Loading...
HomeMy WebLinkAboutN.B. 2 17TH ST DESALT 02-18-92.SATE.. TO: FR010: SUBJECT: NEW BUSINESS N0. 2 2-18-92 . .............. FEBRUARY 10, 1992 WILLIAM A. HUSTON, CITY MANAGER PUBLIC WORKS DEPARTMENT/WATER DIVISION PROPOSED SEVENTEENTH STREET GROUNDWATER DESALTER RECOMMENDATION: That the Tustin City Council at its regular meeting of February 18, 1992, authorize the Mayor to execute an agreement with Orange County Water District (OCWD) for the construction and operation of a groundwater desalter on City property at 18602 E. Seventeenth Street. BACKGROUND: _ The current drought has called attention to the fact that the amount of imported water available for Southern California is not adequate. While we can be sure that this drought will end, the Metropolitan Water District of Southern California (MWD) is now predicting that routine shortages will occur every six years out of ten. MWD attributes this to several factors: 1. An increase in demand on the MWD System. 2. A 50% reduction in available Colorado River supply from 1.2 million acre feet per year (MAF/Y) to 0.6 MAF/Y. Arizona and upper Colorado River users will be taking water to which they are entitled but have not been using in the past. 3. Lack of a concurrent, planned for increase in State Water Project (SWP) supply from the Sacramento/San Joaquin Delta. MWD has contracted and paid for entitlement to 2 MAF/Y from this source, however, the most it has ever received from this source is 1.4 MAF/Y. The facilities of the SWP have not been completed and it appears unlikely that MWD will ever receive its full entitlement from this source. It further appears that court decisions and environmental concerns may place further limitations on this source. In this year of drought MWD was entitled to only 0.2 MAF, and was able to purchase an additional 0.3 MAF from the Governor's water bank. 4. Court decisions and environmental concerns have restricted the amount of water that the Los Angeles Department of Water and Power (LADWP) can pump south from the Owens Valley. This, in turn, has caused LADWP to place an unplanned for, added demand on the MWD system. PROPOSED SEVENTE� iH STREET GROUNDWATER DE. ,TER February 10, 1992 Page 2 Based on the above factors, it is clear that local agencies which have the capability to develop local, reliable supplies should take steps to do so. The City of Tustin Water Service currently owns property located at 18602 Seventeenth Street. The property consists of a 14,000 sq. ft. lot, two inactive wells, a storage shed, and a small, antiquated reservoir. Seventeenth Street Well No. 1 was constructed by the Red Hill Water Company in 1926, and extensively rehabilitated by the Tustin Water Works in 1967. It was taken out of service in 1976 due to poor water quality. Well No. 2 was drilled by the Tustin Water Works in 1972 with the intent of capturing higher quality water from deeper strata than Well No. 1. This attempt was unsuccessful and Well No. 2 was never placed into operation due to poor water quality. The City's Newport Avenue Well located at 12751 Newport Avenue, just south of the intersection of Warren Avenue is also within the vicinity of the Seventeenth Street Plant. This well was also drilled by the Red Hill Water Company circa 1923, and was inactivated by Tustin Water Works in 1976 due to poor water quality. The City has made OCWD aware of all of the above water quality problems. The State Legislature has vested in OCWD, among other things, the responsibility for maintaining and protecting and enhancing the quality of groundwater within its boundaries. Additionally, the OCWD Board of Directors has instructed its staff to aggressively pursue projects which will produce an added water supply for basin agencies. OCWD has recently conducted pump tests to obtain accurate water quality and flow information for the above three wells. The tests yielded the following results: FLOW I NITRATE I TDS 17th No. 1 1500 gpm 106.2 mg/1 1630 mg/1 17th No. 2 400 gpm 94.2 mg/l 1610 mg/l Newport Avenue 650 gpm 106.4 mg/l 1320 mg/1 The Maximum Contaminant Level (MCL) for nitrate is 45 mg/1. The recommended limit for Total Dissolved Solids (TDS) is 500 mg/l, with the MCL being 1000 mg/1. The levels of these constituents found in the three wells are among the highest observed within the OCWD area. Based on the above information, OCWD has completed an Engineers Report and feasibility study to determine the feasibility of constructing a reverse osmosis treatment plant at the City's Seventeenth Street site. The study indicates that a treatment plant at the Seventeenth Street site, along with a collection pipeline from the Newport Avenue Well, could be constructed at a cost of $5.4 million. The plant would produce water with a nitrate level of 42 mg/1 or less, and TDS of 580 mg/1. The plant would reliably produce an estimated 3,200 acre feet per year to the City's supply. The plant would be constructed by OCWD and purchased by the City through an eleven year lease/payback arrangement, with interest set at 7 percent. The total project unit PROPOSED SEVENTE_ L'H STREET GROUNDWATER DE, ,TER February 10, 1992 Page 3 cost, including lease payment and operating expenses is estimated at $575 per acre foot. This compares to (MWD) projected rates of $309 per acre foot for imported water in 1993, and $394 per acre foot in 1995. It is anticipated that this project will be eligible for funding from the MWD Groundwater Recovery Program. This program will pay up to $250 per acre foot of the incremental cost between the established MWD rate and the cost of treatment, including capitalization. The eleven year payback period was chosen with the goal of attaining maximum MWD D assistance. In the unlikely event that MWdenies funding for this project, the City has the option electing not to proceed further. OCWD will guarantee that the cost of water produced by the plant will not be greater than the cost of.the City's alternate, imported supply. In the event that the cost of treated water, less the MWD subsidy, is greater than the City's cost to purchase imported water, OCWD will reimburse the City for the difference. Any reimbursements received by the City would be repaid to OCWD, with 7% interest, at the end of the eleven year lease period. Please refer to the attached schedules which depict cash flow at plant production of 2000 and 3000 acre feet per year. An important feature of this project is that it will not be subject to the normal basin pumping limitations of OCWD, and will displace the purchasing of a. like amount of water from MWD. At the 1993 MWD projected rate, purchasing 3000 acre feet of water will cost over $925,000 New treatment requirements imposed by the EPA, coupled with scarcity of supplies, have caused MWD to project rate increases of $42 per acre foot per year for the next 10 years. OCWD has elected to complete an Initial Study and Negative Declaration for the Tustin Desalter Project. Comments have been received and will be incorporated into the construction and Operation plans. The City will have the option of electing not to proceed further at several critical stages of the project. 1. Upon completion of Initial Study/Negative Declaration (OCWD will pay all costs) 2. Upon completion of preliminary design with cost estimate (OCWD and Tustin share costs 50/50) 3. Upon opening of construction bids (OCWD and Tustin share costs 50/50) 4. Upon denial of MWD Groundwater Recovery Program funding (OCWD and Tustin share costs 50/50) . The City currently operates a treatment plant which was constructed by OCWD and placed on- line March lb, 1990. The plant utilizes both reverse osmosis and ion -exchange technology. The ion -exchange process is not feasible for the Seventeenth Street site due to the high TDS levels of the source waters. The reverse osmosis portion of the plant is currently operating at a PROPOSED SEVENTL. 1'H STREET GROUNDWATER DE. ,TER February 10, 1992 Page 4 capitalized unit cost of $256/acre foot. The plant is providing water which complies with all drinking water standards, and staff is comfortable with its operation. It is now providing approximately 17% of the City's annual supply. Water Services staff believes this to be an important project because it would provide the City with a local, reliable supply that would not be subject to interruption in times of drought and shortage. While the initial $5.4 million project cost may seem high, when viewed in proportion to the $925,000 annual avoided cost of purchasing water, the cost comes into perspective. This avoided cost will increase as MWD is projecting $42 per acre foot per year rate increases for the next 10 years. Additionally, nitrate levels in the City's nearby Beneta and Livingston Wells have been slowly increasing over the past several years. Blending is currently required at these wells in order to meet drinking water standards. It is apparent that the highly contaminated nitrate & TDS plume is slowly migrating to the southwest. If the plume continues to spread, it is probable that the nitrate levels in the two wells would rise to the point that blending would not provide water of adequate quality. This project, when completed, would retard the spread of the contaminated plume to good wells, will clean up the plume and would allow these wells to remain in operation. Bob Ledendecker Director of Public Works/City Engineer BL: GRV:cc Attachments Gary R. Veeh ' Water Service Manager 1. 2. 3. 4. 5. ATTACHMENTS Proposed Agreement. Cash flow schedules at 2,000 and 3,000 acre feet per year production. Graphic depiction of cost sharing arrangement. Nitrate and TDS trends at Prospect and Beneta Wells. Reprint of article from MWD FOCUS. AGREEMENT BETWEEN ORANGE COUNTY WATER DISTRICT AND CITY OF TUSTIN FOR THE CONSTRUCTION, OPERATION AND ACQUISITION OF A GROUNDWATER DESALTER PROJECT THIS AGREEMENT is entered into as of , 1991 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. 19339 as amended (hereinafter 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!). Ir RECITAL A. Two-thirds of all drinking water currently used within the Orange County coastal plain is provided from groundwater. Recent surveys of existing groundwater quality have indicated an ever-increasing concentration of nitrates and total dissolved solids ('"TDS") in those waters used for municipal supply. Inasmuch as Orange County is located in a senuL and area, it is essential that all reasonable efforts be put forth to protect the quality of groundwater supplies and to provide for maximum utilization of that resource. B. The United States Environmental Protection Agency (hereinafter, "USEPA") and the State of California Department of Health Services (hereinafter, "DOHS") have adopted primary drinking water standards for nitrate, and secondary drinking water standards for TDS. Water containing nitrate concentrations in excess of 45 mg/1, or TDS concentrations in excess of 1,000 mg/1, have been determined by USEPA and DOHS not to be suitable for municipal or domestic purposes. 1 C. Tustin operates a water system for the purpose of delivering potable water to its customers, and obtains most of its water by pumping groundwater from wells for delivery to its customers. Tustin has lost the use of some of its groundwater wells due to the presence of nitrates and TDS in quantities exceeding USEPA and DOHS drinking water standards. InP articular, Tustin has lost the use of the "17th Street Well No. 1," the "17th Street Well No. 2," and the "Newport Well." Groundwater wells are hereinafter referred to as the "Project Wells." D. The Legislature of the State of California has vested in OCWD the statutory responsibility to manage, regulate, replenish, and protect the quality of subterranean groundwater supplies within the boundaries of OCWD. E. OCWD and Tustin are currently participating in a joint project relating to the construction and operation of a nitrate removal facility on two Tustin -owned groundwater wells other than the Project Wells. Preliminary results from that facility indicate that it is feasible and cost-effective to remove nitrates and TDS from contaminated groundwater for municipal supply purposes. F. OCWD and Tustin desire to install a desalination treatment plant on either or all of the existing Project Wells, or a new well or well(s) to be constructed within the service area of Tustin. The preliminary cost of the design and construction of such a desalination treatment plant is Five Million Four Hundred Thousand Dollars ($5,400,000). A more accurate determination of the cost cannot be determined until the completion of preliminary project design of the facility. P G. TheP arties are hopeful that the project facilities will be eligible for participation ation in the groundwater recovery program of the Metropolitan Water District of Southern California. If found to be eligible, OCWD or Tustin would receive incentives from MWD forP roduction from the project facilities that would reduce the net cost per acre foot for water produced from the wells. H. In an attempt to mitigate the water quality problems created by nitrates and TDS in increasing concentrations throughout many areas of the Orange County groundwater basin, O CWD and Tustin desire to enter into this Agreement for the design, construction and operation of a desalination treatment facility for the purpose of removing nitrates and TDS from groundwater in order to meet USEPA and DOHS drinking water standards for the use of that water for municipal and domestic purposes. EXECUTORY AGREEMENTS NOW, THEREFORE, in consideration of the facts recited above and the covenants, conditions and promises contained herein, the parties hereto hereby agree as follows: SECTION ONE: DESIGN OF PRO SECT FACILITIES. OCWD shall design the Project Facilities or cause such design to be prepared by contract, for the construction of facilities to remove nitrate and TDS from the groundwater produced by either or all Project Wells or a new well or wells to be constructed in the vicinity of the Project Wells, as shown on theP lan attached hereto as Exhibit "A" (such facilities are hereinafter referred to as the "Project Facilities"). The Project Facilities shall be designed as follows: (a) Mature of Facilities. The Project Facilities shall comprise facilities to remove nitrate and TDS from groundwater by means of a desalination process. The specific k11 desalination process to be installed in the Project Facilities shall be mutually determined by OCWD and Tustin either during the course of the preparation of the design or following receipt of construction bid proposals. The Project Facilities design may provide for alternative desalination process bid proposals. b i na i n nf Consultant. If OCWD determines to retain the services of any p consultant for the re-design and design of the Project Facilities, OCWD and Tustin shall • ' upon an such consultant prior to the retention of the consultant. jointly agree p y () oc WD Furnish Pr -De i n Relort andE im T in. OCWD shall prepare a Pg Pre-Design Report and Cost Estimate. Upon completion, OCWD shall furnish Tustin three () copies ies of the Pre-Design Report and Cost Estimate for the Project Facilities for review and comment by Tustin. Tustin shall have thirty (30) days from the date of receipt of the Pre-Design Report and Cost Estimate to submit advisory comments and recommendations to OCWD regarding the design. d OCWD to Furnish Design for Review to Tustin. If Tustin does not terminate the Agreement based on the Pre-Design Report and Cost Estimate pursuant to Section Two, Subsection b below, OCWD shall proceed with design. Upon completion of design, OCWD shall furnish to Tustin three (3) copies of the design for review and comment by Tustin. Tustin shall have thirty (30) days from the date of receipt of design to submit advisory comments and recommendations to OCWD regarding the design. e Tran mit 1 of A roved Design_. Upon approval of the Project Facilities design by its Board of Directors, OCWD shall transmit to Tustin copies of the approved design for the Project Facilities. 4 _ (f) Exceptions. OCWD Responsible for Design Cost. Except as hereinafter provided, OCWD shall be responsible for all costs incurred in the preparation of the pre - design and design for the Project Facilities. SECTION TWO: TERMINATION OF AGREEMENT AT CRITICAL STAGES. Either Tustin or OCWD may terminate this Agreement by giving written notice to the other party within thirty (30) days of any of the following events: (a) Receipt by Tustin from OCWD of a copy of a Notice of Determination based upon completion of environmental documentation (EIR or Negative Declaration) for the Project. If terminated at this stage, OCWD shall pay for all costs. (b) Receipt by Tustin from OCWD of a copy of the Pre -Design Report and Cost Estimate. If terminated at this stage, Tustin shall pay 50% of the cost of the Pre -Design Report and Cost Estimate to OCWD within thirty (30) days of receipt by Tustin from OCWD of a statement setting forth such costs. (c) Receipt by Tustin from OCWD of copies of the construction bids. If terminated at this point, Tustin shall pay 50% of the Pre -Design and Design Costs to OCWD within thirty (30) days of receipt by Tustin from OCWD of a statement setting forth such costs. (d) Receipt by Tustin from OCWD of Notice that Metropolitan Water District has denied funding under its Groundwater Recovery Program. If terminated at this stage, Tustin shall pay 50% of the Pre -Design and Design Costs to OCWD within thirty (30) days of receipt by Tustin from OCWD of a statement setting forth such costs. 5 - SECTION THREE: !CONSTRUCTION OF PROJECT FACIA• Within a reasonable time following approval of the Project Facilities design by-OCWD, OCWD shall • advertise for bids, and award a contract or contracts, for the construction and installation of the Project Facilities. OCWD shall make all reasonable efforts to award such construction contract(s) within one (1) year of the date of this Agreement. The construction of the Project Facilities shall be subject to the following terms and conditions: a OC" to -be Lead AQency. OCWD shall be the lead agency and the contractingart for the construction of the Project Facilities, and shall be solely responsible P Y for obtaining all permits, licenses and approvals, if any, necessary for the construction of the Project Facilities, and for compliance with the California Environmental Quality Act, Public Resources Code Section 21000, ,e�ems, with respect to the construction and operation of the Project Facilities. Except for payments for the lease and possible acquisition of the proj Prodect facilities by Tustin, as hereinafter provided in this Agreement, OCWD shall be responsible for all costs incurred in the construction of the Project Facilities. (b) Tustin to Provide Easement Rights on Land Owned by Tustin. Tustin shall provide OCWD with easement rights over the site of the Project Facilities, on Tustin -owned property, together with access thereto. from public rights-of-way, for the construction, operation and maintenance of the Project Facilities. c �C'�'VD to Acquire Adiacent Parcel. OCWD shall attempt to acquire title to theP arcel adjacent to the parcel owned by Tustin. If acquired, this parcel shall be included aspart of the Project Facilities. The purchase price shall be subject to the approval of Tustin. 6 d in h c o At all times during construction of the Project Facilities OCWD shall permit authorized representatives of Tustin access to the construction site to observe the construction of the Project Facilities. e O to Require Insurance. OCWD shall require all contractors involved in the construction of the Project Facilities to obtain liability insurance, builders all-risk insuranceand workers' compensation insurance. OCWD and Tustin, together with their , respective officers • , employees, 1 and representatives, shall be named as additional insureds on eachpolicy such oli of insurance. OCWD shall require that each contractor involved in the construction of the Project Facilities shall provide liability insurance coverage in an amount not less than Three Million Dollars ($3,000,000) per occurrence, and furnish certificates evidencing such insurance to both OCWD and Tustin. Notice of Completion and Statement of Costs. Within ninety (90) days of the completion of construction of the Project Facilities and their acceptance by the Board of Directors of OCWD, OCWD shall transmit to Tustin a notice of the completion of the Project Facilities (hereinafter referred to as the "Project Facilities Completion Notice"), together with a certified statement of the total costs paid by OCWD for the pre -design, the design, and the construction n and installation of the Project Facilities, including all costs paid to consultants and contractors, all permit and engineering costs, and all other actual and direct costs incurred by OCWD with respect to the design and construction of the Project s but excluding all costs attributed to work or services performed by employees of Facilities, g OCWD. Such statement shall also include the cost of the adjacent parcel if acquired by OCWD. Such statement of the amount of the total costs paid by OCWD for the design and 7 construction Project the Proect Facilities is hereinafter referred to as the "Total Project Cost Statement." The Total Project Cost Statement shall serve as the basis .for all amounts to be paid by Tustin to OCWD for the lease and acquisition by Tustin of the Project Facilities pursuant to Sections Four, Five -and Six below. SECTION FOUR: LEASE OF PROJECT FACILITIES. Upon the issuance of the Project Facilities Completion Notice pursuant to Section Three above, OCWD shall lease its interest in the Project Facilities to Tustin. The terms and conditions of the Project Facilities Lease shall be as follows: a Term of Lease. The term of the Project Facilities Lease shall commence as of the date 1 of the Project Facilities Completion Notice prepared pursuant to Subsection (e) of Section Three above, and shall continue for a period of eleven (11) years thereafter, unless terminated in accordance with Subsection (b) of this section hereinbelow. b Termination of Lease. The term of the Project Facilities Lease shall terminate upon the earliest of any of the following events: i The exercise by Tustin of its option to acquire the interest of OCWD in the Project Facilities pursuant to the provisions of Section Six below; or (ii) A default by Tustin of its duties and obligations under the Project Facilities Lease; or (iii) The expiration of the term of the Lease as set forth in Subsection (a) of this Section. (c) Title to Facili ies. During the term of the Project Facilities Lease, title to the Project Facilities including the adjacent parcel if purchased by OCWD, and any and all 8 additions comprise rise fixtures, repairs, replacements or modifications thereto, shall P remain in the name of OCWD. Notwithstanding the foregoing, for and during the term of the Project Facilities Lease, Tustin shall have possession and use of the Project Facilities, maintain and repair the Project Facilities in accordance with the and shall operate, provisions of this Section. Tustin to Operate Facilities. Tustin shall, under the supervision of OCWD, (d) be responsible for the operation and maintenance of the Project Facilities throughout the term of the Project Facilities Lease. e OCVYD to Provide Supervision and Support. During the term of the Project Facilities Lease, OCWD shall provide supervision and technical, engineering and analytical support at no cost to Tustin with regard to the operation and maintenance of the Project - Facilities. In this regard, OCWD shall monitor the operation of the Project Facilities and conduct periodic analyses of the water treated by the Project Facilities. (f) Tustin to Obtain Permits and Approvals. Tustin shall be responsible for obtaining any and all permits and approvals required for the operation of the Project Facilitiesduring durin the term of the Project Facilities Lease, including but not limited to a sewage discharge permit from the County Sanitation Districts of Orange County, air emissions permit from the South Coast Air Quality Management District. and a domestic water supply use permit from DOHS. OCWD shall assist Tustin in obtaining such permits and approvals. (g) Tustin to Meet Operation and Maintenance StandardA. Tustin shall, at all times during the term of the Project Facilities Lease, operate and maintain the Project 9 Facilities ' ' in accordance with generally accepted maintenance and operation principles. Tustin further shall, at all times during the term of the Project Facilities Lease, provide personnel sufficient in numbers and qualifications to operate and maintain the Project Facilities. h Titin Responsible for O & M Costs. Tustin shall be responsible for all costs p incurred in the operation and maintenance of the Project Facilities during the term of the Project Facilities Lease, including but not limited to labor, materials and electrical energy � (such costs are hereinafter referred to as the "Project O & M Costs"). i Tustin to Submit Annual Proiect Cost Statement. Tustin shall prepare an Annual Project Cost Statement which itemizes for the previous year: (1) all Project Operations and Maintenance Costs; all lease payments paid to OCWD; (3) the value of , ( 2 ) any MWD subsidies received by Tustin, and (4) plant production in acre feet. Such statement shall be submitted to OCWD no later than thirty (30) days after the close of the year. Such statement shall be subject to audit by OCWD. U) Tustin to Provide Insurance or Evidence of Self Insurance. If Tustin is not self insured, it shall take out and maintain in effect comprehensive general liability insurance in an amount not less than One Million Dollars ($1,000,000) per occurrence, for property bodily injury, death and damage, naming OCWD as an additional insured under s policy. such oli . Tustin shall also take out and maintain at all times during the term of the Project Facilities Lease property casualty insurance (including coverage against damage to or loss of the Project Facilities by reason of fire, smoke, lightning, flooding, vandalism, malicious ious mischief and explosion) in an amount equal to the amount set forth in the Total 10 Project Cost Statementprepared pursuant to Subsection (e) of Section Three above, which • that all proceeds thereunder shall be payable to OCWD. Such policy shall provide insurance covers may be maintained as part of or in conjunction with any other liability g Y andtY ro er casualty insurance carried by Tustin. Evidence of self insurance or a certificate P P of insurance evidencing the coverages and endorsements as required herein shall be furnished to OCWD upon the commencement of the Project Facilities Lease term, and shall be maintained throughout the term of the Project Facilities Lease. If Tustin is, or may become, partially or fully self-insured for its public liabilities, a letter executed by the mayor or city manager, stating Tustin's self-insured status and acknowledging its responsibility to respond to the indemnification of OCWD as provided in Subsection (c) of Section Eight, below, shall be furnished in lieu of the certificate of insurance. Tustin shall provide written notice to OCWD of any change in Tustin's insured or self-insured status during the term of the Project Facilities Lease within thirty (30) days of the effective date of such change. (k) Right of OCVYD to Observe. OCWD shall have the right to enter upon and observe the Project Facilities at all times during the term of the Project Facilities Lease upon twenty-four (24) hours written, verbal or telephonic notice to Tustin. SECTION FIVE: Rent. (a) For and in consideration of its lease of the Project Facilities, Tustin shall pay an annual rental to OCWD for the lease of the Project Facilities which shall be due on the dates and equal to the amounts shown on Exhibit "B" which is attached hereto and incorporated herein by reference. In no event shall the net amount that Tustin pays per acre-foot of water produced from the Project Facilities, including rent and operations and 11 maintenance costs, less MWD Groundwater Recovery Program incentives paid directly Y an to Tustin, exceed the East Orange County Water District (EOCWD) treated, non - interruptible tible rate for water that would otherwise be delivered to Tustin. In the event that the net amount per acre-foot paid by Tustin for the previous year is greater than the EOCWD's treated, non -interruptible rate per acre foot of water produced, OCWD shall pay Tustin the difference between such amounts within sixty (60) days of receipt of Tustin!s Ann �j Annual Project Cost Statement. In the event Tustin does not exercise its option to purchase Project Facilities prior to or at the termination of the lease, such amounts paid to Tustin the P � less the value of an MWD Groundwater Recovery Program incentives received by OCWD (net payments), , shall be reimbursed back to OCWD in years subsequent to the lease period when the sum of Tustin's O & M costs are less than the prevailing EOCWD rate. At such time Tustin shall reimburse to OCWD all net payments received from OCWD plus accrued interest at seven percent (7%) per annum by paying OCWD the difference between the O & M1ro'ect cost and the prevailing EOCWD rate multiplied by the project production in P acre feet. b The Exhibit "B" that is attached to this Agreement is based upon an estimated total cost of Five Million Five Hundred Twenty -Five Thousand Dollars ($5,525,000), an interest rate of 7%, and an eleven -year lease/option period. In the event the actual costs are different, Exhibit "B" shall be amended accordingly with the written consent of both parties which shall not be unreasonably denied. c Each rental payment under the Project Facilities Lease shall be paid in lawful money of the United States to or upon the order of OCWD. Any such rental payment 12 which shall not be paid when due shall bear interest at the rate of one percent (11yo) per month (or the maximug m legal interest rate, whichever is less) for each month or portion thereof that the rental payment remains delinquent. Notwithstanding any dispute between Tustin and OCWDTustin shall make all rental payments when due and shall not withhold , any rental payments pending the final resolution of such dispute, and Tustin shall not assert any right of set-off or counterclaim against its obligation to make any rental payment under g the Project Facilities Lease. SECTION SIX: ACQUISITION OF FACILITIES BY n TIM. Tustin shall choose one of two ways to acquire OCWD's interest in the Project Facilities.. First, Tustin may ei to acquire all of OCWD's interest in the Project Facilities at any time xercise its opt on prior to or at the conclusion of the term of the Lease, provided that Tustin is not in default under any of the terms or conditions of the Lease. Such option shall be exercised by transmitting written notice of such exercise and enclosing with such notice payment to OCWD of the amount shown on Exhibit "B," as amended, for exercising the option at the time thatPaY ment is made, plus the sum of any net payments made to Tustin by OCWD pursuant to Subsection (a) of Section Five, above, with interest at 7% per annum until paid. Upon receipt and acknowledgment of such notice and payment, the Lease shall terminate, a ll of OCWD's interest in and to the Project Facilities shall be deemed assigned to and acquired by Tustin, and OCWD shall execute such instruments as may be reasonably requested b Tustin to document such. assignment and acquisition. Second, Tustin may q Y complete all lease payments plus pay the sum of any net payments made previously to Tustin by OCWD pursuant to Subsection (a) of Section Five, above, with interest at 7% per 13 annum until paid. Upon receipt by OCWD of such payments, all of OCWD's interest in and to the Project Facilities shall be deemed assigned to and acquired by Tustin, and OCWD shall execute such instruments as may be reasonably requested by Tustin to document such assignment and acquisition. SECTION SEVEN: TUSTIN TO OPERATE AT FULL CAPACITY. Tustin shall operate the Project Facilities at full capacity at all times. However, "full capacity" does not mean continuous operation. "Full capacity" will be variable depending on water conditions and down time for repairs and maintenance. SECTION EIGHT: MISCELLANEOUS. (a) Petition for Exemption of Basin Equity Assessments: The parties understand and agree that upon the execution of this Agreement, Tustin intends to file a petition with OCWD pursuant to Section 38.1 of the Orange County Water District Act to exempt the groundwater treated by the Project Facilities from the payment of the basin equity assessments imposed by OCWD pursuant to Section 31.5 of the OCWD Act. OCWD hereby agrees to process, consider and act upon such petition in an expeditious and timely manner. (b) Notices• Any notice, instrument, payment or document required to be given or delivered under this Agreement shall 'be given or delivered by personal delivery or by depositing the same in a United States mail depository, first class postage prepaid, and addressed as follows: 14 If to OCWD: Orange County Water District 10500 Ellis Avenue P.O. Box 8300 Fountain Valley, California 92728-8300 Attn: William R. Mills, Jr., General Manager If to Tustin: City of Tustin 300 Centennial Way Tustin, California 92680 Athi: William Huston, City Manager. Or such other address or person as either party may direct in writing to the other. Service of any instrument or document given by mail shall be deemed complete upon receipt if delivered personally or by registered or certified mail, return receipt requested, or forty- eight (48) hours after deposit of such instrument or document in a United States mail depository, first class postage prepaid and addressed as set forth hereinabove. (c) Indemnification (i) To the extent permJtted by law, OCWD shall indemnify and hold Tustin, together with its officers, councilmembers, employees and representatives, harmless from and against any damages or injury to the person or property of any person not a party hereto, including consequential damages, caused by OCWD's negligent performance of this Agreement or any negligent act or omission of OCWD undertaken in the performance of this Agreement. (ii) To the extent permitted by law, Tustin shall indemnify and hold OCWD, together with its officers, directors, employees and representatives, harmless from and against any damages or injury to the person or property of any person not a party 1s hereto, including consequential damages, caused by Tustin's negligent performance of this Agreement or any negligent act or omission of Tustin undertaken in the performance of this Agreement. (d) successors and Assigns: All of the terms, conditions and provisions of this Agreement shall inure to the benefit of, and be binding upon, OCWD, Tustin, and their respective successors and assigns. (e) No Implied Waivers: In the event that any term, condition or provision of this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the specific breach so waived, and shall not be deemed either to be a continual waiver or to waive any other breach hereunder. (f) Intep-ration. Construction and Amendment: This Agreement represents the entire understanding of OCWD and Tustin as to those matters contained herein. No prior oral or written understanding shall be of any force or effect with respect to those matters covered by this Agreement. This Agreement shall be governed by the laws of the State of California and construed as if drafted by both OCWD and Tustin. This Agreement may be modified, altered or amended by a written amendment signed by both parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. APPROVED AS TO FORM: By: General Counsel, Orange County Water District 16 ORANGE COUNTY WATER DISTRICT By. President BV - .1 General Manager APPROVED AS TO FORM: By: City At ney, City of Tustin ATTEST: - By• City Clerk r.\document\sgmts\ag10091a.tus 17 CITY OF TUSTIN By: - Mayor U_ U) Q CC W Q z D 0 U W 0 z 0 Z Z) LL 0 v m J Cn W 0 z F— U) '0 vJ 0 CL0 m Q - w J D 0 w U CO 0 LL U Q U 0 i— U W L N O O O v to N O c D N r- `Y O 00 00 O Cl CO O 00 r- O N N O tOD O- O O tOD h M O tN0 N R N O O O N f- U3 R COi N o 0 o rn v a 0 R tD tD 0 N Z InQ O O o 0 0 tD 0 to CY)M N n Z R D N O O O N O 00 p t0 (DD 000 N U R O NO O O O NO 00 CD O tD to 00 N m R � W qt O O M O (D COD Z r o Ul) to n F. R 1- tD co cM to O O M M co M -- `0 O r r n (- t 0 o o o O n tD tD N OO " ccn f- Go . O 't tD OQ tD O R' O. N n O .- O O O CD O CD O OI 00 0 tD N O 0 (DD to . (DD . 0 p .. OI � m el (0D (D .- O O N N N to O N M O ca D O J � r t00 O O 4 O O O. 1 t�pp 00 N O. O O M M O 0r.. Oi W- Ql O tD c0 N O O M Cl) O r.. m qt to O to N M M m Cr (o 0 0 0 0 0 r � to N M M U N c Q U O O c Z c w O�� U cwi� w V) } D O ¢ 0 �°� Er c CaV n Z (ACL= N m W Z EEE Q W Z toc`0 D N w 0 Z Z n L uFi a n � w ctn v w 1= v O U 01- D O w w J J Cl Q Cl W zCO 0 zo W Cn Z Q Q W w w o W z 0 a ``n�C" VJ D LL0 LL Q O 0 C CV U o� } U m U CD 0 a E J E C I N v7 U Q N Cl (D o v to 00 �. 00 N N � T �- r R f� O 00 O O O n O W N n O N cD N C (OO n O O O (OO n M o Ncp N Z pQ. N_ S N O O O N n 0) LO N z N R D O O OD coccoo d � R cD .- CO M O cD O O M N O O O C) O D N m Ch N O O co N O O O R cMD coo Goo U 0 LL a o o cD 0 0 (D N GD a0 Go 00 o m W M O O ch (D cD O z n ppN N f - D t9 (D CV) O O o R O n n 0 N co U) 000 n N co _ O o co lw 0o co 0 R O O Cl)N O N S O O 0 (D 0 co O R 0� 00 N N uy Cr o d } co ono o< n .- o .- � .- N OCLN H co 1 CNV cc n J � W O O► (nD n Lr) N - 0 O � v r- O } Oa I co o .- o n n o } d f L N co c.) M O CO � m M uoi GOO o rn rn o p n N O Cl) U O O n N C14 LO (D cli V)o (7 l'! O U') Cl) O O O O O� r (D N to O � cc 4 U O o� c f - z c0 C w OU a c0 a N Q fn o % o w o (9 z O E N � >Q U d O D cn Q Z to Z w0 In Z z z co CL co o cn CD 0 1- 1- w F - (Aw J LL h' U W O ixa LL O 2 a J a >0 a z J W cl:a Z 1" x J �4 W Z J W IL a W _ W z FE � U a z W 2 z c� QW z Z. w �a Qa EXHIBIT "B" Project Capital Cost: Interest Rate: Annual Lease Payment: Begin Lease Payment:,. Fully Amortized By: Prepared by: Laura Li Oct. 3, 1991 ORANGE COUNTY WATER DISTRICT LEASE PAYOUT SCHEDULE TUSTIN DESALTER PROJECT CITY OF TUSTIN $5,525,000 7.00% $736,797 07/01/93 06/30/04 Due Amual Lease Period Date Payout -------------- ----------------- 07/01/93-06/30/94 ------------ 06/30/94 $5,525,000.00 07/01/94-06/30/95 06/30/95 $5,1740953.10 07/01/95-06/30/96 06/30/96 $4,8000402.92 07/01/96-06/30/97 06/30/97 $4,399,634.22 07/01/97-06/30/98 06/30/98 $389700811.72 07/01/98-06/30/99 06/30/99 $30511,971.64 07/01/99-06/30/00 06/30/00 $3,021,012.76 07/01/00-06/30/01 06/30/01 $2,4950686.75 07/01/01-06/30/02 06/30/02 $1,9330587.92 07/01/02-06/30/03 06/30/03 $10332,142.18 07/01/03-06/30/04 06/30/04 $688,595.23 Prepared by: Laura Li Oct. 3, 1991 ORANGE COUNTY WATER DISTRICT LEASE PAYOUT SCHEDULE TUSTIN DESALTER PROJECT CITY OF TUSTIN $5,525,000 7.00% $736,797 07/01/93 06/30/04 Amual Lease Principal interest Payment .............. ---------------- $350,046.90 -------------- $386,750.00 $736,796.90 $3748550.18 $362,246.72 $736,796.90 $4000768.69 $3360028.20 $736,796.90 $428,822.50 $307,974.40 $736,796.90 $458,840.08 $277,956.82 $7360796.90 $490,958.88 $245,838.01 $736,796.90 $525,326.01 $211,470.89 $736,796.90 $562,098.83 $174,698.07 $7368796.90 $601,445.74 $135,351.15 $736,796.90 $643,546.95 $93,249.95 $736,796.90 5688,595.23 548,201.67 $736,796.90 $5,525,000.00 $2,579,765.89 $8,1040765.89 _===__=_=_=_==__ ______________ ______=_=_=_=_ O N rn TIO co T LL 619.a O O O O O O O N O CCo c0D dam' N T- T co P to M N T BL,.4ETA WELL 5S/9W ,2 Nitrate (ma/l-) Total Dissolved Solids (mg/0 70 60 60 40 30 20 10 1000 800 600 400 200 0 0 66 88 69 71 72 74 76 78 79 81 82 84 86 86 87 88.89 90 Year PROSPECT WELL 5S/9W-4J1 Nitrate (mg/L) Total Dissolved Solids (mg/L) 80 60 . -l= 46 mg/L NO, Standard .}•• '"i` 40 20 1000 800 GZ0Z7 400 200 0 0 86 88 69 71 72 74 76 78 79 81 82 84 86 86 87 88 89 90 Year FIGURE 4. HISTORIC NITRATE AND TDS CONCENTRATIONS IN BENETA AND PROSPECT WELLS MWD METROPOLITAN WATER DISTRICT OF SC 'N CAtXORNIA Why using less will cost more by Car! 6oronkay, General Manager Metropolitan Wafer Disfrid of Soufhem California The inevitable is about to occur. And no one is haply about it. The public expects that, when the drought is over, things will retturn to normal. harms will have water, industry will have water, more people will be em- ployed on those farms and in those facto- ries and Californians will be able to get 11 with their lives. This will not be the case. Southern Californians will find them- selves plying not only higher water rates, but also Nigher costs for the goods and ser- vices that rely heavily on water. People al- ready annoyed by the constraints of con- servation will have to pay more to use less. The current drought is only one reason water costs are mounting. To be able to meet reasonable demands (luring years when rainfall is at least normal, Aletropolitan Water District has begun a $6 billion expansion program. The new facilities nearly triple the pre- sent value of all the facilities Metropoli- tan has built since its founding in 1928. New reservoirs, treatment plants, pipelines and Other projects allow us to continue our tradition of nneeting the need for adequate quantities of high qual- ity water. Such a program requires money. electing new, even stricter water qual- -ity standards also costs money. Aletropolitarr's distribution system, .wilt by visionaries undaunted by the (:rent Depression, is now 50 years old. ,Maintenance is expensive. The amount of water delivered is Only one factor in its cost. Any existing system must be paid for and maintained even %vhen drought reduces its flows to a trickle. The efforts, and the paychecks of experts in engineering, planning, water quality and operations, are ongoing re- gardless of how much water is available. Nearly a decade ago, it was Metropoli- tan's practice to base its water rates for the conning year oil predicted sales. This was essentially "break-even" budgeting. Little money was set aside to buffer the sometimes huge fluctuations in water sales np(m which kletropolitan's fiends Number 4, 1991 ose and fell. When sales were high, as was true in years when local weather was dry, income was greater than expenses. Charges then did not have to be in- creased the following year in lockstep with inflation. If water sales were slack, water rates the following year had to be increased in order to cover the fixed, on- going costs of importing water. This made it difficult for Metropolitan's member agencies and their retail sub - agencies to manage their own budgets. Before the onset of the present drought, Metropolitan's board of direc- tors established a special fund designed to absorb the financial shock waves brought on by unpredictable water sales. This "rate stabilization fund", [Wade pos- sible by revenues from unexpectedly high water sales during the last several years, is drawn upon when sales decline. This year is a good example of how the fund works. Sales are down because the drought.has severely limited Metropoli- tan's supplies. Yet, operating costs went up and the fund was needed to help bear these costs. Without die stabilization fund, the rates would have increased by at least 80 percent instead of 13 percent. If existing conditions continue, the sta- bilization fund will be almost exhausted in another year. And what if it rains a lot in Northern California next year and Southern California remains dry? Metropolitan would once again have ample water to sell. "That may replenish the stabilization fund and allow future rate increases to be gradual rather than abrupt. Even so, rate increases will be a hard sell to most consumers who only per- ceive that they are using less water and paying more. But the bottom line is that rates will rise. It is inevitable. 1R The distress of California's fifth consecutive year of drought is about to be compounded by rising costs for Imported water.