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16-R-69 - Interlocal Agreement Between Schertz, Seguin and the Scherts-Seguin Local Government Corporation outlining the cost allocation methodsWHEREAS, The City of Schertz (the "City ") population continues to grow and this growth has created an increasing need for sustainable, clean, healthy drinking water; and WHEREAS, The City acquires almost all of its drinking water through the Schertz Seguin Local Government Corporation (SSLGC), a non -profit corporation developed as a result of the partnership of Schertz and Seguin to acquire sustainable drinking water in 1999; and WHEREAS, The SSLGC's pipeline from Seguin to Schertz has reached its maximum capacity secondary to outside contracts that have provided benefits to the SSLGC and its owners and the growth of Schertz is creating a demand for water that is approaching the maximum capacity of the current well field in Gonzalez County; and WHEREAS, SSLGC has an additional parallel pipeline from Seguin to Schertz and an additional well field in Guadalupe County approved in the State Water Plan and has applied for and received approval for funding from the Texas Water Development Board; and WHEREAS, The Pipeline Project benefits SSLGC and all of its customers including both owners and the Guadalupe Well Field will benefit the City of Schertz and other customers to a greater degree than the City of Seguin; and WHEREAS, SSLGC, the City of Schertz and the City of Seguin staff agree that an additional written agreement that clearly outlines how the costs of both of these projects will be allocated amongst both cities and other customers of SSLGC in accord with the current perceived benefit to all parties. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS 1118"Eu Section 1. The City Council hereby authorizes the City Manager to enter into an interlocal agreement in substantially the same form as the attached agreement in Exhibit A. Section 2. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the City Council. Section 3. All resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. Section 4. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. Section 5. If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted "without such .invalid provision. Section 6. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, Texas Government Code, as amended. Section 7. This Resolution shall be in force and effect from and after its final passage, and it is so resolved. PASSED AND ADOPTED, this 30th day of August, 2016. CITY OF SCHERTZ, TEXAS or, Michael R. Carpenter ATTEST: r ity Secretary, Brenda Dennis (CITY SEAL) 50448599.1 A -1 STATE OF TEXAS § COUNTY OF GUADALUPE § Cost Allocation Agreement Relating to the Guadalupe Project This Cost Allocation Agreement ( "Agreement ") is executed by and among the City of Schertz, Texas ( "Schertz "), the City of Seguin, Texas ( "Seguin "), and the Schertz/Seguin Local Government Corporation ( "SSLGC ") as of August 30, 2016 (the "Effective Date "). Schertz and Seguin are both Texas home -rule cities and the SSLGC is a Texas non - profit, public corporation created by and to act on behalf of Schertz and Seguin pursuant to Subchapter D of Chapter 431 (Sections 431.101- 431.109) of the Texas Transportation Code and other applicable law each of which is authorized to enter into this Agreement pursuant to the authority as further described below. Schertz, Seguin, and the SSLGC are jointly referred to as the "Parties," and individually, each a "Party.,, Recitals: 1. The Parties entered into an agreement captioned "Regional Water Supply Contract" dated November 15, 1999 that addressed the financing, construction, and operation of a regional water supply project benefitting Schertz and Seguin and their utility system ratepayers (the "1999 Agreement "). 2. The 1999 Agreement provides the contractual authority for the SSLGC to operate, maintain, and manage the SSLGC utility system on a regional basis for the direct benefit of the residents and ratepayers of Schertz and Seguin and with respect to their respective utility systems. In addition, the SSLGC, Seguin, Schertz, and the City of San Antonio, Texas, acting by and through the San Antonio Water System ( "SAWS') entered into an agreement captioned "Mutual Regional Water Supply Contract ", effective as of January 1, 2011 (the "2011 Agreement ") that addressed the financing, construction, and operation of a regional water supply project (the "2011 Project ") benefiting SSLGC, Schertz, Seguin, and SAWS. 3. SSLGC has previously issued four separate series of contract revenue bonds supported solely by the 1999 Agreement that were reviewed and approved by the Texas Attorney General to finance the acquisition, construction, and equipment of various regional water supply projects. 4. SSLGC has previously issued one series of contract revenue bonds supported solely by the 2011 Agreement that was reviewed and approved by the Texas Attorney General. 5. The 1999 Agreement and the 2011 Agreement have successfully permitted Schertz and Seguin, acting through SSLGC, and SAWS with respect to the 2011 Agreement, to finance various water supply projects on a regional basis that have permitted Schertz, Seguin, and SAWS to interconnect their water utility systems and to 1 3842/32 #244341 v6 permit Schertz and Seguin to acquire, transport, and treat water for delivery into their respective utility systems in an efficient and cost - effective manner. 6. The Parties have now determined that it is in their best interests for the . SSLGC to proceed with a project to construct a second pipeline with a minimum diameter of 36 inches from the existing pump station located south of the Seguin to a point of delivery in Schertz (the "Pipeline Project ") and to develop a well -field in Guadalupe County, Texas, together with a new water treatment plant (the "Guadalupe Project ", collectively with the Pipeline Project, the "Projects ") to treat water from the Guadalupe Project. These new Projects will be funded using financial assistance from the Texas Water Development Board (the "TWDB "). The Guadalupe Project is in accordance with and compliance with the TWDB State Water Plan. The Pipeline Project and the Guadalupe Project are more fully described in the application for financial assistance and supporting documentation filed by the SSLGC with the TWDB and those descriptions are incorporated by reference into this Agreement. The current financing estimates for these 2016 Projects are: Guadalupe Project Cost Estimate: $34,345,000 Pipeline Project Cost Estimate: $32,155,000 Total Cost Estimate: $66,500,000 SWIRFT Funding Breakdown: Low Interest Loan: $43,670,000 TWDB Participation: $22,830,000 TWDB Loan Assistance Total: $66,500,000 7. This Agreement shall constitute an interlocal cooperative agreement as authorized pursuant to the provisions of Chapter 791, as amended, Texas Government Code, entered into by the Parties hereto for the purpose of delineating the financial obligations undertaken pursuant to the Pipeline Project and the Guadalupe Project, the term of which concludes when the Debt Service Payments (defined below) and any other obligations due and owed in relation to both Projects are no longer outstanding, and this Agreement is subject to the rights and duties of the Parties as further described herein. 8. Schertz, Seguin, and the SSLGC have agreed that the SSLGC will promptly proceed with the construction of the Pipeline Project. The Debt Service Payments (the "Debt Service Payments ") and the Operations and Maintenance Expenses (the "Operations and Maintenance Expenses ")of the Pipeline Project shall be governed by the Parties' 1999 and 2011 Agreements and as prescribed below. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, as to the Guadalupe Project, the Parties hereto hereby agree as follows: 2 3842/32 #244341 v6 1. This Agreement is not intended to amend and should not be construed to amend the 1999 Agreement, its covenants or obligations entered into in connection therewith, or any agreements with the TWDB, but is intended by the Parties to allocate, as between Schertz and Seguin, the responsibility for payment of the Debt Service Payments and Operation and Maintenance Expenses allocated to the Guadalupe Project. 2. The SSLGC, Schertz and Seguin shall accept the financial assistance offered by the TWDB prior to September 6, 2016 and proceed with closing of the transactions with the TWDB. 3. As between Schertz and Seguin, and as long as this Agreement has not been modified or amended, Schertz shall be responsible for timely payment to the SSLGC of one hundred percent (100 %) of the Debt Service Payments relating to TWDB financing of the Guadalupe Project. This Agreement is not intended to and shall not be construed to prohibit or hinder the SSLGC from recovering any portion of Schertz' payment obligations under this paragraph from sales of water produced from the Guadalupe Project and sold to third parties. Until the Guadalupe Project is producing water for entities other than Schertz, Schertz will make the Debt Service Payments. 4. The construction start date for the Guadalupe Project will be delayed at least a year from the Effective Date of this Agreement and if permitted under the terms of the SWIRFT Funding, potentially longer as the overall need and timing of that water is better understood (although the Parties acknowledge that the proceeds of any borrowing from the TWDB are reasonably expected to be spent within 5 years of receipt). This need for water is a primary concern of Schertz, but is also contingent upon a variety of factors within the overall regional water supply as of the Effective Date of the Agreement. It is the Parties' belief that this temporary delay in starting the Guadalupe Project will allow for a number of reviews to occur and reoccur regarding water need, funding models and other potential customers. It is also anticipated that these reviews will allow the Guadalupe Project to be better developed in accordance with those needing the water it will produce. In the absence of mutual agreement between Schertz and Seguin when the SSLGC should commence construction of the Guadalupe Project after the one year agreed -upon delay in the start of construction, Schertz will have the discretion to request or direct that the SSLGC start the construction of the Guadalupe Project 5. At least annually Schertz and Seguin shall review the assumptions and obligations under this Agreement, the 2011 Agreement and the 1999 Agreement. Upon agreement of all Parties, this Agreement may be modified or amended to meet the then current needs. Included in this review the Parties will annually review any alternative water pricing strategies that would increase the financial well -being of the SSLGC, the betterment of Schertz and Seguin, and benefit the water customers of both Schertz and Seguin. The results of the annual review will be reported by SSLGC to the governing body of each of the Parties. 3 3842/32 #244341 v6 6. A Water Treatment Plant is to be constructed as part of the Guadalupe Project. The Water Treatment Plant shall be constructed with a maximum design capacity for the Guadalupe well field. If other entities desire to utilize the Guadalupe Water Treatment Plant, or cause its capacity to be enlarged, then those entities shall pay, prior to any use, the cost of increased capacity or their proportionate share of the present capacity. This payment of capital costs shall be in addition to costs for treatment and transportation of their water, including a proportionate share of the Operation and Maintenance Expenses through the Pipeline Project. 7. The prices and rates for water produced by the Guadalupe Project will be a separate rate and will include all Operation and Maintenance Expenses, as well as the Debt Service Payments, allocated to the Guadalupe Project. The Parties intend for this separate rate to ensure that the users of water produced from the wells in Gonzales County do not pay for or subsidize the Guadalupe Project and that users of water produced by the Guadalupe Project pay the Operation and Maintenance Expenses and the Debt Service Payments, allocated to the Guadalupe Project, and a proportionate share of the Operation and Maintenance expenses of the Pipeline Project. 8. Any and all future water sales to current customers, other than Schertz and Seguin, would only be done if both of these conditions are satisfied: (i) a contractual renegotiation on the original contract to supply water if the customer is not currently paying for incurred debt on the water they are purchasing; and (ii) that all new water sales negotiated will be water produced from the Guadalupe Project until the production of water from the Guadalupe Project reaches capacity. 9. SSLGC presentations done for or at the request of the city council, or city council committee or group of members of the city council, of Schertz or Seguin will be offered to and presented to the city council (or council committee or group of members of the city council) of the other city to help maintain openness and transparency unless said city declines the presentation in writing. 10. Seguin, except as provided herein, shall not be liable for payment of any portion of the Debt Service Payments on the Guadalupe Project, unless there is a default by Schertz under this Agreement which in turn, causes a default under the 1999 Agreement. In the event of Schertz' default, Seguin's obligation is limited to fifty percent of the Debt Service Payments under the 1999 Agreement. Schertz shall reimburse Seguin for any and all Debt Service Payments actually paid by Seguin as required by the bonds issued by SSLGC for the Guadalupe Project, regardless of whether the amount of the payments exceeded the amount that Seguin may be required to pay under the 1999 Agreement. Interest shall accrue on amounts paid by Seguin and not timely reimbursed by Schertz at the then highest interest rate allowed by law for home rule cities. As used in this section, payment is due within forty -five days after receipt of an invoice or other written demand for payment. 11. In consideration of Schertz and Seguin's prior payments towards the development of the Guadalupe Project, including the acquisition of water leases, land, 4 3842/32 #244341 v6 and rights of way required for the well, well collection pipelines, and the Water Treatment Plant and preliminary engineering design and Schertz and Seguin's contingent liability under the 1999 Agreement for fifty percent of the Debt Service Payments on the bonds that have been previously issued by the SSLGC for the Guadalupe Project, Schertz and Seguin shall each have continuous rights to a fifty percent (50 %) of the capacity of the Guadalupe well field. 12. When SSLGC has a bona fide contract for the purchase of Guadalupe Project water, the Parties must both approve the contract in accordance with the 1999 Agreement. If approved, the purchased capacity shall be equally taken from both Schertz and Seguin's share of the Guadalupe well field capacity if possible. If either Party is using a percentage of the Guadalupe well field that prevents the equal division of the newly purchased water, the other Party must agree to the usage of a greater percentage of their rights for that particular customer. Before this request is made by SSLGC, the Party whose share is preventing the equal division of a contracted amount must be using their total allotment from the Gonzales well field. When a customer seeks to purchase Guadalupe Project water, their rate shall also include a debt repayment amount equal to the proportionate share of the water they are to purchase from the Guadalupe well field. 13. If Seguin determines that it needs to take water from the Guadalupe well field between year 1 and year 15 of the Guadalupe Project water production, Seguin shall be responsible for repaying to SSLGC one -half of the Guadalupe Project well field debt paid to date by Schertz. If Seguin determines it needs to take water from the Guadalupe Project well field after year 15 of water production, Seguin shall pay the proportion of the remaining debt as a function of the overall water rate for the water they consume. 14. If either Party needs additional water that causes them to exceed their 50% of the Guadalupe Project well field, including the percentage used by outside customers, and have reached capacity of their Gonzales field share, the other Party shall allow them to use shares of their unused capacity of the Gonzales well field or the Guadalupe well field, at the other Party's choice. Such usage will offset any debt payments due from that Party by the corresponding percentage of water granted. 15. Schertz and Seguin are obligated by this Agreement to make the payments only from revenue from its combined utility system and not from ad valorem taxes (in accordance with Section 791.011(d)(3), Texas Government Code, as amended). These payments are deemed to be and shall be considered combined Operation and Maintenance Expenses of Schertz' or Seguin's, as applicable, combined utility system as required by the ordinance authorizing the issuance of any debt obligations issued by Schertz or Seguin, as applicable, and currently outstanding and payable from the revenues of Schertz' or Seguin's, as applicable, combined utility system. 5 3842/32 #244341 v6 16. This Agreement shall remain in effect so long as any obligations issued by SSLGC for the Guadalupe Project, and any refunding bonds of those obligations, remain outstanding. General Provisions: (a) Subject to the terms and conditions herein {provided, each Party hereto will use such Party's reasonable business efforts to take, or cause to be taken, such actions, to execute and deliver, or cause to be executed and delivered, such additional documents and instruments and to do, or cause to be done, all things necessary, proper or advisable under the provisions of this Agreement and applicable law to consummate and make effective all of the transactions contemplated by this Agreement (collectively, the "Further Acts "), provided, however, no Party shall be required to undertake any Further Acts if it would incur material or unreasonable out -of- pocket expenses or liabilities (other than the pecuniary obligations and liabilities otherwise required hereunder) in connection with or relating to such Further Acts or providing such obligations under this Section and any requirement to so expend such funds shall excuse that Party from performance under the terms of this Section if such Party so elects. (b) If one or more of the provisions hereof shall for any reason be held to be invalid, illegal, or unenforceable in any respect under applicable law, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. (c) All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns, heirs, executors, and administrators. The terms of this Agreement are mutual and not mere recitals. The Parties hereby affirmatively find, agree and determine that all of the recitations, matters, and facts set out in the recitals of this Agreement are true and correct and are incorporated in and are part of the entire Agreement between the Parties. (d) Each Party to this Agreement represents to the others that it is empowered by law to execute this Agreement and other agreements and documents as are or may hereafter be required to accomplish the same, and that its execution of this Agreement has been duly authorized by action of its governing body. (e) The pecuniary obligation by Seguin and Schertz to make the payments required by this Agreement shall not be subject to Force Majeure. The term "Force Majeure" as employed herein shall mean acts of God, strikes, lockouts or other industrial disturbances, acts of public enemy, orders of any kind of the government of the United States or the State of Texas ( "State "), or regulatory restrictions by a groundwater district, any civil or military authority, insurrection, riots, epidemics, landslides, lightning, earthquake, fires, hurricanes, tornados, 6 3842132 #244341 v6 blue northers, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, partial or entire failure of water supply, inability on the part of the SSLGC to deliver water for any reason, or on account of any other causes not reasonably within the control of the Party claiming such inability. (f) No change, amendment, or modification of this Agreement shall be made or be effective that will affect adversely the prompt payment when due of all money required to be paid by a Party under the terms of this Agreement. (g) Any notice, communication, request, reply, or advice (herein severally and collectively, for convenience, called "Notice ") herein provided or permitted to be given, made, or accepted by any Party to the other Parties must be in writing and may be given or be served by depositing he same in the United States mail postpaid and registered or certified and addressed to the party to be notified, with return receipt requested, or by delivering the same to an officer of such Party. Notice deposited in the mail in the manner hereinabove described shall be conclusively deemed to be effective, unless otherwise stated herein, from and after the expiration of three days after it is so deposited. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the Parties shall, until changed as hereinafter provided, be as follows: If to SSLGC: General Manager Schertz /Seguin Local Government Corporation P.O. Box 833 Seguin, Texas 78156 -0833 If to Schertz: City Manager City of Schertz, Texas 1400 Schertz Parkway Schertz, Texas 78154 If to Seguin: City Manager City of Seguin, Texas 210 East Gonzales Seguin, Texas 78155 A Party shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least five (5) days' written notice to the other Parties. 7 3842/32 #244341 v6 (h) This Agreement is subject to all applicable federal and State laws and any applicable permits, ordinances, rules, orders, and regulations of any local, State, or federal governmental authority having or asserting jurisdiction but nothing contained herein shall be construed as a waiver of any right to question or contest any such law, ordinance, order, rule, or regulation in any forum having jurisdiction. Each Party represents that, to the best of its knowledge, no provisions of any applicable federal or State law, nor any permit, ordinance, rule, order, or regulation of either party will limit or restrict the ability of either Party to carry out their respective obligations under or contemplated by this Agreement. (i) Notwithstanding anything to the contrary contained in this Agreement, any right or remedy or any default hereunder, except the right of a Party to receive the payments from another party, which shall never be determined to be waived, shall be deemed to be conclusively waived unless asserted by a proper proceeding at law or in equity within four (4) years after the occurrence of such default. No waiver or waivers of any breach or default (or any breaches or defaults) by any Party hereto or of the performance by any other Party of any duty or obligation hereunder shall be deemed a waiver thereof in the future, nor shall any such waiver or waivers be deemed or construed to be a waiver of subsequent breaches or defaults of any kind, character or description, under any circumstances. (j) All amounts due under this Agreement, including, but not limited to, payments due, pursuant to the Pipeline Project and Guadalupe Project financings, shall be paid and be due in Guadalupe County, Texas, which is the County in which the principal administrative offices of each Party is located. (k) This Agreement shall be governed by and construed in accordance with the laws of the State, and the obligations, rights, and remedies of the Parties hereunder shall be determined in accordance with such laws without reference to the laws of any other state or jurisdiction, except for applicable federal laws, rules, and regulations. (1) This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. (m) No officer or agent of the Parties is authorized to waive or modify any provision of the Agreement except by a written execution of such modification documents signed by each Party's authorized representatives. (n) The Parties agree that the recitals in this Agreement are true and correct and are incorporated into the terms of this Agreement. (o) The Parties agree that this is an Agreement by each Party for providing goods and services to the other Parties, and that this Agreement is subject to Chapter 271, Subchapter I, of the Texas Local Government Code, as amended. In 8 3842132 #244341 v6 addition, each Party agrees that the services provided by this Agreement are governmental acts and not proprietary acts. (p) This Agreement is not intended to confer any rights, privileges or causes of action upon any third party other than the Parties. The relationship of the Parties under this Agreement is not and shall not be construed or interpreted to be a partnership, joint venture or agency. The relationship of the Parties shall be an independent relationship, entered into at arms length for the purposes of effectuating the Agreement. No Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on another Party. IN WITNESS WHEREOF, the Parties hereto acting under authority of their respective governing bodies have caused this Agreement to be duly executed as of the Effective Date. Attest: Secretary, Board of Directors Attest: City Secretary SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION in President, Board of Directors CITY OF S, H �, TEXAS By: r CITY OF SEGUIN, TEXAS in Douglas G. Faseler, City Manager Attest: City Secretary 9 3842/32 #244341 v6