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HomeMy WebLinkAbout2012-03-13; City Council; 20841; APPROVED REIMBURSEMENT AGREEMENT POSEIDON LPCITY OF CARLSBAD AND 1 6 CARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL AB# MTG. DEPT. 20.841 3/13/12 UTIL APPROVE REIMBURSEMENT AGREEMENT BETWEEN CITY OF CARLSBAD, CARLSBAD MUNICIPAL WATER DISTRICT AND POSEIDON RESOURCES (CHANNELSIDE) LP DEPT. HEAD CITY ATTY. CITY MGR. RECOMMENDED ACTION: City Council adopt Resolution No. 2012-066 approving the Reimbursement Agreement between the City of Carlsbad, Carlsbad Municipal Water District and Poseidon Resources (Channelside) LP; and, Board adopt Resolution No. 1439 approving the Reimbursement Agreement between the Carlsbad Municipal Water District, City of Carlsbad and Poseidon Resources (Channelside) LP. ITEM EXPLANATION: Recognizing the importance of securing a sustainable future water supply that is locally controlled, more than 10 years ago city officials took a leadership position in working with Poseidon Resources to develop a desalination project in Carisbad. The Carlsbad Municipal Water District, a subsidiary district of the City of Carlsbad, was the first water agency in San Diego County to negotiate a contract with Poseidon Resources to purchase water from the project. The landmark deal, called a water purchase agreement, cleared the way for the public- private partnership between the city and Poseidon Resources that enabled the project to become a reality. The terms of the agreement were intended to ensure the community would have a reliable, drought-proof water supply developed at no additional expense to the region's taxpayers. Due to financial considerations and the regional nature of this important local water supply, Poseidon Resources is now in discussions with the San Diego County Water Authority on a possible new water purchase agreement. Under such an agreement, the Water Authority would buy all the water from Poseidon and deliver it to water agencies, inciuding the Carlsbad Municipai Water District, instead of water agencies buying it directly from Poseidon. Poseidon is in the process of finalizing the project's financing and working with the San Diego County Water Authority on the details of a water purchase arrangement. The project could be completed as early as 2014. Since June 2002, CMWD contracted with several third party consultants with expertise in various disciplines relating to desalinated water. The consultants' fees paid for by CMWD in connection with the Carlsbad Water Purchase Agreement equaled $560,000. Poseidon has agreed to reimburse CMWD for such third party consultants' costs within one year after the Project commences commercial operation which shall be the date upon which Poseidon first sells any water to the Water Authority or other person or entity. DEPARTMENT CONTACT: Glenn Pruim 760-438-2722 Glenn.Pruim@carlsbadca.qov FOR CITY CLERKS USE ONLY. BOARD ACTION: APPROVED CONTINUED TO DATE SPECIFIC • DENIED CONTINUED TO DATE UNKNOWN • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER-SEE MINUTES • AMENDED • Page Two The Reimbursement Agreement also includes understandings that the City would agree to use good faith efforts to minimize the overall financial impact to Poseidon, provide reasonable assistance to Poseidon in connection with securing timely approval of the SDCWA Water Purchase Agreement, and expeditiously process Poseidon's requests for the review and approval of the Project improvement plans. By entering into this Agreement, Poseidon and the District agree that the Carlsbad Water Purchase Agreement shall terminate and no longer have any force and effect upon approval of the SDCWA Water Purchase Agreement by the SDCWA Board of Directors. FISCAL IMPACT: Poseidon will reimburse the District for its reasonable Third Party Consultant Costs incurred in connection with the Carlsbad Water Purchase Agreement in the amount of $560,000. This reimbursement will be deposited into the CMWD operating fund. ENVIRONMENTAL IMPACT: The City of Carlsbad, acting as lead agency forthe Project, prepared an Environmental Impact Report (EIR 03-05) in compliance with the California Environmental Quality Act ("CEQA") which the City certified on June 13, 2006. The City of Carlsbad prepared an Addendum to the EIR 03-05 (EIR 03- 05(A)) which was adopted on September 15, 2009, and reflects minor and immaterial design modifications to the Project site plan, appurtenant facilities and water delivery pipeline network. The Reimbursement Agreement is within the scope ofthe previously certified EIR and adopted addendum. EXHIBITS: 1. City Council Resolution No. 2012-066 approving the Reimbursement Agreement between the City of Carlsbad, Carlsbad Municipal Water District and Poseidon Resources (Channelside) LP. 2. Board Resolution No. 1439 approving the Reimbursement Agreement between the Carlsbad Municipal Water District, City of Carlsbad and Poseidon Resources (Channelside) LP. 3. Reimbursement Agreement. 9- 1 RESOLUTION NO. 2012-066 19 20 21 22 23 24 25 26 27 28 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING A REIMBURSEMENT ^ AGREEMENT BETWEEN THE CITY OF CARLSBAD, THE 4 CARLSBAD MUNICIPAL WATER DISTRICT AND POSEIDON RESOURCES (CHANNELSIDE) LP 5 " 6 WHEREAS, more than ten years ago city officials took a leadership position in 7 working with Poseidon Resources to develop a desalination project in Carlsbad; and ^ WHEREAS, due to financial considerations and the regional nature of this important local water supply, Poseidon Resources is now in discussions with the San Diego County Water Authority(SDCWA) on a possible new water purchase agreement; and WHEREAS, the City is aware that the Carlsbad Municipal Water District has contracted with several third party consultants with expertise in various disciplines 9 10 11 12 13 14 j5 relating to desalinated water; and 16 WHEREAS, the City concurs that Poseidon has agreed to reimburse the 17 Carlsbad Municipal Water District for such third party consultants' costs within one year 18 after the Project commences commercial operation; and, WHEREAS, this Reimbursement Agreement also includes understanding the City would agree to use good faith efforts to minimize the overall financial impact to Poseidon, provide reasonable assistance to Poseidon in connection with securing timely approval of the SDWCA Water Purchase Agreement, and expeditiously process Poseidon's requests for the review and approval ofthe Project improvement plans. 3 1 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of 2 Carlsbad, California, as follows that: 1. The above recitations are true and correct. 2. The City of Carlsbad City Council approves the Reimbursement Agreement between the City of Carlsbad, the Carlsbad Municipal Water District, and Poseidon Resources (Channelside), LP. 3 4 5 6 7 g 3. That the City Manager is authorized to execute the Reimbursement 9 Agreement. 10 11 12 13 14 15 16 17 18 23 24 25 26 27 28 // // // // // // // 19 // 20 // 21 // 22 1 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the 2 Carlsbad City Council and Carlsbad Municipal Water District Board of Directors, held ^ on the 13th day of March, 2012, by the following vote: AYES: Council Members Hall, Kulchin, Blackburn, Douglas and Packard. NOES: None. ABSENT: None. MATT HALL, Mayor ATTEST 4 5 6 7 8 9 10 11 12 13 14 ' lO^RRAINE M.WOOD, City Clerk 16 (SEAL) 18 19 20 21 22 23 24 25 26 27 28 1 RESOLUTION NO. 1439 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF CARLSBAD MUNICIPAL WATER DISTRICT (CMWD), ^ APPROVING A REIMBURSEMENT AGREEMENT BETWEEN THE CARLSBAD MUNICIPAL WATER DISTRICT, CITY OF CARLSBAD AND POSEIDON 5 RESOURCES (CHANNELSIDE), LP 25 26 27 28 WHEREAS, more than ten years ago city officials took a leadership position in working with Poseidon Resources to develop a desalination project in Carlsbad; and WHEREAS, the Carlsbad Municipal Water District, a subsidiary district ofthe City 6 7 8 9 10 of Carlsbad, was the first water agency in San Diego County to negotiate a contract with 11 Poseidon Resources to purchase water from the project; and 12 WHEREAS, due to financial considerations and the regional nature of this 1^ important local water supply, Poseidon Resources in now in discussions with the San Diego County Water Authority (SDCWA) on a possible new water purchase agreement; and WHEREAS, since June 2002, CMWD contracted with several third party consultants with expertise in various disciplines relating to desalinated water. The Consultants' fees paid for by CMWD in connection with the Carlsbad Water Purchase 14 15 16 17 18 19 20 Agreement equaled $560,000; and 21 WHEREAS, Poseidon has agreed to reimburse CMWD for such third party 22 consultants' costs within one year after the Project commences commercial operations 23 which shall be the date upon which Poseidon first sells any water to the Water Authority '^^ or other person or entity; and WHEREAS, by entering into this Agreement, Poseidon and the District agree that the Carlsbad Water Purchase Agreement shall terminate and no longer have any force 1 and effect upon approval of the SDCWA Water Purchase Agreement by the SDCWA 2 Board of Directors. ^ NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board ofthe City of Carlsbad, California, as follows that: 1. The above recitations are true and correct. 2. The Carlsbad Municipal Water District Board of Directors approve the Reimbursement Agreement between the Municipal Water District, the City of 9 Carlsbad and Poseidon Resources (Channelside), LP. 10 3. That the Executive Director is authorized to execute the Reimbursement 11 agreement. 12 13 14 15 16 17 18 23 24 25 26 27 28 // // // // // 19 // 20 // 21 // 22 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 and the Carlsbad City Council, held on the 13^^ day of March, 2012, by the following vote: AYES: Council Members Hall, Kulchin, Blackburn, Douglas and Packard. NOES: None. ABSENT: None. MATT HALL, President ATTEST: (SEAL) INE M. WOOD, Secretary X:co - EXHIBIT 2 A Reimbursement Agreement between CITY OF CARLSBAD, CARLSBAD MUNICIPAL WATER DISTRICT and POSEIDON RESOURCES (CHANNELSIDE) LP In connection with its proposed 50 MGD seawater desalination facility and associated conveyance pipeline (the "Proiect"). Poseidon Resources (Channelside) LP (f/k/a Poseidon Resources Channelside, LLC) (''Poseidon'') has entered into: (i) a Water Purchase Agreement, dated as of September 28, 2004, as amended (the "Carlsbad Water Purchase Agreement"), with the Carlsbad Municipal Water District (the "District") and (ii) an Amended and Restated Development Agreement, dated as of October 22, 2009 (the "Development Agreement"), with the City of Carisbad (the "Citv" and collectively with the District and Poseidon, the "Parties"). In connection with the Water Purchase Agreement (the "CWA Water Purchase Agreement") to be negotiated between Poseidon and the San Diego County Water Authority (the "Water Authoritv"). Poseidon agrees to reimburse the District for certain expenses incurred by the District (the "Third Partv Consultant Costs") in connection with the negotiation of the Carlsbad Water Purchase Agreement and the City would agree to use good faith efforts to minimize the overall financial impact to Poseidon, provide reasonable assistance to Poseidon in connection with securing timely approval of the CWA Water Purchase Agreement, and expeditiously process Poseidon's requests forthe review and approval ofthe Project improvement plans. Reimbursement of Third Partv Costs Poseidon shall reimburse the District for its reasonable Third Party Consultant Costs incurred in connection with the Carlsbad Water Purchase Agreement in the amount of $560,000. Poseidon shall reimburse the District for such Third Party Consultants costs within one year after the Project commences commercial operation which shall be the date upon which Poseidon first sells any water to the Water Authority or other person or entity. If Poseidon does not reimburse the District within one year after the Project commences commercial operation as specified immediately above, then Poseidon shall be responsible for interest at the rate of 10% per year on any unpaid balance after the one year deadline and a 10% penalty on any unpaid balance after the one year deadline. Poseidon shall also be responsible for all reasonable costs and attorney's fees if collection attempts or litigation is necessary. identification of Cost Savings From and after the date of this Agreement, Poseidon and the City agree to work together in good faith to explore areas which may result in savings of Project Costs by Poseidon in relation to the construction and operation of the Project. The result of these good faith efforts shall not affect the Third Party Consultant Costs repayment obligation addressed in the previous section. Assistance bv the Citv and the District The City and the District shall provide reasonable assistance to Poseidon in connection with securing timely approval of the CWA Water Purchase Agreement, including attending and participating in public hearings and meetings of the Water Authority, and providing Poseidon with documentation and support which is reasonably requested by Poseidon and appropriate underthe circumstances. Plan Check and Inspection The City and District acknowledge the need for timely completion of the Project and agrees to expeditiously process Poseidon's requests for the review and approval of the Project improvement plans. The City and District further acknowledge that the Engineering Procurement Construction ("EPC") 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 Project. 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) to a project coordinator appointed within the City to facilitate the expeditious processing of Poseidon's requests for the review and approval the Project improvement plans. The City shall work diligently to promptly approve or disapprove of any proposed improvements, and shall not unreasonably withhold or condition its approval. The City shall make its best efforts to provide written approval or disapproval ofthe proposed improvement plans within thirty (30) days of submission of same by Poseidon. If the City disapproves a proposed improvement plan(s), then the City's written notice of disapproval shall provide the Poseidon, in reasonable detail, the reasons for such disapproval. Termination of Water Purchase Agreement By entering into this Agreement, Poseidon and the District hereby agree that the Carlsbad Water Purchase Agreement shall terminate and no longer have any force and effect upon approval ofthe CWA Water Purchase Agreement by the Water Authority Board of Directors. 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. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument. This Agreement shall bind and inure to Poseidon's assigns, successors or other persons or entities that produce and sell water from the Project. Dated: _,2012 "CITY' CITY OF CARLSBAD Approved as to form Ronal^^R. Ball ^^(/^ . City Attorney Lisa Hildabrand, City Manager ATTEST By:_ Cit^tlerk (SEAL) ^^§TINUED ON NEXT PAGE] Approved as to form "DISTRICT" CARLSBAD MUNICIPAL WATER DISTRICT Ronara R. Ball 3/sy /2_ , General Counsel ' Bv: Lisa Hildabrand Executive Director Dated: .2012 ATTEST: "POSEIDON" Poseidon Resources (Channelside) LP By: \P<^ Name: ?^T«.«U tA^ObkWio^^ Title: 0»c»*J_ P/vtSi^ilA^T"