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HomeMy WebLinkAbout09/05/2006, C6 - NACIMIENTO/WHALE ROCK EXCHANGE AGREEMENT i Counat M�wwoW 9/5/06 j acEnoa Report CITY OF SAN L U I S O B I S P O FROM: John Moss, Utilities Director Prepared.By: Gary W. Henderson, Water Division Manager SUBJECT: NACRVIIENTO/WHALE ROCK EXCHANGE AGREEMENT CAO RECOMMENDATION Authorize the Mayor to execute an agreement with the County of San Luis Obispo Service Area No. 10 (attached) to provide for the exchange of Nacimiento Project water for water from Whale Rock Reservoir. DISCUSSION The County Service Area No. 10 (CSA10) is interested in participating in the Nacirniento Project to provide a supplemental water supply for the town of Cayucos. Since the Nacimiento Pipeline will terminate at the City's water treatment plant, the most cost effective and environmentally superior option would be to exchange Nacimiento water for an equivalent amount from Whale Rock Reservoir. Water from Whale Rock is already delivered to the Cayucos Water Treatment Plant as discussed in more detail below. Background The City of San Luis Obispo has executed a participation agreement with the County of San Luis Obispo Flood Control and Water Conservation District for participation in the Nacimiento Project. There are currently three other agencies that have executed participation agreements for the Nacimiento Project: City of Paso Robles, Atascadero Mutual Water Company, and the Templeton. Community Services District. Other potential participants were included in the Nacimiento Project Environmental Impact Report (EIR) which was certified by the County of San Luis Obispo Flood Control and Water Conservation District on January 6, 2004. The Nacimiento Project EIR included potential deliveries of up to 160 acre feet per year to portions of the community of Cayucos which fall within the boundary of County Service Area No. 10. CSA 10 plans to initially execute a Nacimiento Entitlement Contract for 25 acre feet per year. The agreement for exchange of Whale Rock water provides for future increases up to 160 acre feet per year as identified in the EIR. There are actually three water purveyors which serve the town of Cayucos: County Service Area IOA, Morro Rock Mutual Water Company, and Paso Robles Beach Water Company. These water purveyors have a joint agreement for the treatment and delivery of water from the Cayucos Water Treatment Plant which is operated and maintained by the County of San Luis Obispo. Nacimiento/Whale Rock Exchange Agreement Page 2 The Cayucos agencies (including the Cayucos Cemetery), known as the Cayucos Area Water Organizations (CAWO), currently have an entitlement of 600 acre feet per year from Whale Rock Reservoir which is an existing agreement executed prior to the construction of the dam in 1958. Until such time as the CAWO exceeds their current entitlement of 600 acre feet, exchange of Nacimiento water for water from Whale Rock will not likely occur. Water Exchange Agreement The exchange agreement will provide a "1 to 1" exchange of Nacimiento water for water from Whale Rock Reservoir. CSA10 will be responsible for all costs associated with the delivery of the Nacimiento Project water (capital, operations and maintenance costs) to the City's water treatment plant. The City will be responsible for delivering water to the Cayucos water treatment plant from the existing point of connection on the Whale Rock pipeline. The agreements include numerous terms and conditions to protect both parties' interests. The term for the agreement states that: "This agreement shall remain in effect so long as CSA 10 (or its successor in interest) is still a participant in the Nacimiento Project Water Delivery Entitlement Contracts". Summary CSA 10 wishes to participate in the Nacimiento Project to provide up to 160 acre feet per year of supplemental water for the town of Cayucos. The most economical and environmentally superior option is to provide an exchange of Whale Rock Reservoir water for Nacimiento water delivered to the City's water treatment plant. The exchange eliminates the need to construct a pipeline all the way to Cayucos,which would not be economically viable. CONCURRENCES The City Attorney has been involved in the development of the agreement and concurs with the recommendation to execute the agreement. FISCAL IMPACT No fiscal impacts have been identified associated with the water exchange agreement. Additional participants in the Nacimiento Pipeline Project will serve to reduce the City's share of the cost of the project. ALTERNATIVES Do not approve execution of the agreement. The Council could consider not approving the agreement at this time. But it is important to understand that by not approving the agreement to allow for the exchange of Whale Rock water for Nacimiento water it would effectively preclude the Cayucos agencies from participating in the Nacimiento Project. The costs and environmental issues associated with extending a pipeline from San Luis Obispo's water treatment plant to Cayucos would be prohibitive. Since there is more water available from the Nacimiento Project NacimientolWhale Rock.Exchange Agreement Page 3 than participants have executed agreements for, there is a cost savings to all participants in the Nacimiento Project from having new participants executing contracts for the available excess water. Therefore, this alternative is not recommended. ATTACHMENTS Agreement for Exchange of Water between the City of San Luis Obispo and San Luis Obispo County Service Area No. 10 C� -3 AGREEMENT FOR EXCHANGE OF WATER BETWEEN THE CITY OF SAN LUIS OBISPO AND SAN LUIS OBISPO COUNTY SERVICE AREA NO..10 THIS AGREEMENT FOR EXCHANGE OF WATER BETWEEN THE CITY .OF SAN LUIS OBISPO AND SAN LUIS OBISPO COUNTY SERVICE AREA NO. 10 (hereafter"Agreement" or"Exchange Agreement") is made this day of , 2006 by and between the City of San Luis Obispo (hereinafter referred to as "City") and the County of San Luis Obispo acting on behalf of County Service Area No. 10 (hereinafter collectively referred to as "CSA 10"). RECITALS WHEREAS, on January 6, 2004, the San Luis Obispo County Flood Control and Water Conservation District (District) certified Environmental Impact Report SCH #20010061002 (Project EIR)for the Nacimiento Water Project (Project); and WHEREAS,the Project EIR provides for the delivery of up to 160 acre-feet peryear (AFY) to areas within the community of Cayucos which fall within the boundaries of CSA 10; and WHEREAS, concurrently with the execution of this Agreement, and in reliance thereon, CSA 10 is entering into a Nacimiento Project Water Delivery Entitlement Contract ("Entitlement Contract")with the District for the delivery of 25 acre-feet per year(AFY) of Project Water, and WHEREAS, since the Project EIR provides for the delivery of up to 160 AFY to portions of the community of Cayucos which fall within the boundary of CSA 10,the Project provides CSA 10 with the ability to take delivery of up to an additional 135 AFY(above the current 25 AFY contract amount)of Project Water through subsequent amendments of its Entitlement Contract with the District; and WHEREAS, City has water rights to Whale Rock Reservoir Water(Reservoir Water) in accordance with City's State Water Rights Board Permit Application No. 17114; and WHEREAS, CSA 10 and the City agree that it is in the mutual best interest of both parties for the City to deliver Reservoir Water to CSA 10 in exchange for an equal amount of CSA 10's Project Water pursuant to the terms of this Agreement; and WHEREAS, this Exchange Agreement provides for the exchange of up to 160 AFY of CSA 10 Project Water for City Reservoir Water, with the understanding that CSA 10 is currently only contracting for 25 AFY of Project Water, and the further understanding that the amount of waterwhich can be exchanged underthis Agreement during any Water Year is limited to the amount of Project Waterwhich CSA 10 is contractually obligated to receive 1 S,.VT G 1 from the District pursuant to its Entitlement Contract and any subsequent amendments thereto; and WHEREAS, this Exchange Agreement shall not be effective until CSA 10 and the District have executed an Entitlement Contract and the City and CSA 10 have executed this Exchange Agreement. NOW,THEREFORE, in consideration of the recitals and promises herein contained, it is hereby agreed by and between the parties hereto as follows: I. Definitions A. "City" shall refer to the City of San Luis Obispo a Chartered city within the County of San Luis Obispo, California. B "CSA 10" shall refer to San Luis Obispo County Service Area No. 10; C. "District" shall refer to the San Luis Obispo County Flood Control and Water Conservation District. D. "Fiscal Year" shall mean the twelve-month period from July 1 of a Calendar Year to June 30 of the immediately following Calendar Year, both dates inclusive. E. "Nacimiento Project Water Delivery Entitlement Contract" or "Entitlement Contract" shall mean those certain contracts entitled "Nacimiento Project Water Delivery Entitlement Contract" between the San Luis Obispo County Flood Control and Water Conservation District and the various Participants in the Nacimiento Project. F. "Project" shall mean the project described in the-Nacimiento Water Project Environmental Impact Report SCH#2001061022 certified January 2004 and as may be amended. G. "Project Water' shall mean that portion of water from the Nacimiento Water Project allocated to CSA 10. H. "Reservoir Water" shall mean that portion of the City's allocation of water from Whale Rock Reservoir, Cayucos, California. I. "Water Exchange Agreement" shall mean this Agreement in it's entirety. J. "Water Exchange Imbalance"shall refer to those instances in which the ratio of water exchanged between CSA 10 and the City is other than the 1 to 1 2 water exchange ratio established herein over the period of any calendar month. K. "Water Year' shall mean the twelve-month period from October 1 of a CalendarYearto September30 of the immediately following Calendar Year, both dates inclusive. II. Term of Contract A. The effective date of this Exchange Agreement shall be only at such time as CSA 10 and the District have executed an Entitlement Contract and the City and CSA 10 have executed this Exchange Agreement. B. This Agreement shall remain in effect so long as CSA 10 (or its successor in interest) is still a Participant in the Nacimiento Project. Water Delivery Entitlement Contracts. III. Exchange of Water A. CSA 10 and City hereby agree to exchange CSA 10's Project Water for an equal amount of the City's Reservoir Water pursuant to the terms set forth herein. B. This Exchange Agreement provides for the exchange of up to 160 AFY of CSA 10 Project Water for City Reservoir Water,with the understanding that CSA 10 is currently only contracting for 25 AFY of Project Water, and the further understanding that the amount of water which can be exchanged under this Agreement during any Water Year is limited to the amount of Project Water which CSA 10 is contractually obligated to receive from the District pursuant to its Entitlement Contract and any subsequent amendments thereto. C. CSA 10 and City hereby agree and affirm that only contractual rights are created ,by this Exchange "Agreement, and that this Water Exchange .. Agreement does not create or convey any entitlement to, or property interest in, any water or water delivery facility. IV. Point of Delivery of Water A. All Reservoir Water to be furnished to CSA 10 by the City pursuant to this Water Exchange Agreement shall be delivered by the City to CSA 10 from Whale Rock Reservoir to the CSA 10 turnout on the Whale Rock Reservoir transmission line located on the Cayucos/Morro Cemetery property. Said deliveries shall be on a 1 to 1 water exchange basis for CSA 10's Project Water as established herein. 3 _J B. All of CSA 10's Project Water to be furnished to the City by CSA 10 pursuant to this Water Exchange Agreement shall be delivered to the City through the Nacimiento Water Project conveyance system at the City of San Luis Obispo Water Treatment Plant turnout on Stenner Creek Road (referred to as Unit T11 of the Nacimiento Project) pursuant to CSA 10's Entitlement Contract with the District. In order to facilitate said delivery, CSA 10 shall identify Unit T11 as the "Place of Delivery" in said Entitlement Contract. Said deliveries shall be on a 1 to 1 water exchange basis for City's Reservoir as established herein. V. Measurement A. All Reservoir Water furnished to CSA 10 pursuant to this Agreement shall be measured by CSA 10 at the point of delivery specified herein with equipment satisfactory to CSA 10 and City. Said equipment shall be installed,operated and maintained by CSA 10, All determinations relative to the measuring of Reservoir Water shall be made by CSA 10 and, upon request of City or CSA 10, theaccuracy of such measurement shall be investigated by CSA 10 and certified to the City in writing. Any error appearing in the course of such investigation and certification shall be cause for adjustment by CSA 10 and/or City. The City may inspect any such .measuring equipment for the purpose of determining the accuracy thereof, at its own expense at reasonable times upon reasonable notice. B. The measurement of all Project Water furnished to City pursuant to this Agreement is subject to the terms and conditions of the Nacimiento Project Water Entitlement Contracts and the resolution of any delivery inaccuracies, errors or failure to deliver CSA 10's Project Water by District shall be resolved per said Entitlement.Contracts. VI. Water Quality A. When City takes delivery of CSA 10's Project Water, said water shall be at a quality that is substantially the same as the quality of said water at the time it was taken from the Nacimiento Reservoir per the terms of the Entitlement Contracts. CSA 10 shall assumes no responsibility for the quality of the_ water delivered to City under this Contract and CSA 10 does not warrant the quality of any such water for any particular use. City shall be responsible for the treatment of all such water to the minimum water quality standards for water for domestic use as may be established from time to time by the State of California and/or by the federal government. City shall defend, indemnify and hold harmless CSA 10 from and against any and all claims, damages, costs, expenses,judgments, attorney fees or other liability to any person or 4 �AL.1.�ME�'�►T entity asserting that said water does not meet or has not met said domestic . use water quality standards. B. When CSA 10 takes delivery of City's Reservoir Water,said water shall be at a quality that is substantially the same as the quality of said water at the time it was taken from the Whale Rock Reservoir. City shall assume no further or additional responsibility for the quality of the water delivered to CSA 10 under this Contract and City does not warrant the quality of any such water for any particular use. The City shall consult with CSA 10 as to which of the Reservoir's intake withdrawal levels to utilize to best optimize the quality of Reservoir Water supplied to CSA 10. In all such cases, City shall retain the right to make the final decision regarding which intake withdrawal level to use, so long as the Reservoir Water delivered to CSA 10 continues to come from the same withdrawal level as the Reservoir Water delivered to the City for domestic use. CSA 10 shall be responsible for the treatment of all such water to the minimum water quality standards for water for domestic use as may be established from time to time by the State of California and/or by the federal government. CSA 10 shall defend, indemnify and hold harmless City from and against any and all claims,damages, costs, expenses,judgments, attorney fees or other liability to any person or entity asserting that said water does not meet or has not met said domestic use water quality standards. VII. Costs of Delivery A. The costs assoe'iated with the acquisition and delivery of the City s Reservoir Water to CSA 10 under this Agreement shall be born exclusively by the City. B. The costs associated with the acquisition and delivery of CSA 10's Project Water to the City shall be paid by CSA 10 to the District_ in accordance with the terms of its Entitlement Contract with the District. VIII. No Financial Remuneration Between Parties Each party agrees that its acquisition,delivery and treatment costs under this Agreement are reasonable relative to the benefits it is receiving under this Agreement. The parties further agree that although no formal estimate or accounting has been made of each party's costs as of the effective date of this Agreement, the parties agree that each party's relative costs are reasonable in relation to the other party's costs as of the effective date of this Agreement. It is the intent of the parties that this Agreement shall not require the transaction of any financial consideration or remuneration between the City and CSA 10 until such time as the City and GSA 10 mutually agree that the following conditions have been satisfied: 1) the pumping, maintenance and treatment costs of the party seeking financial renumeration exceed the pumping, maintenance and treatment costs of the 5 other party, and 2) each party's relative, pumping, maintenance and treatment costs under this Agreement have changed so dramatically in relation to the other party's said costs since the effective date of this Agreement so as to justify the application of additional service charges for the pumping, maintenance and treatment of exchanged water. IX. Annual Delivery Schedules A. No water need be exchanged under this Agreement for any calendar year until CSA 10 submits a written water delivery schedule to the City. B. On or before September 1 of each calendar year, CSA 10 shall submit in writing to City a preliminary water delivery schedule which sets forth the amounts, rate and times of the conveyance and delivery of Reservoir Water as is desired by CSA 10 for each month of the next succeeding one (1) Water Year. The amounts set forth in said schedule shall not exceed the amounts of Project Water which CSA 10 is eligible to receive under its Entitlement Contract. The City shall deliver Reservoir Water to CSA 10 at the amounts, rates and time specified in the schedule so long as said schedule is consistent with the efficient and economical operation of the CSA 10 and City facilities. C. If the City does not believe the requested schedule is consistent with the efficient and economical operation of City facilities,the City shall propose an alternative schedule to CSA 10 in writing within 7 days of its receipt of CSA 10's preliminary water delivery schedule. If CSA 10 does not find the City's alternative schedule acceptable, CSA 10 shall request a meeting with.the City and CSA 10 and City shall make such modifications to the preliminary water delivery schedule as will allow CSA 10 and City to schedule the amounts, times and rates of the conveyance and delivery of the requested deliveries, so as to match as closely as possible CSA 10's requests, but in a manner which is consistent with the efficient and economical operation of the CSA 10 and City facilities. X. Responsibility for Delivery and Distribution of Exchange Water Beyond Delivery Points. A. After Reservoir Water,or any portion thereof, shall have passed the delivery point established herein, neither City nor its officers, agents or employees shall be liable for the control, carriage, handling, use,disposal,distribution or changes occurring in the quality of such water supplied to CSA 10 or for claim of damages of any nature whatsoever, including but not limited to property damage, personal injury or death, arising out of or connected with the control, carnage, handling,. use, disposal, distribution or changes occurring in the quality of such water beyond said delivery point. CSA 10 6 17� - 9 shall defend, indemnify and hold harmless City and its officers, agents and employees from and against any such damages or claims of damage. B. City understands that any and all Project Water delivered to the City under this Agreement shall be delivered by the District to the point of delivery established herein. CSA 10 has no control over the quality of said Project Water, and the quality of said Project Water is governed by Article 11 of the Entitlement Contracts. Neither CSA 10 nor its officers, agents or employees shall be liable for the control, carriage, conveyance, handling, use,disposal, distribution or changes occurring in the quality of such water supplied to City, or for claim of damages of any nature whatsoever, including, but not limited to, property damage, personal injury or death, arising out of or connected with the control, carriage, handling, use, disposal, distribution or changes occurring in the quality of such water beyond said point of delivery. City shall defend, indemnify and hold harmless CSA 10 and its officers, agents and employees from and against any such damages or claims of damage. C. CSA 10 and City are aware and hereby agree that the delivery, quantity and quality of Project Water is subject to the terms and conditions of the Nacimiento Project Delivery Entitlement Contracts and that CSA 10 and City shall not be responsible or liable for the failure to perform any portion of this Exchange Agreement to the extent that such failure is caused by a failure of performance under the Nacimiento Entitlement Contracts. D. In addition to the reasons set forth in Section XI below, CSA 10 and City recognize that other foreseen and unforeseen events may preclude the exchange and delivery of water from occurring on a 1 to 1 basis over any calendar month, thereby resulting in a water exchange imbalance. Therefore, CSA 10 and City hereby agree that, in the event such a water exchange imbalance occurs,the parties hereto mutually agree that the party which received less water during that calendar month shall be delivered the quantity of water which it would have been furnished in the absence of such - imbalance as expeditiously as may be feasible. XI. Curtailment of Delivery A. CSA 10 may temporarily experience a discontinuance or reduction in the amount of Reservoir Water to be furnished to CSA 10 during such time as the City is maintaining, repairing, replacing, investigating,or inspecting any of the portions of the Whale Rock Facilities necessary for the furnishing of water to CSA 10. Insofar as it is feasible, City shall give CSA 10 at least 30 days notice in advance of any such temporary discontinuance or reduction, except in the case of emergency, in which case, while no advance notice need be given, City shall inform CSA 10 of such an emergency immediately after said emergency becomes known to City. In the event of such 7 discontinuance or reduction, the City will upon resumption of service, cause to be delivered, as expeditiously as may be feasible, the quantity of Reservoir Water which would have been furnished to CSA 10 in the absence of such discontinuance or reduction. B. City may temporarily experience discontinuance or reduction in the amount of Project Water to be furnished to City during such time as the Nacimiento Project is maintaining, repairing, replacing, investigating,or inspecting any of the portions of the Nacimiento Project Facilities necessary for the furnishing of water to City. As the City is a party to a separate Entitlement Agreement. with the District, the City will be provided notice of any such curtailment by the District pursuant to the terms of its Entitlement Agreement with the District. In the event of such discontinuance or reduction, CSA 10 will, upon resumption of service, request that the District cause to be delivered, as expeditiously as may be feasible,the quantity of Project Water which would have been furnished to City in the absence of such discontinuance or reduction. XII. Notices All notices that are required either expressly or by implication to be given by any party to the other under this Contract shall be signed for the City and for CSA 10 by such officers as they may, from time to time, authorize to so act. All such notices shall be deemed to have been given and delivered if delivered personally or if enclosed in a properly addressed envelope and deposited with the United States Postal Service for delivery by registered or certified mail. Unless and until formally notified otherwise,all notices shall be addressed to the parties as follows: To CSA 10: County Service Area No.10, Department of Public Works Room 207, County Government Center San Luis Obispo, CA 93408 Attention: Director of Public Works To the City City of San Luis Obispo, Utilities Department 879 Morro Street, San Luis Obispo, Ca 93401 Attn: Utilities Director XII. SEVERABILITY Any provision of this Contract that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof affecting the validity, enforceability or legality of such provision in any other jurisdiction. 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as provided below. COUNTY OF SAN LUIS OBISPO Dated: By Chairperson, Board of Supervisors A'T'TEST: APPROVED AS TO FORM: COUNTY CLERK COUNTY COUNSEL: By By ` �Fce"' Deputy County Clerk Deputy my Counsel Dated: Dated: CITY OF SAN LUIS OBISPO Dated: By Mayor, City of San Luis Obispo APPROVED AS TO FORM: ATTEST: CITY ATTORNEY CITY CLERK BY BY Attorney City Clerk Dated: .4 tJG- -Z 2-0 Dated: 9 ������iiuuIIIIIIII�P° 1111111 Council MEMORANDUM [City of San Luis Ob" ` o RECEIVED DATE: September 5,2006 SSP o 5 2000 TO: Mayor and Members of the City Council SLO CITY CLERK FROM: Gary W. Henderson, Water Division Manager John Moss,Utilities Director VIA: Ken Hampian, City Administrative Officer SUBJECT: NACIMIENTO/WHALE ROCK EXCHANGE AGREEMENT Attached is the revised agreement between the County Service Area 10 and the City of San Luis Obispo for the exchange of water from Nacimiento Lake with water from Whale Rock Reservoir. The paragraph below was inadvertently deleted from the final document and is included in Section X. E. in the attached agreement. "CSA 10 and City are aware and hereby agree that Reservoir Water will only be available as long as City has water available in storage. Although the other Whale Rock Commission agencies may have water available in storage when City does not, nothing in this Agreement shall obligate, limit, diminish or affect in any way the water supplies of the other Whale Rock Commission agencies (California Men's Colony, California State Polytechnic University). " RED FILE COUNCIL $ CDD DIP CAO 'FIN DIR - MEETING AGENDA ACAO SFFIRE CHIEF ATTORNEY ra PW DIP DAT TEM #LdL_ 43 CLERK/ORIG POLICE CHF ❑ D �HEADS REC DIR 12 0 UTIL DIR 7 / a HR 0S eP e140 CADocuments and Settings\ghenders\Desktop\Redfile for Revised Agreement.DOC AGREEMENT FOR EXCHANGE OF WATER BETWEEN THE CITY OF SAN LUIS OBISPO AND SAN LUIS OBISPO COUNTY SERVICE AREA NO. 10 THIS AGREEMENT FOR EXCHANGE OF WATER BETWEEN THE CITY OF SAN LUIS OBISPO AND SAN LUIS OBISPO COUNTY SERVICE AREA NO. 10 (hereafter"Agreement" or"Exchange Agreement") is made this day of , 2006 by and between the City of San Luis Obispo (hereinafter referred to as "City") and the County of San Luis Obispo acting on behalf of County Service Area No. 10 (hereinafter collectively referred to as "CSA 10"). RECITALS WHEREAS, on January 6, 2004, the San Luis Obispo County Flood Control and .Water Conservation District (District) certified Environmental Impact Report SCH #20010061002 (Project EIR)for the Nacimiento Water Project (Project); and WHEREAS,the Project EIR provides for the delivery of up to 160 acre-feet per year (AFY) to areas within the community of Cayucos which fall within the boundaries of CSA 10; and WHEREAS, concurrently with the execution of this Agreement, and in reliance thereon, CSA 10 is entering into a Nacimiento Project Water Delivery Entitlement Contract ("Entitlement Contract")with the District for the delivery of 25 acre-feet per year (AFY) of Project Water; and WHEREAS, since the Project EIR provides for the delivery of up to 160 AFY to portions of the community of Cayucos which fall within the boundary of CSA 10,the Project provides CSA 10 with the ability to take delivery of'up to an additional 135 AFY (above the current 25 AFY contract amount)of Project Water through subsequent amendments of its Entitlement Contract with the District;and WHEREAS, City has water rights to Whale Rock Reservoir Water(Reservoir Water) in accordance with City's State Water Rights Board Permit Application No. 17114; and WHEREAS, CSA 10 and the City agree that it is in the mutual best interest of both parties for the City to deliver Reservoir Water to CSA 10 in exchange for an equal amount of CSA 10's Project Water pursuant to the terms of this Agreement; and WHEREAS,this Exchange Agreement provides for the exchange of up to 160 AFY of CSA 10 Project Water for City Reservoir Water, with the understanding that CSA 10 is currently only contracting for 25 AFY of Project Water, and the further understanding that the amount of water which can be exchanged underthis Agreement during any Water Year is limited to the amount of Project Water which CSA 10 is contractually obligated to receive 1 from the District pursuant to its Entitlement Contract and any subsequent amendments thereto; and WHEREAS,this Exchange Agreement shall not be effective until CSA 10 and the District have executed an Entitlement Contract and the City and CSA 10 have executed this Exchange Agreement. NOW,THEREFORE, in consideration of the recitals and promises herein contained, it is hereby agreed by and between the parties hereto as follows: 1. Definitions A. "City" shall refer to the City of San Luis Obispo a Chartered city within the County of San Luis Obispo, California. B "CSA 10" shall refer to San Luis Obispo County Service Area No. 10. C. "District" shall refer to the San Luis Obispo County Flood Control and Water Conservation District. D. "Fiscal Year" shall mean the twelve-month period from July 1 of a Calendar Year to June 30 of the immediately following Calendar Year, both dates inclusive. E. "Nacimiento Project Water Delivery Entitlement Contract" or. "Entitlement Contract" shall mean those certain contracts entitled "Nacimiento Project Water Delivery Entitlement Contract" between the San Luis Obispo County Flood Control and Water Conservation District and the various Participants in the Nacimiento Project. F. "Project" shall mean the project described in the Nacimiento Water Project Environmental Impact Report SCH#2001061022 certified January 2004 and as may be amended. G. "Project Water' shall mean that portion of water from the Nacimiento Water Project allocated to CSA 10. H. "Reservoir Water" shall mean that portion of the City's allocation of water from Whale Rock Reservoir, Cayucos, California. I. "Water Exchange Agreement" shall mean this Agreement in it's entirety. J. "Water Exchange Imbalance"shall referto those instances in which the ratio of water exchanged between CSA 10 and the City is other than the 1 to 1 2 water exchange ratio established herein over the period of any calendar month. K. "Water Year' shall mean the twelve-month period from October 1 of a Calendar Year to September 30 of the immediately following CalendarYear, both dates inclusive. II. Term of Contract A. The effective date of this Exchange Agreement shall be only at such time as CSA 10 and the District have executed an Entitlement Contract and the City and CSA 10 have executed this Exchange Agreement. B. This Agreement shall remain in effect so long as CSA 10 (or its successor in interest) is still a Participant in the Nacimiento Project Water Delivery Entitlement Contracts. 111. Exchange of Water A. CSA 10 and City hereby agree to exchange CSA 10's Project Water for an equal amount of the City's Reservoir Water pursuant to the terms set forth herein. B. This Exchange Agreement provides for the exchange of up to 160 AFY of CSA 10 Project Water for City Reservoir Water, with the understanding that CSA 10 is currently only contracting for 25 AFY of Project Water, and the further understanding that the amount of water which can be exchanged under this Agreement during any Water Year is limited to the amount of Project Water which CSA 10 is contractually obligated to receive from the District pursuant to its Entitlement Contract and any subsequent amendments thereto. C. CSA 10 and City hereby agree and affirm that only contractual rights are created by this Exchange Agreement, and that this Water Exchange Agreement does not create or convey any entitlementto,or property interest in, any water or water delivery facility. IV. Point of Delivery of Water. A. All Reservoir Water to be furnished to CSA 10 by the City pursuant to this Water Exchange Agreement shall be delivered by the City to CSA 10 from Whale Rock Reservoir to the CSA 10 turnout on the Whale Rock Reservoir transmission line located on the Cayucos/Morro Cemetery property. Said deliveries shall be on a 1 to 1 water exchange basis for CSA 10's Project Water as established herein. 3 B. All of CSA 10's Project Water to be furnished to the City by CSA 10 pursuant to this Water Exchange Agreement shall be delivered to the City through the Nacimiento Water Project conveyance system at the City of San Luis Obispo Water Treatment.Plant turnout on Stenner Creek Road (referred to as Unit T11 of the Nacimiento Project) pursuant to CSA 10's Entitlement Contract with the District. In order to facilitate said delivery, CSA 10 shall identify Unit T11 as the "Place of Delivery" in said Entitlement Contract. Said deliveries shall be on a 1 to 1 water exchange basis for City's Reservoir as established herein. V. Measurement A. All Reservoir Water furnished to CSA 10 pursuant to this Agreement shall be measured by CSA 10 at the point of delivery specked herein with equipment satisfactory to CSA 10 and City. Said equipment shall be installed,operated and maintained by CSA 10. All determinations relative to the measuring of Reservoir Water shall be made by CSA 10 and, upon request of City or CSA 10,the accuracy of such measurement shall be investigated by CSA 10 and certified to the City in writing. Any error appearing in the course of such investigation and certification shall be cause for adjustment by CSA 10 and/or City. The City may inspect any such measuring equipment for the purpose of determining the accuracy thereof,. at its own expense at reasonable times upon reasonable notice. B. The measurement of all Project Water furnished to City pursuant to this Agreement is subject to the terms and conditions of the Nacimiento Project Water Entitlement Contracts and the resolution of any delivery inaccuracies, errors or failure to deliver CSA 10's Project Water by District shall be resolved per said Entitlement Contracts. VI. Water Quality A. When City takes delivery of CSA 10's Project Water, said water shall be at a quality that is substantially the same as the quality of said water at the time it was taken from the Nacimiento Reservoir per the terms of the Entitlement Contracts. CSA 10 shall assumes no responsibility for the quality of the water delivered to City under this Contract artd CSA 10 does not warrant the quality of any such water for any particular use. City shall be responsible for the treatment of all such water to the minimum water quality standards for water for domestic use as may be established from time to time by the State of California and/or by the federal government..City shall defend, indemnify and hold harmless CSA 10 from and against any and all claims, damages, costs, expenses,judgments, attorney fees or other liability to any person or 4 entity asserting that said water does not meet or has not met said domestic use water quality standards. B. When CSA 10 takes delivery of City's Reservoir Water,said water shall be at a quality that is substantially the same as the quality of said water at the time it was taken from the Whale Rock Reservoir. City shall assume no further or additional responsibility for the quality of the water delivered-to CSA 10 under this Contract and City does not.warrant the quality of any such water for any particular use. The City shall consult with CSA 10 as to which of the Reservoir's intake withdrawal levels to utilize to best optimize the quality of. Reservoir Water supplied to CSA 10. In all such cases, City shall retain the right to make the final decision regarding which intake withdrawal level to use, so long as the Reservoir Water delivered to CSA 10 continues to come from the same withdrawal level as the Reservoir Water.delivered to the City for domestic use. CSA 10 shall be responsible for the treatment of all such water to the minimum water quality standards for water for domestic use as may be established from time to time by the State of California and/or by the federal government. CSA 10 shall defend, indemnify and hold harmless City from and against any and all claims,damages, costs, expenses,judgments, attorney fees or other liability to any person or entity asserting that said water does not meet or has not met said domestic use water quality standards. VII. Costs of Delivery A. The costs associated with the acquisition and delivery of the City's Reservoir Water to CSA 10 under this Agreement shall be born exclusively by the City. B. The costs associated with the acquisition and delivery of CSA 10's Project Water to the City shall be paid by CSA 10 to the District in accordance with the terms of its Entitlement Contract with the District. VIII. No Financial Remuneration Between Parties Each party agrees that its acquisition,delivery and treatment costs under this Agreement are reasonable relative to the benefits it is receiving under this Agreement. The parties further agree that although no formal estimate or accounting has been made of each party's costs as of the effective date of this Agreement, the parties agree that each party's relative costs are reasonable in relation to the other parry's costs as of the effective date of this Agreement. It is the intent of the parties that this Agreement shall not require the transaction .of any financial consideration or remuneration between the City and CSA 10 until such time as the City and CSA 10 mutually agree that the following conditions have been satisfied: 1) the pumping, maintenance and treatment costs of the party seeking financial renumeration exceed the pumping, maintenance and treatment costs of the 5 other party, and 2) each party's relative, pumping, maintenance and treatment costs under this Agreement have changed so dramatically in relation to the other party's said costs since the effective date of this Agreement so as to justify the application of additional service charges for the pumping, maintenance and treatment of exchanged water. IX. Annual Delivery Schedules A. No water need be exchanged under this Agreement for any calendar year until CSA 10 submits a written water delivery schedule to the City. B. On or before September 1 of each calendar year, CSA 10 shall submit in writing to City a preliminary water delivery schedule which sets forth the amounts, rate and times of the conveyance and delivery of Reservoir Water as is desired by CSA 10 for each month of the next succeeding one (1) Water Year. The amounts set forth in said schedule shall not exceed the amounts of Project Water which CSA 10 is eligible to receive under its Entitlement Contract. The City shall deliver Reservoir Water to CSA 10 at the amounts, rates and time specified in the schedule so long as said schedule is consistent with the efficient and economical operation of the CSA 10 and City facilities. C. If the City does not believe the requested schedule is consistent with the efficient and economical operation of City facilities,the City shall propose an alternative schedule to CSA 10 in writing within 7 days of its receipt of CSA 10's preliminary water delivery schedule. If CSA 10 does not find the City's alternative schedule acceptable, CSA 10 shall request a meeting with the City and CSA 10 and City shall make such modifications to the preliminary water delivery schedule as will allow CSA 10 and City to schedule the amounts, times and rates of the conveyance.and delivery of the requested deliveries, so as to match as closely as possible CSA 10's requests, but in a manner which is consistent with the efficient and economical operation of the CSA 10 and City facilities. X. Responsibility for Delivery and Distribution of Exchange Water Beyond Delivery Points. A. After Reservoir Water,or any portion thereof, shall have passed the delivery point established herein, neither City nor its officers, agents or employees shall be liable for the control,carriage, handling,use,disposal,distribution or changes occurring in the quality of such water supplied to CSA 10 or for claim of damages of any nature whatsoever, including but not limited to property damage, personal injury or death, arising out of or connected with the control, carnage, handling, use, disposal, distribution or changes occurring in the quality of such water beyond said delivery point. CSA 10 6 shall defend, indemnify and hold harmless City and its officers, agents and employees from and against any such damages or claims of damage. B. City understands that any and all Project Water delivered to the City under this Agreement shall be delivered by the District to the point of delivery established herein.. CSA 10 has no control over the quality of said Project Water; and the quality of said Project Water is governed by Article 11 of the Entitlement Contracts. Neither CSA 10 nor its officers, agents or employees shall be liable for the control, carriage,conveyance, handling, use, disposal, distribution or changes occurring in the quality of such water supplied to City, or for claim of damages of any nature whatsoever, including, but not limited to, property damage, personal injury or death, arising out of or connected with the control, carriage, handling, use, disposal, distribution or changes occurring in the quality of such water beyond said point of delivery. City shall defend, indemnify and hold harmless CSA 10 and its officers, agents and employees from and against any such damages or claims of damage. C. CSA 10 and City are aware and hereby agree that the delivery, quantity and quality of Project Water is subject to the terms and conditions of the Nacimiento Project Delivery Entitlement Contracts and that CSA 10 and City shall not be responsible or liable for the failure to perform any portion of this Exchange Agreement to the extent that such failure is caused by a failure of performance under the Nacimiento Entitlement Contracts. D. In addition to the reasons set forth in Section XI below, CSA 10 and City recognize that other foreseen and unforeseen events may preclude the exchange and delivery of water from occurring on a 1 to 1 basis over any calendar month, thereby resulting in a water exchange imbalance. Therefore, CSA 10 and City hereby agree that, in the event such a water exchange imbalance occurs,the parties hereto mutually agree that the party which received less water during that calendar month shall be delivered the quantity of water which it would have been furnished in the absence of such imbalance as expeditiously as may be feasible. E. CSA 10 and City are aware and hereby agree that Reservoir Water will only be available as long as City has water available in storage. Although the other Whale Rock Commission agencies may have water available in storage when City does not, nothing in this Agreement shall obligate, limit, diminish or affect in any way the water supplies of the other Whale-Rock Commission agencies(California Men's Colony,California State Polytechnic University). 7 XI. Curtailment of Delivery A. CSA 10 may temporarily experience a discontinuance or reduction in the amount of Reservoir Water to be furnished to CSA 10 during such time as the City is maintaining, repairing, replacing, investigating,or inspecting any of the portions of the Whale Rock Facilities necessary for the furnishing of water to CSA 10. Insofar as it is feasible, City shall give CSA 10 at least 30 days notice in advance of any such temporary discontinuance or reduction, except in the case of emergency, in which case, while no advance notice need be given, City shall inform CSA 10 of such an emergency immediately after said emergency becomes known to City. In the event of such discontinuance or reduction,the City will upon resumption of service, cause to be delivered, as expeditiously as may .be feasible, the quantity of Reservoir Water which would have been fumished to CSA 10 in the absence of such discontinuance or reduction. B. City may temporarily experience discontinuance or reduction in the amount of Project.Water to be fumished to City during such time as the Nacimiento Project is maintaining, repairing, replacing, investigating,or inspecting any of the portions of the Nacimiento Project Facilities necessary for the furnishing of water to City. As the City is a party to a separate Entitlement Agreement with the District, the City will be provided notice of any such curtailment by the District pursuant to the terms of its Entitlement Agreement with the District. In the event of such discontinuance or reduction, CSA 10 will, upon resumption of service, request that the District cause to be delivered, as expeditiously as may be feasible,the quantity of Project Water which would have been furnished to City in the absence of such discontinuance or reduction. XII. Notices All notices that are required either expressly or by implication to be given by any party to the other under this Contract shall be signed for the City and for CSA 10 by such officers as they may,from time to time, authorize to so act. All such notices shall be deemed to have been given and delivered if delivered personally or if enclosed in a properly addressed envelope and deposited with the United States Postal Service for delivery by registered or certified mail. Unless and until formally notified otherwise, all notices shall be addressed to the parties as follows: To CSA 10: County Service Area No.10, Department of Public Works Room 207, County Government Center San Luis Obispo, CA 93408 Attention: Director of Public Works 8 To the City City of San Luis Obispo, Utilities Department 879 Morro Street, San Luis Obispo, Ca 93401 Attnc Utilities Director XIII. SEVERABILITY Any provision of this Contract that isprohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof affecting the validity, enforceability or legality of such provision in any other jurisdiction. 9 IN WITNESS WHEREOF, the parties hereto have executed this Contract on the date first above written. COUNTY OF SAN LUIS OBISPO By Chairperson, Board of Supervisors Date APPROVED AS TO FORM: COUNTY COUNSEL: By /ttc Deputy (jo6nty Counsel Date 9� 4�- ATTEST: JULIE L. RODEWALD, COUNTY CLERK By Deputy County Clerk Date CITY OF SAN LUIS OBISPO By Mayor, City of San Luis Obispo Date APPROVED AS TO FORM: ATTEST: CITY ATTORNEY CITY CLERK By BY Attorney City Clerk Date Date 10