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Resolution No. 80951 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 8095 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A PURCHASE AGREEMENT FOR IMPORTED WATER TO BE PROVIDED BY CENTRAL BASIN MUNICIPAL WATER DISTRICT BY AND BETWEEN THE CITY OF VERNON AND CENTRAL BASIN MUNICIPAL WATER DISTRICT WHEREAS, the City of Vernon is located within the Central IlBasi.n Municipal Water District ("Central Basin"); and WHEREAS, the Central Basin Municipal Water District is a member agency of the Metropolitan Water District ("MWD") and provides water service to the City of Vernon through the MWD; and WHEREAS, due to recent changes in Central Basin MWD's new rate structure to go into effect in January, 2003, and the Water Replenishment District of Southern California's discontinuance of the in lieu program, the City has sought alternative means of purchasing water supplies to meet current and future demand requirements; and WHEREAS, after reviewing the City's water demand requirements, on July 3, 2002, City staff submitted a request to Central Basin MWD for a Preliminary Base Allocation of 3,350 acre-feet jper year; and WHEREAS, on October 10, 2002, the City received notification from Central Basin MWD that the City's request to increase the Base Allocation had been granted; and WHEREAS, in order to take advantage of Tier 1 water rates to purchase the quantities of water required, Central Basin is requiring the City to enter into a Purchase Agreement for Imported Water to be Provided by Central Basin for a term of five (5) years; and 1 WHEREAS, by letter dated October 17, 2002, Bruce V. 2 Malkenhorst, City Administrator/City Clerk has recommended that a 3 purchase agreement be entered into with Central Basin to provide the 4 City with imported water. 5 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE 6 CITY OF VERNON AS FOLLOWS: 7 SECTION 1: The City Council of the City of Vernon hereby 8 finds and determines that the recitals contained hereinabove are true 9 and correct. 10 SECTION 2: The City Council of the City of Vernon hereby 11 approves the Purchase Agreement for Imported Water to be Provided by 12 Central Basin Municipal Water District, a copy of which is attached 13 hereto as Exhibit "A" and made a part hereof. 14 SECTION 3: The City Council of the City of Vernon hereby 15 authorizes the Mayor and the City Clerk to execute said Agreement for, 16 and on behalf of, the City of Vernon. 17 SECTION 4: The City Council of the City of Vernon hereby 18 directs the City Clerk, or his designee, to send two fully executed 19 Agreements to: 20 Central Basin Municipal Water District 21 Attn. Darryl G. Miller, General Manager 17140 S. Avalon Blvd., Suite 210 22 Carson, CA 90746-1296 23 24 25 26 27 28 - 2 - 1 SECTION 5: The City Clerk of the City of Vernon shall 2 certify to the passage of this resolution, and thereupon and 3 thereafter the same shall be in full force and effect. 4 APPROVED AND ADOPTED this 23rd day of October, 2002. 5 6 , 7IkEONIS C. MALBU G, Mayo 8 ATTEST: 9 10 11 BRUCE V. MALKENHORST, City Clerk 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 - 1 STATE OF CALIFORNIA ) 2 ) ss COUNTY OF LOS ANGELES ) 3 4 I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do 5 hereby certify that the foregoing Resolution, being Resolution No. 6 8095, was duly adopted by the City Council of the City of Vernon at an 7 adjourned regular meeting of the City Council duly held on Wednesday, 8 October 23, 2002, and thereafter was duly signed by the Mayor of the 9 City of Vernon. 10 11 12 BRUCE V. MALKENHORST, City Clerk 13 (SEAL) 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 _ EXHIBIT PURCHASE AGREEMENT FOR IMPORTED WATER TO BE PROVIDED BY CENTRAL BASIN MUNICIPAL WATER DISTRICT PURCHASER: City of Vernon BASE ALLOCATION: 3,350 acre-feet TIER 1 ANNUAL MAXIMUM (90% of Base Allocation): 3,015 acre-feet PURCHASE COMMITMENT (60% of Base Allocation x 5): 10,050 acre-feet TERM: 5 years EFFECTIVE DATE: January 1, 2003 Definitions of capitalized terms used in this Purchase Agreement are provided in Exhibit 1. COMMITMENTS District agrees to sell Imported Water to Purchaser up to the Tier 1 Annual Maximum amount at the then current Tier 1 Rate. Imported Water sold to Purchaser in an amount greater than the Tier 1 Annual Maximum shall be sold at the Tier 2 Rate. 2. Purchaser agrees to purchase no less than the Purchase Commitment of Imported Water from District during the Term. 3. If Purchaser's actual Imported Water purchases during the Term are less than the Purchase Commitment, Purchaser agrees to pay District the undelivered balance of the Purchase Commitment at the average of the Tier 1 Supply Rate in effect during the Term. Purchaser agrees to pay such amount to District no later than six months after billing. 4. The rates applicable to Imported Water under this Purchase Agreement could change from time to time as determined by the District's Board of Directors. The rates as of the effective date of this Purchase Agreement are shown in Exhibit 1. AMENDMENTS AND RENEWALS Not later than August 1 of each year during the Term, Purchaser may provide a written request to District to change the Base Allocation for the following calendar year. The process for making the change is described in Exhibit 2. District shall determine whether such request, and any similar requests from other purchasers, can be accommodated. District shall notify Purchaser in writing no later than October 31 of that year as to its determination regarding the request. An adjustment to a Purchaser's base allocation will be reflected in an amendment to the Purchase Agreement, to be effective.the first day of the calendar year following the request. 2. Not later than December 31, 2007, Purchaser may provide written notice to District of its determination to extend this Purchase Agreement. WATER SERVICE 1. The Metropolitan Water District of Southern California (Metropolitan) supplies Imported Water sold by the District under this Purchase Agreement. Metropolitan shall use its reasonable best efforts to deliver water when needed by the Purchaser during the Term. There shall be no default by the District under this Purchase Agreement if Metropolitan fails to deliver water to the Purchaser. 2. Purchase Agreement does not convey any right or confer any entitlement to Purchaser to receive Imported Water through Metropolitan's distribution system. 3. Imported Water delivered to the Purchaser under this Purchase Agreement shall be subject to reduction in accordance with the policies and principles governing the allocation of water by Metropolitan to its member agencies. In the event Metropolitan's board determines to reduce, interrupt or suspend deliveries of Imported Water, any outstanding balance of the Purchase Commitment at the end of the Term shall be reduced by the reduction in Imported Water made available to the Purchaser under this Purchase Agreement. MISCELLANEOUS This Purchase Agreement will apply to and bind the successors and assigns of the Purchaser and District. This Purchase Agreement is executed by the duly authorized officers of the Central Basin Municipal Water District and City of Vernon, to be effective January 1, 2003. CENTRAL BASIN MUNICIPAL WATER DISTRICT Darryl G. Miller General Manager CITY OF VERNON SEE ATTACHED SIGNATURE PAGE M CITY OF VERNON By: LEONIS C. MALBURG, Mayor ATTEST: BRUCE V. MALKENHORST, City Clerk APPROVED AS TO FORM: EDUARDO OLIVO, City Attorney EXHIBIT AV Exhibit 1 Imported Water Purchase Agreement DEFINITIONS "Base Allocation" means the Purchaser's share of the District's base amount with Metropolitan (defined as the "Initial Base Demand" in the District's purchase order with Metropolitan). The Purchaser's Base Allocation is used to calculate both the Tier 1 Annual Maximum (90% of Base Allocation) and the Purchase Commitment (60% of Base Allocation times five). Initially, the Base Allocation is determined as the five-year average of Purchaser's non -surplus imported water purchases from District, from fiscal years ending 1997 through 2001, plus a prorated adjustment to account for the District's Initial Base Demand. As described in the Adjustments and Renewals section above, Base Allocation may be increased or decreased if the District can accommodate a Purchaser's request. "Imported Water" means imported water supplied by Metropolitan and sold by the District to Purchaser. Imported Water does not include Long -Term Seasonal Storage Service and other surplus categories of supplies. "Purchaser" means a customer of the District that has entered into a Purchase Agreement with the District. "Purchase Commitment" means the amount of Imported Water that Purchaser agrees to purchase from District. Purchase Commitment must be at least 60% of the Base Allocation times five. Deliveries of surplus imported water supplies, including but not limited to Long -Term Seasonal Storage Service, will not count towards the Purchase Commitment. "Term" means the term of this Purchase Agreement as specified above. "Tier 1 Annual Maximum" means an amount equal to 90% of the Base Allocation. "Tier 1 Rate" means the price charged Water to Purchaser in an amount up to Tier 1 Rate is $457 per acre-foot. by the District for deliveries of Imported the Tier 1 Annual Maximum. The initial "Tier 2 Rate" means the price charged by the District for deliveries of Imported Water to Purchaser in an amount greater than the Tier 1 Annual Maximum. The initial Tier 2 Rate is $538 per acre-foot. "Tier 1 Supply Rate" means Metropolitan's per acre-foot Tier 1 Supply Rate, as determined from time to time by Metropolitan's Board of Directors. The initial Tier 1 Supply Rate is $73 per acre-foot. "Tier 2 Supply Rate" means Metropolitan's per acre-foot Tier 2 Supply Rate, as determined from time to time by Metropolitan's Board of Directors. The initial Tier 2 Supply Rate is $154 per acre-foot. EXHIBIT jj� • `. , ' . • Ir Exhibit 2 Imported Water Purchase Agreement BASE REALLOCATION PROCESS Background In order to receive a greater amount of Tier 1 water for its customers, the District will commit to purchasing supply from Metropolitan. It is the District's goal that the sum of Purchase Commitments of the District's customer agencies must always equal the District's commitment to Metropolitan. The Base Allocations and the Reallocation process are intended to maintain a full allocation of the District's Tier 1-priced water to all Purchasers (customer agencies that have entered into Purchase Agreements with the District) in an objective manner. The Base Allocation determines the Purchase Commitment (60% of Base Allocation times five) and Tier 1 Annual Maximum (90% of Base Allocation) for the Purchaser. Reallocation Process Outline • District considers Purchasers' requests for adjustment annually and must receive requests by August 1. • After August 1, District will compare any request(s) for increase in Base Allocation to any request(s) for decrease. The District will accommodate requests to the extent that the total of base allocation increases does not exceed the total of base allocated decreases (see General Notes 1,2 above). If more than one Purchaser requests an increase or decrease, adjustments will be made on pro-rata basis according to each Purchaser's relative share of the total request (see Reallocation Example below). • District will respond in writing to a Purchaser's request by October 31. The Purchaser could receive less as an adjustment than what was requested. Reallocation Example Initial Base AF Request AF) Rel. Share Adjustment (AF) New Base AF Purchaser A 3,000 -500 58.8% -382 2,618 Purchaser B 1,700 -350 41.2% -268 1,432 Total of Requests for Decrease = -850 100% -650 Purchaser C 500 +100 15.4% +100 600 Purchaser D 650 +250 38.5% +250 900 Purchaser E 420 +300 46.1 % +300 720 Total of Requests for Increase = +650 100% +650 Total Base I 6,270 SUPPORTING DOCUMENTS PURCHASE AGREEMENT FOR IMPORTED WATER TO BE PROVIDED BY CENTRAL BASIN MUNICIPAL WATER DISTRICT PURCHASER: City of Vernon BASE ALLOCATION: 3,350 acre-feet TIER 1 ANNUAL MAXIMUM (90% of Base Allocation): 3,015 acre-feet PURCHASE COMMITMENT (60% of Base Allocation x 5): 10,050 acre-feet TERM: 5 years EFFECTIVE DATE: January 1, 2003 Definitions of capitalized terms used in this Purchase Agreement are provided in Exhibit 1. COMMITMENTS District agrees to sell Imported Water to Purchaser up to the Tier 1 Annual Maximum amount at the then current Tier 1 Rate. Imported Water sold to Purchaser in an amount greater than the Tier 1 Annual Maximum shall be sold at the Tier 2 Rate. 2. Purchaser agrees to purchase no less than the Purchase Commitment of Imported Water from District during the Term. 3. If Purchaser's actual Imported Water purchases during the Term are less than the Purchase Commitment, Purchaser agrees to pay District the undelivered balance of the Purchase Commitment at the average of the Tier 1 Supply Rate in effect during the Term. Purchaser agrees to pay such amount to District no later than six months after billing. 4. The rates applicable to Imported Water under this Purchase Agreement could change from time to time as determined by the District's Board of Directors. The rates as of the effective date of this Purchase Agreement are shown in Exhibit 1. AMENDMENTS AND RENEWALS Not later than August 1 of each year during the Term, Purchaser may provide a written request to District to change the Base Allocation for the following calendar year. The process for making the change is described in Exhibit 2. District shall determine whether such request, and any similar requests from other purchasers, can be accommodated. District shall notify Purchaser in writing no later than October 31 of that year as to its determination regarding the request. An adjustment to a Purchaser's base allocation will be reflected in an amendment to the Purchase Agreement, to be effective the first day of 'the calendar year following the request. 2. Not later than December 31, 2007, Purchaser may provide written notice to District of its determination to extend this Purchase Agreement. WATER SERVICE The Metropolitan Water District of Southern California (Metropolitan) supplies Imported Water sold by the District under this Purchase Agreement. Metropolitan shall use its reasonable best efforts to deliver water when needed by the Purchaser during the Term. There shall be no default by the District under this Purchase Agreement if Metropolitan fails to deliver water to the Purchaser. 2. Purchase Agreement does not convey any right or confer any entitlement to Purchaser to receive Imported Water through Metropolitan's distribution system. 3. Imported Water delivered to the Purchaser under this Purchase Agreement shall be subject to reduction in accordance with the policies and principles governing the allocation of water by Metropolitan to its member agencies. In the event Metropolitan's board determines to reduce, interrupt or suspend deliveries of Imported Water, any outstanding balance of the Purchase Commitment at the end of the Term shall be reduced by the reduction in Imported Water made available to the Purchaser under this Purchase Agreement. MISCELLANEOUS This Purchase Agreement will apply to and bind the successors and assigns of the Purchaser and District. This Purchase Agreement is executed by the duly authorized officers of the Central Basin Municipal Water District and City of Vernon, to be effective January 1, 2003. CENTRAL BASIN MUNICIPAL WATER DISTRICT CITY OF VERNON SEE ATTACHED SIGNATURE PAGE Q' .y ManagerGeneral ft CITY OF VERNON E . L .O,NIS C. MALBUR Mayo ATTEST: BRUCE V. MALKENHORST, City Clerk APPROVED AS TO FORM: EDUARDO OLIVO, City Attorney EXHIBIT 0 Exhibit 1 Imported Water Purchase Agreement DEFINITIONS "Base Allocation" means the Purchaser's share of the District's base amount with Metropolitan (defined as the "Initial Base Demand" in the District's purchase order with Metropolitan). The Purchaser's Base Allocation is used to calculate both the Tier 1 Annual Maximum (90% of Base Allocation) and the Purchase Commitment (60% of Base Allocation times five). Initially, the Base Allocation is determined as the five-year average of Purchaser's non -surplus imported water purchases from District, from fiscal years ending 1997 through 2001, plus a prorated adjustment to account for the District's Initial Base Demand. As described in the Adjustments and Renewals section above, Base Allocation may be increased or decreased if the District can accommodate a Purchaser's request. "Imported Water" means imported water supplied by Metropolitan and sold by the District to Purchaser. Imported Water does not include Long -Term Seasonal Storage Service and other surplus categories of supplies. "Purchaser" means a customer of the District that has entered into a Purchase Agreement with the District. "Purchase Commitment" means the amount of Imported Water that Purchaser agrees to purchase from District. Purchase Commitment must be at least 60% of the Base Allocation times five. Deliveries of surplus imported water supplies, including but not limited to Long -Term Seasonal Storage Service, will not count towards the Purchase Commitment. "Term" means the term of this Purchase Agreement as specified above. "Tier 1 Annual Maximum" means an amount equal to 90% of the Base Allocation. "Tier 1 Rate" means the price charged by the District for deliveries of Imported Water to Purchaser in an amount up to the Tier 1 Annual Maximum. The initial Tier 1 Rate is $457 per acre-foot. "Tier 2 Rate" means the price charged by the District for deliveries of Imported Water to Purchaser in an amount greater than the Tier 1 Annual Maximum. The initial Tier 2 Rate is $538 per acre-foot. "Tier 1 Supply Rate" means Metropolitan's per acre-foot Tier 1 Supply Rate, as determined from time to time by Metropolitan's Board of Directors. The initial Tier 1 Supply Rate is $73 per acre-foot. "Tier 2 Supply Rate" means Metropolitan's per acre-foot Tier 2 Supply Rate, as determined from time to time by Metropolitan's Board of Directors. The initial Tier 2 Supply Rate is $154 per acre-foot. EXHIBIT Exhibit 2 Imported Water Purchase Agreement BASE REALLOCATION PROCESS Background In order to receive a greater amount of Tier 1 water for its customers, the District will commit to purchasing supply from Metropolitan. It is the District's goal that the sum of Purchase Commitments of the District's customer agencies must always equal the District's commitment to Metropolitan. The Base Allocations and the Reallocation process are intended to maintain a full allocation of the District's Tier 1-priced water to all Purchasers (customer agencies that have entered into Purchase Agreements with the District) in an objective manner. The Base Allocation determines the Purchase Commitment (60% of Base Allocation times five) and Tier 1 Annual Maximum (90% of Base Allocation) for the Purchaser. Reallocation Process Outline • District considers Purchasers' requests for adjustment annually and must receive requests by August 1. • After August 1, District will compare any request(s) for increase in Base Allocation to any request(s) for decrease. The District will accommodate requests to the extent that the total of base allocation increases does not exceed the total of base allocated decreases (see General Notes 1,2 above). If more than one Purchaser requests an increase or decrease, adjustments will be made on pro-rata basis according to each Purchaser's relative share of the total request (see Reallocation Example below). • District will respond in writing to a Purchaser's request by October 31. The Purchaser could receive less as an adjustment than what was requested. Reallocation Example Initial Base AF Request AF) Ref. Share Adjustment (AF New Base AF Purchaser A 3,000 -500 58.8% -382 2,618 Purchaser B 1,700 -350 41.2% -268 1,432 Total of Requests for Decrease = -850 100% -650 Purchaser C 500 +100 15.4% +100 600 Purchaser D 650 +250 38.5% +250 900 Purchaser E 420 +300 46.1 % +300 720 Total of Requests for Increase = +650 100% +650 Total Base 6,270 6.270 Central Basin Municipal Water District 17140 S. Avalon Blvd • Suite 210 • Carson, CA 90746-1296 telephone 310-217-2222 • fax 310-217-2414 October 9, 2002 Mr. Scott Rigg Water Operations Supervisor City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Dear Mr. Rigg: Cu° �"luni tyS a,rvices Imported Water Purchase Agreement — Request for Signature Your agency has elected to sign a voluntary Imported Water Purchase Agreement (Agreement) with Central Basin Municipal Water District. The Agreement establishes a customer's annual allocation of lower priced water (Tier 1) and its commitment to purchase a total amount of imported water from the District over the five-year term. Without an Agreement, a customer would pay a higher price (Tier 2) for firm purchases from the District. Enclosed as Attachment A is the final Agreement with a Base Allocation that meets your agency's request (the Base Allocation determines both the annual Tier 1 amount and the total commitment). Attachment B shows two revisions made to the draft Agreement language sent to you in June 2002. These revisions are adopted from similar revisions made to the District's Purchase Order with the Metropolitan Water District and should benefit the Purchaser. Please sign the final Agreement and return the original to the District by October 28, 2002. The District will then send your agency a copy of the final executed Agreement. Sincerely, G!� Darryl G. Miller, General Manager FP:hfd Enclosures Darryl G. Miller, General Manager Recycled ATTACHMENT A FINAL PURCHASE AGREEMENT FOR SIGNATURE ATTACHMENT B REVISIONS TO DRAFT PURCHASE AGREEMENT PURCHASE AGREEMENT FOR IMPORTED WATER TO BE PROVIDED BY CENTRAL BASIN MUNICIPAL WATER DISTRICT PURCHASER: BASE ALLOCATION: acre-feet TIER 1 ANNUAL MAXIMUM (90% of Base Allocation): acre-feet PURCHASE COMMITMENT (60% of Base Allocation x 5): acre-feet TERM: 5 years EFFECTIVE DATE: January 1, 2003 Definitions of capitalized terms used in this Purchase Agreement are provided in Exhibit 1. COMMITMENTS 1. District agrees to sell Imported Water to Purchaser up to the Tier 1 Annual Maximum amount at the then current Tier 1 Rate. Imported Water sold to Purchaser in an amount greater than the Tier 1 Annual Maximum shall be sold at the Tier 2 Rate. 2. Purchaser agrees to purchase no less than the Purchase Commitment of Imported Water from District during the Term. 3. If Purchaser's actual Imported Water purchases during the Term are less than the Purchase Commitment, Purchaser agrees to pay District the undelivered balance of the Purchase Commitment at the average of theTier _1 S_ upply Rate Deleted: then current in effect during the Term. Purchaser agrees to pay such amount to District no later than six months after billing. 4. The rates applicable to Imported Water under this Purchase Agreement could change from time to time as determined by the District's Board of Directors. The rates as of the effective date of this Purchase Agreement are shown in Exhibit 1. AMENDMENTS AND RENEWALS Not later than August 1 of each year during the Term, Purchaser may provide a written request to District to change the Base Allocation for the following calendar year. The process for making the change is described in Exhibit 2. District shall determine whether such request, and any similar requests from other purchasers, can be accommodated. District shall notify Purchaser in writing no later than October 31 of that year as to its determination regarding the request. An adjustment to a Purchaser's base allocation will be reflected in an amendment to the Purchase Agreement, to be effective the first day of the calendar year following the request. 2. Not later than December 31, Z00,7, Purchaser may provide written notice to - - m District of its determination to extend this Pur-chase Agreeent------------------------- WATER SERVICE 1. The Metropolitan Water District of Southern California (Metropolitan) supplies Imported Water sold by the District under this Purchase Agreement. Metropolitan shall use its reasonable best efforts to deliver water when needed by the Purchaser during the Term. There shall be no default by the District under this Purchase Agreement if Metropolitan fails to deliver water to the Purchaser. 2. Purchase Agreement does not convey any right or confer any entitlement to Purchaser to receive Imported Water through Metropolitan's distribution system. Imported Water delivered to the Purchaser under this Purchase Agreement shall be subject to reduction in accordance with the policies and prnciples governing the allocation of water by Metropolitan to its member agencies. In the event Metropolitan's board determines to reduce, interrupt or suspend deliveries of Imported Water, any outstanding balance of the Purchase Commitment at the end of the Term shall be reduced by the reduction in Imported Water made available to the Purchaser under this Purchase Agreement. MISCELLANEOUS This Purchase Agreement will apply to and bind the successors and assigns of the Purchaser and Metropolitan. This Purchase Agreement is executed by the duly authorized officers of the Central Basin Municipal Water District and [Purchaser], to be effective January 1, 2003. CENTRAL BASIN MUNICIPAL [PURCHASER NAME] WATER DISTRICT By: Darryl G. Miller General Manager By: Title: Deleted: 2006 pF YE � A `BtVELY 1119V9 COMMUNITY SERVICES & WATER DEPARTMENT OFFICE MEMORANDUM TO: Bruce V. Malkenhorst, City Administrator FROM: Samuel Kevin Wilson_, rector of Community Services & Water DATE: October 16, 2002 SUBJECT: Central Basin Municipal Water District - Imported Water Purchase Agreement As you are aware, the City currently has adjudicated water rights of 8,039 acre-feet per year.. The City's water demand has remained relatively constant at approximately 12,039 acre-feet per year. This leaves the City with a shortfall of nearly 4,000 acre-feet. Historically, the City has leased pumping rights to make-up for the shortfall. However, due to recent changes in Central Basin MWD's new rate structure and the Water Replenishment District's discontinuance of the in lieu program, the City has been forced to evaluate alternative means of purchasing water supplies to meet current and future demand requirements. It should be noted that Central Basin MWD's new rate structure will not go into effect until January 2003. Initially, because the City received credit for not using water in the summer months as part of the Seasonal Storage Program, the City was originally only eligible for 647 acre-feet of Tier 1 water per year. This would have left the City with a shortfall of approximately 3,350 acre-feet per year. However, the "Purchase Agreement Customer Response Form" provided a section for purveyors wishing to change their base allocation. In reviewing the City's water demand requirements, City staff determined that the City would require the 3,350 acre-feet per year as its Preliminary Base Allocation. The City submitted a request to Central Basin MWD for this amount on July 3, 2002. On October 10, 2002, the City received notification from Central Basin MWD that the City's request to increase the Base Allocation to 3,350 acre-feet per year had been granted. The purchase commitment will require the City to purchase a minimum of 10,050 acre-feet of water over the 5-year term. The City will easily take this quantity of water over a 5-year period. The allocation will provide the City additional flexibility since it will supplement a majority of the City's 4,000 acre-foot shortfall. It will also allow the City to meet daily peak water demand conditions. As things currently stand, the City's production facilities are, at times, pushed to meet peak demand conditions during the summer months. In addition, the costs associated with the Tier I water rate appear to be reasonable at $457.00 per acre-foot since leased water rates currently range from approximately $467.00 to $472.00 per acre-foot. It should be noted that without an agreement, the City would have to purchase supplemental water from Central Basin MWD at Tier H rates of $538.00 per acre-foot. In discussions with Mr. Laurent McReynolds, City water supply consultant, he advised the City to maximise its use of Central Basin MWD water supplies in order to supplement current and future water demand requirements. Two other factors are worth mentioning that could have a negative impact on the City in this agreement: 1), the possibility of two or more large-scale businesses leaving the City and 2) the reclaimed water system being expanded in the future. Both could have the net effect of reducing the City's potable water demand. In the worst case scenario, if the City lost two large customers with a total usage of approximately 1,000 acre-feet per year, the City could choose either not to lease water or reduce its use of Central Basin MWD water from the maximum allocation of 3015 acre feet to its purchase commitment of 2010 acre feet per year. If the City's reclaimed water system were to decrease the demand for potable water, the City would seek to renegotiate this agreement. Terms of the proposed agreement are as follows: • Base Allocation: 3,350 acre-feet • Tier I Annual Maximum (90% of Base Allocation): 3,015 acre-feet • Purchase Commitment (60% of Base Allocation x 5): 10,050 acre-feet • Term: 5 Years Table 1— Annual Demand and Recommended Allocation of Supplies Estimated Annual Demand 12,039 AF (Does not include Malburg Generation Plant) Adjudicated Rights 8,039 AF Shortfall 4,000 AF CBMWD Allocation 3,015 AF Leased Water Rights 985 AF Total 12,039 AF Table 2 - Source Water Costs Tier I $457.00 AF Tier 2 $538.00 AF Owned Ground Water $232.00 AF Lease Water Rights $467.00 - $472.00 AF It is therefore my recommendation that the City enter into the agreement with Central Basin MWD to purchase the quantities of water as specified in the agreement over a 5-year term. SKW/sr Attachment C: City Attorney