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1992-0519_SAN JUAN BASIN AUTHORITY_Agreement AGREEMENT FOR THE USE OF SAN JUAN BASIN AUTHORITY WELLS, PIPELINES AND PRODUCTION FACILITIES This Agreement is made and entered into as of the 19th day of May , 1992, by and among the San Juan Basin Authority, a joint exercise of powers Authority organized and existing pursuant to Chapter 5, Division 7 (commencing at Section 6500) of the Government Code of the State of California (the "Authority" ) , the Capistrano Valley Water District (the "District") and the City of San Juan Capistrano (the "City") . R E - I T A L $ 1. The Authority owns four (4) wells and pipelines, which is sometimes referred to as a confluence pumping field, located near the confluence of San Juan Creek and Oso Creek. Said wells and facilities are shown on Exhibit A attached hereto and made a part hereof . 2. The City owns approximately 56 . 5 acres of land together with water rights near the confluence pumping field, which is utilized to grow various agricultural crops and to provide educational activities for the residents of the City (the "Ag Land" ) . 3 . The City desires to contract with the Authority for use of its wells, pipelines and production facilities for the production of water from the pumping field for use on the Ag Land. The water use is estimated to be between 150 to 300 acre feet per year. The Authority desires to allow the operation of its wells and facilities to produce water for the benefit of the City, pursuant to the terms and conditions as set forth in this Agreement. 4 . The District provides water service within the City and is agreeable to maintaining and operating the Authority' s wells to provide the water to the City for the Ag Land. 5 . The delivery of water to the City from the Authority' s wells shall not adversely affect the water rights of the City or of the District. 6 . The parties intend that this Agreement constitutes an arrangement for the use of the Authority' s facilities for the term of the Agreement as set forth herein and acknowledge that it is not intended to create water rights in favor of any party, nor is it intended to diminish the water rights of any party. NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions herein contained, the parties hereby agree as follows : SECTION 1. The Authority agrees to permit the District to take water from any of the Authority' s wells in the confluence pumping field to provide water to the City for use on its Ag Land. It is anticipated that the District will utilize the Authority' s Well No . 2 and the pipeline from Well No . 2 to the connection with the Ag Land irrigation system to provide the City water, however, the District is not precluded from activating any of the other Authority' s wells for said purpose. SECTION 2 . The City and the District recognize that the Authority is entering into a desalinization program. The Authority may determine that one or more of its wells will be utilized to provide water to the proposed desalinization plant . The Authority may, upon six months notice to the District, take over the operation of any of the Authority' s wells for the purpose of providing water to the desalinization plant. If the Authority takes over a well being used by the District to provide water to the City, the Authority agrees to permit the District to utilize one of its other wells . The Authority will pay the District the depreciated value of any improvements the District added to the Authority' s well that is no longer useable by the District, as herein provided. In lieu of all or a portion of the water being supplied by the District to the City from a Authority' s well, the Authority, at its discretion, may provide water to the District for delivery to the City or may deliver water directly to the City from an alternative source including, but not limited to, water from the Authority' s desalinization plant or reclaimed water acquired by the Authority. The water delivered to the City from an alternative water source shall be of at least the same quality of water for agricultural purposes as is then obtainable from an Authority well in the confluence pumping field. The City shall not be obligated to take water from an alternative source and if water is not available from an Authority well the City and the District may terminate this Agreement . SECTION 3 . The Authority does not warrant or represent the quantity or quality of the water that may be available from the Authority' s wells for delivery to the City. The District shall be obligated to obtain all governmental permits for the delivery of water to the City, including any discharge permit required by the San Diego Regional Water Quality Control Board. SECTION 4 . The District agrees to deliver to the City from the Authority' s wells, in the confluence pumping field or from other water delivered by the Authority to the District for the purpose of delivery to the City, water for use on the 05/07/92 0493Q/2027/000 -2- City' s Ag Land in annual quantities up to approximately 300 acre feet per year . The water shall be delivered to the City, upon the City giving notice to the District, a minimum of 24 hours prior to the taking of the water . It is anticipated that the flow requirements will range from 500 to 700 gpm' s. Prior to improvements to an Authority' s well, the City and the District will agree on the hydraulic grade line. The District does not represent or warrant to the City the quantity or quality of water that may be available from the Authority' s wells in the confluence pumping field or from supplemental water delivered to the District by the Authority from alternative sources as herein provided. SECTION 5 . The District agrees to construct any pipelines to deliver water to the City' s Ag Land, to equip the well utilized to deliver the water to the City and to maintain and operate the Authority' s well or wells and appurtenant equipment in an efficient manner to provide the water to the City. All maintenance and operation costs shall be at the sole expense of the District, including all capital costs for equipment, pipelines and all other appurtenant works deemed necessary by the District to provide water to the City. The Authority, the District and the City recognize that in order to put the Authority' s Well No. 2 into service, the District will expend approximately $63 , 000 .00 for new casing and gravel pack, new pump and motor, modification to the pumping head, piping and various engineering and miscellaneous expenses . SECTION 6 . The City agrees to purchase water from the District, on an as needed basis, and shall pay an initial rate of $170 . 00 per acre foot for the fiscal year July 1, 1992 to June 30, 1993 . This rate represents amortized capital costs, estimated energy costs, miscellaneous O&M costs, District ' s administrative costs and the Authority' s facility replacement and administrative costs . The District may increase the per acre foot rate annually based on increased cost of District salaries and energy costs . The District agrees to pay to the Authority on or before the 10th day of each month for water delivered during the previous month, a replacement and administrative cost fee of $15 .00 an acre foot or 10% of the acre foot cost paid by the City, whichever is greater. For water delivered by the Authority to the District for delivery to the City or delivered directly to the City from an alternate source, it shall be billed to the District or the City at a price based on the Authority' s cost of obtaining said water, plus a factor for the amortization of any of the Authority' s capital costs, the cost of maintenance and operation of any of the Authority' s facilities and a minimum of $15 . 00 per acre foot for facility replacement and administrative costs . If wells, pipelines or other production facilities referred to in this Agreement are not in operating condition, or if the District is unable to supply water to the City as provided for in this Agreement, the District agrees to 05/07/92 0493Q/2027/000 -3- sell water from the District ' s water distribution system to the City. The rate for this water shall be the rate the District pays for water from the Metropolitan Water District of Southern California, plus all applicable surcharges from regional water agencies, plus a five percent (5%) administrative fee. SECTION 7. The City agrees to purchase annually from the District a minimum of 150 acre feet of water. SSECTION 8 . Unless otherwise terminated as herein provided, the term of this Agreement shall be for a period of five (5) years commencing on July 1, 1992 and ending on June 30, 1997. Thereafter, this Agreement may be renewed from fiscal year to fiscal year by mutual consent of the parties by executing an addendum to this Agreement, on or before thirty (30) days prior to the expiration date. SECTION 9 . The District and the City agree to hold the Authority free and harmless from any loss, damage, liability, cost or expense that may arise or be caused in any way by the use, operation or failure of the Authority' s facilities, the District ' s facilities and the City' s facilities including personal injury and property loss and shall jointly and severally defend the Authority at its costs for any such loss, damage, liability, costs or expenses . SECTION 10 . All those demands, payments and notices which may be or are required to be given or made by any party to any other party, shall be in writing sent by United States Mail, postage pre-paid at the address as follows : to the Authority: San Juan Basin Authority 31421 Andres Pico Road San Juan Capistrano, CA 92675 to the District: Capistrano Valley Water District P.O. Box 967 San Juan Capistrano, CA 92693 to the City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 05/07/92 0493Q/2027/000 -4- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first day and year first herein above written. SAN JUAN BASIN AUTHORITY President ATTEST: ` CAPISTRANO VALLEY WATER DISTRI ATT ST: CITY OF SAN—PU N CAPISTRANO �MayOr" � it Jones A EST: Cheryl J00sonV City Clerk APPROVED BY: CJA el RICAARD DENHALTER, CITY ATTORNEY 05/07/92 0493Q/2027/000 -5- recommended that the item be continued to allow additional time for staff analysis on the issue of the cul-de-sac and to notify residents who would be directly affected by the construction of the cul-de-sac. Continuation of Item: It was moved by Councilman Hausdorfer, seconded by Councilman Friess, and unanimously carried that this item be continued to the meeting of June 2 , 1992 . DIRECTOR 09 PUBLIC LANDS AND FACILITIES ------------ 1. AGRE MENT TO PURCHASE WATER FOR THE KINOSHITA FARM (CAP STRANO VALLEY WATER DISTRICT AND SAN JUAN BASIN AUTHOR- TY) (600. 50 Written Communication: Report dated May 19, 1992 , from the Director of Public Lands and Facilities, recommending that the Agreement between the City, the Capistrano Valley Water District, and the San Juan Basin Authority be approved to purchase water to maintain the active agricultural operation at the Kinoshita Farm open space site. The proposed rehabilitation and use of the San Juan Basin Authority well on the property would result in substantial cost savings. Apar val of Use Agreement: It was moved by Councilman Friess, seconded by Councilman Hausdorfer, and unanimously carried that the Agreement between the City, the Capistrano Valley Water District, and the San Juan Basin Authority be approved for a five-year period beginning July 1, 1992 , and ending June 30, 1997, to purchase water to maintain the active agricultural operation at the Kinoshita Farm open space site. ORDINANCES 1. AMENDMENT TO TITLE 5 OF THE MUNICIPAL CODE ADDING CHAPTER 22 REGULATING THE DISPLAY OF MATERIAL WHICH IS HARMFUL TO MINORS (585. 30) (ADOPTION) Written Communication: Report dated May 19, 1992, from the City Clerk, advising that the Ordinance was introduced at the meeting of April 21, 1992, and was scheduled for adoption. Staff met with Mr. and Mrs. Skora regarding their concerns expressed at the April 21 meeting, and it was agreed that no changes to the Ordinance were necessary. Adoption of Ordinance: The Assistant City Manager read the title of the Ordinance next in order. Further reading of all Ordinances had been waived earlier in the meeting. It was moved by Councilman -9- 5/19/92 • • AGENDA ITEM May 19, 1992 TO: Stephen B. Julian, City Manager FROM: Ronald C. Sievers, Director Public Lands and Facilities SUBJECT: Agreement to Purchase Water for Kinoshita Farm (Capistrano Valley Water District and San Juan Basin Authority) ----------------------------------------------------------------- ------------------------------------------------------------------ RECOMMENDATION By motion, approve the Agreement between the City of San Juan Capistrano, Capistrano Valley Water District and San Juan Basin Authority to supply water to Kinoshita Farm. ------------------------------------------------------------------- ------------------------------------------------------------------- SITUATION A. Summary and Recommendation This action will provide the City a means to purchase water from the Capistrano Valley Water District (CVWD) for use on the Kinoshita Farm property at a substantially lower cost than current or projected water costs for domestic water. This water will be obtained by means of a pump system to be constructed and maintained by CVWD on a well site owned by the San Juan Basin Authority (SJBA) . Staff recommends approval of this agreement between the City, the Capistrano Valley Water District and the San Juan Basin Authority. B. Background In 1991, as part of the Open Space Measure D Bond Issue, the City of San Juan Capistrano purchased a 56.5 acre parcel of land known as the Kinoshita Farm. The ultimate use of this property is currently being determined as part of the Open Space Master Plan project. Until the ultimate plan is approved, the entire 56. 5 acre property will continue as an active agricultural operation. Also, a substantial portion of the 56.5 acres will probably be retained for active agricultural use in the future, as suggested by the Open Space Master Plan. FOR CITY COUNCIL AGE C�3� Agenda Item • . May 29, 1992 Page 2 One of the most crucial elements required to continue the agricultural operations at Kinoshita Farms is water. Both the availability and cost of water for the farm are vital. For the past nine years, the farm has obtained water from a combination of well water from the SJBA and domestic water from the CVWD. Kinoshita Farms entered into an agreement in 1983 to obtain water from the SJBA on an emergency need basis (see Attachment B) . This agreement was necessitated due to the failure of the well actually located on the Kinoshita Property. Under terms of the current agreement, the Farm is responsible for all repair, maintenance and utility costs of the SJBA well. Also, the agreement may be terminated at any time by the SJBA. In December of 1991, the SJBA well being utilized by Kinoshita Farms failed. Three other SJBA wells located in the same general area have also all failed in past years. Consequently, there is no longer water available to Kinoshita Farms from the SJBA. The farm, therefore, is currently using domestic water from the CVWD. While this temporarily solves the water supply issue, the cost of this water is currently approximately $387 per acre foot. It is anticipated that a 20% increase in water prices will be imposed in July of 1992 , thereby increasing water costs to approximately $464 per acre foot. Due to the elimination of the Agricultural Water Rate by the Metropolitan Water District (MWD) in 1991, the CVWD has little control over the cost of water provided to Kinoshita Farms, as the majority of water provided by CVWD is obtained from MWD. Also, it is projected that domestic water costs will continue to escalate rapidly in the near future. Due to the above factors, an alternative method of supplying water to Kinoshita Farms is urgently needed. The Department of Public Lands and Facilities has explored several options as follows. First, the possibility of rehabilitating the well actually located on Kinoshita Farm property was explored. Evaluation of the well site on the Kinoshita property recently performed indicated that the well is not salvageable. Costs of drilling and equipping a new well are estimated at $125, 000+. Also, indications are that the new well would not be able to produce sufficient water quantity for the farm due to changes in the water tables under the farm. Second, the possibility of rehabilitating the SJBA well was explored. Under the terms of the existing agreement with the SJBA, the costs for this work would be the responsibility of Kinoshita Farms. This cost is estimated to be approximately $70, 000. In addition, the SJBA would still have the ability to terminate the use of water by Kinoshita Farms with 30 days notice or, in case of drought, with no notice. Agenda Item . • May 29 , 1992 Page 3 The third and recommended option was to negotiate a new agreement with the SJBA (see Attachment A) . This option is represented by the attached three party agreement between the City, SJBA and CVWD. The major elements of this agreement are: 1. The SJBA well site which has been historically used by Kinoshita Farms will be rehabilitated. This will include new casing and gravel pack, a new high efficiency pump and motor, and other miscellaneous items. 2 . The cost of this rehabilitation will be paid for by the CVWD. 3 . Kinoshita Farms will have rights of up to 300 acre feet of water from the SJBA well annually, or an alternate source if the SJBA so decides at the same cost. 4 . The maintenance, repairs, and utility costs of the well will be the responsibility of, and at the expense of, the CVWD during the term of this agreement. 5. The cost to the City shall be $170. 00 per acre foot of water during the first year. This includes a $15 per acre foot payment to the SJBA for use of the well site. The cost for subsequent years will be adjusted to reflect any changes in electrical utility costs. 6. During interruptions in well water delivery for any reason, the City shall be able to purchase domestic water from the CVWD at the cost of MWD water, plus 5%. This cost is approximately 30% less than the regular rates charged by the CVWD. 7 . The agreement shall be for an initial term of five years, with the ability to renew annually upon mutual consent of the City, the SJBA and the CVWD after the first five years. This agreement will provide Kinoshita Farms with a reliable and affordable supply of water. It will reduce dependence on domestic water, and provide protection within reason from both drought conditions and rapidly increasing domestic water rates. Over the past five years, the Kinoshita Farm has used an average of approximately 225 acre feet of water per year. Under the terms of this new agreement, the cost for these 225 acre feet of water would be approximately $38 , 250 for the first year. This same 225 acre feet of water would cost approximately $104,400 if domestic water is used. This results in a net savings of approximately $66, 150 for the first year. As domestic water rates rapidly increase over the next several years, annual savings will be substantially more. Agenda Item • • May 29, 1992 Page 4 For comparison, the past five years of water use at Kinoshita farms has averaged 80% SJBA water and 20% CVWD water. Based on current utility costs and domestic water rates, this 225 acre feet of water would cost approximately $37, 080. NOTIFICATION San Juan Basin Authority, Capistrano Valley Water District COMMISSION/BOARD REVIEW. RECOMMENDATIONS N/A FINANCIAL CONSIDERATIONS There will be no up front costs associated with the execution of this agreement. On-going water costs are paid through the operations budget of Kinoshita Farms. ALTERNATE ACTIONS 1. Approve the Agreement Between the City of San Juan Capistrano, Capistrano Valley Water District and San Juan Basin Authority to supply water to Kinoshita Farm. 2 . Do not approve the agreement. 3 . Refer to Staff for additional information. RECOMMENDATION By motion, approve the Agreement between the City of San Juan Capistrano, Capistrano Valley Water District and San Juan Basin Authority to supply water to Kinoshita Farm. Respectfully submitted, Ronald C. Sievers RCS:nb