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HomeMy WebLinkAbout2011-09-13; City Council; 20684; AGREEMENT SD COUNTY WATER AUTHORITYCARLSBAD MUNICIPAL WATER DISTRICT, CITY OF -1 Q CARLSBAD, AND CARLSBAD HOUSING AND REDEVELOPMENT COMMISSION - AGENDA BILL /QsO. AB# 20,684 Midi. 09/13/11 DEPT. UTIL APPROVE AGREEMENT WITH THE SAN DIEGO COUNTY WATER AUTHORITY MEMORIALIZING CERTAIN UNDERSTANDINGS AND ESTABLISHING A FRAMEWORK FOR COOPERATION REGARDING THE PROPOSED CARLSBAD SEAWATER DESALINATION PROJECT DEPT. HEAD (vKj \ ^^-7GEN COUNSEL^"^^^, EXEC. DIR. , /^_- RECOMMENDED ACTION: Municipal Water District Board adopt Resolution No. 1426 . City Council adopt Resolution No. ?nii-223 . and Housing and Redevelopment Commission adopt Resolution No. 512 . approving the agreement with the San Diego County Water Authority memorializing certain understandings and establishing a framework for cooperation regarding the proposed Carlsbad Seawater Desalination Project. ITEM EXPLANATION The Carlsbad Seawater Desalination Project is an undertaking proposed by Poseidon Resources (Poseidon) designed to produce 50 million gallons per day of drinking water by desalinating seawater. In addition to being within the City limits and Carlsbad Municipal Water District Service Area, the project is within the South Carlsbad Coastal Redevelopment Project Area of the Redevelopment Agency governed by the Housing and Redevelopment Commission. The City of Carlsbad and the Carlsbad Housing and Redevelopment Commission have considered the project and have issued all necessary land use approvals. In addition, the City performed the required CEQA reviews and certified the Environmental Impact Report for the project on June 13, 2006. In 2009, the City approved modifications to the project, including an Addendum to the certified Environmental Impact Report. In conjunction with the project approvals, the City entered into an Amended and Restated Development Agreement with Poseidon, executed by the City on October 5, 2009, to memorialize certain benefits the City would receive from the project. The project is now fully entitled, has all environmental approvals and has successfully defended all lawsuits threatening to stop the development of the project. One case is on appeal after a successful trial court ruling in Poseidon's favor. In order to improve its water supply reliability, the Carlsbad Municipal Water District entered into discussions with Poseidon to purchase some of the project's product water output to satisfy a portion of the District's potable water demands. The CMWD Board directed staff to develop an agreement with Poseidon and specified that the key objectives were the quantity, quality, price and reliability of the water supply as well as the public benefits of the project. The discussions with Poseidon resulted in the development of a Water Purchase Agreement (WPA) between Poseidon and CMWD, which was executed on October 19, 2004. This agreement provided very favorable terms to the City and CMWD and provided Poseidon with its first desalinated water customer. Carlsbad's WPA was used as the template for other water agencies in their discussions with Poseidon and, ultimately, eight other water agencies entered into water purchase agreements with Poseidon for various amounts of water. The aggregate amount of desalinated water purchase amounts in the nine total water purchase agreements exceeded the design capacity of the plant. DEPARTMENT CONTACT: Glenn Pruim 760-438-2722, qlenn.Druim@carisbadca.aov FOR CITY CLERKS USE ONL Y. ^/ BOARD ACTION: APPROVED JS^ DENIED D CONTINUED D WITHDRAWN \0 ./ AMENDED |SC CONTINUED TO DATE SPECIFIC D CONTINUED TO DATE UNKNOWN D RETURNED TO STAFF D OTHER - SEE MINUTES D Page 2 Based on Poseidon's cost estimates, in order to be able to deliver product water at the prices agreed upon in the multiple water purchase agreements, it was essential that the project be eligible to receive financial incentives then available from both the San Diego County Water Authority (CWA) and the Metropolitan Water District of Southern California (MWD). These programs provide a per acre foot incentive for local water supply development within the service areas of those agencies. Due to legal action brought by CWA challenging MWD's rate structure, MWD may terminate its incentive program for this project. This action, coupled with CWA's unwillingness to "backstop" MWD's incentives, made it financially infeasible for Poseidon to deliver product water at the agreed upon price. At that time, CWA and Poseidon began having discussions about a new arrangement, wherein CWA would purchase all of the proposed project's product water. At its July 22, 2010 meeting, the CWA Board approved a Term Sheet outlining general terms for a water purchase arrangement between CWA and Poseidon and directed staff to conduct project due diligence and negotiate a water purchase agreement with Poseidon. The Term Sheet included a provision requiring certain "conditions precedent" be met before formal negotiations could begin. The condition most important to Carlsbad and CMWD was that CWA required that all water purchase agreements between Poseidon and the nine agencies be terminated prior to the onset of negotiations. Although the other eight agencies have indicated their willingness to terminate their agreements upon the execution of a water purchase agreement between CWA and Poseidon, CMWD has not yet done so, due to the unique provisions in its WPA with Poseidon and the complex issues surrounding the development of the project within Carlsbad's jurisdiction. As of this date, formal negotiations between CWA and Poseidon for the development of a water purchase agreement have not yet initiated. In addition to the general terms contained within the Term Sheet, there is a provision that the CWA may acquire the desalination facility at any time after ten years of commercial operation. This potential transition to ownership of the project by a public agency (CWA) creates concern regarding the security of the land dedications, public improvements and tax increment revenue that were guaranteed as part of a privately owned facility. The agreement being presented for consideration provides reasonable safeguards for those items. In order to preserve the numerous benefits that had been provided to Carlsbad in the WPA and related City permits, approvals and agreements, City/CMWD staff began conversations with CWA to develop an agreement that would enable CMWD to terminate its WPA with Poseidon and still protect the interests of the citizens and rate payers of Carlsbad. The proposed agreement seeks to balance Carlsbad's status as the host city and permitting authority for the project along with CWA's legal status provided by the County Water Authority Act. The following are some of the key provisions of the agreement: • Purchase of product water. CMWD may elect to purchase up to 10,000 acre-feet per year of product water under terms that are generally consistent with the CWA guiding principles for the purchase of local water from the Carlsbad Seawater Desalination Project (CSDP). With the approval of this agreement, CMWD will receive local supply purchase benefits not available to other member agencies under the policy. • Direct connection to the CSDP: CMWD, at its own cost, may connect its local potable water supply system directly to the desalinated water pipeline distribution system of the project. • Price of product water: The price for purchasing desalinated water as a local supply will be equal to the actual cost to produce and transport the water, less any incentive money which may become available. • Redevelopment Agency tax increment revenue: This agreement provides that the RDA will receive a minimum of ten years of tax increment revenue regardless of ownership of the project, with an exception provided for a default by Poseidon. Tax increment revenue will continue to accrue to the RDA as long as the project remains under private ownership and the RDA is still active. Pages • Public benefits of the project: The City will receive all public improvements and land dedications outlined in the CSDP approvals regardless of ownership of the project. There is an exception provided if the CWA assumes ownership of the project due to a default by Poseidon prior to the dedications and improvements being provided. • Use of City streets: City street standards will be used for all work performed within City street rights-of-way, regardless of whether the pipelines are constructed by Poseidon or CWA. • Development Agreement: The City unconditionally waives and agrees not to enforce the terms of the Development Agreement as it pertains to the CWA, should CWA take over ownership of the project as anticipated in their Term Sheet with Poseidon. The key provisions of the Development Agreement have been incorporated into the proposed agreement. FISCAL IMPACT: There is no direct fiscal impact associated with the approval of this agreement. The agreement does provide some level of protection for the public improvements, land dedications and tax increment revenues which the City/RDA would receive if CWA takes over ownership of the project. It is estimated that the annual tax increment benefit to the RDA would be between $1M and $2M per year and would continue for a minimum of ten years even if CWA took over ownership of the project as long as Poseidon is not in default under the CWA/Poseidon Agreement being considered by those two parties. This agreement does not commit CMWD to purchase any project product water but does provide for that opportunity. If CMWD elects to purchase product water as provided by this agreement, a separate local water purchase agreement would need to be entered into between CWA and CMWD. The fiscal impact of that decision would be analyzed at that time. ENVIRONMENTAL IMPACT: As noted, the City certified an Environmental Impact Report (EIR) for the project on June 13, 2006, and approved an Addendum to the certified EIR on September 15, 2009. The agreement and its provisions are consistent with the certified EIR and approved Addendum; notably, CWA has agreed to abide by all project mitigation measures whether it assumes ownership of the project by acquisition or default. This agreement itself will not have any physical impact on the environment or commit any agency to any project or funding for any project. EXHIBITS: 1. Municipal Water District Resolution No. 1426 approving the agreement with the San Diego County Water Authority memorializing certain understandings and establishing a framework for cooperation regarding the proposed Carlsbad Seawater Desalination Project. 2. City Council Resolution No2QH-223 approving the agreement with the San Diego County Water Authority memorializing certain understandings and establishing a framework for cooperation regarding the proposed Carlsbad Seawater Desalination Project. 3. Housing and Redevelopment Commission Resolution No. 512 . approving the agreement with the San Diego County Water Authority memorializing certain understandings and establishing a framework for cooperation regarding the proposed Carlsbad Seawater Desalination Project. 4. Agreement approved by the San Diego County Water Authority on August 25, 2011. EXHIBIT 1 1 RESOLUTION NO. 1426 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE 3 CARLSBAD MUNICIPAL WATER DISTRICT APPROVING THE AGREEMENT WITH THE SAN DIEGO COUNTY WATER 4 AUTHORITY MEMORIALIZING CERTAIN UNERSTANDINGS AND ESTABLISHING A FRAMEWORK FOR COOPERATION 5 REGARDING THE PROPOSED CARLSBAD SEAWATER DESALINATION PROJECT 6 7 WHEREAS, on October 19, 2004 the CMWD Board executed a Water Purchase 8 Agreement (WPA) with Poseidon Resources; and g WHEREAS, the City performed the required CEQA approvals and certified the 10 Environmental Impact Report (EIR) for the project on June 13, 2006 and approved an 11 Addendum to the certified EIR on September 15, 2009; and 12 WHEREAS, the City entered into an Amended and Restated Development I O 14 Agreement with Poseidon executed by the City on October 5, 2009, addressing certain -15 benefits to be derived from the project; and 16 WHEREAS, SDCWA and Poseidon began having discussions about a new 17 arrangement, wherein SDCWA would purchase all of the proposed project's product 18 water; and 1Q WHEREAS, at its July 22, 2010 meeting, the SDCWA Board approved a Term 20 Sheet outlining general terms between SDCWA and Poseidon; and 21 WHEREAS, in addition to the general terms contained within the Term Sheet, 22 there is a provision that the SDCWA may acquire the desalination facility at any time23 after ten years of commercial operation; and 25 WHEREAS, in order to preserve the numerous benefits that had been provided 26 to Carlsbad in the Water Purchase Agreement, Development Agreement and related 27 City permits, approvals and agreements, City/CMWD staff began conversations with 28 1 SDCWA to develop an agreement that will protect the interests of the citizens and rate 2 payers of Carlsbad; and 3 NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water 4 District Board of the City of Carlsbad, California, as follows that: 5 1. The above recitations are true and correct. 6 2. That the Carlsbad Municipal Water District approves the "Agreement g Memorializing Certain Understandings and Establishing a Framework for 9 Cooperation Regarding a Desalination Project located within the City of 10 Carlsbad", hereinafter referred to as the "Agreement" with San Diego 11 County Water Authority ("CWA"). The executive director of the district is 12 authorized to execute it provided Attachment "A" to the agreement is 13 approved as to form by the general counsel, the Agreement is fully 14 executed by CWA and, Poseidon and CMWD have entered into a legally 15 binding agreement establishing the terms under which the parties would 16 rescind the Water Purchase Agreement between them.17 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 HI 26 '" 27 '" 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Carlsbad Municipal Water District Board of Directors, Carlsbad City Council, and Carlsbad Housing and Redevelopment Commission held on the 13th day of September 2011, by the following vote to wit: AYES: Board Members Hall, Kulchin, Blackburn, Douglas, Packard. NOES: None. ABSENT: None. to. MATT HALL, President ATTEST: LOtfRAINB/M. WOOD, Secretary (SEAL) .-:tn - EXHIBIT 2 1 RESOLUTION NO. 2011-223 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF 3 CARLSBAD, APPROVING THE AGREEMENT WITH THE SAN DIEGO COUNTY WATER AUTHORITY MEMORIALIZING 4 CERTAIN UNERSTANDINGS AND ESTABLISHING A FRAMEWORK FOR COOPERATION REGARDING THE 5 PROPOSED CARLSBAD SEAWATER DESALINATION PROJECT 6 7 WHEREAS, on October 19, 2004 the CMWD Board executed a Water Purchase 8 Agreement (WPA) with Poseidon Resources; and g WHEREAS, the City performed the required CEQA approvals and certified the 10 Environmental Impact Report (EIR) for the project on June 13, 2006 and approved an 11 Addendum to the certified EIR on September 15, 2009; and 12 WHEREAS, the City entered into an Amended and Restated Development 14 Agreement with Poseidon executed by the City on October 5, 2009, addressing certain 15 benefits to be derived from the project; and 16 WHEREAS, SDCWA and Poseidon began having discussions about a new 17 arrangement, wherein SDCWA would purchase all of the proposed project's product 18 water; and 1Q WHEREAS, at its July 22, 2010 meeting, the SDCWA Board approved a Term 20 Sheet outlining general terms between SDCWA and Poseidon; and 21 WHEREAS, in addition to the general terms contained within the Term Sheet, 22 there is a provision that the SDCWA may acquire the desalination facility at any time 23 after ten years of commercial operation; and 25 WHEREAS, in order to preserve the numerous benefits that had been provided 26 to Carlsbad in the Water Purchase Agreement, Development Agreement and related 27 City permits, approvals and agreements, City/CMWD staff began conversations with 28 1 SDCWA to develop an agreement that will protect the interests of the citizens and rate 2 payers of Carlsbad; and 3 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of 4 Carlsbad, California, as follows that: 5 1. The above recitations are true and correct. 6 2. That the City Council approves the "Agreement Memorializing Certain 8 Understandings and Establishing a Framework for Cooperation Regarding 9 a Desalination Project located within the City of Carlsbad", hereinafter 10 referred to as the "Agreement" with San Diego County Water Authority 11 ("CWA"). The City Manager is authorized to execute it provided 12 Attachment "A" to the agreement is approved as to form by the City 13 Attorney, the Agreement is fully executed by CWA and, Poseidon and 14 CMWD have entered into a legally binding agreement establishing the 15 terms under which the parties would rescind the Water Purchase 16 Agreement between them.17 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 "/ 26 '" 27 '" 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Carlsbad City Council, Carlsbad Municipal Water District Board of Directors and Carlsbad Housing and Redevelopment Commission held on the 13th day of September 2011, by the following vote to wit: AYES: Council Members Hall, Kulchin, Blackburn, Douglas, Packard. NOES: None. ABSENT: None. J22. , Mayor ATTEST: rORRAINEM. WOOD, City Clerk (SEAL) EXHIBIT 3 1 RESOLUTION NO. 512 2 A RESOLUTION OF THE HOUSING AND REDEVELOPMENT 3 COMMISSION OF THE CITY OF CARLSBAD, APPROVING THE AGREEMENT WITH THE SAN DIEGO COUNTY WATER 4 AUTHORITY MEMORIALIZING CERTAIN UNERSTANDINGS AND ESTABLISHING A FRAMEWORK FOR COOPERATION 5 REGARDING THE PROPOSED CARLSBAD SEAWATER DESALINATION PROJECT 6 7 WHEREAS, on October 19, 2004 the CMWD Board executed a Water Purchase 8 Agreement (WPA) with Poseidon Resources; and g WHEREAS, the City performed the required CEQA approvals and certified the 10 Environmental Impact Report (EIR) for the project on June 13, 2006 and approved an 11 Addendum to the certified EIR on September 15, 2009; and 12 WHEREAS, the City entered into an Amended and Restated Development I O 14 Agreement with Poseidon executed by the City on October 5, 2009, addressing certain 15 benefits to be derived from the project; and 16 WHEREAS, SDCWA and Poseidon began having discussions about a new 17 arrangement, wherein SDCWA would purchase all of the proposed project's product 18 water; and 19 WHEREAS, at its July 22, 2010 meeting, the SDCWA Board approved a Term 20 Sheet outlining general terms between SDCWA and Poseidon; and 21 WHEREAS, in addition to the general terms contained within the Term Sheet, 22 there is a provision that the SDCWA may acquire the desalination facility at any time 23 after ten years of commercial operation; and24 25 WHEREAS, in order to preserve the numerous benefits that had been provided 26 to Carlsbad in the Water Purchase Agreement, Development Agreement and related 27 City permits, approvals and agreements, City/CMWD staff began conversations with 28 1 SDCWA to develop an agreement that will protect the interests of the citizens and rate 2 payers of Carlsbad; and 3 NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment 4 Commission of the City of Carlsbad, California, as follows that: 5 1. The above recitations are true and correct. 6 2. That the Housing and Redevelopment Commission approves the 8 "Agreement Memorializing Certain Understandings and Establishing a 9 Framework for Cooperation Regarding a Desalination Project located 10 within the City of Carlsbad", hereinafter referred to as the "Agreement" 11 with San Diego County Water Authority ("CWA"). The executive director is 12 authorized to execute it provided Attachment "A" to the agreement is 13 approved as to form by the general counsel, the Agreement is fully 14 executed by CWA and, Poseidon and CMWD have entered into a legally 15 binding agreement establishing the terms under which the parties would 16 rescind the Water Purchase Agreement between them. 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 //' 26 "/ 27 "' 28 1 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the 2 Carlsbad Housing and Redevelopment Commission, Carlsbad City Council and 3 Carlsbad Municipal Water District Board of Directors held on the 13th day of September 4 2011, by the following vote to wit: 5" 6.. AYES: Commission Members Hall, Kulchin, Blackburn, Douglas, Packard. 7 NOES: None.8 9 ABSENT: None. 10 11 _ __ MATT ft£l_L, Chairman 12 ATTEST: 13 14 15 ( J~>f^ (J^<-—I <- » V—-^ — OSA HILDABRAND, Secretary 16 (SEAL)''if V^"<*£LOP*17 f o/ESTABLISHED\\\ 10 ~ 2 : :- -IO - <n : &\19 20 21 22 23 24 25 26 27 28 ^ San Diego County Water Authority August 17, 2011 Attention: Water Planning Committee Agreement between the Water Authority and City of Carlsbad, Carlsbad Municipal Water District, and Carlsbad Housing and Redevelopment Commission for the Carlsbad Desalination Project. (Action) Staff recommendation Approve the proposed agreement regarding memorializing certain understandings and establishing a framework for cooperation regarding a desalination project in the City of Carlsbad, conditioned upon Carlsbad's approval of the agreement as presented. Alternative Do not approve the proposed agreement. Fiscal Impact None with this action. If the Water Authority enters into a Water Purchase Agreement with Poseidon (WPA) and subsequently acquires the Desalination Plant prior to the 10 year early purchase option, and the Project is not in default of its obligations under the WPA, then the Water Authority will be subject to additional expenses that will be reviewed by the Board at the time such a decision to acquire is considered. Background The Carlsbad Desalination Project (Project) is a fully-permitted seawater desalination plant and conveyance pipeline currently being developed by Poseidon Resources (Poseidon), a private investor owned company that develops water and wastewater infrastructure. The Project has been in development since 1998. The Project is located within the Encina Power Station which is part of the South Carlsbad Redevelopment Area under the jurisdiction of the Carlsbad Housing and Redevelopment Commission. The Project was incorporated into the 2003 Water Facilities Master Plan, the 2005 Update of the Urban Water Management Plan (UWMP) and the Water Authority's 2010 edition of the UWMP. The Project has obtained all required permits and environmental clearances and, when completed, will provide a highly reliable local supply of 56,000 acre-feet (AF) per year for the region. According to the projections contained in the draft 2010 UWMP, in 2020, the Project would account for approximately eight percent of the total projected regional supply and 32 percent of all locally generated water in San Diego County. At its July 22, 2010 meeting, the Board approved a Term Sheet between the Water Authority and Poseidon and directed staff to conduct proj ect due diligence and negotiate a water purchase agreement based on its provisions. However, the Term Sheet included specific conditions precedent that are required to be satisfied before any negotiations on a WPA can be started. These conditions and their status are as follows: Page 21 of 319 Water Planning Committee August 17, 2011 Page 2 of4 1) Poseidon must terminate all existing confidentiality agreements with the Water Authority Status: Poseidon has met this condition. 2) Poseidon must submit to the Water Authority a binding commitment from a construction equity investor Status: Poseidon has provided a binding equity commitment from Stonepeak Infrastructure Partners (formerly Blackstone hifrastructure Partners). 3) Acknowledgement in writing by Poseidon and the nine member agencies with water purchase agreements to cancel those agreements and release the Water Authority from any and all claims Status: Poseidon has satisfied this condition. Of the nine member agencies, the City of Oceanside, Olivenhain Municipal Water District, Rainbow Municipal Water District, Rincon Del Diablo Municipal Water District, Santa Fe Irrigation District, Sweetwater Authority, Vallecitos Water District and Valley Center Municipal Water District have all satisfied this condition. The Carlsbad Municipal Water District had indicated it would require an agreement with the Water Authority that would address key issues affecting its jurisdiction as the project host city. Under the direction of the Board's Carlsbad Desalination Project Advisory Group, staff has been working with Carlsbad on drafting an agreement that would address these key issues and result in cancellation of the Carlsbad -Poseidon agreement and the release of the Water Authority from any and all claims. Because the condition precedent regarding cancellation of existing agreements has not been satisfied, staff has not initiated negotiations with Poseidon on the WPA as required by the Board approved Term Sheet. Discussion For more than 10 years, it has been contemplated that a 50 million gallon per day seawater desalination plant be located at the Encina Power Station (EPS) in Carlsbad as a source of municipal water supply. The city of Carlsbad and the Carlsbad Municipal Water District have been strong proponents of the project since its inception and have helped develop widespread community support for the desalination Project within Carlsbad. The city of Carlsbad was the lead agency for CEQA certification and has issued several major permits to Poseidon for project construction. Carlsbad has had several stated goals concerning the project being located within its jurisdiction. Those goals included increased water reliability for Carlsbad residents through a new local water supply and that a privately owned water supply project would have a positive economic effect for Carlsbad. The EPS is part of a state approved Redevelopment Area, and Carlsbad would be able to collect additional property tax increment from the construction and operation of the Poseidon owned Desalination project. Also, as a private developer in Carlsbad, Poseidon has committed to construct certain community improvements and dedicate land for public uses in the vicinity of EPS prior to commencing commercial operation of the desalination plant. With the Water Authority replacing the nine member agencies as the potential purchaser of the desalinated water from Poseidon, and having a term sheet provision that provides for an early Page 22 of 319 Water Planning Committee August 17,2011 Page 3 of4 purchase option after 10 years, Carlsbad raised concerns regarding the benefits it hopes to derive as the host city for the project. Specifically, Carlsbad has asked for clarity on the Water Authority's ownership intentions towards the Project and how that relates to its potential collection of property tax increment and the attainment of the improvements and public land dedications committed to by Poseidon. It is the intent of the provisions of the July 2010 Term Sheet that the Water Authority not take ownership of the project until the 30 year term is completed. Water Authority participation in the project is through a risk transfer to the private sector, and any exercise of an early purchase option - if the project is operating successfully - would be a very expensive acquisition for the Water Authority and would be an indicator that something unacceptable is occurring in the business relationship between the Water Authority and Poseidon. 'Termination for Convenience" clauses are standard commercial provisions in long term agreements that recognize that a contracting party needs to preserve the option to terminate at a cost. The 10 year commitment contained in the July 2010 Term Sheet was to ensure that if the Water Authority did want to acquire the plant, it would do so only after a long enough operational and maintenance track record. The Water Authority has always recognized the unique role of Carlsbad as host city to the first large scale seawater desalination plant in California and has appreciated its consistent support of the project and its contribution to water supply reliability in the region. However, under the County Water Authority Act, the Water Authority is not subj ect to local land use jurisdiction nor would staff recommend that the region's ratepayers take on long term financial obligations to the benefit of a single member agency, which is not legally required. The proposed agreement with Carlsbad seeks to balance those principles with recognition of Carlsbad's status as host city for a large scale municipal water supply project of benefit to the entire region. The following are the key provisions in the agreement • Waiver & Release: Carlsbad will release the Water Authority from any and all claims and will terminate its agreement with Poseidon if the Water Authority approves its own Water Purchase Agreement (WPA). Carlsbad will also waive any provisions of its Development Agreement with Poseidon as it relates to the Water Authority. • Purchase by Carlsbad of Local Water: Carlsbad will adhere to the guiding principles regarding member agency purchase of local water from the Carlsbad Desalination Project approved by the Water Authority Board in June 2011, including any subsequent revisions approved by the Board, as well as a subsequent member agency supply purchase agreement to be approved by the Water Authority Board. Carlsbad will have the right to purchase up to 10,000 acre feet as local water supply for Carlsbad. • Direct District Connection to Desalination Project: Carlsbad may connect to the desalination pipeline at its own cost. • Mitigation and Redevelopment Agency Assistance: 1. If the Water Authority acquires the Desalination Plant prior to 10 years after commercial operation begins, because Poseidon has defaulted on its agreement with the Water Authority, then the Water Authority will not make any payments to Carlsbad for lost property tax increment 2. If the Water Authority acquires the Project prior to commercial operation because Poseidon is in default, the Water Authority is not required to complete the public Page 23 of 319 Water Planning Committee August 17, 2011 Page 4 of4 improvements or make the public land dedications that Poseidon is obligated to under its permits and agreements with Carlsbad. 3. If the Water Authority voluntarily acquires the plant prior to 10 years from commercial operation and Poseidon is not in default, the Water Authority will owe Carlsbad the balance of tax increment from the acquisition date until the date 10 years from commercial operation. 4. If the Water Authority voluntarily acquires the plant prior to commercial operation and Poseidon has not defaulted, then the Water Authority will cause the public improvements and land dedications to be completed. 5. Under no circumstances will the Water Authority owe Carlsbad payments for lost property tax increment after the date 10 years from start of commercial operations or if Carlsbad is not eligible to receive redevelopment property tax increment under state law. If the Board approves the proposed agreement, Carlsbad is expected to approve the agreement at their September 13, 2011 City Council meeting. With Carlsbad approval of the agreement, the final condition precedent needed to begin face-face negotiations with Poseidon will have been met. Staff will then begin negotiating with Poseidon to prepare a final Draft WPA. Prepared and Reviewed by: Ken Weinberg, Director of Water Resources Reviewed by: Sandra L. Kerl, Deputy General Manager Approved by: Maureen A. Stapleton General Manager Attachment: Agreement memorializing certain understandings and establishing a framework for cooperation regarding a desalination project located in the city of Carlsbad Page 24 of 319 ATTACHMENT AGREEMENT MEMORIALIZING CERTAIN UNDERSTANDINGS AND ESTABLISHING A FRAMEWORK FOR COOPERATION REGARDING A DESALINATION PROJECT LOCATED IN THE CITY OF CARLSBAD Entered Into By and Among The San Diego County Water Authority, The City of Carlsbad, The Carlsbad Municipal Water District, And The Carlsbad Housing and Redevelopment Commission Month, day, 2011 Page 25 of 319 17 This agreement (the "Agreement"), dated as of August , 2011, is entered into by and among the City of Carlsbad ("City"), Carlsbad Housing and Redevelopment Commission ("RDA"), Carlsbad Municipal Water District ("District"), and the San Diego County Water Authority ("Water Authority") which agree as follows: 1. Term. This Agreement is effective on the date it is fully executed. If the Water Authority fails to execute a water purchase agreement as contemplated by the Term Sheet dated July 22, 2010, a copy of which is attached hereto as Attachment A (the "CWA Water Purchase Agreement"), then this Agreement will terminate upon written notice by the Water Authority to the City of the Water Authority's decision. Otherwise, this Agreement will remain in full force and effect for the term of the CWA Water Purchase Agreement. 2. Waiver and Release. a. Subject to Section 2. c., the City, RDA, and District represent and warrant based upon current and actual knowledge that there are no agreements between or among each or any of them and any other party that would impair or impede the Water Authority from executing the CWA Water Purchase Agreement, or affect the price to be paid by the Water Authority for water or services provided under the Water Purchase Agreement. b. The City, RDA, and District, individually and collectively, waive and agree not to assert any claim or cause of action for money, damages, or other legal or equitable remedy against the Water Authority, arising from the negotiation or execution of the CWA Water Purchase Agreement, or seek to prevent or otherwise enjoin its negotiation or execution. c. Upon execution of this Agreement, the City, RDA, and District each will promptly advise Poseidon that it is willing to terminate any water purchase agreement between or among each or any of them and Poseidon. If the Water Authority approves the CWA Water Purchase Agreement, the City, RDA, and District, each will promptly and without cost to the Water Authority, and upon consent by Poseidon to termination without cost to the City, RDA or District, terminate any existing agreement each or any of them may have with respect to purchase of water from Poseidon. d. Nothing in this Agreement is intended to limit the discretion of the Water Authority board of directors, or to give to the City, RDA, or District any right of approval, with respect to the CWA Water Purchase Agreement. 3. Purchase of Desalination Project Water From The Water Authority. a. The District has requested and pursuant to this Section 3 the Water Authority will allow the District to contract with the Water Authority for purchase annually of up to 10,000 acre feet of desalinated water the Water Authority obtains pursuant to the CWA Water Purchase Agreement ("Project Water"). The purchase arrangement described in this Section 3 reflects the unique involvement and relationship among the City, RDA, and District, on the one hand, and Poseidon, on the other hand, and is not precedent for any other policy or practice of the Water Authority, as determined by time-to-time by the Water Authority board of directors regarding member agency participation in Water Authority supply projects. 2 Page 26 of 319 ! b. The District may make a one-time determination fixing the total amount of Project Water it will purchase annually and will notify the Water Authority in writing of that annual purchase amount no less than 45 days after the Water Authority notifies the District in writing that a final draft CWA Water Purchase Agreement containing final pricing and terms is available for public review. If the price or terms contained within the CWA Water Purchase Agreement should change after the date District makes its determination in writing fixing the amount it purchases annually then District may modify or withdraw its determination. Nothing in this section prohibits the Water Authority from providing or District from requesting preliminary information on contract pricing and terms as it becomes publicly available. c. (i) If the District gives the notice provided in paragraph b, the Water Authority and the District will cooperate in good faith to prepare and execute an agreement to effectuate the water purchase contemplated by this Section 3, including the schedule, location, and other terms and conditions of delivery of Project Water. The agreement will have a term equal to the initial term of the CWA Water Purchase Agreement and in all respects will be consistent with the provisions of this Section 3. The agreement will provide an opportunity for the District to terminate the agreement upon 30 days written notice by the Water Authority, if the Water Authority determines to continue the CWA Water Purchase Agreement notwithstanding the occurrence of an event or circumstance that under the CWA Water Purchase Agreement would (a) result in an extraordinary increase in the price of desalinated water and (b) constitute grounds for the Water Authority to terminate the CWA Water Purchase Agreement. (ii) On June 23, 2011, the Water Authority Board of Directors adopted guiding principles for member agency purchases of local supply from the Carlsbad Desalination Project Following execution of this Agreement the Water Authority will prepare a draft uniform member agency supply purchase agreement to establish terms and conditions for the purchase by Water Authority member agencies, including the District, of Project Water, including but not limited to: term of agreement, change in ownership of the Project, price of water, terms for delivery, water quality, rights and obligations of parties pertaining to capital modifications, changes in law and other uncontrollable circumstances that may cause changes to pricing, relationship to the Water Authority's Water Shortage and Drought Management Plan, and termination. Except as expressly provided in this Agreement, the terms and conditions of the agreement referred to in paragraph (i) will be consistent with the guiding principles adopted by the Water Authority Board of Directors on June 23, 2011, or such later guiding principles in existence at the time the agreement is made, and with the uniform member agency supply purchase agreement. d. If the Water Authority acquires the desalination plant according to the CWA Water Purchase Agreement, and if the District at that time has an unexpired agreement to purchase water under this Section 3, then the District will have 90 days after the date it receives the Water Authority's notice of such acquisition to state in writing whether it desires to continue the water purchase agreement. If notice to continue is given, the Water Authority and the District will cooperate in good faith to prepare and execute an extension of or new water purchase agreement for a mutually agreed duration. After the Water Authority acquires ownership of the Project the price of desalinated water to Carlsbad and any other member agencies purchasing such desalinated water pursuant to a contract with the Water Authority as a Page 27 of 319 local supply of the member agency will reflect the Water Authority's cost for capital, operation, and maintenance for the production and conveyance of Project Water to the District. e. The water purchased by the District pursuant to this Section 3 will be local water of the District, is designated as the "District's Local Water," and is additional to any water the District may receive from the Water Authority that is not attributable to the desalination plant (other Water Authority supplies). The District's Local Water may be blended with other Water Authority supplies before delivery to the District The delivery of the District's Local Water will be the same as other water of the Water Authority that is delivered to the District, unless the District's Local Water is delivered pursuant to Section 4. f. The price paid by the District for the District's Local Water will be determined as follows: (i) Unless the circumstances described in paragraph (ii) or (iii) have occurred, and subject to Section 4. c. (iii), the price per acre foot paid by the District to the Water Authority for the District's Local Water will be the full cost paid by the Water Authority for a similar amount of water delivered to the Water Authority delivery point under the Water Purchase Agreement, plus the transportation charge established by the Water Authority under its then applicable rate structure, plus a reasonable administrative charge. (ii) If the price paid by the Water Authority under the Water Purchase Agreement is adjusted to account for the Water Authority's exercise its right under the Water Purchase Agreement to sever the pipeline system for conveyance of desalinated water from the desalination plant to the Water Authority delivery point pursuant to the CWA Water Purchase Agreement (the "Delivery System") and terminate Poseidon's obligations with respect thereto, then the price paid by the District will include the adjusted full cost paid under the Water Purchase Agreement plus the transportation charge established by the Water Authority under its then applicable rate structure, plus a reasonable administrative charge. (iii) If the Water Authority acquires the desalination project in accordance with the Water Purchase Agreement, the price paid by the District will be determined by the Water Authority based upon the full cost (including without limitation, capital, debt service, acquisition, operation, maintenance, administrative overhead, depreciation, reserves) of the Water Authority's ownership, operation, and maintenance of the facilities, plus the transportation charge established by the Water Authority under its then applicable rate structure, plus a reasonable administrative charge. g. This agreement establishes the "methodology" by which the Water Authority intends to charge the District for the production and delivery of District's Local Water. Nothing in this agreement precludes the Water Authority from establishing or excuses the District from paying any other non-discriminatory fee or charge generally applicable to Water Authority member agencies. h. The Water Authority will bill the District for the District's Local Water on a per acre foot basis as it is delivered subject to the same rules and regulations applicable to billing for other water the Water Authority provides to its member agencies including the District. Page 28 of 319 4. Direct District Connection to Distribution System. a. The Water Authority is responsible for construction, operation, and maintenance of the Delivery System. The Water Authority may accomplish this by contract with Poseidon, including the CWA Water Purchase Agreement b. The District desires to have a connection to the Delivery System at the location shown on Exhibit A. The Water Authority will include a provision in the CWA Water Purchase Agreement that will cause Poseidon, to construct one (1) "blind flange" at the location shown on Exhibit A. If the Water Authority builds the Delivery System pursuant to an agreement other than the CWA Water Purchase Agreement, the Water Authority will include a specification for construction of the blind flange. The Water Authority will not require the District to pay the cost of the blind flange, except that the cost of the flange may be included in the full cost of the project for the purposes of Section 3. c. If the District acquires water from the Water Authority pursuant to the provisions of Section 3 of this Agreement, District may connect its local water conveyance and distribution facilities to the Delivery System on the following terms and conditions: (i) If at any time after the Water Authority executes the CWA Water Purchase Agreement, the District notifies the Water Authority of its desire to have a connection, then the Water Authority will allow the connection subject to the same rules and regulations generally applicable to connections to Water Authority facilities by Water Authority member agencies. (ii) Except for the blind flange constructed pursuant to of this Section 4 (a), District will be responsible to pay for all delivery system or flow control facilities required to connect its facilities to the Delivery System. The connection facilities will be constructed in accordance with the rules and regulations generally applicable to connection to Water Authority facilities by Water Authority member agencies. (iii) So long as the price is set according to Section 3 (f) , (i) of this agreement, the District will not be charged the Water Authority transportation charge for the District's Local Water delivered through the connection authorized by this Section 4. (iv) The provisions of this Section 4 apply only if the District chooses to acquire water pursuant to the provision of Section 3 of this Agreement. 5. Incentive Funds. If the Water Authority applies for and receives any per-acre foot incentive funds provided by the Metropolitan Water District of Southern California ("MWD") or any other state or federal agency, the Water Authority will provide the District a per acre foot credit against the price for the District's Local Water equal to the per acre foot incentive received by the Water Authority. The District's Local Water is not eligible for participation in any local supply development incentive or other similar project funding program of the Water Authority. If the Water Authority applies for and receives any federal or state grants or other direct funding that is in support of the desalination project and that is not a per- acre foot incentive, those funds will be used to reduce the project cost generally and will not be Page 29 of 319 2\ eligible for a per acre foot credit to the District. Nothing in this paragraph obligates the Water Authority to apply for any incentive, grant, or other funding. 6. Land Use and Construction Approvals. a The City, RDA, and District each agree that the provisions of paragraph (6) of section 5 of the County Water Authority Act (West's Annot. Cal. Wat C. Append. § 45-5, para. (6)) apply to the construction, operation, and maintenance of the Delivery System. The City will not impose any franchise fee or other similar fee directly or indirectly on the Water Authority for use of streets or other rights-of-way with respect to the Delivery System. With respect to the Delivery System: (i) The City will apply the same rules, regulations, or requirements relating to excavation, refilling of excavation, relaying of pavement, and protection of public safety during periods of construction that the City applies to itself or the District; (ii) The City will not impose a permit fee; (iii) The City may impose a reasonable inspection fee; (iv) The Water Authority will comply with the requirements imposed pursuant to this paragraph. b. The City will cooperate with the Water Authority and Poseidon, and will take all reasonable steps necessary to obtain an encroachment permit acceptable to the Water Authority from the California Department of Transportation ("CalTrans") for the portion of the Delivery System that is within right-of-way or other property subject to CalTrans jurisdiction and regulatory control. c. The City acknowledges that it has previously determined pursuant to Government Code Section 65402, subdiv. (c) that the Delivery System conforms with the City's adopted General Plan. The City also acknowledges that Coastal Development Permit No. 04-41 has been approved by the City on May 3, 2006 for the Poseidon Desalination Project pursuant to City Planning Commission Resolution No. 6092. d. The City acknowledges the need for timely completion of the Project and agrees to expeditiously process the Poseidon's requests for the review and approval of Poseidon's improvement plans. The City further acknowledges that the Engineering Procurement Construction method of delivery of the Project requires City review and approval of the improvement plans for the Project as they are completed to accommodate the concurrent design and construction of portions of the desalination facility and portions of the Delivery System . For purposes of obtaining written approval from the City, Poseidon shall submit the completed improvement plans (and other information as may reasonably be requested by the City Engineer) to the City Engineer. The City Engineer shall promptly approve or disapprove of any proposed improvements, and shall not unreasonably withhold or condition its approval. 12Page 30 of 319 «- t-~ 7. Mitigation and RDA Assistance. a. The Water Authority will not acquire the desalination plant by lease, purchase, or otherwise for a period often years following commercial operation of the Project, as defined in the CWA Water Purchase Agreement, unless the acquisition is a consequence of a failure to achieve commercial operation by the date specified in the CWA Water Purchase Agreement, or of a default by Poseidon after commercial operation under the CWA Water Purchase Agreement. b. If the Water Authority acquires the desalination plant in consequence of a failure or default described in this Section 7(a), the City, RDA, and District will not enforce any obligation of any person or entity to make any future, non-delinquent payments of any tax or payment in lieu under the development agreement between the City and Poseidon recorded October 30, 2009 that arises after the date the Water Authority takes ownership of the desalination plant. c. If the Water Authority acquires the Project sooner than 10 years after commercial operation, except in consequence of a failure or default as described in Section 7(a), then the Water Authority will pay the RDA an amount equal to the property tax increment payments, if any as they become due, that would have been paid by Poseidon for each year from the date of acquisition to the expiration of the tenth year from the date of commercial operation, but only if the RDA is entitled to a tax increment payment in that year under applicable state law. d. Not later than 105 days prior to the hearing held pursuant to Section 1245.235, or at the time of the offer made to the owner or owners of record pursuant to Section 7267.2 of the Government Code, whichever occurs earlier, the Water Authority will give notice to the City and RDA of its desire for representatives of the respective agencies to meet in good faith regarding the potential acquisition. e. The City unconditionally waives and agrees not to enforce the terms of the development agreement between the City and Poseidon recorded October 30, 2009 with respect to the Water Authority. If the Water Authority acquires the desalination plant under any circumstances before Poseidon commences commercial operations it will complete those mitigation measures included in the Mitigation Monitoring and Reporting Program within the certified Environmental Impact Report for the Desalination Plant approved December 2005. If the Water Authority acquires the project: 1) prior to commercial operation and before the date 48 months from the date of commencement of construction and 2) Poseidon is not in default or failure as defined in Section 7 (a) herein, and 3) the land dedications and public improvements specified in Precise Development Plan #00-02(B) and Redevelopment Permit #05-12(A) and specifically defined in Exhibit B to this agreement have not been completed; then the Water Authority will cause those dedications and improvements to be completed. The provisions of this paragraph may be enforced by an action for specific performance. f If the Water Authority intends to declare a default under the CWA Water Purchase Agreement and exercise a right under that agreement to acquire the Project, the Water Authority will provide the City, RDA, and District, individually and collectively, a period of 90 days to seek to cure the default. The 90 day period will commence following any right to cure Page 31 of 319 provided under the CWA Water Purchase Agreement to Poseidon or a Poseidon related person or entity. Miscellaneous Provisions. 8.1 Implementation. Each party's performances required by the provisions of this Agreement shall be undertaken in good faith, and with all parties dealing fairly with one another. Each party agrees to execute any further documents consistent with the terms of this Agreement as any other party may from time to time find necessary to appropriately effectuate the purposes of this Agreement. Nothing in this Agreement is intended to limit or control the exercise of regulatory authority of the City, the District or the RDA, or any of their respective legislative bodies, officers or employees with respect to the desalination project. 8.2 Entire Agreement. This Agreement constitutes the entire understanding among the parties with respect to the matters set forth herein, and supersedes all prior or contemporaneous understandings or agreements among the parties with respect to the subject matter hereof, whether oral or written. 8.3 Non-severability. The covenants and obligations of each party constitute consideration for the covenants and obligations of the other parties and that the provisions of this Agreement cannot be severed one from the other without affecting the respective and mutual benefits to be obtained by the parties from enforcement of the Agreement as a whole. 8.4 Amendment. Neither this Agreement nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an instrument in writing signed by the party against which the enforcement of such waiver, modification, amendment, discharge or termination is sought, and then only to the extent set forth in such writing. 8.5 Construction. This Agreement constitutes a fully-negotiated agreement among commercially sophisticated parties, each assisted by legal counsel, and the terms of this Agreement shall not be construed or interpreted for or against any party hereto because that party or its legal representative drafted or prepared such provision. Headings, titles and captions are for convenience only and shall not be used for the interpretation of the provisions of this Agreement. 8.6 Controlling Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of California, without giving effect to any choice-of-law or conflicts-of-laws rule or principle that would result in the application of any other laws. 8.7 Notices. Any notice, approval, consent, waiver or other communication required or permitted to be given or to be served upon any party in connection with this Agreement shall be in writing. Such notice shall be personally served, sent by facsimile, sent prepaid by registered or certified mail with return receipt requested, or sent by reputable overnight delivery service, such as Federal Express, and shall be deemed given: (a) if personally served, when delivered to the Party to whom such notice is addressed; (b) if given by facsimile, when sent, provided that the confirmation sheet from the sending fax machine confirms that the total number of pages were successfully transmitted; (c) if given by prepaid or certified mail with 8 Page 32 of 319 return receipt requested, on the date of execution of the return receipt, or (d) if sent by reputable overnight delivery service, such as Federal Express, when received. Such notices shall be addressed to the party to whom such notice is to be given at the address specified below or as such party shall otherwise direct in writing to the other parties delivered or sent in accordance with this paragraph. The "copy to" notice to be given as set forth below is a courtesy copy only, a notice given to such person is not sufficient to effect giving a notice to the principal party, and a failure to give such a courtesy copy of a notice does not constitute a failure to give notice to the principal party. If to the Authority: With a copy to: With a copy to: If to the District: San Diego County Water Authority 4677 Overland Avenue San Diego, CA 92123 ATTN: General Manager San Diego County Water Authority 4677 Overland Avenue S an Diego, CA 92123 ATTN: General Counsel If to fee City: City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 ATTN: City Manager City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 ATTN: City Attorney Carlsbad Municipal Water District 1200 Carlsbad Village Drive Carlsbad, CA 92008 ATTN: Executive Director If to RDA: Carlsbad Housing and Redevelopment Commission 1200 Carlsbad Village Dr. Carlsbad, CA 92008 ATTN: Executive Director 8.8 Cumulative Rights; Waiver. The rights created under this Agreement, or by law or equity, shall be cumulative and may be exercised at any time and from time to time. Except as otherwise expressly provided in this Agreement or except passage of time specified by statute for limitation of actions, a failure, delay, or omission by any party in exercising any right, shall not be construed or deemed to be, or operate as a waiver of that right, and no single or partial exercise by any party of a right preclude any other or future exercise thereof or the exercise of Page 33 of 319 any other right. No party may waive any right and no non-defaulting party may waive any breach by the defaulting party of any provision of this Agreement unless the waiver is in writing, and any waiver by any non-defaulting party of any breach by a defaulting party of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of any party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver of any provision or any breach of any provision of this Agreement or deprive that party of the right thereafter to insist upon strict adherence to that provision or any other provision of this Agreement. 8.9 No Third Party Beneficiaries. This Agreement does not create, and shall not be construed to create, any rights enforceable by any person, partnership, corporation, joint venture, Limited Liability Company or other form of organization or association of any kind that is not a party to this Agreement. 8.10 Execution in Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The signature page of any counterpart may be detached there from without impairing the legal effect of the signature(s) thereon, provided such signature page is attached to any other counterpart identical thereto except for having an additional signature page executed by the other party. Each party agrees that the other parties may rely upon the facsimile signature of a party on this Agreement as constituting a duly authorized, irrevocable, actual, current delivery of this Agreement as fully as if this Agreement contained the original ink signature of the party supplying a facsimile signature. 8.11 Time of the Essence. Time is of the essence of each and every provision of this Agreement. 8.12 Authority. Each party shall deliver to the other party or parties copies of such resolutions, certificates or written assurances evidencing authorization to execute, deliver and perform this Agreement. 8.13 Number. Gender. Where a word or phrase is defined in this Agreement, its other grammatical forms have a corresponding meaning. As used herein, and as the circumstances require, the plural term shall include the singular, the singular shall include the plural, the neuter term shall include the masculine and feminine genders, the masculine term shall include the neuter and the feminine genders, and the feminine term shall include the neuter and the masculine genders. 8.14 Relationship. Nothing in this Agreement shall be deemed to constitute either party a partner, agent or legal representative of the other party. No liability or benefits, such as workers' compensation, pension rights or liabilities, other provisions or liabilities arising out of or related to a contract for hire or employer/employee relationship, shall arise or accrue to any party's agent or employee as a result of this Agreement or its performance. Each party is responsible for its own acts and omissions, and the acts or omissions of its respective officers, employees and agents. 10 Page 34 of 319 8.15 Defense. The parties agree to cooperate to defend this Agreement by any person or entity that is not a party to this Agreement, provided, however, that each party shall bear its own attorneys' fees and costs, unless the parties otherwise agree. 8.16 Assignment. The City, District or RDA may not assign this Agreement or any of their respective rights, interests, or obligations under it without the prior written consent of the Water Authority. The Water Authority may not assign this Agreement or any of its rights, interests, or obligations under it without the prior written consent of the City, District and RDA. Consent under this paragraph will not be unreasonably withheld or delayed. Subject to the foregoing restrictions, the terms and provisions of this Agreement shall be binding upon and inure to the benefit of all affiliates, subsidiaries, assigns, and successors-in-interest of the parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "WATER AUTHORITY" San Diego County Water Authority By: Maureen A. Stapleton General Manager "CITY" City of Carlsbad By: Lisa Hildabrand City Manager "RDA" Carlsbad Housing and Redevelopment Commission By:__ Lisa Hildabrand Executive Director 11 , „ Page 35 of 319 "DISTRICT" Carlsbad Municipal Water District By: Lisa Hildabrand Executive Director Page 36 of 319 Tentative Location of Carlsbad MWD Connection EPS BOUNDARY DELIVERY POINT PROPOSED 54* PIPELINE PROPOSED- 54" PIPELINE LEGEND PROPOSED 54" PIPELINE SCALE: 1" = 3/4 MILES 0 3/4 MILES 1-1/2 MILES TENTATIVE LOCATION CARLSBAD MWD CONNECTION TO PRODUCT WATER DELIVERY SYSTEM FOR CARLSBAD DESALINATION PROJECT EXHIBIT A EXHIBIT «B' RPA Community Enhancement Payment Project List Amount Total of all projects listed below $6,650,000 1. Parking improvements in vicinity of power plant 2. Frontage improvements - Carlsbad Blvd 3. Signalization of pedestrian crossing 4. Cannon Park expansion 5. Bluff top improvem ents in vicinity of power plant 6. Beach restroom 7. Coastal Rail Trail - Cannon to Tamarack 8. North Agua Hedionda Lagoon trail improvements 9. Power Plant screening 14 Page 38 of 319 *•• • J C I T Y O F CARLSBAD Memorandum September 13, 2011 To: City Manager From: Assistant City ClerlT Via: Assistant City Attorney R. Re: REVISION TO CITY COUNCIL AGENDA ITEM NO. 13 The agenda bill approving an agreement with the San Diego County Water Authority regarding the desalination project contained one resolution that authorized only the Executive Director of the Municipal Water District to execute said agreement. The agreement is a multiple agency document that requires the signature of the Water District and RDA Executive Director and City Manager. Revisions have been made to the agenda bill to reflect each agency's authorization for execution of the agreement. Revisions include: • Agenda Bill No. was changed from 739, a CMWD number to City Council Agenda No. 20,684 to reflect a joint agency agenda item. • The addition of City Council Resolution 2011-223, authorizing the City Manager to execute the agreement on behalf of the City. • The addition of Housing and Redevelopment Commission Resolution No. 512, authorizing the Executive Director to execute the agreement on behalf of the RDA. The revised agenda bill in its entirety is attached. Attachment ®\ City Hall fey 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 1 760-720-9461 fax I www.carlsbadca.gov Carlsbad/San Diego County Water Authority Desalination Project Agreement Overview•Background•Overview of Agreement•Staff Recommendation•Board discussion and action Background•September 2004 – Poseidon and CMWD enter into a Water Purchase Agreement•June 2006 – Carlsbad Seawater Desalination Project obtains City approvals•June 2006 – Carlsbad and Poseidon enter into a Development Agreement for the CSDP3 Background•June 2010 –SDCWA sues MWD over water rates and charges•June 2010 –SDCWA and Poseidon begin discussions regarding a water purchase agreement•July 2010 ‐SDCWA Board approves a Term Sheet outlining general terms for a water purchase agreement between SDCWA and Poseidon4 SDCWA/Poseidon Term Sheet•Outlines general details of a SDCWA/Poseidon Water Purchase Agreement•“Conditions Precedent” to negotiations–Poseidon to provide finance/investor commitment–Poseidon/SDCWA to cancel all Confidentiality Agreements–Poseidon to obtain commitment to terminate all existing Water Purchase Agreements5 Agreement with SDCWA•To facilitate development of the CSDP, CMWD must terminate its WPA with Poseidon•Carlsbad is seeking to protect its interests–Project conditions of approval–Environmental Mitigation Measures–Development Agreement–Water Purchase Agreement6 Carlsbad’s Objectives•Quantity•Quality•Reliability•Price•Public Benefit7 Overview of AgreementKEY PROVISIONS OF THE AGREEMENTPurchase of Product WaterCMWD may elect to purchase up to 10,000 acre‐feet per year as a local supplyDirect Connection to the Carlsbad Seawater Desalination Project (CSDP)CMWD, at its own cost, may connect its local potable water supply system directly to the desalinated water pipeline distribution systemPrice of Product WaterThe price for purchasing desalinated water as a local supply will be equal to the actual cost to produce and transport the water, less any incentive money which may become availableRedevelopment Agency (RDA) Tax Increment RevenueThe RDA will receive a minimum of ten years of tax increment revenue regardless of ownership of the project (with limitation)8 Overview of AgreementKEY PROVISIONS OF THE AGREEMENT (cont’d.)Public Benefits of the ProjectThe City will receive all public improvements and land dedications outlined in the CSDP approvals regardless of ownership of the project (with limitation)Use of City StreetsCity street standards will be used for all work performed within City street rights‐of‐way, regardless of whether the pipelines are constructed by Poseidon or SDCWADevelopment AgreementThe City would agree to not enforce the terms of the Development Agreement as it pertains to the SDCWA, should SDCWA take over ownership of the project as anticipated in its Term Sheet with Poseidon9 Agreement Exceptions•Agreement addresses possibility of a Poseidon default under its agreement with SDCWA–If SDCWA acquires plant less than 10 years from beginning of commercial operation, Carlsbad will not receive “lost” property tax increment–If SDCWA acquires plant prior to beginning of commercial operation, Carlsbad will not receive public improvements and land dedications10 Staff Recommendation•Approve the Agreement with the San Diego County Water Authority memorializing certain understandings and establishing a framework for cooperation regarding the proposed Carlsbad Seawater Desalination Project.11 Board Discussion and Action12QUESTIONS?