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HomeMy WebLinkAbout04/05/2005, C10 - AMENDMENT NO. 1 TO NACIMIENTO WATER SUPPLY AGREEMENT Ott., council M c j acjenaa aepoin '�"umbe' o CITY O F SAN LUIS O B I S P O FROM: John Moss, Utilities Director Prepared By: Gary W. Hende on,Water Division Manager eWkJ SUBJECT: AMENDMENT NO. 1 TO NACHAMNTO WATER SUPPLY AGREEMENT CAO RECOMMENDATION 1. Adopt a resolution approving the first amendment to the Nacimiento Water Supply Agreement with the San Luis Obispo County Flood Control and Water Conservation District and authorize the Mayor to execute the amendment, which will allow quarterly payments for design costs. 2. Adopt a resolution in connection with the financing of the Nacimiento Water Project design phase and declaring the City's intent to reimburse certain expenditures from bond anticipation note proceeds. DISCUSSION On June 29, 2004, the City Council adopted a resolution approving the agreement with the San Luis Obispo County Flood Control and Water Conservation District for the design, construction and operations of the facilities required for the delivery of 3,380 acre-feet of water per year to the City of San Luis Obispo from the Nacimento Water Supply Project. The agreement includes conditions relative to costs associated with design of the project and how these costs will be shared and paid by the participants in the project. The agreement provisions envisioned issuing bond anticipation notes ("Notes") to finance the design related costs. Following design of the project, revenue bonds would be issued to fund the construction and the design costs. An option is available for the agencies to pay the design cost up front and reduce the long term debt service for each participant. The current contract language would require a lump sum payment in advance by each agency for their share of the design costs. For the City of San Luis Obispo, this would mean a lump sum payment of $6,630,202. Since design will require approximately two years to complete, the participating agencies have requested that quarterly payment be allowed in lieu of the lump sum payment. Amendment 1 to the agreement (Exhibit A of Attachment 1) will allow quarterly payments for the design costs. The agencies can still decide to be reimbursed for the up front design costs once bond anticipation notes or revenue bonds are issued for the project. Attachment 2 is a resolution which will allow the City to be reimbursed for design costs previously paid prior to bond issuance. The City can decide at a later date whether to be reimbursed for the design costs or not. This will be evaluated as part of the Water Fund analysis which is prepared each year and presented to Council in May. Clp_ � Amendment No. 1 to Nacimiento Water Supply Agreement Page 2 In summary, the two recommended actions preserve the City's option of either paying for our share of the design costs on a pay-as-you-go (cash) basis, or financing them through bond anticipation note proceeds. As set forth in Exhibit A of Attachment 2 (Article 25), the City will need to select which option within 30 days of the effective date of the Memorandum of Understanding (which will not be until all agencies, including the County, have executed the document). Accordingly, staff will return to the Council within the next 30 to 90 days with a recommendation regarding which option we should select. This will allow us adequate time, in the context of the City's 2005-07 Financial Plan process to fully analyze our ability to fund this cost on a pay-as-you-go basis,which would be our preference if it is feasible to do so. CONCURRENCES The City Attorney has reviewed the amendment to the contract and concurs with the recommended approval of the amendment. FISCAL IWACT The City has already committed to the funding for the design phase of the project and there are "opt out" provisions following design if the construction bids exceed the current estimates.. Approval of the amendment to the contract will provide the City greater flexibility associated with our share of the design costs and the option to be reimbursed in the future. ALTERNATIVES 1. Do not approve the amendment. This would limit the options to the City for paying for design costs and would not provide the potential for reimbursement of previously paid costs towards design. This alternative is not recommended. ATTACHMENTS 1. Resolution approving amendment to the Nacimiento Water Delivery Entitlement Contract 2. Resolution in connection with financing of the Nacimiento Project design phase Attachment 1 RESOLUTION NO. (2005 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING AN AMENDMENT TO THE NACIM ENTO PROJECT WATER DELIVERY ENTITLEMENT CONTRACT WITH THE SAN LUIS OBISPO COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT WHEREAS, the Council for the City of San Luis Obispo adopted Resolution No. 9586 on June 29, 2004 approving the Nacimiento Project Water Delivery Contract with the San Luis Obispo Flood Control and Water Conservation District; and WHEREAS, the current contract requires a lump sum payment for the City's share of the project design costs: and WHEREAS, the Amendment to the contract will allow the City to make quarterly payments for the design costs associated with the project. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo to adopt a resolution approving the Amendment to the Nacimiento Project Water Delivery Contract with the San Luis Obispo Flood Control and Water Conservation District . SECTION 1. The forgoing recitals are true and correct. SECTION 2. The terns and provisions of the Amendment, included as Exhibit A to this resolution and as presented to and reviewed by this meeting of the Council for the City of San Luis Obispo, are hereby approved, and the Mayor of the City is hereby authorized and directed to execute the Amendment in the name and on behalf of the City, in substantially the form presented to and approved at this meeting of the Council for the City of San Luis Obispo.. SECTION 3. This resolution shall take effect immediately upon its adoption. Upon motion of seconded by , and on the following vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of 2005. Mayor David F. Romero ATTEST: R I. Resolution No. (2005 Series) Page 2 Audrey Hooper, City Clerk APPROVED AS TO FORM: Jonato- P well Citymey Exhibit A MEMORANDUM OF UNDERSTANDING (First Amendment to Nacimiento Project Water Delivery Entitlement Contract) This Memorandum of Understanding (the "MOU") is entered into by and between the San Luis Obispo County Flood Control and Water Conservation District, a Flood Control and Water Conservation District duly established and existing under the San Luis Obispo County Flood Control and Water Conservation Act, Act 7205 of the Uncodified Acts of the California Water Code (the "District"), and the City of San Luis Obispo, a chartered city and municipal corporation of the State of California (the "Participant"), is undertaken with regard to the following facts: RECITALS: WHEREAS, the Participant has contracted with the District pursuant to that certain Nacimiento Project Water Delivery Entitlement Contract, approved by the District on August 17, 2004 (as originally executed, the "Original Contract" and as amended hereby, the "Contract') regarding the financing, construction and operation of a water pipeline project intended to reach from Lake Nacimiento to the Participant (the "Project") for the delivery of additional water for the use and benefit of the lands and inhabitants served by the Participant; and WHEREAS, the Contract requires the Participant to make semiannual payments with respect to the Participant's allocation of costs accumulated in connection with the financing and later operation of the Project; WHEREAS, notwithstanding such payment schedule in the Contract, the Participant and the District desire to follow a separate payment schedule with respect to the initial financing of the preliminary,planning and design costs of the Project; WHEREAS, the Participant and the District now wish to use this MOU to effect an amendment to the Contract to reflect an additional option available to the Participant for its share of such costs; and WHEREAS, in compliance with Article 32 of the Contract, all Other Participants (as defined in the Contract) are also being provided with a Memorandum of Understanding (First Amendment to Nacimiento Project Water Delivery Entitlement Contract) (each, an "Other MOU"), all of which shall be executed by the respective Other Participants as a condition to the effectiveness hereof; NOW, THEREFORE,be it agreed and understood by the parties hereto, as follows: Section 1. Recitals: Defined Terms. The foregoing recitals are true and correct. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Contract. Section 2. Amended and Added Definitions. The following definitions shall replace the definitions of"Design Phase"and"Construction Phase" in the Original Contract: 3161cpagr.doc i Exhibit A "Design Phase" shall mean that period of time preceding the Construction Phase during which the design, engineering and/or planning for the construction of the Nacimiento Project are being undertaken. The Design Phase shall conclude with the opening of the first group of Construction Bids resulting in the award of a construction contract for all, or a sub-phase of, the Nacimiento Project. Any costs incurred for the design, engineering, and/or planning of the Nacimiento Project after the Design Phase still constitute part of the Nacimiento Project Construction Costs. "Construction Phase" shall mean the period of time following the opening of the first group of Construction Bids resulting in the award of a construction contract for all, or a sub- phase of, the Nacimiento Project. During the Construction Phase, the District shall apply the proceeds of the Municipal Obligations to pay the Nacimiento Project Costs. The following new definitions shall be added to the Original Contract: "Cash Contribution" shall mean the cash payment(s) made to the District by the Participant towards its pro rata share of Design Phase Costs pursuant to Article 2.5. Proceeds of Notes do not constitute the payment of a Cash Contribution. "Design Phase Costs"shall mean the costs and expenses incurred by or on behalf of the District, the Participant or any Other Participant in connection with the design, engineering and/or planning of the Nacimiento Project during the Design Phase. Section 3. Correction of Clerical Error in Article 2(D). The words "on the Opt-out Date" and "on an Opt-out Date" in the second and third sentences respectively of paragraph (D) of Article 2 of the Original Contract are hereby both corrected and replaced with the words "by the Opt-out Date." Section 4. Addition of New Article to Contract. A new Article is hereby added to the Contract, to be inserted between Article 2 and Article 3 of the Contract,and to read in its entirety as follows: ARTICLE 2.5 ALTERNATE FINANCING OF DESIGN PHASE COSTS (A) Financing Design Phase Costs. The Participant is obligated to pay to the District its pro rata share of the Design Phase Costs. The parties have determined that the Design Phase Costs may be financed initially with Cash Contributions from the Participant and from some or all the Other Participants and/or from the proceeds of certain Tax-Exempt and/or taxable Notes to be issued by the District or by the SLO County Financing Authority on behalf of the Participant and/or Other Participant(s). To the extent that the Participant elects to make Cash Contributions towards its pro rata share of Design Phase Costs, such Cash Contributions shall be calculated and become due in accordance with this MOU. (B) Notice of Election. In order to make Cash Contributions under this Article, the Participant shall provide the District with its written election to make Cash Contributions towards Design Phase Costs by a date no later than 30 days following the effective date of this MOU, as described in Section 7 of this MOU. In the event the Participant does not elect to make -2 - Exhibit A a Cash Contribution, or in the event that the Cash Contributions described herein do not completely cover the Participant's pro rata share of all Design Phase Costs, the Participant confirms and ratifies the authorization of the District to issue or cause to be issued Notes on behalf of the Participant. (C) Cash Contribution Amount. If the Participant elects to use the Cash Contribution method described in this Article, the amount of said Cash Contributions is hereby established as follows: (i) Current Cash Contribution Amount. The amount of the Participant's Cash Contribution is set forth in the attached Exhibit A, which is incorporated herein by this reference, and made a part hereof. Exhibit A also sets forth the District's current estimate of the total Design Phase Costs and the Participant's and each Other Participant's pro rata share of that estimate. Participant shall pay its Cash Contribution to the District pursuant to the payment schedule set forth on Exhibit A. (ii) Methodology for Calculating Any Additional Cash Contributions. The Parties understand and agree that the amount of the current Cash Contribution is based upon a District estimate of the cost of the various services and tasks needed to complete the Design Phase, and that the actual Design Phase Costs may actually be higher or lower than these. estimates. In the event the Design Phase Costs exceed the District's original estimates, additional Cash Contributions may be necessary to pay for the total Design Phase Costs. The exact amount of any such additional Cash Contributions will depend upon (1) the actual Design Phase Costs incurred to date, (2) any anticipated additional Design Phase Costs need to complete the Design Phase, and (3) whether any Notes have or will be issued to finance Design Phase Costs. Any such additional Cash Contributions shall be evidenced by a revised Exhibit A to this MOU which will reflect the increases in Design Phase Costs calculated by the District. Any such revised Exhibit A shall be submitted by the District to the Nacimiento Project Commission ("NPC") for the NPC's approval. No revision to Exhibit A will be presented to the NPC until after the District has provided written notice of such revision to the Participants. Once approved by the NPC and delivered by the District to the Participant, the amount of any additional Cash Contributions set forth in the revised Exhibit A shall be binding upon the Participant. Only one revision of Exhibit A is allowed under this paragraph. Regardless of whether any additional Cash Contribution(s) are required of Participant under this Article, the Participant is still obligated to pay its pro rata share of the total Design Phase Costs. In the event the NPC should fail to approve future revisions to Exhibit A, any Design Phase Costs not paid through Cash Contribution(s) shall be financed as provided in the Contract. In such event, the Participant understands and agrees that it may not be possible to complete the Design Phase unless the District issues or causes to be issued Notes in the name and on behalf of one or more of the Participants in order to fund the remaining Design Phase Costs not covered by Exhibit A. (D) Participant's Access to Information. At Participant's request, the District shall provide the Participant with any and all updated engineering or design information, contract terms and other information relating to the Project which supports the District's calculation of the Cash Contribution. - 3 - Exhibit A (E) Payment Schedule. The Participant covenants and agrees that, in the event it elects to make a Cash Contribution, it will make installment payments to the District pursuant to the payment schedule included on Exhibit A. The payment schedule for any additional Cash Contributions shall be set forth in any further revision to Exhibit A. The Participant understands that, unless it has opted out under the provisions of Article 2(B) of the Contract, its Cash Contribution(s), if any, may (at the option of the Participant, and only to the extent covered by the terms of a resolution adopted by the governing body of the Participant in compliance with U.S. Treasury Regulation Section 1.150-2)be reimbursed to the Participant from the proceeds of the Notes and/or the Revenue Bonds. The parties understand and agree that any payment schedule for the Notes and/or the Revenue Bonds shall be dictated by financial market conditions on such date of issuance and that payments due from the Participant in connection with its proportionate share of the Notes and/or the Revenue Bonds may be made more frequently, or less frequently, and in larger or smaller amounts than the Participant's payments hereunder. Section 5. Governine Law. This MOU shall be governed by the provisions of the laws of the State of California applicable to contracts made and performed in such State. Section 6. Counterparts. This MOU may be executed in counterparts, each of which shall,together, constitute an entire document. Section 7. Effective Date. This MOU shall become effective as of the last date upon which the District, the Participant, and the Other Participants shall execute this MOU or one of the Other MOUS, in accordance with Article 32 of the Contract. Section 8. Ratification. In all other respects, the provisions of the Original Contract are confirmed and ratified. IN WITNESS WHEREOF, the parties have each executed this MOU by their duly authorized representatives as of the first date set forth above: CITY OF SAN LUIS OBISPO By David F. Romero, Mayor Date APPROVED AS TO FORM: ATTEST: By By Jo an P. Lowell, City Attorney Audrey Hooper, City Clerk -4- Exhibit A SAN LUIS OBISPO COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT By Chairperson, Board of Supervisors Date APPROVED AS TO FORM: COUNTY COUNSEL: By Deputy County Counsel Date ATTEST: JULIE L. RODEWALD, COUNTY CLERK By Deputy County Clerk Date - 5 - � I Exhibit A EXHIBIT A ESTIMATED DESIGN PHASE COSTS AND CASH CONTRIBUTIONS The current estimated total Design Phase Costs of the Project are $18,890,000, within which the District calculates the following numbers as the Cash Contributions of various Participants: Total Estimated Cash Participant Contribution City of San Luis Obispo $ 6,630,202 City of Paso Robles 7,846,339 Templeton CSD 490,384 Atascadero MWC 3,923,075 Total $18,890,000 Payment Schedule Installment No. Participant Due Date Amount 1 SLO City April 1, 2005 $816,964 Paso Robles April 1, 2005 $966,815 Templeton April 1, 2005 $60,425 AMWC April 1, 2005 $483,396 2 SLO City July 1, 2005 $616,514 Paso Robles July 1, 2005 $729,597 Templeton July 1, 2005 $45,599 AMWC July 1, 2005 $364,790 3 SLO City October 1, 2005 $681,447 Paso Robles October 1, 2005 $806,441 Templeton October 1, 2005 $50,401 AMWC October 1, 2005 $403,211 4 SLO City January 1,2006 $659,510 Paso Robles January 1, 2006 $780,480 Templeton January 1, 2006 $48,779 AMWC January 1, 2006 $390,231 45552339.11 _ 6 _ Exhibit A Payment Schedule Continued Installment No. Participant Due Date Amount 5 SLO City April 1, 2006 $922,753 Paso Robles April 1, 2006 $1,092,008 Templeton April 1, 2006 $68,249 AMWC April 1, 2006 $545,990 6 SLO City July 1, 2006 $1,473,526 Paso Robles July 1, 2006 $1,743,806 Templeton July 1,2006 $108,985 AMWC July 1,2006 $871,882 7 SLO City October 1, 2006 $1,459,487 Paso Robles October 1,2006 $1,727,192 Templeton October 1,2006 $107,947 AMWC October 1, 2006 $863,575 Total $18,8909000 45552339.11 - 7 - 1 Attachment 2 RESOLUTION NO. (2005 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO, IN CONNECTION WITH THE FINANCING OF THE NACIMIENTO WATER PROJECT DESIGN PHASE AND DECLARING ITS INTENT TO REIMBURSE CERTAIN EXPENDITURES FROM BOND ANTICIPATION NOTE PROCEEDS WHEREAS, the City of San Luis Obispo ("City") has heretofore entered into a Nacimiento Project Water Delivery Entitlement Contract ("Contract") with the San Luis Obispo County Flood Control and Water Conservation District ("District"), pursuant to which, among other things, the City has agreed to pay its pro rata share of the costs of construction of a water pipeline from Lake Nacimiento to the City(the"Project"); and WHEREAS, the District now desires to commence the design and engineering phase of the Project (the "Design Phase") and the City and the District wish to provide for the advancement of funds, from time to time, by the City to pay the City's pro rata share of the Design Phase costs (the "Reimbursable Expenditures"); and WHEREAS, the District has advised the City that it intends to cause to be issued certain tax- exempt bond anticipation notes ("Notes") or revenue bonds ("Bonds") to reimburse the City among others for the Reimbursable Expenditures and to pay for additional Design Phase and/or Project expenditures and WHEREAS, Section 1.150-2 of the Treasury Regulations requires the City Council to declare its reasonable official intent to reimburse such Reimbursable Expenditures for the Project with proceeds of such Notes which the City reasonably expects will be issued to finance the costs of the Design Phase incurred prior to the date of issuance of the Notes and that certain of the proceeds of such Notes or Bonds (collectively, the "Obligations") in the amount of not to exceed $8,287,750 ($6,630,302 estimated design cost + 25% contingency) will be used to reimburse the Reimbursable Expenditures. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows/or that(whatever action is needed): SECTION 1. Recitals. The foregoing recitals are true and correct. SECTION 2. Intention to Reimburse. The City hereby declares its reasonable official intention to use a portion of the proceeds of the Notes to reimburse itself for the Reimbursable Expenditures. SECTION 3. Intention to Issue Obligations. The District presently intends and reasonably expects to issue or cause to be issued the Obligations on behalf of the City within 18 months of the date of the expenditure of moneys on the Design Phase or the date upon which the Project is placed in service or abandoned, whichever is later(but in no event more than 3 years after the date of the original expenditure of such moneys), and to allocate an amount of not to exceed $8,287,750 of the proceeds thereof to the Reimbursable Expenditures in connection with the Project. All of the Reimbursable Expenditures covered by this Resolution were made not earlier than 60 days prior to the date of this Resolution. R Resolution No. (2005 Series) Page 2 SECTION 4. Compliance with Treasury Regulations. This Resolution is adopted for purposes of establishing compliance with the requirements of Section 1.150-2 of the Treasury Regulations. SECTION 5. Official Actions. The Mayor, City Administrative Officer, Director of Finance and Information Technology, and the Clerk of the City are hereby authorized and directed to take all actions and do all things necessary or desirable hereunder in connection with the financing of the Design Phase, including but not limited to the execution and delivery of any and all related agreements, filings, instruments and other documents which they, or any of them, may deem necessary or desirable and not inconsistent with the purposes of this Resolution. SECTION 6. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of )2005. Mayor David F. Romero ATTEST: Audrey Hooper, City Clerk APPROVED AS TO FORM: J ath P. Lowell, City Attorney