02-1015_SAN JUAN BASIN AUTHORITY_Agreement First Amd (2)r
FIRST AMENDMENT TO
1998 SAN JUAN BASIN DESALTER PROJECT AGREEMENT
This First Amendment to 1998 San Juan Basica Desalter Project Agreement
("Amendment"), dated as of October 15, 2002, is made by the San Juan Basin Authority
("SJBA"), the Municipal.. Water District of Orange County ("MWDOC") and the Metropolitan
Water District of Southern California ("Metropolitan"), and agreed to and accepted by the
Capistrano Valley Water .District ("CVWD").
Recitals
A. SJBA is a California joint powers agency formed in 1971 for the purpose of managing the
San Juan Groundwater Basin and jointly funding certain water system facilities to make
water resources available to the areas within the San Juan Creek Watershed serviced by the
SJBA.
B. SJBA, MWDOC and Metropolitan entered into the 1998 San Juan Basin Desalter Project
Agreement (the "Project Agreement"), dated as of December 4, 1998, to provide for the
construction and operation of the San ,Tuan Basin Desalter Project (as defined and described
in the Project Agreement) (the "Project").
C. Under the Project Agreement, SJBA is the sole owner of all Project facilities and is solely
responsible for development of the Project.
D. Pursuant to the Lease Agreement to be dated as of November 1, 2002 (the "Lease
Agreement"), between SJBA and CVWD relating to San Juan Basin Authority Lease
Revenue Bonds (Ground. Water Recovery Project) Issue of 2002, CVWD will agree, as
agent for SJBA, to exercise its rights pursuant to the Service Contract (as defined in Recital
E) as may be reasonably necessary to cause the Service Contract Project Improvements (as
defined in the Lease Agreement) to be acquired, constructed, delivered and installed, and
SJBA will have no responsibility with respect to acquisition, construction, delivery and
installation of the Service Contract Project Improvements. The Project is comprised of the
Service Contract Project Improvements.
E. CVWD has entered into the Service Contract for the Design, Construction, Financing and
Operation of the San Juan Basin Desalter Project, dated September 3, 2002 (the "Service
Contract"), between CVWD and ECO Resources, Inc. (the "DBO vendor"). CVWD
negotiated the Service Contract pursuant to a design -build -operate (DBO) competitive
procurement approach for the Project. Because the Project Agreement was prepared under
the assumption that a. traditional procurement process was going to be used to develop the
Project, it is important to clarify the language and to provide for implementation of the
Project Agreement under a DBO contract.
F. CVWD will operate the Project as the contracted operator of SJBA during the term of the
Lease Agreement, pursuant to the Project Lease and Implementation Agreement --San. Juan
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Basin Desalter Project (the "Implementation Agreement") among SJBA, CVWD, the City
of San Juan Capistrano, Moulton Niguel Water District and Santa Margarita Water District.
G. Pursuant to Section 12 of the Project Agreement, neither the Project Agreement nor any
portion thereof may be assigned or transferred to any entity not an original party to the
Project Agreement, nor shall any duties thereunder be delegated, without the express
written consent of all parties to the Project Agreement.
H. Section 9.2 of the Project Agreement permits the amendment thereof at any time by written
mutual agreement of the parties. The parties agree to amend the Project Agreement to
clarify certain provisions as shown below and CVWD consents to such amendments.
I. Capitalized terms used in this Amendment and not otherwise defined shall be as defined in
the Project Agreement,
Agreement
By their authorized signatures below, the parties to this Amendment consent and agree that
CVWD may cause acquisition, construction, delivery and installation of the Service
Contract Project Improvements by exercising its rights under the Service Contract, and that
CVWD may operate the Project as contracted operator of SJBA.
2. Under the Service Contract, CVWD has contracted for design, construction and operation
of the Service Contract Project Improvements by the DBO vendor. The parties desire to
amend the Project Agreement to clarify how its terms will work in light of the DBO
approach, and to modify other provisions as set forth below.
3. The Project Agreement is hereby amended as follows:
(a) Recital I of the Project Agreement is hereby amended in full to read as follows:
"Capistrano Valley Water District (CVWD), as an agent of SJBA, has entered
into the Service Contract for the Design, Construction, Financing and Operation
of the San Juan Basin Desalter Project, dated September 3, 2002 (the "Service
Contract"), between CVWD and ECO Resources, Inc. (the "DBO vendor"), to
provide for design, construction, delivery and installation of the Project
Improvements (as defined in the Service Contract)."
(b) Recital J of the Project Agreement is hereby amended in full to read as follows:
"CVWD will operate the Project as SJBA's contracted operator during the terra
of this Agreement."
(c) Section 2.2 of the Project Agreement is amended by adding the following sentence at
the end of such section:
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"CVWD WD shall furnish to Metropolitan evidence of its right to produce, distribute
and sell Allowable Yield produced from the Project."
(d) Section 5.1 of the Project Agreement is amended by inserting the following sentence
after the first sentence of such section;
"Although the arrangement between CVWD and the DB® vendor may call for
the payment of a service fee for each acre-foot of water delivered, the
documentation supporting the Project costs should be presented in a way that
will allow Metropolitan to calculate the Project costs as required by this
Agreement."
(e) Section 7.4 of the Project Agreement is amended by adding the following sentences at
the end of such section:
"With respect to Project costs invoiced by the DBO vendor, Metropolitan shall
have the right to audit the DB® vendor's invoices with respect to the fixed
charges described below under Exhibits B, C and D in order to determine if the
invoice was properly submitted. Metropolitan also shall have the right to audit
the books and records of the DB® vendor and CVWD with respect to any other
costs claimed by CVWD as incurred costs."
(f) Section 9.4 of the Project Agreement is amended by deleting subsection (c) and
inserting the following new subsection (c):
(c) no Allowable Yield is produced within six years following execution of
this Agreement; or"
(g) Exhibit B to the Project Agreement is amended by adding the following at the end of
Exhibit B:
"5. This paragraph 5 is applicable in the event that the Project is designed,
built and financed by the DB® vendor. CVWD will mare payments with
respect to capital and financing costs through a fixed lease payment.
The fixed lease payment shall be established through the competitive proposal
process, and will be a function of the bid fixed design/build price, and the bid
interest rate, using a 20 -year amortization schedule. Prior to the start of
Project operations, CVWD will submit information to Metropolitan to
document the competitiveness of the procurement process.
The DB® vendor's fixed design/build price is an incurred cost under
paragraph 1, to the extent that it includes only eligible costs described in
paragraph 1, and does not include any ineligible costs described in paragraph
2. CVWD has provided a copy of the Service Contract to Metropolitan as
verification of the DB® vendor's fixed design/b uild price. The lease payment
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is based on the DBO vendor's eligi ble fixed design/ build price. The DBO
vendor's eligible fixed design/build price shall not exceed $25,030,607, except
as permitted in the Service Contract. "
The interest rate upon which the lease payment is based is the fixed interest
rate to be used in computing the Annualized Capital Cost under paragraph 3,
not to exceed 5.7 percent.
The invoice submitted by the DBO vendor for the lease payment shall be
subject to audit by Metropolitan in order to determine if the invoice was
properly submitted.
The fixed design/build price does not include all incurred costs under
paragraph 1. Other costs will be incurred costs only if they are eligible under
paragraph 1, and if CVWD certifies that such costs do not represent (i) any
costs with respect to which the fixed lease payment is payable or (ii) any
ineligible costs described in paragraph 2. Any such other costs will be subject
to direct audit by Metropolitan.,'
(h) Exhibit C to the Project Agreement is amended by (i) adding the following sentence at
the end of paragraph I(b):
"Notwithstanding the foregoing, in the event the Project is operated and
maintained by the DEO vendor, labor costs will be equal to the fixed labor
component calculated pursuant to paragraph 4 below."
and. (ii) adding the following at the end of Exhibit C:
"4. This paragraph 4 is applicable in the event that the Project is operated
and maintained by the DBO vendor. The service fee payable to the DBO
vendor by CVWD under the Service Contract will include a fixed
component, which also shall be established through the competitive proposal
process.
The fixed component will. include a fixed Iabor component and a fixed
operation and maintenance component.
The fixed labor component will be $170,600, subject to annual adjustment
for inflation as provided below in this paragraph 4. The fixed labor
component includes all the required labor for the Project, whether it is
contracted or hired labor. The fixed labor component is an incurred cost.
The fixed operation and maintenance component shall exclude energy costs
and major replacement costs described in Exhibit D, and shall be payable for
and include all other costs of operating, maintaining, repairing, managing
and performing minor replacements (costing less than $100,000 per item, as
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adjusted pursuant to Exhibit D) with respect to the Project. The fixed
operation and maintenance component is an incurred cost, and shall not
exceed $611,400 per year, subject to annual adjustment for inflation as
provided below in this paragraph 4.
In each year beginning July 1, 2003, the fixed labor component and the fixed
operation and maintenance component shall be adjusted upward or downward
for inflation at a rate of 90 percent of the change in the Unadjusted Consumer
Price Index, as reported by the U.S. Department of Labor, Bureau of Labor
Statistics, for All Urban Consumers, for all items in the Los Angeles -
Riverside -Orange County, California area (CPI).
Electrical energy used for Project facilities is a variable cost that will be paid
directly by CVWD and will not be part of the service fee payable to the DBO
vendor. The service fee will also include certain variable or contingent costs.
These may include, but are not limited to, costs resulting from force majeure
and other uncontrollable circumstances, and additional water treatment costs
if the quality of the raw water is outside the assumed parameters which were
the basis of the DBO vendor's competitive proposal and the Service Contract.
A copy of the DBO vendor's proposal sh owing the assumed parameters on
which its proposal were based has been provided to Metropolitan. Any such
additional costs will be subject to audit and treated as incurred costs if
eligible under paragraph I. Costs for cleanup of contamination caused by
third parties are not eligible costs.
The Operation and Maintenance Component, as required in this Agreement,
shallnot include deposits to any reserve fund for major replacement costs
described in Exhibit D. Such replacements will be considered when they
occur and will be added to the calculation of Project Unit Cost as described
in this Agreement.
The'service fee to be paid by CVWD to the DBO vendor shall be
independent of Metropolitan's water rate applicable to this Agreement.
Reconciliation of all of the Project's operation and maintenance costs is
required to determine the Project Unit Cost. When audited, the auditor will
audit CVWD books to determine its costs, and if he considers it necessary
based on. the understandings set forth in this letter, he will audit the DBO
vendor's books and records.
Costs actually paid for energy used by the Project under the energy
limitations of paragraph I are incurred costs. Energy costs will be reconciled
from the agency or vendor who makes the actual payment to the utility
company. Audit will be based on metering and payment records. Adequate
metering must be provided.
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The operation and .Maintenance component does not include all incurred costs
under paragraph 1. Other costs of operation and maintenance will be
incurred costs only if they are eligible under paragraph 1, and if CVWD
certifies that such costs do not represent (i) any costs with respect to which
the operation and maintenance component is payable, or (ii) any ineligible
costs described in paragraph 2. Any such other costs will be subject to direct
audit by Metropolitan. "
(i) Exhibit D to the Project Agreement is amended by adding the following at the end of
Exhibit D.
"Replacement costs incurred for the Project will be considered in the
calculation of Project Unit Cost pursuant to this Exhibit D when they occur
as described in this Agreement. Records should include life of the replaced
part, purchase cost, salvage value, and financing, if any. payments to any
reserve fund will not be used in the calculation of the Project Unit Cost."
4, This Amendment shall be effective as of the date on which it is approved and fully executed
by SJBA, MWDOC and Metropolitan and accepted by CVWD, as indicated by the
signatures of their authorized representatives and the dates of such signatures indicated
below, subject to Metropolitan's receipt of fully executed .copies of the Lease Agreement
and Implementation Agreement, in form and substance satisfactory to Metropolitan.
5: The Project Agreement is, and shall continue to be, in full force and effect, except as
specifically amended by this Amendment. T his Amendment shall not be construed to be a
waiver of any provision of the Project Agreement or a consent to any failure to comply with
the Project Agreement.
6. Except as otherwise expressly provided herein, the Project Agreement is in all respects
ratified and confirmed, and nothing contained in this Amendment shall, or shall be
construed to, modify, invalidate or otherwise affect any provision of the Project Agreement
or any right of the parties arising thereunder.
7. This Amendment may be executed in as many counterparts as may be deemed necessary or
convenient and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an. original, but all such counterparts shall
constitute but one and the same agreement.
I Me
8. This Amendment shall be governed by and construed in accordance with the laws of the
State of California.
Approved as to form:
Approved as to form:
0
Title:
Date.
Approved as to form:
-0
Title:
Date:
Ali]
By:
Titl
Dat
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San Juan Basin Authority
By:
Title:
Date: 10I.5/Ori
Municipal Water District of Orange County
0
Title:
Date:
The Metropolitan Water District
of Southern California
M
Title:
Date -
IN
Date:
alley Water District
8. This Amendment shall be governed by and construed in accordance with the laves of the
State of California.
Approved as to form:
By.
Title:
Date.-
Approved
ate:
Approved as to form:
By:_
Title:
Date:
Approved as to form,:
By:
Title:
Date:
AGREED AND ACCEPTED:
Approved as to form
By:
Title:
Date:
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San Juan Basin Authority
By:
Title:
Date:
The Metropolitan Water District
of Southern California
By:_
Title:
Date:
Capistrano Valley Water District
By:
Title:
Date:
T% I f)rjllv V or nnr 1I, Ljr -4bb 1- UIR P-514
This Amendmew, &halI be -govemed by and construed in accordance with the laws of the
State of Califamis,
Approved as W form Sari Juan Basin Authority
By. By:
Title: Title:
mate:
Approved as to form:
arlz���
By: -
Title:
Date-
AGREED AND ACCEPTED:
Approved as to form -
L -03
Title:
Date.
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Date:
Municipal Water Districi of Orange, eoty
By;
Tide:
Date:
The Metropolitan Water District
of Souter Califomia
By,
-
Title:
100
Capistrano 'Valley Water District
By:-
Title: -
Date.
8: This Amendment shall be governed by and construed in accordance with the laws of the
Mate of California.
Approved as to form:
By:_
Title:
Date:
.Approved as to farm:
By:
Title:
Date:
Approved as to form,
By: V
Title:s ' ant General Counsel
Date: October 14 2002
AGREED AND ACCEPTED:
Approved as to form:
By
Title:
Date:
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San Juan Basin Authority
By:
Title:
Municipal Water District of Orange County
By:_
Title:
Date:
The Metropolitan Water District
Capistrano 'Walley Water District
By:_
Title:
Date:
THIS AGREEMENT is entered into by the SAN JUAN BASIN AUTHORITY ("SJBA"), a joint
powers authority, and the CITY OF SAN JUAN CAPISTRANO acting as the governing body
for CAPISTRANO VALLEY WATER. DISTRICT ("CVWD"), which may sometimes
hereinafter be referred to individually or collectively as "the PARTY" or "tine PARTIES".
References hereinafter to CVV�FD shall for purposes of this Agreement also mean the CITY.
A. On February 5, 1991, SJBA, CVVD, MN D, SMWD and Trabuco Canyon Water
District entered into the San Juan Basin Projects Agreement ("the 1991 Agreement") for
purposes including the development, conservation and management of imported water
conjunctively with water produced locally. The 1991 Agreement provides, among other
items, that whenever construction of project facilities for, an authorized project shall be
funded by a bond issue, each SJBA member shall enter into a Project Lease Agreement,
which shall be substantially in the form attached to the 1991 Agreement.
B. On November 21, 1995, SJBA, CVWD and the City of San Juan Capistrano entered into
an agreement ("the 1995 Agreement") to clarify the agreement between those parties with
respect to the extraction of water from the San Juan Basin for CVVD and the City
relative to SJBA's extraction of water from the Basin for the project specified in that
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agreement.
C. On October 27, 1998, SJBA, CVWD, MNWD and SMWD (collectively, the
"Participating Members" for reference purposes only to this recital and Recital "E",
herein) entered into a Memorandum of Understanding ("the 1998 MOU"), which
provides among other items, that prior to commencing construction of the project
specified in the MOU, the Participating Members allocated interest in the specified
project's water rights and water supplies will be established by a project implementation
agreement among the Participating Members and SJBA.
D. The San Juan Basin Desalter Project is proposed for purposes of extracting approximately
5,800 acre-feet of water annually to enable the production of approximately 4,800 acre-
feet of potable water annually, all of which will be delivered to CVWD's potable water
delivery system for use within CVWD's service area allowing CVWD to reduce its
purchase of treated non -interruptible water from Metropolitan Water District of Southern.
California ("the Desalter Project")
E. The purpose of this Agreement is to i) comply with Section 7(a) of the 1991 Agreement,
which requires a Project Lease Agreement whenever construction of a project is funded
by a bond issue; ii) to comply with Section 7 of the 1998 MOU, which requires each
Participating Member's allocated interest in the Project's water rights and water supplies
to be established by a project implementation agreement among the Participating
Members and SJBA; and, iii) to address provisions in the 1991 Agreement, 1995
Agreement and the 1998 MOU which are or may be affected by this Agreement.
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IOW THEREFORE, the Parties agree as follows:
The Desalter Project Lease Agreement are attached hereto collectively as Exhibit "A",
incorporated by reference herein in substantially the form to be used, and is agreed to satisfy the
requirements of Section 7(a) of the 1991 Agreement.
F�. a �; le mn
CVWD's and the City's allocated interest in the SJBA's Desalter Project's water rights
and water supplies, which water rights are established by State Water Resources Control .Board
Permit No. 21074, shall be in the amount of 5,800 acre-feet per year. A portion of the Desalter
Project water may be delivered from tune -to -time to SJBA's other member agencies on terms
mutually agreeable to CVWD, SJBA and SJBA's participating member agencies.
(a) In accordance with Section 7 of the 1998 MAIN, in the event the Desalter Project is
operated during periods when the Desalter Project interferes with extractions by CVWD, SJBA
shall not have any obligation to provide CVWD with Make -Up Water since CVWD's allocation
of Desalter Project water exceeds 3,325 acre-feet per year. This Section 3(a) shall operate to
relieve SJBA of its obligations under Sections 4 and 5 of the 1995 Agreement to remedy the
Desalter Project impacts on CVWD, however, SJBA's obligation under Sections 4 and 5 of the
1995 Agreement otherwise remain in full force and effect to the extent provided in Section 7 of
the 1998 MOU.
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(b) The Parties agree to initiate negotiations immediately on diversions of water from
the San Juan Basin in addition to the production of water from the Desalter Project, which may
include one or more expansions of the Desalter Project capacity and/or the construction or use of
groundwater wells not connected to the Desalter Project, subject to a comprehensive agreement
to be entered into between the involved parties addressing, among other items, potential water
quantity and water quality impacts, and consequential mitigation measures as appropriate, on the
Desalter Project and/or CVWD's other groundwater supplies.
The Parties agree that, since CVWD is the only SJBA member participating in the
Desalter Project, major decisions and approvals concerning the Desalter Project, as defined by
Project Committee Nos. 4 or 7, including construction, operation, maintenance and repair shall
be made by CVWD in consultation with SJBA. Such decisions and approvals shall not impair the
rights of SJBA in any subsequent expansion of the Desalter Project. Although CVWD will not
necessarily be the sole member of SJBA Project Committee Nos. 4 and 7, SJBA will take no
action that would impair the ability of the Desalter Project to extract up to 5,800 acre-feet per
year or impair the 1998 San Juan Basin Desalter Project Agreement Between the Metropolitan
Water District of Southern California, Municipal Water District of ®range County, and SJBA,
dated December 4, 1998 ("1998 MWD Agreement"). CVWD will be a member of the SJBA
Coordinating Committee established by the 1998 MWD Agreement. The subsidy described in
the 1998 MWD Agreement shall be irrevocably committed to the Desalter Project and SJBA will
not exercise its right to terminate the 1998 MWD Agreement without the prior written consent of
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(a) CVWD will operate the Desalter Project as the contracted operator of SJBA
during the Lease Term described in the Project Lease Agreement and the Operating Lease
Agreement. CVWD's contracted operation of the Desalter Project shall include the right to make
alterations or improvements or attach fixtures or structures to the Desalter Project in consultation
with SJBA if said alterations, improvements, fixtures and structures are necessary or reasonably
beneficial for the use of the Desalter Project and are consistent with sound engineering and
construction practices.
(b) SJBA and CVWD will comply with all conditions of approval and mitigation
measures of the Permit for Diversion and Use of Water No. 21074 issued for the Project by the
State mater Resources Control Board and with the conditions of approval and mitigation
measures approved for the Project by SJBA.
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(a) CVWD shall defend, indemnify, and hold harmless SJBA, SJBA's member
agencies, their respective elected and appointed officials, officers, employees, and agents from
any and all actual or alleged claims, demands, causes of action, liability, loss, damage, or injury,
to property or persons, including wrongful death, whether imposed by a court of law or by
administrative action of any federal, state, or local governmental body or agency arising out of or
incident to the performance of this Agreement and resulting from the negligence or wrongful act
of CVWD's elected and appointed officials, officers, agents, employees or invitees including
without limitation any such claims, disputes, controversies or injury to property or persons
arising from or in connection with the "Service Contract For The Design, Construction,
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Financing And Operation Of The San Juan Basin Desalter Project" between CVWD and Eco
Resources, Inc. This indemnification includes, without limitation, the payment of all penalties,
fines, judgments, awards, decrees, attorneys' fees, and related costs or expenses, and the
reimbursement of SJBA, SJBA's member agencies, their respective elected officials, officers,
employees, and/or agents for all legal expenses and costs incurred by each of them.
(b) SJBA shall defend, indemnity, and bold harmless CVWD, its elected officials,
officers, employees, and agents from any and all actual or alleged claims, demands, causes of
action, liability, loss, damage, or injury, to property or persons, including wrongful death,
whether imposed by a court of law or by administrative action of any federal, state, or local
governmental body or agency, arising out of or incident to the performance of this Agreement
and resulting from the negligence or wrongful act of SJBA, SJBA's member agencies, their
respective elected and appointed officials, officers, agents, employees or invitees. This
indemnification includes, without limitation, the payment of all penalties, fines, judgments,
awards, decrees, attorneys' fees, and related costs or expenses, and the reimbursement of C` WD,
its elected officials, officers, employees, and/or agents for all legal expenses and costs incurred
by each of thein.
In the event of destruction of or damage to the Desalter Project during the Lease Terre by
fire, flood, or earthquake or other casualty or event so that it becomes wholly or partly unusable,
then CV WD, acting in consultation with SJBA, may do either of the following:
(1) Rebuild and repair the Desalter Project using the money collected from
insurance, if any, so that it may be fully restored to use, in which case this Agreement shall
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remain in fall force and effect; or
(2) Declare this Agreement terminated and use the money collected from
insurance, if any, against destruction of or damage to the Desalter Project to the extent necessary
to retire any outstanding securities which SJBA may have incurred for the Desalter Project.
This Agreement comprises the entire understanding of the Parties concerning the issues
herein described, and supersedes all previous oral and written agreements, negotiations,
communications, representations and cormnitments, and the provisions of this Agreement shall
prevail in the event of any inconsistency between this Agreement and the 1971 Agreement, 1991
Agreement and 1998 MOU, however, the provisions of the 1971 Agreement, the 1991
Agreement and the 1998 MMU otherwise remain in full force and effect. To the extent the terms
of this Agreement are inconsistent with the Property Lease, dated as of 1, 2002, (the
"Property Lease'), by and between the City and SJBA, the Lease Agreement, dated as of
1, 2002 (the "Lease Agreement9), between CVWD and SJBA, and the Trost Agreement,
dated as of , 2002, (the Trust Agreement") among CVWD, SJBA and BNY Western
Trust Company, the terms of the Property Lease, the Lease Agreement and the Trost Agreement
shall prevail so long as the bonds issued under the Trust Agreement remain outstanding;
provided however, that such Agreements shall not result in the imposition of any financial
liabilities on SJBA, INWD or SMWD.
All notices, demands, requests, consents, or other communications permitted or required
by this Agreement shall be personally delivered, sent by registered or certified mail, postage
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prepaid, return -receipt requested, or by facsimile, addressed to the respective parties as follows:
TO SJEA: Sacs Juan Basin Authority
27500 La Paz Road
Laguna Niguel, California 92677
Attention: General Manager
949-448-4055
FAX. 949-831-5651
TO CVWD: Capistrano Valley Water District
c/o City of San Juan. Capistrano
32400 Paseo Adelanto
San Juan Capistrano, California 92675
Attention: 'Treasurer
949-443-6301
FAX: 949-493-1053
Each of the individuals executing this Agreement verifies that each of them has the
authority to enter into this Agreement, that the necessary resolutions or other consents have been
passed or obtained, and that this Agreement shall be binding on the party for whom each of there
is signing.
Time is of the essence of all provisions of this Agreement where time is a factor.
The interpretation, validity and enforcement of,this Agreement shall be governed by and
construed under the laws of the State of California. Venue for any action brought to enforce or
interpret this Agreement shall be brought in the appropriate federal or state court in or nearest to
the South ®range County Judicial District, County of ®range.
13. AMENDMENT
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Ell
This Agreement may not be modified orally or in any manner other than by an agreement
in writing signed by the Parties or their respective successors in interest. No right or remedy will
be waived unless the waiver is in writing and signed by the parry claimed to have made the
waiver. One waiver will not be interpreted as a continuing waiver.
This Agreement shall inure to the benefit of and be binding upon the Parties and their
respective officers, governing bodies, contractors, agents, employees, successors and assigns.
(a) Any Party to this Agreement may declare a breach hereof by serving written
notice describing the nature of the breach to all Parties. The Party alleged to have breached the
Agreement shall be afforded a reasonable period, not less than thirty (30) days from service of
the notice of breach to tape whatever steps are necessary to cure the breach.
(b) All disputes arising out of or in connection with the interpretation or enforcement
of this Agreement shall be submitted to mediation prior to the commencement of court
proceedings at the request of any Party, by a retired judge from the panel of the Judicial
Arbitration and Mediation Services, Inc., ("JAMS") with experience in the area of California
water law. This provision shall be specifically enforceable. If the Parties to the dispute fail to
agree upon a member of the JAMS panel, any Party may apply to the Presiding Judge of the
®range County Superior Court for appointment of a panel member consistent with provision to
resolve the dispute. Upon completion of the mediation process described herein, any Party may
pursue all remedies otherwise provided them by law, including the remedy of specific
performance.
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(c) 1n the event any legal action or proceeding is commenced to interpret or enforce
the terms of, or obligations arising out of, this Agreement, or to recover damages for the breach
of this Agreement, the party prevailing in any such action or proceeding shall be entitled to
recover from the non -prevailing party all reasonable attorney fees and expenses incurred by such
prevailing party.
The Parties agree to execute such other and further documents, assignments and
instruments and to take such other actions as are or may become necessary or convenient to carry
out this Agreement. The Parties agree to cooperate and do all acts as may be reasonably required
to implement the Desalter Project including SJBA's financing and CVWD's construction,
operation and maintenance of the Desalter Project. The Parties further agree to expedite issuance
of all governmental permits and approvals necessary for CSI" to perform the acts described
herein throughout the term of this Agreement.
All section headings are for convenience only and in no way define or limit the scope or
interpretation of this Agreement.
Each of the Parties acknowledges that it has reviewed this Agreement and has consulted
legal counsel, and that the non -nal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of this Agreement
or any amendments hereto.
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Other than as provided in Section 21 of this agreement, there are no intended third party
beneficiaries of any right or obligation assumed by the Parties under this Agreement.
The terra of this agreement shall commence upon its execution by all Parties and shall
continue until this Agreement is terminated by mutual agreement of the Parties.
The parties shall provide notice to the Chief Executive Officer of the Metropolitan Water
District of Southern California, 700 North Alameda Street, Los Angeles, CA 90054 - 0153, upon
any amendment or termination of this Agreement. The Metropolitan Water District Of Southern
California is a third party beneficiary solely for the purpose of receiving notice pursuant to this
Section 21.
N WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the day and year first written above.
Dated: I ,5 6' �
Dated: �M01 -
2:58 PM 10/14/2002
SAN JUAN BASIN AUTHORITY,
a Joint Powers Authority
By: V'r'0 I/V
President, Do d of Directors
By:,
a
Chairperson., Boakdk Directors
-11-
MWD9 io
Y ' METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
Office of the General Counsel
October 30, 2002
Karl Seckel
Asst. Manager/District Engineer
Municipal Water District of Orange County
10500 Ellis Avenue
Fountain Valley, Ca 29708
Amy Amarani
Public Works Director
Capistrano Valley Water District
P.O. Box 967
San Juan Capistrano, CA 902693
Dear Mr. Seckel and Ms. Amarani:
.fie: 1998 San Juan Basin DesafterProject Agreement
Enclosed for your files is a fully -executed copy of the First Amendment to 1998 San Juan Basin
Desalter Project Agreement, with original signatures by Metropolitan.
Very truly yours,
Jeffrey Kightlinger
General Counsel
By: "
Sy e Bennion
Ass eneral Counsel
SBB:ey
Enclosure
cc: Steve Arakawa
Andy Sienkiewich
Jose Vergara
700 N. Alameda Street, Los Angeles, California 90012 ® Mailing address: Box 54153, Los Angeles, California 90054-0153 w Telephone (213) 217-6000
FIRST AMENDMENT TO
1998 SAN JUAN BASIN DESALTER PROJECT AGREEMENT
This First Amendment to 1998 San Juan Basin Desalter Project Agreement
("Amendment"), dated as of October 15, 2002, is made by the San Juan Basin Authority
("SJBA"), the Municipal Water District of Orange County ("MWDOC") and the Metropolitan
Water District of Southern California ("Metropolitan"), and agreed to and accepted by the
Capistrano Valley Water District ("CVWD").
Recitals
A. SJBA is a California Joint powers agency formed in 1971 for the purpose of managing the
San Juan Groundwater Basin and jointly funding certain water system facilities to make
water resources available to the areas within the San Juan Creek Watershed serviced by the
SJBA.
B. SJBA, MWDOC and Metropolitan entered into the 1998 San Juan Basin Desalter Project
Agreement (the "Project Agreement"), dated as of December 4, 1998, to provide for the
construction and operation of the San Juan Basin Desalter Project (as defined and described
in the Project Agreement) (the "Project").
C. Under the Project Agreement, SIBA is the sale owner of all Project facilities and is solely
responsible for development of the Project.
D. Pursuant to the Lease Agreement to be dated as of November 1, 2002 (the "Lease
Agreement"), between SJBA and CVWD relating to San Juan Basin Authority Lease
Revenue Bonds (Ground Water Recovery Project) Issue of 2002, CVIvVL will agree, as
agent for SJBA, to exercise its rights pursuant to the Service Contract (as defined in Recital
E) as may be reasonably necessary to cause the Service Contract Protect Improvements (as
defined in the Lease Agreement) to be acquired, constructed, delivered and installed, and
SJBA will have no responsibility with respect to acquisition, construction, delivery and
installation of the Service Contract Project Improvements. The Project is comprised of the
Service Contract Project Improvements,
E. CVRD has entered into the Service.Contract for the Design, Construction, Financing and
Operation of the San Juan Basin Desalter Project, dated September 3, 2002 (the "Service
Contract"), between CVWD and ECO Resources, Inc. (the "DBO vendor"). CVWD
negotiated the Service Contract pursuant to a design -build -operate (DBO) competitive
procurement approach for the Project. Because the Project Agreement was prepared under
the assumption that a traditional procurement process was going to be used to develop the
Project, it is important to clarify the language and to provide for implementation of the
Project Agreement under a DBO contract.
F. CVWD will operate the Project as the contracted operator of SJBA during the term of the
Lease Agreement, pursuant to the Project Lease and implementation Agreement—San Juan
-I-
Basin Desalter Project (the "Implementation Agreement") among SJBA, CVWD, the City
of San Juan Capistrano, Moulton Niguel Water District and Santa Margarita Water District,
G. Pursuant to Section 12 of the Project Agreement, neither the Project Agreement nor any
portion thereof may be assigned or transferred to any entity not an original party to the
Project Agreement, nor shall any duties thereunder be delegated, without the express
written consent of all parties to the Project Agreement.
H. Section 9.2 of the Project Agreement permits the amendment thereof at any time by written
mutual agreement of the parties. The parties agree to amend the Project Agreement to
clarify certain provisions as shown below and CVWD consents to such amendments.
I. Capitalized terms used in this Amendment and not otherwise defined shall be as defined in
the Project Agreement.
Agreement
1. By their authorized signatures below, the parties to this Amendment consent and agree that
CVWD may cause acquisition, construction, delivery and installation of the Service
Contract Project Improvements by exercising its rights under the Service Contract, and that
CVWD may operate the Project as contracted operator of SJBA,
2. Under the Service Contract, CVWD has 'contracted for design, construction and operation
of the Service Contract Project Improvements by the DBO vendor. The parties desire to
amend the Project Agreement to clarify how its terms will work in light of the DBO
approach, and to modify other provisions as set forth below.
3. The Project Agreement is hereby amended as follows:
(a) Recital I of the Project Agreement is hereby amended in full to read as follows:
"Capistrano Valley Water District (CVWD), as an agent of SJBA, has entered
into the Service Contract for the Design, Construction, Financing and Operation
of the San Juan Basin Desalter Project, dated September 3, 2002 (the "Service
Contract"), between CVWD and ECO Resources, Inc. (the "DBO vendor"), to
provide for design, construction, delivery and installation of the Project
Improvements (as defined in the Service Contract)."
(b) Recital J of the Project Agreement is hereby amended in full to read as follows:
"CVWD will operate the Project as SJBA's contracted operator during the term
of this Agreement."
(c) Section 2.2 of the Project Agreement is amended by adding the following sentence at
the end of such section:
-2-
"CVWD shall furnish to Metropolitan evidence of its right to produce, distribute
and sell Allowable Yield produced from the Project."
(d) Section 5.1 of the Project Agreement is amended by inserting the following sentence
after the first sentence of such section:
"Although the aFaigemdm-b, tween CVWD and the DB® vendor may call for
the payment of''a service fee f r each acre-foot of water delivered, the
documentation us gport ni g't& Project costs should be presented in a way that
will allow Metropolitan to calculate the Project costs as required by this
Agreement." ,w.-;.-A-.:z-I_.'
(c) Section 7.4 of the Project Agreement is amended by adding the following sentences at
the end of such section:
-�� "With respect to Project costs invoiced by the DB® vendor,
Metropolitan shall
have the right to audit the DBO vendor's invoices„with respect to the fixed
charges described below under Ex'h&is~B, C and D in order to determine if the
invoice was properly submitted. Metropolitan also shall have the right to audit
IiIL the books and records of the DB® vendor and CVWD with respect to any other
costs claimed by CVWD as incurred costs."
�! (f) Section 9.4 of the Project Agreement is amended by deleting subsection (c) and
inserting the following new subsection (c):
(c) no Allowable Yield is produced within six years following execution of
this Agreement; or"
(g) Exhibit B to the Project Agreement is amended by adding the following at the end of
Exhibit B:
'5. This paragraph 5 is applicable in the event that the Project is designed,
built and financed by the DB® vendor. CVWD will make payments with
respect to capital and financing costs through a fixed Iease payment.
The fixed lease payment shall be established through the competitive proposal
-, process, and will be a function of the bid fixed design/build price, and the bid
=` interest rate, using a 20 year amortization schedule. Prior to the start of
Project operations, CVWD will subzit information to Metropolitan to
document the competitiveness of the procurement process.
The DB® vendor's fixed design/build price is an incurred cost under
paragraph 1, to the extent that it includes only eligible costs described in
paragraph 1, and does not include any ineligible costs described in paragraph
2. CVWD has provided a copy of the Service Contract to Metropolitan as
verification of the DBO vendor's fixed design/b uild price. The lease payment
-3-
is based on the DBO vendor's eligi ble fixed design/ build price. The DBO
vendor's eligible fixed design/build price shall not exceed $25,030,607, except
as permitted in the Service Contract. "
The interest rate upon which the lease payment is based is the fixed interest
rate to be used in computing the Annualized Capital Cost under paragraph 3,
not to exceed 5.7 percent.
The invoice submitted by the DBO vendor for the lease payment shall be
subject to audit by Metropolitan in order to determine if the invoice was
properly submitted.
The fixed design/build price does not include all incurred costs under
paragraph 1. Other costs will be incurred costs only if they are eligible under
paragraph 1, and if CVWD certifies that such costs do not represent (i) any
costs with respect to which the fixed lease payment is payable or (ii) any
ineligible costs described in paragraph 2. Any such other costs will be subject
to direct audit by Metropolitan. "
(h) Exhibit C to the Project Agreement is amended by (i) adding the following sentence at
the end of paragraph 1(b):
"Notwithstanding the foregoing, in the event the Project is operated and
maintained by the DBO vendor, labor costs will be equal to the fixed labor
component calculated pursuant to paragraph 4 below."
and (ii) adding the following at the end of Exhibit C:
"4. This paragraph 4 is applicable in the event that the Project is operated
and maintained by the DBO vendor. The service fee payable to the DBO
vendor by CVWD under the Service Contract will include a fixed
component, which also shall be established through the competitive proposal
process.
The fixed component will include a fined labor component and a fixed
operation and maintenance component..
The fixed labor component will be $170,600, subject to annual adjustment
,,.,. .
for inflation as provided below in this paragraph 4. The fixed labor
component includes all the required labor for the Project, whether it is
contracted or hired labor. The fixed labor component is an incurred cost.
The fixed operation and maintenance component shall exclude energy costs
and major replacement costs described in Exhibit D, and shall be payable for
and include all other costs of operating, maintaining, repairing, managing
and performing minor replacements (costing less than $100,000 per item, as
-4-
adjusted pursuant to Exhibit D) with respect to the Project. The fixed
operation and maintenance component is an incurred cost, and shall not
exceed $611,400 per year, subject to annual adjustment for inflation as
provided below in this paragraph 4.
In each year beginning July 1, 2003, the fixed labor component and the fixed
operation and maintenance component shall be adjusted upward or downward
' for inflation at a rate of 90 percent of the change in the Unadjusted Consumer
I Price Index, as reported by the U.S. Department of Labor, Bureau of Labor
Statistics, for All Urban Consumers, for all items in the Los Angeles -
Riverside -®range County, California area (CPI).
Electrical energy used for Project facilities is a variable cost that will be paid
directly by CVWD and will not be part of the service fee payable to the DBO
vendor. The service fee will also include certain variable or contingent costs.
These may include, but are not limited to, costs resulting from force majeure
and other uncontrollable circumstances, and additional water treatment costs
if the quality of the raw water is outside the assumed parameters which were
the basis of the DBO vender's competitive proposal and the Service Contract.
A copy of the DBO vendor's proposal sh owing the assumed parameters on
which its proposal were based has been provided to Metropolitan. Any such
additional costs will be subject to audit and treated as incurred costs if
eligible under paragraph 1. Costs for cleanup of contamination caused by
third parties are not eligible costs.
The Operation and Maintenance Component, as required in this Agreement,
shall not include deposits to any reserve fund for major replacement costs
described in Exhibit D. Such replacements will be considered when they
occur and will be added to the calculation of Project Unit Cost as described
in this .Agreement.
The service fee to be paid by CVWD to the DB® vendor shall be
independent of Metropolitan's water rate applicable to this Agreement.
Reconciliation of all of the Project's operation and maintenance costs is
t
required to determine the Project Unit Cost. When audited, the auditor will
audit CVWD books to determine its costs, and if he considers it necessary
based on the understandings set forth in this letter, he will audit the DBO
vendor's books and records.
Costs actually paid for energy used by the Project under the energy
limitations of paragraph I are incurred costs, Energy costs will be reconciled
from the agency or vendor who makes the actual payment to the utility
company. Audit will be based on metering and payment records. Adequate
metering must be provided.
-5-
The operation and maintenance component does not include all incurred costs
under paragraph 1. Other costs of operation and maintenance will be
incurred costs only if they are eligible under paragraph 1, and if CVWD
certifies that such costs do not represent (i) any costs with respect to which
the operation and maintenance component is payable, or (ii) any ineligible
costs described in paragraph 2. Any such other costs will be subject to direct
audit by Metropolitan."
(i) Exhibit D to the Project Agreement is amended by adding the fallowing at the end of
Exhibit D. -
"Replacement costs incurred for the Project will be considered in the
calculation of Project Unit Cost pursuant to this Exhibit D when they occur
as described in this Agreement. Records should include life of the replaced
part, purchase cost, salvage valise, and financing, if any. Payments to any
reserve fund will not be used in the calculation of the Project Unit Cost."
4. This Amendment shall be effective as of the date on which it is approved and fully executed
by SJBA, MWDOC and Metropolitan and accepted by CVWD, as indicated by the
signatures of their authorized representatives and the dates of such signatures indicated
below, subject to Metropolitan's receipt of fully executed copies of the Lease Agreement
and Implementation Agreement, in form and substance satisfactory to Metropolitan.
5. The Project Agreement is, and shall continue to be, in full force and effect, except as
specifically amended by this Amendment. This Amendment shall not be construed to be a
waiver of any provision of the Project Agreement or a consent to any failure to comply with
the Project Agreement.
6. Except as otherwise expressly provided herein, the Project Agreement is in all respects
ratified and confirmed, and nothing contained in this Amendment shall, or shall be
construed to, modify, invalidate or otherwise affect any provision of the Project Agreement
or any right of the parties arising thereunder.
7. This Amendment may be executed in as many counterparts as may be deemed necessary or
convenient and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original, but all such counterparts shall
constitute but one and the same agreement.
N
8. This Amendment shall be governed by and construed in accordance: with the laws of the
State of California.
Approved as to forth:
By:
Title:
Date:
Approved as to form:
Title.
.Date:
Approved as to forth:
Title:
Date:
Approved as to form:
F
Title:
Date:
-7-
San Juan Basin Authc)rity
By:
Title:
Date: )5 ba
Municipal Water District of Orange County
Title:
Date:
The Metropolitan Water District
of Southern California
Title:
Date:
Malley Vater District
Date:
$. This Amendment shall be governed by and construed in accordance with the laws of the
State of California.
Approved as to form: San Juan. Basin Authority
By: By:
Title: Title:
Date: Date:
Approved as to form: Municipal Water District of Orange County
B -
By: y:
Title: General Manager
Title:
Bate: 111114/11
Date:
Approved as to form:
By:
Title:
Date:
AGREED AND ACCEPTED:
Approved as to form:
By:
Title:
Date:
-7-
The Metropolitan. Water District
of Southern California
By:_
Title:
Date:
Capistrano Valley Mater District
By:
Title:
Date:
This Amead=w. &hall be govemcd by and consn-ued in accordance with the laws of the
State of California.
Approved as to for=
0
T41e:
San Juan Basiii Authority
m
Title:
Date-_ . . . . . . ............ . Dare: ....
Approved as to forr=
ED
Title:
Date:
CRRFWWOJ���R
Approved as to form:
Municipal Water District of Orange, County
By:
Title:
Date:
The MetropoEtan Wau_x District
of Southern Califonia.
Title:
Date:
Capistrano Valley Water District
By:-- By:
Title:
Date:
N,
Title:
& This Amendment shall be governed by and construed in accordance with the laws of the
Mate of California.
Approved as to form:
By:
Title:
Date.-
Approved
ate:Approved as to form:
By:
Title:
Date:
Approved as to form:
By: V
Title: s dant General Counsel
Date: October 14 2002
AGREED AND ACCEPTED:
Approved as to form:
By:
Title:
Date:
-7-
San Juan Basin Authority
By:_
Title:
Date:
Municipal Water District of Orange County
By:_
Title:
Bate:
The Metropolitan mater District
of Southern California
Title:
Date: October 14, 2002
Capistrano Valley Water District
By:_
Title:
Date:
AGREEMENT BETWEEN
THE METROPOLITAN WATER DISTRICT" OF SOUTHERN CALIFORNIA,
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY,
AND
THE SAN JUAN BASIN AUTHORITY.
Page
Recitals....................................................................................................................................... • .....1
Section1: Definitions......................................................................................................................3
A-1
Section2: Warranties.......................................................................................................................4
B-1
Section 3: Ownership and Responsibilities......................................................................................5
C-1
Section 4: Billing Process..... ........... ....................... ....................
....................................................
Section 5: Reconciliation Process....................................................................................................6
E-1
Section 6: Coordinating Committee................................................................................................7
Section 7: Record Keeping and Audit.............................................................................................8
Section 8: Interruption of Replenishment Water Supply...............................................................10
Section 9: Term and Amendments.................................................................................................10
Section 10: Hold Harmless and Liability .......................................................................................11
Section. 11: Notice— ...... ...................................... ...................................................................
I I
Section 12: Successors and Assigns..a,-.... --- ..............................................................................12
Section13: Severability.................................................................................................................13
Section14: Integration...................................................................................................................13
Section 15: Governing Law...........................................................................................................13
EXHIBITA.................................................................................................................................
A-1
EXHIBITB ............................................. .............................. ............................. ..........................
B-1
EXHIBITC ................ ................... ........ ............................. ................................. .........................
C-1
EXHIBITD.................................................................................................................................
D-1
EXHIBITE..................................................................................................................................
E-1
TIDE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA,
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY, .AND
THE SAN JUAN BASIN AUTHORITY.
il
THIS AGREEMENT is made and entered into as of P 1998, by and among
OF
the METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA (hereinafter
"Metropolitan"), the MUNICIPAL WATER DISTRICT OF ORANGE COUNTY (hereinafter
"MWDOC"), and the SAN JUAN BASIN AUTHORITY (hereinafter "SJBA").
RECITALS
A. Metropolitan was incorporated under the Metropolitan Water District Act ("Act") for the
purpose of developing, storing, and distributing water for domestic and municipal purposes.
B. The Act empowers Metropolitan to acquire water and water rights within or without the
State; develop, store, and transport water; provide, sell, and deliver water at wholesale for
domestic and municipal uses and purposes; fix the rates for water; and acquire, construct,
operate, and maintain any and all works, facilities, improvements, and property necessary
or convenient to the exercise of the powers granted by the Act.
C. MWDOC, as a member public agency of Metropolitan under the Act, is a wholesale
purchaser within its service area of water developed, stored and distributed by
Metropolitan.
D. SJBA is a Joint Powers Authority, that was formed in 1971. for the purpose of managing
the San. Juan Groundwater Basin and jointly funding certain water system facilities to
make water resources available to the areas within the San.Juan Creek Watershed
serviced by the SJBA.
E. Metropolitan's water supply and demand projections for its service area, including that
encompassed MWDOC, show that additional sources of supplemental water must be
developed to meet future needs.
-I-
F. Metropolitan has determined to take all necessary steps to provide its service area with
adequate and reliable supplies of high quality water in the years ahead in an
environmentally and economically responsible way.
G. Certain portions of the Lower San Juan Basin contain significant concentrations of total
dissolved solids, iron and manganese exceeding potable water standards thereby
preventing its use as a domestic supply unless treatment is provided
H. MWDOC and SJBA have determined that it would be more costly to obtain a portion of
its water supply by reclaiming groundwater from the Lower San Juan Basin than to
purchase the equivalent amount from Metropolitan's Treated Full Service from
MWDOC.
The SJBA project Com fn tree No. 4, comprised of Capistrano Valley Water District
(CVWD), Mouton Niguel Water District (MNWD) and Santa Margarita Water District
p�.
(SMWD"),yhas been formed as an agent of SJBA to construct and operate the San Juan
sin Desalter Project.
It is anticipated tha�"the SJBA will execute a separate agreement to implement the San
�y
Juan Basi alter Project with CVWD, MNWD, and SMWD.
K. Metropolitan, MWDOC and SJBA have determined that it is mutually beneficial for
SJBA to increase production from the Lower San Juan Basin by developing and operating
a new treatment facility.
L. Metropolitan, in accordance with its Groundwater Recovery Program, desires to assist
MWDOC and SJBA with the cost of recovering the degraded groundwater that exceeds
the cost of Treated Full Service from Metropolitan.
M. MWDOC and SJBA desire to comply with the provisions of Metropolitan's Groundwater
Recovery Program (hereinafter "GRP) in return, for Metropolitan's financial assistance
for the San Juan Basin Desalter Project.
-2-
N. The San Juan Basin Desalter Project will increase regional production for domestic and
municipal use by producing approximately 4,800 acre-feet per year of potable water frori
the Lower San Juan Basin.
Therefore in consideration of the promises and covenants hereinafter set forth, the Parties do
agree as follows:
Section 1: Definitions
The following words and terms, unless otherwise expressly defined in their context, shall be
defined to mean and shall be operative as specified:
1.1 "Allowable Yield" shall mean the actual amount of Recovered Groundwater measured in
acre-feet that is delivered from the Project for domestic and municipal use in any given year,
which receives Metropolitan's financial assistance. Allowable yield shall only include
Recovered Groundwater produced based on an established water right. Such Allowable
Yield shall be considered to be local water for purposes of Metropolitan shortage allocations,
Agricultural Vater Programs and Seasonal Storage Service Calculations.
1.2 "Deferred Cost" shall mean that cost, in dollars per acre-foot, carried forward from the
preceding Fiscal Year as calculated in Exhibit E, incorporated herein by this reference.
1.3 "Degraded Groundwater" shall mean groundwater which does not meet applicable drinking
water quality standards such as those set forth in Division 4, Environmental health of Title
22, California Code of Regulations, as amended from time to time, or any successor statute.
1.4 "Estimated GRP contribution" shall mean the advanced financial contribution in dollars
per acre-foot Metropolitan pays for Allowable Yield for monthly billing purposes until
the Final GRP Contribution is calculated pursuant to procedures in Sections 4.2 and 5.2,
respectively
1.5 "Final GRP Contribution" shall mean the financial contribution by Metropolitan to the
Project in dollars per acre-foot of Allowable Yield. The final GRP Contribution for the
-a-
Project is equal to the sure of the Project Unit Cost and Deferred Cost minus
Metropolitan's prevailing full service treated water rate, but shall not exceed
$250 per acre-foot.
1.6 "Fiscal Year" shall mean a Metropolitan fiscal year that begins on July 1 and ends on
June 30.
1.7 "Project" shall mean the San Juan Basin Desalter Project being developed by SJBA to
produce Recovered Groundwater. The Project is described in Exhibit A, incorporated
herein by this reference. The San Juan Basin Authority shall consult with Metropolitan
and obtain Metropolitan's approval prior to malting any changes to the Project.
1.8 "Project Capacity." shall mean 4,800 acre-feet'per year.
1.9 "Project Unit Cost" shall mean the actual cost to produce an acre-foot of water by the
Project in a Fiscal Year and is comprised of three components: Annualized Capital
Component, Operation and Maintenance Component, and Annualized Replacement
Component, as specified in Exhibits B, C, and D, incorporated herein by this reference.
110 "Recovered Groundwater" shall mean all Degraded Groundwater recovered and delivered
for beneficial use by the Project in a Fiscal Year, measured in acre-feet.
1.11 "Replenishment Nater" shall mean imported water obtained from Metropolitan and used
for the purpose of replenishing natural groundwater basins.
Section 2: Warranties
2.1 MWDOC and SJBA warrant that the Project will increase groundwater production for
potable uses from the Lower San Juan Basin and improve regional water supply
reliability.
2.2 SJBA warrants that it will acquire the right to distribute and sell Allowable Yield
produced from the Project prior to start of Project operation, and that it will furnish
a ,
evidence of that right to Metropolitan. �. �< t�
-4-
2.3 MWDOC and SJBA warrant that they do not discriminate against employees or against
any applicant for employment because of ethnic group identification, religion, age, sex,
color, national origin, or physical disability and further warrant that they require all
contractors and consultants performing work on the Project to comply with all the laws
and regulations prohibiting discrimination against,employees or against any applicant for
employment because of ethnic group identification, religion, age, sex, color, national
origin, or physical or mental disability.
2.4 SJBA warrants that it has or will comply with the provisions of California Environmental
Quality Act for each and all components of the Project facilities.
Section 3: Ownership and Responsibilities
3.1 SJBA shall be the sole owner of all Project facilities. Metropolitan shall have no
ownership right, title, security interest or other interest in any Project facilities
3.2 SJBA is solely responsible for all design, environmental compliance, right-of-way
acquisitions permits, construction, and cost of the Project and all modifications thereof.
3.3 SJBA shall be solely responsible for operating and maintaining the Project in accordance
with all applicable local, state, and federal laws. Metropolitan shall have no rights, duties
or responsibilities for operation and maintenance of the Project.
3.4 SJBA shall install, operate and maintain metering devices for the purpose of measuring
the quantity of Recovered Groundwater and Allowable Yield. SJBA shall also provide
electrical metering devices to accurately measure the energy used for the Project to
determine incurred operation and maintenance costs.
3.5 SJBA shall, at all tunes during the term of this Agreement, exercise its best efforts to
operate the Project facilities to maximize Allowable Yield on a sustained basis.
3.6 SJBA shall assist Metropolitan in its effort to forecast fixture Project production and cost.
-5-
Section 4. Billing Process
4.1 Metropolitan shall pay the Final GRP Contribution for up to 5,760 acre-feet (120 percent
of Project Capacity) of Allowable Yield in any one Fiscal Year.
4.2 Metropolitan shall consult with SJBA to determine the Estimated GRP Contribution
based on historic cost data and expected Project activities. Reconciliation of the
Estimated GRP Contribution and Final GRP Contribution shall be performed by
Metropolitan pursuant to Section 5.
4.3 SJBA shalll provide written notification to Metropolitan of the initiation of Project
operation no less than 30 days prior to initiation of Project operation.
4.4 SJBA shall invoice Metropolitan monthly for the Allowable Yield delivered during the
previous month subject to the limitations outlined in Section 4.1 and 4.5. Metropolitan
shall pay MWD®C for invoiced Allowable Yield pursuant to Section 4.2 by means of a
credit included on the next billing issued to MWD®C.
4.5 Upon receiving the Metropolitan billing, MWDGC shall either include the full amount of
the Estimated GRP Contribution for the Allowable. Yield received from Metropolitan as a
credit on its next billing to the SJBA or shall make direct payments to the SJBA.
4.6 All invoicing, billing, and credit process shall be in accordance to the rules and
regulations established from time to time by Metropolitan as reflected in Metropolitan's
Administrative Code,
Section 5: Reconciliation Process
5.1 By January First of each Fiscal Year, SJBA shall provide Metropolitan with: (a) records
of Recovered Water and Allowable Yield; (b) supporting documentation of the actual
cost of the Project for the previous Fiscal Ygar required to perform the calculations
prescribed in Exhibits B, C, and D; (c) the terms and schedule of payments of the
Project's financing instrument; and (d) a description of any changes to the Project's
M
financing instrumentsy Metropolitan will suspend its Estimated GRP Contribution if
SJBA fails to provide any of the above -required data by April First of each Fiscal Year.
During the suspension period, SJBA shall continue to invoice Metropolitan for the
Allowable Yield for water accounting purposes. Metropolitan will resume the monthly
Estimated GRP Contribution once complete data is received and conduct the
corresponding reconciliation pursuant to Section 5.2. Failure by SJBA to provide
reconciliation data within 18 months after the end of the Fiscal Year for which a
reconciliation is required shall constitute material breach of the Agreement.
5.2 Within 180 days after Metropolitan receives complete data from SJBA, pursuant to
Section 5. 1, Metropolitan shall calculate the Final GRP Contribution for the Fiscal Year.
The Final GRP Contribution shall then apply retroactively to all Allowable Yield for the
applicable Fiscal Year. An adjustment shall be computed by Metropolitan for over- or
under -payment for the Allowable Yield and included on the next billing issued to
MWDOC; and payments shall be made in accordance with Metropolitan's Administrative
Code.
5.3 Parties agree that all contributions other than those derived from within MWDOC's
service area boundaries received prior to and during the term of this Agreement that
offset eligible Project cost shall be deducted from respective cost components. During the
reconciliation following receipt of such contributions, the parties shall determine the
equitable apportionment of such contributions for capital and/or operational purposes. If
the parties are unable to arrive at an agreement, Section 6 shall apply.
Section 6: Coordinating Committee
6.1 The Coordinating Committee is composed of one participant each from Metropolitan and
SJBA. The Coordinating Committee shall meet as needed to resolve issues regarding the
GRP Contribution, Annualized Capital Component, Operation and Maintenance
Component, Annualized Replacement Component and Project Unit Cost. Coordinating
Committee's responsibilities exclude renegotiating the terms of this agreement.
-7-
6.2 The Coordinating Committee shall, to the extent possible, seek to establish consensus in
carrying out its responsibilities. Metropolitan and SJBA shall each have a single vote on
the Committee. If, by voting, the Coordinating Committee cannot resolve a particular
matter or matters, a third party shall be appointed by the parties to represent a third vote
on the Committee, and the Coordinating Committee shall then act by majority vote as to
the matter or matters. The Coordinating Committee's decision shall be final and binding
on the parties. If the parties cannot agree on the third party, then any party to this
Agreement may request a court to appoint the third party pursuant to Code of Civil
Procedures, Section 1281.6. Costs for the third party shall be shared equally by
Metropolitan and SJBA and shall not be included in Project Unit Cost.
Section 7: Record Keeping and Audit
7.1 SJBA shall establish and maintain accounting records of all costs incurred for
construction, operation and maintenance, and replacement parts of the Project as
described in Exhibits B, C and D and all contributions described in Section 53.
Accounting for the Project shall utilize generally accepted accounting practices and be
consistent with the terms of this Agreement. SJBA's Project accounting records must
clearly distinguish all costs for the Project from SJBA's other water production,
treatment, and distribution costs. SJBA's records shall also be adequate to determine
Allowable Yield and Recovered Groundwater to accomplish all cost calculations
described in this Agreement.
7.2 SJBA shall establish and maintain accounting records of all contributions including
grants that offset eligible Project capital costs, operation and maintenance costs, and/or
replacement costs, as outlined in Section 5.3.
7.3 SJBA shall collect Recovered Water and Allowable Yield data for each Fiscal Year of
Project operation and retain records of that data based on the metering requirements in
Section 3.4.
-8-
7.4 Metropolitan shall have the right to audit the Project costs and other data relevant to the
terms of this Agreement for a period of three Fiscal Years following the termination of
the Agreement. Metropolitan may elect to have such audits conducted by its staff or by
others, including independent accountants, as designated by Metropolitan. SJBA shall
make available for inspection to Metropolitan or its designee, upon 30 days advanced
notice, all records, books and other documents, including billings and costs incurred by
contractors, relating to the construction, operation and maintenance of the Project; any
grants and contributions, as described in Exhibits B, C, and D; and capital cost. financing.
Upon 30 days advance notice and at Metropolitan's request, SJBA shall also allow
e w Metropolitan's personnel or its designee to accompany SJBA staff in inspecting SJBA's
f r L -ontractors' records and books for the ,purpose of conducting such audits of Project costs.
7.5 In lieu of conducting its own audit(s), Metropolitan shall have the right to direct SJBA to
have an independent audit conduted of all Project costs incurred in any Fiscal Year(s)
pursuant to this Agreement. SJBA shall then have an audit performed for said Fiscal
Year(s) by an independent certified public accounting firm and provide Metropolitan
copies of the audit report within six months after the date the audit was requested. The
cost of any independent audit performed under this Agreement shall be paid by SJBA and
is an allowable Project operation and maintenance cost pursuant to Exhibit C. Based on
the results of any independent audit, an adjustment for over or underpayment of
Allowable Yield for each applicable Fiscal Year shall be reflected by Metropolitan in
subsequent billing to MWD®C.
7.6 With the first submittal of Project data as required by Section 5, SJBA shall provide
Metropolitan with an audit of costs pursuant to Section 7.5 and a certification from. an
independent certified public accounting firm indicating that SJBA has established an
accounting system to record Project water deliveries, and costs pursuant to Section 7. 1,
7.2; and 7.3.
-9-
Section 8: 8: Interni tion c p Replenishment Water Supply
., of .
8.1 This section shall become applicable only upon SJBA's initial purchase of
Replenishment mater for the Project from Metropolitan and shall remain operative
thereafter for the term of this Agreement.
8.2 MWDOC and SJBA agree (to the extent that each has the authority) to diligently prepare
for and operate the Project during interruption of Metropolitan's Replenishment dater
deliveries pursuant to Sections 8.3 and 8.4.
8.3 During water shortage conditions, Metropolitan may suspend for up to and including
three continuous years delivery to SJBA of Replenishment Mater equal to the last three-
year average of replenishment water required to support Project's AIlowable Yield.
Metropolitan may also otherwise suspend delivery to MWDOC of Replenishment Water
to the extent required by law or by rules enacted by Metropolitan's Board of Directors,
which are generally applicable to Metropolitan's member public agencies. Failure by
SJBA to cause the Project to operate or reduce replenishment deliveries during such
shortages shall constitute material breach of the agreement effective the first day of the
Fiscal Year in which the breach occurs.
8.4 Subsequent to restoration of Metropolitan deliveries of Replenishment Water, MWDOC
and SJBA shall diligently replenish Lower San Juan Basin to sustain another three years
of interruption of Metropolitan Replenishment Water.
Section 9: Term and Amendments
9.1 The term of this Agreement shall be twenty (20) years from the date of the initial
production of Allowable Yield.
9.2 This Agreement may be amended at any time by written mutual agreement of the Parties.
9.3 SJBA may terminate this Agreement upon 30 days prior notice.
-10-
9A This Agreement shall automatically terminate, and Metropolitan's obligations under this
Agreement shall terminate accordingly, upon occurrence of any of the following:
a. payments are not required to be made ander this Agreement by Metropolitan to
MWDOC for a five consecutive -year period subsequent to the initiation of operation;
b. construction has not commenced within four years following execration of this v
agreement;
C. no Allowable Yield. is produced within W years following execution of this V
Agreement or
d. material breach of this Agreement by any party other than Metropolitan.
Section 10: Hold Harmless and Liabili
STBA agrees at its sole cost and expense to defend and hold Metropolitan and MWDOC
harmless from any claim and any and all liability (including but not limited to, liability due to
water quality) which may arise out of SJBA's approval of, and subsequent construction and
operation of, the Project or out of the ownership of the Project, and will save and defend
Metropolitan and MWDOC and its officers, agents, and employees free from any claims for
injury, including death or damage to property, or injury (including death or damage) due to water
quality, construction, operation, or ownership of the Project. Such indemnity shall include all
loss related to any claim made, whether or not a court action is filed, and shall include attorneys
fees, administrative and overhead costs, engineering and consulting fees and all other costs
related to or arising out of such claim of liability. Such indemnity to MWDOC shall not apply in
the event MW®DC assumes responsibility for operation of the Project.
Section 11: Notice
Any notice, payment, or instrument required or permitted to be given hereunder shall be deemed
received upon personal delivery or 24 hours after deposit in any United States post office, first
class postage prepaid and addressed to the Party to this Agreement for whore intended, as
follows:
If to Metropolitan: The Metropolitan Water District of Southern California
P.O. Box 54153
Los Angeles, California 90054-0153
Attention: General Manager
If to MWDOC: Municipal Water District of Orange County
10500 Ellis Avenue
P.O. Box 20895
Fountain Valley, California 92728
Attention: General Manager
If to SJBA: San Juan Basin Authority
27500 La Paz Road
Laguna Niguel, California 92656
Attention: General Manager
Any Party to this Agreement may change such address by notification given to the other Parties
as provided in this section.
Section 12: Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon any successor agency and
assigns of the parties hereto. Except as provided herein, this Agreement and any portion thereof
shall not be assigned or transferred to any entity not an original party to this Agreement, nor shall
any of the duties be delegated, without express written consent of all parties. Any attempt to
assign or delegate this Agreement without the express written consent of all parties shall be void
and of no force or effect. Except as otherwise noted above, and provided that MWDOC provide
all other parties to this Agreement with written acceptance of the ownership, obligations or
responsibilities to be transferred, the SJBA is authorized to delegate or assign any or all of its
obligations and responsibilities pursuant to this Agreement to MWDOC without express written
consent of Metropolitan, and SJBA is also authorized to transfer ownership of the Project and all
obligations and responsibilities pursuant to this Agreement to MWDOC without express consent
of Metropolitan.
-12-
Section 13: ,,.,.
Severability
The partial or total invalidity of one or more sections of this Agreement shall .not affect the
validity of this Agreement.
Section 14. Integration
This Agreement comprises the entire integrated understanding between the parties concerning the
San Juan. Basin I3esalter Project, and supersedes all other negotiations, representations, or
agreements.
Section 15. Governing Law
The laws governing this Agreement shall be the laws of the State of California and the venue of
any action brought hereunder shall be Los Angeles County, California.
-13-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective as of the
date first herein above written.
ACCEPTED:
APPROVED AS TO FORM:
THE METROPOLITAN WATER DISTRICT
OF SOUTHERN CALIFORNIA
N. Gregory Taylor, General Counsel
Edward G. Means, Ill,
Deputy General Manager
By: C
EY
Signatory
Debra C. Man, Chief
Deputy General Counsel
Planning and Resources
Date: '/ �� ��
Date: S
ACCEPTED:
APPROVED AS TO FORM:
MUNICIPAL WATER DISTRICT OF
ORANGE COUNTY
By: �-
By:
AStanleiyS
J et Mornin ar
e
General Counsel
General Manager
Date:
Date:
ACCEPTED:
APPROVED AS TO FORM;
By:
Fritz Stra ing
General ounsel
Date:
o:Icontractla,-rccljvsjuan.doc
-14-
SAN JUAN BASIN AUTHORITY
By:
John Schatz)
President
i l
Date: - ti
EXHIBIT A
PROJECT DESCRIPTION
San Juan Basin Desalter
Overview
The San Juan Basin Desalter Project will pump and treat groundwater from the Lower San Juan
Basin and deliver it to the Capistrano Valley Water District's (CVWD) distribution system. The
Lower San Juan Basin is located in south Orange County. The proposed facilities are to be
completed in phases. Phase I project facilities will consist of a four million gallon per day
desalter to treat brackish groundwater, groundwater extraction wells with 5.7 million gallons per
day (MGD) of production capacity, collection pipelines to convey pumped groundwater to the
treatment plant, a pump station, product water pipeline to convey treated water to CVWD's water
delivery system and brine disposal pipeline. The Phase I facilities will capture and desalt the
unused sustained yield of the lower basins of about 5,800 acre-feet per year, producing a potable
water supply of approximately 4,800 acre-feet annually. Operation of Phase I of the Project will
not require replenishment water. Phase I is being developed by the SJBA Project Committee
No. 4, which consists of CVWD, Moulton Niguel Water District (MNWD), and Santa Margarita
Nater District (SMWD). The proposed Phase I Project facilities are shown in Figure 1.
Subsequent phased construction would include the construction of additional distribution
pipelines and booster station to deliver water to MNWD's and SMWD's systems, expansion of
the desalter capacity to 8 MGD and construction of additional extraction wells, recharge
facilities, product water pipelines, and pumping facilities. Facilities other than Phase I facilities
are not considered as part of the Project as defined in Section I of this Agreement except that
cost of Recovered Groundwater produced by subsequent phases may be taken into account in
determining Metropolitan's contribution to the Phase I of the Project. Subsequent phases will
finally be sized and developed based on the operating and groundwater management experience
gained from Phase I operation.
Phase I Treatment Facilities
The proposed Phase I desalter facility will include a 4 -MGD reverse osmosis plant, a
10,000 -square -feet building to house the desalter, a pump station with associated building, and
parking areas. Approximately three acres are needed to accommodate the desalter facility. The
proposed treatment process will include pre-treatment to remove or stabilize iron and manganese,
hardness and adjust the pH. Primary treatment will be by reverse osmosis process, followed by
post treatment. Post treatment will consist of aeration, pH adjustment and disinfection. Raw
water entering the treatment plant from the well field will split into two streams. The main
stream, approximately 85 to 88 percent of pumped groundwater, will be delivered to the reverse
osmosis treatment process. The second stream will bypass the primary treatment and will be
blended with treated water prior to the post-treatment process. Figure 2 illustrates the treatment
process schematically.
A-1
3
-4 MIMMM14-
EXISTING 57,
SERRA OCEAN
OUTFALL
M.
2411PRODUCT
DISTRIBUTION,WATER
coq
sTy�
P,gCIFjC 0 y
Figure I
A-2
NOT TO SCALE
Phase I Well Collection, Distribution and Brine Disposal Facilities
Phase I will include approximately 7,000 feet of 18 -inch and 7,500 feet of 24 -inch -diameter
pipeline to collect and convey raw groundwater from the well sites to the desalter facility for
treatment, Approximately 5,000 feet of 24 -inch diameter pipeline will be required to deliver
treated water from the desalter to a pipeline connected to an existing reservoir in CVWD's
system (425 -foot Pressure Zone) located near Ortega Highway and Rancho Viejo Road. Brine
will be disposed to the Chiquita Land Outfall by gravity flow through approximately 700 feet of
12 -inch diameter pipeline.
Phase I Wells
The Project will include the construction of approximately five wells, requiring about
2,000 square feet of land for each. Depending on the final design, the wells .may be housed in
underground vaults, above ground buildings or fenced enclosures. A total well capacity of
approximately 4,000 gallons per minute (gpm) will be required to provide feedwater to the
Project. Wells are anticipated to have a capacity range from 450 gpm each in the northern end to
1,000 gpm in the southern end of the system, and will discharge into a manifold pipe system,
with diameters ranging froze. 10 to 20 inches.
Phase I Points of Connection
The Project product water pipeline will terminate at a connection to an existing pipeline located
near the intersection of Ortega Highway and Rancho Viejo Road, which is connected to
CVWD's existing reservoir, and the reject brine pipeline will terminate at a connection to the
Chiquita Land Outfall.
M
HIGH
PRESSURE
PUMP
PRETREATMENT R/O UNIT
�. ,
0
4.67 MGD
4 . 8 0 * j
POST
TREATED
R®DUCT
DISINFECTION POST TREATMENT OCEAN
am
A-4
EXHIBIT B
ANNUALIZED CAPITAL COMPONENT
The Annualized Capital Component shall be computed using only the following incurred
costs by SJBA for the Project:
a. Final design and construction management services.
b. Construction of Project facilities, more particularly described in Exhibit A.
Additional capital improvements that are not consistent with the Project
Description outlined in Exhibit A must be submitted to Metropolitan for review.
Written approval by Metropolitan is required before such costs are considered
eligible for inclusion in the Annualized Capital Component Calculation.
Agency administration of the design, construction, and start-up not to exceed
three percent of the eligible construction costs, unless approved in writing by
Metropolitan.
d. Permits, including required data collection.
e. Land, rights-of-way and easements for the Project described in Exhibit A.
f Concentrate Waste Disposal Connection Fee.
g. All contributions as outlined in Section 5.3 of this Agreement shall be treated as
negative capital cost values for the purpose of computing the Annualized Capital
Component.
h. Capital costs similar to those above for Phase II facilities if the unit cost of the
combined production of all Recovered Groundwater reduces Metropolitan's net
contribution for Allowable Yield.
2. Costs of the following items shall not be used to calculate the Annualized Capital
Component:
Distribution and concentrated waste disposal facilities beyond the Project's points
of connection.
b. Environmental planning, documentation and mitigation measures required to
comply with the California Environmental Quality Act (CEQA).
C. Existing water systems, facilities, land, rights-of-way, and easements owned by
SJBA, or members of the SJBA Project Committee No. 4.
d. Feasibility studies.
B-1
e. Deposit of any reserve funds required as a condition of financing.
f All others not specified in Section I of this Exhibit.
Annualized Capital Cost (ACCost) in dollars per year shall be computed using the
following procedure:
a. For fixed -interest rate financing with uniform payments:
ACCost = CRF, x P, + CRFZ x P2 +...+CRF,. x P,
Where:
Pj is each portion of the incurred capital cost for Project with a distinct financing
arrangement.
CRFi, is the capital recovery factor for each distinct financing arrangement, as
follows:
CRF = i x (1+ i)° J / [(I + 1)n-1
i is the interest rate
n is the tern of financing (in years) commencing in the first Fiscal Year of
Project operation
j is the number of each separate financing element
In the first Fiscal Year and Fiscal Year n+1 of production of Allowable Yield,
each amortization for the calculation of ACCost shall be prorated by the number
of days needed to achieve exactly n years of amortization following the first day
of production of Allowable Yield.
b. For variable -interest rate financing, annual payments shall be computed based on
the actual payments made in applicable Fiscal Year according to SJBA's
financing documents. Any principal payments toward Project capital cost before
the Project operation will be treated as cash. SJBA shall provide Metropolitan
with the accumulated paid principal pursuant to Section 5.1.
For fixed -interest rate financing with a non-uniform annual payment schedule, an
economically -equivalent uniform annual payment schedule shall be calculated
based on "Internal Rate of Return" analysis to establish the annualized capital cost.
d. If the Project capital cost is part of a broad financing arrangement that includes
other costs, annual payments shall be calculated by prorating the annual payments
of the broad financing using the ratio of the Project capital cost to total principles
of the financing instrument.
W
Project capital costs not covered by a financing arrangement described above and
all grants and contributions as defined in Section 5.3 shall be amortized over
20 years at an interest rate equal to the lesser of: (i) Metropolitan's most recent
weighted cost of long-term debt on June 30 in the year the capital expenditure
occurred; or (ii) the Fiscal Year average of the 25 -bond Revenue Bond Index
(RBI), as published in the Bond Buyer, in the year the capital expenditure
occurred.
f All grants or contributions shall be amortized as negative capital cost values
beginning in the year the money was received.
g. After the first Fiscal Year of operation, only refinancing changes that lower the
Annualized Capital Component shall be included in the Annualized Capital
Component calculation of each subsequent Fiscal Year.
h. For all capital financing, cash expenditures, and grants and contributions received
after the Project operation, annual payments shall be calculated, using above
process, beginning in the Fiscal Year the costs occur.
4. The Annualized Capital Component (ACCom) in dollars per acre-foot for purposes of
determining the Project Unit Cost each Fiscal Year shall be calculated using the
following formula:
ACCom = (ACCost) / Recovered Groundwater
Recovered Groundwater shall not be less than 80 percent of Project Capacity in any year
subsequent to initial production of Allowable Yield. Project Capacity in the first
Fiscal Year of production of Allowable Yield shall be prorated based on the number of
days of production of Allowable Yield.
EXHIBIT C
OPERATION ANIS MAINTENANCE COMPONENT
The Operation and Maintenance Component shall be computed using the costs incurred
during the applicable Fiscal Year for the following:
a. Professional consulting services for Project operation, maintenance and audits,
excluding daily project operation.
b.,, SJBA labor costs equal to $205,075 x (Maximum hourly rate for CVWD Utility
Supervisor /$30.88) where $30.-88 is maximum hourly rate for CVWD Utility
Supervisor for Fiscal Year 1998-1999. Between July I and December 30
following the fifth full Fiscal Year of operation and every fifth Fiscal Year
thereafter, any party may request the Coordinating Committee to revise the
allowable labor cost. Labor cost in the first Fiscal Year of production of
Allowable Yield shall be prorated based on the number of days of production of
Allowable Yield. t €< �� s�� C 7 V'g - �" 3"*kv^ 4
,4
e. Chemicals and supplies for Project operation, maintenance and repair to maintain
reliable system operation and achieve regulatory compliance.
d. Electrical energy use for Project facilities:
Project supply wells and treatment plant.
Booster p,i ps. Energy cost to pump Recovered Groundwater from
Project to CVWD's 425 -foot pressure zone. Supporting data shall be
provided indicating the energy utilized to deliver Recovered Groundwater
to 425 -foot pressure zone. The energy amounts utilized shall be
reasonable and practical regarding said delivery. Electrical energy for
booster pumping shall not exceed 650 kilowatt hours for each acre-foot of
Recovered Groundwater.
0 Project lighting and general electric needs.
Water quality sampling and analysis for the Project.
f. Concentrate waste disposal costs.
g. All contributions as outlined in Section 5.3 of this Agreement shall be treated as
negative values for the purpose of computing Operation and Maintenance
Component.
C-1
h. Replacement parts costs, which are less than or equal to the following amount per
unit:
�. 100,000 x (ENRCCI / 6,694)
Where ENR.CCI is the Engineering News Record Construction Cost Index for
Los Angeles area for July of each applicable Fiscal Year. ENRCCI for July 1998
is 6,694.
Operating costs for Phase 11 facilities and future delivery system and booster
pumping for delivery of product water to MNWD and SMWD, if the unit cost of
the combined production of all Recovered Groundwater reduces Metropolitan's
net contribution for Allowable Yield.
2. Costs of the following items shall not be used to calculate the Operation and Maintenance
Component:
a. Operation and maintenance of distribution and concentrate waste disposal systems
beyond the Project's point of connection.
b. MWDOC's project participation.
C. Replacement parts pursuant to Exhibit D.
d. Payments made to another department or element or member of SJBA other than
for contracted operation of the Project.
C. Leases of land, rights-of-way, water systems, and facilities owned by SJBA, or
members of the SJBA Project Committee No. 4.
f Payment by SJBA to any party for Project operation labor costs except as noted in
1 b.
g. All other operation and maintenance items not specified in Section 1 of this
Exhibit.
3. The Operation and Maintenance Component (O&MC) in dollars per acre-foot for
purposes of determining the actual Project Unit Cost each Fiscal Year shall be calculated
using the following formula:
(O&MC) = (Actual Annual Cost of O&M) / (Recovered Groundwater)
(F G t?
F k s E i
C-2
EXHIBIT D
ANNUALIZED REPLACEMENT COMPONENT
1. The Annualized Replacement Component shall be computed using incurred costs for the
following:
a. Membrane replacement.
b. Replacement of major parts costing more than the following amounts per unit.
100,000 x (ENRCCI { 6;694)
Where ENRCCI is the Engineering News Record Construction Cost Index for
Los Angeles area for July of each applicable Fiscal Year. ENRCCI for July 1998
is 6,694.
C All contributions as outlined in Section 5.3 of this Agreement shall be treated as
negative values for the purpose of computing Annualized Replacement
Component.
d Salvage of replaced parts shall be a negative replacement cost.
e Replacement costs for Phase II facilities and future delivery system and booster
pumping for delivery of product water to MN WD and SMWD if the unit cost of
the combined production of all Recovered Groundwater reduces Metropolitan's
net contribution for Allowable Yield.
2. Costs of the following items shall not be used to calculate the Annualized Replacement
Component:
a. Replacement of distribution and concentrate waste disposal systems beyond the
Project's points of connection.
b. MWDOC's Project participation.
c. Any capital or operation and maintenance as previously defined in Exhibits B
and C, respectively.
d. Reserve funds. e'
D-1
3. The Annualized Replacement Cost (ARCost) regarding each replacement occurrence
defined in this Exhibit D shall be calculated using the following procedure:
ARCost = (CRF) X (M) + (CRF,) X (R,) + ..... CRF) X (R)
Where:
® CRF is the capital recovery factor used for n years using Metropolitan's default
interest rate.
CRF = [i X (1 + i)°] / p + i)"- 1I
n is the number of years determined as follows: for membrane replacement, n is
the number of years the replaced membranes were in service; for all other
replacement costs, n is 20 years.
R is the sum of all costs of replacing major Project parts other than membranes in
a Fiscal Year.
® M is the incurred membrane replacement cost pursuant to this Exhibit D.
0 i is Metropolitan's default interest rate and shall be equal to the lesser of -
(a) Metropolitan's most recent cost of long term debt on June 30 for each
applicable Fiscal Year, or
(b) the Fiscal Year average of the 25 -bond Revenue Bond Index (RBI), as
published by the Bond Buyer, for the Fiscal Year in which the replacement costs
are incurred by SJBA.
r j is the Fiscal Year in which a replacement cost is incurred.
4. The Annualized Replacement Component (ARCorn) for each replacement occurrence in
dollars per acre-foot shall be calculated using the following procedure:
ARCom = ARcost / Recovered Groundwater
For purposes of this calculation, Recovered Groundwater shall not be less than 80 percent
of Project Capacity in any year.
D-2
EXHIBIT E
DEFERRED COST
Deferred Cost (DC) applicable to the determination of Final GRP contribution for the next Fiscal
Year is computed as follows:
DC = AYP x (PUCP — RateP-250) / RW
Where:
AYP = Allowable Yield in the previous Fiscal Year (AF)
PUCP = Project Unit Cost in the previous Fiscal Year ($/AF) as defined in Section 1.19
RateP — Metropolitan's applicable full service treated water rate in the previous Fiscal
Year ($/AF)
250 = Maximum Final GRP Contribution ($/AF), and
RW= Recovered Water in the Fiscal Year that the reconciliation is performed for
There shall be no DC value carryover upon Agreement termination
If DC is calculated as a negative number using the above equation, DC will be zero.
o:lcontractlagreeljvsj uan. doe
E-1.
cc w/ attachment
M. Scully
N. Jazmaderian
G. Green
A. Sienkiewich
1, Vergara.