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HomeMy WebLinkAbout06-17-2014 C6 Agreement and General Release with Madonna PropertiesCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Carrie Mattingly, Utilities Director Prepared By: David Hix, Deputy Director – Wastewater SUBJECT: AGREEMENT AND GENERAL RELEASE WITH MADONNA PROPERTIES RECOMMENDATION Approve an agreement and general release with Madonna Properties in the amount of $509,337.80 providing for the decommissioning of the City’s Madonna Sewer Lift Station, relieving the City of all future operations and maintenance obligations related to the station, and waiving potential claims against the City related to the location and operation of the station. DISCUSSION Background In 1961 the City required the Madonna Inn (Inn) to install a sewer lift station to serve the Inn and some adjacent parcels. After the lift station was completed the City accepted ownership including operations and maintenance responsibilities. Several years later a gravity sewer, which serves the adjacent parcels to the Inn, was installed on Madonna Road, leaving the Inn the only parcel served by the lift station. The lift station has been continuously operated and maintained by the City, on the Madonna property ever since. The Madonna lift station is now at the end of its useful life and will require replacement. The City only operates lift stations that benefit larger areas, served by multiple parcels connected by public sewer mains. Because the lift station only serves the Inn, it has been a goal to relinquish ownership and responsibility of this facility back to the Inn in order to avoid replacement and operational costs and liabilities. City staff met with representatives of the Inn at a recent site visit to discuss replacement of the lift station. During this conversation it was determined by both the City and the Inn that no documentation regarding ownership, access or service agreements, or easements existed. This leaves the City in the vulnerable position of having no formal agreements or easements for critical infrastructure it has assumed as an asset and operated continuously on private property. Staff met with Council in closed session on March 4, 2014, for direction on how to best proceed with the situation. During the site visit, the Inn had expressed its interest in having control of the lift station and input into the design of the new facility. It was agreed that both the City and the Inn would work cooperatively on an agreement satisfactory to both parties in order to avoid replacement, operational and potential litigation costs. The Agreement Attached is a general release and settlement agreement that allows the City and the Inn to pursue replacement of the lift station. The agreement constitutes a waiver of all existing or potential legal claims between the parties relating to the location or operation of the lift station, establishes June 17, 2014 C6 C6 - 1 Agreement with Madonna Properties Page 2 a timeline and process that obligates the City decommission the existing lift station and obligates the Property owner to construct a new, privately owned and maintained facility to City standards. to settle all claims with the Inn after completion of a new facility while the City maintains and operates the existing Madonna lift station during construction. The agreement indemnifies the City during the construction of the new facility and releases the City of claims if, for some reason, the new facility is not satisfactorily completed within the specified time frame and the City is required to operate the existing station longer than anticipated. Once the new facility is completed and operational, the City will decommission the old lift station. This agreement is the result of a collaborative effort that allows both parties to pursue their goals without resort to formal legal action. It also resolves the lack of documentation of ownership, easements, access and egress issues and any related City liability subsequent liability. FISCAL IMPACT The agreement and general release will cost $509,337.80 in 2014-15. Replacement of the Madonna lift station was identified in the 2013-15 Capital Improvement Plan, pages 3-152 – 156 for 2015-16 at a cost of $1,000,000. The Margarita Lift station project, which was budgeted for in 2014-15, will not be ready for construction until 2015-16. Therefore, the $900,000 budgeted for 2014-15 will be used to fund this agreement. Revisions to the 2014-15 CIP are reflected in the 2013-15 Financial Plan Supplement. ALTERNATIVES 1. Direct staff to replace the Madonna Lift Station then transfer ownership to the Inn. This alternative would take an additional year, require access and egress agreements and require negotiations and an agreement to transfer ownership. 2. Direct staff to replace the Madonna Lift Station and retain ownership and maintenance. This alternative would take an additional year, require easement/access agreements and require negotiations for a facility that only serves the Inn with no benefit to adjacent properties. This option would also obligate the City to ongoing maintenance and operations costs and associated liabilities. ATTACHMENT 1. Agreement and General Release t:\council agenda reports\2014\2014-06-17\agreement with madonna enterprises (mattingly-hix)\car-madonna council agenda report.docx C6 - 2 Attachment 1 1 AGREEMENT AND GENERAL RELEASE This Agreement and General Release (“Agreement”) is made and entered into in San Luis Obispo County, California on ___________, 2014 by and between the City of San Luis Obispo, a municipal corporation (collectively with its successors and assigns, “City”), and Madonna Properties, LLC (collectively with their predecessors, successors and assigns, “Customer”). City and Customer are hereinafter sometimes referred to individually as a “Party” and collectively as the “Parties.” The “Lift Station” means the City sewer lift station and force main located at 100 Madonna Road, San Luis Obispo, California 93405 (Assessor’s Parcel Number 004-511-021) (“Subject Property”). RECITALS: A. In 1961, City required Customer to install the Lift Station to provide sewer service to both the Subject Property and several adjacent properties (“Adjacent Properties”) which the City subsequently accepted as a City asset, but without proper written documentation of an access easement to the Lift Station. B. Since the City’s acceptance of the Lift Station, the City has owned and operated the Lift Station. C. In 1965, the City approved the installation of a gravity sewer to service the properties adjacent to the Subject Property, which eliminated any need for the Adjacent Properties to utilize the Lift Station. D. The Lift Station is now at the end of its useful life and requires replacement. E. The City desires to relinquish ownership and responsibility of the Lift Station because it only serves the Subject Property and there are no plans for it to serve any other properties. F. Customer desires to have control and flexibility over the design of any new sewer conveyance system or facility that serves the Subject Property. G. The City and Customer desire to avoid costly litigation and to work together to achieve an equitable solution and improved situation for both parties. H. This Agreement is not binding upon either party upon and until the formal approval of the terms and conditions of the herein Agreement by the City Council of the City of San Luis Obispo (“Formal Approval”). The effective date of this Agreement (“Effective Date”) shall be the date Formal Approval is obtained. NOW, THEREFORE, in consideration of the premises and the mutual promises made in this Agreement, and in consideration of the recitals, representations, warranties and covenants herein contained, the Parties agree as follows: C6 - 3 2 AGREEMENT 1. City Obligations: a. Within thirty days of the Completion Date (defined in Paragraph 2.a), and subject to Paragraph 2.b., City shall pay to Customer the total sum of $509,337.80 (Five Hundred Nine Thousand, Three Hundred Thirty Seven Dollars and Eighty Cents), (“Settlement Amount”), which amount is in settlement of all claims for compensation by Customer that were asserted or could have been asserted by Customer, including, but not limited to claims for just compensation, improvements pertaining to the realty, temporary construction easements, land acquisition, accommodations for business disruption both temporary and permanent, fixtures and equipment, relocation assistance, relocation benefits, loss of goodwill, precondemnation damages, interest, litigation expenses including attorneys’ fees, appraisal fees, statutory costs, and for damages of every other kind and nature suffered or to be suffered by Customer. b. Within one year of the Completion Date (defined in Paragraph 2.a) or the Delayed Completion Date (defined in Paragraph 2.b.), whichever is later, City shall abandon and decommission the Lift Station. Upon written notification from the Utilities Director that the Lift Station has been decommissioned and abandoned, the Lift Station shall no longer be considered a City asset, and Customer may modify or remove any or all remaining parts of the Lift Station as the property owner in accordance with otherwise applicable laws, regulations, permits and/or approvals. 2. Customer Obligations: a. Within 240 days of the Effective Date of this Agreement (“Anticipated Complete Construction Date”), Customer shall have completed construction of a new sewer conveyance system and any necessary related accessories to serve the Subject Property (“New Facility”). “Complete construction” as used herein shall be defined as Customer demonstrating to the approval of the City Utilities Director that the new sewer conveyance system is a fully operational, code compliant sewer conveyance system connected to the public sewer system. Customer acknowledges that nothing in this Agreement shall be construed as the City approving the new sewer conveyance system in its regulatory capacity and Customer shall be required to obtain any and all legally required certificates, permits and/or other approvals from either City and/or any other regulatory agency that may have jurisdiction over the new lift station and/or its operation and/or maintenance. In the discretion of the City Utilities Director, the parties may extend the Anticipated Complete Construction Date but only in writing signed by both Customer and the Utilities Director. b. The City, at is sole expense, shall continue to operate and maintain the Lift Station until the Anticipated Complete Construction Date (including any extensions thereof). If Customer fails to complete construction of the New Facility by the Anticipated Complete Construction Date (including any extensions thereof), then the City shall C6 - 4 3 continue to operate and maintain the Lift Station until the actual date Customer completes construction of the New Facility (“Delayed Complete Construction Date”). Customer shall reimburse the City for any and all actual and reasonable costs related to or arising from the operation and/or maintenance of the Lift Station after the Anticipated Complete Construction Date (including any extensions thereof) and until the Delayed Complete Construction Date. City may deduct said costs from the Settlement Amount specified in Paragraph 1.a. c. Customer hereby grants permission to the City, its employees and agents reasonable access to the Subject Property for the purposes of operating, maintaining, decommissioning and/or abandoning the Lift Station. d. Indemnification by Customer: i. Except as expressly set forth herein, on and after the Anticipated Completion Date (including any extensions thereof), Customer agrees to indemnify, defend (with counsel selected by City but reasonably satisfactory to Customer) and hold harmless City and City’s officers, agents, employees, attorneys, successors and assigns from and against any and all liabilities, losses, causes of action, claims, damages, costs, liens, fines, penalties, and expenses (including reasonable attorneys’, experts’, and consultants’ fees and expenses) arising out of or relating to the operation, maintenance, and replacement of the Lift Station, including but not limited to, any liability of City not specifically assumed by City (including without limitation, any of: noncompliance with any environmental laws or regulations; product liability claims; or liability arising out of injury (including personal or bodily injury) to, or death of, any person or damage to any property resulting from any error, omission, negligence, or willful misconduct of Customer or Customer’s agents, subcontractors or employees; any claim by any of Customer’s employees, consultants or customers, disputes or proceedings or litigation or claims of any type or nature associated with the Lift Station. Notwithstanding any provision herein to the contrary, Customer shall not be obligated hereunder to indemnify, defend and hold harmless City and City’s officers, agents, employees, attorneys, successors and assigns for any and all liabilities, losses, causes of action, claims damages, costs, liens, fines, penalties, and expenses arising out of or related to any: (a) alleged acts of fraud, gross negligence, negligence or professional malpractice by the City, its officers, agents, employees, attorneys successors and assigns and (b) the physical acts of the City, its officers, agents, employees, attorneys, successors and assigns related to the decommission of the Lift Station. ii. Other Indemnification Provisions: The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy either party may have against the other for breach of any representation, warranty or covenant in this Agreement. C6 - 5 4 3. Construction of Agreement: This Agreement is the result of arm’s length negotiations, both Parties had an opportunity and participated in drafting this Agreement, and any ambiguity of this Agreement shall not be interpreted against either Party to this Agreement. 4. Limited Release: a. Except for the rights and obligations set forth in this Agreement, Customer for themselves, their agents, assigns and related entities, fully releases, acquits and discharges City, and the officers, directors, employees, attorneys, accountants, other professionals, insurers and agents of City (collectively “Agents”) and all entities related to City, from all rights, claims, demands, actions or causes of action which Customer now have or may have against City arising from the acquisition of portions of the Lift Station and the City’s acceptance of the Lift Station without proper documentation of an access easement, including but not limited to, claims for just compensation, improvements pertaining to the realty, temporary construction easements, land acquisition, accommodations for business disruption, both temporary and permanent, fixtures and equipment, relocation assistance, relocation benefits, loss of goodwill, precondemnation damages, interest, litigation expenses including attorneys’ fees, appraisal fees, statutory costs, and for damages of every other kind and nature suffered or to be suffered by Customer. b. This limited release is intended as a full and complete release and discharge of any and all such claims that Customer may or might have against City and its related entities arising from the acquisition of portions of the Lift Station and the City’s acceptance of the Lift Station without proper documentation of an access easement. No other claims that Customer may or might have against the city and its related entities and Agents are hereby released. In making this limited release, Customer intends to release City, its related entities and Agents from any liability of any nature whatsoever for any such claim or injury or for damages or equitable or declaratory relief of any kind arising out from the acquisition of portion of the Lift Station existing as of the Effective Date of this Agreement, whether the claim arising from the acquisition of portions of the Lift Station, or any facts on which such claim might be based, is known or unknown to the Party possessing such claim as of the Effective Date. Solely for the purpose of the limited release set forth in this Paragraph 4, Customer expressly understands and agrees to waive all rights under Section 1542 of the Civil Code of the State of California, which Customer understands provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. c. Customer acknowledges that it may hereafter discover facts or law different from or in addition to those which it now believes to be true with respect to the release of such claims arising from the acquisition of the Lift Station. Customer agrees that the C6 - 6 5 foregoing limited release shall be and remain effective in all respects notwithstanding such different or additional facts or law or any party’s discovery thereof. Customer shall not be entitled to any relief in connection therewith, including, but not limited to any damages or any right or claim to set aside or rescind this Agreement. 5. No Reliance: No Party nor any agents nor any related entities have made any statement or representation to any other Party regarding any fact relied upon in entering into this Agreement, and each Party expressly states it does not rely upon any statement, representation or promise of any other Party or any Party’s agent or related entities in executing this Agreement, except as is expressly stated in this Agreement. Each Party to this Agreement has made such investigation of the facts and law pertaining to this Agreement, and of all other matters pertaining thereto, as it deems necessary. 6. Termination: This Agreement may be terminated at any time prior to the payment of the Settlement Amount by mutual written consent of the Parties. In the event of termination of this Agreement by City or Customer as provided in this paragraph, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party, except to the extent that such termination results from a breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement. 7. Miscellaneous: a. Advice of Counsel Each Party has had the opportunity to receive independent legal advice with respect to the advisability of making this Agreement and with respect to the meaning of California Civil Code Section 1542. Each Party hereto, by its due execution of this Agreement, represents to every other Party that it has reviewed each term of this Agreement with its counsel and that hereafter no Party shall deny the validity of this Agreement on the ground that the Party did not have the opportunity to receive the advice of counsel. b. Further Documents and Assurances Each Party agrees to execute such other or further documents or instruments or take or cause to be taken such other or further action as may reasonably be necessary or appropriate in order to more fully and completely effectuate the transactions contemplated by this Agreement or to carry out its intent. c. Entire Agreement This Agreement constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof or thereof. d. Succession and Assignment C6 - 7 6 This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Customer may not assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of City. e. Expenses City shall pay all of City’s own costs and expenses in connection with the negotiation, execution and delivery of this Agreement and any related agreements or instruments. Customer shall bear all its own costs and expenses in connection with the negotiation, execution and delivery of this Agreement and any related agreements or instruments. f. Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. g. Headings The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. h. Notices All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to City: City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Attn: Utilities Director Tel: (805) 781-7140 Fax: (805) 781-7109 With a copy to: J. Christine Dietrick, City Attorney City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 If to Customer: Madonna Properties, LLC 284 Higuera Street C6 - 8 7 San Luis Obispo, California Telephone: (805) 543-0300 Fax: (805) Attention: Clint Pearce With a copy to: Adamski Moroski Madden Cumberland & Green LLP P.O. Box 3835 San Luis Obispo, California 93403 Telephone: (805) 543-0990 Fax: (805) 543-0980 Attention: Steven J. Adamski Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, facsimile, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Either Party may change the address to which notices, requests, demands, claims, or other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. i. Governing Law This Agreement is entered into under and shall be governed by and construed in accordance with the laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. j. Amendments No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by City and Customer. k. Waivers Failure of either Party at any time to require the performance by the other Party of any provision of this Agreement or any related agreement shall in no way affect the right to require full performance of such provision thereafter. Furthermore, the waiver by either Party of a breach of any provision of this Agreement or any related agreement will not be held to be a waiver of any other provision of this Agreement or any related agreement. l. Severability The invalidity or unenforceability of any term or provision of this Agreement or any related agreement shall not affect the validity or enforceability of the remaining terms and provisions thereof. C6 - 9 8 m. Specific Performance Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each Party agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches and to secure specific performance, in addition to any other remedy to which it may be entitled, at law or in equity. n. Force Majeure Neither Party shall be liable for failure to perform its obligations under this Agreement when such failure is due to any cause beyond the reasonable control of the Party unable to perform, excluding economic or financial reasons. o. Independent Contractor Pursuant to this Agreement and otherwise, each Party shall act as an independent contractor and not as an agent of the other Party, and neither Party shall represent itself as an agent of the other Party. No act done by either Party will be deemed to create a partnership or joint venture with the other Party, nor will the provisions of this Agreement or the related agreements be construed as creating a partnership or joint venture. p. No Third Party Beneficiaries This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and made and entered into as of the date first set forth above. ___________________________________ CARRIE MATTINGLY City Utilities Director ____________________________________ CLINT PEARCE on behalf of Madonna Properties, LLC APPROVED AS TO FORM: ___________________________________ J. CHRISTINE DIETRICK City Attorney APPROVED AS TO FORM: ___________________________________ STEVEN J. ADAMSKI Attorney for Madonna Properties, LLC C6 - 10