HomeMy WebLinkAboutItem 14 - Water Energy Efficiency Project
Department Name: Utilities
Cost Center: 6001
For Agenda of: November 19, 2019
Placement: Business Item
Estimated Time: 45 min
FROM: Aaron Floyd, Utilities Director
PREPARED BY: Mychal Boerman, Deputy Director - Water
Jason Meeks, Water Treatment Plant Supervisor
Jennifer Metz, Utilities Project Manager
SUBJECT: WATER ENERGY EFFICIENCY PROJECT
RECOMMENDATION
1. Receive the Water Energy Efficiency Project Investment Grade Audit (Attachment A).
2. Authorize the City Manager to execute a Work Order, upon approval of the City Attorney as
to form, to enter into agreement with PG&E for implementation of the Water Energy
Efficiency Project (Project) at a not to exceed cost of $13,999,644 (Attachment B).
3. Approve Resolution (Attachment C) for the use of Water Fund Unreserved Working Capital
to provide adequate cash flow when considered necessary for Project implementation and
authorize the Finance Director to execute any and all certificates, contracts, and other
documents necessary to secure project financing.
4. Authorize the City Manager to execute a no-cost, 50-year ground lease (Attachment D) with
Cal Poly for 0.5 acres adjacent to the City’s Water Treatment Plant on Stenner Creek Road.
REPORT-IN-BRIEF
The City’s Water Energy Efficiency Project (Project) involves a public/private partnership with
Pacific Gas and Electric (PG&E) available for streamlined implementation of energy projects
under PG&E’s Sustainable Solutions Turnkey (SST) program. Staff began working with a team
of engineers from PG&E to identify the most economical and viable energy projects for the City
to undertake at Water Division facilities in July 2016. Staff from the Utilities Department
worked with the PG&E team through June 2019 on pilot studies and the Project’s preliminary
design. Due to the specialty nature of the work and the current economic climate, construction
bids were higher than anticipated causing staff to revisit Water Treatment Plant (WTP) capital
priorities.
Staff’s recommended approach is to complete the Project in two implementation phases
including an Efficiency Phase and a future Resiliency Phase. Efficiency Phase project
components include upgrading the WTP ozone generation system, Supervisory Control and Data
Acquisition (SCADA) system, plant service water, and improvements to the Transfer Pump
Station. Staff is also proposing to include the delivery of a Resiliency Phase component, a
permanent backup generator for the WTP, with the Project.
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At a cost of approximately $14 million, the Efficiency Phase of the Project would contribute to
the City’s sustainability goals and advancement toward Zero Net Energy by reducing annual
energy usage at the WTP by over 600 kWh or 118 MTCO2e (Metric Tons CO2 equivalent). This
is 15 percent of the reduction target of 770 MTCO2e identified for Government Operations in
the 2012 Climate Action Plan and 29 percent of the WTP’s GHG emissions from electricity use.
Construction is estimated to take 13 months with completion estimated in early 2021. The total
Project cost is $15,984,644, including the permanent WTP generator and additional SCADA
integration services.
On May 21, 2019, the City Council approved Resolution 11011 authorizing the Utilities Director
to enter into a financing agreement with the Infrastructure Bank (IBank). As private financing
may offer more favorable terms for the Project, staff continues to explore financing alternatives
with its financial advisors at this time.
DISCUSSION
Background
Consistent with the City Council’s commitment to Climate Action, Utilities Department staff
began exploring the potential for achieving greater energy efficiency in Water Division
operations in 2016. At a public hearing on April 4, 2018, the City Council adopted Resolution
10878 (Attachment E) approving the continued participation in the SST program and authorized
the City Manager to enter into a service agreement for the Project pursuant to Government Code
section 4217.10 et seq., including the following findings:
a) The Water Energy Efficiency Project is subject to Government Code section 4217.10 et
seq. and Article IX Section 907 of the City Charter and provides unique benefits to the
public;
b) The anticipated cost to the City under the contract with PG&E will be less than the
anticipated marginal cost to the City for the electrical energy that would have been
consumed by the City in the absence of those purchases;
c) The project is exempt from Article IX Section 901 of the City Charter and is allowed by
Government Code section 4217. 10 as an energy efficiency project.
The agreement with PG&E is atypical of the City’s contracting procedures defined in Article IX,
Section 901 of the City’s Charter. However, the City’s Charter, Article IX, Section 907 exempts
energy projects and California Government Code Section 4217.10 et seq. allows the City to
forgo standard procurement processes for certain conservation energy projects if it finds it best
serves the City’s interest.
The WTP treats over five million gallons of potable drinking water per day with an estimated
cost of $345,000 per year for electricity. The total electricity cost for the City’s water treatment
plant, water distribution system, and Whale Rock Reservoir raw water system facilities is
approximately $628,000 annually. These facilities were examined as part of the Project. Energy
used for raw water deliveries from Salinas Reservoir and Nacimiento Reservoir were not
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examined as they are operated by San Luis Obispo County.
PG&E Sustainable Solutions Turnkey (SST) Program
PG&E’s SST Program involves a prescribed approach for implementing energy conservation
projects. The goal of the SST Program is to implement energy saving projects at facilities and
reallocate the money saved from reduced energy consumption and operational maintenance costs
toward payment of the debt service for project construction. The SST Program has four stages.
Sustainable Solutions Turnkey Program.
The City’s Water Energy Efficiency Project
In April of 2018, Council reviewed the Preliminary Energy Assessment and directed staff to
proceed to the next phase of the Project, the Investment Grade Audit (IGA). Of the Energy
Conservation Measures (ECMs) identified in the Preliminary Energy Assessment, eleven were
selected for further investigation in the IGA. Preliminary cost estimates indicated that all eleven
ECMs could be constructed for $14.3 million which was established as the City’s project budget.
This project budget did not recognize a reduction in WTP operational costs from the potential
energy savings. The City had planned to debt finance the project for 30 years with the initial
payment during the 2019-20 fiscal year.
To be considered viable, ECMs must adhere to the “triple bottom line” concepts of being
environmentally, socially, and fiscally sustainable. The team investigated replacing aging
infrastructure identified in the WTP capital improvement plan, with more energy efficient
options. In order to maximize efficiencies, projects were evaluated in the context of their impact
on the entire treatment process, as opposed to being studied individually. After removing
projects that were determined to not be viable based on the triple bottom line criteria, City staff
worked with the PG&E team to complete bid documents for eight ECMs. The IGA provides an
in-depth study of the Project (eight ECMs), estimated energy savings, a set of design/build plans,
and an implementation proposal.
Bids were received for the eight ECMs on July 17, 2019 at a cost of over $24.8 million – $10.5
million over the preliminary construction estimate. Additional costs were due to the risk and
complexity of the primary disinfection (ozone generation) system design and construction effort,
the health of the economy, and a historically competitive construction market. ECMs were then
prioritized and, as critical infrastructure, replacement of the WTP ozone generation system was
identified as the ECM of greatest importance and its replacement will achieve significant energy
savings. Since July, staff has worked to categorize and prioritize other ECMs for construction
within budgetary resources. Staff’s recommended approach is to complete the Project in two
implementation phases: An Efficiency Phase and a future Resiliency Phase.
Efficiency Phase
Four ECMs are proposed for inclusion in the Project’s Efficiency Phase. These include
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upgrading the WTP ozone generation system, SCADA system, plant service water, and
improvements to the Transfer Pump Station. A summary of the Efficiency Phase projects is
provided below. A detailed description of each ECM component is available in the IGA
(Attachment A). The anticipated energy savings and the cost of each component is included in
Table 1. The expected benefits of the Efficiency Phase include:
1. Contribute to the City’s sustainability goals and
advancement toward Zero Net Energy.
2. Reduce energy consumption and greenhouse gas
emissions.
3. Replace obsolete equipment and components.
4. Improve ability to perform maintenance.
5. Improve reliability of achieving permit compliance.
6. Increase operational reliability, flexibility, and
redundancy.
7. Reduced staff requirements for manual operation.
8. Optimized system sequencing and functionality.
The Efficiency Phase ECMs will cost approximately $14 million and reduce energy usage by
over 33 percent annually from current WTP operations. Construction is estimated to take 13
months with completion estimated in early 2021.
Table 1: Efficiency Phase - Energy Savings and Cost
ECM Description Annual Energy Savings
(kWh) Efficiency Phase Cost
Ozone System 541,009 $12,133,235
Transfer Pump Station - $456,060
Plant Service Water System 70,224 $366,795
SCADA System/Controls - $1,043,554
611,233 $13,999,644
The Project would contribute to the City’s sustainability goals and advancement toward Zero Net
Energy by reducing annual energy usage at the WTP by over 600 kWh or 118 MTCO2e (Metric
Tons CO2 equivalent). This annual reduction is equal to removing vehicle trips from 25 cars for
a year1 or the annual amount of carbon sequestration achieved by 140 acres of forest.
Ozone System. The City’s existing WTP ozonation system was installed in 1994, and due to its
age is currently operating at about 50 percent efficiency. City staff worked with the PG&E team
during September 2018 to conduct a pilot study to assist with equipment sizing by identifying
maximum ozone demand for various blend ratios of the City’s three water supply sources. From
this evaluation, it was determined to replace the existing ozone generators with modular ozone
generators. The new generators will be fed by new liquid oxygen (LOx) storage and delivery
systems. The WTP will remain in operation during construction, so demolition and construction
of the ozone system will be conducted in two phases.
1 Calculated at a rate of 4.71 metric tons per vehicle per year .
Act. Adapt. Thrive.
Although some measures are not
recommended for construction
at this time due to available
budget, the City continues to
plan for resilience, and lay the
foundation for achieving carbon
neutrality by 2035.
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The contractor for the ozone system, Cushman Contracting, Inc., has completed a similar ozone
upgrade in Santa Barbara and has performed other water and wastewater work in the region
(Paso Robles, Cayucos, Nacimiento, etc.). The City also has a demonstrated history of working
with Electricraft, a key subconsultant on the Cushman team and an electrical contractor that is
very experienced with the City’s WTP.
Transfer Pump Station. The existing Transfer Pump Station (TPS) is located near the WTP at
the south end of Stenner Creek Road. The TPS facility houses four-75 hp pumps that pump
treated water from the WTP Clearwells to Reservoir 2 which provides water to the City’s high-
pressure distribution system. The Project includes the addition of variable frequency drives
(VFDs) to each of the four existing transfer pumps and improved pump sequencing, the
combination of which is expected to improve overall system efficiency.
Benefits include the ability to slowly ramp up each pump when they are brought online to
eliminate pressure spikes, potentially harmful to the water distribution system, and the ability to
continually modulate the pump speed to meet varied demands of the system. Another component
to manage the operational costs of the TPS is to integrate level sensing at Clearwell #1 and pump
sequencing to minimize the energy consumption related to serving Reservoir 2. This would
include the strategic operation of pumps based on energy usage, energy rates, and tank levels.
Plant Service Water System (PSWS). The Plant Service Water System provides treated water
to processes in the WTP including cooling water for equipment, plant water, irrigation, fire
hydrants, and the WTP fire suppression system. The Project includes the removal and disposal of
the existing booster pump system and control panel, furnishing, installing, start-up and
commissioning of the new booster pump system and diaphragm tank, and provision of temporary
booster pump service for the PSWS during demolition of the existing system and installation of
the new system.
SCADA System/Controls. The WTP existing SCADA system is utilized by the City’s staff to
monitor and control key equipment and processes at the WTP. This system is equipped with ten
controllers of varying age (1994–2008). The existing controllers are an aging platform with
limited availability of spare parts and service providers which is accompanied with rising
maintenance costs. The project proposes replacement of eight of the ten existing controllers to
provide a robust SCADA system that utilizes a centralized communication and control protocol
and will provide the City the ability to monitor the potable water system (treatment and
distribution) and optimize operation as a connected system. The proposed system will also
provide critical process information of connected systems to evaluate and improve process
operations and efficiency.
Staff is proposing a budget of $185,000 for integration services, software, and hardware as part
of the WTP SCADA upgrade. New software is recommended by the City’s Information
Technology staff, as the City’s existing human-interface software has not kept up with the
functionality of other platforms. It is timely to conduct this software upgrade with the
replacement of the WTP SCADA system.
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Resiliency Phase
To assist the City with moving toward an energy neutral WTP, as well as contribute to the City’s
sustainability goals and advancement toward Zero Net Energy, the Project looked for
opportunities to generate energy on-site from renewable sources. These measures could offset
100 percent of the WTP’s GHG emissions from electricity use. With budgetary constraints and
capital priorities, staff is proposing to move forward with two components of the overall
Resiliency Phase, the WTP Generator and ground lease. Staff will return to Council with other
Resiliency Phase measures, such as the proposed hydroelectric generation facility and on-site
solar generation, in the future when a funding approach is identified including the potential for
grant funding.
WTP Generator. To prepare for Public Safety Power
Shutoff (PSPS) events, on August 20, 2019, the City
Council authorized the use of up to $2 million
including design, equipment acquisition, construction
costs and contingencies from Water Fund, Unreserved
Working Capital to fund the Water Fund portion of the
Emergency Power Supply needs. To date, the City has
expended approximately $500,000 toward generator
rentals, procurement of two portable generators, and
installation of a temporary transfer switch to enable the
connection of a backup generator, and other
components that enable a future permanent connection
at the WTP.
In early November, the City Manager approved a Change Order with PG&E and an extension of
the August 2018 Work Order until February 28, 2020. This Work Order also included the design
of the WTP permanent generator as part of this Project. A portion of the remaining funding
approved on August 20, 2019 is proposed to be used for the procurement and installation of a
permanent transfer switch and generator to power the WTP.
The IGA had looked at providing limited backup power at the WTP’s Transfer Pump Station.
However, due to the potential for PSPS events, staff identified the need for broader backup
power for all WTP treatment processes.
Ground Lease Agreement. City and Cal Poly staff prepared a draft, no-cost, 50-year ground
lease for approximately one half-acre, undeveloped land owned by the State of California (Cal
Poly) located near the entrance to the WTP on Stenner Creek Road. Staff recommends the City
Council approve the attached Resolution authorizing the City Manager to execute the Ground
Lease Agreement (Attachment D). The area is proposed for construction staging and will be
considered for future on-site solar installation during the Project’s Resiliency Phase.
Project Financing Strategy
The 2019-21 Financial Plan identified a budget of $14.3 million for the Project; other
components are described in Table 2. Staff is requesting using the remaining $1,700,000 budget
from the Emergency Power Supply for this project. The Work Order with PG&E will cost
Temporary Water Treatment Plant
Generator.
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$13,999,644 and is proposed to be debt financed. Staff is anticipating future savings in
operational and energy costs that will be accounted for in future budget planning.
On May 21, 2019, the City Council approved Resolution 11011 authorizing the Utilities Director
to enter into a financing agreement with the Infrastructure Bank (IBank). IBank offers a 20-year
loan at 3.21 percent where the annual debt service is projected to be approximately $980,000 per
year with payments starting in 2020.
As private financing may offer more favorable terms for the Project (US Bancorp has offered the
City 2.75 percent for a 15-year term), staff is still exploring various alternatives with its financial
advisors at this time. Staff recommends Council approve a Resolution (Attachment C)
authorizing the Director of Finance and/or the Utilities Director to execute and deliver any and
all certificates, contracts and other documents that would be necessary or appropriate to finance
the Project.
Staff is requesting use of Water Fund Unreserved Working Capital to ensure the City has
adequate cash flow for the Project. After the City approves a pay estimate, it is obligated to make
the payment within 30 days. While the City has a plan for project financing, it may tak e up to 90
days after the City requests reimbursement to receive funds. Utilizing Water Fund Unreserved
Working Capital will allow the City to pay the contractor while it waits for reimbursement and
keep the Project moving. There is approximately $18 million (unaudited financials) in
Unreserved Working Capital in the Water Fund to manage Project cashflow.
Table 2: Project Budget
Water Energy Efficiency Project
(Specification No. 91566)
PG&E Contract/Work Order $13,999,644
SCADA Integration Services, Hardware, and Software $185,000
WTP Generator (2020 Rental and Permanent) $1,700,000
Project Total 15,984,644
Available Balance from Emergency Power Supply $1,700,000
I-Bank or Alternate Financing $14,300,000
Total Project Budget $16,000,000
Previous Council Actions
On April 4, 2018, the City Council adopted Resolution 10878 approving the continued
participation in the SST program and authorized the City Manager to enter into a service
agreement, for the Project pursuant to Government Code section 4217.10 et seq. On August 18,
2018, the City Manager executed a Work Order with PG&E to complete the Investment Grade
Audit for an amount not to exceed $860,000.
On May 21, 2019, the City Council approved Resolution 11011 authorizing the Utilities Director
to enter into a financing agreement with the Infrastructure Bank (IBank).
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On August 20, 2019, the City Council authorized the use of up to $2 million including design,
equipment acquisition, construction costs and contingencies from Water Fund, Unreserved
Working Capital to fund the Water Fund portion of the Emergency Power Supply needs.
Policy Context
Policies that support the City’s participation in the SST Program include the Major City Goal on
Climate Action, the Climate Action Plan, and the Conservation and Open Space Element of the
City’s General Plan.
Public Outreach
Climate action is a Major City Goal for the financial planning period (2019 -21), with attention to
reducing the City’s carbon footprint in City operations. The Water Energy Efficiency Project
focuses on the City’s Water Treatment Plant operations to reduce energy consumption and
optimize the control of energy-consuming systems.
CONCURRENCES
The Finance Department concurs with the funding approach recommended in this report. The
Public Works Department concurs with the recommendation to implement the Project.
ENVIRONMENTAL REVIEW
The City has determined the Project is categorically exempt from the California Environmental
Quality Act pursuant to CEQA Guidelines section 15301, Class 1 – Existing Facilities and
15328, Class 28 - Small Hydroelectric Projects at Existing Facilities (Attachment F). The
exemption was filed with the State Clearinghouse on January 24, 2019.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2019-20
Funding Identified: Yes
Fiscal Analysis:
Funding Sources Current FY Cost Annualized
On-going Cost Total Project Cost
General Fund
State
Federal
Fees
Other: Water Fund $16,000,000 0 $16,038,770
Total $16,000,000 0 $16,038,770
Staff anticipates an overall reduction in ongoing annual maintenance costs with the new ozone
system and other equipment included in the Project. These annual maintenance costs are part of
the WTP operating budget projected in the Water Fund.
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ALTERNATIVES
Do Not Authorize Execution of the Work Order with PG&E (Attachment B). Council
should only select this alternative if it feels this public/private partnership with PG&E will not
provide a quality, cost effective project and is not in the best interest of the community.
Attachments:
a - COUNCIL READING FILE - Investment Grade Audit Report
b - PGE Implementation Work Order with City of SLO
c - Resolution Authorizing Use Water Fund Unreserved Working Capital
d - Ground Lease Between Cal Poly and City for WTP
e - COUNCIL READING FILE - Resolution 10878
f - Water Energy Efficiency Project_Notice of Exemption
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CITY OF SAN LUIS OBISPO WATER TREATMENT PLANT SUSTAINABLE SERVICES TURNKEY
IMPLEMENTATION PROJECT
WORK ORDER
This WORK ORDER (“Work Order”), effective as of the date of the latest signature executing this
agreement (“Work Order Effective Date”) is made and entered into by and between City of San Luis Obispo
(“Customer”) and Pacific Gas and Electric Company (“PG&E”). This Work Order is subject to the terms and
conditions of the PG&E Master Services Agreement, Contract # 21007 between Customer and PG&E dated
09/18/2018 (“Services Agreement”). Customer and PG&E are referred to collectively as the “Parties.”
In accordance with the provisions of the Services Agreement, the Customer wishes to engage PG&E to
provide the Implementation Work on the following Project:
PROJECT NAME: San Luis Obispo SST Water Treatment Plant Upgrades
CONTRACT No.: 21007
WORK ORDER AMOUNT $13,999,644
1. SCOPE OF WORK
1.1 PG&E will procure equipment for, construct, implement and deliver to Customer those
measures described in the Scope of Work (“SOW”) at Customer’s Water Treatment Plant, located at 1900
Stenner Creek Road, San Luis Obispo, CA 93405 facility described in the SOW (each facility a “Site” and
collectively the “Sites”). The SOW is attached hereto as Exhibit A and incorporated by reference herein.
The services to be performed under this Work Order shall be referred to hereinafter as the
“Implementation Work”.
PG&E shall have no obligations to perform any Implementation Work under this Work Order
unless and until PG&E and Customer have signed this Work Order. The issuance of this Work Order does
not commit PG&E to perform any future work for Customer.
1.2 Subcontractors. PG&E reserves the right to engage third party subcontractors
(“Subcontractors”) to perform some or a portion of the Implementation Work. PG&E agrees that, as
between PG&E and Customer, PG&E shall be solely responsible for the Subcontractors performance of
the Implementation Work under this Work Order. In addition, unless otherwise set forth in this Work
Order, the fees and costs billed to Customer shall be inclusive of any, and all, fees and compensation due
to any Subcontractors. PG&E shall be responsible for the payment of any compensation, monies, wages
or other payment due or allegedly due Subcontractors, including prevailing wages. For purposes of this
Agreement, PG&E and its Subcontractors shall be collectively referred to as “PG&E”.
1.3 Term of Work Order. This Work Order shall commence upon the Work Order Effective
Date and shall continue until all the Implementation Work is complete; unless sooner terminated or
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extended as permitted under the Services Agreement (the “Work Order Term”). PG&E shall complete the
Implementation Work in accordance with the milestone dates described in the project schedule attached
hereto as Exhibit B and incorporated by reference herein.
2. PERFORMANCE OF THE IMPLEMENTATION WORK
2.1 Project Construction
2.1.1 PG&E’s Responsibilities.
2.1.1.1. Upon execution of this Work Order by Customer and approval of project
financing, PG&E shall commence and complete construction and implementation of the Project in
accordance with the Services Agreement, this Work Order, the attached SOW and any applicable Work
Order modifications. PG&E will provide all professional and other services, labor, materials, equipment,
tools, transportation and other services necessary for the proper performance and completion of the
Implementation Work per the City stamped plans and specifications approved for construction, and in
accordance with Customer applicable codes, regulations, and the 2018 Standard Specifications and
Engineering Standards. PG&E will be responsible for the means, methods, techniques, sequences and
procedures to implement the Project, and shall oversee Project construction including construction
management, and inspection testing per the plans and specifications approved for construction.
2.1.1.2. PG&E will use commercially reasonable efforts to minimize disruption to
Customer’s use and operations at the Site. PG&E will provide at least ten (10) calendar days written notice
to Customer of any planned power or other utilities outages that will be necessary for the Implementation
Work. Customer will cooperate with PG&E in scheduling such outages, and Customer agrees to provide
its reasonable approval of any scheduled outage.
2.1.1.3. Customer has first rights to all equipment being removed during demolition.
PG&E will coordinate with Customer to identify all items to be turned over to Customer prior to start of
demolition. At least five (5) days prior to commencement of demolition, Customer shall provide to PG&E
a written list of all equipment to be returned to Customer prior to completion of demolition. PG&E will
provide legal offsite disposal for all items not returned to the Customer. Customer is responsible for all
labor, equipment, rigging and transportation necessary to remove demolished items from the jobsite and
transport them to their final location.
2.1.2 Customer's Responsibilities.
2.1.2.1. Customer will take reasonable measures to provide PG&E, its personnel and
Subcontractors with site access, suitable office space and other reasonable accommodations and facilities
necessary to permit PG&E personnel and its Subcontractors to perform the Implementation Work on this
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Project. While working on the Site, if requested by Customer, the PG&E Project team personnel will be in
an area adjacent to Customer's subject matter experts and technical personnel, and all necessary security
badges and clearance will be provided for access to this area, all in accordance with Customer’s vendor
policies. Additionally, upon request Customer will provide to PG&E and its Subcontractors relevant site
information or documents necessary to perform the Implementation Work, including but not limited to a
copy of this Work Order, all Work Order modifications, the Services Agreement, a copy of relevant
drawings, specifications, operation and maintenance manuals for equipment at the Site, and other
pertinent documents.
2.1.2.2. Customer will arrange for a temporary staging area for the storage and assembly
of equipment for completion of the Implementation Work, if needed.
2.1.2.3. Customer will coordinate the Implementation Work to be performed by PG&E
with the Customer’s operations and other activities and with any other construction project that is
ongoing at or around the Site.
2.2 Training and Commissioning Services. PG&E shall provide training to Customer on
equipment that PG&E installs in accordance with the terms of this Work Order, and as described in the
SOW. PG&E shall perform start up, testing, and commissioning services in accordance with the equipment
manufacturers’ startup and commissioning recommendations and the Project Schedule. Customer
reserves the right to contract a third-party inspection company to spot-check the work performed by
PG&E under this agreement at any time during the construction phase.
2.3 Certificate of Substantial Completion. Promptly upon substantial completion of each
Project measure, PG&E will submit a Certificate of Substantial Completion to Customer for such measure.
Upon receipt of such certificate, Customer may inspect the Implementation Work and meet with PG&E’s
Project Manager to determine if the Project measure has achieved substantial completion. Customer
shall, within ten (10) business days of receipt of the Certificate of Substantial Completion, inform PG&E if
Customer agrees that the Project measure has achieved substantial completion. If Customer disagrees
that the Project measure has achieved substantial completion, Customer will specify in detail and in
writing the deficiencies requiring correction in order to achieve substantial completion. When substantial
completion has been achieved, Customer will file a Notice of Completion (NOC) with the County
Recorder’s Office, and return the NOC with a Certificate of Substantial Completion to PG&E stating that:
(i) the Project measure has achieved substantial completion and the date on which it did so, and (ii) that
on and after that date Customer will assume responsibility for the Project measure’s operation,
maintenance and repair, for damage to or destruction of the Project measure, and for the Project
measure’s security and insurance coverage. Title to the Project measure materials and equipment
installed pursuant to this Work Order shall pass to Customer on the date of substantial completion
together with equipment warranties.
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2.4 Close-Out Documentation. Within thirty (30) days after each Certificate of Substantial
Completion has been executed by Customer and received by PG&E, PG&E shall provide Customer with
(a) any applicable governmental approvals, permits, and sign-offs, (b) all equipment specifications and
ratings, (c) any applicable test data and reports, (d) CAD drawings and PDFs of final as-built and shop
drawings, (e) operating instructions, operations and maintenance manuals and schedules, recommended
spare parts lists, and all other written information relating to the Project measure, and (f) equipment
warranties.
2.5 Final Completion. Promptly after PG&E reasonably believes that Final Completion has
occurred, PG&E shall issue to Customer a Notice of Final Completion (defined below in Section 2.5.1).
Thereafter, Customer shall, within fourteen (14) business days, deliver its acknowledgment that Final
Completion has been achieved. The date of Final Completion shall be the date of Customer’s written
acceptance of PG&E’s Notice of Final Completion. Customer’s failure to respond within the thirty (30) day
notice period shall be deemed acceptance that Final Completion has occurred.
2.5.1 For purposes of this Work Order, the term “Final Completion” means the date
when all of the following have been accomplished: (a) each Project measure has achieved Substantial
Completion, (b) all “punch list” items have been completed, (c) all Close-out documentation has been
delivered to Customer, (d) PG&E has delivered to Customer: (i) a release of all lien rights, (ii) certification
that all claims for payment for labor and equipment for which PG&E is responsible have been paid or
satisfied, (iii) copies of waivers/releases of lien rights by Subcontractors that have furnished more than
twenty-five thousand dollars ($25,000) of goods, services or both for the Project, (iv) notice of all
outstanding claims of PG&E, any Subcontractor or equipment or materials supplier or distributor that may
affect Customer, PG&E or the Project, (v) a letter of indemnification regarding claims not addressed by
waivers/releases, and (vi) removal of all of PG&E and Subcontractors’ personnel, supplies, equipment,
waste materials, rubbish, and temporary facilities from the Site.
2.6 PG&E shall not be liable for any claims, liabilities, or losses arising out of, resulting from,
or in any way connected with, Customer’s: (a) neglect, misuse or abuse of the equipment; (b) use of
unauthorized parts, or removal of any parts; (c) repair, modification or alteration of equipment by anyone
other than authorized representatives as described in the warranties covering the equipment;
(d) relocation of the equipment.
3. MODIFICATIONS
If a modification to this Work Order is necessary, the Parties agree to follow the modification
process set forth in Section 4.2. of the Services Agreement.
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4. PAYMENT
4.1 PG&E will submit invoices, certified payrolls (redacted and unredacted), and daily
inspection reports on a monthly basis to Customer based upon the agreed-upon Bid Schedule, which is
attached hereto as Exhibit C and incorporated by reference herein. Prior to the first application for
payment a baseline schedule, and schedule of values detailing labor, equipment, and materials shall be
approved by the City. A 5% retention will be applied to the monthly progress payment in accordance with
Public Contract Code Section 22300 and Customer’s 2018 Engineering Standards and Specifications. Final
release of the payment retention shall be conducted in accordance with the City requirements as specified
in the 2018 Engineering Standards and Specifications. Proof of insurance, performance bonds, and
payment bonds shall be executed and submitted to Customer within 10 working days after Notice of
Award (NOA). A Notice to Proceed (NTP) will be issued after all bonds and insurance documents have been
approved by Customer.
4.2 Each PG&E invoice will reference this Work Order and be submitted to Customer’s billing
address. Customer shall instruct its financial institution or Project financier to render all payments to
PG&E within thirty (30) days from the invoice date and when Customer has received a complete
application for payment per Section 4.1. Each payment made by Customer or its third-party designee
must reference this Work Order and invoice number and be mailed to:
PACIFIC GAS AND ELECTRIC COMPANY
Attn: Sales and Service Manager, Business Development
P.O. Box 770000, Mail code: N10D
San Francisco, CA 94177
5. ORDER OF PRECEDENCE
In the event of a conflict between the provisions of the Work Order, any modification to the Work
Order, and the Services Agreement, the following order of precedence shall apply (in descending order):
(a) the modification to this Work Order, (b) the Work Order, and (c) the Services Agreement.
6. NOTIFICATIONS AND INTERFACE
Both Parties shall contact and/or deliver written notices (email is allowed) to the business contacts below
in the normal course of business, and in the event of any problems which may significantly affect the
performance of the Implementation Work under this Work Order.
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BUSINESS CONTACTS
CUSTOMER REPRESENTATIVE PG&E REPRESENTATIVE
Name Name Brent Patera
Title Title Business Development Manager
Address Address 245 Market Street, Mail Code N10D
San Francisco, CA 94105
Telephone Telephone 415-973-5335
Email Email Brent.Patera@PGE.com
7. AUTHORITY
Each Party represents and warrants that the individual signing below, as well as any Work Order
Modifications and approvals hereunder, has and shall have all requisite power and legal authority to bind
the Party on whose behalf he/she is signing to that Party’s obligations hereunder.
IN WITNESS THEREOF, the parties agree to be bound by this Work Order as of the date first set forth
above.
CITY OF SAN LUIS OBISPO PACIFIC GAS AND ELECTRIC COMPANY
Signature: Signature:
Print Name: Print
Name:
Title: Title:
Date: Date:
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EXHIBIT A
SCOPE OF WORK
Scope of Work Overview
PG&E will implement energy conservation measures (“ECMs”) at the Customer’s Water Treatment Plant
(“WTP”). The ECMs are described generally below, and more specifically in the Investment Grade Audit
Report, dated 10/18/19 (“IGA Report”). The IGA Report is attached hereto as Attachment 1 and is
incorporated herein. The Scope of Work (“SOW”) to be included in the Work order as outlined in the IGA
includes:
ECM # ECM Name
2 Ozone System Upgrade
4 Transfer Pump Station Upgrades
9 Plant Service Water System Upgrades
11 SCADA /Controls Upgrades
ECM # 2 –Ozone System Upgrade
The focus of this measure is the removal and replacement of the existing ozone water treatment system
with a new system that offers improved reliability, functionality and uses less energy to operate when
compared to the existing system.
The SOW includes the removal and proper disposal of the existing ozone system in its entirety with a new
turnkey system which will include all components necessary for a complete functioning system. The new
ozone generators will be a modular design system by Primozone, a Pureflow Ozone Division. The new
generators will be fed by new LOx storage and delivery systems. As this is a replacement of a critical
system in an operating plant, careful consideration was given to the planned approach. It is understood
that the WTP must always remain in operation during construction. The construction shall be
accomplished in four phases: Phase 1 Demolition; Phase 2 Construction, Phase 3 Demolition; and Phase 4
Construction. Ozone generators #1 and #2 and destruct Unit #2 shall remain fully operable during Phase
1 until the new system is online and accepted by the owner.
For the construction phase, a written schedule outlining the proposed phasing and sequence of the work
will be developed by PG&E and the Customer to ensure that the WTP remains in operation during the
duration of the construction.
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ECM # 4 – Transfer Pump Station Upgrades
This measure includes the addition of Variable Frequency Drives (“VFDs”) to each of the four existing
transfer pumps. The VFDs will improve overall system efficiency and controllability by providing Customer
with the ability to slowly ramp up each pump when the transfer pumps are brought online. Consequently,
Customer will more easily be able to eliminate pressure spikes, and will have the ability to continually
modulate the pump speed to meet varied demands of the high-pressure system.
This ECM will include the following SOW:
• Install a wall-mounted Allen Bradley VFDs for each of the four existing transfer pumps and
integrate the VFDs into the Supervisory Control and Data Acquisition (“SCADA”) system. Each VFD
will be configured with a bypass, disconnect switch, line reactor and communication interface
compatible with Allen Bradley CompactLogix controllers.
• Modify the existing hardwired controls for the transfer pumps and their discharge valves to
function with the new VFDs.
• Integrate the existing tank level sensor at the Bishop Storage tank to monitor the high-pressure
system.
• Add sequence of operation in the SCADA system to allow for automatic operation of the Transfer
pumps to directly serve the high-pressure system when Reservoir-2 is out-of-service or
disconnected from the system.
• Add programming to the Throttle Position Sensor (“TPS”) control system with logic to optimize
the operation of the pumps when serving Reservoir-2 based on Clearwell Levels, Reservoir-2 levels
and Time-of-Use (“TOU”) electric rates.
ECM # 9 – Plant Service Water System Upgrades
This ECM will include the following SOW:
This measure includes the replacement of the existing booster pump system (“BPS”) with a new packaged
system that is sized for the flow rates that will occur after PG&E completes ECM 2 by replacing the ozone
system. The new BPS will utilize variable speed pumps to efficiently maintain the required system
discharge pressure. The BPS system will include a pressurized diaphragm tank that discharges water to
the plant service water system when the pumps shut off during low-demand conditions. The proposed
BPS is manufactured by Grundfos. The factory-assembled system includes three variable speed,
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multistage vertical inline pumps with integrated motor/VFD rated for 80 GPM each, suction and discharge
piping, and a control panel.
The SOW includes:
• Removal and disposal of the existing BPS and control panel.
• Furnishing, installing, start-up and commissioning the new BPS and diaphragm tank.
• Provision of temporary BPS for the PSWS during demolition of the existing system and
installation of the new system.
ECM # 11 – SCADA/Controls Upgrades
The objective of this measure is to improve the existing WTP SCADA system by upgrading the existing
controllers to a platform that is compatible with the recently-installed system on the water distribution
system.
This measure includes the replacement of the existing Bristol Babcock controllers with CompactLogix
and/or ControlLogix Programmable Logic Controllers (“PLCs”) by Allen-Bradley. Compact Logix and
Control Logix represent small and large PLCs from the same family of controllers. Compact Logix and
Control Logix PLCs are fully compatible with each other and use the same programming software. The
system replacements/upgrades are described below.
• At the Ozone building CSP-1 and CSP-7:
o PG&E will remove the existing controllers and infrastructure. One new integrated Ozone
controller will be provided and installed in conjunction with the Ozone system upgrade
described in ECM 2. This new controller will be provided with the following:
▪ Provide a new cabinet and custom back panel
▪ The new integrated Ozone controller will be an Allen Bradley PLC
▪ Add a new power supply and uninterruptable power supply
▪ Provide new Ethernet switch
▪ Provide new terminal blocks, Relays, Fuses as required
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• At the Ozone contact basin CSP-2:
o PG&E will remove this existing controller and associated wiring as it will no longer be
needed for the new Ozone system upgrade installed as part of ECM 2
• At the Filter Building CSP–3 and CSP-4:
o Provide a new custom back panel for installation in the existing PLC cabinet
o Replace existing controllers with a new Allen Bradley PLC
o Add a new power supply and uninterruptable power supply
o Provide new Ethernet switch
o Provide new terminal blocks, Relays, Fuses as required
• At the Chemical Building CSP-5:
o Replace with new PLC in the existing cabinet and location
o Provide a new custom back panel for installation in the existing PLC cabinet
o Replace existing controllers with a new Allen Bradley PLC
o Add a new power supply and uninterruptable power supply
o Provide new Ethernet switch
o Provide new terminal blocks, Relays, Fuses as required
• At the Plant Water Service Pump Station CSP-6:
o Provide a new custom back panel for installation in the existing PLC cabinet
o Replace existing controllers with a new Allen Bradley PLC
o Add a new power supply and uninterruptable power supply
o Provide new Ethernet switch
o Provide new terminal blocks, Relays, Fuses as required
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• At the TPS CSP-8:
o Provide a new custom back panel for installation in the existing PLC cabinet
o Replace existing controllers with a new Allen Bradley PLC
o Add a new power supply and uninterruptable power supply
o Provide new Ethernet switch
o Provide new terminal blocks, relays, and fuses as required
• Reprogramming Services. PG&E will reprogram the upgraded PLCs listed above with existing
sequences, alarms and trending
• Portable computer tablets. PG&E will provide two (2) portable computer tablets (Apple iPad or
equal) with Graphic interface software to optimize operator interface
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EXHIBIT B
ESTIMATED PROJECT SCHEDULE
Below is the estimated project schedule. PG&E will submit a detailed schedule following the kick-off
meeting.
Duration Assumed Start Assumed Finish
Preconstruction 241 days 12/02/19 11/02/20
Receive NTP 1 day 12/02/19 12/02/19
Bond and Insurance 5 days 12/01/19 12/16/19
Write Subcontracts 5 days 12/17/19 12/23/19
Cushman Precon 190 days 12/24/19 09/14/20
Design Drawings 4 months 12/24/19 04/13/20
Submittal Review Process Ozone
Equipment
8 weeks 12/24/19 02/17/20
Submittal Review Process Concrete
Rebar Pip
8 weeks 12/24/19 02/17/20
Submittal Review Process Electrical and
Pumps
8 weeks 04/14/20 06/08/20
Release electrical 1 day 06/09/20 06/09/20
Release ozone equipment 1 day 02/18/20 02/18/20
Ozone equipment lead time 14 weeks 02/18/20 05/25/20
Procure miscellaneous material 4 weeks 02/19/20 03/17/20
Procure electrical and pumps 14 weeks 06/09/20 09/14/20
SCADA Precon 225 days 12/24/19 11/02/20
Engineering and Submittals 180 days 12/24/19 08/31/20
Materials Procurement 45 days 09/01/20 11/02/20
Hazmat layout and testing 6 days 04/14/20 04/21/20
Permits 5 days 04/14/20 04/20/20
Construction 305 days 03/18/20 05/18/21
Ozone 275 days 03/18/20 04/06/21
Mobilize CCC 5 days Wed 3/18/20 Tue 3/24/20
LOX Excavate for Tank pad and LOX
receiving 4 weeks Wed 3/25/20 Tue 4/21/20
LOX Form pour Strip LOX tank pad
and LOX receiving 6 weeks Wed 4/22/20 Tue 6/2/20
LOX excavate Lay Backfill LOX Yard
Pipe 4 weeks Wed 6/3/20 Tue 6/30/20
LOX set and connect LOX tank and
Evaporators 1 weeks. Wed 7/1/20 Tue 7/7/20
Phase 1 Ozone Demo 7 weeks Wed 4/22/20 Tue 6/9/20
Phase 1 Concrete 3 weeks Wed 6/10/20 Tue 6/30/20
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Phase 1 Equipment 4 weeks Wed 7/1/20 Tue 7/28/20
Phase 1 Mechanical 6 weeks Wed 7/29/20 Tue 9/8/20
Phase 1 Electrical 8 weeks Wed 8/26/20 Tue 10/20/20
Ozone Phase 1 Training 5 days Wed 10/21/20 Tue 10/27/20
Phase 1 Startup and Test 5 weeks Wed 10/21/20 Tue 11/24/20
Phase 2 Demo 4 weeks Wed 11/25/20 Tue 12/22/20
Phase 2 Concrete/Tile 2 weeks Wed 12/23/20 Tue 1/5/21
Phase 2 Mechanical 4 weeks Wed 1/6/21 Tue 2/2/21
Phase 2 Electrical 6 weeks Wed 1/20/21 Tue 3/2/21
Ozone Phase 2 Training 5 days Wed 3/3/21 Tue 3/9/21
Phase 2 Startup and Test 5 weeks Wed 3/3/21 Tue 4/6/21
Plant Service Water Upgrade 41 days Tue 9/15/20 Tue 11/10/20
Mobilize CCC 1 day Tue 9/15/20 Tue 9/15/20
Demo and set up bypass 2 weeks Wed 9/16/20 Tue 9/29/20
Install new pumps and mechanical 3 weeks Wed 9/30/20 Tue 10/20/20
Install new Electrical 1 week Wed 10/21/20 Tue 10/27/20
Training 5 days Wed 10/28/20 Tue 11/3/20
Startup and Test 1 week Wed 11/4/20 Tue 11/10/20
Transfer Pump Station Upgrades 26 days Wed 11/11/20 Wed 12/16/20
Mobilize CCC 1 day Wed 11/11/20 Wed 11/11/20
Install TPS VFD's 3 weeks Thu 11/12/20 Wed 12/2/20
Training 5 days Thu 12/3/20 Wed 12/9/20
Startup and Test 1 week Thu 12/10/20 Wed 12/16/20
SCADA Upgrades 218 days Mon 7/6/20 Wed 5/5/21
Mobilize TESCO 2 days Mon 7/6/20 Tue 7/7/20
Site Installation Work 150 days Wed 7/8/20 Tue 2/2/21
Training 5 days Wed 2/3/21 Tue 2/9/21
System Implementation and startup 61 days Wed 2/10/21 Wed 5/5/21
Closeout 30 days Wed 4/7/21 Tue 5/18/21
TOTALS 382 days 12/2/19 05/18/21
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EXHIBIT C
BID SCHEDULE
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ATTACHMENT 1
INVESTMENT GRADE AUDIT REPORT
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R ______
RESOLUTION NO. _____ (2019 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AUTHORIZING USE OF WATER FUND
UNRESERVED WORKING CAPITAL FOR THE WATER ENERGY
EFFICIENCY PROJECT
WHEREAS, on April 4, 2018, the City Council adopted Resolution 10878, reviewed the
Preliminary Energy Assessment for the Water Energy Efficiency Project (Project) and voted in
favor of proceeding to the Project’s Investment Grade Audit; and
WHEREAS, on May 21, 2019, the City Council approved Resolution 11011 authorizing
the Utilities Director to enter into a financing agreement with the Infrastructure Bank (IBank) to
debt finance the Project.
WHEREAS, in June 2019, the City Council approved 2019-21 Financial Plan, Capital
Improvement Program, identified a Project budget of $14,300,000; and
WHEREAS, On August 20, 2019, the City Council authorized the use of up to $2 million
including design, equipment acquisition, construction costs and contingencies from Water Fund,
Unreserved Working Capital to fund Emergency Power Supply needs and $1,700,000 is available
to contribute for funding the Project; and
WHEREAS, on November 1, 2019, the City Manager approved an extension and an
amendment to the Work Order to include design for a permanent Water Treatment Plant generator
in response to potential Public Safety Power Shutoff events; and
WHEREAS, the total available budget for the Efficiency Phase of the Project is
$16,000,000; and
WHEREAS, private financing (US Bancorp, and others) is also being considered for the
Project as it may offer the City more favorable financing terms; and
WHEREAS, a balance of approximately $18 million (unaudited financials) is available
from Water Fund, Unreserved Working Capital to fund the Efficiency Phase of the Project and
manage cashflow.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo
as follows:
SECTION 1. The Director of Finance and/or the Utilities Director is authorized to execute
and deliver any and all certificates, contracts and other documents necessary or appropriate to
finance the Project.
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Resolution No. _____ (2019 Series) Page 2
R ______
SECTION 2. Environmental Review. Construction of this project is exempt from the
California Environmental Quality Act (CEQA) 15301, Class 1 – Existing Facilities and 15328,
Class 28 - Small Hydroelectric Projects at Existing Facilities. The Community Development
Department issued a Notice of Exemption on January 24, 2019.
Upon motion of _______________________, seconded by _______________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 2019.
____________________________________
Mayor Heidi Harmon
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this ___________ day of ____________________, ___________.
____________________________________
Teresa Purrington
City Clerk
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GROUND LEASE
by and between
BOARD OF TRUSTEES OF THE CALIFORNIA STATE UNIVERSITY
and
CITY OF SAN LUIS OBISPO
for
WATER TREATMENT PLANT HYDROGENERATION AND RENEWABLE ENERGY
FACILITY
SAN LUIS OBISPO, CALIFORNIA
Dated
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GROUND LEASE
(Board of Trustees of the California State University/City of San Luis Obispo)
Water Treatment Plant Hydrogeneration and Renewable Energy Facility
San Luis Obispo, California
THIS GROUND LEASE (“Lease”) is effective as of _____________, 2019 (“Effective
Date”), by and between the Board of Trustees of the California State University, on behalf of
California Polytechnic State University, San Luis Obispo (“University” or “Lessor”) and the City
of San Luis Obispo, a municipal corporation (“City” or “Lessee”):
RECITALS
A. Lessor is the owner of certain real property consisting of an approximately 0.5-acre
portion of the parcel identified as Assessor’s Parcel Number 073-271-001, legally described in
Exhibit A and depicted in Exhibit B, attached hereto and made a part hereof by this reference
(“Property”), located adjacent to the City’s Water Treatment Plant (“WTP”) on Stenner Creek
Road in San Luis Obispo, California, and proximate to the existing 12-inch Nacimiento Water
Project pipeline near the entrance to the WTP.
B. Lessee wishes to construct and operate a Hydrogeneration and Renewable Energy
Facility on the Property, including a turbine generating unit, photovoltaic arrays, and a backup
generator (“Project”), in order to increase system reliability, reduce ut ility costs, reduce the
consumption of fossil fuel based energy, and reduce greenhouse gas emissions, and Lessor wishes
to lease the Property to Lessee for such purposes, which will benefit as water used to serve the
University is treated at the City’s WTP.
NOW THEREFORE, in consideration of the foregoing recitals which are incorporated by
this reference and the covenants hereinafter contained, Lessor and Lessee agree as follows:
ARTICLE 1.
BASIC PROVISIONS
1.1 Description of Property. A legal description and map depiction of the Property are
hereto attached as Exhibit “A”. Lessee accepts the property in its current “as-is” condition without
any representations or warranties from Lessor as to its condition or suitability for the Project, or
any associated City use.
1.2 Lease and Grant of Use. Lessor does lease to Lessee and Lessee does hereby lease
from Lessor, upon the terms and conditions set forth herein, the Property described in Exhibit A
and depicted in Exhibit B (“Premises”).
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1.3 Notices:
LESSOR/UNIVERSITY:
Cal Poly
Strategic Business Services
1 Grand Avenue
Building 1 Room 128
San Luis Obispo, CA 93407
Attn: Dru Zachmeyer, Assistant Vice President, Strategic Business Services
Email: dzachmey@calpoly.edu
LESSEE/CITY:
City of San Luis Obispo
879 Morro Street
San Luis Obispo, CA 93401-2710
Attn: Jennifer Metz, Utilities Project Manager
Email: jmetz@slocity.org
1.4 Exhibits. The following exhibits are attached hereto and incorporated herein by this
reference:
Exhibit A – Legal Description of Property
Exhibit B - Map Depicting Property
ARTICLE 2.
TERM
2.1 Term. Fifty (50) years commencing upon approval of this Lease by Lessee’s City
Council (the “Commencement Date”) and terminating at midnight on the day before the fiftieth
anniversary of the Commencement Date, subject to earlier termination as provided herein. The
phrase “Term of this Lease” or “the Term hereof” as used in this Lease, or words of similar import,
will refer to the initial term of this Lease together with any holdover or any option termed.
2.2 Holdover. If Lessee remains in possession of the Premises or any part thereof after
the expiration of the Term of this Lease, such occupancy will be a tenancy which is terminable
only upon 90 days written notice from Lessor or 30 days written notice from Lessee, and subject
to all of the terms, covenants and conditions of this Lease.
ARTICLE 3.
RENT
3.1 Rent. The use of the Property will be gratis during the initial term, any option term,
or holdover. Consideration for this Lease will be Lessor’s adherence to the terms and conditions
of the Lease.
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ARTICLE 4.
USE
4.1 Permitted Use. Lessee will utilize the Property only for the development,
construction, operation, and maintenance of the Project, including the installation, construction,
operation, maintenance, repair, replacement, relocation, and reconstruction of the Project
components and equipment and all fixtures or appurtenances incidental thereto (collectively,
“Permitted Uses”). Fixtures and appurtenances used or useful in the operation of the Project may
be constructed any distance either below or above the ground surface and may include security
fencing. The Permitted Uses further include the removal of the Project components, fixtures, and
appurtenances, and to remove objects interfering with the construction, operation and maintenance
thereof.
4.2 Compliance with Law. Lessee will, at Lessee’s sole cost and expense, comply with
all applicable statutes, laws, and regulations. Upon completion of construction, if any license,
permit, or other governmental authorization is required for the lawful use or occupancy of the
Property or any portion of the Property, Lessee will procure and maintain said authorization, at
Lessee’s sole cost and expense, throughout the Term of this Lease.
ARTICLE 5.
DISCRETIONARY PERMITS
5.1 Applications. During the term of this Lease, Lessor will, promptly upon Lessee’s
request, sign (as owner of the Property) and acknowledge any application to any governmental
entity having jurisdiction over the Property for any of the discretionary permits necessary for
construction and operation of the Project, provided that Lessor incurs no cost (other than the
administrative and consulting cost necessary for review). No such signing by Lessor will be
deemed to be Lessor’s commitment to satisfy, any condition (i) in or precedent to a discretionary
permit or (ii) adversely affecting Lessor’s interest in the Property.
ARTICLE 6.
EASEMENTS
6.1 Utility Easements. Lessor will execute (as owner of the Property), acknowledge
and deliver to Lessee for recording, any grant of easement (i) over, upon, across or under the
Property or any portion thereto (ii) in favor of any governmental subdivision or any gas, electric,
telephone or similar company and (iii) for the purpose of (a) widening any street, (b) transmitting
potable water, storm water, sewage, gas, electricity, telephone or other communication, or (c)
providing to the Property and the persons using and enjoying the Property such materials and
services as are, from time to time, customarily understood to be “utilities.”
ARTICLE 7.
PROJECT CONSTRUCTION
7.1 Construction Scope. Lessee will provide all services necessary to construct the
Project.
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7.2 Compliance with Laws. The Project will be constructed and all work on the
Property will be performed in accordance with all applicable laws, ordinances, and regulations of
all federal, state, county or local governmental agencies having jurisdiction over the Property, as
amended from time to time. All work performed on the Property under this Lease will be done in
a good and workmanlike manner.
7.3 Mechanics Liens. At all times during the term of this Lease, Lessee will make its
best efforts to keep the Property and the Project now or hereafter located on the Property free and
clear of all liens and claims of liens for labor, service, materials, supplies, or equipment performed
on or furnished to the Property.
7.4 Ownership of Project. During the term of this Lease, and for any extended term or
holdover period, and upon termination of this Lease, title to the Project and all components thereof,
including all associated equipment, fixtures, and appurtenances, will be vested in Lessee.
ARTICLE 8.
MAINTENANCE, REPAIR, DAMAGE AND DESTRUCTION
8.1 Maintenance. Except as otherwise provided herein, at all times during the term of
this Lease including any option term or holdover, Lessee will, at Lessee’s sole cost and expense,
keep and maintain the Property and the Project in good order and repair, and in a safe condition.
Lessor will have no obligation to alter, remodel, improve, or repair the Property or the Project.
8.2 Repair. At all times during the term of this Lease and for any extended term, Lessee
will, at Lessee’s own cost and expense, do all of the following:
8.2.1 Make all alterations, additions or repairs to the Property or the Project
required by any applicable law, ordinance, statute or regulation now or hereafter issued by any
federal, state, county, local, or other governmental agency, as amended from time to time; and
8.2.2 Observe and comply with all applicable laws, ordinances, statutes, orders
and regulations now or hereafter made respecting the Property or the Project by any federal, state,
county, local, or other governmental agency.
8.3 Damage or Destruction. In the event of damage to, or destruction of all or any
portion of the Project, Lessee will have the option to commence and proceed diligently to repair,
reconstruct, and restore (collectively, “restore”) the Project to substantially the same condition as
it existed immediately prior to the casualty, whether or not insurance proceeds are sufficient to
verify the actual cost of restoration. This Lease will continue in full force and effect
notwithstanding such damage or destruction; provided, however, that the Lessee may, at its option,
demolish the Project and terminate the Lease.
8.4 Utilities. At all times during the term of this Lease, Lessee will pay the expenses
of all utility services supplied to the Property, including but not limited to all electricity and gas
units, together with any taxes thereon.
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ARTICLE 9.
INDEMNIFICATION AND INSURANCE
During the term of this Agreement or as otherwise specified herein, the following
indemnification and insurance requirements will be in effect. Either party, at its sole option, may
elect to use a program of self-insurance, commercial insurance, or any combination thereof to
satisfy its insurance requirements herein.
9.1 Indemnification.
9.1.1 The Lessor will indemnify, defend, and hold harmless Lessee, its elected
and appointed officers, agents, and employees from and against any and all liability, loss, expense
(including reasonable attorney’s fees), or claims for injury or damages arising out of the
performance of this Lease, but only in proportion to and to the extent such liability, loss, expense,
attorney’s fees, or claims for injury or damages are caused by or result from the negligent or
intentional acts or omissions of Lessor, its trustees, officers, agents, employees, contractors, and/or
consultants.
9.1.2 The Lessee will indemnify, defend and hold harmless Lessor, its trustees,
officers, agents, and employees from and against any and all liability, loss, expense (including
reasonable attorney’s fees), or claims for injury or damages arising out of the performance of this
Lease, but only in proportion to and to the extent such liability, loss, expense, attorney’s fees, or
claims for injury or damages are caused by or result from the negligent or intenti onal acts or
omissions of Lessee, its trustees, officers, agents, employees, contractors, and/or consultants.
9.1.3 The indemnification provisions of this section will survive the expiration or
termination of this agreement.
9.2 General Insurance - Lessee Requirements. Without limiting Lessee’s
indemnification of Lessor and at its own expense, Lessee will provide and maintain the following
programs of insurance.
9.2.1 General Liability insurance (providing scope of coverage equivalent to ISO
policy form CG 00 01) with limits of not less than the following:
General Aggregate: $2 million
Each Occurrence: $1 million
Such insurance will name Lessor, its trustees, officers, employees, agents, and volunteers as
additional insureds.
9.2.2 Workers Compensation and Employers’ Liability insurance satisfying
statutory requirements, which includes Employers’ Liability coverage with limits of not less than
$1 million per accident.
9.2.3 Property insurance covering damage to Lessee-constructed improvements
from perils covered by the Causes-of-Loss Special Form (ISO form CP 10 30), written for the full
replacement cost of the property, and including a Waiver of Subrogation in favor of Lessor.
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9.2.4 Lessee Contractors. Throughout the period of any construction, Lessee will
require its Contractors to provide and maintain, or Lessee will provide and maintain, types and
limits of insurance coverage appropriate to the Project, at no cost to Lessor. All Contractor
insurance will be primary to and not contributing with any other insurance or self-insurance
programs maintained by Lessee or Lessor. Lessor and Lessee also will be named as additional
insureds under all Contractor general liability coverage.
9.3 General Insurance - Lessor Requirements. Without limiting Lessor’s
indemnification of Lessee and at its own expense, Lessor will provide and maintain the following
programs of insurance.
9.3.1 General Liability insurance (providing scope of coverage equivalent to ISO
policy form CG 00 01) with limits of not less than the following:
General Aggregate: $2 million
Each Occurrence: $1 million
Such insurance will name Lessee, its officers, employees, agents, and volunteers as additional
insureds.
9.3.2 Workers Compensation and Employers’ Liability insurance or qualified
self-insurance satisfying statutory requirements, which includes Employers’ Liability coverage
with limits of not less than $1 million per accident.
9.4 Review of Insurance Requirements. The types and limits of coverage required
under this Agreement may be reviewed annually by Lessor and Lessee. Coverage types and limits
will reflect the prevailing practice in the area for insuring similar property and casualty risks, and
be subject to the mutual agreement of the parties.
9.5 Self Insurance. Notwithstanding the provisions of this Article 11, either Lessor or
Lessee, at its sole option, may satisfy all or any part of the insurance requirement through the us e
of program of self-insurance. Certificate evidencing coverage or letter evidencing self-insurance
will be provided by the respective parties within sixty (60) days after the execution of this
agreement.
ARTICLE 10.
DEFAULT AND REMEDIES
10.1 Lessor’s Default. Lessor will not be in default of any of its obligations under this
Lease unless Lessor fails to perform such obligations within a reasonable time, but in no event less
than thirty (30) days after written notice by Lessee to Lessor specifying wherein Lessor has failed
to perform such obligations; provided however, that if the nature of Lessor’s default is such that
more than thirty (30) days are required for its cure, Lessor will not be in default if Lessor
commences such cure within such thirty (30) day period and thereafter diligently prosecutes the
same to completion.
10.2 Lessee’s Remedies. In the event of any default by Lessor as described in Section
10.1 above, subject to all applicable laws that may restrict remedies against a California State
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University, Lessee’s remedies under this Lease are to pursue Lessor for specific performance
and/or actual damages, resulting from Lessee’s default. Lessee will have no rights as a result of
any default by Lessor until Lessee gives thirty (30) days’ notice to Lessor, specifying the nature
of the default. Lessor will then have the right to cure such default, and Lessor will not be deemed
in default if Lessor cures such default within thirty (30) days after receipt of notice of the default,
or within such longer period of time as may reasonably be necessary to cure the default, provided
that Lessor commences such cure within such thirty (30) days.
10.3 Lessee’s Default. Lessee will not be in default of any of its obligations under this
Lease unless Lessee fails to perform such obligations within a reasonable time, but in no event less
than thirty (30) days after written notice by Lessor to Lessee specifying wherein Lessee has failed
to perform such obligations; provided however, that if the nature of Lessee’s default is such that
more than thirty (30) days are required for its cure, Lessee will not be in default if Lessee
commences such cure within such thirty (30) day period and thereafter diligently prosecutes the
same to completion.
10.4 Lessor Remedies. In the event of any default by Lessee as described in Section
10.3 above, subject to all applicable laws that may restrict remedies against a city, including, but
not limited to, restrictions within the California Government Code, Lessor’s remedies under this
Lease are to pursue Lessee for specific performance and/or actual damages resulting from Lessee’s
default. Lessor will have no rights as a result of any default by Lessee until Lessor gives thirty
(30) days’ notice to Lessee, specifying the nature of the default. Lessee will then have the right to
cure such default, and Lessee will not be deemed in default if Lessee cures such default within
thirty (30) days after receipt of notice of the default, or within such longer period of time as may
reasonably be necessary to cure the default, provided that Lessee commences such cure within
such thirty (30) days and thereafter diligently prosecutes the same to completion.
ARTICLE 11.
HAZARDOUS MATERIALS
11.1 Compliance. During the term of this Lease, Lessee, at its sole cost, will comply
with all applicable laws, statutes, ordinances, codes regulations and orders relating to the receiving,
handling, use, storage, transportation, discharge, release, and disposal of Hazardous Material (as
defined below) in or about the Property or the Project. Lessee will not cause or permit any
Hazardous Material to be brought upon, kept, or used in or about the Property or the Project by
Lessee or Lessee’s agents in a manner or for a purpose prohibited by any federal, state, or local
agency or authority.
11.2 Notice. Lessee will immediately provide Lessor with telephonic notice, which will
promptly be confirmed by written notice, of any and all spillage, discharge, release, and disposal
of Hazardous Material onto or within the Property or the Project, including the soils and subsurface
waters thereof, where the spillage, discharge, release, or disposal by law must be reported to any
federal, state, or local agency, and will also report to Lessor any injuries or damages resulting
directly or indirectly therefrom.
11.3 Definition of Hazardous Material. As used herein, “Hazardous Materials” means
any chemical, substance, material, controlled substance, object, condition, waste, living organism,
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or combination thereof, whether solid, semi solid, liquid, or gaseous, which is or may be hazardous
to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity,
reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness, or
other harmful or potentially harmful properties or effects, including, without limitation, molds,
toxic levels of bacteria, petroleum and petroleum products, asbestos, radon, polychlorinated
biphenyls (PCBs), refrigerants (including those substances defined in the Environmental
Protection Agency’s “Refrigerant Recycling Rule,” as amended from time to time), and all of those
chemicals, substances, materials, controlled substances, objects, conditions, wastes, living
organisms or combinations thereof which are now or become in the future listed, defined or
regulated in any manner by any Environmental Law based upon, directly or indirectly, such
properties or effects. As used herein, “Environmental Laws” means any and all federal, state, or
local environmental, health and/or safety-related laws, regulations, standards, decisions of courts,
ordinances, rules, codes, orders, decrees, directives, guidelines, permits or permit conditions,
currently existing and as amended, enacted, issued or adopted in the future which are or become
applicable to Lessor, the Project, or the Property.
ARTICLE 12.
OPTION TO EXTEND
12.1 Option to Extend. On or prior to the date which is twelve (12) months before the
expiration of the initial fifty (50) year term hereof, provided Lessee will not then be in material
default (as defined herein) under the provisions of this Agreement, Lessee may notify Lessor of
its request to exercise the Option to extend this Lease for up to three additional ten (10) year terms,
each additional ten-year term being referenced herein as an “Extension Term,” by providing
written notice to Lessor (“Option”). If Lessee fails to exercise its Option as provided for herein,
this Lease will expire upon the 50th anniversary of the commencement date or upon the expiration
of the exercised Extension Term, whichever is later, unless otherwise agreed by the parties. Upon
receipt of a notice to exercise the Option, Lessor will extend the Term Expiration Date for the
period of the Extension Term upon the same terms and conditions of this Lease.
ARTICLE 13.
QUIET ENJOYMENT AND RIGHT OF ENTRY
13.1 Quiet Enjoyment. Lessor covenants and agrees that it will not take any action to
prevent Lessee’s quiet enjoyment of the Property during the Term of this Lease.
13.2 Right of Entry. Lessor reserves the right for any of its duly authorized
representatives to enter the Property upon prior notice at any reasonable time for any reasonable
actions, including but not limited to (i) inspecting the Property and (ii) posting in such places as
Lessor may select notices of non-responsibility for works of construction, repair or improvement
made by Lessee. In doing so, Lessor will not interfere with Lessee’s enjoyment and use of the
Property and Project except in case of emergency improvements. Lessor acknowledges that the
Project will include security fencing and that entry onto the Property will require coordination with
Lessee.
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ARTICLE 14.
PROPERTY RECORDS
14.1 Property Records. Within thirty (30) days of the Effective Date of this Lease,
Lessor will provide to the Lessee copies of all non-privileged or non-confidential books and
records of Lessor with respect to the ownership, maintenance, and operation of the Property,
including any appraisals, surveys, engineering, environmental, and other reports and analyses of
the Property which are in Lessor’s possession.
ARTICLE 15.
EMINENT DOMAIN
15.1 Agreement Governs. In the event of any acquisition of all or any part of the
Property, or any interest therein by eminent domain, whether by condemnation proceeding or
transfer in avoidance of an exercise of the power of eminent domain or otherwise during the Term
or any extension thereof the rights and obligations of the parties with respect to such appropriation
will be as provided in this Article 15.
15.2 Termination of Agreement. This will terminate if the entire Property is
permanently taken under the power of eminent domain or if a material part of the Property is taken
such that the operation of the Project cannot feasibly continue on the remaining portion of the
Property. If only part of the Property is permanently taken under the power of eminent domain and
Lessee can reasonably continue to operate the Project, this Lease will not terminate and will remain
in full force in effect with respect to the remaining portion of the Property.
15.3 Allocation of Condemnation Award. In the event of a permanent condemnation or
taking of all or part of the Property at any point during the Term or any extension thereof, Lessor
will be entitled to any award which may be made in such taking or con demnation to the extent
such award relates to the fee title to the Property, and Lessee will be entitled to any award which
may be made in such taking or condemnation to the extent it relates to the Project. Nothing
contained in this Article 15 will be deemed to give Lessor any interest in or to require Lessee to
assign to Lessor any separate awards designated by the condemning authority and Lessee will be
able to retain any separate award as designated by the condemning authority made to Lessee for
the taking of Lessee’s personal property, or the interruption of or damage to Lessee’s operations
on the Property, except to the extent that the separate award includes damages for lost sublease
rent, in which case Lessor will be entitled to its share of those damages.
ARTICLE 16.
TERMINATION
16.1 Termination by Lessor. This Lease may be terminated unilaterally by Lessor upon
Lessee’s failure to commence construction of any portion of the Project within five (5) years of
the effective date of this Lease, by providing prior written notice to Lessee one hundred and eighty
(180) days prior to termination.
16.2 Termination by Lessee. This Lease may be terminated unilaterally by Lessee for
convenience by providing prior written notice to Lessor one hundred and eighty (180) days prior
to termination.
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16.3 Termination by Agreement of the Parties. Notwithstanding Sections 16.1 or 16.2,
the Lease may be terminated by the mutual agreement of the parties at any time, upon terms and
conditions agreed to by the parties.
ARTICLE 17.
GENERAL PROVISIONS
17.1 Waiver and Modification. No provision of this Lease may be modified, amended
or added to except by an agreement in writing signed by all parties hereto.
17.2 Applicable Law. This Lease and all rights and obligations arising out of it will be
construed in accordance with the laws of the State of California and without regard to any conflict
of laws provisions.
17.3 Time. Time is of the essence with respect to the performance of every provision of
this Lease in which time of performance is a factor.
17.4 Authority to Execute Lease. Lessor and Lessee each acknowledge that it has all
necessary right, title, and authority to enter into and perform its obligations under this Lease, that
this Lease is a binding obligation of such party and has been authorized by all requis ite action
under the party’s governing instruments, that the individuals executing this Lease on behalf of
such party are duly authorized and designated to do so, and that no other signatories are required
to bind such party.
17.5 Consents. Whenever consent or approval of either party is required hereunder, that
party will not unreasonably withhold or delay such consent or approval, except as may be expressly
set forth to the contrary.
17.6 Entire Agreement. The terms of this Lease are intended by the parties as a final
expression of their agreement with respect to the terms as are included herein and may not be
contradicted by evidence of any prior or contemporaneous agreement
17.7 Severability. Any provision of this Lease which proves to be invalid, void, or
illegal in no way affects, impairs, or invalidates any other provisions hereof, and such other
provisions will remain in full force and effect.
17.8 Impartial Construction. The language in all parts of this Lease will be in all cases
construed as a whole according to its fair meaning and not strictly for or against either Lessor or
Lessee.
17.9 Notices. All notices, demands, and communications between Lessor and Lessee
will be in writing and given by personal delivery, facsimile transmission, electronic mail,
registered mail (return receipt requested with postage prepaid), Federal Express, or other reliable
private express delivery, addressed to Lessor or Lessee at the addresses shown in Section 1.3
above. Either party may, by notice to the other given pursuant to this Section 17.9, specify
additional or different addresses for notice purposes.
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17.10 Counterparts. This Lease may be executed in one or more counterparts, each of
which will constitute an original.
17.11 Lessee Approval. Whenever this Lease calls for approval by Lessee of an action
implementing the provisions of this Lease, the City Manager, or his or her designee, will have
authority to grant such approval, without necessity of further authorization or approval of the City
Council.
17.12 Lessor Approval. Whenever this Lease calls for approval by Lessor of an action
implementing the provisions of this Lease, the ______________________ of the University, or
his or her designee, will have authority to grant such approval, without necessity of further
authorization or approval of the Board of Trustees of the University.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first
above written.
LESSOR:
BOARD OF TRUSTEES OF THE CALIFORNIA STATE UNIVERSITY, On Behalf Of
California Polytechnic State University, San Luis Obispo
By: Date:
APPROVED AS TO FORM:
By: Date:
LESSEE:
CITY OF SAN LUIS OBISPO, a California municipal corporation
By: Date:
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
By: J. Christine Dietrick Date:
City Attorney
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Exhibit A
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EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
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Exhibit B
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EXHIBIT B
MAP DEPICTING PROPERTY
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