 241 Toll Road and Oso Parkway. (Attachment 1) The original project participation goal was for the City to obtain as much as 32.6 million gallons of operational storage capacity. In the process of developing the project the size of the project as a whole has been scaled down from the then contemplated 975 acre-feet to 750 acre-feet due to physical constraints of the available site, site geology, logistics of construction, and environmental constraints. The parties involved were each scaled back a proportionate amount of their planned participation level, leaving the City with the opportunity to obtain 24,8 million gallons, for Agenda Report Page 2 June 16, 2009 a projected cost of $5,025,085. This works out to $0.20 per gallon, and compares very favorably with the cost of constructing reservoir storage within the City. Recent costs have come to about $2.12 per gallon for Terminal Reservoir No. 3, (November 2006), and projected at $1.32 per gallon for the 760S Reservoir which at current has a 4 million gallon (summer 2007) reservoir and a pad for a second 4 million gallon reservoir, with plans to complete the second 4 million gallon reservoir (summer 2013). The Upper Chiquita Emergency Storage Reservoir would augment and more than double the City's total planned local reservoir volume of nearly 18.0 million gallons providing a buffer from import disruptions and provide a hedge against natural disaster which may impact the local reservoirs. SMWD recently received bids, and has completed the attached Agreement (Attachment 1) titled the "Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement." Note that work on the project is underway therefore the budget shows costs spent to date and projections of future expenditures. The projected start date of construction for the main reservoir is June 2009, with deadline of December 2010. The deadline is of particular importance as the UCR will be needed by the participating agencies to operate during a planned 10 day shut down of the Metropolitan Water District's (MET) import system in the spring of 2011. The UCR Agreement covers both the construction process and the operations period. The system of accounting and cost sharing is based in the format highly typical of joint participation agreements in that fixed capital costs are divided based on the proportionate share of the project ownership, and the operational costs are based on the proportionate share of the use of that capacity and adjusted for inflation based on the Anaheim -Long Beach -Riverside consumer price index. FINANCIAL CONSIDERATIONS: The projected cost of the entire project at $49.5M has a firm basis in existing contracts with the permitting regulatory agencies and mitigation bank (The Corridor Authority, US Fish and Wildlife Service, California Department of Fish & Game, Rancho Mission Viejo Land Trust, $2.8M) , the design engineers (Boyle Engineering, $3.2M), the construction manager (AECOM USA, $1.2M), the Contractor (Sukut Construction, $36.2M), including a 10 percent contingency ($4.5M), and several miscellaneous charges ($1.9M). The detailed breakdown of the projected costs is attached as part of Exhibit "A" to the Agreement. The City's portion of this is '10.15 percent, or $5,025,084. The City's budget for the Chiquita Reservoir project has $4,834,107. The cost of participation for 24.8 million gallons is $5,025,085; requiring an additional budget appropriation of $220,000 from the water capital fund to capital project No. 070808 to cover the difference between the cost and the currently budgeted funds, staff time, and other costs that may arise in the process. Alternately, if The City does not wish to increase its budgeted expenditure at this point or wishes to lower its participation the Agenda Report Page 3 June 16, 2009 other participants have expressed an interest in acquiring volume for which the City sloes not wish to obtain. There will be an annual operations cost to be added to the Water Operations fund starting in 2010- 2011. Kelt't1►11MM11-��TA N4N:k►tl�TT�-AkI1'o7 *0161LY17,l:li<iT-%11[40 The Utilities Commission recommended the Council approve this project and the additional funding at its meeting of May 26, 2009. NOTIFICATION: City of San Clemente MNWD SMWD SCWD 12 Xslej6161921f7_lICai2J By motion: 1) Approve the Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement with the City of San Clemente, Moulton. Niguel Water District, Santa Margarita Water District, and South Coast Water District; and, 2) Appropriate an additional $220,000 from the Water Capital budget to fully fund the . City's share. 3) Authorize the Mayor to execute the Agreement. Res ectfully submitted, oe Tait, Acting Utilities Director Attachments: 1. location Map 2. UCR Agreement Prep ed b Eric .Bauman, Utilities Engineer PROPOSED RESERVOIR LAYOUT Upper Chiquita Emergency Storage Reservoir Participation. and Operations Agreement South ®range County April 2009 City of San Clemente City of ,San. Juan Capistrano Moulton Niguel Water District Santa Margarita Water District South Coast Water District April 23, 2009 ........... .. This Agreement is made this day of 2009, (the "Effective Date") by and between City of San Clemente (`:CSC"), City of San Juan Capistrano ("CSJC"), Moulton Miguel Water District ("MNWD"), Santa Margarita Water District ("SMWD"), and South Coast Water District ("SCWD") hereinafter sometimes individually or collectively referred to as "Party" or the "Parties," respectively. WHEREAS, the Parties hereto are south Orange County agency water suppliers who presently rely on imported water used for domestic (potable) purposes, which is supplied by Metropolitan Water District of Southern California ("MWD") through Municipal Water District of Orange County ("MWDOC") via regional importation . pipelines; and WHEREAS, each of MWD and MWDOC has each adopted a policy that its respective member or contracting agencies shall have a minimum of seven (7) average days of water supplies when imported water deliveries are curtailed during aplanned or emergency shutdown; and WHEREAS, the Parties are implementing portions of the "South Orange County Water Reliability Study Phase 2 System Reliability Plan, " dated June, 2004, prepared by MWDOC (the "Plan," and also known as the "Emergency Service Program"); and WHEREAS, the Plan analyzed various risk scenarios, including planned and emergency outages of the Diemer Filtration Plant, the Allen McColloch Pipeline and the East Orange County Feeder No. 2, and recommended a number of projects to help agencies continue to meet consumers' water needs during outages (either planned or emergency) of key facilities; and WHEREAS, the Plan recommended various reliability projects including: i) construction of one or more regional reservoirs, ii) pursuit of regional interconnection work iii) pursuit of emergency groundwater storage and conveyance with Orange County Water District and the groundwater producing agencies and iv) improvements by MWD; that would collectively help to improve the standard of reliability for the Parties who participate in such projects; and WHEREAS, MNWD and SMWD entered into an memorandum of understanding entitled "Water Storage Reservoirs Participation Agreement, " dated April 14; 2006 (the "MNWD Participation Agreement"); providing for participation by MNWD in the construction of the reservoirs and establishing a reserve capacity of 470 acre-feet ("AF") in the Upper Chiquita and East Ortega Reservoir; and WHEREAS, MNWD Participation Agreement identified the allocation in the Reservoir may revised based on participation by other agencies and MNWD and SMWD arc willing to revise it's .prorate capacity for the other Parties; and WHEREAS, SMWD is proceeding with plans to construct the Upper Chiquita Domestic Water Emergency Storage Reservoir in Lipper Chiquita Canyon April 23, 2009 2 ("Reservoir") to address planned and emergency supply curtailment and willing to construct the Reservoir with sufficient capacity to accommodate participation by other South Orange County water agencies; and WHEREAS, SMWD is proceeding with plans to construct an. inlet/outlet pipeline and the Upper Chiquita Reservoir Pump Station: ("Pump Station") to the South County Pipeline ("SCP") as the source of imported water for the reservoir; and WHEREAS, the Parties, each or jointly, take imported water from Service Connections to the SCP per the rules and Regulations governing the Operation and Maintenance of the South County Pipeline and Service Connections During Phase I and II Operation (SCP Rules and Regulations); and WHEREAS, MWDOC is willing and able to provide administrative services to assist with the metering and payment for water stored and delivered through the Reservoir under the terms of the SCP Rules and Regulations; and WHEREAS, the .Parties desire to participate in the Reservoir project described herein; NOW, THEREFORE, in consideration of the foregoing Recitals, which arc incorporated herein by reference, and the mutual covenants and promises among the Parties hereinafter set forth, the Parties agree as follows: SECTION I. REPLACEMENT OF MNWD PARTICIPATION AGREEMENT MNWD and SMWD hereby acknowledge this Agreement supersedes and replaces the MNWD Participation Agreement. Parties acknowledge that MNWD cost allocations will incorporate MNWD's participation to date in the project. SECTION 2. CAPACITY RIGHTS SMWD shall own and operate the Reservoir under the terms of this Agreement. The Parties shall have Capacity Rights in the Reservoir and Pump Stations. As used herein, "Capacity Right" means a Party's undivided percentage ownership interest in the capacity of the Reservoir. The total Capacity Rights in the Reservoir shall be deemed to equal the sum of all Parties' Capacity Rights therein expressed as percentages totaling 100%. The Capacity Rights equate to approximate nominal storage capacity in the Reservoir and nominal flow capacity in the Pump Station, but no change in the percentage Capacity Rights shall occur by reason of any variance between actual storage capacity and nominal storage capacity or actual flow rates and the nominal flow rates, or increase or decrease in the nominal capacity or flow rates as a result of re -rating of the capacity in the Reservoir or Pump Station or any component thereof, except by amendment of this Agreement. The Capacity Rights do not include any capacity or right April 23, 2009 in other SMWD system or facilities including the SCP. The Capacity Right percentage of each Party is the basis for allocation of capital and common operating casts. The following table summarizes the Capacity Rights allocated to each of the Parties. The parties agree the Capacity Rights percentages shown on the table shall be utilized to allocate Project costs. During the operation of the Reservoir or Pump Station in either a planned or emergency water shortage, no Party shall take action to prevent the delivery to another Party of its proportionate share of available water. Summary of Capacity Riahts in Upper Chiquita Reservoir and Pump Station Agencies Reservoir Capacity (AF) Percentage Pump Station Capacity (CFS) City of San Clemente 83.80 11.17% 5.59 City of San Juan Capistrano 76.10 10.15% 5.07 Moulton Niguel Water District 1 255.80 34.11% 17.05 Santa Margarita Water District 285.60 38.48% { 19.24 f South Coast Water District 45.70 6.09% 3.05 Total 750.00 i__._ 100.00% 50.00 SECTION 3. PROJECT COMMITTEE A Project Committee shall be appointed, consisting of one representative selected by each Party. Each Party shall also select an alternate representative to serve in the absence of its Project Committee representative. The primary purpose of the Project Committee shall be to facilitate communication among the members and aid in the administration of this Agreement. The Project Committee shall be responsible for reviewing and approving conceptual changes to the Upper Chiquita Reservoir and Pump Station as defined herein and such other matters as provided herein. Decisions of the Project Committee shall require a simple majority approval of the Project Committee representatives. The Project Committee shall meet periodically as needed during construction and implementation of the Reservoir to review and approve such items as submitted to the Project Committee. Upon implementation of said projects, the Project Committee shall meet at least once per year to review the status of the Reservoir facilities and operation. April 23, 2009 4 SECTION 4. PROJECT WORK AND REVIEW Subject to available funding from the Parties or other sources of fW- ding, including but not limited to State and Federal funds, SMWD or its designee is solely responsible for overseeing and implementing all aspects of the planning, environmental documentation, land and right-of-way acquisition, permitting, design and construction of the Reservoir and Pump Station, and any applicable terms for receipt of any state or federal funding of the projects identified in this Agreement, including the procurement and award of all contracts SMWD deemed necessary for such purpose (collectively, the "Project Work"). The foregoing notwithstanding, as of the Agreement date, Project Committee approval shall be required for (1) the award of any original contracts for environmental documentation, design and construction, (2) the issuance of any design change variance that individually exceeds $30,000 or, when added to previously issued variances, exceeds 10% of the original contract bid amount, and (3) the issuance of any construction change order that individually exceeds $100,000 or, when added to previously issued change orders, exceeds 10% of the original contract bid amount. A schedule of the Project Work is set forth in Exhibit "B," which exhibit is attached hereto and incorporated herein by this reference. Any changes needed in the schedule will be subject to approval by the Project Committee. All Project Work contemplated under this agreement shall meet the then applicable SMWD standards and specifications. SMWD or its designee shall provide copies of requests for proposals, staff reports, design reports, and plans and specifications, including estimates for SMWD costs related to environmental documentation, design, permits, legal fees, surveying, geotechnical. services, construction management services, inspection and accounting, for review by the other Parties and any regulatory agency with authority over an aspect of the Project Work. The Parties shall provide any comments to SMWD or its designee within seven days of receipt of any such report or other document or any updated version thereof. SMWD or its designee shall review and reasonably consider all comments. In the event of any dispute or conflicting comments with respect to the Project Work, the Project Committee shall meet and confer, and resolve such disputes prior to proceeding with the Project Work. Each Party who contracts for Project Work shall provide to each of the other Parties copies of all plans, designs, bids and construction contracts, within five (5) working days after each such document has been approved and/or finalized by SMWD. SECTION 5. PROJECT COSTS Each of the Parties agrees to pay its Capacity Right percentage share of the cost to complete the Reservoir and Pump Station, estimated to be $54 million. A Party shall not reduce or increase its Capacity Right unless one or more other Parties make a corresponding increase or decrease in its/their Capacity Right(s), and the change is made in accordance with Section S. The Parties further agree that funding received from State and/or Federal sources for the Reservoir and Pump Station shall be applied first and the April 23, 2009 remaining Project costs shall be allocated to the Parties based on their respective Capacity Rights as shown in the table in Section 2. SMWD or its designee will invoice the Parties for their respective shares of the prospective Project Work in two parts. The first deposit installment will fund the project cost for environmental, pen -hitting, design and construction services identified in Exhibit A. The second part will fund the remaining estimated Project Work, including construction based on progress payment plan in Exhibit B. The first deposit shall be invoiced by SMWD upon execution of this agreement by the parties. The progress payments shall be invoiced by SMWD upon award of contract for construction of the project components per the schedule. All invoices shall be payable when mailed or delivered and shall be delinquent 45 days thereafter. A final reconciliation will be provided by SMWD or its designee upon completion of the Project Work, which may result in refunds or additional deposit invoices. From the deposits, SMWD will disburse any amounts advanced by any Party for costs of the Project Work. Funds deposited with SMWD shall earn interest for the benefit of the Party depositing the same at a rate equivalent to the average prevailing rate of earnings on SMWD's invested funds. If any Party does not hake timely payment(s) as invoiced, such Party's right to use its Capacity Rights shall be deemed to be suspended, SMWD or its designee will exercise best efforts to sell or otherwise transfer the Party's Capacity Right among the other Parties, and a change will be processed under Section 8. In any event, each Party shall remain financially responsible for its share of its Capacity Right share of cost, including the cost attributable to the suspended Capacity Right share as reallocated by SMWD among the non -suspended rights, unless and until one or more other Parties agree to acquire or use the available Capacity Right and Flow -Rate Reservation share. SECTION G. DEMAND MANAGEMENT SMWD shall operate the Reservoir and Pump Station to maximize the water supply available during a planned or emergency water shortage. In the event the amount of water made available by SMWD is less than the amount specified in the table in Section 2, then the available water will be allocated based on the .Parties' respective Capacity Right percentage at the time the water is made available, except in the case of a Party that through its own election withdrew its water held under its Capacity Right. In the event of an emergency or planned outage, Parties shall notify SMWD of its requested capacity and flow rate. In the event the flow rate, provided said flow rate is equal to or less than the capacity specified in the table in Section 2. If a Party does not make a request, SMWD will provide water at the flow rate specified in the table in Section 2 until the total available capacity for the Party is used. SECTION 7. OPERATION AND MAINTENANCE COSTS SECTION 7.1. General April 23, 2009 6 SMWD shall operate_and maintain the Reservoir and Pump Station. The cost of operating and maintaining shall be determined for each facility, on the basis of specific operational criteria or limitations. SMWD will operate and use the facilities as part of its routine system SCP operations when the facilities are not being used by the Parties for planned outage or emergency use. Operation, maintenance, repair and replacement costs shall include both fixed costs that do not vary with the quantity of water delivered by the SCP system through the SCP Service Connections, and variable costs that vary with the quantity of water delivered. SECTION 7.2. Fixed Costs Annually, by March I of each year, SMWD shall prepare a budget for fixed costs during the next budget year (July I — June 30) for approval by the Project Committee, and shall provide each Party with a copy of the budget. Fixed costs, including the cost of facilities maintenance and repair, shall be allocated among the Parties based on their Capacity Rights. Each Party's share of the budgeted fixed costs for the budget year shall be payable by advance deposits made quarterly in four (4) equal installments or as otherwise determined by the Project Committee, and shall be due upon presentation of invoices by SMWD. In the second and each subsequent budget year, any excess/shortfall from the preceding budget year's deposits shall be subtracted from/added to the second quarterly deposit or otherwise addressed as determined by the Project Committee. If and for so long as the Project Committee fails to approve a budget for fixed costs, then the last budget approved by the Project Committee, increased in an amount equal to the percentage change, if any (but not less than zero), in the Consumer Price Index (All Items) for the [[Anaheim -Long Beach -Riverside]] Area, published by the United States Department of Labor, Bureau of Labor Statistics, or if the same shall no longer be published, the most nearly equivalent official index published by said Bureau or its successor or equivalent government agency (the "Index"), over the Index that was in effect at the commencement of the last approved budget, shall be used. . SECTION 7.3. Variable Costs Variable costs, including but not limited to the cost of water delivered, chemicals and power, shall be allocated among the Parties based on the volume of water delivered to each agency. Water delivered shall be deemed MWD imported water and shall be charged by MWDOC at the current applicable rate. SECTION 7.4 Invoices Each Party shall pay invoices presented to it within forty-five (45) days of receipt, In the event that a Party fails to pay the charges within such forty -five-day period, the Party shall he assessed and shall pay a penalty of one and one-half percent (1.5%) of the total outstanding charges each succeeding forty -five-day period or portion thereof that the amount remains unpaid until said charges are paid in full. SECTION 7.5 Overhead. April 23, 2009 7 All design, construction and operation costs allocated to the Parties under this Section and Section 5 shall include the cost of SMWD labor and equipment, on a time and materials basis, using the actual number of man-hours and equipment -hours required (including travel time to and from SMWD facilities), multiplied by the applicable rates for the crew members and equipment deployed. After-hours services (defined as between 5:00 pin on a working day and 7:00 am on the next following working day; "working day" to exclude Saturdays, Sundays and SMWD-designated holidays) will be charged at time and a half. The equipment rates effective upon the execution of this Agreement are set forth in Exhibit "C", attached hereto and incorporated herein by this reference, and thereafter are subject to adjustment in accordance with standard SMWD practices, without the need for an amendment to this Agreement. . The labor rates are comprised of a direct component that is adjusted periodically whenever SMWD's Board of Directors approves a salary schedule adjustment (generally, one cost of living adjustment and one competitive wage adjustment each year), and an indirect (general and administrative overhead or "G&A") component. The G&A component includes a "benefits burden" and a "contract burden." A total benefits and contract burden rate of 7$.6% shall remain in effect through June 30, 2013, and thereafter is subject to adjustment at five (5) year intervals. . Such total benefits and contract burden rate shall be applied as follows for each crew member used: Labor Rate = base hourly salary + (base hourly salary X (total benefits and contract burden rate)) Services contracted by SMWD to others and/or materials used shall be at SMWD's direct cost and shall not include an SMWD indirect (general and administrative overhead) component. SECTION 7.6 Records SMWD shall keep appropriate records and accounts of all costs and expenses relating to the planning, design, construction, replacement, operation, maintenance and repair of the Reservoir and Pump Station. Said records and accounts shall be provided by SMWD to the Project Committee annually, in advance of the preparation of the annual budgets, and shall be subject to reasonable inspection by any authorized representative of any Party at its expense. Further, said accounts and records shall be audited annually by an independent certified public accounting firm appointed by SMWD pursuant to generally accepted auditing standards as part of SMWD's annual audit process. SECTION 7.7 Operating and Procedures Manual to Cover Other Matters April 23, 2009 Prior to operation of the Reservoir and Purnp Station, the Project Committee shall prepare and approve an Operating and Procedures Manual ("Manual"), which shall include, but not be limited to the following: A. Methodology for determining operations, maintenance and replacement expenses, including energy costs for water delivery, by SMWD. B. Procedures for operation of the Reservoir and Pump Station during normal operation, planned shutdown and emergency outage conditions contemplated herein, including the notification, coordination, monitoring and problem - resolution activities. C. Criteria for compliance with water quality objectives D. Development/description of operating criteria including useful service life and criteria for replacement and refurbishment. E. Procedures for measurement (metering) and payment for water delivered to the Parties, including the allocation and method of water delivery to the Parties, inclusive of conditions for allowing the Parties to exchange or use other Parties' Capacity Rights SECTION 8. TRANSFER. OF CAPACITY RIGHTS The Parties shall have the first right of refusal for any available Capacity Rights in the Reservoir and Pump Station if a Party determines to reduce its Capacity Rights. The Party acquiring the Capacity Rights will reimburse the selling/transferring Party on the basis of the selling Party's Capacity Right cost adjusted by the EMIR Construction Cost Index for the Los Angeles area from the date of acceptance of the Project Work to the date of transfer to the receiving Party, less depreciation for that same period over the expected life of the facility or facilities. An amendment to this Agreement reflecting the change shall be executed by all Parties. SECTION 9. EMERGENCY USE OF CAPACITY RIGHTS BY NON- PARTICIPANTS The capacity in the Reservoir and Pump Station is reserved for the use of the Parties. Capacity Rights may be transferred between the Parties as provided herein. The Parties shall have the first right of use of available Capacity Rights. If non -participating water providers request water during an emergency from the water provided by the Reservoir, the request will be forwarded to all Parties. In the event any Party/Parties are able and willing to make their Capacity Rights available for use by a non -participating water provider, a charge representing the cost for use of the Reservoir and Pump Station shall be paid by such non_participating water provider and shall include the cost of the water, operation and maintenance costs, plus a capital charge determined as follows for each time of use: April 23, 2009 9 1120 of the total current replacement capital cost of the Reservoir and Pump Station, multiplied by the volume of water delivered to the non -participant in acre feet divided by the total volume of water to participants and non -participants in acre feet delivered. The current replacement cost shall be determined by escalating the original actual cost by the ENR Construction Cost Index for Los Angeles. The proceeds of the capital charge shall be distributed proportionately to the parties willing to make their Capacity Rights available. SECTION .10. INDEMNIFICATION; INSURANCE SMWD shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, SMWD's negligent acts or omissions in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of an indemnified Party; provided, however, SMWD assumes no liability with respect to interruptions in water deliveries, reductions in water deliveries, or the quality of the source water. The foregoing indemnification obligation shall not relieve the Parties' respective obligations to pay their shares of any and all costs of the design, construction, replacement, operation, maintenance, and/ or repair of the Reservoir and Pump Station. Each Party who contracts for Project Work shall require each of the contractors and consultants retained by such Party for the Project Work to include all of the Parties and each of their officers, employees and agents as indemnified parties in the indemnification provisions of the respective contract. Each Party shall assume the defense of, indemnify and hold harmless the other Parties and each of their officers, employees and agents from and against any and all actions, damages, liability or claims for death, injury, loss, damage or expense to persons or property arising from or related to, or claimed to have arisen from or be related to, the negligent acts or omissions of the indemnifying Party in the design, construction, replacement, use, operation, maintenance, and/ or repair of the Reservoir and Pump Station, except to the extent such actions, damages, claims, losses, expenses or liability have arisen from or relate to the negligent acts or omissions of the indemnified Party. Liability to third parties related to the Reservoir and Pump Station and not determined to have arisen from any Party's negligent act or omission shall be borne by the Parties in proportion to their respective cumulative volumetric measurements of use of the Reservoir and Pump Station to which such liability is related during the time interval in which such liability accrued.. Each Party who contracts for Project Work shall require each of its contractors and design consultants to include the other Parties, their officers, agents and employees ,April 23, 2009 10 as additional insureds in. the insurance coverages that the contracting Party requires such contractors and design consultants to obtain and maintain. With respect to operation of the Projects, SMWD shall maintain in full force and effect appropriate public liability and property damage insurance and shall add the names of the other Parties, their officers, agents and employees to such policies as additional insureds. A proportionate amount of SMWD 's cost of insurance relative to the operation of the Projects as hercin provided shall be included within the fixed costs. SECTION 11. SUCCESSORS ANIS ASSIGNS This Agreement shall inure to and be for the benefit of the successors and assigns of the Parties hereto. SECTION 12. ATTORNEYS' FEES In the event that an action is commenced by any Party to this Agreement to enforce or construe its rights or obligation arising hereunder, the prevailing Party in such action, in addition to any other relief or recovery awarded by the court, shall be entitled to recover all statutory costs plus a reasonable amount of attorneys' fees. SECTION 13. ENTIREAGREENIENT, INTERPRETATION; GOVERNING LAW,• EXECUTION IN COUNTERPARTS This Agreement and the Exhibits, as amended from time to time, constitutes the entire agreement between. the Parties hereto and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof California law shall govern the interpretation of this Agreement. Any action or proceeding brought to enforce the Agreement or related to the Agreement, shall be brought in Orange County, California, notwithstanding the provisions of California Code of Civil Procedure Section 394. This Agreement shall be construed as if prepared by all Parties hereto. The Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14. NO'T'ICES Any notices given pursuant to the Agreement or regarding matters contained within this Agreement shall be deemed delivered upon personal delivery or five (5) days after deposit in the United States Mail, first class, postage prepaid, addressed to the General Manager/City Manager of each Party at the address included in the signature section. April 23, 2009 11 SECTION 15. SEVERABILITY If any covenant, term, condition, or provision. of this Agreement shall, to any extent, be invalid or unenforceable, the remainder of this Agreement shall be valid and enforceable to the fullest extent permitted by law unless that covenant, term, condition, or provision declared to be invalid is so material that its invalidity deprives any Party of the basic benefit of their bargain or renders the remainder of this Agreement meaningless. SECTION 16. NO THIRD PARTY BENEFICIARIES No customer, other person or entity other than Parties shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement, either express or implied, is intended to confer upon any customer or other person or entity, other than the Parties and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 17. DISPUTE RESOLUTION The Parties desire to resolve as quickly and as amicably as possible any disputes as to the meaning of any portion of this Agreement, the validity of any determination or calculation, or the rights or obligations of the Parties pursuant hereto. Therefore, prior to initiation by a Party of any litigation or other proceeding in connection with this Agreement, the Parties shall meet and make good -faith efforts to resolve any such disputes on an informal basis. The Party that first raises a claim against another Part(ies) in connection with a dispute shall be responsible for providing written notice to such other Part(ies) and thereby initiating the informal dispute resolution efforts. Such . informal efforts may include mediation of the dispute if agreed by the Parties involved in the dispute. Not sooner than thirty (30) days after diligent efforts to resolve a dispute have been initiated, if the Parties have been unable to resolve the dispute on such informal basis, any Party involved in the dispute may, in its discretion and after providing written notice to the other Part(ies) that the informal dispute -resolution efforts are being terminated, proceed to take any and all such action to enforce or protect its rights as permitted by law and/or this Agreement. If a Party initiates informal dispute -resolution with respect to a dispute, any statutory limitation for filing of a court action or commencement of any other proceeding shall be tolled for a period of days equal to the number of days that elapsed between delivery of the notice initiating informal dispute - resolution and the notice terminating informal dispute -resolution. IN WI'T'NESS WHEREOF, the Parties hereto have executed this Agreement on the Effective Date hereinabove written. April 23, 2009 , 12 President, Santa Margarita Water District Date 26111 Antonio Parkway P.O. Box 7005 Mission Viejo, CA 92690-7005 President, Moulton Niguel Water District Date 27500 La Paz Road P.O. Box 30203 Laguna Niguel, CA 92607-0203 Mayor, City of San Clemente Date 100 Avenida Presidio San Clemente, CA 92672 President, South Coast Water District Date 31592 West Street Laguna Beach, 92651 Mayor, City of San Juan Capistrano Date April 23, 2009 13 m no 0 N C N �a N E wi cLS Cr u N CL a Y CC] C'I 1� I c o � 0 n E d rri K; bn c m E m 00 ,.n tD C Q C? 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MtD to Ln 00 00 to *zr 0 Ln CL r14 r�4 rl a 4a-+ cO m ro a E ai C m 41 w C C 0 z ro Q ru V1 co C C 0 O 4- O L-0 401 M C 0 �� (S 4-1 O O V LJ U ® to D to L] h- ri 0 0 V-4 The City Council of San Juan Capistrano will meet at 6:30 p.m. on Tuesday, June 16, 2009 in the City Council Chamber in City Hall, to consider: "Consideration of Upper Chiquita Emergency Storage Reservoir Participation and Operations Agreement, and Appropriation of Funds (City of San Clemente, Boulton Niguel dater District, Santa Margarita Water District, South Coast Water District)" — Item No. Gla. If you have specific thoughts or concerns regarding this item, you are encouraged to participate in this decision making process. You can communicate with the City Council through correspondence addressed to the Council and/or by attending the meeting and speaking to the Council during the public meeting. Correspondence related to this item must be received at the City Clerk's office by 5:00 p.m. on Monday, June 15, 2009 to allow time for the Council to consider its content. If you would like to speak at the meeting, please complete a yellow "Request to Speak" form found inside the entrance to the Council Chamber. This form is turned in at the staff table, just in front of the Council dais. You will be called to speak by the Mayor when the item is considered. You have received this notice at the request of the City staff member Eric P. Bauman, Utilities Engineer. You may contact that staff member at (949) 487-4312 with any questions. The agenda, including agenda reports, is available to you on our web site: www.sanjuancapistrano.orp. If you would like to subscribe to receive a notice when agendas are posted to the web site, please make that request by sending an e-mail to: cit clerk sanivanca istrano.or . Meg Monahan, MMC City Clerk cc: City of San Clemente; MNWD; SMWD; SCWD