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HomeMy WebLinkAbout2012-05-22; Municipal Water District; 751; Authorize Exec Director Send Notice of TerminationCARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL 14 AB# 751 AUTHORIZE EXECUTIVE DIRECTOR DEPT. HEAD A' MTG. 5/22/12 TO SEND NOTICE OF TERMINATION CITY ATTY. DEPT. UTIL OF RECYCLED WATER PURCHASE AGREEMENT WITH THE LEUCADIA WASTEWATER DISTRICT CITY MGR. RECOMMENDED ACTION: Adopt Resolution No. 1441 authorizing the Executive Director to send a notice of termination of Agreement for Sale of Recycled Water to the City of Carlsbad by the Leucadia County Water District and granting signature authority to the Executive Manager to provide agreement termination notice as provided in the subject agreement. ITEM EXPLANATION: On March 25, 1991, an agreement was entered into between the Leucadia County Water District, subsequently renamed the Leucadia Wastewater District (LWD), and the Carlsbad Municipal Water District (CMWD or District) for the sale of recycled water from LWD to CMWD. The term of the agreement was for twenty years, expiring on March 25, 2011. The agreement provided that the terms of the agreement shall remain in force from year to year after the initial twenty-year term until either party gives a one year written notice to the other party of its intention to terminate or renegotiate the agreement. On March 24, 2011, CMWD notified LWD that CMWD intended to continue purchasing recycled water under the agreement terms on a year to year basis while it explored other recycled water supply options. Over the past two years, CMWD staff has undertaken an extensive look into its recycled water supplies, demands and costs. CMWD has also been working cooperatively with the North San Diego County Recycled Water Committee to investigate a regional approach to addressing recycled water in northern San Diego County. Additionally, CMWD has recently completed the technical portion of its Recycled Water Master Plan and is working on the Phase III Recycled Water Project. The results of the studies performed and the inter-agency cooperative work to date indicate that the terms of the recycled water sales agreement with LWD are no longer favorable to CMWD. The data shows that CMWD has adequate supplies to meet the near-term projected demand without LWD's source of recycled water and the price of the LWD recycled water far exceeds the cost of CMWD's alternate supplies. Staff recommends that the CMWD Board of Directors authorize the Executive Director to provide LWD with written notice that CMWD intends to terminate the recycled water purchase agreement, pursuant to Section 17 of the subject agreement. It shouid be noted that LWD has approached CMWD with an offer to renegotiate the existing agreement on terms that would be more favorable to CMWD. At this time, however, based on the significant DEPARTMENT CONTACT: Glenn Pruim 760-438-2722 Glenn.Pruim@carisbadca.aov FOR CITY CLERKS USE ONLY. 1 - BOARD ACTION: APPROVED K CONTINUED TO DATE SPECIFIC • DENIED CONTINUED TO DATE UNKNOWN • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER - SEE MINUTES • AMENDED • Page Two difference in price between LWD's proposal and CMWD's alternative supply cost, it is uncertain whether mutually acceptable terms on a new agreement could be reached. The requested action simply authorizes the Executive Director to provide the required written one year agreement termination notice. District staff will continue to work with LWD staff to discuss terms for a potential new recycled water sales agreement. If a new agreement is not brought fonA/ard within one year of LWD being provided with termination notice, the existing agreement will terminate and no longer be in effect. FISCAL IMPACT: There Is no direct fiscal impact associated with the requested action. However, by terminating the existing agreement the District stands to save considerable amounts of money on its recycled water supply costs. Based on the anticipated recycled water purchase amounts from LWD, District staff estimates that terminafing the agreement will reduce recycled water supply costs by more than $300,000 per year. Due to the fact that the existing agreement establishes the LWD recycled water purchase costs as a percentage of imported water rates, those savings are expected to increase as imported potable water rates continue to rise. A capital investment would be required to construct a pipeline to replace the LWD recycled water supplies and the savings referenced above reflect the capital investment. The required pipeline is included in the proposed 2012/2013 Capital Improvement Program. ENVIRONMENTAL IMPACT: 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. This project, therefore, does not require environmental review. Any required environmental review for the referenced pipeline will be conducted as part of the CIP environmental review and subsequent project-level environmental review, if required. EXHIBITS: 1. Resolution No. 1441 authorizing the CMWD Executive Director to provide a notice of termination to the Leucadia Wastewater District for the agreement titled "Agreement for Sale of Recycled Water to the City of Carlsbad by the Leucadia County Water District." 2. Copy of the "Agreement for Sale of Recycled Water to the City of Carlsbad by the Leucadia County Water District." 14 15 16 17 18 19 20 EXHIBIT 1 1 RESOLUTION NO. 1441 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT AUTHORIZING THE 3 EXECUTIVE DIRECTOR TO PROVIDE TERMINATION NOTICE TO THE LEUCADIA WASTEWATER DISTRICT FOR THE 4 RECYCLED WATER PURCHASE AGREEMENT ENTITLED "AGREEMENT FOR SALE OF RECYCLED WATER TO THE 5 CITY OF CARLSBAD BY THE LEUCADIA COUNTY WATER DISTRiCT" 6 7 WHEREAS, the Carisbad Municipal Water District (CMWD or District) provides 8 potable and recycled water to the customers within its defined service area; and WHEREAS, the use of recycled water is recommended whenever appropriate, 11 consistent with existing health and safety codes, to minimize the demand on limited 12 potable water supplies; and 13 WHEREAS, CMWD had access to limited supplies of recycled water in the eariy years of the development of the recycled water program; and WHEREAS, on March 25, 1991, CMWD entered into an agreement (Agreement) with the Leucadia County Water District to purchase recycled water. Leucadia County Water District subsequently was renamed the Leucadia Wastewater District; and WHEREAS, the term of the Agreement was for twenty years, expiring on March 25, 2011. Secfion 17 of the Agreement provided for the terms to confinue on a year to 21 year basis beyond the expiration date until either party gives one-year written nofice of 22 its intenfion to terminate or renegofiate the agreement; and 23 WHEREAS, the costs of the recycled water purchased under the Agreement has risen sharply in recent years, primarily due to rapidly increasing imported water rates, to 25 which the recycled water price is fied, and the reduced consumption of the purchased 26 water's only customer; and 27" 28 3 1 WHEREAS, CMWD has invested significant sums of money to procure and 2 develop alternative recycled water supplies which are now far less costly than those supplies obtained under the Agreement; and WHEREAS, CMWD has sufficient supplies to meet the recycled water demands without the supplies obtained under the Agreement; and WHEREAS, the Agreement does not specifically authorize staff to provide proper written nofice of termination for the Agreement. NOW, THEREFORE, BE IT RESOLVED by the Carisbad Municipal Water 10 District Board of Directors of the City of Carisbad, California, as follows: 11 1. That the above recitations are true and correct. 2. That the Board of Directors finds that it is in the best interests of the 13 14 15 16 17 13 provide proper written one-year notice of terminafion to Leucadia Wastewater District 19 consistent with the terms of the Agreement. 20 /// 21 /// /// /// /// /// 22 23 24 25 26 27 28 District to terminate the existing Agreement, entitled "Agreement for Sale of Recycled Water to the City of Carisbad by the Leucadia County Water District," with the Leucadia Wastewater District. 3. That the Board hereby authorizes the District's Executive Director to 7 1 PASSED, APPROVED AND ADOPTED at a Special Meefing of the Board of 2 Directors of the Carisbad Municipal Water District of the City of Carisbad on the 22"^ ^ day of May, 2012, by the following vote to wit: AYES: Board Members Hall, Kulchin, Blackburn, Douglas and Packard. NOES: None. ABSENT: None. 4 5 6 7 8 9 10 11 12 13 ATTEST: 14 15 MATT HALL, President 16 LaRRAlNE M. WOOD, Secretary 17 10 X:o» = \%J?«OF0t<*:V^/ 20 V •* > 21 22 23 24 25 26 27 28 AGREEMENT FOR SALE OF RECYCLED WATER TO THE CITY OF CARLSBAD BY THE LEUCADIA COUNTY WATER DISTRICT This RECYCLED WATER SALES AGREEMENT (AGREEMENT) is made and entered into this day of Al^^^. ; 1991, by and between the Leucadia County Water District, a County Water District existing under the California Water Code, hereinafter referred to as "LEUCADIA," and the CARLSBAD MUNICIPAL WATER DISTRICT a DISTRicT^•''^*'^'' district, hereinafter referred to as the "WATER RECITALS: WHEREAS, the WATER DISTRICT is responsible for the distribution of potable water within its DISTRICT boundary; and, WHEREAS, the WATER DISTRICT and LEUCADIA recognize the use of recycledwater (treated domestic wastewater) as a positive and achievable means of helping to meet the growing water demands of Southern California in the future; and, i"<aiius or WHEREAS, LEUCADIA operates the Forest R. Gafner Water Reclamation Plant for the treatment of domestic wastewater and TMGDf;''fnd, producing up to 0.75 million gallons per day WHEREAS, the WATER DISTRICT is interested in purchasing recycled water from LEUCADIA for purveyance to ultimate users fo? ^?STRICT^^^^ appropriate uses within the WATER WHEREAS, the California Regional Water Quality Control Board San Diego Region (hereinafter known as REGIONAL BOARD) adopted ok January 23, 1984, ORDER No. 84-10, WATER RECT.AMATIQN RROTTTLMPKrmc FOR THE CITY OF CART.qRAn FOR THF Pm^TTT^YANCE OF PFPT.ArSgrrir^^^ SAN DIgGO COIJNTX, which permits the CITY and tL wS SISTRI^^ to distribute withm its boundaries recycled water; and, ^"^^^-""-^ REGIONAL BOARD adopted ORDER NO WASTE DISCHARGE REQUTPFMENTS FHP T.T^JCADTA ^rofmTV ^A^^^ DISTRICT FOREST R. GAFNKR WATER PEnr.AMATTQN V.^^ ^v.Jo^^^ CARISBAD, SAN nTJGO.COmiTY^ as an update to its prev^ourgRDErNC! llll^^^^n^J^^"^^'^ order NO. 87-82, in its findings, stated that to 0.75 MGD of secondary recycled water from LEUCADIA'S Forest R. Gafner Water Reclamation Plant will be used for the irrigation of the 250-acre La Costa Golf Course within the WATEP DISTRICT. The Order further states that recyclerwaSr from ?he plant would be chlorinated and pumped to a small lake in the La costa Golf course and the lake would hold the ?eScled water untn -1- being repumped for irrigation. Order No. 87-82 further states that the golf course reservoir shall be at all times protected against erosion, flooding, overland runoff resulting from a 2-year frequency 24-hour storm; and that discharge of recycled water to the golf course reservoir is prohibited from November 1 through March 30. A copy of Order No. 87-82 is attached hereto and incorporated herein by this reference as Exhibit "A"; and, WHEREAS, in a letter dated August 18, 1978, the California Department of Health Services required LEUCADIA to upgrade its treatment plant to meet the most stringent provisions of Article 5, Title^ 22, Division 4, of the California Administrative Code (hereinafter referred to as Title 22 Requirements) prior to use of Its recycled water for the irrigation of the La Costa Golf Course A copy of said letter is attached hereto and incorporated herein by this reference as Exhibit "B"; and, WHEREAS, LEUCADIA is at present in the process of upgradina Its Forest R. Gafner Water Reclamation Plant to meet the most stringent Title 22 Requirements, and is scheduled to complete this facilities upgrade by October 1993 . "f-^^^e tnis of-.^o^f^^' or<ier/or the DISTRICT to qualify for and receive state funding to upgrade the Gafner plant as referenced above it is a requirement of the state that a commitment be made for the purchase of a minimum amount of recycled water; and, ^^^^J^^^^' mutual desire of the parties hereto to establish herein an agreement for the delivery of a minimum commitment of 394 acre feet and of up to 840 acre-feet on a^ average annual basis of recycled water from the Forest R. Gafner water Reclamation Plant to the WATER DISTRICT for the purposes and on the terms and conditions herein set forth, and in sSch a manner as to qualify LEUCADIA for the necessary state loan; and, NOW, THEREFORE, in consideration of these recitals and the mutual covenants contained herein, WATER DISTRICT and LEUCADIA agree as follows: SECTION 1. DELIVERY AND ACCEPTAWPTg agrees to deliver to WATER DISTRICT and WATER DISTRICT agrees to accept from LEUCADIA recycled water produced a? the Forest R. Gafner Water Reclamation Plant in the quantities and on the terms and conditions specified in this AGREEMENT. SECTION 2. TREATMENT STANDARDS LEUCADIA Shall treat the wastewater to be delivered to the WATER DISTRICT in conformance with the standards ofThe REGIONAL BOARD as specified in Exhibit "A" and as specified by the Health Department m Exhibit "B." If applicable regulatory requirements -2- 1 are made more stringent by the San Diego Regional Water Quality ^ Board, the California Water Resources Board, or the State Health t Department such that upgraded treatment is required, LEUCADIA shall have the option to terminate its obligations under this AGREEMENT on sixty (60) days written notice to WATER DISTRICT; or to upgrade the plant to meet the new requirements subject to negotiation of the cost thereof with WATER DISTRICT. In the event that LEUCADIA chooses to upgrade the plant to meet the new requirements WATER DISTRICT shall continue to purchase recycled water as herein provided following the upgrade. SECTION 3. OUANTITY TO BE DELIVERED LEUCADIA shall operate the Forest R. Gafner Water Reclamation Plant so as to produce up to 0.75 million gallons per day (MGD), of recycled water for delivery to WATER DISTRICT under this AGREEMENT, consistent with sound management practices, applicable government regulations and requirements, and commitments to other customers, if any. The parties hereto understand that the volume of recycled water that will be delivered to WATER DISTRICT will be about 394 acre-feet per year, but that the actual volume per year will vary according to seasonal needs for irrigation water. The parties further understand and accept the fact with no liability to LEUCADIA that there may be day to day interruptions in service due to plant emergencies requiring occasional plant shut-down and repair associated with acts of God, orders by regulatory bodies and judicial courts, and/or equipment breakdowns. The General Managers or their Designee of the WATER DISTRICT and LEUCADIA shall meet monthly to establish a schedule for delivery of recycled water. LEUCADIA and WATER DISTRICT shall make every reasonable effort to comply with such delivery schedules once mutually accepted. WATER DISTRICT agrees to accept a minimum of 394 acre feet of recycled water per year. If WATER DISTRICT accepts and pays for more than 394 acre feet of recycled water in any given year, WATER DISTRICT shall be entitled to a carry forward credit for every acre foot (or portion thereof) so purchased over the 394 acre foot minimtim. Such carry forward may be applied in future years to meet the 394 acre foot minimum purchase requirement. It is recognized that LEUCADIA must have a commitment to a minimum purchase in order to meet the requirements of its state loan to upgrade the Gafner plant. In the event that WATER DISTRICT decides to purchase additional recycled water from LEUCADIA, WATER DISTRICT shall inform LEUCADIA of its desire to increase the quantity of recycled water purchased. WATER DISTRICT shall have those rights of first refusal to purchase additional water set forth in Section 11. -3- SECTION 4. MWD OR OTHER REBATE Any rebate or other incentive payment from the Metropolitan Water District (MWD) or from any other governmental agency now available or available at any time in the future for this recycled water project shall be secured by and be the responsibility of LEUCADIA. SECTION 5. METERS LEUCADIA shall be responsible for installing and maintaining a flow meter at t:he Forest R. Gafner Plant that will measure the quantity of recycled water supplied to the WATER DISTRICT pursuant to this AGREEMENT. LEUCADIA shall be responsible for operating, maintaining, calibrating, and reading this flow meter on a regular basis. LEUCADIA shall read and report to WATER DISTRICT meter results no less than once per month. Results of calibrations shall be copied to the WATER DISTRICT on a regular basis. SECTION 6. OWNERSHIP. OPERATION. AND MAINTENANCE. LEUCADIA Shall have no responsibility for owning, operating, or maintaining the recycled water storage and distribution system, except for downstream of the point of delivery as shown on Exhibit "C." All facilities and equipment beyond the point of delivery shall be the responsibility of WATER DISTRICT and the ultimate user, as they shall agree amongst themselves. Both parties to this AGREEMENT shall grant each other necessary easements and rights of way to operate and maintain the reclamation facilities described herein on lands they control, and each shall assist the other to obtain easements or rights of way on lands controlled by other entities not subject to this AGREEMENT. WATER DISTRICT will arirange for necessary easements in favor of LEUCADIA for the construction, installation, and maintenance of facilities required to deliver recycled water to the point of delivery as shown on Exhibit "C," to the extent that such easements do not already exist. SECTION 7. RECYCLED WATER OUALITY LEUCADIA shall use its best good faith efforts to ensure that the recycled water delivered to WATER DISTRICT shall have a quality meeting the standards and approvals herein specified. LEUCADIA represents and warrants that it will meet the following requirements: a. LEUCADIA will do all testing as required by the terms of its permits, on the schedule specified in the permits; b. All recycled water delivered pursuant to this AGREEMENT will meet the standards stated in Exhibit "A"; -4- c. LEUCADIA will not substantially change any of its treatment practices in a manner which will cause a decrease in water quality of the recycled water without notifying WATER DISTRICT in advance. Both parties to this AGREEMENT understand that the presence of dissolved minerals in the recycled water and other substances in higher concentrations can be deleterious to the plants irrigated with such water. LEUCADIA agrees to do everything reasonably within its power to ensure that the quality of the recycled water it delivers pursuant to this AGREEMENT will not be harmful to the golf course areas to be irrigated. These efforts shall include a ban by LEUCADIA of self-regenerization water softening equipment within LEUCADIA'S boundaries as outlined in Ordinance 10, attached hereto as Exhibit "D." LEUCADIA shall further mail annual notices to residents and vendors of water softening equipment notifying them of the prohibition against self-regenerization water softening equipment. Both parties further agree that failure to supply recycled water with a TDS concentration less than 1,000 milligrams per liter (mg/l) as determined in conformance with the methodology specified in the project's waste discharge permit may be sufficient grounds for CITY to suspend its obligation to accept and pay for recycled water until the recycled water quality is restored to less than 1,000 (mg/l) TDS. The parties recognize during periods of drought LEUCADIA may experience lower flows as a result of conservation efforts. However, the amount of solids received would not decrease and could cause the TDS levels to rise. During such drought periods as designated by the WATER DISTRICT the parties agree recycled water with a TDS concentration of no more than 1,200 mg/l will be an acceptable quality under the terms of this agreement. SECTION 8. USE OF RECYCLED WATER The WATER DISTRICT agrees that the use of recycled water delivered pursuant to this AGREEMENT shall be confined to the boundaries of Carlsbad. SECTION 9. RECYCLED WATER DELIVERY PRESSURE Recycled water delivered by LEUCADIA to WATER DISTRICT shall be at no guaranteed minimum pressure, provided LEUCADIA will pump to the La Costa Lake. SECTION 10. COMPLIANCE WITH REGULATORY REOUIREMENTS WATER DISTRICT agrees to comply with all applicable recycled water distribution regulations issued and/or mandated by the California Department of Health Services, the County of San Diego -5- 0 Department of Health, and the REGIONAL BOARD. WATER DISTRICT shall be responsible for insuring that all users of recycled water within WATER DISTRICT'S jurisdiction shall first apply for and receive California Water Reclamation Requirements issued by the REGIONAL BOARD, and that all users shall be made to comply with WATER DISTRICT'S most up-to-date recycled water RULES AND REGULATIONS LEUCADIA shall bear no responsibility or liability for compliance with such rules and regulations by WATER DISTRICT, the ultimate F^H^A-H?^..o^?^°"® beyond the point of delivery as shown on SECTION 11. PRICE OF RECYCLED WATFP WATER^ DISTRICT shall pay LEUCADIA for all recycled water delivered by LEUCADIA pursuant to this AGREEMENT with the minimum purchase in any given year being 394 acre feet, adjusted to take into account the WATER DISTRICT'S right to carry forward credits as provided for in paragraph three above. The basic price pavable by WATER DISTRICT to LEUCADIA shall be ninety-nine percent (99%) potable water price charged to residential users within the WATER DISTRICT boundary. xuentxai users WATER DISTRICT shall have a right of first refusal to purchase additional recycled water from LEUCADIA on the following terms: a. The price and payment terms shall be as set forth in this Agreement; b. WATER DISTRICT'S right of first refusal shall be subject ™T^to^. official policy or policies established by LEUCADIA, by ordinance or resolution, in effect at the time governing priority of access to recycled water; c. WATER DISTRICT shall give LEUCADIA at least 30 days advance notice of its intent to exercise, in whole or in part. Its rights of first refusal; and d. WATER DISTRICT'S rights are subject to LEUCADIA'S recycled water availability. SECTION 12. TERMS OF PAYMENT WATER DISTRICT shall be invoiced by LEUCADIA for recycled water delivered to WATER DISTRICT at least quarterly, but no more frequently than monthly, and WATER DISTRICT agrees to pay LEUCADIA T^irtnr^ deliveries within 30 days of receipt of an invoice from LEUCADIA for such purchases.. In the event payment is more than 30 days m arrears, LEUCADIA reserves the right to stop deliverv of recycled water until payment is made, or to charge a penaltv of one percent (l%) per month on delinquent amounts, or to trsectioi^L^hSeof ^ DISTRICT'S payment obligations pursuant -6- SECTION 13. ACCESS TO RECORDS LEUCADIA and WATER DISTRICT shall keep proper books and records, in which complete and correct entries shall be made of all recycled water delivered throughout the duration of this AGREEMENT. Said books and records shall, upon written request, be subject to inspection by any duly authorized representative of LEUCADIA, WATER DISTRICT, and the REGIONAL BOARD or any agency providing a rebate to LEUCADIA. SECTION 14. NOTICE Notices required or permitted under this AGREEMENT shall be sufficiently given if in writing and if either served personally upon the party to whom it is directed or by deposit in the United States mail, postage prepaid, certified, return receipt requested, addressed to the parties at the following addresses: a. WATER DISTRICT General Manager Carlsbad Municipal Water District 5950 El Camino Real Carlsbad, CA 92008 b. LEUCADIA General Manager Leucadia County Water District 1960 La Costa Avenue \^ Carlsbad, CA 92009 It shall be the sole responsibility of each party to this AGREEMENT to promptly notify the other of any change of title and/or address as long as this AGREEMENT remains in effect. SECTION 15. ASSIGNMENT The rights and obligations of the parties under this AGREEMENT shall not be assigned, or transferred without the prior written consent of the other party, which consent shall not be unreasonably withheld. SECTION 16. EFFECTIVE DATE This AGREEMENT shall become effective upon the date at which it is executed by both parties hereto. SECTION 17. TERMINATION OF AGREEMENT The term of this AGREEMENT shall be twenty (20) years, subject to the rights of the parties to an earlier termination as provided in SECTION 18 hereof. This AGREEMENT shall continue in force from year to year after the initial twenty-year term of the AGREEMENT -7- until either party gives one year written notice to the other of its intention to terminate or renegotiate the AGREEMENT. The AGREEMENT shall terminate one year from the date upon which such written notice is received unless the parties agree otherwise, in writing. SECTION 18. EARLY TERMINATION a. LEUCADIA Termination. If at any time during the term of this AGREEMENT recycled water in compliance with the quality standards of Section Seven of this AGREEMENT cannot lawfully be used by WATER DISTRICT for the purposes intended by this AGREEMENT, because of government regulations now in effect or hereinafter imposed, LEUCADIA may terminate this AGREEMENT with no further obligation by giving sixty (60) days written notice thereof to WATER DISTRICT,or at LEUCADIA'S option, specifically enforce WATER DISTRICT'S obligations pursuant to Section 19 hereof. b. WATER DISTRICT Termination. WATER DISTRICT shall be entitled to terminate this AGREEMENT early for an act of God or if LEUCADIA fails to deliver recycled water to WATER DISTRICT meeting the quality standards of Section Seven hereof. Provided, however, that WATER DISTRICT must first give LEUCADIA written notice of any alleged deficiency in the recycled water quality and a minimum sixty (60) day period to cure the problem, or longer if a longer cure period is reasonably required. If WATER DISTRICT gives such notice and LEUCADIA fails to cure the problem within the 60 day cure period, or if a longer period is reasonably necessary and LEUCADIA is not diligently pursuing a cure, WATER DISTRICT may upon thirty (30) days further written notice terminate this AGREEMENT with no further obligation on its part. So long as the recycled water meets the quality standards provided for herein, or in the event of a change in standards or a decline in quality, so long as LEUCADIA is diligently endeavoring to meet the new standards or cure the quality problem, and provided that LEUCADIA does in fact cure the problem as provided above, WATER DISTRICT shall not have a right to terminate this AGREEMENT. However, the WATER DISTRICT reserves the right to refuse delivery of recycled water and payment thereof, until the quality again meets all previously stated standards. SECTION 19. SPECIFIC PERFORMANCE. In recognition of the fact that LEUCADIA has made a long term capital commitment to this project and has undertaken a long term loan committment with the State related thereto, and in recognition of the fact that WATER DISTRICT is making a long term commitment to the project, the parties agree that specific performance shall be available to enforce the obligations of the parties hereunder, including LEUCADIA'S obligation to deliver recycled water as required hereunder and WATER DISTRICT'S obligation to accept and pay for the same. The parties agree that specific performance -8- /i shall be available as a remedy in addition to any other available remedy. The parties expressly agree that money damages for a breach is an inadequate remedy. SECTION 20. ENTIRE AGREEMENT. This AGREEMENT constitutes the entire understanding between the parties hereto with respect to the subject matter hereof superseding all negotiations, prior discussions and preliminary agreements and understandings, written or oral. This AGREEMENT shall not be amended, except by written consent of the parties hereto, and no waiver of any rights under this AGREEMENT shall be binding unless it is in writing signed by the party waiving such rights. In the event any provision of this AGREEMENT shall be held to be invalid and unenforceable, the other provisions of this AGREEMENT shall be held to be valid and binding on the parties hereto. SECTION 21. RINDING EFFECT. This AGREEMENT shall be binding upon the parties hereto and their respective successors in interest, permitted assigns, executors, administrators, and personal representatives. SECTION 22. LIABILITY AND INDEMNIFICATION. LEUCADIA assumes all liability for damage to persons or property caused by the recycled water prior to the time that it reaches the point of delivery as designated on Exhibit "C" hereto. LEUCADIA agrees to indemnify, defend, and hold harmless WATER DISTRICT, its officers, agents, and employees from any and all claims, demands, actions, liability or loss which may arise from LEUCADIA'S storage, use, treatment or delivery of the treated effluent prior to the time it passes the point of delivery. In addition, LEUCADIA agrees to asstime all liability for damage to persons or property caused in any manner by the delivery of water which does not meet the quality standards of Section Seven hereof. WATER DISTRICT assumes all liability except as defined in the preceding paragraph for damage to persons or property caused in any manner by the recycled water once it passes the point of delivery as shown on Exhibit "C" hereto. WATER DISTRICT agrees to indemnify, defend, and hold harmless LEUCADIA, its officers, agents, and employees from any and all claims, demands, actions, liability or loss which may arise from WATER DISTRICT'S storage, use, or delivery of recycled water after it passes the point of delivery. WATER DISTRICT understands that the product being sold by LEUCADIA is treated waste water effluent and that its purity and chemical composition cannot be guaranteed by LEUCADIA beyond LEUCADIA'S obligation to meet the quality standards of Section -9- Seven hereof. WATER DISTRICT acknowledges that no warranty or ottier representation as to the physical, chemical, or biological quality of the recycled water is made by LEUCADIA, except for LEUCADIA'S obligation to meet the quality standards of Section Seven hereof. SECTION 23. ATTORNEY'S FEES If any Court action is brought to enforce or interpret the provisions of this AGREEMENT, the prevailing party shall be entitled to reasonable attorney's fees and expert witness fees, which may be set by the Court or arbitrator in the same action brought for that purpose, in addition to any other relief to which may be granted. SECTION 24. VENUE In the event of any disagreement as to the interpretation, effect, enforceability, or the rights of the parties under this AGREEMENT, such dispute shall first be addressed by negotiation between the parties. In the event that the parties cannot resolve their disagreement by negotiation, either party, upon written notice, may request mediation or arbitration before the American Arbitration Association. Such mediation or arbitration shall be non-binding and shall be held in North County. SECTION 25. PARTIES TO BEAR OWN COSTS OF MAINTAINING PERMITS. LEUCADIA and the WATER DISTRICT shall each, respectively, pay all costs of maintaining their own permits to carry out the project. IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed and be effective on the date first above mentioned. LEUCADIA:^ WATER DISTRICT: ATTEST: ATTEST: reneral Manager Date er City Clerk) : ^/j^/fJ Date; '3h.</Qf (Doc:LCWDO10.cln/E.4-3) (Rev. 3/07/91) -10-