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Resolution No. 2010-015 (3)COMMUNITY SERVICES & WAI Samuel Kevin Wilson, Director of Comn 4305 Santa Fe Avenue, Vernon, ( Telephone (323) 583-8811 Fa January 25, 2010 Art Aguilar - Central Basin Municipal Water District 6252 Telegraph Road Commerce, California 90040-2512 Dear Mr. Aguilar: C-2 Via U.S. Certified Mail '�70z)q 1 .35 0000l Z55-7 1?87q 1 1 2 -? The City of Vernon ("City") has learned that Central Basin Municipal Water District l"the District") has awarded a contract for the first phase of the construction of the Southeast Water Reliability Project ("Project") and a construction management contract to oversee the Project. We also understand the District representatives may be privately and publicly stating that the City rernains responsible to fund a portion of the Project. fhe District has been advised by the City on several occasions that the November 22, 2005 agreement between the District and the City no longer is valid or viable. This is due to the fact that the energy project which was fundamental to the City's participation and a prerequisite to the City becoming responsible for partially funding the Project no longer is being implemented and most likely will not be implemented in its original size. Further, the pipeline at the core of the Project has been downsized unilaterally by District action. Accordingly, the City is constrained to again advise the District hereby that the City is not financially obligated to pay for any portion of the Phase I construction of the Southeast Water Reliability Project. The City continues to believe that the Project will provide a valuable resource to the southeast area of Los Angeles by providing an alternative supply of water to the region and encourages the District to continue discussing how Vernon might participate in this revised project based on a mutually agreeable new structure. Sincerely. Donal O'Callaghan City Administrator DOC/SKW/ca Douglas Wance, Sedgwick Central Basin Municipal Water District Board Members Exc[usiveCv Industiicd in Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. le Print your name and address on the reverse so that we can return the card to you. ® Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: FART AGUILAR CENTRAL BASIN MUNICIPAL WATER DISTRICT 6252 TELEGRAPH ROAD A. Signature ❑ Agent X Addressee B. Received by (Printed Name) C. D fjD9iSlrery D. Is delivery address different from item 1 ❑Yes If YES, enter delivery address below: ❑ No COMMERCE, CA 90040-2512 3. VSqervice Type XICertifled Mail ❑ Express Mail © Registered M Return Receipt for Merchandise ❑ Insured Mail ❑ C.O.D. 4. Restricted Delivery? (Extra Fee) ❑ Yes 2. Article Number 7004 1350 0001 2557 9874 (Transfer from service lab PS Form 3811, February 2004 Domestic Return Receipt 102595-02-M-1540 UNITE 0. g��tl • Sender, Please print your name, address, and ZIP+4 in this box ° w SAMUEL KEVIN WILSON CITY OF VERNON 4305 SANTA FE AVENUE VERNON, CALIFORNIA 90058 i MJ J1111 J171 Jll W,1, 11.... 1111) 11J1J1b I)JIIf1JJ J)lltl'I lif RESOLUTION NO. 2010-15 A RESOT=_ ION OF THE CITY COUNCIL OF TPF CITY OF VERNON APPROVING AND AUTHCRIZING THE EXECUTION OF A LETTER TO THE CENTRAL BASIN MUNICIPAL WATER DISTRICT REGAR)ING THE FUNr_TNG AND CONSTRUCTION OF THE VERNON PIPELINE PROJECT AND THE SOUTHEAST WATER RELIABILITY PROJECT WHEREAS, on November 2, 2005, the City Council of the City of Vernon adopted Resolution No. 8890 appro-ving an Agreement Petween Central Basin Municipal Water District ;the "ri.strict") and the City of Vernon (the "City") Regarding the Buying and Selling of Recycled Water (the "Agreement") under which the District would provide recycled water to the Ci'=y for a proposed power plant; and WHEREAS, under the terms of the Agreement, the District would construct (i) approx_mately one and a half m,�.les of 42-inch pipeline from the intersection of Industrial Way and Grande Vista in the City to the City's proposed power plant (the "Vernon Pl.pe_.ine Project"' and ('i) approximately 10-mi-es of 42-inch pipeline from the intersection of Industrial Way and Grande Vista in the City to the Rio Hondo -Pump Station in Whittier, plus other appurtenances known as the "Southeast Water Reliability Project;" L:.nd WHEREAS, in accordance with the Agreement, the City would pay the Pistrict a portion of the cost of the Southeast Water Re'i.abili�y Project, plus 100 percent of the Vernon Pipeline Project, upon the District's completion of the Vernon Pipeline Project and the Southeast Water Reliability Project; and WHEREAS, in ,:uly of 2009, City officials met with the Central Basin staff tc, d;.scuss the status of the Southeast Water Reliability Project and were advised that the District had redesigned - 1 - 0 .) the pipeline to a 30" diameter from the originally proposed 42" diameter pipeline; and WHEREAS, the City believes the change in the pipeline size invalidates the Agreement; and WHEREAS, by letter dated August 13, 2009, the Director of Community Services & Water requested the District to stop work on the Southeast Water Reliability Project and not seek financing until the parties could agree to and approve amendments to the Agreement; and WHEREAS, by letter dated September 2009, the Director of Community Services & Water requested a meeting to discuss amending the Agreement and the City's obligations respecting the payment of costs for the Southeast Water Reliability Project; and WHEREAS, City officials met with the District on October 1, 2009, and by letter dated October 22, 2009, the Director of Community Services & Water memorialized the technical terms to be incorporated into a new agreement; and WHEREAS, the power plant that was fundamental to the City's participation in the Agreement and a prerequisite to the City becoming responsible for partially funding the Southeast Water Reliability Project has not been implemented and, if implemented, will likely not be implemented in its original size; and WHEREAS, since the October 2009 letter, the City has discovered that the District has moved forward with the Southeast Water ReliaW lity Project; and WHEREAS, by Staff Report dated January 19, 2010, the Director of Community Services & Water recommended that the City Administrator be authorized to sign a letter to the District stating the City's position with respect to the Agreement, the Southeast Water - 2 - i l Reliability Project and the City's fund:l.ng obligations under the Agreement. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNCN AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby authorizes the City Administrator, or his designee, to send a letter to the District reiterating the City's position regarding the Agreement, the Southeast Water Reliability Project and the funding thereof by the City, a copy o' which is attached hereto as Exhibit A and incorporated by reference. SECTICN 3: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk o.` the City of Vernon shall cause this resolution and the City Clerk's certifi.catiop to be entered in the File of Resolutions of the Council of this City. APPROVE.--' AND ADOPTED this 25th day of t-anuary, 2010. ATTEST: 14ANUELA GIRON, Ci y Clerk Name • lil lari.o Gonzales 'itle : Mayor /R - 3 - r STATE OF CALIFORNIA ) ss COUNTY OF LOS ANGELES ) I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2010-15, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Monday, Jan*zary 25, 2010, and thereafter was duly signed by the Mayor or Mayor Fro-Tem -of the City of Vernon. Executed this %-A day of January, 2010, at Vernon, California. (SEAL) A��`'`'`-e � A � < MANUELA GIRON, 6ity Clerk - 4 - G C) EXHIBIT A COMMUNITY SERVICES & WATER DEPARTMENT Samuel Kevin Wilson, Director of Community Services & Water 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1435 January 25, 2010 Art Aguilar Central Basin Municipal Water District 6252 Telegraph Road Commerce, California 90040-2512 Dear Mr. Aguilar: C-2 Via U.S. Certified Mail The City of Vernon ("City") has learned that Central Basin Municipal Water District ("the District") has awarded a contract for the first phase of the construction of the Southeast Water Reliability Project ("Project") and a construction management contract to oversee the Project. We also understand the District representatives may be privately and publicly stating that the City remains responsible to fund a portion of the Project. The District has been advised by the City on several occasions that the November 22, 2005 agreement between the District and the City no longer is valid or viable. This is due to the fact that the energy project which was fundamental to the City's participation and a prerequisite to the City becoming responsible for partially funding the Project no longer is being implemented and most likely will not be implemented in its original size. Further, the pipeline at the core of the Project has been downsized unilaterally by District action. Accordingly, the City is constrained to again advise the District hereby that the City is not financially obligated to pay for any portion of the Phase I construction of the Southeast Water Reliability Project. The City continues to believe that the Project will provide a valuable resource to the southeast area of Los Angeles by providing an alternative supply of water to the region and encourages the District to continue discussing how Vernon might participate in this revised project based on a mutually agreeable new structure. Sincerely, Donal O'Callaghan City Administrator 70C SKW,ca c: Douglas Wance, Sedgwick Central Basin Municipal Water District Board Members Er,c(usivefv Inds striaf p,,,EIVED APPROVED JAN 2510 Cam' COUNCIL AID 2 0 ZOtO 40 C. CITY COWS STAFF REPORT COMMUNITY SERVICES & WATER DEPARTMENT DATE: January 19, 2010 Revised January 20,201 TO: Honorable Mayor and City Council FROM: Samuel Kevin Wilson, Director of Community Services & Water /c/' RE: CENTRAI BASIN MLNICIP kI. WATER DISTRICT RFC YCLED WATER PIPELINE AGREEMENT The City of Vernon entered into an agreement with Central Basin Municipal Water District (CBMWD) on November 22, 2005 to provide recycled water to the proposed Vernon Power Generating facility (see Attachment "A"). As part of the Southeast Water Reliability Project (Project) the City agreed to fund a portion of the cost to design and construct the Project. The Project consisted of a 42" pipeline from Vernon to a pump station in Whittier, and included metering, SCADA controls, pumping and flushing facilities, and other appurtenances. CBMWD retained HDR Fngineering, Inc. to prepare the pans and specifications for the Project. The design work has been completed. The City has been advised that the pipeline size originally agreed to in our Agreement has been unilaterally changed by CBMWD from a 42" pipeline to a 30" pipeline. The City of Vernon advised CBMWD on August 13, 2009 (see Attachment "B"' that the change in the pipeline size voided the November 22; 2005 Agreement and advised CBMWD that the terms of the Agreement must be renegotiated. CBMWD sent the City an invoice seeking the City's first payment for its portion of the design work. In response, a letter was mailed to CBMWD dated September ', 2009 ksee 4ttaulunent "C"). The City advised that in accordance with Section 3C of the Agreement, no capital recovery fee was due from the City until CBMWD completed the Project. This letter reiterated that the change in the pipeline size voided the terms of the Agreement and that CBMWD should stop work including financing the Project until the terms of the Agreement are amended. Finally, City and CBMWD staff met on October 1, 2009 and agreed that the November 2-, 2005 Agreement needed to be amended. Can October 22, 2009 a foliow up letter was sent to CBMWD (see Attachment "D") setting forth technical items that needed to be amended in the Agreement. This letter also advised CBMNVD that the new agreement would set forth new timelines anu risk sharing provisions which would be negotiated following concurrence on the technical points. Since that time CBMWD has not submitted any proposed revisions to the Agreement to the City of Vernon. City staff has learned that CBMWD has contracted for the construction of the first phase of the Project. City staff is recommending that the City Council authorize the City Administrator to sign and send the letter in Attachment 'IF' to CBMWD. The letter states that it is the City's understanding that CBMWD representatives may be privately and publicly stating that the City remains responsible to fund a portion of the Project and that it is Vernon's position that the November 22, 2005 Agreement is no longer valid or viable. This is due to the fact that the energy project which was fundamental to the t 'ity's participation and a prerequisite to the City becoming mspunsible for partially funding the Project no longer is being implemented and most likely will not be implemented in its original size. Further, the pipeline at the core of the Project has been downsized unilaterally by CBMWD and accordingly, the City again advises CBMWD that the City will not be financially obligated to pay for any portion of the Phase I construction of the Project. SKI a Enclosures :4 r ATTACHMENT "A" AGREEMENT BETWEEN CENTRAL BASIN MUNICIPAL WATER DISTRICT AND THE CITY OF VERNON REGARDING THE BUYING AND SELLING OF RECYCLED WATER THIS AGREEMENT is made, entered into and executed in duplicate originals, any copy of which may be considered and used as the original hereof for all purposes, as of this 2Tnd day of November, 2005, in the City of Vernon, County of Los Angeles, California BY AND BETWEEN THE CITY OF VERNON, a municipal corporation (hereinafter referred to as "CITY"), 4305 Santa Fe Avenue Vernon, CA 9005.8 _ AND CENTRAL BASIN MUNICIPAL WATER DISTRICT (hereinafter referred to as "DISTRICT"), 17140 S. Avalon Blvd., Ste. 210 Carson, CA 90746-1296 1. RECITALS CITY and DISTRICT enter into this Agreement (hereinafter referred to as the "Agreement") in recognition of, and concurrence in., the following: A. CITY owns and operates its own electric and water distribution systems providing electricity and water to all its customers, with the exception of certain water customers located within the CITY which are served by the California Water Service Company or Maywood Mutual Water Company, B. CITY is proposing to build the Vernon Power Generating Station Project (the "Projec'L") in phases. The first phase of the Project will be an eight hundred ninety (890) megawatt electrical generation facility to be located at the southeast corner of the intersection of Boyle Avenue and Fruitland Avenue in CITY. The Project will require a firm water supply of approximately 13,500 acre-feet per year for use in its cooling towers by the Project's planned in-service date of August 27, 2007. C. CITY has elected to utilize approximately 13,500 acre- feet per year of recycled water for the Project in lieu of potable water to conserve potable water. D. DISTRICT owns and operates a recycled water distribution system and will have recycled water available to meet the Project s anticipated recycled water needs. E. To provide recycled water to the Project, certain facilities must be constructed. The facilities include: i) VERNON PIPELINE PROJECT. These facilities consist of approximately one and one half (1 1/2) miles of 42--inch pipeline from the intersection of Industrial Way and Grande Vista in the City of Vernon to the proposed "Project". CITY will pay for all of the VERNON PIPELINE PROJECT. A drawing- indicating the route of the VERNON PIPELINE PROJECT to the Project site is attached 'hereto as Exhibit "A" and made a part hereof as though fully set forth at length, ii) THE SOUTHEAST WATER RELIABILITY PROJECT. These facilities consist of approximately ten (10) miles of 42- inch pipeline from the intersection of Industrial Way and Grande Vista in the City of Vernon to the Rio Hondo Pump Station in Whittier; expansion of the existing DISTRICT Rio Hondo Pump Station or addition of a new pump station; 2 c back-up power generation for the pump station; two (2) two-way meters installed at the two locations where DISTRICT's recycled water pipeline enters the CITY boundary for this project and at the CITY boundary for the previously constructed Malburg Generation Station Project; a flushing facility for the 42-inch recycled water pipeline and a Supervisory Control and Data Acquisition (SCADA) system to monitor and control flow at r both locations of entry into the city boundary. A drawing indicating the potential route of the Southeast [dater Reliability Project is attached hereto as Exhibit ,.B„ . F. Under this Agreement, the parties will cooperate to conserve potable water supplies by providing recycled water to the Project. NOW, THEREFORE, THE PARTIES HERETO DO MUTUALLY AGREE AS SET FORTH HEREIN: 2. DEFINITIONS A. PROJECT COSTS shall mean the costs incurred to administer, plan, permit, finance, design, perform construction management, perform public outreach, and construct all facilities contemplated by this agreement; B. RECYCLED TRATER shall mean treated wastewater that meets California Code of Regulations Title 22 standards. C. MALBURG PIPELINE PROJECT shall mean the pipeline owned by CITY and Hollydale Pump Station constructed by the CITY and owned by 3 C C the DISTRICT to provide recycled water service to the Malburg Power Plant. D. VERNON PIPELINE PROJECT shall mean the 42-inch pipeline and flushing facility within the CITY boundary from the intersection of Industrial Way and Grande Vista to the proposed "Project"; E. SOUTHEAST WATER RELIABILITY PROJECT shall mean the approximately ten (10) miles of 42-inch pipeline from the intersection of Industrial Way and Grande Vista in the City of Vernon to the Rio Hondo Pump Station in Whittier by way of Pico Rivera, Montebello, City of Commerce and East Los Angeles exclusive of the Vernon Pipeline Project; expansion of the existing DISTRICT Rio Hondo Pump Station or addition of a new pump station; back-up power generation for the pump station; two (2) two-way meters installed at the two locations where DISTRICT's recycled water pipeline enters the CITY boundary for this project and at the CITY boundary for the previously constructed Malburg Generation Station Project; a flushing facility for the 42-inch recycled water pipeline and a SCADA system to monitor and control flow at both locations of entry into the city boundary. 3. CITY'S DUTIES AND OBLIGATIONS. CITY shall be responsible for performing the following: A. CITY will purchase recycled water from DISTRICT and pay for said recycled water at DISTRICT'S prevailing wholesale recycled water commodity rate, as established by DISTRICT; B. If the DISTRICT establishes a wholesale recycled water commodity rate that is less than the City's rate for the Project, CITY will pay for said received water at the lesser rate as the base for N monthly invoice calculation exclusive of any lesser rate established for the Malburg project. C. CITY will pay District a monthly Capital Recovery Fee to recover 64.9% of the Southeast Water Reliability Project cost, plus 100% of the VERNON PIPELINE PROJECT beginning on the latest of August 27, 2006, or the DISTRICT's completion of the VERNON PIPELINE PROJECT and the SOUTHEAST WATER RELIABILITY PROJECT. The fee will be paid in 300 monthly installments at an interest rate equal to the Bond Buyer Municipal Bond Index (40 Bonds) at the date of DISTRICT's financing of project. The fee is a "take -or -pay" obligation which is payable by the CITY regardless of completion of the project, availability of recycled water or purchases of recycled water by the CITY or for any other reason. D. CITY anticipates the amount of recycled water to be purchased will be up to approximately 13,500 acre-feet per year for the Vernon Power Plant. E. CITY anticipates peak flow demands to be a fourteen thousand (14,000) gpm for the Project from the Southeast Water Reliability Project. F. The actual flow and amount purchased by the CITY will depend on the operation of the Project. G. Through either usage or discharge to a sewer, CITY will daily purchase and use a minimum of 6.7 acre-feet (2,431 AFY) for the "Project" beginning August 27, 2007. The minimum daily purchase/use amount for the Project will be reduced a lice amount by the daily sum of water taken by all users along the Southeast Water Reliability Project pipeline preceding the connection to the CITY. 5 H. CITY will comply with all provisions of: California Regional Water Quality Control Board ("RWQCB") Order No. 87-50 and Order No. 87-51 (hereinafter "Orders") and their successors issued to the County Sanitation District of Los Angeles County; Title 17 and 22 of the California Code of Regulations; and regulations of the State of California Department of Health Services regarding recycled water; I. CITY will perform annual visual inspections and periodic cross -connection tests at the "Project" site and provide documentation to DISTRICT when requested; J. CITY will require "Project" "on -site supervisors" to sign a document similar to DISTRICT'S "Conditions for she Introduction and Use of Recycled Water" thereby acknowledging the conditions under which recycled water may be used at the site; K. CITY will provide a copy of the latest "RTn7QCB" Orders to the "Project" "on -site supervisor" as required in the Orders; L. CITY will allow DISTRICT to design and construct the VERNONT PIPELINE PROJECT. M. CITY will, subject to approval of the Vernon City Council, provide letters of support for DISTRICT'S pursuit of additional grant funding for projects in DISTRICT'S service area. N. CITY will submit its application for permit to construct and operate an eight hundred ninety (890) megawatt power generation station to California Energy Commission (CEC) in November, 2005. 0. CITY will cooperate and support DISTRICT in pursuit of additional customers for recycled water use within the CITY. 4. DISTRICT'S DUTIES AND OBLIGATIONS. DISTRICT agrees to perform the following: 0 A. Subject to Section 5. below, DISTRICT will complete the Southeast Water Reliability Project on or before August 27, 2007. B. DISTRICT will sell recycled water to CITY at DISTRICT's prevailing wholesale recycled water commodity rate or at such lower rate as specified in Section 3.B.; C. Subject to applicable federal, state, and local laws, the DISTRICT will operate and maintain its recycled water distribution system (not including facilities within the CITY Water Department's service area) to provide approximately 13,500 AFY for the Vernon Power Plant with a chlorine residual of 0.4 parts per million; D. DISTRICT will provide recycled water, except during circumstances beyond its control, to CITY at the point of connection between the Vernon Pipeline Project and the Southeast Water Reliability Project to meet a peak demand of fourteen thousand (14,000) gpm from the Southeast Water Reliability Project at a minimum of forty (40) pounds per square inch for the `Project". The actual flow will depend upon the operation of the "Project"; E. DISTRICT will design and construct the Vernon Pipeline Project for the City of Vernon; F. DISTRICT will provide monthly invoices in accordance with process set forth in Section 8. G. DISTRICT will assist CITY with regulatory approvals from the State of California Department of Health Services for the Vernon Pipeline Project; H. DISTRICT will provide CITY with copies of DISTRICT'S Recycled [dater Customer Guide that explains the roles and responsibilities of the recycled water customer with regard to the use of recycled water; 7 I. DISTRICT will support CITY'S application to the California Energy Commission (hereinafter "CEC") for the proposed Project by providing a "Will Serve" Letter as part of the application, along with additional exhibits, analyses, and documents, when, requested by CITY or CEC. Drafts of exhibits, analyses and documents, if any, will be provided by DISTRICT to CITY for review prior to submittal to CEC; J. DISTRICT will install two (2) two-way recycled water meters at the CITY boundary (one on the north border of CITY and the other orz the south border) with SCADA signal from meters and metered sewer connection to CITY and DISTRICT at CITY'S cost; K. DISTRICT will provide yearly calibration of the two-way meters described in Section 4.K. DISTRICT will replace as needed but no less than every ten years; L. DISTRICT will, on a monthly basis, read the recycled water meters serving the CITY; 5. CRITICAL PATH. To meet the CITY's planned in-service date of August 2007 the following critical path milestones must be met: A. CITY will submit its application for permit to construct and operate an eight hundred ninety (890) megawatt power generation station to California Energy Commission (CEC) in November, 2005; B. CEC deems permit application complete by February 10, 2006; C. CEC approves permit application and construction commences by October 1, 2006; D. City completes financing of the Project (last opportunity to terminate agreement with respecu to payment of the Capital Recovery Fee) by October 1, 2006; E. Transmission back -feed complete on August 27, 2007; and F. Plant is operational August 27, 2007. Any delay for a critical path milestone will create a day for day alteration in completion date for the DISTRICT`s Southeast Water Reliability Project. Should the DISTRICT fail to meet its obligation to provide -recycled water, for any reason, on the agreed date in accordance with the Critical Path and the CITY is ready to begin operation of the "Project" using recycled water, DISTRICT will reimburse CITY $4,500 per day to offset the cost difference between, potable water costs and recycled water costs. DISTRICT guarantees that imported water will be available in amounts specified in this Agreement. 6. TERMINATION OF AGREEMENT Either party may terminate this agreement with thirty (30) days written notification. If City initiates termination, CITY agrees upon termination to reimburse DISTRICT for all costs incurred by the DISTRICT to administer, finance, plan, permit, design, perform construction management, perform public outreach, and construct the Southeast Water Reliability Project and Vernon Pipeline Project to date. Should the District secure customers outside the City of Vernon that subscribe a portion of the pipeline capacity allocated for CITY, the City's Capital Recovery Fee would be reduced a like percentage. If DISTRICT terminates the agreement, CITY is relieved of the obligation to continue payments of Capital Recovery Fee. 0 7. EXPANSION OF PROJECT The incremental cost of any requested increase to the size or length of the proposed pipelines or pump station shall be borne entirely by the party requiring the increase. If the DISTRICT expands the pipeline to accommodate additional users, the CITY's Capital Recovery Fee payment would be recalculated to reflect the adjusted proportion of capacity allocated to the CITY. 8. INVOICING PROCESS CITY and DISTRICT agree to use the following process: A. After the "Project" is operational or August 27, 2007, whichever comes first: i) DISTRICT will determine the amount of recycled water consumed by reading the two (2) two-way meters located at the CITY boundaries; ii) DISTRICT will calculate the invoice for recycled water based on the amount of recycled water consumed and the DISTRICT'S prevailing wholesale recycled water commodity rates; B. On August 27, 2007 the DISTRICT will invoice the CITY for its portion of the Southeast Water Reliability Project and Vernon Pipeline Project. CITY will make three hundred (300) equal monthly payments over 25 (twenty-five) years in the amount calculated in Section 3.C. 9. FUTURE RATE INCREASE. The DISTRICT Board of Directors will establish its wholesale recycled water commodity rate from time to time. Any increase of rates by the 10 DISTRICT after the date of this Agreement shall be reasonable and shall not be greater than those charged to other purchasers of wholesale recycled water from DISTRICT, notwithstanding the separate rate agreement regarding the Malburg Power Generation Station. The rate for recycled water shall not be greater than the DISTRICT's effective rate for imported potable water. 10. IiYDRAULIC CALCULATIONS. The Vernon Pipeline Project and the Southeast Water Reliability Project shall each be 42-inch diameter. 11. ANNUAL RECONCILIATION. CITY and DISTRICT shall meet annually to review recycled water deliveries and other matters of mutual interest. 1 7 M=cn r The term of this agreement shall be thirty (30) years. Two ten-year automatic renewals will occur unless either party provides notice of intent to terminate two years in advance of the applicable term period. 13, ATTORNEYS' FEES If any action is instituted to enforce this Agreement, the prevailing party shall be reimbursed all reasonable attorneys' fees, costs of collection, as well as any other costs and expenses incurred in connection with the enforcement effort. 14. NOTICES A. Notices given pursuant to the provisions of this Agreement, or necessary to carry out its provisions, shall be in writing and delivered either: (1) personally to the person to whom the notice is to be given; or (2) faxed and mailed to such person. Addresses of DISTRICT and CITY for this purpose shall be: 11 Central Basin; CENTRAL BASIN MUNICIPAL WATER DISTRICT ATTN : GENERAL 14ANAGER 17140 SOUTH AVALON BOULEVARD, SUITE 210 CARSON, CA 90746-1296 - with a copy to: LEMIEUX & O'NEILL 2393 TOWNSGATE ROAD, SUITE 201 WESTLAKE VILLAGE, CA 91361 City of Vernon: THE CITY OF VERNON ATTN: BRUCE V. INIALKENHORST, JR. ACTING CITY CLERK 4305 SANTA FE AVENUE VERNON, CA 90058-0805 15. SEVERABILITY. If any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or enforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable. 16. GOVERNING LAW. The validity, interpretation and performance of this Agreement shall be controlled and construed under the laws of the State of California as enacted and in force at the time this Agreement is fully executed. 17. ENTIRE AGREEMENT. 12 This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject hereof and contains all of the covenants and agreements between the parties with respect to said matter. Each party to this Agreement acknowledges that any representations, inducements, promises, statements or agreements, orally or otherwise, that have been made by any party, or anyone acting on behalf of any party, which are not contained in this Agreement shall not be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. 18. INDEMNIFICATION. A. DISTRICT shall indemnify, defend, protect and hold CITY and its officers, agents and employees free and harmless from and against any and all claims, demands, losses, damages, liabilities, fines, charges, penalties, orders, judgments and all costs and expenses incurred in connection therewith, including reasonable attorney's fees and costs of defense arising out of the negligent acts by DISTRICT, its contractors or agents, in the performance of this Agreement, except to the extent arising from or caused by the negligence or willful misconduct of CITY, its officers, agents or employees. B. CITY shall indemnify, defend, protect and hold DISTRICT and METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA and its officers, agents and employees free and harmless from and against any and all claims, demands, losses, damages, liabilities, fines, charges, penalties, orders, judgments and all costs and expenses incurred in connection therewith, including reasonable attorney's fees and costs of defense arising out of the negligent acts by CITY, its contractors or agents, in the performance of this Agreement, except to the extent 13 arising from or caused by the negligence or willful misconduct of DISTRICT, METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, and its officers, agents or employees, 19. ASSIGNMENT AND SUBCONTRACTING PROHIBITED. No party to this Agreement may assign or subcontract any right or obligation pursuant to this Agreement except with the express written consent of the other party. Any other attempted or purported assignment of any right or obligation pursuant to this Agreement shall be void and of no effect. 20. AMENDMENTS. This Agreement may be modified or amended only by a written document properly executed by both DISTRICT and CITY. 21. BENEFIT OF AGREEMENT. This Agreement shall bind and benefit the parties hereto and their heirs, successors, and permitted assigns. 22. FORUM SELECTION. Any action brought relating to this Agreement shall be brought and held exclusively in a State Court in the County of Los Angeles, California. 23. RECITALS. All recitals are incorporated by reference. 24. WAIVER. Any waiver at any time by either party of its rights with respect to a default under this Agreement, or with respect to any other matters arising in connection with this Agreement, shall not be deemed a waiver with respect to subsequent default or other matter. Neither Party shall be considered in to be in default in any of its obligations under this Agreement when a failure of performance 14 shall be due to an uncontrollable force. The term "uncontrollable force" shall mean any cause beyond the control of the party affected, including, but not restricted to, flood, earthquake, storm, fire, lightening, epidemic, war, riot, civil disturbance or disobedience, sabotage, or embargoes of the United States Government or any other government, which by exercise of due diligence such party could not reasonably have been expected to avoid and by exercise of due diligence has been unable to overcome. Either party rendered unable to fulfill any of its obligations under this Agreement by reason of an uncontrollable force, shall give written notice within five business days of such fact to the other party and shall exercise due diligence to remove such inability with all reasonable dispatch. IN WITNESS WtIEREOF, the parties to this Agreement have executed this Agreement by their duly authorized officers effective as of the day and year first above written. EST: f BRUCE V. APPROV•EP--AS rl)0 i FQRK: / FRESCH, City A CITY OF VERNON BY LEONIS C. BURG, fayor ./ Acting City Clerk ney CENTRAL BASIN MUNICIPAL WATER DISTRICT BY: 15 DISTRICT'S EGAL COUNSE BY: A/t/Z STEVE NEILL, Lemieux & O'Neil BY 4RICHARD NAGEL, Co eneral Manager 16 EXHIBIT A G EXHIBIT B ATTACHMENT "B" COMMUNITY SERVICES & WATER DEPARTMENT Samuel Kevin Wilson, Director of Community Services & Water 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (3Z3) 826-1435 August 13, 2009 Art Aguilar, General Manager (ventral Basin Municipal Water District 6252 Telegraph Road Commerce, California 90040-2512 Dear Mr. Aguilar. C-2 In early July, City of Vernon officials met with yourself and Centra: Basin Municipal Water District (Ventral Basin) staff to discuss the status of the Southeast Water Reliability Project. At that meeting the City of Vernon was advised that Central Basin hao redesigned the pipeline to a 30" diameter from the originally proposed 42" diameter pipeline. In addition Central Basin advised the City of Vernon that it intends to construct the project in two phases. The first phase would construct the pipeline through portions of Pico Rivera, and Montebello and is scheduled to commence the latter part of this year. Central Basin will be seeking bond financing for the project in the fall of this year. City of Vernon staff has reviewed the executed agreement between Central Basin and the City of Vernon dated November 22, 2005. The agreement specifically defines the project as a •12" pipeline. All of the costs, flow rate, and capacity calculations contained in the agreement were based on the 42" pipe size. Central Basin's dec6ion to change the pipe size void the agreement as drafted. The City of Vernon is currently reevaluating its recycled water needs to determine if the 30" pipeline is appropriately sized for Vernon's future needs. As you are aware the City of Vernon continues to pursue a permit for what is referred to in the agreement as the "Vernon Power Generating Station Project." The City is committed tr providing its customers with the most economical and reliable water and therefore the City seeks to have a backbone recycled water system in its community. However, the City of Vernon must hereby request that Central Basin stop work on the Southeast Water Reliability Project and, not seek financing, until such time that an amendment to the agreement can be approved by both parties. With the change in the pipeline size the existing agreement is no longer valid and the terms must be renegotiated. E clusiveC 7nLstriaf Art Aguilar -2- August '.3, 2009, The City of Vernon looks forward to meeting with Central Basin to discuss its water needs and working towards an agreement to provide recycled water to the City. Please contact me so th- t we can set up a meeting to d scuss `he to-ms of the agreement. Sincere amuel Kevin Wilson, P.F. Director of Community Services & Water SKWIca c: City Administrator Lemieux & O'Neil ATTACHMENT "C" COMMUNITY SERVICES & WATER DEPARTMENT Samuel Kevin Wilson, Director of Community Services & Water 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1435 September 1, 2009 Art Aguilar, General Manager Central Basin Municipal Water Pistrict 6252 Telegraph Road Commerce, California 90040-2512 Dear Mr. Aguilar: C-2 Via U.S. Certified Mail i he City of Vernon is in receipt of Central Basin Municipal Water District's (Centra; Basin) invoice dated August 12, 2009 for the City of Vernon's first monthly billing of the Capital Recovery Fee for the 42" pipeline design of the Southeast Water Reliability Project. The City of Vernon entered into an agreement with Central Basin on November 2, 2005 to provide recycled water to the proposed Vernon Power Generating Station. Section 3 of the agreement outlines the City's Duties and Obligations. Specifically, Section 3 C sets forth the City's obligation to pay a monthly Capital Recovery Fee. This section states the fee will be paid in 300 monthly installments beginning the later of August 27, 2006 or Central Basin's completion of the Vernon pipeline project and the Southeast Water Reliability Project. Therefore, since the project has not been completed the City is not obligated to pay at this time. On August 13, 2009 I sent a letter to you advising that since Central Basin changed the pipeline -from a 42" diameter, which was originally prescribed in the agreement, to a 30" diameter pipeline the terms of the agreement had been voided and all work shall stop including financing of the project until such time as the City determines if the 30" pipeline is appropriately sized for its needs and the agreement is amended. The City is committed to providing its customers with the most economical and reliable water. Therefore, we are anxious to meet to discuss Vernon's water needs, and amend the November 22, 2005 agreement. At that time we can discuss how payment of the design cost of the recycled pipeline may be obligated. E c(wivef Zn6sft ial Art Aguilar .2- Please contact me so that we may set up a meeting time to discuss the agreement. Sincerely, Samuel Kevin Wilson, P.B. Director or'Community Services & Water SKM'-ca c: City Administrator Aileen Hermoso, UrO Lemieux & O'Nei: September 1, 2009 ATTACHMENT "D" 0\ COMMUNITY SERVICES & WATER DEPARTMENT Samuel Kevin Wilson, Director of Community Services & Water 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1435 October 22, 2009 K. "Ana" Ananda Central Basin Municipal Water District 6252 Telegraph Road Commerce, California 9004N51' Dear Mr. Ananda: C-2 It was a pleasure meeting with you and Central Basin Municipal Water District f L;ials on October 1, 2009 to discuss the recycled water agreement between the City of Vernon and Central Basin Municipal Water District (CBMWD). As discussed some of the terms of the original agreement have been changed invalidating the current agreement. Therefore an amendment to the agreement is necessary to move the recycled water line project forward. In review of the November 22, 2005 agreement between the City of Vernon and CBMWD, the rohowing technical items need to be amended to reflect the current conditions: :) Reference to the Vernon Power Generating Station project shall be changed to "Power Generation Facility" (the "Project"). 2) Rererence to a first phase of the Project being a 89C megawatt electrical generating facility to be located in the southeast corner of the intersection of Boyle Avenue and Fruitland Avenue and should be changed to a 330 megawatt facility in the City of Vernon. 3) The Agreement states that the Project will require approximately 13,500 acre feet of water. This should be amended to reflect a water supply of approximately 2,500 acre feet per year. 4` The Project in service date is unknown at this time. 51 Fhe Agreement should reflect that the City has an anticipated additional future need of 4,500 acre feet in addition to the water needed for the Project. 6) Remove meters and meter at the customer sites. 7) City would like the ability to audit all costs. 8) The 42" pipeline shay. be replaced with the actual pipe size needed to meet the City's and CBMWD's demand. 9) City's percentage of the Capital Recovery Fee shall be recalculated based on the City's portion of the capacity of water main it will acquire. 10) Peak flow demand for the City will be 5,500 gpm. 11) Minimum daily purchase shall be adjusted based on the pipe capacity and minimum flow requirements. Fr�,clusiveCy IndustriaC 0 O 4 K. "Ana" Ananda -2- October 22, 2009 12) The milestone dates should be updated based on the construction of the newly proposed Proiect. These technical amendments should be incorporated in a new agreement between the City and the District which not only reflects these technical differences, but, also, new timelines and a structure for risk sharing to be negotiated following concurrence on the technical points. This new agreement would supersede any and all prior agreements between the parties dealing with this subject matter. We look forward to receiving your response. Sincerely amuel Kevin Wilson, P.E. Director of Community Services & Water SKW,ca ATTACHMENT "E" IT, �r COMMUNITY SERVICES & WATER DEPARTMENT Samuel Kevin Wilson, Director of Community Services & Water 4305 Santa Fe Avenue, Vernon, California 90058 Telephone k323) 583-8811 Fax (323) 826-1435 January 25, 2010 .Art Aguilar Central Basin Municipa: Water District 6212 Telegraph Road t ommerce, California 90040-251= Dear Mr. Aguilar: C-2 'via ' - 6. l ertified Mail The City of Vernon ("City" � has learned that Central Basin Municipa. W ater District ("the District") has awarded a contract for the first phase of the construction of the Southeast Water Reliability Project ("Project") and a construction management contract to oversee the Project. We also understand the District representatives may be privately and publicly stating that the City remains responsible to fund a portion of the Project. The District has been advised by the City on several occasions that the November 2, 2005 agreement between the District and the City no longer is valid or viable. This is due to the tact that the energy project which was fundamental to the City's participation and a prerequisite to the City becoming responsible for partially funding the Ptojcct no longer is being implemented and most likely will not be implemented in its original size. Further, the pipeline at the core of the Project has been downsized unilaterally by District action. Accordingly, the City is ;onstrained to again advise the District hereby that the City is not financially obligated to pay for any portion of the Phase I construction of the Southeast Water Reliability Project. The City continues to believe that the Project will provide d valuable resource to the southeast area of L,)s .Angeles by providing an alternative supply of water to the region and encourages the District to continue discussing how Vernon might participate in this revised project based on a mutually agreeable new structure. Sincerely, Donal O'( allaghan City Administrator Douglas Wance, Sedgwick Central Basin Municipal Water District Board Members #fu sivefy Industdcd