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HomeMy WebLinkAboutMETROPOLITAN WATER DISTRICT OF SO. CALIF ET ALAGREEMENT NO. 22156 GREEN ACRES RECLAMATION PROJECT LOCAL RESOURCES PROGRAM CONVERSION AGREEMENT BETWEEN THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, MUNICIPAL WATER DISTRICT OF ORANGE COUNTY, COASTAL MUNICIPAL WATER DISTRICT, CITY OF SANTA ANA AND ORANGE COUNTY WATER DISTRICT RECORD NO.Z�� OCWD DOC AGREEMENT NO.22156 GREEN ACRES RECLAMATION PROJECT LOCAL RESOURCES PROGRAM CONVERSION AGREEMENT BETWEEN THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, MUNICIPAL WATER DISTRICT OF ORANGE COUNTY, COASTAL MUNICIPAL WATER DISTRICT, CITY OF SANTA ANA AND ORANGE COUNTY WATER DISTRICT TABLE OF CONTENTS Section Pake RECITALS...................................................................................................................................... I Section1: Definitions............................................................................................................ .......3 Section2: Warranties...................................................................................................................... 4 Section 3: Ownership and Responsibilities.....................................................................................5 Section4: Billing Process................................................................................................................ 5 Section 5: Reconciliation Process ............................................................................................... 6 Section 6: Coordinating Committee................................................................................................7 Section 7: Record Keeping and Audit..............................................................................................7 Section S: Term and Amendments......................................................................... ..................... S Section 9: Hold Harmless and Liability........................................................................................... 9 Section10: Notice........................................................................................................................... 9 Section 11: Successors and Assigns........................................................................:...................10- Section12: Severability..................................................................................... ........................10 Section13: Integration.................................................................................................................. 10 Section14: Governing Law........................................................................................................... 10 Exhibits Exhibit A (Project Description) Exhibit B (Annualized Capital Component) Exhibit C (Operation and Maintenance Component) Exhibit D (Annualized Replacement Component) Exhibit E (Deferred Cost) Exhibit F (Performance Provisions) Exhibit G (Green Acres Phase 1 Capital Projects Debt Service Allocation) AGREEMENT NO. 22156 GREEN ACRES RECLAMATION PROJECT LOCAL RESOURCES PROGRAM CONVERSION AGREEMENT BETWEEN THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, MUNICIPAL WATER DISTRICT OF ORANGE COUNTY, COASTAL MUNICIPAL WATER DISTRICT, CITY OF SANTA ANA, AND ORANGE COUNTY WATER DISTRICT THIS AGREEMENT is made and entered into as of July 1, 1999 by and among The Metropolitan Water District of Southern California (Metropolitan), Municipal Water District of Orange County (MWDOC), Coastal Municipal Water District (CMWD), City of Santa Ana (SA), and Orange County Water District (OCWD). Metropolitan, MWDOC, CMWD, SA, 'and OCWD a may be collectively referred to as "Parties" and individually as "Party". RECITALS A. There is now in effect a Joint Participation Agreement (JPA) dated June 1, 1988 which was amended on April 3, 1992 (First Amendment), September 1, 1995 (Second Amendment) and September 8, 1997 (Third Amendment) by and among Parties for the development and utilization of recycled water, which provides for the Green Acres Reclamation Project (Project) to participate in Metropolitan's Temporary Local Resources Program (TLRP) until Metropolitan adopted terms and conditions for a new Local Resources Program (LRP); B. Metropolitan's Board of Directors, at its June 9, 1998 meeting, established terms and conditions for the LRP and authorized all existing agreements under the TLRP to be incorporated into the LRP, which provides financial incentives from $0 to $250 per acre-foot of recycled water produced and used within Metropolitan's service area for the purposes of improving regional water supply reliability; C. The Parties mutually agree to terminate the JPA as amended and enter into this agreement (Agreement) with terms and conditions outlined herein; D. Metropolitan was incorporated under the Metropolitan Water District Act (Act) for the purpose of developing, storing, and distributing water for domestic and municipal purposes; E. 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 municipal and domestic uses and purposes; set 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; Agreement 22156 -1- F. MWDOC, CMWD and SA, as member public agencies of Metropolitan under the Act, are wholesale purchasers within their respective service areas of water developed, stored, and distributed by Metropolitan; G. OCWD is a member public agency of MWDOC with boundaries that include portions of the service boundaries of MWDOC, CMWD and SA; H. OCWD was created under a Special Act of the California Legislature in 1933 (OCWD Act) for the purpose of protecting and managing the Orange County groundwater basin. The OCWD Act specifically empowers OCWD to manage the groundwater basin; to provide for conservation of the basin including both quantity and quality of water; and to provide protection both of the water rights of Orange County and of the natural flow of the Santa Ana River; I. Metropolitan has determined to take all reasonable and necessary steps to provide its service area with adequate and reliable water to meet present and future needs in an environmentally and economically responsible way including providing financial incentives to water recycling projects under its LRP; J. A significant amount of treated wastewater generated within OCWD's service area is currently discharged into the ocean, which water when provided with tertiary treatment could be used for irrigation, agricultural, commercial and industrial purposes, thereby avoiding disposal thereof as a waste product, and avoiding the use of an equivalent volume of imported water from Metropolitan's water supply system for such purposes; K. Pursuant to the JPA, the Project commenced operation in October 1991; L. Under the Project, OCWD owns and operates a tertiary treatment facility known as Green Acres Reclamation Plant which is a source of recycled water for the Project. Under a separate agreement, recycled water may be purchased from the Irvine Ranch Water District (IRWD) during the winter through an intertie with the Newport Beach pipeline and used to satisfy Project demands. Further, OCWD has entered into discussions regarding conveyance of well water through the Project's distribution system to IRWD via the intertie and connecting pipelines; M. Metropolitan, MWDOC, CMWD, SA and OCWD have determined that it is mutually beneficial for local water projects originating in the service areas of MWDOC, CMWD, and SA to be developed as a supplement to Metropolitan's imported water supplies in order to meet future water needs; N. Metropolitan desires to assist in increasing production and distribution of recycled water by providing a financial incentive to OCWD, through MWDOC, CMWD, and SA, for implementation of the Project; O. MWDOC, CMWD, and SA desire to participate in and affirmatively support the Project by transferring to OCWD the financial incentive that they receive from Metropolitan; Agreement 22156 -2- P. OCWD believes that Metropolitan's continued financial contribution toward the cost of the Project will make the Project operation economically viable, and thus is committed to implementation of this Project; Q. OCWD has an agreement with Orange County Sanitation District (OCSD) to provide Project recycled water which is not Allowable Yield under this Agreement. R. The Parties believe development of recycled water by the Project will benefit the local community within OCWD and the region served by Metropolitan. NOW, 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: 1.1 "Allowable Yield" shall mean the amount of Recycled Water including IRWD recycled water delivered to the End Users by OCWD from the Project in a Fiscal Year that is eligible to receive Metropolitan's financial assistance. Allowable Yield shall not exceed Ultimate Yield and shall exclude any Recycled Water Metropolitan reasonably determines will not reduce MWDOC's, CMWD's and SA's demand for Metropolitan's imported water. Unless otherwise approved in writing by Metropolitan, Allowable Yield shall exclude: (1) groundwater, surface water or potable water deliveries to supplement the Recycled Water system; (2) Allowable Yield from other projects with active or terminated LRP or Local Projects Program agreements; and (3) additional Recycled Water or any type of water conveyed through Project facilities to OCSD. 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 "End User" shall mean each user that purchases Allowable Yield furnished by this Project. 1.4 "Estimated LRP Contribution" shall mean the advanced financial contribution in dollars per acre-foot Metropolitan pays for Allowable Yield to OCWD for monthly billing purposes until the Final LRP Contribution is calculated pursuant to procedures in Sections 4.2 and 5.2, respectively. 1.5 "Final LRP Contribution" shall mean the financial contribution, not to exceed $250 per acre-foot, by Metropolitan to the Project in dollars per acre-foot of Allowable Yield. The Final LRP Contribution for the Project is equal to the sum of the Project Unit Cost and Deferred Cost minus the sum of Metropolitan's prevailing full service treated water rate and the amortized cost of any avoided Metropolitan New Demand Charge. The New Demand Charge will be applied in the formula used to determine the Final LRP Agreement 22156 -3- 1.6 "Fiscal Year" shall mean a Metropolitan Fiscal Year that begins on July 1 and ends on June 30. 1.7 "New Demand Charge" shall mean those amounts charged to each member agency to recover the capital costs associated with meeting that agency's new demands on Metropolitan's system, pursuant to the discretionary rate -setting authority of Metropolitan's Board of Directors. 1.8 "Project" shall mean the "Green Acres Reclamation Project", as defined in Exhibit A attached hereto and incorporated herein by this reference, being developed by OCWD to produce the Ultimate Yield. 1.9 "Project Unit Cost" shall mean the actual cost to produce an acre-foot of Recovered Water.by. the'Project 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. 1.10 "Recovered Water" shall mean all types of water including Recycled Water delivered for beneficial use by the Project in a Fiscal Year, measured in acre-feet. 1.11 "Recycled Water" shall mean treated wastewater which, subject to regulatory requirements, is suitable for beneficial uses. 1.12 "Ultimate Yield" is originally established as 7,000 acre-feet per Fiscal Year and is subject to the reduction provisions as outlined in Exhibit F, incorporated herein by this reference. Section 2. Warranties 2.1 OCWD, by virtue of its ownership of the Green Acres Reclamation Plant and its agreements with OCSD and IRWD, warrants that it has a firm and adequate source of Recycled Water to operate the Project; 2.2 OCWD warrants that it is able and has a right to sell Allowable Yield from the Project. 2.3 OCWD warrants that it does not discriminate against employees or against any applicant for employment because of ethnic group identification, religion, age, sex, color, national origin, or physical or mental disability and further warrants that it requires all contractors and consultants performing work on the Project to comply with all 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 OCWD warrants that it has or will comply with the provisions of the California Environmental Quality Act for each and all components of the Project facilities. Agreement 22156 -4- Section 3: Ownership and Responsibilities 3.1 OCWD shall be the sole owner of the Project facilities. Metropolitan, MWDOC, CMWD, and SA have no ownership right, title, security interest or other interest in the Project facilities. 3.2 OCWD shall be solely responsible for all design, environmental compliance, right-of- way acquisitions, permits, construction, and cost of the Project and all modifications thereof. 3.3 OCWD shall be solely responsible for operating and maintaining the Project in accordance with all applicable local, state, and federal laws. Metropolitan, MWDOC, CMWD, and SA shall have no rights, duties or responsibilities for operation and maintenance of the Project. 3.4 OCWD shall install, operate and maintain metering devices for the purpose of measuring the quantity of Recovered Water, Deliveries to OCSD and Allowable Yield delivered to each End User. OCWD shall also provide electrical metering devices to accurately measure the energy used for the Project to determine incurred operation and maintenance costs. Metropolitan shall not pay for electrical energy cost if OCWD fails to install electrical metering devices. 3.5 OCWD shall, at all times during the term of this Agreement, use its best efforts to operate the Project facilities to maximize Allowable Yield on a sustained basis. 3.6 OCWD shall assist Metropolitan in its effort to forecast future Project production and cost. 3.7 OCWD shall notify and provide Metropolitan with copies of relevant agreements if OCWD decides to convey water using Project facilities to any party that is not an End User. Section 4: Billing Process 4.1 Metropolitan shall pay OCWD, through MWDOC, CMWD, and SA, the Final LRP Contribution for the Allowable Yield. 4.2 Metropolitan shall consult with OCWD to determine the Estimated LRP Contribution based on historic cost data and expected Project activities. Reconciliation of the Estimated LRP Contribution and Final LRP Contribution shall be performed by Metropolitan pursuant to Section 5. 4.3 OCWD shall invoice Metropolitan monthly for the Estimated LRP Contribution based upon the Allowable Yield billed to the End Users during the previous month. Metropolitan shall pay OCWD for invoiced Estimated LRP Contribution pursuant to Sections 4.1 and 4,2 by means of a credit included on the next water service invoice issued to MWDOC, CMWD, and SA. Agreement 22156 -5- 4.4 Upon receiving the Metropolitan invoice, MWDOC, CMWD and SA shall include the full amount of the Estimated LRP Contribution for the Allowable Yield received from Metropolitan as a credit on its next invoice to OCWD. 4.5 . All invoicing, billing, and crediting processes shall be in accordance with 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 1" of each Fiscal Year, OCWD shall provide Metropolitan with the following reconciliation data for the previous Fiscal Year: (a) records of Recovered Water, Allowable Yield, and deliveries to OCSD; (b) supporting documentation of the actual cost of the Project 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; (d) a description of any changes to the Project's financing instruments; and (e) all contributions other than those derived from End Users. Metropolitan will suspend its Estimated LRP Contribution if OCWD fails to provide any of the above required data by April 1" of each Fiscal Year. During the suspension period, OCWD shall continue to invoice Metropolitan for the Estimated LRP Contribution based upon the Allowable Yield for water accounting purposes. Metropolitan will resume the monthly Estimated LRP Contribution once complete data is received and the corresponding reconciliation is . complete pursuant to Section 5.2. In the event OCWD fails to provide reconciliation data by January 1st of the following Fiscal Year which is 18 months after the end of the Fiscal Year for which a reconciliation is required, this Agreement shall automatically terminate without notice or action by any Party and OCWD shall repay to Metropolitan within,90 days of termination all estimated LRP Contributions for which no reconciliation data was provided to Metropolitan. 5.2 Within 180 days after Metropolitan receives complete data from OCWD, pursuant to Section 5.1, Metropolitan shall calculate the Final LRP Contribution for the Fiscal Year. The Final LRP 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 invoice issued to MWDOC, CMWD, and SA; and payments shall be made in accordance with Metropolitan's Administrative Code. 5.3 The Parties agree that all contributions other than those derived from End Users or within MWDOC, CMWD, and SA service area boundaries and Final LRP Contribution under this Agreement, including but not limited to grants provided by the U.S. Bureau of Reclamation and IRWD payments to OCWD for wheeling water through the Project, received prior to and during the term of this Agreement that offset eligible Project costs 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. Agreement 22156 -6- Section 6: Coordinating Committee 6.1 The Coordinating Committee is composed of one participant each from Metropolitan, MWDOC, CMWD, SA and OCWD. The Coordinating Committee shall meet as needed to resolve issues regarding the LRP Contribution, Annualized Capital Component, Operation and Maintenance Component, Annualized Replacement Component, and Project Unit Cost, The Coordinating Committee's responsibilities are limited to interpretation of the terms of this agreement. The Coordinating Committee shall not have authority to negotiate, amend, or otherwise change the terms of the Agreement. 6.2 The Coordinating Committee shall, to the extent possible, seek to establish consensus in carrying out its responsibilities. Metropolitan shall have a single vote on the committee and MWDOC, CMWD, SA and OCWD shall collectively 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 provide a third vote on the Committee. The Coordinating Committee shall then act by majority vote as to the matter or matters. If the Parties cannot agree on the third party, or for any other reason the Parties cannot resolve the disputed matter or matters using the Coordinating Committee, the Parties agree to settle the dispute using mediation conducted by a neutral organization agreed upon by the Parties. The.Parties shall pay their own expenses of mediation with the exception of the mediator's fee which shall be borne one-half by Metropolitan and one-half collectively by MWDOC, CMWD, SA and OCWD. Costs of mediation shall not be included in the Project Unit Cost. Section 7: Record Keeping and Audit. 7.1 OCWD shall establish and maintain accounting records of all costs incurred for the construction, operation and maintenance, and replacement parts of the Project as described in Exhibits B, C, and D. Accounting for the Project shall utilize generally accepted accounting practices and be consistent with the terms of this Agreement. OCWD'.s Project accounting records must clearly distinguish all costs for the Project from OCWD's other water production, treatment, and distribution costs. OCWD's records shall also be adequate to determine Allowable Yield, Deliveries to OCSD and Recovered Water to accomplish all cost calculations contemplated in this Agreement. 7.2 OCWD 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 OCWD shall collect Recovered Water, Deliveries to OCSD 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. In addition, OCWD shall collect and retain records of total annual amount of water conveyed outside of OCWD's service area using Project facilities. Agreement 22156 -7- 7.4 Metropolitan shall have the right to audit all Project costs and other data relevant to the terms of this Agreement for a period of three years following the termination of this Agreement. Metropolitan may elect to have such audits conducted by its staff or by others, including independent accountants, as designated by Metropolitan. OCWD shall make available for inspection to Metropolitan or its designee, upon 30 days advance notice, all records, books and other documents, including all 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, OCWD shall also allow Metropolitan's personnel or its designee to accompany OCWD staff in inspecting OCWD's contractors' 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 the OCWD to have -an independent audit conducted of all Project costs incurred in any Fiscal Year(s) pursuant to this Agreement. OCWD 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 OCWD 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 under -payment of Allowable Yield for each applicable Fiscal Year shall be paid by Metropolitan or OCWD within one year of determination after such adjustment. 7.6 OCWD shall keep all Project records for at least three years following the termination of this Agreement. Section 8: Term and Amendments 8.1 The Agreement shall commence at 12:01 A.M. on July 1, 1999 and terminate on October 31, 2016, subject to provisions outlined in Exhibit F. The JPA as amended shall .terminate at 12:00 midnight on June 30, 1999. The provisions regarding reconciliation and audit shall remain in effect until three years after the termination of the Agreement. 8.2 This Agreement may be amended at any time by the written mutual agreement executed by each of the Parties. 8.3 In addition to the automatic termination provided for in Section 5.1, Metropolitan may terminate this Agreement due to any other material breach of this Agreement by any Party other than Metropolitan, upon thirty (30) days notice to other Parties. Metropolitan shall notify OCWD of any other material breach and OCWD shall have 30 days to address and rectify the breach. Only in the event of failure to rectify the breach shall Metropolitan terminate the Agreement. Agreement 22156 -8- Section 9: Hold Harmless„and Liability OCWD agrees at its sole cost and expense to indemnify, defend, and hold harmless Metropolitan, MWDOC, CMWD, and SA and their Boards of Directors, officers, agents, and employees from any.claim and any and all liability, including but not limited to, any claims for injury or death to any person, or damage to property for any act or omission or any liability due to water quality, which may arise out of OCWD's approval of, and subsequent construction, operation, or ownership of the Project including the sale of Project water. Such indemnity shall include any and all losses related to any claim made, whether or not a court action is filed, and shall include attorney fees, administrative and overhead costs, engineering and consulting fees and all other .costs related to or arising out of such claim of liability. Section 10: 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 for whom intended, as follows: If to Metropolitan: The Metropolitan Water District of Southern California Post Office Box 54153 Los Angeles, California 90054-0153 Attention: General Manager If to MWDOC: Municipal Water District of Orange County 10500 Ellis Avenue Fountain Valley, California 92708 Attention: General Manager If to CMWD: Coastal Municipal Water District 3 Monarch Bay Plaza, Suite 205 Dana Point, California 92629 Attention: General Manager Agreement 22156 -9- If to SA: City of Santa Ana Public Works Agency 220 S. Daisy Avenue Santa Ana, California 92703 Attention: Water Resources Manager If to OCWD: Orange County Water District 10500 Ellis Avenue Fountain Valley, California 92708 Attention: General Manager Any Party may change such address by notice given to each of the other Parties as provided in this section. Section 11: Successors and Assigns This Agreement shall inure to the benefit of and be binding upon the successors and assignsof the Parties hereto. 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 the express written consent of all Parties. Any attempt to assign or delegate this Agreement or any of the obligations or benefits of this Agreement without the express written consent of all Parties shall be void and of no force or effect. Section 12: Severability The partial or total invalidity of one or more sections of this Agreement shall not affect the validity of this Agreement. Section 13: Integration This Agreement comprises the entire integrated understanding between the Parties concerning the Green Acres Reclamation Project, and supersedes all prior negotiations, representations, or agreements. Section 14: Governing Law The law governing this Agreement shall be the laws of the state of California and the venue of any action brought hereunder shall be in Los Angeles County, California. Agreement 22156 -10- IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first hereinabove written. APPROVED AS TO FORM: THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA N. Gregory Taylor Ronald R. Gastelum General Counsel General Manager By: By: Deputy General Counsel Chief of Planning and Resources APPROVED AS TO FORM: MUNICIPAL WATER DISTRICT OF ORANGE COUNTY McCormick, Kidman & Behrens By: . By: eneral Cou el General Mana APPROVED AS TO ORM: COYSNTAA,4-NA PAL ER DI RICT By: ,r�. By: General Counsel APPROVED AS TO FORM: CIT B f� By: , City Attorney by Manager ATTEST: /City Clerk APPROVED AS TO FORM: r By:•_ General Counsel o:lclustr I OlmmsharedlcontractlagreeM t 5G.d oc By: N X&Ytel A. Pulido, Mayor ORANGE C UNTY ISTRICT 2 By. President I By: {� ! General Manager Agreement 22156 -11- EXHIBIT A PROJECT DESCRIPTION Overview The Green Acres Reclamation Project (Project) is owned and operated by the Orange County Water District (OCWD). The Project will ultimately produce and deliver about 7,000 acre-feet per year (AFY) of Recycled Water from the Green Acres Reclamation Plant (GARP) to End Users within portions of Costa Mesa, Santa Ana, Huntington Beach, Fountain Valley, Newport Beach, and Huntington Beach as shown on the attached map. Recycled Water from the Project is also delivered to the Orange County Sanitation Distriet's (OCSD) for various implant uses. However, these deliveries, about 5,000 AFY, do not replace an existing demand or prevent a new demand on Metropolitan and therefore, are not considered Allowable Yield. Existing Project There are no existing Recycled Water users in the Project's service area other than those developed pursuant to this Agreement. Project Facilities Project facilities will be developed incrementally and include a tertiary treatment plant at the. Water Factory 21 (WF-21) site in Fountain Valley, a clearwell and pump station, storage facilities, distribution system, and ancillary facilities. The tertiary treatment. facilities will not be used for wastewater disposal purposes. Tertiary Plant The GARP receives undisinfected secondary treated wastewater from the OCSD's Plant No. 1. The Green Acres tertiary plant is a direct filtration plant which treats water by providing coagulation, flocculation, filtration, and disinfection. Treated water is stored in a clearwell prior to being pumped to users throughout the distribution system. IRWD Intertie Typically during the winter, Recycled Water may be purchased from Irvine Ranch Water District (IRWD) through an intertie with the Newport Beach pipeline and used to satisfy Project demands. During this time, the GARP would be taken out of service for maintenance and repairs. Recycled Water deliveries made through the OCWD/IRWD intertie to serve Project End Users shall be considered Allowable Yield delivered by the Project and are eligible for LRP Contributions. Agreement 22156 -12- In order to deliver Recycled Water from IRWD to OCSD during the winter via the intertie, a portion of the Project's distribution system is used. Hence, in this Agreement, the cost of facilities to make deliveries to Project End Users and OCSD via the OCWD/IRWD intertie are prorated as outlined in Exhibit B, Section 5. Groundwater OCWD currently blends groundwater with Recycled Water produced by the tertiary plant to control total dissolved solids (TDS) Ievels. Groundwater is ineligible for payment under this Agreement. In addition, IRWD's groundwater may be pumped from satellite wells located in Santa Ana into the Project's Recycled Water distribution system and conveyed to IRWD via the intertie. IRWD may compensate OCWD for use of Project facilities to wheel groundwater through the system. OCWD will receive water quality benefits in the form of reduced'total dissolved solids levels in Recycled Water delivered to their Newport Beach customers. Payments by IRWD for use of Project facilities to convey groundwater shall be treated as negative capital and operation and maintenance cost values in Exhibits B and C. Distribution System The Project also includes varying diameter Recycled Water pipelines in Fountain Valley, Santa Ana, Huntington Beach, Costa Mesa, Newport Beach, and Huntington Beach. Other facilities include a treated water clearwell and pump station at GARP, storage facilities and booster pump stations in the distribution system to maintain system operation and pressure. End Users Recycled Water from the Project will be used for non -potable landscape, agricultural, commercial and industrial purposes. This amount excludes Recycled Water deliveries (about 5,000 AFY) to OCSD, which is not part of this Agreement. Points of Connection Project facilities shall terminate at the points of connection to the potable distribution systems, sewer systems, storm drains, groundwater extraction systems, OCSD Plant Nos. 1 and 2, connection to the OCWD/IRWD Intertie, secondary effluent connection to GARP, and meter connections to the End Users. Agreement 22156 -13- jw r'ssJ . 3Z' �'; �nw o a. �! �s00 w 4 4 D w m z lu zz ZN V WLLJWD N4 MOW y 0amm wi � J cc w as 'is anona ZW- ww� CCUJ Z O cc w Q� to a N w z J W 0 yP U P� y� oP G 4P 1 Pa O z a pL Q zM - a s� U .."3 0 z J W m CO ui cc C) Z Lu m C) EXHIBIT B ANNUALIZED CAPITAL COMPONENT The Annualized Capital Component shall be computed using only the following incurred costs by OCWD for the Project: a. Design and construction management services. b. Construction of Project facilities, more particularly described in Exhibit A. C. Agency administration of the Project design, construction, and start-up, not to exceed three (3) percent of construction costs unless otherwise approved in writing by Metropolitan. d. Permits; including required data collection. C. Land, right-of-way and easements for the Project described in Exhibit A. f. Environmental documentation and mitigation measures directly related to the implementation or operation of the project and required to comply with applicable environmental permits and laws, including but not limited to the California Environmental Quality Act, National Environmental Policy Act, and the California and Federal Endangered Species Acts. Environmental documentation costs shall commence with the Notice of Preparation and conclude with the filing of the Notice of Determination. g. All contributions as outlined in Section 5.3 of this Agreement, including but not limited to payments from IRWD to OCWD for excess capacity purchases or groundwater conveyance through the Project, shall be treated as negative capital cost values for the purpose of computing the Annualized Capital Component. 2. Cost of the following items shall not be used to calculate the Annualized Capital Component: a. Storm drains, sewer collection systems, and treatment and distribution facilities beyond the Project's points of connection. b. Existing facilities, land, right-of-way, and easements. C. Feasibility studies. d. Facilities necessary to meet the National Pollution Discharge Elimination System and California Waste Discharge requirements. e. Deposit of any reserve funds required as a condition of financing. Agreement 22156 -15- f. Payments made to another department or element of OCWD, MWDOC, CMWD, SA, OCSD, or IRWD, unless otherwise approved in writing by Metropolitan. g. Intertie pipeline between the Irvine Ranch Water District Reclamation Project and this Project. h. Public outreach, education, and water marketing activities including but not limited to preparing brochures and handout materials, training, meetings, and workshops. i. All other items not specified in Section 1 of this Exhibit. 3. Annualized Capital Cost (ACCost) in dollars per year shall be computed as follows in conjunction with Section #5 of this Exhibit a. For Green Acres Reclamation Project Phase 1, the ACCost shall be determined using the Green Acres Debt Service Allocation for each respective Fiscal Year as summarized in Exhibit G. If OCWD refunds any or all issues shown in Exhibit G for savings with no economic detriment to Metropolitan, Exhibit G shall be revised by letter agreement to incorporate such refunds for savings without amending this agreement. b. For all other phases of the Green Acres Reclamation Project, the ACCost shall be . computed using the following procedure: ACCost = CRFI x P1 + CRF2 x PZ +... + CRFj x Pj Where: Pj is each portion of incurred capital cost for the Project with a distinct financing arrangement. CRFj is the capital recovery factor for each distinct financing arrangement, as follows: CRFj = [i x (1+i)"] 1 [(1+i)"-1] where: i is the interest rate (%). n is the term of financing (in years) commencing in the first Fiscal Year of Project operation. For all capital financing, cash expenditures, and grants and contributions received after the Project begins operation, annual payments shall be calculated beginning in the Fiscal Year the costs occur using the above process. j is the number of each separate financing element. Agreement 22156 -16- 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. C. For variable -interest rate financing, annual payments shall be computed based on the actual payments made in the applicable Fiscal Year according to OCWD's financing documents. Any principal payments toward the Project capital cost before the Project operation will be treated as cash. OCWD shall provide Metropolitan with the accumulated paid principal pursuant to Section 5.1. d. For fixed -interest rate financing with a non -uniform annual payment schedule, an economically -equivalent uniform annual payment schedule shall be calculated based on an "Internal Rate of Return" analysis to establish the annualized capital cost. e. 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 25 years at an interest rate equal to the lesser of: • Metropolitan's most recent weighted cost of long-term debt on June 30 in the year the capital expenditure occurred; or • the Fiscal Year average of the 25-bond Revenue Bond Index (RBI) as published in the Bond Buyer, or such other index that may replace the RBI, over the most recent Fiscal Year prior to the date the replacement cost was incurred. All grants or contributions shall be amortized as negative capital cost values beginning in the year that money was received. f. After the first Fiscal Year of operation, only refinancing changes which lower the Annualized Capital Component shall be included in the Annualized Capital Component calculation of each subsequent Fiscal Year. g. If the Project capital cost is part of a broad financing arrangement, annual payments shall be calculated by prorating the annual payments of the broad financing using the ratio of the Project capital cost to the initial principal of the broad financing arrangement. 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 / Allowable Yield 5. When Recycled Water is delivered to OCSD plants, the Annualized Capital Component shall be adjusted as follows: Agreement 22156 -17- Green Acres Project Facility Component GAP Treatment Plant First 7.5 MGD facility_ Future expansions Phase I Pipeline OCWD/IRWD Intertie used OCWD/IRWD Intertie not used Phase 11 Newport Beach Pipeline OCWD/IRWD Intertie used OCWD/IRWD Intertie not used All other facilities Eligible Capital Cost (% of Total Green Acres Debt Service Allocation 29 100 88- 95* 83 100* 100 * To qualify for these higher percentages, OCWD must demonstrate that no Recycled Water was delivered during the contractual Fiscal Year to OCSD plants through the OCWD/IRWD Intertie. Agreement 22156 -18- EXHEBItT C OPERATION AND MAINTENANCE COMPONENT 1. The Operation and Maintenance Component shall be computed using only the following incurred costs by OCWD during the applicable Fiscal Year. a. Professional consulting services for Project operation, maintenance and audit, excluding daily Project operation. b. OCWD Iabor costs and/or contract labor costs equal to: $175,000 x (A / $22.89) where A is maximum hourly rate for O&M Technician (i.e., entry level plant operator) for the applicable Fiscal Year and $22.89 is the maximum hourly rate for O&M Technician for Fiscal Year 1998-99. Between July 1 and December 30 in the year 2002, and every third year thereafter, any Party may request the Coordinating Committee to revise the allowable labor cost. Labor cost in the first year of production of Allowable Yield shall be prorated based on the number of days of production of Allowable Yield. C. Chemicals and supplies for Project operation and maintenance. d. Net electrical energy (recovered energy shall be deducted from energy purchased) for Project operations. Metropolitan shall not pay for electrical energy cost if OCWD fails to install electrical metering devices. e. Contractor services and supplies for Project facilities, operation, maintenance and repair to maintain reliable system operation and achieve regulatory compliance. f. Monitoring required by permits, including water quality sampling and analysis of Recycled Water produced by the Project. g. Replacement of Project parts costing less than or equal to the following amount 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. h. Payments to Irvine Ranch Water District (1RWD) for Recycled Water service via the Irvine Reclamation Project/Green Acres Project intertie during winter months. Agreement 22156 -19- IRWD will furnish recycled water to the Green Acres Reclamation Project during the winter months at a price not to exceed one-half of the rate OCWD charges the Orange County Sanitation District for recycled water service. i. All contributions as outlined in Section 5.3 of this Agreement including but not limited to payments from IRWD to OCWD for wheeling water through the Project, shall be treated as negative operation and maintenance cost values for the purpose of computing the Operation and Maintenance Component. 2. Costs of the following items shall not be used to calculate the Operation and Maintenance Component: a. Operation and maintenance of any facilities beyond the Project's points of connection. b. Operation and maintenance of any facilities necessary to meet National Pollution Discharge Elimination System and California Waste Discharge Requirements. C. Payments made to another department or element of OCWD, MWDOC, CMWD, SA, OCSD, or IRWD, unless otherwise approved in writing by Metropolitan. d. Brine disposal beyond the point of connection to the existing sewer. Public outreach, education, and water marketing activities including but not limited to preparing brochures and handout materials, training, meetings, and workshops. f. Intertie pipeline between the Irvine Ranch Water District Reclamation Project/Green Acres Project. g. Fines, penalties, settlements, or judgments due to Project operation. h. All others not specified in Section 1 of this Exhibit. 3. The Annualized 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) / [(Deliveries to OCSD) + (Allowable Yield)] Agreement 22156 -20- EXHIBIT D ANNUALIZED REPLACEMENT COMPONENT 1. The Annualized Replacement Component shall be computed using incurred costs for the following: a. Replacement cost of major Project parts costing more than the following amount 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. b. Salvage value of replaced'parts shall be a negative replacement cost. , c. All contributions as outlined in Section 5.3 of this Agreement including but not limited to payments from IRWD to OCWD for wheeling water through the Project, shall be treated as negative replacement cost values for the purpose of computing the Annualized Replacement Component. 2. Costs of the following items shall not be used to calculate the Annualized Replacement Component: a. .Replacement of any facilities beyond the Project's points of connection. b. Any capital or operation and maintenance cost as previously defined in Exhibits B and C, Annualized Capital Component and Operation and Maintenance Component, respectively. C. Reserve funds. d. Intertie pipeline between the Irvine Ranch Water District Reclamation Project/Green Acres Project. 3. The Annualized Replacement Cost (ARCost) shall be calculated Using the same procedure as for capital amortization (ACCost) in Exhibit B except that: • For membrane replacement, n is the number of years the replaced membranes were in service; for all other replacement costs, n is 25 years. • i is the interest rate in the Fiscal Year of replacement established in Section 3e of Exhibit B. • P is the actual costs of replacement in the Fiscal Year, subject to the adjustments cited in Section 5 of Exhibit B. 4. The Annualized Replacement Component (ARCom) for each replacement occurrence in dollars per acre-foot shall be calculated using the following procedure: ARCom = ARCost / [(Deliveries to OCSD) + (Allowable Yield)] Agreement 22156 -21- EXHIBIT E DEFERRED COST Deferred Cost (DC) applicable to the determination of the Final LRP Contribution is. computed as follows: DC = AYP x (PUCP - RateP - ANDC - 250) / RW where, AYP = Allowable Yield in the previous Fiscal Year (AF) PUCP = Project Unit Cost, as defined in Section 1.8, in the previous Fiscal Year ($/AF) RateP = Metropolitan's applicable full service treated water rate in the previous Fiscal Year ($/AF) ANDC = Amortized cost of any avoided Metropolitan's New Demand Charge in the previous Fiscal Year ($/AF) 250 = Maximum Final LRP Contribution ($/AF) RW = Recovered Water in the Fiscal Year that the reconciliation is performed • There shall be no DC value carryover upon Agreement termination. • If DC calculated as a negative number using the above equation, DC will be Zero. • DC for 1998-99 (under TLRP) shall be included in reconciliation for 1999-2000. Example: The following hypothetical example demonstrates how DC is calculated and used in calculation of the LRP Contribution: . Fiscal Year Sum of MWD's Water Rate and ANDC ($/AF) Recovered Water (AF) Allowable Yield (AF) Project Unit Cost ($/AF) DC ($/AF) LRP Contribution ($/AF) 1 431 2,600 2,100 781 0 250 2 431 3,000 2,500 670 70 250 3 431 3,500 3,000 72I 0 250 4 431 4,000 3,500 600 30 199 5 431 4,200 4,200 585 0 154 Fiscal Year 1: DC = 0 because project was not operating in the previous year LRP Contribution = 781 - 431 > 250 4 LRP Contribution = 250 $/AF Fiscal Year 2: DC = 2,100 x (781 - 431 - 250) / 3,000 = 70 $/AF LRP Contribution = 670 + 70 - 431 > 250 4 LRP Contribution = 250 $/AF Fiscal Year 3; DC = 2,500 x (670 - 431 - 250) / 3,500 < 0 4 DC = 0 LRP Contribution = 721 - 431 > 250 4 LRP Contribution = 250 $/AF Fiscal Year 4: DC = 3,000 x (721 - 421 - 250) / 4,000 = 30 $/AF LRP Contribution = 600 + 30 - 431 = 199 $/AF Fiscal Year 5: DC = 3,500 x (600 - 431 - 250) / 4,200 <0 4 DC = 0 LRP Contribution = 585 - 431 = 154 $/AF Agreement 22156 -22- EXHIBIT F PERFORMANCE PROVISIONS Until a project reaches its Ultimate Yield in any one Fiscal Year, the following performance provisions apply: It. Metropolitan will terminate this Agreement if construction has not commenced by June 30, 2001. As opposed to Provision lb below, there is no established appeal process for this outcome. b. Metropolitan will terminate this Agreement if Allowable Yield is npt.delivered by June 30, 2005. The Project sponsor(s) may, appeal this decision to MetropolitWs Boaird' of Directors. C. If the Allowable Yield during the 2003-04 through 2006-07 Fiscal Years after agreement execution does not reach the target yield of 37% of the Ultimate Yield, then Metropolitan will reduce the Ultimate Yield by one-half the 37% target shortfall using the highest Allowable Yield produced in that period. For example, the Ultimate Yield of a project with the following performance will be revised from 2,000 to 1,950 AFY for Scenario 1 while there would be no adjustment under Scenario 2: Project Ultimate Yield = 2,000 AFY Scenario I Scenario 2 Fiscal Year after agreement execution Allowable Yield (AFY) Allowable Yield (AFY) 2003-04 400 400 2004-05 640 650 2005-06 450 750 2006-07 500 500 37% of the Ultimate Yield = 0.37 x 2,000 = 740AFY Scenario 1: Shortfall = 740 - 640 = 100 AFY Revised Ultimate Yield = 2,000 - (0.5 x 100) = 1,950 AFY Scenario 2: Since, the Allowable Yield in the 2006-07 is greater than 740, no adjustment is required. d. If the Allowable Yield during Fiscal Years 2007-08 through 2010-11 does not reach the target yield of 63% of the Ultimate Yield, then Metropolitan will reduce the Ultimate Yield (or the Revised Ultimate Yield) by one-half the target shortfall using the highest Allowable Yield produced in that period. For Example, the Ultimate Yield of the project in above example with the following performance Agreement 22156 -23- will be reduced from 1,950 to 1,850 AFY for Scenario 1 and from 2,000 to 1,900 AFY under Scenario 2: Scenario 1 Scenario 2 Fiscal Year after agreement execution Allowable Yield (AFY) Allowable Yield (AFY) 2007-08 700 900 2008-09 800 1,000 2009-10 1,029 1,000 2010-11 900 1,060 Scenario 1: Ultimate Yield = 1,950 AFY 63% of Ultimate Yield•= 0.63 x 1,950 = 1,229 AFY Shortfall = 1,229 - 1,029 = 200 AFY Revised Ultimate Yield = 1,950 - (0.5 x 200) = 1,850 AFY Scenario 2: Ultimate Yield = 2,000 AFY 63% of Ultimate Yield = 0.63 x 2,000 = 1,260 AFY Shortfall = 1,260 - 1,060 = 200 AFY Revised Ultimate -Yield = 2,000 - (0.5 x 200) = 1,900 AFY e. 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