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HomeMy WebLinkAbout2015-01-13; Municipal Water District; 796; Finance Agreement with Water Boards for RWMPT 14 CARLSBAD MUNICIPAL WATER DISTRICT -AGENDA BILL AB# 796 ADOPTING FINANCE AGREEMENT WITH THE DEPT.DIRECTOR MTG. 01-13-15 CALIFORNIA STATE WATER RESOURCE GEN. COUNSEL CONTROL BOARD FOR THE PHASE III RECYCLED DEPT. PW-UTIL WATER PROJECT CITY M R. v RECOMMENDED ACTION: Adopt CMWD Resolution No. 1511 to approve Finance Agreement with the State Water Resources Control Board for the Phase III Recycled Water Project. ITEM EXPLANATION: The CMWD started its recycled water program in 1990 with preparation of its five phase Recycled Water Master Plan (RWMP), which was accepted and approved by the Board through adoption of Resolution No. 779 on March 3, 1992. Based on the adopted Recycled Water Master Plan, the Phase I Project was designed and construction completed in 1995 and the Phase II Project was subsequently completed in 2008. The total recycled water demand is now averaging approximately 4,100 acre-feet per year (afy). On November 6, 2012, CMWD Board of Directors (Board) accepted and approved the CMWD Recycled Water Master Plan (RWMP) through the adoption of Resolution No. 1450. Based on information contained in the 2012 RWMP, a Feasibility Study for a Phase III Recycled Water Project was completed showing the recommended facilities to supply an additional estimated average annual demand of 2,088 afy. To provide the recycled water to the user sites, the Phase III project will include four major components: (1) Construction of 16 miles of pipeline ranging in size from 4-inches to 18-inches in diameter. With reference to the 2012 RWMP the following Pipeline Expansion Segments are included in 1A, 2, 4A, 5, 7, 8, 9 and 18. (2) Installing 156 metered service connections. (3) Expanding the capacity of the Carlsbad WRF from 4.0 mgd to 7.0 mgd. (4) Constructing a 1.5 MG storage reservoir at CMWD's Twin D reservoir site. Alignments for the pipeline extensions were included in the mitigated negative declaration (EIA 12- 02) for the Phase III Project. Refer to Exhibit 3 for a location map of the Phase III Project. DEPARTMENT CONTACT: David Ahles 760-603-7350 david.ahles@carlsbadca.gov FOR SECRETARY USE. BOARD ACTION: APPROVED CONTINUED TO DATE SPECIFIC ❑ DENIED CONTINUED TO DATE UNKNOWN ❑ CONTINUED ❑ RETURNED TO STAFF ❑ WITHDRAWN ❑ OTHER— SEE MINUTES ❑ AMENDED ❑ REPORT RECEIVED ❑ 1 Financial Agreement January 13, 2015 Page 2 of 4 The Board adopted Resolution No. 1456 which authorized a grant application to obtain a California State Water Resources Control Board Loan and approve and authorize dedication of a revenue source for the Carlsbad Municipal Water District's repayment of the California State Water Resources Control Board's Loan and dedication of a capital reserve fund for the Phase III Recycled Water Project. FISCAL IMPACT: The Finance Agreement for the Phase III Recycled Water Project provides project funds for the design and construction of the Phase III Recycled Water Project in the amount up to twenty nine million, five hundred thousand dollars, ($29,500,000). The term of the loan is thirty years. The term of this agreement is from November 13, 2014 to June 30, 2048 to allow for construction of the project and the term of the loan. CMWD agrees to make all installment payments at an interest rate of one percent (1.0%) per annum. The State Water Board administrative service charge will be zero percent. The total capital cost for the Phase III Project is estimated at $29,400,000 as shown in Table 1. Table 1 Capital Cost for Phase III Recycled Water Project Distribution Pipelines $20,700,000 CWRF 3.0 mgd Expansion $6,900,000 1.5 MG Steel Tank Reservoir $1,800,000 Total $29,400,000 Funding for the Phase III project includes various grants, a loan, and Recycled Water Funds. Phase III Project Grants Received On July 7, 2009, the Board approved an agreement with the San Diego County Water Authority (SDCWA) for their "Local Investigations and Studies Assistance" Program Funding for preparation of the Phase III Feasibility Study. Grant funding received was $170,500 and the Feasibility report was completed in June 2012. In June 2010, as part of developing grant funding opportunities for Carlsbad Municipal Water District's (CMWD) Phase III Recycled Water Project, staff entered into discussions with nine north San Diego County agencies (listed below) pursuing development of their own respective recycled water projects. The group collectively entered into an agreement to retain the engineering consultant, RMC, to develop a comprehensive report to maximize the use of recycled water referred to as the North San Diego County Regional Recycled Water Project (NSDCRRWP), with Olivenhain Municipal Water District (OMWD) serving as the lead agency. Olivenhain Municipal Water District Santa Fe Irrigation District Rincon Del Diablo Municipal Water District San Elijo Joint Powers Authority Leucadia Wastewater District Vallecitos Water District City of Oceanside City of Escondido Vista Irrigation District 2 Financial Agreement January 13, 2015 Page 3 of 4 The CMWD Board adopted Resolution No. 1409 authorizing an application to obtain a Proposition 84 grant for the Phase III Recycled Water Project where up to a 75 percent total cost share grant is available from the State of California for planning, engineering, environmental, and design efforts. In August 2010, OMWD, on behalf of all the partner agencies submitted for consideration several projects to the Regional Water Management Group for the San Diego region's Round 1 Proposition 84 Integrated Resources Water Management (IRWM) grant application to the Department of Water Resources. The Round 1 Proposition 84 IRWM grant was approved and an agreement was executed on December 12, 2012, officially granting $7.9 million to the San Diego IRWMP via the San Diego County Water Authority (SDCWA). The total grant for the NSDCRRWP was $1,455,000 which will be distributed evenly between the partner agencies. CMWD's share of this grant is approximately $130,000 which will be used in constructing Pipeline Segment No. 18. In July 2012, OMWD submitted for consideration of the NSDCRRWP to the Regional Water Management Group for the San Diego region's Round 2 Proposition 84 Integrated Resources Water Management (IRWM) grant application to the Department of Water Resources. The grant was approved and an agreement executed in August 2014, granting $10.5 million to the San Diego IRWMP. The San Diego County Water Authority (SDCWA) is the grantee; however it does not directly administer individual projects contained within the IRWMP. Thus, before grant funding may be distributed for each individual project, SDCWA will enter into an agreement with each project's lead agency or "local project sponsor." The total grant is $3,452,000 for NSDCRRWP which will be distributed evenly between the partner agencies. Each of the 10 agencies will receive approximately $345,000 to apply to their individual subprojects. Under a separate application, CMWD submitted the Carlsbad Water Recycling Facility Phase III Expansion and Pipeline Expansion Segments No. 1A and 7 in the region's Round 3 Proposition 84 IRWM grant application, and was notified that the project was recommended by the Regional Water Management Group to receive a grant award of $4,000,000. A summary of the available funding for the Phase III Recycled water Project is as follows: Source Amount State Water Board $29,500,000 SDCWA: Local Investigations & Studies $170,500 Proposition 84 (Round 1): NSDCRRWP $130,000 Proposition 84 (Round 2): NSDCRRWP $345,000 Proposition 84 (Round 3): SDCWA $4,000,000 Total' $34,145,500 1. Any grant funds received will be expended first. If any excess funds remain when the project is completed, the amount of the loan from the State Water Board will be reduced. 3 Financial Agreement January 13, 2015 Page 4 of 4 ENVIRONMENTAL IMPACT: An environmental impact assessment was conducted for the Phase III Recycled Water Project, and a Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program was approved by the Board through Resolution No. 1455, on November 27, 2012. Furthermore, pursuant to Public Resources Code section 21065, this action does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. PUBLIC NOTIFICATION None required. FXHIBITS_ 1. Resolution No. 1511 of the Board of Directors of Carlsbad Municipal Water District (CMWD) to approve finance agreement with the State Water Resources Control Board for the Phase III Recycled Water Project. 2. Carlsbad Municipal Water District and California State Water Resources Control Board Installment Sale Agreement for the Phase III Recycled Water Project Agreement No. 14-820-550. 3. Location Map. 4 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 Exhibit 1 RESOLUTION NO. 1511 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT (CMWD), APPROVING THE FINANCE AGREEMENT WITH THE STATE WATER RESOURCES CONTROL BOARD FOR THE PHASE III RECYCLED WATER PROJECT. WHEREAS, CMWD is pursuing funding programs for development of the Phase III Recycled Water Project; and WHEREAS, on November 6, 2012, CMWD Board of Directors (Board), accepted and approved the CMWD Recycled Water Master Plan (RWMP) through the adoption of Resolution No. 14560; and, WHEREAS, the Board adopted Resolution No. 1456 on November 27, 2012 which authorized a grant application to obtain a California State Water Resources Control Board Loan and approve and authorize dedication of a revenue source for the Carlsbad Municipal Water District's repayment of the California State Water Resources Control Board's Loan and dedication of a capital reserve fund for the Phase III Recycled Water Project. WHEREAS, the Executive Director was previously authorized per Resolution No. 1456 to execute the Finance Agreement after the agreement received approval by General Counsel and final approval by the Board. NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board of the City of Carlsbad, California, as follows that: 1. The above recitations are true and correct. 2. The Board approves the Finance Agreement Number 14-820-550 with the State Water Resource Control Board in the amount of $29,500,000 for the Phase III Recycled Water Project. // 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 Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad on the 13th day of January 2015, by the following vote to wit: AYES: Board Members Hall, Blackburn, Schumacher, Wood, Packard. NOES: None. ABSENT: None. A tL�f . MATT HALL, President ATTEST: BARBARA ENGLESON, 4cretary �.%% f R b •' C •GIFOPNIA Water Boards State Water Resources Control Board December 12, 2014 Mr. Steven R. Sarkozy Executive Director Carlsbad Municipal Water District 1200 Carlsbad Village Drive Carlsbad, CA 92008 Dear Mr. Sarkozy: Agreement Number: 14-820-550; Project Number: C-06-7899-110 i EDmu,o G. HE+oO k JR. tit U.E.4�1*. S'eC'i'iE"nNY Fi)li GNViviZJNntcy=lL PHn Ti-:CTYN EXHIBIT 2 Enclosed is your Finance Agreement for your approval and signature. This Agreement cannot be considered binding by either party until approved by the State Water Resources Control Board. The State is not obligated to make any payments for services performed prior to final approval of any Agreement. If the District is in agreement with all terms and conditions of the Agreement, please sign and date two (2) signature pages, in addition to the General Counsel Legal Opinion letter, and return to: US Mail Ms. Eva Kawada Contract Analyst State Water Resources Control Board Division of Financial Assistance P.O. Box 944212 Sacramento, CA 94244 Overnight Mail Ms. Eva Kawada Contract Analyst State Water Resources Control Board Division of Financial Assistance 1001 1 Street, 17th Floor Sacramento, CA 95814 Expeditious handling of this Agreement is appreciated. Please contact Ms. Kawada at (916) 341-5715 or ekawada(p)waterboards.ca.gov. Once final approval is obtained, we will forward you an executed copy for your records. Enclosure F-t. C;'A CHAIR j THOMAS HOWARD, EXECUTIVE OFFICER 1001 1 Street, Sacramento, CA 95814 1 Mai1'ng Address: P.O. Box 1QO, Sacramento, Ca 95812-0100 1 www.waterboards.ca.90v CARLSBAD MUNICIPAL WATER DISTRICT AND CALIFORNIA STATE WATER RESOURCES CONTROL BOARD 9%0 Water Boards INSTALLMENT SALE AGREEMENT PUBLICLY OWNED TREATMENT WORKS (POTW) CONSTRUCTION FINANCING PHASE III RECYCLED WATER PROJECT CLEAN WATER STATE REVOLVING FUND PROJECT NO. C-06-7899-110 AGREEMENT NO. 14-820-550 AMOUNT: $29,500,000 START DATE: NOVEMBER 13, 2014 END DATE: JUNE 30, 2048 DATED AS OF NOVEMBER 13, 2014 Cam. THIS PAGE INTENTIONALLY LEFT BLANK C'j� Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 TABLE OF CONTENTS ARTICLEI DEFINITIONS.........................................................................................................................1 1.1 Definitions............................................................................................................................................1 1.2 Exhibits and Appendices Incorporated................................................................................................4 ARTICLE II REPRESENTATIONS, WARRANTIES, AND COMMITMENTS...........................................4 2.1 General Recipient Commitments........................................................................................................4 2.2 Authorization and Validity....................................................................................................................4 2.3 Violations.............................................................................................................................................4 2.4 Litigation..............................................................................................................................................4 2.5 Solvency..............................................................................................................................................4 2.6 Legal Status and Eligibility..................................................................................................................5 2.7 Financial Statements...........................................................................................................................5 2.8 Completion of Project..........................................................................................................................5 2.9 Project Completion Report................................................................................................... 2.10 Award of Construction Contracts........................................................................................................5 2.11 Notice..................................................................................................................................................6 2.12 Findings and Challenge.......................................................................................................................7 7 2.13 Project Access..................................................................................................................................... 2.14 Project Completion; Initiation of Operations........................................................................................7 2.15 Continuous Use of Project; Lease or Disposal of Project...................................................................7 2.16 Reports................................................................................................................................................8 2.17 Federal Disadvantaged Business Enterprise DBE Reporting 9 2.18 Records................................................................................................................................................9 9 2.19 Audit.................................................................................................................................................... 2.20 Signage.............................................................................................................................................10 ARTICLE III FINANCING PROVISIONS.................................................................................................10 10 CM141004 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 3.1 Purchase and Sale of Project............................................................................................................10 3.2 Amounts Payable by the Recipient...................................................................................................11 3.3 Obligation Absolute...........................................................................................................................12 3.4 No Obligation of the State.................................................................................................................12 3.5 Disbursement of Project Funds; Availability of Funds.......................................................................13 3.6 Withholding of Disbursements and Material Violations.....................................................................13 3.7 Pledge; Rates, Fees and Charges; Additional Debt.........................................................................14 3.8 Financial Management System and Standards................................................................................15 3.9 Accounting and Auditing Standards..................................................................................................15 3.10 Federal or State Assistance..............................................................................................................16 ARTICLEIV TAX COVENANTS.............................................................................................................16 4.1 Purpose.............................................................................................................................................16 4.2 Tax Covenant.....................................................................................................................................16 4.3 Governmental Unit...........................................................................................................................16 4.4 Financing of a Capital Project........................................................................................... 4.5 Ownership and Operation of Project.................................................................................................16 4.6 Temporary Period..............................................................................................................................16 4.7 Working Capital.................................................................................................................................17 4.8 Expenditure of Proceeds...................................................................................................................17 4.9 Private Use and Private Payments...................................................................................................17 4.10 No Sale, Lease or Private Operation of the Project..........................................................................17 4.11 No Disproportionate or Unrelated Use..............................................................................................18 4.12 Management and Service Contracts...........................................................................I.....................18 4.13 No Disposition of Financed Property.................................................................................................20 4.14 Useful Life of Project.........................................................................................................................20 4.15 Installment Payments........................................................................................................................20 4.16 No Other Replacement Proceeds.....................................................................................................20 4.17 No Sinking or Pledged Fund.............................................................................................................20 ii l� CM141W14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 4.18 Reserve Amount................................................................................................................................20 4.19 Reimbursement Resolution................................................................................................ ................ 21 4.20 Reimbursement Expenditures........................................................................................................ ... 21 4.21 Change in Use of the Project............................................................................................................ 21 4.22 Rebate Obligations............................................................................................................................21 4.23 No Federal Guarantee.......................................................................................................................21 4.24 No Notices or Inquiries From IRS.....................................................................................................21 22 4.25 Amendments................................................................................... ................................................. 4.26 Application.........................................................................................................................................22 4.27 Reasonable Expectations............................................................................................. ARTICLE V MISCELLANEOUS PROVISIONS......................................................................................22 5.1 Covenants.........................................................................................................................................22 .. 22 5.2 Assignability..................................................................................................................................... 5.3 State Reviews and Indemnification................................................................................................. .. 23 5.4 Termination; Immediate Acceleration; Interest..................................................................................23 5.5 Income Restrictions...........................................................................................................................24 5.6 Prevailing Wages..............................................................................................................................24 24 5.7 Timeliness......................................................................................................................................... ... 24 5.8 Governing Law............................................................................................................................... 5.9 Amendment.......................................................................................................................................24 24 5.10 Bonding............................................................................................................................................. 5.11 Compliance with Law, Regulations, etc............................................................................................24 5.12 Conflict of Interest.............................................................................................................................25 5.13 Damages for Breach Affecting Tax Exempt Status or Federal Compliance.....................................25 25 5.14 Disputes.............................................................................................................. .............................. 5.15 Independent Actor..................................................................................................................I..........25 25 5.16 Non -Discrimination Clause.................................................... ........................................................... 26 5.17 No Third Party Rights........................................................................................................................ III czou ia:ia 5.18 Operation and Maintenance; Insurance ............................. 5.19 Permits, Subcontracting, and Remedies ............................ 5.20 Recipient's Responsibility for Work .................................... 5.21 Related Litigation............................................................... 5.22 Rights in Data.................................................................... 5.23 State Water Board Action; Costs and Attorney Fees........ 5.24 Unenforceable Provision ................................................... 5.25 Useful Life.......................................................................... 5.26 Venue................................................................................ 5.27 Waiver and Rights of the State Water Board ................... EXHIBIT A — SCOPE OF WORK & INCORPORATED DOCUMENTS EXHIBIT A -FBA —FINAL BUDGET APPROVAL EXHIBIT B — PROJECT FINANCING AMOUNT EXHIBIT C — CWSRF PAYMENT SCHEDULE EXHIBIT D - SPECIAL CONDITIONS EXHIBIT E - FEDERAL CONDITIONS & CROSS -CUTTERS EXHIBIT F — SCHEDULE OF MATERIAL OBLIGATIONS EXHIBIT G — DAVIS-BACON REQUIREMENTS, EXHIBIT H — MATERIAL LITIGATION, INVESTIGATIONS, AUDITS Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 26 26 27 27 27 27 .......................... 27 27 27 ............. 28 iv 13 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 This Installment Sale Agreement, including all exhibits and attachments hereto, (Agreement) is dated as of the date set forth on the first page of this Agreement, by and between the State Water Resources Control Board, an administrative and regulatory agency of the State of California (State Water Board), and the local government entity identified on the first page of this Agreement, duly organized and existing under the laws of the State of California (Recipient): WITNESSETH: WHEREAS the United States of America, pursuant to Title VI of the federal Water Pollution Control Act as such has been and may be amended from time to time (Clean Water Act), requires each State to establish a water pollution control revolving fund to be administered by an instrumentality of the State as a condition to receipt of capitalization grants under the Clean Water Act; and WHEREAS the State of California (State) has established a Clean Water State Revolving Fund (CWSRF) pursuant to Chapter 6.5 of Division 7 of the California Water Code (State Act) to be used for purposes of the Clean Water Act; and WHEREAS the State Water Board is the state agency authorized to administer the CWSRF and provide financial assistance from the CWSRF to recipients for the construction of eligible projects, as provided in the State Act; and WHEREAS the State Water Board determines Project eligibility for financial assistance from the CWSRF, pursuant to the Clean Water Act and the State Act, determines a reasonable schedule for financing and construction of projects, ensures compliance with the Clean Water Act, and establishes the terms and conditions of an applicable financing agreement; and WHEREAS the Recipient has applied to the State Water Board for financial assistance from the CWSRF, for the purpose of financing or refinancing the Project described below, and the State Water Board has reviewed and approved said application; and WHEREAS the Recipient has or will incur costs incurred in connection with, the planning, design, acquisition, construction, and installation of the Project described in Exhibit A and Exhibit A -FBA hereto; and WHEREAS on the basis of the Recipient's application and the representations and warranties set forth herein, the State Water Board proposes to assist in financing the costs of the Project and/or to refund outstanding bonds, notes, or other debt obligations of the Recipient, if any, issued to finance the Project, and the Recipient desires to participate as a recipient of financial assistance from the CWSRF and evidence its obligation to pay Installment Payments, which obligation will be secured by Net Revenues, as defined herein, upon the terms and conditions set forth in this Agreement, all pursuant to the Clean Water Act and the State Act; NOW, THEREFORE, in consideration of the premises and of the mutual representations, covenants and agreements herein set forth, the State Water Board and the Recipient, each binding itself, its successors and assigns, do mutually promise, covenant and agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. Unless otherwise specified, each capitalized term used in this Agreement (including the Exhibits hereto) has the following meaning: "Additional Payments" means the Additional Payments described in Section 3.2(c) of this Agreement. / q- ,2M4 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 reement, datd as of the date set forth on the first page by and between the Statenstallment Water Boardland gthe Rec p ente hereof, including all exhibits and attachments hereto. by an "Allowance" means an amount based on a percentage of the accepted bid for an eligible project to help defray the planning, design, and construction engineering and administration costs of the Project. "Authorized Representative means the duly appointed representative of the Recipient. For all authorized representatives, a certified original of the authorizing resolution that designates the authorized representative, by title, must accompany the first disbursement request, and any other documents or requests required or allowed under this Agreement. "Bank" means the California Infrastructure and Economic Development Bank. "Bonds" means any series of bonds issued by the Bank all or a portion of the proceeds of which may be applied to fund the Project in whole or in part or that are secured in whole or in part by Installment Payments paid hereunder. "Code" means the Internal Revenue code86 promulgated amentand any successor provisions and the regulations of the U.S. Department of the Treasury "Completion of Construction" means the date, as determined by the Division after consultation with the Recipient, that the work of building and erection of the Project is substantially complete. "CWSRF" means the Clean Water State Revolving Fund. "Division" means the Division of Financial Assistance of the State Water Board or any other segment of the State Water Board authorized to administer the CWSRF. "Enterprise Fund" means the enterprise fund of the Recipient in which Revenues are deposited. "Fiscal Year" means the period of twelve (12) months terminating on June 30 of any year, or any other annual period hereafter selected and designated by the Recipient as its Fiscal Year in accordance with applicable law. "Force Account" means the use of the Recipient's own employees or equipment for construction of the Project. "Initiation of Construction means the date that notice to proceed with work is issued for the Project, or, if notice to proceed is not required, the date of commencement of building and erection of the Project. "Installment Payments" means Installment Payments due and payable by the Recipient to the State Water Board under this Agreement, the amounts of which are set forth as Exhibit C hereto. "Listed Event" means, so long as the Recipient has outstanding any Material Obligation subject to Rule 15c2-12, any of the events required to be reported pursuant to Rule 15c2-12(b)(5). "Material Event" means any of the following events: (a) revenue shortfalls; (b) unsc heduled adverse n the reserve fund or the Enterprise Fund; (c) substitution of insurers, or their failurelitigation at on rforelated to the water quality findings by the Regional Water Quality Control Board; or (e) ig Revenues or to the Project, whether pending or anticipated. "Material Obligations" means all senior, parity, and subordinate obligations of the Recipient payable from Revenues as identified as of the date of this Agreement in Exhibit F and such additional obligations as may hereafter be issued in accordance with the provisions of such obligations and this Agreement. 2 c=4101.14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 "Net Revenues" means, for any Fiscal Year, so long as there may be any pre-existing and outstanding Material Obligation other than the Obligation, the definition of the term as defined under such Material Obligation, and thereafter, all Revenues received by the Recipient less the Operations and Maintenance Costs for such Fiscal Year. "Obligation" means the obligation of the Recipient to make Installment Payments and Additional Payments as provided herein, as evidenced by the execution of this Agreement, proceeds of such obligations being used to fund the Project as specified in the Project Description attached hereto as Exhibit A and Exhibit A -FBA and in the documents thereby incorporated by reference. "Operations and Maintenance Costs" means, so long as outstanding Material Obligations other than the Obligation are outstanding, the definition of such term as defined therein, and thereafter, the reasonable and necessary costs paid or incurred by the Recipient for maintaining and operating the System, determined in accordance with generally accepted accounting principles, including all reasonable expenses of management and repair and all other expenses necessary to maintain and preserve the System in good repair and working order, and including all reasonable and necessary administrative costs of the Recipient that are charged directly or apportioned to the operation of the System, such as salaries and wages of employees, overhead, taxes (if any), the cost of permits, licenses, and charges to operate the System and insurance premiums; but excluding, in all cases depreciation, replacement, and obsolescence charges or reserves therefor and amortization of intangibles. "Policy" means the State Water Board's policy for implementing the CWSRF program, as amended from time to time. "Project" means the Project financed by this Agreement as described in Exhibit A and in the documents incorporated by reference herein. "Project Completion" means the date, as determined by the Division after consultation with the Recipient, that operation of the Project is initiated or is capable of being initiated, whichever comes first. "Project Costs" means the incurred costs of the Recipient which are eligible for financial assistance from the CWSRF under the federal Clean Water Act, which are allowable costs as defined under the Policy, and which are reasonable, necessary and allocable by the Recipient to the Project under generally accepted accounting principles, plus capitalized interest. "Project Funds" means funds disbursed by the State Water Board to the Recipient for purposes of this Agreement. "Recipient" means the recipient of Project Funds, as identified on the front page of this Agreement. "Revenues" means, for each Fiscal Year, all gross income and revenue received or receivable by the Recipient from the ownership or operation of the System, determined in accordance with generally accepted accounting principles, including all rates, fees, and charges (including connection fees and charges) as received by the Recipient for the services of the System, and all other income and revenue howsoever derived by the Recipient from the ownership or operation of the System or arising from the System, including all income from the deposit or investment of any money in the Enterprise Fund or any rate stabilization fund of the Recipient or held on the Recipient's behalf, and any refundable deposits made to establish credit, and advances or contributions in aid of construction. "Rule 15c2-12(b)(5)" means Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. "State" means State of California. 1co 3 c2014101,14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 "State Water Board" means the State Water Resources Control Board, an administrative and regulatory agency of the State of California. "System" means all wastewater, water recycling, and/or potable water collection, transport, treatment, storage, and/or disposal facilities, including land and easements thereof, owned by the Recipient, including the Project, and all other properties, structures or works hereafter acquired and constructed by the Recipient and determined to be a part of the System, together with all additions, betterments, extensions or improvements to such facilities, properties, structures, or works, or any part thereof hereafter acquired and constructed. 1.2 Exhibits and Appendices Incorporated. All exhibits and appendices to this Agreement, including any amendments and supplements hereto, are hereby incorporated herein and made a part of this Agreement. ARTICLE II REPRESENTATIONS, WARRANTIES, AND COMMITMENTS The Recipient represents and warrants the following as of the date set forth on the first page hereof and continuing thereafter for the term of the Agreement: 2.1 General Recipient Commitments. The Recipient accepts and agrees to comply with all terms, provisions, conditions, and commitments of this Agreement, including all incorporated documents, and to fulfill all assurances, declarations, representations, and commitments made by the Recipient in its application, accompanying documents, and communications filed in support of its request for financial assistance. 2.2 Authorization and Validity. The execution and delivery of this Agreement, including all incorporated documents, has been duly authorized. This Agreement constitutes a valid and binding obligation of the Recipient, enforceable in accordance with its terms, except as such enforcement may be limited by law. 2.3 Violations. The execution, delivery, and performance by Recipient of this Agreement, including all incorporated documents, do not violate any provision of any law or regulation in effect as of the date set forth on the first page hereof, or result in any breach or default under any contract, obligation, indenture, or other instrument to which Recipient is a party or by which Recipient is bound as of the date set forth on the first page hereof. 2.4 Litigation. There are no pending or, to Recipient's knowledge, threatened actions, claims, investigations, suits, or proceedings before any governmental authority, court, or the financial condition or operations of the System and/or the Project other ative agency which other than as a described in Exhibit H hereto. 2.5 Solvency. None of the transactions contemplated by this Agreement will be or have been made with an actual intent to hinder, delay, or defraud any present or future creditors of Recipient. As of the date set forth on the first I' 4 c2DU 1NX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 page hereof, Recipient is solvent and will not be rendered insolvent by the transactions contemplated by this Agreement. Recipient is able to pay its debts as they become due. 2.6 Legal Status and Eligibility. Recipient is duly organized and existing and in good standing under the laws of the State of California, and will remain so during the term of this Agreement. Recipient shall at all times maintain its current legal existence and preserve and keep in full force and effect its legal rights and authority. Recipient shall maintain compliance with provisions of state law that restrict state funding to non -compliant entities. 2.7 Financial Statements. The financial statements of Recipient previously delivered to the State Water Board as of the date(s) set forth in such financial statements: (a) are materially complete and correct; (b) present fairly the financial condition of the Recipient; and (c) have been prepared in accordance with generally accepted accounting principles or other accounting standards reasonably approved by the State Water Board. Since the date(s) of such financial statements, there has been no material adverse change in the financial condition of the Recipient, nor have any assets or properties reflected on such financial statements been sold, transferred, assigned, mortgaged, pledged or encumbered, except as previously disclosed in writing by Recipient and approved in writing by the State Water Board. 2.8 Completion of Project. The Recipient agrees to expeditiously proceed with and complete construction of the Project in substantial accordance with Exhibit A and Exhibit A -FBA. 2.9 Project Completion Report. The Recipient shall submit a Project Completion Report to the Division with a copy to the appropriate Regional Water Quality Control Board on or before the due date established by the Division and the Recipient at the time of final project inspection. The Project Completion Report must address the following: (a) describe the Project, (b) describe the water quality problem the Project sought to address, (c) discuss the Project's likelihood of successfully addressing that water quality problem in the future, and (d) summarize compliance with environmental conditions, if applicable. Where the Recipient fails to submit a timely Project Completion Report, the State Water Board may stop processing pending or future applications for new financial assistance, withhold disbursements under this Agreement or other agreements, and begin administrative proceedings. 2.10 Award of Construction Contracts. (a) The Recipient agrees to award the prime construction contract no later than the date specified in Exhibit A. (b) The Recipient agrees to promptly notify the Division in writing both of the award of the prime construction contract for the Project and of Initiation of Construction of the Project. The Recipient agrees to make all reasonable efforts to complete construction in substantial conformance with the terms of the contract by the Completion of Construction date established in Exhibit A. Such date shall be binding upon the Recipient unless modified in writing by the Division upon a showing of good cause by the Recipient. The Recipient shall deliver any request for extension of the Completion of Construction date no less than 90 days prior to the )8 5 U014 IDIX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 Completion of Construction date. The Division will not unreasonably deny such a timely request, but the Division will deny requests received after this time. 2.11 Notice. The Recipient agrees to notify the Division in writing within 5 days of the occurrence of the following: (a) Principal and interest payment delinquencies on this CWSRF Obligation; (b) Non payment related defaults, if material; (c) Unscheduled draws on debt service reserves reflecting financial difficulties; (d) Unscheduled draws on credit enhancements, if any, reflecting financial difficulties; (e) Substitution of credit or liquidity providers, if any, or their failure to perform; (f) Adverse tax opinions, the issuance by the Internal Revenue Service or proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices of determinations with respect to the tax status of any tax-exempt bonds; (g) Rating changes on tax-exempt bonds, if any; (h) Bankruptcy, insolvency, receivership or similar event of the Recipient; (i) Actions taken in anticipation of filing Chapter 9, as required under state law; (j) Any litigation pending or threatened against Recipient regarding its wastewater or water capacity or its continued existence, circulation of a petition to challenge rates, consideration of dissolution, or disincorporation, or any other material threat to the Recipient's Revenues; (k) Other Material Events or Listed Events; (1) Change of ownership of the Project or change of of the Project; or management or service contract for operation (m) Negotiations regarding proposed parity obligations. The Recipient agrees to notify the Division promptly of the following: (a) Any substantial change in scope of the Project. The Recipient agrees that no substantial change in the scope of the Project will be undertaken until written notice of the proposed change has been provided to the Division and the Division has given written approval for such change; (b) Cessation of all major construction work on the Project where such cessation of work is expected to or does extend for a period of thirty (30) days or more; (c) Any circumstance, combination of circumstances, or condition, which is expected to or does delay Completion of Construction for a period of ninety (90) days or more beyond the estimated date of Completion of Construction previously provided to the Division; (d) Discovery of any potential archeological or historical resource. Should a potential archeological or historical resource be discovered during construction of the Project, the Recipient agrees that all work in the area of the find will cease until a qualified archeologist has evaluated the 19 6 ozn,a,aNu Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 situation and made recommendations regarding preservation of the resource, and the Division has determined what actions should be taken to protect and preserve the resource. The Recipient agrees to implement appropriate actions as directed by the Division; (e) Discovery of any unexpected endangered or threatened species, as defined in the federal Endangered Species Act. Should a federally protected species be unexpectedly encountered during construction'of the Project, the Recipient agrees to promptly notify the Division. This notification is in addition to the Recipient's obligations under the federal Endangered Species Act; (f) Any monitoring, demonstration, or other implementation activities such that the State Water Board and/or Regional Water Quality Control Board staff may observe and document,such activities; (g) Any public or media event publicizing the accomplishments and/or results of this Agreement and provide the opportunity for attendance and participation by state and federal representatives with at least ten (10) working days' notice to both the Division and USEPA Region IX. The contact for USEPA Region IX is Josh Amaris at Amaris.josh@epa.gov (415) 972-3597; or (h) Completion of Construction of the Project, and actual Project Completion. 2.12 Findings and Challenge Upon consideration of a voter initiative to reduce Revenues, the Recipient shall make a finding regarding the effect of such a reduction on the Recipient's ability to satisfy its Obligation under this Agreement and to operate and maintain the Project for its useful life. The Recipient agrees to make its findings available to the public and to request, if necessary, the authorization of the Recipient's decision -maker or decision - maker body to file litigation to challenge any such initiative that it finds will render it unable to satisfy either the Obligation or the covenant to operate and maintain, or both. The Recipient shall diligently pursue and bear any and all costs related to such challenge. The Recipient shall notify and regularly update the State Water Board regarding any such challenge. 2.13 Project Access. The Recipient agrees to ensure that the State Water Board, the Governor of the State, the United States Environmental Protection Agency, the Office of Inspector General, any member of Congress, the President of the United States, or any authorized representative of the foregoing, will have safe and suitable access to the Project site at all reasonable times during Project construction and thereafter for the term of the Obligation. The Recipient acknowledges that, except for a subset of archeological records, the Project records and locations are public records, including all of the submissions accompanying the application, all of the documents incorporated by Exhibit A, and all reports, disbursement requests, and supporting documentation submitted hereunder. 2.14 Project Completion; Initiation of Operations. Upon Completion of Construction of the Project, the Recipient agrees to expeditiously initiate Project operations. 2.15 Continuous Use of Project; Lease or Disposal of Project. The Recipient agrees that, except as provided in the Agreement, it will not abandon, substantially discontinueuseful life of the Project without p� or written n approval of the Division. se of the Project or any significant part Such approval hmay be co ereof during di h use oned C) 7 .2014101.14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 as determined to be appropriate by the Division, including a condition requiring acceleration of all or any portion of all remaining funds covered by this Agreement together with accrued interest and any penalty assessments which may be due. 2.16 Reports. (a) Quarterly Reports. The Recipient agrees to expeditiously provide status reports no less frequently than quarterly, starting with the execution of this Agreement. At a minimum the reports will contain the following information: a summary of progress to date including a description of progress since the last report, percent construction complete, percent contractor invoiced, and percent schedule elapsed; • a description of compliance with environmental requirements; • a listing of change orders including amount, description of work, and change in contract amount and schedule; • any problems encountered, proposed resolution, schedule for resolution, and status of previous problem resolutions. (b) As Needed Reports. The Recipient agrees to expeditiously provide, during the term of this Agreement, such reports, data, and information as may be reasonably required by the Division, including but not limited to material necessary or appropriate for evaluation of the CWSRF Program or to fulfill any reporting requirements of the federal government. (c) Recycled water reports. The Recipient shall submit annual reports for a period commencing with Completion of Construction through one (1) full year after all proposed recycled water users included in the Project are connected for service (minimum five [5) years). Reports will be submitted in hard copy and electronically The first annual report is due on February 28th following the first complete calendar year of operation and shall cover the period from the Completion of Construction through the end of the first full calendar year thereafter. Subsequent annual reports are due by February 28th following the year covered. The annual reports shall be prepared in accordance with the "Water Recycling Funding Guidelines", dated July 2008, or any successor guidelines. The reports shall briefly review the operation of the Project during the preceding year, identify current users and user contracts, provide monthly Project water deliveries to each user, the amount of fresh/potable water usage offset by the use of recycled water, and monthly amounts of water from each source delivered through Project facilities, list the funds received from other State and federal agencies for this Project during the period by I gency, the amount, type of assistance (grants, loans, etc.), and a description of the facilities, components, and items the funds were used for; list the power and maintenance costs associated with the Project for the period, indicate current plans and programs for use of any Project capacity not under contract, summarize Project financial experience, describe compliance with any special conditions of this contract; describe direct and indirect benefits of the project to the state/local water supply and economy; describe other benefits and challenges arising from the project; and provide such other information as may be reasonably required to evaluate Project benefits and use of Project facilities. a014 iW14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 2.17 Federal Disadvantaged Business Enterprise (DBE) Reporting. The Recipient agrees to report DBE utilization to the Division on the DBE Utilization Report, State Water Board Form DBE UR334. The Recipient must submit such reports to the Division semiannually within ten (10) calendar days following April 1 and October 1 until such time as the "Notice of Completion" is issued. The Recipient agrees to comply with 40 CFR § 33.301. 2.18 Records. (a) Without limitation of the requirement to maintain Project accounts in accordance with generally accepted accounting principles, the Recipient agrees to: (1) Establish an official file for the Project which shall adequately document all significant actions relative to the Project; (2) Establish separate accounts which will adequately and accurately depict all amounts received and expended on the Project, including all assistance funds received under this Agreement; (3) Establish separate accounts which will adequately depict all income received which is attributable to the Project, specifically including any income attributable to assistance funds disbursed under this Agreement; (4) Establish an accounting system which will accurately depict final total costs of the Project, including both direct and indirect costs; (5) Establish such accounts and maintain such records as may be necessary for the State to fulfill federal reporting requirements, including any and all reporting requirements under federal tax statutes or regulations; and (6) If Force Account is used by the Recipient for any phase of the Project, other than for planning, design, and construction engineering and administration provided for by allowance, accounts will be established which reasonably document all employee hours charged to the Project and the associated tasks performed by each employee. Indirect Force Account costs are not eligible for funding. (b) The Recipient shall be required to maintain separate books, records and other material relative to the Project. The Recipient shall also be required to retain such books, records, and other material for itself and for each contractor or subcontractor who performed work on this project for a minimum of thirty-six (36) years after Project Completion. The Recipient shall require that such books, records, and other material be subject at all reasonable times (at a minimum during normal business hours) to inspection, copying, and audit by the State Water Board, the Bureau of State Audits, the United States Environmental Protection Agency (USEPA), the Office of Inspector General, the Internal Revenue Service, the Governor, or any authorized representatives of the aforementioned, and shall allow interviews during normal business hours of any employees who might reasonably have information related to such records. The Recipient agrees to include a similar right regarding audit, interviews, and records retention in any subcontract related to the performance of this Agreement. The provisions of this section shall survive the discharge of the Recipient's Obligation hereunder and shall survive the term of this Agreement. 2.19 Audit. (a) The Division, at its option, may call for an audit of financial information relative to the Project, where the Division determines that an audit is desirable to assure program integrity or where Z2- c2014101c14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 such an audit becomes necessary because of federal requirements. Where such an audit is called for, the audit shall be performed by a certified public accountant independent of the Recipient and at the cost of the Recipient. The audit shall be in the form required by the Division. (b) Audit disallowances will be returned to the State Water Board. 2.20 Signage. The Recipient shall place a sign at least four feet tall by eight feet wide made of % inch thick exterior grade plywood or other approved material in a prominent location on the Project site and shall maintain the sign in good condition for the duration of the construction period. The sign shall include the following color logos (available from the Division) and the following disclosure statement: Clean Water oe:-ft���o Water Boards vo EMt �ratadrin gwmcy "Funding for this project has been provided in full or in part by the Clean Water State Revolving Fund through an agreement with the State Water Resources Control Board. California's Clean Water State Revolving Fund is capitalized through a variety of funding sources, including grants from the United States Environmental Protection Agency and state bond proceeds." The Project sign may include another agency's required promotional information so long as the above logos and disclosure statement are equally prominent on the sign. The sign shall be prepared in a professional manner. The Recipient shall include the following disclosure statement in any document, written report, or brochure prepared in whole or in part pursuant to this Agreement: "Funding for this project has been provided in full or in part through an agreement with the State Water Resources Control Board. The contents of this document do not necessarily reflect the views and policies of the State Water Resources Control Board, nor does mention of trade names or commercial products constitute endorsement or recommendation for use. (Gov. Code § 7550, 40 CFR § 31.20.)" ARTICLE III FINANCING PROVISIONS 3.1 Purchase and Sale of Project. The Recipient hereby sells to the State Water Board and the State Water Board hereby purchases from the Recipient the Project. Simultaneously therewith, the Recipient hereby purchases from the State Water Board, and the State Water Board hereby sells to the Recipient, the Project in accordance with the provisions of this Agreement. All right, title, and interest in the Project shall immediately vest in the Recipient on the date of execution and delivery of this Agreement without further action on the part of the Recipient or the State Water Board. Z"b 10 oxoia 1OIX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 3.2 Amounts Payable by the Recipient. (a) Installment Payments. The Recipient's obligations under this Agreement shall be secured by and payable solely from Net Revenues. Repayment of the Project Funds, together with all interest accruing thereon, shall be repaid in annual installments commencing on the date that is one (1) year after Completion of Construction, and shall be fully amortized by the date specified in Exhibit B. The Installment Payments are based on a standard fully amortized assistance amount with equal annual payments. The remaining balance is the previous balance, plus the disbursements, plus the accrued interest on both, less the Installment Payment. Installment calculations will be made beginning one (1) year after Completion of Construction and shall be fully amortized not later than the date specified in Exhibit B. Exhibit C is a payment schedule based on the provisions of this article and an estimated disbursement schedule. Actual payments will be based on actual disbursements. Upon Completion of Construction and submission of necessary reports by the Recipient, the Division will prepare an appropriate payment schedule and supply the same to the Recipient. The Division may amend this schedule as necessary to accurately reflect amounts due under this Agreement. The Division will prepare any necessary amendments to the payment schedule and send them to the Recipient. The Recipient agrees to make each installment payment on or before the due date therefor. A ten (10) day grace period will be allowed, after which time a penalty in the amount of costs incurred to the State Water Board will be assessed for late payment. These costs may include, but are not limited to, lost interest earnings, staff time, bond debt service default penalties, if any, and other costs incurred. Penalties assessed will not change the principal balance of the financing Agreement. Such penalties will be treated as a separate receivable in addition to the annual payment due. For purposes of penalty assessment, payment will be deemed to have been made if payment is deposited in the U.S. Mail within the grace period with postage prepaid and properly addressed. Any penalties assessed will not be added to the assistance amount balance, but will be treated as a separate account and obligation of the Recipient. The interest penalty will be assessed from the payment due date. The Recipient as a whole is obligated to make all payments required by this Agreement to the State Water Board, notwithstanding any individual default by its constituents or others in the payment to the Recipient of fees, charges, taxes, assessments, tolls or other charges ("Charges") levied or imposed by the Recipient. The Recipient shall provide for the punctual payment to the State Water Board of all amounts which become due under this Agreement and which are received from constituents or others in the payment to the Recipient. In the event of failure, neglect or refusal of any officer of the Recipient to levy or cause to be levied any Charge to provide payment by the Recipient under this Agreement, to enforce or to collect such Charge, or to pay over to the State Water Board any money collected on account of such Charge necessary to satisfy any amount due under this Agreement, the State Water Board may take such action in a court of competent jurisdiction as it deems necessary to compel the performance of all duties relating to the imposition or levying and collection of any of such Charges and the payment of the money collected therefrom to the State Water Board. Action taken pursuant hereto shall not deprive the State Water Board of, or limit the application of, any other remedy provided by law or by this Agreement. Attached as Exhibit C is a Payment Schedule based on the provisions of this section and an estimated disbursement schedule. This schedule will be revised based on actual disbursements following Completion of Construction. 11 Q01410u14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 Each Installment Payment shall be paid by check and in lawful money of the United States of America. The Recipient agrees that it shall not be entitled to interest earned on undisbursed project funds. Upon execution of this Agreement, the State Water Board shall encumber an amount equal to the Obligation. The Recipient hereby agrees to pay Installment Payments and Additional Payments from Net Revenues and/or other amounts legally available to the Recipient therefor. Interest on any funds disbursed to the Recipient shall begin to accrue as of the date of each disbursement. (b) Project Costs. The Recipient agrees to pay any and all costs connected with the Project including, without limitation, any and all Project Costs. If the Project Funds are not sufficient to pay the Project Costs in full, the Recipient shall nonetheless complete the Project and pay that portion of the Project Costs in excess of available Project Funds, and shall not be entitled to any reimbursement therefor from the State Water Board. (c) Additional Payments. In addition to the Installment Payments required to be made by the Recipient, the Recipient shall also pay to the State Water Board the reasonable extraordinary fees and expenses of the State Water Board, and of any assignee of the State Water Board's right, title, and interest in and to this Agreement, in connection with this Agreement, including all expenses and fees of accountants, trustees, attorneys, litigation costs, insurance premiums and all other extraordinary costs reasonably incurred by the State Water Board or assignee of the State Water Board. Additional Payments may be billed to the Recipient by the State Water Board from time to time, together with a statement executed by a duly authorized representative of the State Water Board, stating that the amounts billed pursuant to this section have been incurred by the State Water Board or its assignee for one or more of the above items and a copy of the invoice or statement for the amount so incurred or paid. Amounts so billed shall be paid by the Recipient within thirty (30) days after receipt of the bill by the Recipient. (d) The Recipient may without penalty prepay all or any portion of the outstanding principal amount of the Obligation provided that the Recipient shall also pay at the time of such prepayment all accrued interest on the principal amount prepaid through the date of prepayment. 3.3 Obligation Absolute. The obligation of the Recipient to make the Installment Payments and other payments required to be made by it under this Agreement, from Net Revenues and/or other amounts legally available to the Recipient therefor, is absolute and unconditional, and until such time as the Installment Payments and Additional Payments have been paid in full, the Recipient shall not discontinue or suspend any Installment Payments or other payments required to be made by it hereunder when due, whether or not the System or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments and other payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. 3.4 No Obligation of the State. Any ° and any such obligation ashallll be payable solely out of the moneys inthealiability of the State CWSRF made ava available State y pursuant to this Agreement. Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 3.5 Disbursement of Project Funds; Availability of Funds. (a) Except as may be otherwise provided in this Agreement, disbursement of Project Funds will be made as follows: (1) Upon execution and delivery of this Agreement, the Recipient may request immediate disbursement of any eligible incurred planning and design allowance as specified in Exhibit B from the Project Funds through submission to the State Water Board of the Disbursement Request Form 260, or any amendment thereto, duly completed and executed. (2) The Recipient may request disbursement of eligible construction and equipment costs consistent with budget amounts referenced in Exhibit B. (Note that this Agreement will be amended to incorporate Final Budget Approval.) (3) Additional Project Funds will be promptly disbursed to the Recipient upon receipt of Disbursement Request Form 260, or any amendment thereto, duly completed and executed by the Recipient for incurred costs consistent with this Agreement, along with receipt of status reports due under Section 2.16 above. (4) The Recipient agrees that it will not request disbursement for any Project Cost until such cost has been incurred and is currently due and payable by the Recipient, although the actual payment of such cost by the Recipient is not required as a condition of disbursement request. (5) Recipient shall spend Project Funds within 30 days of receipt. Any interest earned on Project Funds shall be reported to the State Water Board and may be required to be returned to the State Water Board or deducted from future disbursements. (6) The Recipient agrees that it will not request a disbursement unless that Project Cost is allowable, reasonable, and allocable. (7) Notwithstanding any other provision of this Agreement, no disbursement shall be required at any time or in any manner which is in violation of or in conflict with federal or state laws, policies, or regulations. (b) The State Water Board's obligation to disburse Project Funds is contingent upon the availability of sufficient funds to permit the disbursements provided for herein. If sufficient funds are not available for any reason, including but not limited to failure of the federal or State government to appropriate funds necessary for disbursement of Project Funds, the State Water Board shall not be obligated to make any disbursements to the Recipient under this Agreement. This provision shall be construed as a condition precedent to the obligation of the State Water Board to make any disbursements under this Agreement. Nothing in this Agreement shall be construed to provide the Recipient with a right of priority for disbursement over any other agency. If any disbursements due the Recipient under this contract are deferred because sufficient funds are unavailable, it is the intention of the State Water Board that such disbursement will be made to the Recipient when sufficient funds do become available, but this intention is not binding. 3.6 Withholding of Disbursements and Material Violations. (a) The State Water Board may withhold all or any portion of the funds provided for by this Agreement in the event that: 13 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 (1) The Recipient has materially violated, or threatens to materially violate, any term, provision, condition, or commitment of this Agreement; (2) The Recipient fails to maintain reasonable progress toward completion of the Project; or (3) The Recipient fails to comply with section 5103 of the Water Code, where applicable. (b) For the purposes of this Agreement, the terms "material violation" or "threat of material violation" include, but are not limited to: (1) Placement on the ballot of an initiative to reduce revenues securing this Agreement; (2) Passage of such an initiative; (3) Successful challenges by ratepayer(s) to the process used by Recipient to set, dedicate, or otherwise secure revenues used for securing this Agreement; or (4) Any other action or lack of action that may be construed as a material violation or threat thereof. 3.7 Pledge; Rates, Fees and Charges; Additional Debt. (a) Establishment of Enterprise Fund and Reserve Fund. In order to carry out its System Obligations, including the Obligation, the Recipient agrees and covenants that it shall establish and maintain or shall have established and maintained the Enterprise Fund. All Revenues received shall be deposited when and as received in trust in the Enterprise Fund. This requirement applies to Recipients that are public agencies. To the extent required in Exhibit D of this Agreement, the Recipient agrees to establish and maintain a reserve fund. (b) Pledge of Net Revenues, Enterprise Fund, and Reserve Fund. The Obligation hereunder shall be secured by a lien on and pledge of the Enterprise Fund, Net Revenues, and any Reserve Fund specified in Exhibit D in priority as specified in Exhibit F. The Recipient hereby pledges and grants such lien on and pledge of the Enterprise Fund, Net Revenues, and any Reserve Fund specified in Exhibit D to secure the Obligation, including payment of Installment Payments and Additional Payments hereunder. The Net Revenues in the Enterprise Fund shall be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Recipient. (c) Application and Purpose of the Enterprise Fund. Subject to the provisions of any outstanding Material Obligations, money on deposit in the Enterprise Fund shall be applied and used first, to pay Operations and Maintenance Costs, and thereafter, all amounts due and payable with respect to the Material Obligations. After making all payments hereinabove required to be made in each Fiscal Year, the Recipient may expend in such Fiscal Year any remaining money in the Enterprise Fund for any lawful purpose of the Recipient, including payment of subordinate debt. This requirement applies to Recipients that are public agencies. (d) Rates, Fees and Charges. The Recipient agrees, to the extent permitted by law, to fix, prescribe and collect rates, fees and charges for the System during each Fiscal Year which are reasonable, fair and nondiscriminatory and which will be at least sufficient to yield during each Fiscal Year Net Revenues equal to the debt service on Material Obligations, including the Obligation, for such Fiscal Year, plus any coverage ratio specified in Exhibit D of this Agreement. The Recipient may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates, 14 «o,<,a.,< Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 fees and charges then in effect unless the Net Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the requirements of this section. (e) Additional Debt Test. (1) The Recipient's future debt may not be senior to this Obligation, except where: (A) the senior obligation refunds a senior obligation that predates the dated as of date of this Obligation, the new senior obligation has the same or earlier repayment term as the refunded senior debt, the new senior debt service is the same or lower than the existing debt service, and the new senior debt will not diminish the applicant's ability to repay its CWSRF obligations; or (B) the future senior obligation is a CWSRF obligation owed to the State Water Board. (2) The Recipient's future debt may be on parity with the CWSRF debt if the following conditions are met: (A) The Recipient's net revenues pledged to pay all senior debts relying on the pledged revenue source are at least 1.2 times the highest year's debt service and net revenues pledged to pay all debts are at least 1.1 times the highest year's debt service; and (B) One of the following conditions is met: 1. The Recipient's proposed additional parity obligation is rated 'A" or higher, by at least two nationally recognized rating agencies; or 2. The Recipient is a disadvantaged community and the Division determines that it would be economically burdensome for the agency to obtain nationally recognized ratings for its parity debt; 3. The Recipient is a disadvantaged community and the Division determines that requiring the proposed additional obligations to be subordinate to the Recipient's Obligations hereunder will unduly restrict the Recipients from obtaining future system debt necessary for water quality improvements; or 4. The proposed additional obligation is CWSRF debt. 3.8 Financial Management System and Standards. The Recipient agrees to comply with federal standards for financial management systems. The Recipient agrees that, at a minimum, its fiscal control and accounting procedures will be sufficient to permit preparation of reports required by the federal government and tracking of Project funds to a level of expenditure adequate to establish that such funds have not been used in violation of federal or state law or the terms of this Agreement. To the extent applicable, the Recipient agrees to be bound by, and to comply with, the provisions and requirements of the federal Single Audit Act of 1984, Office of Management and Budget (OMB) Circular No. A-133, and updates or revisions, thereto, including but not limited to Section 210(a)-(d). (Pub. L. 98-502.) 3.9 Accounting and Auditing Standards. The Recipient will maintain separate Project accounts in accordance with generally accepted accounting principles. The Recipient shall comply with "Standards for Audit of Governmental Organizations, 2—F 15 �14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 Programs, Activities and Functions" promulgated by the U.S. General Accounting Office. (40 CFR § 35.3135, subd. (1).) 3.10 Federal or State Assistance. If federal or state funding for Project Costs is made available to the Recipient from sources other than the CWSRF, the Recipient may retain such funding up to an amount which equals the Recipient's local share of Project Costs. To the extent allowed by requirements of other funding sources, any funding received in excess of the Recipient's local share, not to exceed the total amount of the CWSRF financing assistance, shall be remitted to the State Water Board to be applied to Installment Payments due hereunder. ARTICLE IV TAX COVENANTS 4.1 Purpose. The purpose of this Article IV is to establish the reasonable expectations of the Recipient regarding the Project and the Project Funds, and is intended to be and may be relied upon for purposes of Sections 103, 141 and 148 of the Code and as a certification described in Section 1.148-2(b)(2) of the Treasury Regulations. This Article IV sets forth certain facts, estimates and circumstances which form the basis for the Recipient's expectation that neither the Project nor the Project Funds will be used in a manner that would cause the Obligation to be classified as "arbitrage bonds" under Section 148 of the Code or "private activity bonds" under Section 141 of the Code. 4.2 Tax Covenant. The Recipient agrees that it will not take or authorize any action or permit any action within its reasonable control to be taken, or fail to take any action within its reasonable control, with respect to the Project which would result in the loss of the exclusion of interest on the Bonds from gross income for federal income tax purposes under Section 103 of the Code. 4.3 Governmental Unit. The Recipient is a state or local governmental unit as defined in Section 1.103-1 of the Treasury Regulations or an instrumentality thereof (a "Governmental Unit") and is not the federal government or any agency or instrumentality thereof. 4.4 Financing of a Capital Project. The Recipient will use the Project Funds to finance costs it has incurred or will incur for the construction, reconstruction, installation or acquisition of the Project. Such costs have not previously been financed with the proceeds of any other issue of tax-exempt obligations. 4.5 Ownership and Operation of Project. The Recipient exclusively owns and, except as provided in Section 4.12 hereof, operates the Project. 4.6 Temporary Period. The Recipient reasonably expects that at least eighty-five percent (85%) of the Project Funds will be allocated to expenditures for the Project within three (3) years of the earlier of the effective date of this Agreement or the date the Bonds are issued ("Applicable Date"). The Recipient has incurred, or reasonably expects that it will incur within six (6) months of the Applicable Date, a substantial binding obligation (i.e., not subject to contingencies within the control of the Recipient or a related party) to a third party to expend at least five percent (5%) of the Project Funds on the costs of the Project. The � _1 16 c2D141OIX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 completion of acquisition, construction, improvement and equipping of the Project and the allocation of Project Funds to expenditures for the Project will proceed with due diligence. 4.7 Working Capital. No operational expenditures of the Recipient or any related entity are being, have been or will be financed or refinanced with Project Funds. 4.8 Expenditure of Proceeds. Project Funds shall be used exclusively for the following purposes: (i) Reimbursement Expenditures (as defined in Section 4.20 below), (ii) Preliminary Expenditures (as defined in Section 4.20 below) in an aggregate amount not exceeding twenty percent (20%) of the Project Funds, (iii) capital expenditures relating to the Project originally paid by the Recipient on or after the date hereof, (iv) interest on the Obligation through the later of three (3) years after the Applicable Date or one (1) year after the Project is placed in service, and (v) initial operating expenses directly associated with the Project in the aggregate amount not more than five percent (5%) of the Project Funds. 4.9 Private Use and Private Payments. None of the Project Funds or the Project are, have been or will be used in the aggregate for any activities that constitute a Private Use (as defined below). None of the principal of or interest with respect to the Installment Payments will be secured by any interest in property (whether or not the Project) used for a Private Use or in payments in respect of property used for a Private Use, or will be derived from payments in respect of property used for a Private Use. 'Private Use" means any activity that constitutes a trade or business that is carried on by persons or entities, other than a Governmental Unit. The leasing of the Project or the access by or the use of the Project by a person or entity other than a Governmental Unit on a basis other than as a member of the general public shall constitute a Private Use. Use by or on behalf of the State of California or any of its agencies, instrumentalities or subdivisions or by any local governmental unit and use as a member of the general public will be disregarded in determining whether a Private Use exists. Use under an arrangement that conveys priority rights or other preferential benefits is generally not use on the same basis as the general public. Arrangements providing for use that is available to the general public at no charge or on the basis of rates that are generally applicable and uniformly applied do not convey priority rights or other preferential benefits. For this purpose, rates may be treated as generally applicable and uniformly applied even if (i) different rates apply to different classes of users, such as volume purchasers, if the differences in rates are customary and reasonable; or (ii) a specially negotiated rate arrangement is entered into, but only if the user is prohibited by federal law from paying the generally applicable rates, and the rates established are as comparable as reasonably possible to the generally applicable rates. An arrangement that does not otherwise convey priority rights or other preferential benefits is not treated, nevertheless, as general public use if the term of the use under the arrangement, including all renewal options, is greater than 200 days. For this purpose, a right of first refusal to renew use under the arrangement is not treated as a renewal option if (i) the compensation for the use under the arrangement is redetermined at generally applicable, fair market value rates that are in effect at the time of renewal; and (ii) the use of the financed property under the same or similar arrangements is predominantly by natural persons who are not engaged in a trade or business. 4.10 No Sale, Lease or Private Operation of the Project. The Project will not be sold or otherwise disposed of, in whole or in part, to any person who is not a Governmental Unit prior to the final maturity date of the Obligation. The Project will not be leased to any person or entity that is not a Governmental Unit prior to the final maturity date of the Obligation. Except as permitted under Section 4.12 hereof, the Recipient will not enter any contract or arrangement or cause or permit any contract or arrangement to be entered (to the extent of its reasonable control) with persons or entities that are not Governmental Units if that contract or arrangement would confer on such persons ;Q 17 c201410W4 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 or entities any right to use the Project on a basis different from the right of members of the general public. The contracts or arrangements contemplated by the preceding sentence include but are not limited to management contracts, take or pay contracts or put or pay contracts, and capacity guarantee contracts. 4.11 No Disproportionate or Unrelated Use. None of the Project Funds or the Project are, have been, or will be used for a Private Use that is unrelated or disproportionate to the governmental use of the Project Funds. 4.12 Management and Service Contracts. With respect to management and service contracts, the determination of whether a particular use constitutes Private Use shall be determined on the basis of applying Section 1.141-3(b)(4) of the Treasury Regulations, Revenue Procedure 97-13, and other applicable rules and regulations. As of the date hereof, none of the Project Funds or the Project are being used to provide property subject to contracts or other arrangements with persons or entities engaged in a trade or business (other than Governmental Units) that involve the management of property or the provision of services that do not comply with the standards of the Treasury Regulations and Revenue Procedure 97-13. Except to the extent the Recipient has received an opinion of counsel expert in the issuance of state and local government bonds the interest on which is excluded from gross income under Section 103 of the Code ("Nationally -Recognized Bond Counsel") and satisfactory to the State Water Board and the Bank to the contrary, the Recipient will not enter into any management or service contracts with any person or entity that is not a Governmental Unit for services to be provided with respect to the Project except with respect to contracts where the following requirements are complied with: (i) the compensation is reasonable for the services rendered; (ii) the compensation is not based, in whole or in part, on a share of net profits from the operation of the Project; (iii) not more than twenty percent (20%) of the voting power of the Recipient in the aggregate may be vested in the service provider and its directors, officers, shareholders, and employees and vice versa; (iv) any overlapping board members between the Recipient and the service provider must not include the chief executive officer or executive director of either, or their respective governing bodies; and (v): (a) At least ninety-five percent (95%) of the compensation for services for each annual period during the term of the contract is based on a periodic fixed fee which is a stated dollar amount for services rendered for a specified period of time. The stated dollar amount may automatically increase according to a specified objective external standard that is not linked to the output or efficiency of a facility, e.g., the Consumer Price Index and similar external indices that track increases in prices in an area or increases in revenues or costs in an industry are objective external standards. A fee shall not fail to qualify as a periodic fixed fee as a result of a one (1) time incentive award during the term of the contract under which compensation automatically increases when a gross revenue or expense target (but not both) is reached if that award is a single stated dollar amount. The term of the contract, including all renewal options, must not exceed the lesser of eighty percent (80%) of the reasonably expected useful life of the financed property and fifteen (15) years (twenty (20) years for "public utility property" within the meaning of Section 168(i)(10) of the Code); (b) At least eighty percent (80%) of the compensation for services for each annual period during the term of the contract is based on a periodic fixed fee. The term of the contract, including all renewal options, must not exceed the lesser of eighty percent (80%) of the reasonably expected useful life of the financed property and ten (10) years. A one (1) time incentive award during the term of the contract similar to the award described in subsection (a) above is permitted under this option as well; (c) At least fifty percent (50%) of the compensation for services for each annual period during the term of the contract is based on a periodic fixed fee or all of the compensation for services is 18 cza;<,o',< Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 based on a capitation fee or combination of a periodic fixed fee and a capitation fee. A capitation fee is a fixed periodic amount for each person for whom the service provider or the Recipient assumes the responsibility to provide all needed services for a specified period so long as the quantity and type of services actually provided to covered persons vary substantially; e.g., a fixed dollar amount payable per month to a service provider for each member of a plan for whom the provider agrees to provide all needed services for a specified period. A capitation fee may include a variable component of up to twenty percent (20%) of the total capitation fee designed to protect the service provider against risks such as catastrophic loss. The term of the contract, including all renewal options, must not exceed five (5) years. The contract must be terminable by the Recipient on reasonable notice without penalty or cause, at the end of the third year of the contract; (d) All of the compensation for services is based on a per -unit fee or a combination of a per -unit fee and a periodic fee. A per -unit fee is defined to mean a fee based on a unit of service provided as specified in the contract or otherwise specifically determined by an independent third party, such as the administrator of the program or the Recipient; e.g., a stated dollar amount for each specified procedure performed, car parked or passenger mile is a per -unit fee. The term of the contract, including all renewal options, must not exceed three (3) years. The contract must be terminable by the Recipient on reasonable notice, without penalty or cause, at the end of the second year of the contract term; or (e) All of the compensation for services is based on a percentage of fees charged or a combination of a_ per -unit fee and a percentage of revenue or expense fee. During the start up period, however, compensation may be based on a percentage of gross revenues, adjusted gross revenues, or expenses of a facility. The term of the contract, including renewal options, must not exceed two (2) years. The contract must be terminable by the Recipient on reasonable notice without penalty or cause, at the end of the first year. This type of contract is permissible only with respect to contracts under which the service provider primarily provides services to third parties, and management contracts involving a facility during an initial start-up period for which there have been insufficient operations to establish a reasonable estimate of the amount of the annual gross revenues and expenses (e.g., a contract for general management services for the first year of the operations). If the compensation terms of a management or service contract are materially revised, the requirements for compensation terms must be retested as of the date of the material revision and the management or service contract is treated as one that was newly entered into as of the date of the material revision. A renewal option, for purposes of the foregoing, is defined to mean a provision under which the service provider has a legally enforceable right to renew the contract. Thus, for example, a provision under which a contract is automatically renewed for one (1) year periods absent cancellation by either party is not a renewal option, even if it is expected to be renewed. A cancellation penalty is defined to include a limitation on the Recipient's ability to compete with the service provider, a requirement that the Recipient purchase equipment, goods, or services from the service provider, and a requirement that the Recipient pay liquidated damages for cancellation of the contract; in comparison, a requirement effective on cancellation that the Recipient reimburse the service provider for ordinary and necessary expenses or a restriction against the Recipient hiring key personnel of the service provider is generally not a contract termination penalty. Another contract between the service provider and the Recipient, such as a loan or guarantee by the service provider, is treated as creating a contract termination penalty if that contract contains terms that are not customary or arm's length, or that could operate to prevent the Recipient from terminating the contract (e.g., provisions under which the contract terminates if the management contract is terminated or that places substantial restrictions on the selection of a substitute service provider). 19 e2D14 10414 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 The service provider must not have any role or relationship with the Recipient, that, in effect, substantially limits the Recipient's ability to exercise its rights, including cancellation rights, under the contract, based on all the facts and circumstances. 4.13 No Disposition of Financed Property. The Recipient does not expect to sell or otherwise dispose of any portion of the Project, in whole or in part, prior to the final maturity date of the Obligation. 4.14 Useful Life of Project. The economic useful life of the Project, commencing at Project Completion, is at least equal to the term of this Agreement, as set forth on Exhibit B hereto. 4.15 Installment Payments. Installment Payments generally are expected to be derived from assessments, taxes, fees, charges or other current revenues of the Recipient in each year, and such current revenues are expected to equal or exceed the Installment Payments during each payment period. Any amounts accumulated in a sinking fund or bona fide debt service fund to pay Installment Payments (whether or not deposited to a fund or account established by the Recipient) will be disbursed to pay Installment Payments within thirteen months of the initial date of accumulation or deposit. Any such fund used for the payment of Installment Payments will be depleted once a year except for a reasonable carryover amount not exceeding earnings on such fund or one -twelfth of the Installment Payments in either case for the immediately preceding year. 4.16 No Other Replacement Proceeds. The Recipient will not use any of the Project Funds to replace or substitute other funds of the Recipient that were otherwise to be used to finance the Project or which are or will be used to acquire securities, obligations or other investment property reasonably expected to produce a yield that is materially higher than the yield on the Bonds. 4.17 No Sinking or Pledged Fund. Except as set forth in Section 4.18 below, the Recipient will not create or establish any sinking fund or pledged fund which will be used to pay Installment Payments on the Obligation within the meaning of Section 1.148-1(c) of the Treasury Regulations. If any sinking fund or pledged fund comes into being with respect to the Obligation before the Obligation has been fully retired which may be used to pay the Installment Payments, the Recipient will invest such sinking fund and pledged fund moneys at a yield that does not exceed the yield on the Bonds. 4.18 Reserve Amount. The State Water Board requires that the Recipient maintain and fund a separate account in an amount equal to one (1) year of debt service with respect to the Obligation (the "Reserve Amount") as set forth in Exhibit D. The Recipient represents that the Reserve Amount is and will be available to pay debt service with respect to the Obligation, if and when needed. The Reserve Amount consists solely of revenues of the Recipient and does not include any proceeds of any obligations the interest on which is excluded from gross income for federal income tax purposes or investment earnings thereon. The aggregate of the Reserve Amount, up to an amount not exceeding the lesser of (i) ten percent of the aggregate principal amount of the Obligation, (ii) the maximum annual debt service with respect to the Obligation, or (iii) 125 percent of the average annual debt service with respect to the Obligation, will be treated as a reasonably required reserve fund. 20 .321.„ Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 4.19 Reimbursement Resolution. The "reimbursement resolution" adopted by the Recipient is incorporated herein by reference, pursuant to Exhibit A. 4.20 Reimbursement Expenditures. A portion of the Project Funds may be applied to reimburse the Recipient for Project costs paid before the date hereof, so long as the Project cost was (i) not paid prior to sixty (60) days before the Recipient's adoption of a declaration of official intent to finance the Project, (ii) not paid more than eighteen (18) months prior to the date hereof or the date the financed facility was placed -in-service, whichever is later, and (iii) not paid more than three.(3) years prior to the date hereof (collectively, "Reimbursement Expenditures"), unless such cost is attributable to a "preliminary expenditure." Preliminary expenditure for this purpose means architectural, engineering, surveying, soil testing and similar costs incurred prior to the commencement of construction or rehabilitation of the Project, but does not include land acquisition, site preparation and similar costs incident to the commencement of acquisition, construction or rehabilitation of the Project. Preliminary expenditures may not exceed 20% of the costs of the Project financed with the Obligation. 4.21 Change in Use of the Project. The Recipient reasonably expects to use all Project Funds and the Project for the entire stated term to maturity of the Obligation. Absent an opinion of Nationally -Recognized Bond Counsel to the effect that such use of Project Funds will not adversely affect the exclusion from federal gross income of interest on the Bonds pursuant to Section 103 of the Code, the Recipient will use all Project Funds and the Project solely as set forth in the Agreement. 4.22 Rebate Obligations. If the Recipient satisfies the requirements of one of the spending exceptions to rebate specified in Section 1.148-7 of the Treasury Regulations, amounts earned from investments, if any, acquired with the Project Funds will not be subject to the rebate requirements imposed under Section 148(f) of the Code. If the Recipient fails to satisfy such requirements for any period, it will notify the State Water Board and the Bank immediately and will comply with the provisions of the Code and the Treasury Regulations at such time, including the payment of any rebate amount or any yield reduction payments calculated by the State Water Board or the Bank. 4.23 No Federal Guarantee. The Recipient will not directly or indirectly use any of the Project Funds in any manner that would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code, taking into account various exceptions including any guarantee related to investments during an initial temporary period until needed for the governmental purpose of the Bonds, investments as part of a bona fide debt service fund, investments of a reasonably required reserve or replacement fund, investments in bonds issued by the United States Treasury, investments in refunding escrow funds or certain other investments permitted under the Treasury Regulations. 4.24 No Notices or Inquiries From IRS. Within the last 10 years, the Recipient has not received any notice of a final action of the Internal Revenue Service that determines that interest paid or payable on any debt obligation of the Recipient is or was includable in the gross income of an owner or beneficial owner thereof for federal income tax purposes under the Code. net 21 C20141NX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 4.25 Amendments. The provisions in this Article may be amended, modified or supplemented at any time to reflect changes in the Code upon obtaining written approval of the State Water Board and the Bank and an opinion of Nationally -Recognized Bond Counsel to the effect that such amendment, modification or supplement will not adversely affect the exclusion from federal gross income of interest on the Bonds pursuant to Section 103 of the Code. 4.26 Application. The provisions in this Article IV shall apply to a Recipient only if any portion of the Project Funds is derived from proceeds of Bonds. 4.27 Reasonable Expectations. The Recipient warrants that, to the best of its knowledge, information and belief, and based on the facts and estimates as set forth in the tax covenants in this Article, the expectations of the Recipient as set forth in this Article are reasonable. The Recipient is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representation made in the provisions in this Article IV. ARTICLE V MISCELLANEOUS PROVISIONS 5.1 Covenants. (a) Tax Covenant. Notwithstanding any other provision hereof, the Recipient covenants and agrees that it will comply with the Tax Covenants set forth in Article IV attached hereto if any portion of the Project Funds is derived from proceeds of Bonds. (b) Disclosure of Financial Information, Operating Data, and Other Information. The Recipient covenants to furnish such financial, operating and other data pertaining to the Recipient as may be requested by the State Water Board to: (i) enable the State Water Board to cause the issuance of Bonds and provide for security therefor; or (ii) enable any underwriter of Bonds issued for the benefit of the State Water Board to comply with Rule 15c2-12(b)(5). The Recipient further covenants to provide the State Water Board with copies of all continuing disclosure reports -and materials concerning the Recipient required by the terms of any financing other than this Agreement and to submit such reports to the State Water Board at the same time such reports are submitted to any dissemination agent, trustee, nationally recognized municipal securities information repository, the Municipal Securities Rulemaking Board's Electronic Municipal Market Access (EMMA) website or other person or entity. 5.2 Assignability. The Recipient agrees and consents to any pledge, sale, or assignment to the Bank or a trustee for the benefit of the owners of the Bonds, if any, at any time of any portion of the State Water Board's estate, right, title, and interest and claim in, to and under this Agreement and the right to make all related waivers and agreements in the name and on behalf of the State Water Board, as agent and attorney -in -fact, and to perform all other related acts which are necessary and appropriate under this Agreement, if any, and the State Water Board's estate, right, title, and interest and claim in, to and under this Agreement to Installment Payments (but excluding the State Water Board's rights to Additional Payments and to notices, opinions and indemnification under each Obligation). This Agreement is not assignable by the Recipient, either in whole or in part, without the consent of the State Water Board in the form of a formal written amendment to this Agreement. 22 3 e ia.0 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 5.3 State Reviews and Indemnification. The parties agree that review or approval of Project plans and specifications by the State Water Board is for administrative purposes only and does not relieve the Recipient of its responsibility to properly plan, design, construct, operate, and maintain the Project. To the extent permitted by law, the Recipient agrees to indemnify, defend, and hold harmless the State Water Board, the Bank, and any trustee, and their officers, employees, and agents for the Bonds, if any (collectively, "Indemnified Persons"), against any loss or liability arising out of any claim or action brought against any Indemnified Persons from and against any and all losses, claims, damages, liabilities, or expenses, of every conceivable kind, character, and nature whatsoever arising out of, resulting from, or in any way connected with (1) the System or the Project or the conditions, occupancy, use, possession, conduct, or management of, work done in or about, or the planning, design, acquisition, installation, or construction, of the System or the Project or any part thereof; (2) the carrying out of any of the transactions contemplated by this Agreement or any related document; (3) any violation of any applicable law, rule or regulation, any environmental law (including, without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the California Hazardous Substance Account Act, the Federal Water Pollution Control Act, the Clean Air Act, the Toxic Substances Control Act, the Occupational Safety and Health Act, the Safe Drinking Water Act, the California Hazardous Waste Control Law, and California Water Code Section 13304, and any successors to said laws), rule or regulation or the release of any toxic substance on or near the System; or (4) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements required to be stated therein, in light of the circumstances under which they were made, not misleading with respect to any information provided by the Recipient for use in any disclosure document utilized in connection with any of the transactions contemplated by this Agreement. To the fullest extent permitted by law, the Recipient agrees to pay and discharge any judgment or award entered or made against Indemnified Persons with respect to any such claim or action, and any settlement, compromise or other voluntary resolution. The provisions of this section shall survive the discharge of the Recipient's Obligation hereunder. 5.4 Termination; Immediate Acceleration; Interest. (a) This Agreement may be terminated by written notice during construction of the Project, or thereafter at any time prior to complete satisfaction of the Obligation by the Recipient, at the option of the State Water Board, upon violation by the Recipient of any material provision of this Agreement after such violation has been called to the attention of the Recipient and after failure of the Recipient to bring itself into compliance with the provisions of this Agreement within a reasonable time as established by the Division. (b) In the event of such termination, the Recipient agrees, upon demand, to immediately repay to the State Water Board an amount equal to Installment Payments due hereunder, including accrued interest, and all penalty assessments due. In the event of termination, interest shall accrue on all amounts due at the highest legal rate of interest from the date that notice of termination is mailed to the Recipient to the date of full satisfaction of the Obligation by the Recipient. (c) Where the Recipient is a private entity that has been determined to have violated an applicable prohibition in the Prohibition Statement below or has an employee who is determined by USEPA to have violated an applicable prohibition in the Prohibition Statement below that is either associated with performance under this aware or imputed to the Recipient using the standards and due process for imputing the conduct of an individual to an organization pursuant to 2 CFR Part 180, the Recipient acknowledges and agrees that this Obligation may become immediately due and payable and that penalties up to $175 million may be due by the Recipient to the State Water Board, in addition to any other criminal or civil penalties that may become due. The Recipient, its employees, its contractors, and any subrecipients or 23 C201410414 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 subcontractors may not engage in trafficking in persons, procure a commercial sex act, or use forced labor. 5.5 Income Restrictions. The Recipient agrees that any refunds, rebates, credits, or other amounts (including any interest thereon) accruing to or received by the Recipient under this Agreement shall be paid by the Recipient to the State, to the extent that they are properly allocable to costs for which the Recipient has been reimbursed by the State under this Agreement. 5.6 Prevailing Wages. The Recipient agrees to be bound by all the provisions of State Labor Code Section 1771 regarding prevailing wages. The Recipient shall monitor all agreements subject to reimbursement from this Agreement to assure that the prevailing wage provisions of State Labor Code Section 1771 are being met. 5.7 Timeliness. Time is of the essence in this Agreement. 5.8 Governing Law. This contract is governed by and shall be interpreted in accordance with the laws of the State of California. 5.9 Amendment. No amendment or variation of the terms of this Agreement shall be valid unless made in writing, signed by the parties and approved as required. No oral understanding or agreement not incorporated in this Agreement is binding on any of the parties. 5.10 Bonding. Where contractors are used, the Recipient shall not authorize construction to begin until each contractor has furnished a performance bond in favor of the Recipient in the following amounts: faithful performance (100%) of contract value; labor and materials (100%) of contract value. This requirement shall not apply to any contract for less than $20,000.00. 5.11 Compliance with Law, Regulations, etc. (a) The Recipient agrees that it will, at all times, comply with and require its contractors and subcontractors to comply with all applicable federal and state laws, rules, guidelines, regulations, and requirements. Without limitation of the foregoing, the Recipient agrees that, to the extent applicable, the Recipient will: (1) Comply with the provisions of the adopted environmental mitigation plan for the term of this Agreement; (2) Comply with the State Water Board's "Policy for Implementing the Clean Water State Revolving Fund," dated May 7, 2013; (3) Comply with and require its contractors and subcontractors on the Project to comply with federal DBE requirements; and 24 ,<,a.,< Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 (4) Comply with and require its contractors and subcontractors to comply with the list of federal laws attached as Exhibit E. 5.12 Conflict of Interest. The Recipient certifies that it is in compliance with applicable state and/or federal conflict of interest laws. 5.13 Damages for Breach Affecting Tax Exempt Status or Federal Compliance In the event that any breach of any of the provisions of this Agreement by the Recipient shall result in the loss of tax exempt status for any bonds of the State or any subdivision or agency thereof, including Bonds issued on behalf of the State Water Board, or if such breach shall result in an obligation on the part of the State or any subdivision or agency thereof to reimburse the federal government by reason of any arbitrage profits, the Recipient shall immediately reimburse the State or any subdivision or agency thereof in an amount equal to any damages paid by or loss incurred by the State or any subdivision or agency thereof due to such breach. In the event that any breach of any of the provisions of this Agreement by the Recipient shall result in the failure of Project Funds to be used pursuant to the provisions of this Agreement, or if such breach shall result in an obligation on the part of the State or any subdivision or agency thereof to reimburse the federal government, the Recipient shall immediately reimburse the State or any subdivision or agency thereof in an amount equal to any damages paid by or loss incurred by the State or any subdivision or agency thereof due to such breach. 5.14 Disputes. (a) The Recipient may appeal a staff decision within 30 days to the Deputy Director of the Division or designee, for a final Division decision. The Recipient may appeal a final Division decision to the State Water Board within 30 days. The Office of the Chief Counsel of the State Water Board will prepare a summary of the dispute and make recommendations relative to its final resolution, which will be provided to the State Water Board's Executive Director and each State Water Board Member. Upon the motion of any State Water Board Member, the State Water Board will review and resolve the dispute in the manner determined by the State Water Board. Should the State Water Board determine not to review the final Division decision, this decision will represent a final agency action on the dispute. (b) This clause does not preclude consideration of legal questions, provided that nothing herein shall be construed to make final the decision of the State Water Board, or any official or representative thereof, on any question of law. (c) Recipient shall continue with the responsibilities under this Agreement during any dispute. 5.15 Independent Actor. The Recipient, and its agents and employees, if any, in the performance of this Agreement, shall act in an independent capacity and not as officers, employees, or agents of the State Water Board. 5.16 Non -Discrimination Clause. (a) During the performance of this Agreement, Recipient and its contractors and subcontractors shall not unlawfully discriminate, harass, or allow harassment against any employee or applicant for employment because of sex, race, color, ancestry, religious creed, national origin, sexual orientation, physical disability (including HIV and AIDS), mental disability, medical condition (cancer), age (over 40), marital status, and denial of family care leave. -32 25 o2M,,a,,, Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 (b) The Recipient, its contractors, and subcontractors shall insure that the evaluation and treatment of their employees and applicants for employment are free from such discrimination and harassment. (c) The Recipient, its contractors, and subcontractors shall comply with the provisions of the Fair Employment and Housing Act and the applicable regulations promulgated thereunder. (Gov. Code, §12990, subds. (a)-(f) et seq.; Cal. Code Regs., tit. 2, § 7285 et seq.) Such regulations are incorporated into this Agreement by reference and made a part hereof as if set forth in full. (d) The Recipient, its contractors, and subcontractors shall give written notice of their obligations under this clause to labor organizations with which they have a collective bargaining or other agreement. (e) The Recipient shall include the nondiscrimination and compliance provisions of this clause in all subcontracts to perform work under the Agreement. 5.17 No Third Party Rights. The parties to this Agreement do not create rights in, or grant remedies to, any third party as a beneficiary of this Agreement, or of any duty, covenant, obligation, or undertaking established herein. 5.18 Operation and Maintenance; Insurance. The Recipient agrees to sufficiently and properly staff, operate and maintain all portions of the Project during its useful life in accordance with all applicable state and federal laws, rules and regulations. The Recipient will procure and maintain or cause to be maintained insurance on the System with responsible insurers, or as part of a reasonable system of self-insurance, in such amounts and against such risks (including damage to or destruction of the System) as are usually covered in connection with systems similar to the System. Such insurance may be maintained by the maintenance of a self- insurance plan so long as any such plan provides for (i) the establishment by the Recipient of a separate segregated self-insurance fund funded in an amount determined (initially and on at least an annual basis) by an independent insurance consultant experienced in the field of risk management employing accepted actuarial techniques and (ii) the establishment and maintenance of a claims processing and risk management program. In the event of any damage to or destruction of the System caused by the perils covered by such insurance, the net proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the System. The Recipient shall begin such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such net proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the System shall be free and clear of all claims and liens. If such net proceeds are insufficient to enable the Recipient to pay all remaining unpaid principal portions of the Installment Payments, the Recipient shall provide additional funds to restore or replace the damaged portions of the System. 5.19 Permits, Subcontracting, and Remedies. The Recipient shall comply in all material respects with all applicable federal, state and local laws, rules and regulations. Recipient shall procure all permits, licenses and other authorizations necessary to accomplish the work contemplated in this Agreement, pay all charges and fees, and give all notices necessary and incidental to the due and lawful prosecution of the work. Signed copies of any such permits or licenses shall be submitted to the Division before construction begins. 26 c2014,OM14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 5.20 Recipient's Responsibility for Work. The Recipient shall be responsible for all work and for persons or entities engaged in work performed pursuant to this Agreement, including, but not limited to, contractors, subcontractors, suppliers, and providers of services. The Recipient shall be responsible for any and all disputes arising out of its contracts for work on the Project. The State Water Board will not mediate disputes between the Recipient and any other entity concerning responsibility for performance of work. 5.21 Related Litigation. Under no circumstances may a Recipient use funds from any disbursement under this Agreement to pay costs associated with any litigation the Recipient pursues against the State Water Board or any Regional Water Quality Control Board. Regardless of the outcome of any such litigation, and notwithstanding any conflicting language in this Agreement, the Recipient agrees to complete the Project funded by this Agreement or to repay all of the disbursed funds plus interest. 5.22 Rights in Data. The Recipient agrees that all data, plans, drawings, specifications, reports, computer programs, operating manuals, notes, and other written or graphic work produced in the performance of this Agreement are subject to the rights of the State as set forth in this section. The State shall have the right to reproduce, publish, and use all such work, or any part thereof, in any manner and for any purposes whatsoever and to authorize others to do so. If any such work is copyrightable, the Recipient may copyright the same, except that, as to any work which is copyrighted by the Recipient, the State reserves a royalty -free, nonexclusive, and irrevocable license to reproduce, publish, and use such work, or any part thereof, and to authorize others to do so, and to receive electronic copies from the Recipient upon request. (40 CFR 31.34, 31.36) 5.23 State Water Board Action; Costs and Attorney Fees. The Recipient agrees that any remedy provided in this Agreement is in addition to and not in derogation of any other legal or equitable remedy available to the State Water Board as a result of breach of this Agreement by the Recipient, whether such breach occurs before or after completion of the Project, and exercise of any remedy provided by this Agreement by the State Water Board shall not preclude the State Water Board from pursuing any legal remedy or right which would otherwise be available. In the event of litigation between the parties hereto arising from this Agreement, it is agreed that each party shall bear its own costs and attorney fees. 5.24 Unenforceable Provision. In the event that any provision of this Agreement is unenforceable or held to be unenforceable, then the parties agree that all other provisions of this Agreement have force and effect and shall not be affected thereby. 5.25 Useful Life. The economic useful life of the Project, commencing at Project Completion, is at least equal to the term of this Agreement, as set forth in Exhibit B hereto. 5.26 Venue. The State Water Board and the Recipient hereby agree that any action arising out of this Agreement shall be filed and maintained in the Superior Court in and for the County of Sacramento, California. 27 C2014101x14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 5.27 Waiver and Rights of the State Water Board. Any waiver of rights by the State Water Board with respect to a default or other matter arising under the Agreement at any time shall not be considered a waiver of rights with respect to any other default or matter. Any rights and remedies of the State Water Board provided for in this Agreement are in addition to any other rights and remedies provided by law. 28 .2014 iON14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto. CARLSBAD MUNICIPAL WATER DISTRICT: By: Name: Steve R. Sarkozy Title: Exec tive Manager Date: (- KV-1,5 STATE WATER RESOURCES CONTROL BOARD: By:_ Name: Title: Date: Darrin Polhemus Deputy Director Division of Financial Assistance 29 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT A — SCOPE OF WORK & INCORPORATED DOCUMENTS 1. The Recipient agrees to start construction no later than the estimated date of March 1, 2015. 2. The estimated Completion of Construction date is hereby established as June 30, 2018. 3. The Recipient agrees to ensure that its final Request for Disbursement is received by the Division no later than six months after Completion of Construction date, unless prior approval has been granted by the Division. If the Recipient fails to do so, then the undisbursed balance of this Agreement will be deobligated. 4. Incorporated by reference into this Agreement are the following documents: (a) the Final Plans & Specifications, which are the basis for the construction contract to be awarded by the Recipient (Agreement will be amended to incorporate such document); (b) the Regional Water Quality Control Board, San Diego Region Order No. 2001-352 as amended by Order No. R9-2012-0027; (c) the Recipient's Authorized Representative Resolution No. 1456 — authorizes loan dated November 27, 2012; (d) the Recipient's Pledged Revenues and Funds Resolution No. 1457 — doesn't authorize revenues by name dated November 27, 2012; and (e) the Recipient's Reimbursement Resolution No. 1457 dated November 27, 2012. 5. Scope of Work. (a) Project Objectives The objectives of the Phase III project components will be completed between 2014 and 2020. The Phase III project will expand the treatment capacity within the Carlsbad Water Recycling Facility (WRF) from 4.0 mgd to 6.0 MGD, the Phase III project will also install 85,0 00 linear feet of pipeline, construct a 1.5 MG storage tank, convert existing potable water facilities to recycled water use, and retrofit publicly owned landscape irrigation water systems to use recycled water in eight expansion segment locations throughout the project area. (b) Project Description The Carlsbad WRF is owned by Carlsbad Municipal Water District (CMWD), but is operated by Encina Wastewater Authority (EWA), and currently operates as a tertiary treatment plant by treating secondary effluent from the adjacent Encina Wastewater Pollution Control Facility (EWPCF). The design maximum flow is 4 MGD (4,480 AFY), but on an average annual basis has not exceeded 1.79 MGD (2,000 AFY) (CMWD 2011). As the City of Carlsbad's capacity ownership at the EWPCF is 10.26 MGD, the Carlsbad WRF can be expanded beyond its current flow without requiring an additional supply source. The Phase III project will expand the Carlsbad WRF from its current capacity of 4 MGD to a total capacity of 6 MGD, and sufficient space and infrastructure is in place to accommodate the expansion. A-1 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT A — SCOPE OF WORK & INCORPORATED DOCUMENTS Additional storage will be required to meet the expected demand following implementation of the Phase III project. The CMWD owns the Twin D Reservoir site, which has sufficient area to construct additional storage that would consist of a 1.5 million gallon steel tank. The market assessment determined that an additional 2,088 AFY (1.86 MGD) recycled water as the Phase III system demand, of which 1,535 AFY (1.37 MGD) will come from pipeline expansions. Phase III distribution pipelines are separated into seven pipeline expansion segments. As pipeline expansion segments are being implemented, other "pick-up" customer use sites along the pipeline alignment, such as roadway medians, will be included in the design. Segment alignments were based on contiguous or nearby potential customers. The potential demand includes 1109 AFY (0.99 MGD) of demand associated with retrofits and conversions of existing potable water customers, and 979 AFY (0.87 MGD) of demand associated with new customers. Most of the expansion segments do not require any property acquisition, and lie within existing rights -of -way. Segment 7, however, will require additional right-of-way access by the Quarry Creek developer for the new pipeline within the existing hillside. A-2 M Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT B — PROJECT FINANCING AMOUNT 1. Estimated Reasonable Cost. The estimated reasonable cost of the total Project, including associated planning and design costs, is twenty nine million, five hundred thousand dollars and no cents ($29,500,000.00). 2. Project Funding. Subject to the terms of this Agreement, the State Water Board agrees to provide Project Funds in the amount of up to twenty nine million, five hundred thousand dollars and no cents ($29,500,000.00). 3. Payment, Interest Rate, and Charges. The Recipient agrees to make all Installment Payments according to the schedule in Exhibit C at an interest rate of one percent (1.0%) per annum. The Recipient agrees to pay an Administrative Service Charge of zero percent (0.0%) per annum. The Recipient agrees to pay a Small Community Grant Fund Charge at zero percent (0.0%) per annum. 4. The term of this agreement is from November 13, 2014 to June 30, 2048. 5. Budget costs are contained in the Project Cost Table, which is part of Exhibit A -FBA. (This Agreement will be amended to incorporate Exhibit A -FBA.) 6. Preliminary budget costs are as follows: Design allowances: $2,000,000 Construction costs and disbursements are not available until after this Agreement has been amended to incorporate Exhibit A -FBA. Any construction expenses incurred by the Recipient prior to such amendment of this Agreement are at the Recipient's risk. Failure to begin construction according to the timelines set forth in Exhibit A will require the Recipient to repay to the State Water Board all disbursed Project Funds, including planning and design allowances. B-1 c2014 IDIX14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT C — CWSRF PAYMENT SCHEDULE See the attached preliminary CWSRF Payment Schedule dated November 20, 2014. The final CWSRF Payment Schedule will be forwarded to the Recipient after all disbursements have been paid and construction of the Project has been completed. C-1 IN V7 Y.N L � O H O O O M � ti C r.' R i W Aa c 'O H .G d d r lQ G C C a` d H GC C G s G as C d a+ 4 O A � P d i AC a; i o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o I o > o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 n d' 00 M b m 00 d' [� 00 W 7 00 N N O �o 00 O O f N ut O 7 0o O)c O 7 M O M [� N00 M �O I� ^ a, V N D, O+ o r- d• O 0, O1 N M �O �D d' 'N V1 DD V a0 V v) O O �O o0 O O .�. M �D M N N N N ] a0 r cln O �O O n O �D d;, V 'n v1 W O •-• •-• T N W 7 N M v) DO vl O �O l� cn 01 vl l� N l� +) ao .-• V V W N v1 b vl M O N M d' v� \O �D l� l� 00 00 00 00 00 00 O O, oo l� vi V cn N O ON 00 h �O vi 7 m N V N N N N N N N N N — ^-' ^^^ '-' V, In "I In � . . V1 h V) V1 vl v) h ul h V1 V1 v1 V1 Vl h Vl Vl V1 V) v) v) Vl v) v) v) v) V1 h vi vi uw vw v) q uw h v-) vi v-i h vi ut vi vi un h un un un vi rw vi un b N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N r V � V V � V t ,t � N ... ... .-. .-. .-. .-. .-. '. r. .-. — — — .-. .--. — — .-. .-. .-. .-. .-. .--- �o N N �o v1 vl h �o 'o "1' 00 � h u" vi vi v� un vi vi vi vw In v) vw vi v) 7 7 V 7 V a Ns 7 7NV 7 7 7 V C V 7 V V 7 V V N [� O^ N M v1 O, 0, O` N M l� �D d' M N -" O V1 M O O O T oo N t� - - V - O � V O O+ .-. oo l� Oi M O+ N W 7 N V1 O �D I- M OP �O M co .-• t [� b 7 �• oo M oo <t .0 �O .0 N oo V oo N 7 kn M, �n c+i V �O r D\ C; N M V r r- 00 00 00 00 00 0o ao lz l- X Z '� M N '� r O Q+ W .�•. .M-. .N. O� O) W f� �p v) 7 M N 00 00 l- �O \O V1 7 M N .... N N" N N N N N N N N ;+ V' N 'O v) V M 'O r'T M- O N M m O 4' N O V1 h V V v) oo N �O W D, O O V1 0' O� l'4 mo h v) O) M Q1 M 7 V' M �' 0 N vt [� o0 � 00 r- v) •d' vi O� h O� �D O--� O O o�0 M o0 M O l� vt 7 V Cl �p N r O N M M N 0 l� M T O+ .�-. O� M a n o0 00 O, M l� l� M O w O� O n O �O V M oN0 Off. N `D vi 7 V C M C> m oo O+ m V v) l� oD m O N M 'a v7 00 00 00 W W W CD 00 Q\ D1 Q` O) O) .-+ .-: '-. .-. ... .--� .-. .-. .-. O\ N N M" v) " r -" N M V h-- oo - O^ N M V ut r o0 N N N N N N N N N N, M M M m m m M m M V 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 O O O O O O CD O O O O ClO N N N N N N N N\ N N N ci N N N N N N N N N N N N Q Q O O CD OM M M M CD O O O O O O O O O O O O O O O O O O O O O O O O M M M M ZB ;�5 'ZB � ;25 �BZB b Zil 7 0 N O Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT D — SPECIAL CONDITIONS Recipient agrees to perform the following special conditions: Environmental Special Conditions as follows: The following documents are incorporated by reference and the Recipient shall comply with the conditions therein: 1. The November 27, 2012 Mitigation Monitoring and Reporting Program, including but not limited to the following mitigation measures: Bio 1A through Bio 1 F for biological resources, and Haz-1 through Haz-2 for hazards and hazardous materials 2. The May 2014 Cultural Resources Report implementing an archaeological monitoring plan during construction activities within a 100-foot buffer of the following expansion segments (ES) for the Phase III Recycled Water Project, County of San Diego, California: ES 1A near site CA-SDI-8348; ES 2 near site CA-SDI-6751; ES 4A near site CA-SDI-6819; ES 5 near sites CA-SDI-6139,-13124, -6140,-10612, and -5213; and ES 9 near site CA-SDI-12670. 3. The Coastal Development Permit(s) (CDP) issued prior to construction by the City of Carlsbad for the Phase III Recycled Water Project, County of San Diego, California. The Recipient will make no changes in the Project, construction area, or special conditions, without obtaining prior approval from the State Water Board and the City of Carlsbad. The Recipient understands that it is prohibited from making any such changes without those approvals. REPORTING TO THE STATE WATER BOARD The Recipient shall include the status of its environmental compliance with the measures identified in this Exhibit D in the Project Quarterly Construction Status Reports, and shall report its environmental compliance efforts with these measures identified herein in the final Project Quarterly Construction Status Report for submittal to the State Water Board after the completion of the Project construction. Financial Special Conditions as follows: 1. The Recipient shall establish sewer rates and charges sufficient to generate net revenues equal to at least 1.10 times the total annual debt service. 2. The Recipient shall establish a restricted reserve fund, held in the Recycled Water Rate Fund, equal to one year's debt service prior to the construction completion date of the project. The restricted reserve fund shall be maintained for the full term of the finance agreement and shall be subject to lien and pledge as security for the Obligation. D-1 c201410M4 IV Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT D — SPECIAL CONDITIONS Other :_ Legal Special Condition as follows: The Recipient complies with the State Water Board's Drought Emergency Water Conservation regulations in Section 863-865 of title 23 of the California Code of Regulations. The Recipient will include a discussion of its implementation in reports submitted pursuant to Section 2.16 of this Agreement. D-2 c M410l"4 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT E — FEDERAL CONDITIONS & CROSS -CUTTERS The Recipient agrees to comply with the following conditions required by USEPA: 1. Architectural and engineering contracts. Where the Recipient contracts for program management, construction management, feasibility studies, preliminary engineering, design, engineering, surveying, mapping, or architectural related services, the Recipient shall ensure that such any such contract is negotiated in the same manner as a contract for architectural and engineering services is negotiated under chapter 11 of title 40, United States Code, or an equivalent State qualifications - based requirement as determined by the State Water Board. 2. GAAP. The Recipient must maintain project accounts according to Generally Accepted Accounting Principles (GAAP) as issued by the Governmental Accounting Standards Board (GASB). The Recipient shall maintain GAAP-compliant project accounts, including GAAP requirements relating to the reporting of infrastructure assets. 3. Fiscal sustainability. The Recipient certifies that it has developed and is implementing a fiscal sustainability plan for the Project that includes an inventory of critical assets that are a part of the Project, an evaluation of the condition and performance of inventoried assets or asset groupings, a certification that the recipient has evaluated and will be implementing water and energy conservation efforts as part of the plan, and a plan for maintaining, repairing, and, as necessary, replacing the Project and a plan for funding such activities. 4. Unless the Recipient has obtained a waiver from USEPA on file with the State Water Board, the Recipient shall not purchase "iron and steel products" produced outside of the United States on this Project. Unless the Recipient has obtained a waiver from USEPA on file with the State Water Board, the Recipient hereby certifies that all "iron and steel products" used in the Project were or will be produced in the United States. For purposes of this section, the term "iron and steel products" means the following products made primarily of iron or steel: lined or unlined pip s and and fittings, manhole covers and other municipal castings, hydrants, tanks, flanges, pipe clamps restraints, valves, structural steel, reinforced precast concrete, and construction materials. 5. No Recipient or subrecipient may receive funding under this Agreement unless it has provided its DUNS number to the State Water Board. (2011 Cap Grant) 6. Executive Compensation. Where the Recipient received 80 percent or more of its annual gross revenues from federal procurement contracts (and subcontracts) and $25,000,000 or more in annual gross revenues from federal procurement contracts (and subcontracts), the Recipient agrees to notify the State Water Board. The Recipient agrees to provide information regarding executive compensation to the State Water Board upon request, in order for the State Water Board to comply with USEPA requirements. 7. Trafficking in Persons. The Recipient, its employees, contractors and subcontractors and their employees may not engage in severe forms of trafficking in persons during the term of this Agreement, procure a commercial sex act during the term of this Agreement, or use forced labor in the performance of this Agreement. The Recipient must include this provision in its contracts and subcontracts under this Agreement. The Recipient must inform the State Water Board immediately of any information regarding a violation of the foregoing. The Recipient understands that failure to comply with this provision may subject the State Water Board to loss of federal funds in the amount of $101,065,000. The Recipient agrees to compensate the State Water Board for any such funds lost due to its failure to comply with this condition, or the failure of its contractors or subcontractors to comply with this condition. The State Water Board may unilaterally terminate this Agreement and full payment will be due immediately, if a Recipient or subrecipient that is a private entity is determined to have violated the foregoing. Trafficking Victims Protection Act of 2000. E-1 c2014101v14 Kel Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT E — FEDERAL CONDITIONS & CROSS -CUTTERS Contractors, Subcontractors, Debarment and Suspension, Executive Order 12549; 2 CFR Part 180; 2 CFR Part 1532. The Recipient shall not subcontract with any party who is debarred or suspended or otherwise excluded from or ineligible for participation in federal assistance programs under Executive Order 12549, "Debarment and Suspension". The Recipient shall not subcontract with any individual or organization on USEPA's List of Violating Facilities. (40 CFR, Part 31.35, Gov. Code 4477) The Recipient certifies to the best of its knowledge and belief, that it and its principals: (a) Are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded by any federal department or agency; (b) Have not within a three (3) year period preceding this Agreement been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; violation of federal or state antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property; ed by a governmental ity (c) Are not (federal, state olr local) with commission of any of the offenses icted for or otherwise criminally or civilly henumerr enumerated in paragraph (b)tof (federa , this certification; and (d) Have not within a three (3) year period preceding this application/proposal had one or more public transactions (federal, state or local) terminated for cause or default. Suspension and debarment information can be accessed at http://www.sam.gov. The Recipient represents and warrants that it has or will include a term or conditions requiring compliance with this provision in all of its contracts and subcontracts under this Agreement. The Recipient acknowledges that failing to disclose the information as required at 2 CFR 180.335 may result in the termination, delay or negation of this Agreement, or pursuance of legal remedies, including suspension and debarment. Anti -Lobbying Provisions (40 CFR Part 34) & Anti -Litigation Provisions (2 CFR 220, 225, or 230). The Recipient shall ensure that no funds under this Agreement are used to engage in lobbying of the federal government or in litigation against the United States unless authorized under existing law. The Recipient shall abide by 2 CFR 225 (OMB Circular A-87) (or, if not applicable, other parallel requirements), which prohibits the use of federal grant funds for litigation against the United States or for lobbying or other political activities. The Recipient agrees to comply with 40 CFR Part 24, New Restrictions on Lobbying. The Recipient agrees to submit certification and disclosure forms in accordance with these provisions. In accordance with the Byrd Anti -Lobbying Amendment, any Recipient who makes a prohibited expenditure under 40 CFR Part 34 or fails to file the required certification or lobbying forms shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such expenditure. The Recipient shall abide by its respective 2 CFR 200, 225, or 230, which prohibits the use of federal grant funds for litigation against the United States or for lobbying or other political activities. 10. Disadvantaged Business Enterprises. 40 CFR Part 33. The Recipient agrees to comply with the of usiness requirementsEnterprises. The DBE rule canrbe accessed at am for Utilization epall gov/osbp , Minority a T e Recipient B Enterp shall comply E-2 c12014 %X14 �I Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT E — FEDERAL CONDITIONS 8, CROSS -CUTTERS with, and agrees to require its prime contractors to comply with 40 CFR Section 33.301, and retain all records documenting compliance with the six good faith efforts. 11. The Recipient agrees to comply with the Davis -Bacon provisions attached as Exhibit G. The Recipient agrees to comply with the following federal laws, as applicable to recipients of CWSRF funding: Environmental Authorities 1. Archeological and Historical Preservation Act of 1974, Pub. L. 86-523, as amended, Pub. L. 93-291 16 USC § 469a-1. 2. Clean Air Act, Pub. L. 84-159, as amended. 3. Coastal Barrier Resources Act, Pub. L. 97-348, 96 Stat. 1653; 16 USC § 3501 et seq. 4. Coastal Zone Management Act, Pub. L. 92-583, as amended; 16 USC § 1451 et seq. 5. Endangered Species Act, Pub. L. 93-205, as amended; 16 USC § 1531 et seq.. 6. Environmental Justice, Executive Order 12898. 7. Floodplain Management, Executive Order, 11988 as amended by Executive Order 12148. 8. Protection of Wetlands, Executive Order 11990, as amended by Executive Order No. 12608. 9. Farmland Protection Policy Act, Pub. L. 97-98; 7 USC § 4201 et seq. 10. Fish and Wildlife Coordination Act, Pub. L. 85-624, as amended. 11. National Historic Preservation Act of 1966, Pub. L. 89-665, as amended, 80 Stat. 917 (1966) 16 USC § 470 et seq. 12. Safe Drinking Water Act, Pub. L. 93-523, as amended; 42 USC § 300f et seq. 13. Wild and Scenic Rivers Act, Pub. L. 90-542, as amended, 82 Stat. 913; 16 USC § 1271 et seq. 14. Essential Fish Habitat Consultation. Pub. L. 94-265, as amended, 16 USC § 1801 et seq. 15. Recycled Materials. Executive Order 13101; Section 6002 Resource Conservation and Recovery Act — 42 USC § 6962. Economic and Miscellaneous Authorities 1. Demonstration Cities and Metropolitan Development Act of 1966, Pub. L. 89-754, as amended, Executive Order 12372/ 42 USC § 3331 et seq. 2. Procurement Prohibitions under Section 306 of the Clean Air Act and Section 508 of the Clean Water Act, including Executive Order 11738, Administration of the Clean Air Act and the Federal E-3 .=0004 15�__ Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT E — FEDERAL CONDITIONS & CROSS -CUTTERS Water Pollution Control Act with Respect to Federal Contracts, Grants, or Loans; 42 USC § 7606; 33 USC § 1368; 40 CFR Part 31. 3. Uniform Relocation and Real Property Acquisition Policies Act, Pub. L. 91-646, as amended; 42 USC §§4601-4655 4.. Preservation of Open Competition and Government Neutrality Towards Government Contractors' Labor Relations on Federal and Federally Funded Construction Projects, EO 13202, as amended by EO 13208. 6. Hotel and Motel Fire Safety Act of 1990 (PL 101-391, as amended). All conference, meeting, convention, or training funded in whole or in part with federal funds shall comply with the protection and control guidelines of this act. Recipients may search http://www usfa dhs qov/applications/hotel/. 7. Records and financial reporting requirements. 40 CFR Part 31. Copyright requirements. 40 CFR Part 31 Social Policy Authorities 1. Age Discrimination Act of 1975, Pub. L. 94-135; 42 USC § 6102. 2. Race Discrimination. Title VI of the Civil Rights Act of 1964, Pub. L. 88-352.1; 42 USC § 2000d; 40 CFR Part 7. 3. Sex b Discrimination.9500the Section 13 of the Federal Water Act); 33 USC § 125140 Pollution CFR Part 7 Act Amendments of 1972, Pu 4. Disability Discrimination. Section 504 of the Rehabilitation Act of 1973, Pub. L. 93-112 (including Executive Orders 11914 and 11250); 29 USC § 794; 40 CFR Part 7. 5. Equal Employment Opportunity, Executive Order 11246. 6. Section 129 of the Small Business Administration Reauthorization and Amendment Act of 1988, Pub. L. 100-590. E-4 001410x14 53 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT F — SCHEDULE OF MATERIAL OBLIGATIONS Except for the following and the Obligation evidenced by this Agreement, the Recipient certifies that it has no outstanding Material Obligations and that it is in compliance with all applicable additional debt provisions of the following: The following outstanding debt is senior to the Obligation: The following outstanding debt is on parity with the Obligation: ;740-3903;-l le Interest Total Amount Amount Remaining End Date Rate JSRF10 2.5%$9,695,504 $6,154,355.30 06/1/2025 WRFP-3903-10 2.3% $19,382,546 $13,682,221.10 04/1/2027 The following outstanding debt is subordinate to the Obligation: F-1 -C�,11W% Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS The Recipient shall have the primary responsibility to maintain payroll records as described in Section 3(ii)(A), below and for compliance as described in Section 5. Requirements Under The Consolidated Appropriations Act, 2014 (P.L. 113-76) For Recipients That Are Governmental Entities: If a Recipient has questions regarding when DB applies, obtaining the correct DB wage determinations, DB provisions, or compliance monitoring, it may contact the State Water Board. The Recipient may also obtain additional guidance from DOL's web site at http://www.dol.gov/whd/ 1. Applicability of the Davis- Bacon (DB) prevailing wage requirements. Under the FY 2014 Consolidated Appropriation Act, DB prevailing wage requirements apply to the construction, alteration, and repair of treatment works carried out in whole or in part with assistance made available by a State water pollution control revolving fund and to any construction project carried out in whole or in part by assistance made available by a drinking water treatment revolving loan fund. If the Recipient encounters a unique situation at a site that presents uncertainties regarding DB applicability, the Recipient must discuss the situation with the State Water Board State before authorizing work on that site. 2. Obtaining Wage Determinations. determination for the locality in which a covered activity subject (a) Recipients shall obtain the wage to DB will take place prior to issuing requests for bids, proposals, quotes or other methods for soliciting contracts (solicitation) for activities subject to DB. These wage determinations shall be incorporated into solicitations and any subsequent contracts. Prime contracts must contain a provision requiring that subcontractors follow the wage determination incorporated into the prime contract. (i) While the solicitation remains open, the Recipient shall monitor www.wdol.gov weekly to ensure that the wage determination contained in the solicitation remains current. The Recipients shall amend the solicitation if DOL issues a modification more than 10 days prior to the closing date (i.e. bid opening) for the solicitation. If DOL modifies or supersedes . the applicable wage determination less than 10 days prior to the closing date, the Recipients may request a finding from the State State Water Board that there is not a reasonable time to notify interested contractors of the modification of the wage determination. The State Water Board will provide a report of its findings to the Recipient. (ii) If the Recipient does not award the contract within 90 days of the closure of the solicitation, any modifications or supersedes DOL makes to the wage determination contained in the solicitation shall be effective unless the State Water Board, at the request of the Recipient, obtains an extension of the 90 day period from DOL pursuant to 29 CFR 1.6(c)(3)(iv). The Recipient shall monitor www.wdol.gov on a weekly basis if it does not award the contract within 90 days of closure of the solicitation to ensure that wage determinations contained in the solicitation remain current. (b) If the Recipient carries out activity subject to DB by issuing a task order, work assignment or similar instrument to an existing contractor (ordering instrument) rather than by publishing a solicitation, the Recipient shall insert the appropriate DOL wage determination from www.wdol.gov into the ordering instrument. (c) Recipients shall review all subcontracts subject to DB entered into by prime contractors to verify that the prime contractor has required its subcontractors to include the applicable wage determinations. (d) As provided in 29 CFR 1.6(f), DOL may issue a revised wage determination applicable to a Recipient's contract after the award of a contract or the issuance of an ordering instrument if DOL determines that the Recipient has failed to incorporate a wage determination or has used a wage determination that clearly does not apply to the contract or ordering instrument. If this occurs, the Recipient shall either terminate the contract or ordering instrument and issue a revised solicitation or G-1� c201d 1gx16 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS ordering instrument or incorporate DOL's wage determination retroactive to the beginning of the contract or ordering instrument by change order. The Recipient's contractor must be compensated for any increases in wages resulting from the use of DOL's revised wage determination. 3. Contract and Subcontract provisions. (a) The Recipient shall insure that the Recipient(s) shall insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a treatment work under the CWSRF or a construction project under the DWSRF financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in § 5.1 or the FY 2014 Consolidated Appropriations Act, the following clauses: (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. Contributions made or costs reasonably anticipated for bona fide fringe benefits under section 1(b)(2) of the Davis -Bacon Act on behalf of laborers or mechanics are considered wages paid to such laborers or mechanics, subject to the provisions of paragraph (a)(1)(iv) of this section; also, regular contributions made or costs incurred for more than a weekly period (but not less often than quarterly) under plans, funds, or programs which cover the particular weekly period, are deemed to be constructively made or incurred during such weekly period. Such laborers and mechanics shall be paid the appropriate wage rate and fringe benefits on the wage determination for the classification of work actually performed, without regard to skill, except as provided in § 5.5(a)(4). Laborers or mechanics performing work in more than one classification may be compensated at the rate specified for each classification for the time actually worked therein: Provided that the employer's payroll records accurately set forth the time spent in each classification in which work is performed. The wage determination (including any additional classification and wage rates conformed under paragraph (a)(1)(ii) of this section) and the Davis -Bacon poster (WH-1321) shall be posted at all times by the contractor and its subcontractors at the site of the work in a prominent and accessible place where it can be easily seen by the workers. Recipients may obtain wage determinations from the U.S. Department of Labor's web site, www.dol.gov. (ii)(A) The Recipient(s), on behalf of EPA, shall require that any class of laborers or mechanics, including helpers, which is not listed in the wage determination and which is to be employed under the contract shall be classified in conformance with the wage determination. The State award official shall approve a request for an additional classification and wage rate and fringe benefits therefore only when the following criteria have been met: (1) The work to be performed by the classification requested is not performed by a classification in the wage determination; and (2) The classification is utilized in the area by the construction industry; and (3) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination. (B) If the contractor and the laborers and mechanics to be employed in the classification (if known), or their representatives, and the Recipient(s) agree on the classification and wage rate (including the amount designated for fringe benefits where appropriate), documentation of the action taken and the request, including State illnation shall award off c al wl t a smit the regu sh t, to e Administrator tsState ofthe Wage official. and Hour G-2 ,2D141axu Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS Division, Employment Standards Administration, U.S. Department of Labor, Washington, DC 20210 and to the EPA DB Regional Coordinator concurrently. The Administrator, or an authorized representative, will approve, modify, or disapprove every additional classification request within 30 days of receipt and so advise the State award official or will notify the State award official within the 30-day period that additional time is necessary. (C) In the event the contractor, the laborers or mechanics to be employed in the classification or their representatives, and the Recipient(s) do not agree on the proposed classification and wage rate (including the amount designated for fringe benefits, where appropriate), the award official shall refer the request and the local wage determination, including the views of all interested parties and the recommendation of the State award official, to the Administrator for determination. The request shall be sent to the EPA DB Regional Coordinator concurrently. The Administrator, or an authorized representative, will issue a determination within 30 days of receipt of the request and so advise the contracting officer or will notify the contracting officer within the 30-day period that additional time is necessary. (D) The wage rate (including fringe benefits where appropriate) determined pursuant to paragraphs (a)(1)(ii)(B) or (C) of this section, shall be paid to all workers performing work in the classification under this contract from the first day on which work is performed in the classification. (iii) Whenever the minimum wage rate prescribed in the contract for a class of laborers or mechanics d as an hourly rate, the includes r pay the as stated ed benefit thewage determination or e contractor shall pay an ther bona f defrishall e nge benefitorhourly benefit cash equivalent thereof. (iv) If the contractor does not make payments to a trustee or other third person, the contractor may consider as part of the wages of any laborer or mechanic the amount of any costs reasonably anticipated in providing bona fide fringe benefits under a plan or program, Provided, That the Secretary of Labor has found, upon the written request of the contractor, that the applicable standards of the Davis -Bacon Act have been met. The Secretary of Labor may require the contractor to set aside in a separate account assets for the meeting of obligations under the plan or program. (2) Withholding. The Recipient(s), shall upon written request of the EPA Award Official or an authorized representative of the Department of Labor, withhold or cause to be withheld from the contractor under this contract or any other Federal contract with the same prime contractor, or any other federally -assisted contract subject to Davis -Bacon prevailing wage requirements, which is held by the same prime contractor, so much of the accrued payments or advances as may be considered necessary to pay laborers and mechanics, including apprentices, trainees, and helpers, employed by the contractor or any subcontractor the full amount of wages required by the contract. In the event of failure to pay any laborer or mechanic, including any apprentice, trainee, or helper, employed or working on the site of the work, all or part of the wages required by the contract, the (Agency) may, after written notice to the contractor, sponsor, applicant, or owner, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased. . (3) Payrolls and basic records. (i) Payrolls and basic records relating thereto shall be maintained by the contractor during the course of the work and preserved for a period of three years thereafter for all laborers and mechanics working at the site of the work. Such records shall contain the name, address, and social security number of each such worker, his or her correct classification, hourly rates of wages paid (including rates of contributions or costs anticipated for bona fide fringe benefits or cash equivalents thereof of the types described in section 1(b)(2)(B) of the Davis -Bacon Act), daily and weekly number of hours worked, deductions and actual wages paid. Whenever the Secretary of Labor has found under 29 CFR 5.5(a)(1)(iv ) that the wages of any laborer or mechanic include the amount of any costs reasonably anticipated in providing benefits under a plan or program described in section 1(b)(2)(B) of the Davis -Bacon Act, the contractor shall maintain records which show that the commitment to provide such benefits is enforceable, that the plan or program is financially responsible, and that the plan or program has been communicated in writing to the laborers or mechanics affected, and records which show the costs anticipated or the actual cost incurred in providing such benefits. Contractors employing apprentices or trainees under G-3 r I o,.,oi.,. Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS approved programs shall maintain written evidence of the registration of apprenticeship programs and certification of trainee programs, the registration of the apprentices and trainees, and the ratios and wage rates prescribed in the applicable programs. (ii)(A) The contractor shall submit weekly, for each week in which any contract work is performed, a copy of all payrolls to the Recipient, that is, the entity that receives the sub -grant or loan from the State capitalization grant recipient. Such documentation shall be available on request of the State recipient or EPA. As to each payroll copy received, the Recipient shall provide written confirmation in a form satisfactory to the State indicating whether or not the project is in compliance with the requirements of 29 CFR 5.5(a)(1) based on the most recent payroll copies for the specified week. The payrolls shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on the weekly payrolls. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH-347 is available for this purpose from the Wage and Hour Division Web site at http://www.dol.gov/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and current address of each covered worker, and shall provide them upon request to the Recipient(s) for transmission to the State or EPA if requested by EPA , the State, the contractor, or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the Recipient(s). (B) Each payroll submitted shall be accompanied by a "Statement of Compliance," signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract and shall certify the following: (1) That the payroll for the payroll period contains the information required to be provided under § 5.5 (a)(3)(ii) of Regulations, 29 CFR part 5, the appropriate information is being maintained under § 5.5 (a)(3)(i) of Regulations, 29 CFR part 5, and that such information is correct and complete; (2) That each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages earned, other than permissible deductions as set forth in Regulations, 29 CFR part 3; (3) That each laborer or mechanic has been paid not less than the applicable wage rates and fringe e benefits or cash equivalents for the classification of work performed, as specified in the applicable9 determination incorporated into the contract. (C) The weekly submission of a properly executed certification set forth on the reverse side of Optional Form WH-347 shall satisfy the requirement for submission of the "Statement of Compliance" required by paragraph (a)(3)(ii)(B) of this section. (D) The falsification of any of the above certifications may subject the contractor or subcontractor to civil or criminal prosecution under section 1001 of title 18 and section 231 of title 31 of the United States Code. (iii) The contractor or subcontractor shall make the records required 3 i of this under paragraph (a)( )(i) section available for inspection, copying, or transcription by authorized representatives of the State, EPA or the Department of Labor, and shall permit such representatives to interview employees during working hours on the job. If the contractor or subcontractor fails to submit the required records or to make them available, the Federal agency or State may, after written notice to the contractor, sponsor, applicant, or owner, take such action as may be necessary to cause the suspension of any further ermore, failure to submit payment, to ance, ormake such records available mayuarantee of funds. hbe grounds for debarment action act onuired pu suant to upon request o 29 CFR 5.12. (4) Apprentices and trainees-- G-4 c201410ix14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS (i) Apprentices. Apprentices will be permitted to work at less than the predetermined rate for the work they performed when they are employed pursuant to and individually registered in a bona fide apprenticeship program registered with the U.S. Department of Labor, Employment and Training Administration, Office of Apprenticeship Training, Employer and Labor Services, or with a State Apprenticeship Agency recognized by the Office, or if a person is employed in his or her first 90 days of probationary employment as an apprentice in such an apprenticeship program, who is not individually registered in the program, but who has been certified by the Office of Apprenticeship Training, Employer and Labor Services or a State Apprenticeship Agency (where appropriate) to be eligible for probationary employment as an apprentice. The allowable ratio of apprentices to journeymen on the job site in any craft classification shall not be greater than the ratio permitted to e contractor rgee tirew e ntiror s force under the registered program. Any worker listed on a payroll an apprentice w not registered or otherwise employed as stated above, shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any apprentice performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed. Where a contractor is performing construction on a project in a locality other than that in which its program is registered, the ratios and wage rates (expressed in percentages of the journeyman's hourly rate) specified in the contractor's or subcontractor's registered program shall be observed. Every apprentice must be paid at not less than the rate specified in the registered program for the apprentice's level of progress, expressed as a percentage of the journeymen hourly rate specified in the applicable wage determination. Apprentices shall be paid fringe benefits in accordance with the provisions of the apprenticeship program. If the apprenticeship program does not specify fringe benefits, apprentices must be paid the full amount of fringe benefits listed on the wage determination for the applicable classification. If the Administrator determines that a different practice prevails for the applicable apprentice classification, fringes shall be paid in accordance with that determination. In the event the Office of Apprenticeship Training, Employer and Labor Services, or a State Apprenticeship Agency recognized by the Office, withdraws approval of an apprenticeship program, the contractor will no longer be permitted to utilize apprentices at less than the applicable predetermined rate for the work performed until an acceptable program is approved. (ii) Trainees. Except as provided in 29 CFR 5.16, trainees will not be permitted to work at less than the predetermined rate for the work performed unless they are employed pursuant to and individually registered in a program which has received prior approval, evidenced by formal certification by the U.S. Department of Labor, Employment and Training Administration. The ratio of trainees to journeymen on the job site shall not be greater than permitted under the plan approved by the Employment and Training Administration. Every trainee must be paid at not less than the rate specified in the approved program for the trainee's level of progress, expressed as a percentage of the journeyman hourly rate specified in the applicable wage determination. Trainees shall be paid fringe benefits in accordance with the provisions of the trainee program. If the trainee program does not mention fringe benefits, trainees shall be paid the full amount of fringe benefits listed on the wage determination unless the Administrator of the Wage and Hour Division determines that there is an apprenticeship program associated with the corresponding journeyman wage rate on the wage determination which provides for less than full fringe benefits for apprentices. Any employee ysted n the p y o ment and Trai neng ate who is not registered and participating in a training plan approvedby Administration shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any trainee performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed. In the event the Employment and Training Administration withdraws approval of a training program, the contractor will no longer be permitted to utilize trainees at less than the applicable predetermined rate for the work performed until an acceptable program is approved. (iii) Equal employment opportunity. The utilization of apprentices, trainees and journeymen under this part shall be in conformity with the equal employment opportunity requirements of Executive Order 11246, as amended and 29 CFR part 30. G-5 '1 c204 JUX16 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS (5) Compliance with Copeland Act requirements. The contractor shall comply with the requirements of 29 CFR part 3, which are incorporated by reference in this contract. (6) Subcontracts. The contractor or subcontractor shall insert in any subcontracts the clauses contained in 29 CFR 5.5(a)(1) through (10) and such other clauses as the EPA determines may by appropriate, and also a clause requiring the subcontractors to include these clauses in any lower tier subcontracts. The prime contractor shall be responsible for the compliance by any subcontractor or lower tier subcontractor with all the contract clauses in 29 CFR 5.5. (7) Contract termination; debarment. A breach of the contract clauses in 29 CFR 5.5 may be grounds for termination of the contract, and for debarment as a contractor and a subcontractor as provided in 29 CFR 5.12. (8) Compliance with Davis -Bacon and Related Act requirements. All rulings and interpretations oft e Davis -Bacon and Related Acts contained in 29 CFR parts 1, 3, and 5 are herein incorporated by reference in this contract. (9) Disputes concerning labor standards. Disputes arising out of the labor standards provisions of this contract shall not be subject to the general disputes clause of this contract. Such disputes shall be resolved in Disputes within hetmean meaning ofthis clausethe inc include disputes Labor between the contractor ((or any of its and 7. Disputes within t 9 subcontractors) and Recipient(s), State, EPA, the U.S. Department of Labor, or the employees or their representatives. (10) Certification of eligibility. (i) By entering into this contract, the contractor certifies that neither it (nor he or she) nor any person or firm who has an interest in the contractor's firm is a person or firm ineligible to be awarded Government contracts by virtue of section 3(a) of the Davis -Bacon Act or 29 CFR 5.12(a)(1). (ii) No part of this contract shall be subcontracted to any person or firm ineligible for award of a acon Act or 29 CFR Government penalty tract by for makingrtue false statementsection s s prescribed inBthe U S. Criminal Code, 18 (U.S .C. 1001. (iii) The penalty f 9 4. Contract Provision for Contracts in Excess of $100,000.lowing (a) Contract Work Hours and Safety Standards f his sectionCct. The ln(full in anent ly insert co t act in the Ian amount neexcess set forth in paragraphs (a)(1), (2), (3), and (4) o of $100,000 and subject to the overtime provisions of the Contract Wok Hours and Safety Standards Act. These clauses shall be inserted in addition to the clauses required by Item 3, above or 29 CFR 4.6. As c tract work used in this paragraph, the terms laborers and mechanics include watchmen and guards. (1) Overtime requirements.contractor or contracting for any hpart of the on anics shall r quire or pe m t any such which may require or involve theemployment of laborersor me ek in which he or she is employed on such work to work in excess o laborer or mechanic in any workwer or mechanic receives forty hours in such workweek unless such times the basic rah labore for all hours worked in excess of forty hours t ou sin than one and one-half of pay workweek. (2) Violation; liability for unpaid wages; liquidated damages. In the event of any violation of the clause set forth in paragraph (a)(1) of this section the contractor and any subcontractor responsible therefore shall be liable for the unpaid wages. In addition, such contractor and subcontractor shall be liable o such o the United States (in the case aof lliquidated damages. Suche under contract rthe liquidated lstrict of damages shla or a territory, all be computed with District or to such territory), respect to each individual laborer or mechanic, (1) of this sectioning, watchmen and n the sum of $ 0 for each calendar day on violation of the clause set forth in paragraph p ( ) which such individual f the overtime wagesas required or d to work in excess of required by the clause set forth nr e standad workweek of forty hours without paymentt oparagr ph (a)(1) of this section. ages. The Recipient, theWithholding for official p o anages and liquidated authorized representative of the Department of Labor, shall withhold or the EPA Award G-6 Len e1M4, .14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS cause to be withheld, from any moneys payable on account of work performed by the contractor or subcontractor under any such contract or any other Federal contract with the same prime contractor, or any other federally -assisted contract subject to the Contract Work Hours and Safety Standards Act, which is held by the same prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor or subcontractor for unpaid wages and liquidated damages as provided in the clause set forth in paragraph (b)(2) of this section. (4) Subcontracts. The contractor or subcontractor shall insert in any subcontracts the clauses set forth in paragraph (a)(1) through (4) of this section and also a clause requiring the subcontractors to include these clauses in any lower tier subcontracts. The prime contractor shall be responsible for compliance by any subcontractor or lower tier subcontractor with the clauses set forth in paragraphs (a)(1) through (4) of this section. (b) In addition to the clauses contained in Item 3, above, in any contract subject only to the Contract Work Hours and Safety Standards Act and not to any of the other statutes cited in 29 CFR 5.1, the Recipient shall insert a clause requiring that the contractor or subcontractor shall maintain payrolls and basic payroll records during the course of the work and shall preserve them for a period of three years from the completion of the contract for all laborers and mechanics, including guards and watchmen, working on the contract. Such records shall contain the name and address of each such employee, social security number, correct classifications, hourly rates of wages paid, daily and weekly number of hours worked, deductions made, and actual wages paid. Further, the Recipient shall insert in any such contract a clause providing hat the records to be maintained under this paragraph shall be ection, copying, or made available by authorized y the contractor the USEPA, therDepartmenttof Labor,or for and transcription and the State WaterBoard, at and he contractor representatives o or subcontractor will permit such representatives to interview employees during working hours on the job. 5. Compliance Verification nterview a sufficient number of employees entitled to D (a) The Recipient shall periodically iB prevailing wages (covered employees) to verify that contractors or subcontractors are paying the appropriate wage rates. As provided in 29 CFR 5.6(a)(6), all interviews must be conducted in confidence. The Recipient must use Standard Form 1445 (SF 1445) or equivalent documentation to memorialize the interviews. Copies of the SF 1445 are available from EPA on request. (b) The Recipient shall establish and follow an interview schedule based on its assessment of the risks of noncompliance with DB posed by contractors or subcontractors and the duration of the contract or subcontract. Recipients must conduct more frequent interviews if the initial interviews or other information indicated that there is a risk that the contractor or subcontractor is not complying with DB. Recipients shall immediately conduct interviews in response to an alleged violation of the prevailing wage requirements. All interviews shall be conducted in confidence." payroll (c) The Recipient shall periodically conduct spot checks of a representative sample of weekly data to verify that contractors or subcontractors are paying the appropriate wage rates. The Recipient shall establish and follow a spot check schedule based on its assessment of the risks of noncompliance with DB posed by contractors or subcontractors and the duration of the contract or subcontract. At a minimum, if practicable, the Recipient should spot check payroll data within two weeks of each contractor or subcontractor's submission of its initial payroll data and two weeks prior to the completion date the contract or subcontract . Recipients must conduct more frequent spot checks if the initial spot check or other information indicates that there is a risk that the contractor or subcontractor is not complying with DB. In addition, during the examinations the Recipient shall verify evidence of fringe benefit plans and payments there under by contractors and subcontractors who claim credit for fringe benefit contributions. (d) The Recipient shall periodically review contractors and subcontractors use of apprentices and trainees to verify registration and certification with respect to apprenticeship and training programs approved by either the U.S Department of Labor or a state, as appropriate, and that contractors and subcontractors are not using disproportionate numbers of, laborers, trainees and apprentices. These reviews shall be conducted in accordance with the schedules for spot checks and interviews described in G-7 CC' .=4 IM14 Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT G — DAVIS BACON REQUIREMENTS Item 5(b) and (c) above. (e) Recipients must immediately report potential violations of the DB prevailing wage requirements to the EPA DB contact listed above and to the appropriate DOL Wage and Hour District Office listed at http://www dol gov/contacts/whd/america2.htm. G-8 tlo2— c201410ix14 None. Carlsbad Municipal Water District Agreement No.: 14-820-550 Project No.: C-06-7899-110 EXHIBIT H — MATERIAL LITIGATION, INVESTIGATIONS, AUDITS H-1 AGUA PIPELINE / SEGMENT2 CWRF / EXPANSION PIPELINE SEGMENT 9 BA PIPELINE tt SEGMENT 18 PIPELINE ,rGMENT 1A A�Es . - ■ PIPELINE jHl SEGMENT8PROJECTNAME PROJECT PHASE Ill RECYCLED WATER 1 NUMBER 5208 PLOTTED BY. SCOTT EVANS PLOT DATE 12117114 PATH.D. \UTILITIES DEPARTMENT\DESIGN DIVISION\AHLES\5208 ALL SEGMENTSM 7 N