HomeMy WebLinkAbout11 GDWTR DESALTER 10-16-00 _ NO. 11
AGENDA RE 'ORT
MEETING
DATE OCTOBER 16,2000
TO:
FROM:
SUBJECT:
WILLIAM A. HUSTON, CI'i~Y MANAGER
PUBLIC WORKS DEPARTMENT/ENGINEERING DIVISION
AMENDMENT TO THE AGREEMENT BETWEEN ORANGE COUNTY WATER
DISTRICT AND THE CITY OF TUSTIN FOR THE CONSTRUCTION,
OPERATION, AND ACQUISITION OF A GROUNDWATER DESALTER
PROJECT, FOR REPLACEMENT OF FAILED WELL.
SUMMARY
The proposed amendment provides for the financing, design, and construction of a new well at the
Seventeenth Street Desalter to replace. Well No. 1. The design and construction of the
replacement well will be funded through a loan from the Orange County Water District in
accordance with the terms of the original Agreement for the construction of the Seventeenth
Street Desalter and this amendment. Additionally, the Metropolitan Water District (MWD) of
Southern California is providing financial incentives for the Seventeenth Street Desalter under a
Groundwater Recovery Program and have indicated that the construction of a new well is an
eligible cost under the existing Groundwater Recovery Program Agreement. As an eligible cost, it
is anticipated that the project loan will be paid through the financial incentive provided by MWD on
each acre-foot of water produced annually at the Desalter.
RECOMMENDATION
It is recommended that the City Council approve the amendment to the Agreement between the
Orange County Water District and the City of Tustin for the Construction, Operation and
Acquisition of a Groundwater Desalter Project, for Replacement of Failed Well, and authorize the
Mayor and City Clerk to execute the amendment on behalf of the City.
FISCAL IMPACT
The design and construction of the project.will be funded through a loan from the Orange County
Water District to the City of Tustin for an estimated amount of $1,000,000. The loan is to be
repaid over a ten-year period at seven per cent interest through an annual payment of
$142,377.50. The annual payment will be paid through the financial incentive provided to the City.
of Tustin by 'MWD under the Groundwater Recovery Program Agreement on each acre-foot of
water prOduced annually at the Seventeenth Street Desalter. The current amendment is based on
the estimated project cost, the actual cost and final loan amount will be determined at the
completion of the project.
Amendment to the Agreement between Orange County Water District and the City of Tustin
October 16, 2000
Page 2
BACKGROUND
On February 18, 1992, the City entered into an Agreement with the Orange County Water District
for the construction, operation, and purchase of a Groundwater Desalter Plant at 18602 E.
Seventeenth Street. This agreement provided for the Orange County Water District to design and
construct a treatment plant and the City of Tustin to operate and maintain the plant. The
Agreement also specified that the Orange County Water District will own the plant and that the
City of Tustin will acquire the Water District's interest through annual lease payments. The City is
currently making annual lease Payments of $780,237.00 to the Orange' County Water District.
The annual payments will be completed in 2008 at which time Tustin will own the treatment plant.
Subsequently, on December 8, 1992, the City entered into a joint participation Agreement with the
Metropolitan Water District of Southern California along with several other Orange County Water
agencies regarding the recovery and utilization of contaminated groundwater from the
Seventeenth Street Desalter. This Agreement insured that the cost of water produced by the
Seventeenth Street Des.alter, including maintenance and operation costs, replacement costs, and
capital costs, would not exceed the cost of water that the City would alternately have to purchase
from MWD.
The original Groundwater Recovery Program Agreement prescribed a Complicated billing/credit
process under which the City would invoice MWD for the full cost of producing the water. MWD
would then issue a check for the full cost to the City, and then in turn invoice the City through the
Municipal Water District of Orange County (MWDOC) and East Orange County Water District
(EOCWD) for the water at the current MWD rates. The City would retain the difference between
the amount invoiced to MWD and the amount billed back to the City through MWDOC/EOCWD.
However, the Agreement was amended in 1996 to allow MWD to issue a credit for purchased
water to MWDOC, which will then be passed down through EOCWD to Tustin.
The Desalter provides the City of Tustin a local water supply that is not vulnerable to cutbacks
while also retarding the spread of the existing nitrate plume and preventing the degradation of the
water quality in other wells.
DISCUSSION
The construction of the Seventeenth Street Desalter enabled the City to regain the use of three
wells that had been lost due to nitrate contamination. The contaminated wells consisted of two
wells located on the Desalter site, Seventeenth Street Well No. I and Seventeenth Street Well
No. 2, along with a well on Newport Avenue south of Warren Avenue.
Well No. 1 was constructed in 1926 and was recently rehabilitated for the third time this past
summer. This well was the largest producer of' three wells and produced approximately half the
water used by the plant. It is now operating at 75% of its original capacity and is producing 1125
acre-feet per year. However, to fully utilize the production capabilities of the treatment plant and
provide protection from the posSible failure of any of the other existing wells, a new well needs to
be constructed that would restore, the annual water production at the plant to 3000 acre-feet
annually.
Amendment to the Agreement between Orange County Water District and the City of Tustin
October 16, 2000
Page 3
There is available space on-site for a replacement well and the cost of the replacement will be part
of the water unit cost produced by the treatment plant and calculated into the MWD Groundwater
Replenishment Program subsidy.
Tim D. Serlet ~,..,, '
Director of Public Works/City Engineer
/l'~terim Water Manager
TDS:JS:ccg:Amend to Agmt btwn OCVVD & Tustin.doc
Attachment
AMENDMENT TO AGREEMENT BETWEEN OCWD AND CITY OF
TUSTIN FOR THE CONSTRUCTION, OPERATION AND
ACQUISITION OF A GROUNDWATER DESALTER PROJECT,
FOR REPLACEMENT OF FAILED WELL
THIS AMENDMENT TO AGREEMENT is entered into as of
, 2000, by and between the ORANGE COUNTY WATER
DISTRICT, a special governmental district organized and existing pursuant to the
Orange County Water District Act, Chapter 924, Stats. 1933, as amended
(hereafter referred to as "OCWD"), and the CITY OF TUSTIN, a municipal
corporation organized and existing pursuant to the-laws Of the State of California
(hereinafter referred to as "Tustin").
Ao
Bo
C.
D.
RECITALS
E.
The parties have previously entered into an Agreement entitled,
"Agreement Between Orange County Water District and City of Tustin for
the Construction, Operation and Acquisition of a Groundwater Desalter
Project," dated February 18, 1992, for the construction of a groundwater
treatment project (hereinafter referred to as the "17th Street Desalter
Project").
A supplement to the Agreement was made in a document entitled,
"Supplemental Agreement Re: Agreement Between Orange County Water
District and City of Tustin for the Construction, Operation and Acquisition of
a Groundwater Desalter Project," dated May 13, 1992. The supplement to
the Agreement provided for OCWD to transfer fee title in a parcel of
property to be used as part of the project site for the desalter, to Tustin to
facilitate annexation to the City of Tustin.
An amendment to the Agreement was entered into as of June 16, 1993, to
provide for a lower interest rate on that portion of the project that is funded
with a State loan, so as not to violate State arbitrage provisions.
The 17th Street Desalter Project, operational since October 1996, made
use of three existing wells that were rehabilitated, to supply water for
treatment for the project. Two of the wells were constructed in the 1920s
and the other in 1972.
During project development, concerns were raised about the reliability of
the wells to produce water for the next 20 years. A contingency plan, dated
May 3, 1995, was prepared by OCWD to address the situation, by
identifying possible alternative well sites for construction of replacement
wells.
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Fo
Well No. I on the 17" Street Desalter site was shut down in March 2000 due
to downhole problems caused when the well screen deteriorated to the
point of allowing sand and gravel to clog and freeze the pump. This well
was constructed in 1926 and has been rehabilitated twice. A third
rehabilitation is proposed as a short-term means to restore partial
production until a new well can be constructed.
G.
Metropolitan Water Distdct (MWD) of Southern California is providing
financial incentives for the project under a Groundwater Recovery Program
agreement. MWD has indicated that rehabilitation of the existing well as a
short-term fix and construction ora new well as a long-term fix,' are eligible
costs under the GRP agreement, Therefore, most if not all of the cost of
well rehabilitation work and the new well construction work will be paid
through the financial incentive provided by MWD on each acre-foot of water
produced annually.
H.
Tustin has indicated that it will pay for the rehabilitation of the existing well
and will attempt to bring it back on line during the summer of 2000 (with the
cost reimbursed by MWD through long term production incentives).
However, for the new well, Tustin has requested that OCVVD pay the capital
cost of planning, designing and constructing it, with these costs reimbursed
to OCWD by Tustin, similar to the reimbursement for designing and building
the 17th Street Desalter.
AGREEMENT
Now, therefore, the Agreement dated February 18, 1992, as amended, is
further amended to read as follows:
SECTION 1: Subsection (g) is added to SECTION ONE of the Agreement
to read:
"(g) OCWD shall design the Additional Project Facilities or cause
such design to be prepared by contract, consisting of a new production .
Well, including, well drilling, wellhead facilities, and pipeline to connect new
well to the 17~ Street Desalter Project existing as of August 1, 2000.
(i) Nature of Facilities. The Additional Project Facilities
shall consist of a new production well, including well drilling,
wellhead facilities, and pipeline to connect new well to existing 17~h
·
Street Desalter.
(ii) OCWD to Fumish a Pre-Desiqn Report and Cost
Estimate to Tustin. OCWD shall prepare geologic and hydrogeologic
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analyses and study concerning the recommended'location, size and
depth of proposed well, and estimated cost of construction. If
recommended location is not On the existing desalter site, study shall
present alternative sites for evaluation, review and approval by
Tustin.
Based on location of well as approved by Tustin, OCWD shall
prepare wellhead facility and pipeline alignment study. Study shall
present pipeline alignment altematives, with assessment of
environmental, permitting and cost implications for each, for review
and determination by Tustin.
(iii) OCI/VD to Furnish Desi,qn for Review bi/Tustin. If
Tustin approves well site, facilities and pipeline study findings, and
estimated cost, OCWD will proceed with design of facilities. OCWD
shall prepare well drilling specifications and bid documents for
review by Tustin. 'OCWD shall prepare wellhead facilities and
pipeline design plans, specifications, and bid documents for review
by Tustin."
SECTION 2: Subsection (d) is added to SECTION FIVE of the agreement
to read:
"(d) Design of Additional Project Facilities. For and in
consideration of its lease of the Project Facilities, Tustin pays an annual
rental to OCWD for the lease of the Project Facilities which is due on the
dates and equal to the amounts shown on Exhibit 'B" entitled "Tustin
Desalter Loan #1," which is attached hereto and incorporated herein by
reference. Exhibit "B" shows two loans to Tustin, identified as "State Loan"
and "OCWD Loan." These are for the completed and operational Tustin
17th Street Desalter, for which annual payments of $780,237.70 are being
paid to OCWD.
For the Additional Project Facilities a new loan, independent of the
two loans shown in Exhibit B, will be made by OCWD to Tustin. The new
loan will be repaid over a maximum period of ten (10) years at an annual .'
interest rate of seven percent (7%). Annual payments will be made by
Tustin to OCWD based on the actual cost of the Additional Project
Facilities, as determined at completion of construction, in accord with the
Total Project Cost Statement, as described in Section 3(f) of the Agreement
except that the Total Project Cost Statement may include actual labor costs
attributed to work or services performed by employees of OCWD as
approved by Tustin. Interest charges shall accrue at the annual interest
rate of seven percent (7%) for funds loaned to Tustin by OCWD from the
date that funds are paid by OCWD to consultants, contractors, or others, as
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approved by Tustin, for costs related to Additional Project Facilities. The
loan Payment for the Additional Prq~ect Facilities shall be due and payable
on a date mutually agreed upon by OCWD and Tustin and annually
thereafter until the loan is paid in full. Further, OCWD and Tustin shall
mutually agree on the number of years over which to repay the loan, up to
a maximum of ten (10) years.
For the Additional Project Facilities, Exhibit "C" shows a new loan
identified as "Tustin Desalter Loan #2." This is the currently estimated cost
of the new well and appurtenances with an estimated total cost of One
Million Dollars ($1,000, 000) repaid over ten 'years at seven percent (7%)
interest, at an annual payment of One Hundred Forty-Two Thousand,
Three Hundred Seventy-Seven Dollars and Fifty Cents ($142,377. 50). Note
that this is only an estimate. The actual cost will be determined at the
completion of construction, as described above."
SECTION 3: SECTION SIX of the agreement is amended by adding the
phrase "and Additional Project Facilities" after the phrase "Project Facilities"
wherever such phrase appears in said SECTION SIX. In addition, the reference
to "with interest at seven percent (7%) per annum until paid" as it appears in
SECTION 4 shall not be applied to the Additional Project Facilities.
SECTION 4: OCWD shall be the lead agency and the contracting party for
the construction of the Additional Project Facilities, and shall be solely responsible
for obtaining all permits licenses, and approvals, if any, necessary for the
construction and operation of the Additional Facilities. Tustin shall be the lead
agency for environmental review of the Additional Project Facilities and shall be
responsible for compliance with the California Environmental Quality Act (Public
Resources Code Section 21000, et. seq.). All costs incurred by Tustin in the
performance of its obligations to provide environmental review of the Additional
Project Facilities, including the costs of any consultant, shall be deemed a
reimbursable project cost, funded through the loan generally described in Section
5 d and Exhibit "C" of the Agreement.
SECTION 5: Except as amended herein, all the terms and conditions of the
agreement dated February 18, 1992, with amendments noted, shall remain in full
force and effect.
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IN WITNESS HEREOF, the parties have executed this agreement as of the
date first written above.
APPROVED AS TO FORM:
DISTRICT
ORANGE COUNTY WATER
By: By:
General Counsel,
Orange County Water District
By:
President
General Manager ....
APPROVED A~S,~ FORM:
By: //tJ'v ///" ~
As~ist~t~ity Attorney
City of Tustin
CITY OF'TUSTIN
BY:
Mayor
ATTEST:
By:
City Clerk
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EXHIBIT "B"
TUSTIN DESALTER LOAN #1
State Loan I
Amount $4,794,271 (1)
Interest 3.00%
Term (yrs) 11
I Payment Annual Remaining Annual
Date Payment Principal Interest Principal Payment
OCWD Loan
Amount $1,965,291 (2)
Interest 7.00%
Term (yrs) 11
Remaining Total
Principal Interest Principal Payment
6-15-98 $518,152.57 $374,324.44 $143,828.13 $4,419,946.56 $262,085.12 $124,514.75 $137,570.37 $1,840,776.25 $780,237.69
6-15-99 $518,152.57 $385,554.17 $132,598.40 $4,034,392.39 $262,085.12 $133,230.79 $128,854.34 $1,707,545.46 $780,237.69
6-15-00 $518,152.57 $397,120.80 $121,031.77 $3,637,271.59 $262,085.12 $142,556.94 $119,528.18 $1,564,988.51 $780,237.69
6-15-01 $518,152.57 $409,034.42 $109,118.15 $3,228,237.17 $262,085.12 $152,535.93 $109,549.20 $1,412,452.59 $780,237.69
6-15-02 $518,152.57 $421 305.46 $96,647.11 $2,806,931.71 $262,085.12 $163,213.44 $98,871.68 · $1,249,239.14 $780,237.69
6-15-03 $518,152.57 $433,944.62 $84,207.95 $2,372,987.09 $262,085.12 $174,638.38 $87,446.74 $1,074,600.76 $780,237.69
6-15-04 $518,152.57 $446,962.96 $71,189.61 $1,926,024.14 $262,085.12 $186,863.07 $75,222.05 $887,737.69 $780,237.69
6-15-05 $518,152.57 $460,371.85 $57,780.72 $1,465,652.29 $262,085.12 $199,943.49 $62,141.64 $687,794.20 $780,237.69
6-15-06 $518,152.57 $474,183.00 $43,969.57 $991,469.29 $262,085.12 $213,939.53 $48,145.59 $473,854.67 $780,237.69
·
6-15-07 $518,152.57 $488,408.49 $29,744.08 $503,060.80 $262,085.12 $228,915.30 $33,169.83 $244,939.37 $780,237.69
6-15-08 $518,152.57 $503,060.80 $15,091.82 $0.00 $262,085.12 $244,939.37 $17,145.76 $0.00 $780,237.69
Total $4,794,271.00 $905,407.32 $1,965,291.00 $917,645.37 $8,582,614.64
c:\LAFinance\General\Tustin Desalter Loan #1
EXHIBIT "C"
TUSTIN DESALTER LOAN # 2
Amount $1,000,000
Interest 7.00%
Term (yrs) 10
Annual
Payment No. Payment
1 $142,377.50
2 $142,377.50
3 $142,377.50
4 $142,377.50
5 $142,377.50
6 $142,377.50
7 $142,377.50
8 $142,377.50
9 $142,377.50
10 $142,377.50
Total
Principal
$72,377.50
$77,443.93
$82,865.00
$88,665.55
$94,872.14
$101,513.19
$108,619.12
$116,222.45
$124.358.02
$133 063.10
$1,000,000.00
Interest
$70,000.00
$64,933.57
$59,512.50
$53,711.95
$47,505.36
$40,864.31
$33,758.39
$26,155.05
$18,019.48
$9,314.42
$423 775.03
Remaining
Principal
$927,622.50
$850,178.57
$767,313.57
$678,648.02
$583,775.88
$482,262.69
$373,643.57
$257,421.12
$133,063.10
$0.00
c:\Li\Finance\General\Tustin Desalter Debt Loan #2