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HomeMy WebLinkAbout06-12-2012 ph2 calpoly water and sewer agreement("counci lj,aGenda nepoRt Meeting Date ]ten, Number June 12, 201 2 PH 2 CITY O F SAN LUIS O B I S P O FROM : Carrie Mattingly, Utilities Directo r Prepared By :Wade Horton, Water Division Manage r SUBJECT :RENEWAL OF AGREEMENT WITH CAL POLY REGARDING WATE R AND SEWER RATE SETTIN G RECOMMENDATIO N By motion, approve and authorize the Mayor to execute the updated agreement with Californi a Polytechnic State University regarding water and sewer rate setting . DISCUSSIO N Backgroun d The City and California Polytechnic State University San Luis Obispo (Cal Poly) have a long - standing relationship, with the City providing water and wastewater services to the Universit y dating back to the 1960's . The City provides Cal Poly with water and sewer services vi a agreement because the University lies outside the City limits . In 1993, through agreement, the City and University established a mutually-approve d methodology for calculating the University's appropriate water and sewer rates . The methodology is based on the University owning its own source of supply in the Whale Roc k Reservoir and, as a member agency of the Whale Rock Commission, paying separately for it s water supply costs . It also previously made capital contributions to the Water Treatment Plan t and Water Reclamation Facility upgrade projects . The 2012 updated agreement (Attachment) maintains the basic methodology of recognizing th e University's unique customer profile while charging the University its fair share for water an d sewer service . The attached agreement and ratio schedules define the methodology used an d summarize the calculations that set the appropriate percentage of the water and sewer rat e applicable to the University . The agreement calls for an annual review of the applicable ratio s and any major assumptions significantly changing the applicable ratio . Changes to Agreemen t 1.Amendments to the Agreemen t The 2012 Agreement provides for annual automatic extensions to the term of agreement , as long as all conditions described (other than the five year ratio which changes annuall y as expenses associated with treatment and distribution are adjusted) remain the same ; previous agreements specified five year automatic extensions to the term of agreement . 2.Rate Recalculation Period PH2-1 RenewalofAgreement with Cal Poly Regarding Water and Sewer Rate Setting Page2 In previous agreements (1993-2007), rates were recalculated every five years . For the 2012 agreement, rates will be calculated annually based on a rolling five year rat e window . Maintaining the rolling five year rate window continues to provide for rate smoothing and is more responsive to changes in costs for both parties . 3.Five Year Rate Window Modificatio n 1993 2007 Rate Windo w The rate methodology prescribes a review of five years of financial data to determine th e University's appropriate percentage of water and sewer rates . Changing the rate windo w provides an additional year of audited data, thus shifting the rate basis more toward actual cos t versus future projections . CONCURRENCE S Cal Poly staff Dennis Elliot, Assistant Director — Energy, Utilities, and Sustainability and Dr u Zachmeyer, Associate Director — Contracts, Procurement and Risk Management, concur with th e attached agreement. FISCAL IMPACT This agreement modifies the applicable percentage of the water and sewer rate to be paid b y California Polytechnic State University . The Water Fund will see a decrease in revenues in the amount of $287,700 (17% reduction i n revenues from Cal Poly). For FY 2012-13, this reduction has a minor impact on the water fund . The Sewer Fund will see an increase in revenues in the amount of $4,200 (.5% increase in Ca l Poly revenues) which has no impact on the fund for FY 2012-13 . These changes are incorporate d into the fund analyses for FY 2012-13 . Wate r Percer/Z af C 'ill RuJE Wastewate r Pel'Cent of Ci/ Rah ." Mil only of decrease due to University being exempt fro m Nacimiento Project costs and debt financing as it has its ow n source of supply Capital expenditures in the sewer fund impacts the ratio of pre - paid debt used to calculate Cal Poly costs . This trend is projected to continue until 2017 when 100% will be reache d Current .2012 7 1 .3 .. 82 86 PH2-2 Renewal of Agreement with Cal Poly Regarding Water and Sewer Rate Setting Page3 ATTACHMENT Agreement between the City of San Luis Obispo and California Polytechnic State Universit y Regarding Water and Sewer Rate s G:\CAR Reports\2012 Council Agenda Reports\2012 Cal Poly Water and Sewer Rate Agreement CAR .DOC PH2-3 Attachment AGREEMENT BETWEE N THE CITY OF SAN LUIS OBISP O AND CALIFORNIA POLYTECHNIC STATE UNIVERSITY . REGARDING WATER AND SEWER RATES ("Agreement") THIS AGREEMENT, made this day of , by and between th e CITY OF SAN LUIS OBISPO,CALIFORNIA (hereinafter referred to as "City"), an d CALIFORNIA POLYTECHNIC STATE UNIVERSITY (hereinafter referred to a s "University") WITNESSETH : WHEREAS, the City and the University agree that this Agreement is solely for th e purpose of establishing appropriate water and sewer rate structures based on th e Memorandum of Understanding between the City of San Luis Obispo and Californi a Polytechnic State University Regarding Capacity Interest in City Facilities dated May 1 , 2007, the 1993 Agreement between the City of San Luis Obispo and Californi a Polytechnic State University Regarding Water and Sewer Rates dated January 5, 1993 , the Agreement between the City of San Luis Obispo and California Polytechnic Stat e University Regarding Optional Equity Interest in the Water and Sewer Systems date d January 5, 1993, and the Memorandum of Understanding between the City of San Lui s Obispo and California Polytechnic State University dated January 6, 1993, collectivel y referred to as the "Agreement "; an d WHEREAS, the City and the University entered into a new methodology o f calculating rates in January 1993, and subsequently recalculated the rates in 1998, 2003 , 2007 and 2012 ; an d WHEREAS, the City and the University agreed at that time to a rate structur e which ties the University to the City's approved Non-residential rate structure and periodi c rate review, while reflecting the University's unique differences from other City customers ; and WHEREAS, it is agreed that the University is exempt from all City Water Source o f Supply costs as it has its own source of supply in the Whale Rock Reservoir and as a member agency of the Whale Rock Commission pays separately for its water suppl y costs ;and NOW, THEREFORE, in consideration of their mutual covenants, the parties hereto agree as follows : 1 RATE STRUCTURE METHODOLOG Y Water Rate Structur e The University's rate structure for water shall be based on whatever the current rate is fo r PH2-4 Attachmen t City Non-residential accounts as modified by a percentage ("ratio") that accounts for tha t part of the rate structure that is applicable to the University . Using only those expenses related to water treatment and distribution, less any capacit y interest in the system purchased by the University (with the University paying n o percentage cost of those components related to Source of Supply) this ratio is based o n the following formula :The sum of (3 most recent fiscal years audited expenses +1 current fiscal year projected expenses + 1 upcoming fiscal year projected expenses ) divided by 5 = annual ratio . As an example, FY 2013 rate ratio calculation would be (2009+2010+2011+2012+2013)/5 .It shall be established as outlined in paragraph 2 an d shall be recalculated annually . The calculation of the current ratio for water charges i s shown in Schedule A to this agreement . Sewer Rate Structur e University - The University's rate structure for sewer shall be based on whatever th e current rate is for City Non-residential accounts as modified by a percentage ("ratio ")that accounts for that part of the rate structure that is applicable to the University . Using expenses divided appropriately according to operational, capital and debt servic e expenses for three components : collection, pretreatment and treatment less any capacit y interest in the system purchased by the University, this ratio is based on the followin g formula :The sum of (3 most recent fiscal years audited expenses + 1 current fiscal year projected expenses + 1 upcoming fiscal year projected expenses) divided by 5 = annua l ratio . As an example, FY 2013 rate ratio calculation would b e (2009+2010+2011+2012+2013) / 5 . It shall be established as outlined in paragraph 3 an d shall be recalculated annually . The calculation of the current ratio for sewer charges i s shown in Schedule B to this agreement . 2 .SETTING A WATER RATE RATI O The ratio to be applied to the Non-residential water rate structure shall be determined b y the City . The City shall prepare a five year analysis of the expenses for the City's wate r system . These expenses shall be divided appropriately according to operational, capita l and debt service for three components : source of supply, treatment, and distribution . The division of expenses in this manner will therefore appear as a matrix (three column s labeled source of supply, treatment, and distribution ; four rows labeled operations an d maintenance, capital outlay, debt service -- 2006 WTP and debt service - other). The University's rate structure will be based only on those expenses related to wate r treatment and distribution, less any capacity interest in the system purchased by th e University. The University shall not pay the percentage cost of those components related to Source of Supply, as the University has its own source of supply from Whale Roc k PH2-5 Attachment reservoir. Schedule A sets forth this analysis for the period beginning with the execution of this Agreement and extending until June 30, 2013, and shall serve as an example fo r determining any changes to the ratio in subsequent annual periods . Schedule A to this Agreement shows the current five year expense analysis and related percentages a s described above . In addition, the schedule provides a step by step description of the ratio - setting method . 3.SETTING A SEWER RATE RATI O The ratio to be applied to the Non-residential sewer rate structure shall be determined b y the City . The City shall prepare a prospective five year analysis of the expenses for th eCity's sewer system . These expenses shall be divided appropriately according t o operational, capital and debt service expenses for three components : collection , pretreatment and treatment . The University's rate structure will be based on the expense s for these components less any capacity interest in the system purchased by the University . The division of expenses in this manner will therefore appear as a matrix (three columns labeled collection,pretreatment, and treatment ; four rows labeled operations and maintenance, capital outlay, debt service - prepaid and debt servic e other . Schedule B sets forth this analysis for the period beginning with the execution of thi s Agreement and extending until June 30, 2013, and shall serve as an example fo r determining any changes to the ratio in subsequent annual periods . Schedule B to thi s Agreement shows the current five year expense analysis and related percentages a s described above . In addition, the schedule provides a step by step description of th e ratio-setting method . 4.AMENDMENTS TO THE RATI O Annual review .It is the intent of both parties to meet annually no later than January , with information provided 30-days prior to the meeting, to review the prior fiscal year'sanalysiscompared to actual expenses,review the sewer meter calibration report , consumption and rate trends, University's development and population projections,and to discuss in good faith any major assumptions significantly changing the ratio . Resetting the ratio .In the event the City and University cannot reach agreement on th e proposed applicable ratio for the next year, the ratio in existence at that time shall remai n in effect until agreement is reached . The parties agree to cooperate and use their best efforts to reach agreement on the proposed ratio in an expeditious manner . Attachment TERM OF AGREEMEN T Annual extensions to the term of this agreement shall be automatic, as long as al l conditions described (other than the five year ratio) remain the same . 6.AMENDMENTS TO THIS AGREEMEN T Any amendment, modification, or variation from the terms of this Agreement shall be i n writing and shall be effective only upon approval by both parties . 7.COMPLETE AGREEMEN T This written Agreement, including the Memorandum of Understanding between the City of San Luis Obispo and California Polytechnic State University Regarding Capacity Interest in City Facilities dated May 1, 2007, attached hereto as Attachment ; the 1993 Agreement between the City of San Luis Obispo and California Polytechnic Stat e University Regarding Water and Sewer Rates dated January 5, 1993, attached hereto as Exhibit A ; the Agreement between the City of San Luis Obispo and California Polytechnic State University Regarding Optional Equity Interest in the Water and Sewe r Systems dated 2007, attached hereto as Exhibit B ; the Memorandum of Understandin g between the City of San Luis Obispo and California Polytechnic State University date d January 6, 1993, attached hereto as Exhibit C, specifically incorporated herein b y reference, shall constitute the complete agreement between the parties hereto . No ora l agreement, understanding, or representation not reduced to writing and specificall y incorporated herein shall be of any force or effect,nor shall any such oral agreement , understanding, or representation be binding upon the parties hereto . NOTIC E The City shall provide the University with at least the same notice of proposed changes i n water and sewer rates as other City customers . All notices related to this agreement shal l be in writing and addressed as follows : University i t Associate Vice President of Facilities Carrie Mattingl y Assistant Director of Energy, Utilities Utilities Directo r and Sustainability City of San Luis Obisp o Facility Services 879 Morro Stree t Cal Poly State University San Luis Obispo, CA 9340 1 San Luis Obispo, CA 93407 PH2-7 Attachment Directo r Contracts, Procurement and Risk Managemen t Cal Poly State Universit y San Luis Obispo, CA 93407 8.JOINT WORK PRODUC T This agreement is the joint work product of both parties ; accordingly, in the event o f ambiguity no presumption shall be imposed against either party by reason of documen t preparation . 9.RELATIONSHIP OF PARTIE S City and the agents and employees of City in the performance of this agreement shal l act in an independent capacity and not as officers or employees or agents of University . The employees of University who participate in the performance of this agreement ar e not agents of the City . 10.AUTHORITY TO EXECUTE AGREEMEN T Both City and University do covenant that each individual executing this agreement o n behalf of each party is a person duly authorized and empowered to execute Agreement s for such party . IN WITNESS WHEREOF, the parties hereto have caused this instrument to b e executed the day and year first above written . PH2-8 Attachmen t ATTEST :CITY OF SAN LUIS OBISPO , A Municipal Corporatio n By : City Clerk Mayo r APPROVED AS TO FORM : City Attorney CONCUR :UNIVERSITY : By: Assistant Director Associate Directo r Energy, Utilities, Sustainability Contracts, Procurement an d Risk Management PH2-9 Attachmen t SCHEDULE A Steps to setting Cal Poly'sappropriate share of the non-residential water rate q Annually the City shall prepare a rolling five year schedule of expenses related to the City's provision ofwater service . The schedule will include actual expenses for the three most recent audited fiscal years an dprojected expenses for both the current and next fiscal year , q These expenses shall be divided appropriately according to operational, capital, or debt service . Each o fthese categories will be further divided according to whether it is a source of supply, treatment, or distributio nexpense. The information for each year will be shown in a matrix, at the bottom and right of which wil l appear the totals for that row and that column . TABLE OF DEFINITIONS Operations and MaintenanceThe portion of the budget that pertains to daily operations and delivery of basic governmenta l services related to provision of water service . The six water program budgets in the City'sfinancial plan form the Water Fund's operating budget . Capital Outla y The portion of the budget that pertains to maintaining or replacing existing public facilities an dassets, and for building or acquiring new ones as set forth in the City's capital improvemen tplan.For the purpose of the Cal Poly ratio-setting model, any project that is debt-finance d will not show in the capital outlay expense category .It will show in debt service . Debt Servic ePayments of principal and interest on bonds and other debt instruments according to a pre -determined schedule . Source of Supply Those water expenses directly related to the City's water supply from Whale Rock, Salinas ,and Nacimiento Reservoirs, recycled water . It also includes water conservation expenses, a s this has been the key to reducing City water demand, effectively creating more water byreducing the need to create additional water supply . Development of new water suppl yprojects fall into this category . Treatment The cost to treat raw water from the City's sources to meet potable water standards, an ddeliver it into the water distribution system . Distributio nThe cost to deliver potable water from the water treatment plant to customers and fir ehydrants via the distribution infrastructure . Meter reading and billing (customer service) ar e included as distribution expenses . q Expenses applicable to Cal Poly will be shaded . For example, Cal Poly has its own source of supply, so th e source of supply expenses are not shaded . Cal Poly chose to be a partner in the 1996 upgrade of the wate r treatment plant, and has prepaid all of its share of these costs . Therefore, Cal Poly is excluded from th e debt service component of the treatment expenses (hence debt service is not shaded). q The percentage of the shaded expenses to the total expenses will be calculated each year on the lin e labeled "Percent Applicable to Cal Poly". q The five annual percentages will be totaled and then divided by five to determine the average percentage o f the rate applicable to Cal Poly, based on the five year schedule of expenses . This is the percentage of th e Non-residential rate that will be charged to Cal Poly for the upcoming year Each year, the oldest year will b e moved out of the schedule, the most recent audited fiscal year expenses will be added and a new year o f projected expenses will be added after which a new five year average will be calculated . This "rollin g average" will determine each new year's ratio PH2-10 Attachment ®Formula :(3 most recent fiscal years audited expenses)+(1 current fiscal year projected expenses)+ (1upcoming fiscal year projected expenses) divided by 5 = annual rati o ®The Non-residential rate itself will vary according to the rates set by City Council each year . PH2-11 WATER RATE SCHEDULE A Cal Poly State Universit y Schedule of Applicable.Ratio .:Proposed Method .49 % Summary of Water Cost Components for 2008-200 9 Source of Supply Treatment Distribution Tota l Operations and Maintenance 2,823,900 2,754,100 2,174, 800 7,752,800 Capital Outlay 890,300 445,000 1,415,200 2,750,500 Debt Service - 2006 WTP 1,036,500 1,036,500 Debt Service - Other 556,400 692,400 10,400 1,259,200 Total 4,270,600 4,928,000 3,600,400 12,799,00 0 Percent Applicable to Cal Poly 33%28%61 % Summary of Water Cost Components for 2009-201 0 Sourc e of Supply Treatment Distribution Total Operations and Maintenance 2,590,800 2,921,600 1,978,900 7,491,30 0 Capital Outlay 363,600 53,100 2,201,500 2,618,200 Debt Service - 2006 WTP 1,035,400 1,035,40 0 Debt Service - Other 554,500 690,100 66,200 1,310,80 0 Total 3,508,900 4,700,200 4,246,600 12,455,70 0 Percent Applicable to Cal Poly 32%34%66 % Summary of Water Cost Components for 2010-1 1 Sourc e of Supply Treatment Distribution Tota l Operations and Maintenance 8,112,500 2,490,800 1,673,100 12,276,40 0 Capital Outlay 622,100 169,800 1,405,500 2,197,400 . Debt Service - 2006 WTP 1,032,800 1,032,80 0 Debt Service - Other 554,500 687,200 66,900 1,.308,600 : Total 9,289,100 4,380,600 3,145, 500 16,815,20 0 Percent Applicable to Cal Poly 22%1994 41% Summary of Water Cost Components for 2011-2012 Source of Supply Treatment Distribution Tota l Operations and Maintenance 10, 396, 300 2,734,500 1,760,400 14,891,20 0 Capital Outlay 904,300 356 .600 2,392,600 3,653,50 0 Debt Service - 2006 WTP 1,034,000 1,034,00 0 Debt Service - Other 554,700 688,200 66,900 1,309,80 0 Total 11,855,300 4,813,300 4,219,900 20,888,50 0 Percent Applicable to Cal Poly 20%20%40 % PH2-1 2 SCHEDULE A Summary of Water Cost Components for 2012-1 .3 Source of Supply Treatment Distribution Tota l Operations and Maintenance 9,916,700 2,803,300 1,817,000 14,537,00 0 Capital Outlay 0 0 200,000 200,00 0 Debt Service -2006 WTP 1,034,600 1,034,60 0 Debt Service - Other 554,800 531,600 66,500 1,152,900 Total 10,471,500 4,369,500 2,083,500 16,924,50 0 Percent Applicable to Cal Poly 23%12%35% PH2-1 3 Attachmen t SCHEDULE BStepsto setting Cal Poly's appropriate share of the non-residential sewer rate q The City shall prepare a five year schedule of expenses for the City's sewer system . The five year period wil linclude the three most recent historical years, the current year, and one prospective year . •These expenses shall be divided appropriately according to operational, capital or debt service . Each o fthese categories will be further divided according to whether it is a collection, pretreatment or a treatmen texpense. The information for each year will be shown in a matrix, at the bottom and right of which wil l appear the totals for that row and that column . TABLE OF DEFINITION S Operations and Maintenanc eTheportion of the budget that pertains to daily operations and delivery of basic governmenta lservices. The four sewer program budgets in the City's financial plan form the Sewer Fund'soperating budget. Capital Outla yThe portion of the budget that pertains to maintaining or replacing existing public facilities an d assets, and for building or acquiring new ones as set forth in the City's capital improvemen t plan . For the purpose of the Cal Poly ratio-setting model, any project that is debt-finance d will not show in the capital outlay expense category .It will show in debt service. Debt Servic e Payments of principal and interest on bonds and other debt instruments according to a pre- determined schedule . Collectio n Those sewer expenses directly related to the collection and transportation of wastewater fro mitsvarious sources to the water reclamation facility . Pretreatmen tThe cost of the program whose goal is to prevent toxic waste from entering the wastewate rcollection system at Non-residential and industrial sources . Treatmen tThe cost to treat and dispose of municipal wastewater . All disposal must strictly comply wit hthe State Health and Regional Water Quality board's requirements for discharge into th ecreek or disposal of biosolids . q Expenses applicable to Cal Poly will be shaded . For example, Cal Poly chose to be a partner in the 199 6upgrade of the water reclamation facility and the collection system, and has prepaid all of its share of thes e costs . Therefore, Cal Poly is excluded from the debt service component of the collection and treatmen texpenses (hence debt service is not shaded in these two columns). q The percentage of the shaded expenses to the total expenses will be calculated each year on the lin elabeled"Percent Applicable to Cal Poly". ©The five annual percentages will be totaled and then divided by five to determine the average percentage o f the rate applicable to Cal Poly, based on the five year schedule of expenses . This is the percentage of th e Non-residential rate that will be charged to Cal Poly for the five year period . ©The Non-residential rate itself will vary according to the rates set by City Council each year . PH2-14 SEWER RATE SCHEDULE B Cal Poly State Universit y Schedule of Applicable Ratio :Proposed Method 86 % Summary of Sewer Cost Components for 2008-2009 Collection Pretreatment Treatment Total Operations and Maintenance 1,554,700 343,700 5,250,900 7,149, 30 0 Capital Outlay - Adjusted 12,027,900 1,300 334,700 12,363,90 0 Debt Service - Prepaid 249,800 0 1,885,800 2,135,60 0 Debt Service - Other 351,400 0 279,700 631,10 0 Total 14,183,800 345,000 5,865,300 22,279,90 0 Percent Applicable to Cal Poly 63%2%26%90% Summary of Sewer Cost Components for 2009-201 0 Collection Pretreatment Treatment Tota l Operations and Maintenance 1,658,500 313,100 5,073,200 7,044,80 0 Capital Outlay - Adjusted 1,627,900 300 249,300 1,877,50 0 Debt Service Prepaid 249,800 0 1,885,800 2,135,60 0 Debt Service - Other 774,700 0 281,300 1,056,00 0 Total 4,310,900 313,400 7,489, 600 12,113, 90 0 Percent Applicable to Cal Poly 34%3%46%82 % Summary of Sewer Cost Components for 2010-1 1 Collection Pretreatment Treatment Total , Operations and Maintenance 1,834,900 313,500 4,971,000 7,119,40 0 Capital Outlay - Adjusted 1,790,500 5,500 514,100 2,310,10 0 Debt Service - Prepaid 249,800 0 1,885,800 2,135,60 0 Debt Service - Other 774,200 0 281,700 1,055,90 0 Total 4,649,400 319,000 7,652,600 12,621,00 0 Percent Applicable to Cal Poly 35%3%46%83 % Summary of Sewer Cost Components for 2011-2012 Collection Pretreatment Treatment Tota l Operations and Maintenance 1,602,400 355,000 5,614,500 7,571,90 0 Capital Outlay - Adjusted 5,699,900 9,500 1,676,900 7,386,30 0 Debt Service -Prepaid 249,800 0 1,885,800 2,135,60 0 Debt Service Other 0 0 281,700 1,107,80 0 Total 8,378,200 364,500 9,458,900 18,201,60 0 Percent Applicable to Cal Poly 45%2%42%88 % PH2-1 5 SCHEDULE B Summary of Sewer Cost Components for 2012-13 Collection Pretreatment Treatment Total Operations and Maintenance 1,646,800 363,100 5,677,800 7,687,70 0 Capital Outlay - Adjusted 2,100,000 0 2,270,000 4,370,00 0 Debt Service Prepaid 0 0 1,884,800 1,884,80 0 Debt Service Other 825,700 0 233,800 1,109,50 0 Total 4,572,500 363,100 10,116,400 15,052,00 0 Percent Applicable to Cal Poly 30%2%55%87% PH2-1 6 MEMORANDUM OF UNDERSTANDING ("MOU") BETWEE N THE CITY OF SAN LUIS OBISPO ("City") AND CALIFORNIA POLYTECHNIC STATE UNIVERSITY ("University") REGARDING CAPACITY INTEREST IN CITY FACILITIE S This MOU is made this 1st day of May 2007 by and between the City and the University . Recita l This MOU is intended to clarify the University's capacity interest (referenced in prio r agreements as an "equity interest") in the City's water and wastewater treatmen t facilities as more specifically set forth in the 1993 Agreement between the City of Sa n Luis Obispo and California Polytechnic State University Regarding Water and Sewe r Rates dated January 5, 1993, exhibit A, the Agreement between the City of San Lui s Obispo and California Polytechnic State University Regarding Optional Equity Interest i n the Water and Sewer Systems dated January 5, 1993, exhibit B, and the Memorandu m of Understanding between the City of San Luis Obispo and California Polytechnic Stat e University dated January 6, 1993, exhibit C . Capacit y The City and University agree to work together in the planning and development o f facilities to ensure that adequate capacity in the City's water and wastewater treatmen t facilities is available to meet the University's current and projected needs . The University agrees to provide the City with its development and population projection s annually which shall include an analysis of the University's water and/or wastewate r treatment capacity needs as planned and projected for the next five years . The City shall include the University's projections in its own master planning to ensure that th e University's capacity needs are included in future facility upgrades and expansions . Capacity Interest The University has historically maintained a capacity interest in the City's water an d wastewater treatment facilities sufficient to serve current and projected Universit y needs . The University has done so by financially participating in required facilit y upgrades and expansions via capital contribution based on the University's desire d capacity percentage share of the facilities . Maintenance of said capacity interest ha s ensured that the City has maintained available capacity to serve the University's need s up to the amount of the capacity interest, and as set forth in the Water and Sewer Rat e Agreement, has served to reduce the University's rates . The University may elect to participate in future required upgrades and expansions to the City's water an d wastewater treatment facilities and realize the resultant reduced rates . The University's capacity interest in the City's facilities shall be calculated as water treatment averag e demand equivalent to 1,000 acre feet as calculated on an annual basis and wastewate reffluent daily dry weather flow as calculated on a monthly average of .471 millio ngallons daily (MGM . PH2-17 Authority to Execute Memorandum of Understandin q Both the City and University agree that each individual executing this memorandum o f understanding on behalf of each party is a person duly authorized and empowered t o execute agreements for such party . The parties hereto have caused this memorandum of understanding to be executed th e day and year first above written . UNIVERSITY CITY OF SAN LUIS OBISPO , A Municipal Corporatio n By :By : Matthew Roberts,Director Ken Hampian, City Administrative Office r Contract and Procurement Services PH2-18 A-03-93--CC ATTACHMEN T EXHIBIT .."A " AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISP OAND CALIFORNIA POLYTECHNIC STATE UNIVERSIT Y REGARDING WATER AND SEWER RATE S THIS AGREEMENT, made this 5th day of January ,,1993 by and between the CITY OF SAN LUIS OBISPO, CALIFORNIA (hereinafter refered to as "City"), an d CALIFORNIA POLYTECHNIC .STATE ' UNIVERSITY (hereinafter referred to a s "University").. WITNESSETH : WHEREAS, the City ,and the University • have a 'long-standing and uniqu e relationship with regard ,to the co-development of water and 'sewer system ; 'and WHEREAS, it is the desire of both parties to continue that 'relationship ; an d WHEREAS, the City is upgrading both it's Water Treatment Plant *and Sewer Treatment/Collection Systems ; and WHEREAS, other City utility .customers have experienced periodic rate increases due to changing costs ;and WHEREAS,the University's rate .structure has ;not been modified • since 198 6 for sewer and 1964 for water;. an d WHEREAS, both the City and''University have met and agreed to update the rat e structure to reflect changing costs and the new capital projects ;an d WHEREAS, the' City . and University .have •agreed .to a• new rate' structur e methodology which ties the University to the City's approved rate structure and periodic rate reviews, while reflecting the University's unique, differences from othe r utility customers ... NOW, THEREFORE, in consideration of their mutual covenants,the parties hereto agree as follows :. 1 .RATE STRUCTURE METHQDOLOG Y The University's rate structure for both water and sewer:shail be based on whateve r the current rate is for City commercial accounts as modified by a percentage ("rati o that accounts for that part of the rate structure that is applicable to the University . This ratio shall be established as outlined in paragraphs 2 and 3, and reviewed ever y five years . ZW A-Q3 r ~ ATTACHMEN T ~XN1B1T "A" The ratio to be applied to the commercial water rate structure shall be determined . by the City. The City shelf prepare a prospective five • year . projection of -the revenu e requirements for ; the City's :;water system : •• These .revenue requirements 'shall b e divided : appropriatelyaccordingto operational, capital and debt service requirement s forthree components :.source of supply, treatment and distribution . The appropriat e percentage of total :revenue' requirements shall • be assigned -to each of 'th e components . 'The e University's rate •• structure will be based ..on . the revenu erequirements for these components less any equity interest in the system purchased by the University . •• The University's option to .-maintain en ,equity interest in the watersyste m 'is define d in a `separate agreement with the City ;' dated January 5, 1993 . ,Exhibit A sets,forth this analysis for the period July 1 19 9 .2 through June•"30,::1997,. and shell serve as an example for determining any changes to the *ratio in subtequentfiveyearperiods. 3 . ,SETTING :A SEWER .RATI RAT 'i't--ratio•to be applied to the commercial sewer rate, structure shall be 'determined by the . City .'.The City shalt•prepare .,a •prospective five .year projection ,of th e .revenu e .requirements .for • the . City's.. sewer system . , These revenue 'requirements'.shall be divided :appropriately according to operational, capital • and debt service requirement sfor three components : treatment, collection and pre-treatment .The University's .rate structure will be based on the revenue requirements for these components .less any ..equity interest In the system purchased by the" University : . The University's option to maintain an equity interest in .the "sewer system IS defined'. in'.a separate agreement ,with the City,.dated :January 3,1993 'Exhibit B sets forth this "analysis for the 'period -July '1, 1992 ,through June 30,-1 997,. and,shalt serve as an example for determining any changes: to the ratio in subsequen t five year periods .. '...'.. 4:EFFE CCTIVE :DATEFOR THIS RATE STRUCTUR E This rate structure shall be effective July 1,1992 ..The City agrees that, due to th e. significant financial impact, the University may .implement this .change by phasing i n the total increase over a five year period . It is the City's 'understanding that th e University cannot change its budget for 92/93, so the total increase is divided evenl y in the four: following years . By 1996/97, the University shall be paying the 'ful l commercial rate times the applicable ratio for water and for sewer . Water charges wil l e-/rte 1 Rate "Agreemen tPage2 PH2-20 0 arracHMEa r be assessed according to . Metered water flow . Sewer charges will be .assessed'according .to metered effluent :discharge'•flow.Table-.l 'sets 'forth the ,phase-in ' schedule of the ratios to be` used . Per paragraphs, two`and three of this Agreement. "5 . ' j-4OLA HAf In recognition that the University`s'.vested interest is limited to the upgrading of the facility, and that the University does not actively participate in the management of th e services being:provided .by the facility, the. City of San Luis Obispo will indemnify , defend and save harmless• the Trustees of the California :State University, its officers , agents, and employees from any and alt claims and losses accruing :or'resulting to any personas), firmis), or corporation(s)who maybe injured or damaged as a result of the service being provided 'by the City of .San Lilts .Obispo through Its • ' facility described herein,except for -any such injury or .damage caused by any act,omission, o r negligence of University •.. - 6.AMENDMENTS TO .TtE RATI O in the event the City and University 'cannot •reach agreement .on the' proposed applicable ratio for the next five years ; the ratio in existence at that time shall remai n in effect until agreement Is reached .. The parties agree to cooperate and ,use their bes t efforts to reach agreement .on the proposed ratio il`i an .expeditious manner .. 7.NOTICE . The City shall provide the University with 'at least• the same 'notice of >propose d changes in water and sewer rates as other City customers .. ' • '• WATER RATI O :..••FIVE YEAR PHASE I N July 1, 1992 Current rate structure -Ratio applied-against . City standard isles,for. commercialet'counts July 1, 1993 21 % July 1 . 1994 30% July 1, 1995 July 1, 1996 . Table I SEWER RATS ) ,FIVE YEAR PHASE I N Current rate 'structure Ratio applied against .-. City Standard rates . fa :commercial accord 39%. 48% 80 % 100% Rate Agreemen t Page 3 PH2-21 Bete Agreemen t.Page 4 ATTACHMENT t .All notices related to this agreement shall be in'writing and addressed as follows : University Norm .Jacobsoh,; Energy Coordinator.::City Cler kFacilities Administration City•' of San Luis Obisp o'Cal Poly ,State University F .Q .Box 8100 . Sen.Luis Obispo, CA 93407 -San Luis Obispo, CA ...9340 6 ;Ray (*des,Directo r :Support ;Services .tiCal Poly State University.....:?:;San Luis Obispo, CA .93407 ; AGREEMENT CONTAINS ALLUNDERSTANDINGS . This;tiocument (including all exhibits"referre d .to above and attached : hereto) represent sthe-::entire `and .-'integrated .Agreement between the .City .and :the -University :and'.supersedes ail .prior .negotiations,: representations,or•Agreements,either ,written o r ".. ` oral,_'; except•at *described in :a .:separate Memorandum •of Understanding .by .andbetween'the parties herein ..:This document- may be amended .only by.••writteninstrumnent,:signed by both 'City and University :All .provisions of this Agreement.are "' •ex'pressly . Made conditions .This 'Agreement shall .be •governed,by .the .laws of theStateof California .' IN WITNESS WHEREOF, CITY and UNIVERSITY have executed this Agreemen t the day and year first -above written: e -/F" PH2-22 Rate Agreemen t Page 5 ATTACHMEN T EXHIBIT "A " UNIVERSITY'S APPLICABLE PERCENTAGE (RATIO). .. OF .APPROVED, WATER RATE STRUCTUR E -.As 'required in Paragraph 2, the City has •developed :a five year revenue projection for.-.::the water•.syystem'.;°The components and applicable :percentages of,the•.total••reyenu erequirement.for 92/93 through FY '96197 are shown on Schedules' A-1 and A-2 . w1 .: ••Applicable••Components to the .' Universit y • The ; University ...shall • not .;pay.the, percentage cost of ;those , components ..related t oSource of Supply, as the University :has its .own source of supply .at':Whale Rock . Th eUniversity shall pay the, percentage cost •of treatment :end distribution ;.less any costfor debt service related to the continuing equity investment in a .portion of the wate rsystem... 2... `.: Applicable Water :Rate• Ratio .for the period beginning'July ::i ;1992 and ending ..June 30; 1997 ..:.The :City : is currently proposing to :make',significenfimprovements to . Its wate rtreatment plant to meet drinking water quality reguiations'and to modernize the facility ;.it•is expected that the City will debt finance ths project using leaserevenue.bonds ove r.a period of 20•t o .30 years ....The University may choose toparticipate in the :financing•or pay ;its capital share .of the revenue requirements •directly. The appropriate ratio to .be applied against the City's commercial, rateswill depend upon -which'of these options the University selects : A.' Percentage ofrate structure for 7992/1997,withoutcapital contribrtion for equity interest In Water Treatment Plant .Upgrades,, '...• The University shall pay the, average :of .:th$five :year percentage cost oftreatment:and 'distribution,orpercent of the city-wide commercial rate,•assuming it does not make a direct equity contribution to the proposed Wate r. Treatment 'Plant improvements . The table' below summarizes the detail o nSchedule A-1 : NO EQUITY COIQTRIBUTION 92193 61%. .93/94 ..56%.:: 94/95-48%! 95/98 .42 % '88/97 PH2-2 3 ATTACHMENT Rate AgreementPage.6 EXHIBiT .. B Percentage ofrate structure for 1992/1997,yvith_capital contribution fo r equity interest In .Water Treatment Plapt Upgrade •• The University may elect to ,make an equity contribution to the Water 4 Treatment Plant upgrade . The City will adjust the percentage indicated .i n' ,paragraph A above as necessary,1f .the University elects this option and when a'•' payment is'received . The 'City anticipates the applicable percentage of City-.'f....' wide commercial rate Will .be reduced to approximately percent; but this :. 'percentage wil l 'be refined when project,costs' and applicable debt service is'`'4 established. In . the 'event that' the • University - chooses .this'option,'thi s ';.Agreement will be amended to reflect the revised 'ratio :The :table below summarizes the detail on Schedule A,2 : ATTACHMEN T EXHIBIT ."A " APPLICABLE' RATIO NONEQUITY CONTRIBUTIO N SUMMARY OF WATER COST . COMPONENTS FOR 1892-9 3 Source'ot S u Operations and Maintenance $2,727,837 ' Capital Outlay $0 Debt Service $269,200 ..',$2,997,03t .TOTAL ' . SUMMARY OF-WATER COST .'COMPONENTS FOR,1993-94 ' SourceofSupply ,Operations and 'Maintenance $2,984,693• Capital outlay • $0 Debt Service '• $269,200 Operations and Maintenanc e Capital Outlay Debt Service TOTAL ' ,;SUMMARY OF WATER COST COMPONENTS FOR•1995-96 .. Operations acid MaintenanceCapital'Outlay Debt Service TOTAL • F t o SUMMARY OF WATER COST .COMPONENTS FOR 1 996-97 Total •'44,792,06 1 $600,000 ' ;$681,200 •$6;073 ;251 TOtai . $7,345,38 9 $600,090$2 .044,700 $9.890,089 Total $7,645,180 •$500,000 !k'$2,044,700 $10,189 88 0 PH2-2 5 SUMMARY : OF WATER COST COMPONENTS•FOR i :994-=9 Source of SuppiY r`r •$3,664i789'; $Q i `' ~- "~- Yyz s $869,200 to s...r ,. 3 ,.;..r .~}f sy rs :•......$4,6$3 089 'Source of Su • • i ` $burce .of Su Operations and Maintenanc eCapital OutlayDebt Servic e TOTAL . Total •$6,163,676500,0000.....+' $2 044,700 $8,708,376 PH2-2 6 Rate Agreemen t Page 8 ATTACHMEN T SUMMARY OF WATER-COST COMPONENTS FOR 3'996797 Operations and Maintenance . Capital outlay . Debt Service TOTAL -:°-.`. SUMMARYf=OF .WATER CAST CQMPONENTS .PQR .1994—9 5 Operations and maintenance Capital Outlay 'Debt Service TOTAL 5 YR AV G 92/93 100%"93/94 . ° 100 %94196 :100 %95/96 . 100 ,.96/97 '1QO % 100% !XHIBIT '1A" UNIVERSITY'S 'APPLICABLE PERCENTAGE (RATIO )OF APPROVED SEWER RATE STRUCTUR E As' required in Paragraph 3 ; the City ; has .developed a ..five year revenue projection fo r • the =sewer system.• !:The -components sand related rpercentages ':of :the .'total revenu eTequirement:for. FY 92/93 through FY .96/97•are-shown on .Schedules B-1 and B-2 . 11 .Applicable Comp'onents-to .the University.. , .The :Universityshell pay the applicable percentage cost of treatment,collection andFiretreetment, less .;any.. cost for,debt ..service related to the .continuing ;equityinvestmentin'a portion of the sewer system.' 2 .;:':.':Applicable Sewer Ratio for the period • beginning . July:1, 7992 .and tending Jun e30, 199 7 'The City.. is .currently making modifications .to•its ; sewer:.system to :assure =.continuin g':.compliance'• with':'State of : California -:effluent. ' discharge . 4equirements . These..: modifications 'sere being performed in three phases,:each-of :which'has been approve d for .low interest- loan funding through'the State Revolving Loan Fund administered b ythe State- Water Resources' Control : Board ; -:Division !Of :Clean,Water-Programs . The University may choose to.'participate'in the;financing •orrpay its .'capital share of the revenue'requirements directly.The appropriate ratio to be . applied against the City`s 'commercial rates will depend upon which ofthese options the University selects .• • A . Percentage of rate stnrcture for 1992/1997,wjthout,capital contributionfor equity interest in Sewer System Upgrade ' The table below summarizes the detail on Schedule B-I : ATTACHMEN T Rate Agreement - Page 9 • The.:University shalt pay the average .of the . five ':. year• percentage cost o f:treatment and collection and "pretreatment,• or Z)Q . percent of the city-widecommercial rate, if it does not . continue' its equity..interest in the sewer system , PH2-27 Rate Agreemen t .Pagel0 ATTACHMEN T HIEIT ."A ' Percentage of ratestructure for •1992/1997,,wftft capital contribution for equityinterest In Sewer System Upgrade The,University may elect to make an .equity contribution to the,sewer•systemupgrade.The City .will adjust ,the •percentage'indicated in paragraph A abov eas:necessary, if the University,electsthis option and 'when payment is received . The City anticipates the applicable percentage of city-wide commercial rate will '.be reduced to approximately 1Q percent, but this percentage will ,be,refine d ,r•when project costs and applicable debt,servkke is established . In the event tha t fat:N. the University chooses this option, this Agreement •will . be arrlended to .reflect..he ,revised ratio..: The table below summarizes`the' detail•'ori :Schedule B-2 ., Enu1TY •cQNTRIBUTION X66 % 70°,6 ri r ..; '.92193 •_:93% '. .93194 •63 % 94195 •.'.0 6 4%64%' ' 95/96 65%'. '96197 .5 YR AVG .,•:.. ATTACHAOENT EXHIBIT T APPLICABLE RATIO NON-EQUITY CONTRIBUTIO N SUMMARY OF SEWER COST-COMPONENTS FOR 1992-9 3 •.C:.3»sw. )G:: ~iv1i:',}SR+W:2 :.Rk.SR.d?.SY34<'L'.~:s~+^5*~YF~.{FY.y»;4g!'"~..gT.t41h':X .n^?:35`5?! •.:Operations and : Maintenance ,. . Capital Outlay , Debt,Serylce •. TOTAL .SUMMARY OR SE WER :COST:COMPONENTS-FOR ;1993-..9. Operations and Maintenance . Qapltal Outlay Debt Service ;..< TOTA L .SUMMARY;OF:SEWER:COST :`COMPONENTSFOR `l9 .94-;9,..4 'x r3~~-'Z~~F+F3 y'i'~~~rsSc1AkS ~oS.v '~;raa`Sibc7.! •••Operations end atntenanc e C pital Outlay e ~r ~:C ;. a y {wF.~y f?»'x ! R.tY,r F rt d'~^'F X' •~:~Z~_C ~~o~~z a,y $, sro i~^..~ x^•-syy y .1/1 s Tu .~`,~Y ~Debt Servic$;.• M 3r 3'y°'ti n s ? {v ZTOTAL••'•2 ~ { ~~~C,`{~~a~~i~~+.A~i'Gi x }"s ,<~~.fs ~r .or+E7:<3'ufk$`'S • SUMMARY OF SEWER COST COMPONENTS FOR 1Q95-9 6 ~.;;^ti'.iJ..1'?55<c... {t':ro::~>:FSk:,,;.~c;;'.5i<5•2w.5?3i.:I S K .z?z^ k?.Y3i <t ~d's:?% Operations and Maintenanc e 'OapitalOutlay . Debt Service TOTA L SUMMARY :OF SEWER COST COMPONENTS FOR 1995 .97 . Operations and MaintenanceCapitalOutlay' Debt Servic e .TOTAL Rate Agreement . Page 11 rH2-29 .APPLICABLERATIO -~ ' EQUITY CONTRIBUTIO N SUMMARY OF SEWER COST COMPONENTS FOR 1992-9 3 Operations and Maintenanc e Capital Outla y • bebt'Service .. .TOTAL . .... t s,F'?ti~,'o'e:,1xi.'Y$2o`°.~kF .'1..,?,1.~,..5..`.~:~;=t:t`.ti1b5 . -, -s ...:.,>~•,3w§«;.:sF :.k~?~;:;z.,s :s:,r~v~?'I,J~rri.z..,:Yz.'..a.ti>:: T,,-SUMMARY ' OF .SEWER• COST :COMPONENTS FOR 1993 9 f l Y .u f .1bSw~^.,WiiSaY`33~.f.'uRPU4?.R.'J!n,Y9lkC £v~.L~~+^aYSh-`.eWn`i.•i.a'h~.SCmt'<."1~{z '~'s5''y~.~F â p N~L+~'~i l'3z9fi~"r~}L P N ~5'TOperationsandMaintenance Capital Outlay 'Debt Service'$251,504 $1,848,600 $2,100,100 ' TOTAL $847;6558 :'.':$4,620,695 $5,641.,127 . SUMMARY 'OF SEWER COST COMPONENTS FOR 19944 5 ;.:-:.. :y '. •••3sr"'k arc-w"'v.m z ~~~"'~'.r~,~~"7 'Operations and Maintenance~~~~,s Ca Ital Odtla ~s x i >s E ~s ~ Debt Service $251 ;500 -.$l ;$68,400.$2,117,90 0 TOTAL'.$877,46f;-$4:758 .760.x .$5,814,65 $ SUMMARY OF SEWER COS` COMPONENTS ~Ol995-96 ' ASV yf3 4 5i lg 3yt ~L /4y %y z Operations and Maintenance'y'~y /~.n.'Ska {i S ~. ~f TkSrk" ~~ '.rx\~y ~v yw~•aY sy Capita( Outlay .''a¢w'Y `~ia"'Y,^'w^~..x`2>F~Eo ,r/~fF#r o m'."F '.cF'"~~~i,'?~3'i,.3k°'~ Debt Service $251,500 u r<f ,$1 866 400 ..•$2 ;117,900 TOTAL :$908 763~4 f $4,878,914 :$5,978,153 t SUMMARY OF SEWER COST COMPONENTS FOR 1996-9 7 },°1 cs *§rJ ,v^Y,''<'3ro-;Y~1\`~~r!!s,c f ^F '?P~3h..~ir wu ~~n aka " ~f 5~r ; Operations and Maintenance ..~~r ~\£i .'~~. 3 Y Y 'vt`s, }!i r ~~~ > ~~'1.,~`S ~F<~.'g/ r3 ,y ,nf~4 Capital Outlay • Debt Service $251,500 .7 s:' >t $1 ;866,400 $2,117.900 TOTAL $940,927f : $5,018,095 :$6,158 ;$30 .$251,500 s:wsk?.%:n 3 ;'$251,500'. $819,270 $3,729 ;200 MEMORANDUM OF UNDERSTANDING ("MOU") BETWEE N THE CITY OF SAN LUIS OBISPO ("City") AND CALIFORNIA POLYTECHNIC STATE UNIVERSITY ("University") REGARDING CAPACITY INTEREST IN CITY FACILITIE S This MOU is made this 1st day of May 2007 by and between the City and the University . Recita l This MOU is intended to clarify the University's capacity interest (referenced in prio r agreements as an "equity interest") in the City 's water and wastewater treatmen t facilities as more specifically set forth in the 1993 Agreement between the City of Sa n Luis Obispo and California Polytechnic State University Regarding Water and Sewe r Rates dated January 5, 1993, exhibit A, the Agreement between the City of San Lui s Obispo and California Polytechnic State University Regarding Optional Equity Interest i n the Water and Sewer Systems dated January 5, 1993, exhibit B,and the Memorandu m of Understanding between the City of San Luis Obispo and California Polytechnic Stat e University dated January 6, 1993, exhibit C . Capacity The City and University agree to work together in the planning and development o f facilities to ensure that adequate capacity in the City's water and wastewater treatmen t facilities is available to meet the University's current and projected needs . The University agrees to provide the City with its development and population projection s annually which shall include an analysis of the University's water and/or wastewate r treatment capacity needs as planned and projected for the next five years . The Cit y shall include the University's projections in its own master planning to ensure that th e University's capacity needs are included in future facility upgrades and expansions . Capacity Interes t The University has historically maintained a capacity interest in the City's water an d wastewater treatment facilities sufficient to serve current and projected University needs . The University has done so by financially participating in required facilit y upgrades and expansions via capital contribution based on the University's desire d capacity percentage share of the facilities . Maintenance of said capacity interest ha s ensured that the City has maintained available capacity to serve the University's need s up to the amount of the capacity interest, and as set forth in the Water and Sewer Rat e Agreement,has served to reduce the University's rates . The University may elect t o participate in future required upgrades and expansions to the City's water an d wastewater treatment facilities and realize the resultant reduced rates . The University's capacity interest in the City's facilities shall be calculated as water treatment averag e demand equivalent to 1,000 acre feet as calculated on an annual basis and wastewate r effluent daily dry weather flow as calculated on a monthly average of .471 millio n gallons daily (MGD). PH2-31 Authority to Execute Memorandum of Understandin q Both the City and University agree that each individual executing this memorandum o f understanding on behalf of each party is a person duly authorized and empowered t o execute agreements for such party . The parties hereto have caused this memorandum of understanding to be executed th e day and year first above written . UNIVERSITY CITY OF SAN LUIS OBISPO , A Municipal Corporatio n By:By : Matthew Roberts, Director Ken Hampian, City Administrative Office r Contract and Procurement Services PH2-32 ATThCHMEN T X1EtRIT C1<s To :John Dunn Date :,xsu ary 6, 1993 City Administrative .Office r City of San Luis Obi o -From :Frank Lebens""' Interim Vice .President :for BusinessAffeirsCalifornia Palytechnic`State Universit y :Subject :..MEMORANDUM .OF "UNDERSTANDIN G Water'and Sewer Rates/Water and Sewer System s •development of •water .and sewer systems ;and WHEREAS, it Is the :desire of .both parties to continue :that relationship;an d WHEREAS; the City of'San Luis Obispo is upgrading both Its Water :Treatment .Plant and 'Sewer Treatment/Collection Systems ; and • • •• WHEREAS, other City of San'Luis Obispo utility customers have experiencedperiodic rate increases due to changing costs ; an d WHEREAS, both the City of San Luis Obispo and California Polytechnic StateUniversity have met and agreed to update the rate structure to reflect changing costs and the new capital projects ; and WHEREAS, Cat Poly State University wishes At'Update ; prior agreementsregardingitsoperational needs and .related equity interest in the • City of San LuisObispo's water and "sewer system ; and WHEREAS, maintaining an equity interest in the City of San Luis Obispo's water and sewer systems is solely at the option of the University ;- NOW, THEREFORE, agreements setting the conditions and terms for thi srelationship have been :.developed by both parties wherein a payment schedule ha s been agreed to by both parties which would be funded through California Poiyto hnicState University's Major Capital Outlay Program,'such funding expected to b e approved for fiscal year 1994 .95 .. .WHEREAS, the City of San Luis Obispo . and Celifeinia,•,Polytechnic,stat e•'University have'a .longstanding and unique .:relationship :With :regard-to': the co - PI-12-3J ATTACHMEN T Wm ' The funding formula set forth in the referenced agreements by California Polytechni c State University assumes na equity contribution to the City of San Luis Obispo for the upgrading of its Water Treatment Plant and Sewer TreatmentlCollection Systems . If the University chooses ,to maintaln .an equity interest .and funding is available, th e fees will ,be recalculated :as stated in .O f Exhibit A and paragraph 2B o f Exhibit B.; of the Agreement Regarding Water and Sewer Rates . '.. If this Memorandum of Understanding is acceptable, please sign,• date, ,and return the attached copy to me :,Tbani •.