2011-R-02 Mutual Regional Water Supply ContractRESOLUTION NO. 11-R-02
A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF
SCHERTZ, TEXAS AUTHORIZING A MUTUAL REGIONAL WATER
SUPPLY CONTRACT, AND OTHER MATTERS IN CONNECTION
THEREWITH
WHEREAS, the City staff of the City of Schertz (the "City") has recommended that the
City enter into a Mutual Regional Water Supply Contract (the "Contract") with the City of
Seguin, the Schertz Seguin Local Government Corporation (the "SSLGC"), and the San Antonio
Water System ("SAWS") relating to the sale of surplus SSLGC water and the construction of
facilities and installation of equipment necessary for water treatment and transport; and
WHEREAS, the City Council has determined that it is in the best interest of the City to
contract with Seguin, the SSLGC, and SAWS pursuant to the Contract attached hereto as
Exhibit A.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS
THAT:
Section 1. The City Council hereby authorizes the City Manager to execute and
deliver the Contract with Seguin, the SSLGC, and SAWS in substantially the form set forth on
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any provision of this Resolution are hereby repealed to the extent of such conflict, and the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 Governrent Code, as amended.
so3srua.i
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 18`h day of January, 2011.
ATTEST:
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EXHIBIT A
MUTUAL REGIONAL WATER SUPPLY CONTRACT
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L O C A L G O V E R N M E N T C O R P O R A T I O N
February 28, 2011
Ivlr. Don Taylor
City Manager
City of Schertz
1400 Schertz Parkway
Schertz, Texas 78154
Regarding: San Antonio Water System (SAWS) /
Schertz/Seguin Local Govermnent Corporation (SSLGC)
Mutual Regional Water Supply Contract
Dear Don:
The following documents are enclosed for your file:
o Mutual Regional Water Supply Contract between SAWS and SSLGC
o SSLGC Rate Study and Long-Term Financial Forecast - Economists.com
If you have questions or need additional information, please contact me at (830) 401-2403 or via
email at acockerell@seguintexas.gov.
Sincerely,
R. Alan C_ockerell
General Manager
Enclosures (2)
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cc: File
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P.O. BOX 833 • 600 RIVER DRIVE WEST • SEGUIN, TEXAS 78156-0833 • 830-401-2409 • FAX 830-401-2481
MUTUAL REGIONAL WATER SUPPLY CONTRACT
THIS MUTUAL REGIONAL WATER SUPPLY CONTRACT (this "Contract") is
entered into by and among the Schertz/Seguin Local Government Corporation (the
"Corporation"), anon-profit corporation of the State of Texas (the "State"), created and
existing under the laws of the State, including the Texas Transportation Corporation Act, as
amended, Texas Transportation Code Section 431.001 et. seq., the City of Schertz, Texas, a
home-rule city ("Schertz"); the City of Seguin, Texas, ahome-rule city ("Seguin"); and the City
of San Antonio, Texas, ahome-rule city, acting by and through its San Antonio Water System
("SAWS").
RECITALS
WHEREAS, Seguin and Schertz (collectively, the "Cities") have approved the creation of
the Corporation as their constituted authority and instrumentality to accomplish the specific
public purpose of acquiring, constructing, improving, enlarging, extending, repairing,
maintaining, and operating a water utility system, pursuant to the provisions of Chapter 552 of
the Texas Local Government Code, as amended, and other applicable ]aw; and for the purposes
set forth in the Corporation's Articles of Incorporation, including the issuance of bonds to
fmatrce the costs of the water utility system; and
WHEREAS, each of the Cities and the Corporation have entered into a contract entitled
"Regional Water Supply Contract" dated November 15, 1999 (the "Corporation/City Contract")
which unconditionally obligates each of the Cities to pay one-half of the debt service on the
Corporation's bonds and other obligations and entitles each of the Cities to one-half of the water
provided by the Corporation; and
WHEREAS, in order to deliver the water to which the Cities are entitled under contracts
with the Corporation and to other potential purchasers on a regional basis, the Corporation has
constructed Facilities, lines, booster pumps, treatment facilities, and other appurtenances,
acquired interests in property; and acquired regulatory approvals for the production and transport
of groundwater (the "Corporation's Water System"); and
WHEREAS, SAWS provides water service to its customers in Bexar County and
sunounding areas through a water production, treatment, storage, and distribution system (the
"SAWS Water System") inclose proximity to the Corporation's Water System; and
WHEREAS, the Corporation has determined that the Corporation's Water System
cunently has capacity to temporarily supply water in excess of the current needs of the
Corporation's existing customers, including the Cities, and the City of Selma, the City of
Universal City, the City of Converse (for a limited five-year term) and Springs Hills Water
Supply Corporation (jointly referred to as the "Initial Customers") and that the Corporation's
existing facilities can be increased to produce, treat, and deliver water that is temporarily in
excess of the then-demand by the Cities, the Initial Customers, and other persons who may
contract with the Corporation for the purchase of a specified volume of water; and
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WHEREAS, SAWS desires to obtain an additional water supply to supplement its
existing water supply sources and is willing to accept delivery of treated water from the
Corporation that is available to the Corporation from the Corporation's own sources and is
determined by the Corporation from time to time to be in excess of the demands of the Cities and
the Corporation's Initial Customers; and
WHE}2EAS, operating the Corporation's Water System at full volume creates
opportunities for the Corporation to reduce the rates paid by all of its customers due to the
economies of scale; and
WHEREAS, SAWS plans to install a well field in western Gonzales County in the
vicinity of the Corporation's Water System to produce groundwater from the Carrizo Aquifer
formation, subject to obtaining and maintaining permits from the Gonzales County Underground
Water Conservation District ("GCUWCD"), and the proposed wells and related infrastructure, if
permitted, will be available to deliver untreated groundwater to the Corporation's Water System
for treatment; and
WHEREAS, SAWS anticipates the opportunity to acquire additional groundwater from
sources in the region; and
WHEREAS, the Corporation and SAWS have determined that significant efficiencies
and cost savings can be achieved for the Corporation and SAWS by SAWS delivering untreated
groundwater to the Corporation's Water System and the Corporation delivering treated water to
the SAWS Water System; and
WHEREAS, the Corporation has determined that the Corporation's Water System has
available capacity in its existing transportation pipeline from Gonzales County to transport the
volume of water at the rate of delivery required for the Corporation to satisfy its contractual
obligations to the Cities and the Initial Customers of the Corporation, and to deliver an additional
12,688 acre-feet of water annually of SAWS Water (defined in Section 1.03 of this Contract) to
SAWS as described in this Contract, but additional upgrades to the Corporation's Water System
are required to receive, treat, and pump the water to be delivered by SAWS to the Corporation as
described in this Contract; and
WHEREAS, integration of treated water from the Corporation's Water System into the
SAWS Water System and the emergency delivery of treated water from the SAWS Water
System to the Corporation's Water System will require SAWS to acquire interests in real
property and regulatory approvals, and to construct transmission pipelines, booster pumps,
storage facilities, and other appurtenances to the SAWS Water System, but SAWS could avoid,
or delay for a substantial period of time, the need to construct a water pipeline connecting its
proposed well-field to SAWS' existing treatment facility and the expansion of the treatment
facility at a significant cost savings; and
WHEREAS, the Corporation and SAWS have determined that obtaining water from each
other with the written consent of the Cities is in their mutual best interest and that the terms and
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conditions of this Contract are fair and reasonable and that there is no disparate bargaining power
between the parties to this Contract; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the sufficiency of which are hereby acknowledged, and upon and subject to the terms
and conditions hereinafter set forth, the Corporation, the Cities, and SAWS mutually undertake,
promise, and agree as follows:
ARTICLE I
MUTUAL DELIVERY OF WATER
Section 1 O1. Surplus Water. Subject to receiving and maintaining any necessary
regulatory approvals from the GCUWCD, the Corporation agrees to sell, and SAWS agrees to
buy, surplus treated water from the Corporation in accordance with the terms of this Contract.
A. Definition. "Surplus Water" is the treated water available to the Corporation and
which the Corporation has pipeline capacity to transport to the Corporation's Point of
Delivery (as described in this Contract) from any source other than water delivered by
SAWS in excess of the amount required to meet the then- actual usage of the Cities
(as that demand may increase or decrease from time to time on an annual basis) and
the Initial Customers. The annual projected amount of Surplus Water shall be
determined by the Corporation. SAWS acknowledges that (i) the amount of Surplus
Water available for purchase by SAWS under this Contract is limited by the transport
capacity of the Corporation's existing pipeline between the Corporation's Water
Treatment Plant and Schertz; (ii) the Corporation may have excess treated water
available at the Water Treatment Plant and the existing booster pump station located
south of Seguin, andlor excess untreated water at the Corporation's wells and Water
Treatment Plant; and (iii) the Corporation may make this excess water available for
purchase by persons other than SAWS and is not obligated by this Contract to make
the excess water available at these locations available for purchase by SAWS.
B. Suunly Start Date. The availability of Surplus Water to SAWS under this Contract
will begin upon request by SAWS following (i) completion by the Corporation of
delivery facilities as described in Section 1.09 of this Contract at the Corporation's
Point of Delivery, and (ii) completion by SAWS of the SAWS' facilities on SAWS'
side of the meter at the Corporation's Point of Delivery as those facilities are
generally described in Section 1.04.B.4 of this Contract.
C. Share of Surolus Water Available for SAWS. SAWS shall have the right to purchase
up to seventy-five percent (75%) of the Surplus Water. If, at the time of each annual
determination by the Corporation of the amount of Surplus Water, SAWS is the only
entity agreeing to buy Surplus Water from the Corporation, then SAWS shall have the
right to purchase up to the full estimated volume of the Surplus Water the
Corporation can make available at the Corporation's Point of Delivery. However, if
other parties have contracted with the Corporation to purchase a portion of the
Surplus Water, SAWS shall have the right to purchase at least seventy-Five percent
(75%) of the Surplus Water plus any amount of the remainingtwenty-five percent
(25%) of the Surplus Water not committed to the Corporation's other customers, all at
the Corporation's Point of Delivery. In no event shall the Corporation commit more
than twenty-five percent (25%) of the Surplus Water to any person other than SAWS.
D. Notice. No later than June 1 of each year, beginning in 2013, the Corporation shall
notify SAWS in writing of the amount of Surplus Water available for SAWS during
the upcoming calendar year and the expected timing of delivery of such Surplus
Water. Within thirty (30) days of receipt of the written notice, SAWS shall notify the
Corporation in writing of the amount of Surplus Water SAWS agrees to accept for the
upcoming calendar year.
E. Surplus Water Commitment. SAWS shall not be obligated to accept any amount of
the Surplus Water into the SAWS Water System. However, SAWS shall be obligated
to pay the Corporation at the rate set forth in Section 2.03.B on a monthly basis for an
amount equal to one-twelfth of the annual commitment of Surplus Water that SAWS
has agreed to accept during the calendar year. If the Corporation is unable to actually
deliver the volume of Surplus Water that SAWS has agreed to accept and for which
SAWS has paid, the Corporation agrees to credit the amount of overpayment to any
future payments due under this Contract, except for payments due under Section 2.01
and Section 2.02.B, during the next calendar year. The Corporation may make
available to any person the amount of Surplus Water in excess of the volume of
Surplus Water that SAWS agreed to accept.
F. Monthly Estimates. SAWS and the Corporation acknowledge that the volume of
Surplus Water stated in the annual notice described in subsection 1.O1C above will be
conservative, During the calendar year, the Corporation may determine, in its sole
discretion, that additional amounts of Surplus Water may be available for purchase by
SAWS and others. The Corporation will give notice to SAWS regarding the updated
availability of Surplus Water, and the provisions of subsection 1.01 C and E shall
apply to the additional volume of Surplus Water.
G. Surplus Water Facilities. The Corporation shall use due diligence to expeditiously
design and construct the delivery facilities at the Corporation's Point of Delivery
following execution of this Contract, but in no event later than January 1, 2014.
SAWS shall use due diligence to expeditiously design and constnuct SAWS facilities
on the SAWS side of the Corporation's Point of Delivery following execution of this
Contract in order to receive Surplus Water, if any, from the Corporation, but in no
event later than January 1, 2014.
H. Reeulatorv Approvals. The Corporation's obligations under this Section 1.01 of this
Contract are contingent upon the Corporation obtaining and maintaining any
authorizations or approvals required from the GCUWCD for the Corporation to sell
Surplus Water to SAWS. The Corporation will be responsible for obtaining this
authorization, if required.
I. SAWS Improvements. The Corporation shall be under no obligation to deliver any
portion of the Surplus Water to SAWS unless and until SAWS substantially
completes the improvements described in Section 1.04.B.4 and SAWS has taken all
the actions required on its part so that the Corporation may substantially complete the
Emergency Interconnect described in Section 1.15.
Times and Rate of Delivery. The time and rate of delivery of the Surplus Water
requested by SAWS under this Contract shall be determined by the Corporation's
designated representative in its sole discretion. The Corporation's duty to satisfy
then-actual demands of Schertz and Seguin and the Initial Customers as determined
on an annual basis will take priority over deliveries of Surplus Water to SAWS.
Section 1.02. Option. The Corporation grants SAWS the option to commit, in the future,
to purchase water treatment services from the Corporation and sell treated water to the
Corporation subject to the conditions and requirements set forth in this Contract. The term of
this option shall begin on the Effective Date (as defined in Section 3.01) of this Contract and
shall end forty-eight (48) months after the Effective Date of this Contract. During the term of this
option, the Corporation shall reserve capacity within that portion of the Corporation's Water
System consisting of the pipeline from the Corporation's existing water treatment plant to the
existing ground storage tank in Schertz to discharge its potential obligations to SAWS under this
Contract. SAWS may in its sole discretion exercise this option by notifying the Corporation, in
writing, of its intent to do so, and delivering to the Corporation the notice and check described in
Section 1.06.A of this Contract.
Section 1 03 Canacity Reservation Fee. The Corporation and SAWS acknowledge and
agree that the Corporation is unable to commit the transport capacity in the Corporation's
existing pipeline to other persons while SAWS is deciding whether or not to pursue the
Expansion (as defined in Section 1.04.A) and during construction of the Expansion, if applicable.
Therefore, during the option term described in Section 1.02, SAWS shall pay to the Corporation
an annual Capacity Reservation Fee in the amount of Five Hundred Thirty Eight Thousand
Dollars ($538,000), payable in equal semi-annual installments on March 1 and October 1 of each
year, commencing March 1, 2011. The obligation of SAWS to pay the Capacity Reservation Fee
shall continue until the option described in Section 1.02 ends if SAWS does not exercise the
option or, if SAWS timely exercises the option, then until SAWS Water (as used in this Contract,
a reference to "SAWS Water" means the volume of water that SAWS delivers to the Corporation
for treatment) is treated by the Corporation and delivered to SAWS at the Corporation's Point of
Delivery, whichever shall first occur. If delivery of SAWS Water occurs prior to a payment date
or between the two payment dates, no further Capacity Reservation Fee shall be due or owed by
SAWS. No portion of the Capacity Reservation Fee payment will be refunded by the
Corporation to SAWS.
Section 1.04. Svstem Improvements.
A. Comoration Water Svstem. Subject to the conditions set forth in this Contract and
receiving and maintaining any necessary regulatory approvals from the Texas
Commission on Environmental Quality ("TCEQ") and the GCUWCD, the
Corporation agrees to design and construct infrastructure improvements to the
Corporation's Water System to receive from SAWS untreated groundwater in a
volume, rate, and quality set forth in this Contract and to deliver treated water to
SAWS at the volume, rate, and quality set forth in this Contract. The required
infrastructure improvements shall be referred to in the Contract as "the Expansion."
The Corporation will use its best efforts to substantially complete the Expansion
within fifteen (15) months after receipt of the funds for the Expansion. Irr addition to
the currently funded and designed additions to the Corporation's existing treatment
plant and delivery and storage capacity as of the Effective Date, the improvements
known as of the Effective Date to be required for the Expansion are summarized on
the attached Exhibit A, along with the estimated cost as of the Effective Date.
However, the actual improvements will not be known until the preliminary
engineering report described in this Contract is completed, and the actual cost of the
improvements will not be known until bids from contractors are received. The
improvements for the Expansion will include the facilities and equipment required for
the Metering Station and Metering Equipment as described in this Contract for the
SAWS Point of Delivery and the Corporation's Point of Delivery. Provided, however,
the Corporation may install additional or different improvements in order to satisfy its
obligation to SAWS under this Contract and the Corporation's other customers. As
changes to the planned improvements for the Expansion are proposed, the
Corporation will notify SAWS and will cooperate with SAWS during the planning
and design phases so [hat the needs of both parties are known and considered.
After the Expansion is financed in accordance with Section 1.06.E of this Contract,
the Corporation may install additional improvements in order to satisfy its obligation
to SAWS under this Contract and the Corporation's other customers, but in no event,
however, shall these additional or different improvements result in costs to SAWS in
addition to those costs shared with the Corporation's other customers through the
Corporation's rates.
B. SAWS Water Svstem. As a condition to SAWS receiving water other than Surplus
Water from the Corporation under this Contract, SAWS, at its sole cost, must satisfy
all of the following requirements:
1. Permits. Obtain and continue to hold permits issued by the GCUWCD andlor
other groundwater districts to produce water from the Carrizo Aquifer formation
and to transport the produced water outside the boundaries of the GCUWCD
andlor other local districts. The opportunity of SAWS to obtain water other than
Surplus Water from the Corporation under this Contract is limited to the
authorizations under permits held by SAWS and any additional water available to
SAWS by contract with third parties.
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2. hnprovements. Complete the wells and well collection lines and other
improvements to the SAWS Water System required to deliver to the SAWS Point
of Delivery untreated groundwater produced from the Canizo Aquifer formation.
The improvements shall include a Supervisory Control and Data Acquisition
("SCADA") system compatible with the Corporation's system as upgraded, and
the Corporation will have access to the information regarding the SAWS well
field shown on the SCADA system and access to such controls as may be required
for the convenient and proper operation of the treatment processes.
3. Mitigation A erg ement. Accept and sign a mitigation agreement with the
GCUWCD as required by the GCUWCD establishing a mitigation fund for wells
in western Gonzales County containing substantially the terms of the mitigation
agreement imposed by the GCUWCD upon the Corporation on March 16, 2010,
make the initial deposit into the mitigation fund, and continue to make deposits
into the fund pursuant to the mitigation agreement.
4. Pipeline Pump Station and Storage Tank. Install a pipeline and pump
stationlstorage tank to receive water from the Corporation on the SAWS side of
the meter at the Corporation's Point of Delivery, but SAWS shall not use,
consume, sell, or transfer any water between the Metering Station and the Air
Gap, as described in Section 1.16 of this Contract.
C. City of Schertz Water 5ystem. Schertz agrees to:
1. Cooperation. Cooperate with the Corporation and SAWS regarding the
installation of the Emergency Interconnect described in Section 1.15 below and to
allow the use of its water distribution system to transport water received through
the Emergency Interconnect.
2. Facility Sites and Easements. Within one hundred eighty (180) days of the
Effective Date of this Contract, convey to SAWS for a sum determined by an
appraisal agreed upon by Schertz and SAWS the facility sites and easements
required by SAWS under this Contract and identified on Exhibit B, and work
proactively and cooperatively with SAWS and the Corporation to assist in the
identification and acquisition of any other property or easements deemed
necessary by the Corporation to achieve the purposes of this Contract.
3. Metering. Allow the Corporation and SAWS to install the metering station and
metering equipment required by this Contract on property owned by Schertz;
provided, however, the location of the metering station and metering equipment
shall be subject to approval by Schertz.
4. Pumn Station. Allow SAWS to install high service pumps and a ground storage
tank with a capacity, size and design determined by SAWS at the location
identified in Exhibit C.
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5. Water Transmission Main. Allow SAWS to construct the water transmission
main required by this Contract at the location identified in Exhibit B.
6. Annrovals. Any approvals required to be obtained by SAWS from Schertz under
this Section 1.04 shall be obtained by SAWS in advance of final design of any of
the improvements described in this Section 1.04.
Section 105. Delivery. In addition to the Surplus Water to be delivered by the
Corporation to SAWS, and subject to the terms and conditions of this Contract:
A. Sunnly by Comoration. Upon (i) completion of the Expansion, (ii) satisfaction by
SAWS of the conditions described in Section 1.04.B. above, (iii) receipt of untreated
groundwater from SAWS, and (iv) payment by SAWS to the Corporation for services
in accordance with this Contract, the Corporation will make treated water available to
SAWS at the Corporation's Point of Delivery, in an amount equal to the amount of
untreated water delivered by SAWS to the Corporation at the SAWS Point of
Delivery, less a reasonable volume of treatment and transportation loss not to exceed
twelve percent (12%) per annum (the "Annual Water Loss"), at an Annual Maximum
(hereinafter defined) not to exceed the amounts set forth in Subsection C below and at
a quality set forth in this Contract. The limit of twelve percent (12%) loss will not
include or apply to water lost during major leaks in storage or transportation facilities
due to force majeure as defined in Section 6.02 of this Contract.
B. S~~bvSAWS.
Untreated Water. SAWS will deliver to the Corporation untreated water produced
from the Carrizo Aquifer formation at (or through) the SAWS Point of Delivery;
provided, however, such delivery is conditioned upon SAWS (i) obtaining and
maintaining the necessary permits from TCEQ and the GCUWCD and (ii)
constructing the proposed wells and related facilities and pipelines necessary to
deliver the untreated water.
2. Emer~encv Water. SAWS will deliver treated water from the SAWS Water
System to the Corporation's Water System or to Schertz on an emergency basis as
described in Section 1.15.
C. Annual Maximum Rate and Maximum Instantaneous Rate. The term "Annual
Maximum Rate" shall mean the amount of water delivered through the Delivery
Meter during any calendar year and the term "Maximum Instantaneous Rate" means
the amount of water' delivered through the Delivery Meter' during any consecutive 60
seconds. The Corporation shall design and construct the Expansion so that the
Corporation's Water' System may receive and treat groundwater fiom SAWS meeting
the quality requirements set forth in this Contract at an Annual Maximum of 12,688
acre-feet per year and Maximum Instantaneous rate of 9,500 gallons per minute (not
including the Surplus Water delivered to SAWS under Section 1.01), and deliver
treated water to SAWS meeting the quality requirements set forth in this Contract at
the stated Annual Maximum Rate, less actual losses during treatment and
transportation, and at a Maximum Instantaneous Rate of 9,500 gallons per minute
(not including the Surplus Water delivered to SAWS under Section 1.01). SAWS
agrees not to deliver, or attempt to deliver, to the Corporation untreated water at a
volume or rate that exceeds these maximum limits, and the Corporation is under no
obligation to receive untreated water from SAWS in a volume or rate that exceeds
these limitations. Pursuant to Section 2.02.D of this Contract, the Annual Maximum
Rate during any year will be limited to the Annual Authorized Pumping Amount
determined in accordance with Section 2.02. D of this Contract. Subject to these
]imitations on volume and rate; the Corporation agrees, on an annual basis, to treat
and deliver SAWS Water to SAWS prior to treating and delivering Surplus Water to
SAWS, if SAWS Water is available.
Section 1 06 Financing and Construction.
A. Preliminary Engineering Report. SAWS may exercise its option to acquire water from
the Corporation as described in Section 1.02 of this Contract by notifying the
Corporation in writing and delivering to the Corporation a check payable to the
Corporation in the amount of $50,000. Upon timely receipt of the check, the
Corporation will cause its consulting engineer to immediately begin the preparation
of a preliminary engineering report for the Expansion and to complete the report as
soon as practicable. The preliminary engineering report must contain the following
information:
• The amounts, if any, previously paid by the Corporation for the preliminary
design of the Expansion, as reflected by copies of invoices provided to SAWS;
The then-projected cost of designing and constructing the Expansion based upon
projected costs at the time SAWS exercises its option;
• A contingency equal to ten percent (10%) of the projected construction cost of the
Expansion;
Three years of capitalized interest on the Contract Revenue Bonds (hereinafter
defined);
• Projected premium on insurance policies relating to construction including a
builders risk insurance coverage in the amount of the projected construction cost
of the Expansion; and
Projected reserve fund requirements and insurance premiums for the Contract
Revenue Bonds and other bond issuance costs and expenses.
A draft of the report will be provided to SAWS for review and comment, and SAWS
will have thirty (30) calendar days to submit comments on the draft report. A final
engineering report will be submitted to SAWS within thirty (30) calendar days after
the receipt of SAWS comments or the expiration of the SAWS comment period,
whichever occurs first.
B. Termination of Expansion. If SAWS does not want to proceed with the Expansion
based upon the projected cost of the Expansion as set forth in the preliminary
engineering report, SAWS will notify the Corporation of the decision within sixty
(60) days of receiving the preliminary engineering report. Upon the Corporation's
receipt of this notice, the rights and obligations of SAWS and the Corporation under
this Contract as they relate to' SAWS Water shall terminate. SAWS will not be
entitled to any refund of any money previously paid to the Corporation, but shall have
the continuing right to purchase Surplus Water in accordance with Section 1.01 of
this Contract.
C. Final Plans and Snecifications and Bid. If SAWS accepts the preliminary engineering
report, then within sixty (60) days after SAWS receives the preliminary engineering
report, SAWS shall authorize the Corporation to prepare final plans and
specifications, and to require the contractor(s) to provide the agreements and
insurance specified in Exhibit D, for the Expansion and to solicit construction bids in
accordance with the Corporation's required procurement procedures. The
Corporation's costs to prepare the final plans and specifications ("Costs of Final Plans
and Specifications") shall be billed by the Corporation to SAWS on a monthly basis
as they are incurred, and shall be paid by SAWS to the Corporation within thirty (30)
days of receipt of the monthly billing. Irr the event that the Corporation issues
Contract Revenue Bonds as provided herein in Section 1.06.E and Section 2.01, the
Corporation shall reimburse SAWS within thirty (30) days of issuance of such
Contract Revenue Bonds the Costs of Final Plans and Specifications. Upon
completion of the contract documents and plans and specifications, and upon receipt
by the Corporation and SAWS of all regulatory approvals from the GCUWCD that
may be required for the Corporation to receive and transport SAWS Water,
containing permit terms and conditions that are acceptable to the holder of the permit,
the Corporation shall advertise for bids. At this time, the Corporation will also
initiate the process to issue Contract Revenue Bonds subject to SAWS approval ofthe
bid prices. The Corporation shall notify SAWS in writing of the bid results and the
lowest responsible bid. In the event that the lowest responsible bid received by the
Corporation for construction of the Expansion exceeds the construction cost estimate
reflected in the preliminary engineering report by more than twenty percent (20%),
SAWS in its sole discretion may elect not to proceed with the Expansion and shall
notify the Corporation of its decision within sixty (60) days after receiving written
notice of the bid results fiom the Corporation. In such event, SAWS' and the
Corporation's rights and obligations under this Contract as they relate to SAWS
Water shall terminate.
D. Refund of Costs. If the Corporation elects not to proceed with the construction of the
Expansion without participation by SAWS, the Corporation shall so notify SAWS. In
that event, SAWS shall not be entitled to refund of the Costs of Final Plans and
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Specifications. However, if the Corporation decides at any time within five years of
the notice to proceed with the Expansion in such a manner as to utilize the final plans
and specifications, the Corporation shall, within thirty (30) days of the decision,
refund to SAWS the Cost of Final Plans and Specifications. The contract documents
will require the contractor to hold the bid prices for ninety (90) days to allow SAWS
forty-five (45) days to decide whether to pursue the Expansion. The Corporation shall
not be obligated to award contracts prior to receiving the proceeds from the Contract
Revenue Bonds.
E. Request to Issue Contract Revenue Bonds. If the lowest responsible bid does not
exceed the preliminary construction cost estimate by more than twenty percent (20%),
or if SAW5 wants the Corporation to proceed with the Expansion regardless of the
bid prices, then SAWS shall request the Corporation to issue one or more series of
contract revenue bonds (the "Contract Revenue Bonds") secured solely by the pledge
of revenue received by the Corporation from SAWS pursuant to Sections 2.01 and
2.02.B of this Conhact and SAWS will fully cooperate with the Corporation in the
issuance of such Contract Revenue Bonds. SAWS must deliver its written request to
the Corporation within forty-five (45) calendar days after opening of bids, and if such
request is not timely received the Corporation may terminate the portion of the
Contract relating to the SAWS Water or may rebid the Expansion, provided SAWS
pays the Corporation all of the costs relating to the rebid. If SAWS rejects the bid
prices and the Corporation does not issue the Contract Revenue Bonds, SAWS will
reimburse the Corporation for its financial advisory fees associated with the
preliminary steps to issue the Contract Revenue Bonds in an amount not to exceed
$50,000. The amount of the Contract Revenue Bonds will be the amount required to
discharge the following Expansion expenses required to treat and transport SAWS
Water and no other:
a. Design (preliminary and final) and engineering costs and other casts relating to
design whether paid by the Corporation or SAWS, and cost of construction
inspection;
b. Premium for a surety bond from a company authorized to do business in Texas;
c. All contractor construction costs, plus a contingency of at least ten percent
(10%)>
d. Capitalized interest for the first three (3) years after the Contract Revenue
Bonds are issued;
e. Any required deposits to a reserve fund as set forth in subsection F below or any
bond insurance premiwn.
f. Projected premium on insurance policies relating to construction including a
builders risk insurance coverage in the amount of the projected construction cost
of the Expansion;
g. Other items of cost included in the Preliminary Engineering Report and
acceptable to SAWS; and
11
h. Customary Contract Revenue Bond issuance costs, including bond counsel,
financial advisor, hustee, trustee's counsel, paying agent, registrar,
underwriters, underwriters' counsel, and bond marketing fees and expenses.
The debt service payments on the Contract Revenue Bonds issued for the Expansion
and the Corporation's other customary pecuniary obligations set forth in the
Corporation's resolution as approved by SAWS authorizing the issuance of the
Contract Revenue Bonds will be secured solely by a pledge of the revenues received
from SAWS under Section 2.01 and 2.02.B and fiom no other source. SAWS shall
have the right in its sole discretion to disapprove any proposed refunding of the
Contract Revenue Bonds. SAWS will remain only a customer of the Corporation and
will have no ownership interest in the Corporation's Water System, any component of
the Corporation Water System, or any capacity in the Corporation's Water System.
The Corporation will have rro ownership interest in the SAWS Water System, or in
any component or capacity of the SAWS Water System.
F. Reserve Fund. If the issuance of the Contract Revenue Bonds requires the
Corporation to accumulate and maintain a reserve fund for the payment of the
Contract Revenue Bonds, the Corporation agrees to establish and maintain a separate
and special fund or account known as the "SAWS Contract Revenue Bond Reserve
Fund", which fund or account will be maintained at the Corporation's general
depository bank or the trustee's or paying agent's bank. All funds deposited into the
SAWS Conh'act Revenue Bond Reserve Fund, including proceeds from the Contract
Revenue Bonds and earnings and income derived or received from deposits or
investments in the SAWS Contract Revenue Bond Reserve Fund, shall be used solely
for the payment of principal and interest on the Contract Revenue Bonds, when and to
the extent other funds available for such purposes are insufficient, and in addition,
may be used to retire the last stated maturity and/or interest on the Contract Revenue
Bonds. Should the funds deposited in the SAWS Contract Revenue Bond Reserve
Fund be greater than the amount required to retire the last stated maturity of and/or
interest on the Contract Revenue Bonds, the remaining proceeds, after the payment of
the last stated maturity and/or interest, shall be returned to SAWS. The Corporation
shall provide monthly bank statements to SAWS reflecting all activity in the SAWS
Contract Revenue Bond Reserve Fund. Should the SAWS Contract Revenue Bond
Reserve Fund be drawn upon, then SAWS shall be obligated to replenish the SAWS
Contract Revenue Bond Reserve Fund in the manner set forth in the Corporation's
resolution approved by SAWS authorizing issuance of the Contract Revenue Bonds.
G. Consruction.
Contract Award and Chanee Orders. Upon receipt of the Contract Revenue Bond
proceeds, the Corporation will award the construction contract(s) and notify the
contractor(s) to proceed with construction of the Expansion. SAWS shall have the
right to approve any change orders to the construction contract(s), which approval
shall not be unreasonably withheld. If SAWS disapproves, or does not timely
12
approve a change order, SAWS agrees to defend, indemnify, and hold harmless the
Corporation for any claims by the contractor relating to SAWS' denial of the
change order request, or refusal to timely approve the requested change order. If
the change order(s) approved by SAWS result in an increase in the construction
cost beyond the ten percent (10%) contingency including any proceeds of the
Contract Revenue Bonds, the additional costs shall be billed by the Corporation to
SAWS on a monthly basis as they are incuned, and shall be paid by SAWS to the
Corporation within thirty (30) days of receipt of the monthly billing.
2, Status Reports. The Corporation will make monthly construction status reports to
SAWS, and SAWS will have the right to observe construction of the Expansion.
A SAWS representative shall have the right to attend and shall attend monthly
payment application/design/construction meetings with the design engineer and
the contractor. The SAWS representative shall have the right to disapprove any
payment application. Approval shall not be unreasonably withheld. The
Corporation shall use good faith efforts to resolve any dispute with regard to a
payment application within ten (10) days. If the SAWS representative has not
approved the payment application within ten (10) days, the application shall be
deemed automatically approved by SAWS. Irr the event SAWS disapproves any
payment application, SAWS agrees to defend, indemnify, and hold harmless the
Corporation for any claims relating to the denial of the payment request.
3. Disbursement of Contract Revenue Bond Proceeds. Contract Revenue Bond
proceeds shall be distributed to a separate Corporation bond proceeds account
under the control of Seguin. All disbursements from the Corporation's bond
proceeds account shall be approved by no fewer than two (2) signatories
previously designated by the Corporation and Seguin. The Corporation shall
provide monthly bank statements to SAWS reflecting all account activity.
4. Builder's Risk Insurance. From the Contract Revenue Bond proceeds, the
Corporation will purchase a builders risk insurance policy for the risk that the
Expansion is not substantially complete by the time that SAWS is required to
begin making payments equal to the debt service on the Contract Revenue Bonds
from sources other than the proceeds of the capitalized interest.
H. Completion. The Corporation's engineer expects that the Expansion can be completed
within fifteen (15) months after the proceeds from the Contract Revenue Bonds are
received by the Corporation, and the Corporation agrees to use its best efforts to
substantially complete the Expansion within fifteen (15) months after receipt of
Contract Revenue Bond proceeds for the Expansion. The Corporation acknowledges
that SAWS will be unconditionally required to make payments to the Corporation
equal to the debt service on the Contract Revenue Bonds and the other customary
pecuniary obligations set forth in the Corporation's resolution approved by SAWS
authorizing the issuance of the Contract Revenue Bonds after the three (3) years of
capitalized interest has been used and that it is absolutely necessary that the
13
Expansion be substantially complete by that date. The Corporation agrees to use its
best efforts to cause the Expansion to be substantially complete as promptly as
possible after the Contract Revenue Bond proceeds are received and in conjunction
with SAWS' completion of its untreated groundwater production and delivery
facilities, but within three (3) years after the date that the proceeds of the Contract
Revenue Bonds are received, subject to Force Majeure, as defined in Section 6.02 of
this Contract. If the Corporation has not caused the Expansion to be substantially
completed by that date, subject to Force Majeure, the Corporation will pay SAWS the
amounts received by the Corporation from the builders risk insurance policy
purchased by the Corporation with the proceeds of the Contract Revenue Bonds equal
to the debt service payments made by SAWS on the Contract Revenue Bonds from
sources other than capitalized interest. SAWS shall remain unconditionally obligated
to continue to make payments to the Corporation equal to the debt service payments
on the Contract Revenue Bonds and the other customary pecuniary obligations set
forth in the Corporation's resolution approved by SAWS authorizing the issuance of
the Contract Revenue Bonds. If the Corporation is unable to substantially complete
the Expansion within twenty (20) months after the Corporation awards contracts for
construction of the Expansion and after notice and opportunity to cure, and SAWS
determines that it can cause the Expansion to be completed sooner than the
Corporation, then upon SAWS' demand, the Corporation will assign the construction
and related engineering contracts to SAWS and grant SAWS a right of entry upon the
Corporation's land and facilities to manage the completion of the construction
contracts. If SAWS elects to assume the construction contracts, the Corporation will
not be obligated to reimburse SAWS for any payments made to the Corporation
during construction of the Expansion.
I. Excess Funds. The Corporation shall use the proceeds from the Contract Revenue
Bonds for the purposes set forth in subsection E above. If after completion of the
Expansion, the Corporation holds excess Contract Revenue Bonds proceeds, the
Corporation shall use the excess funds to make debt service payments or otherwise
reduce the bonded indebtedness, if the Contract Revenue Bonds provide for partial
redemptions.
J. Re~~latory Approvals. If any approval or action is required from the GCUWCD or
TCEQ in order for either party to perform its obligations under this Contract, that
party will use its best efforts to obtain the necessary approval or action at its own
expense. The other party will cooperate in obtaining the necessary approval or action.
SAWS- and the Corporation agree, as between themselves, that the cost to the
Corporation of obtaining any regulatory approval from the GCUWCD for the
Corporation to receive groundwater from SAWS and to treat, transport, and deliver
the water to SAWS shall be an operating expense of the Corporation for purposes of
determining the rate paid by SAWS for treatment and transportation of SAWS Water.
If the Corporation must obtain GCUWCD approval of any amendment to the
Corporation's permits in order to receive and transport SAWS Water, the Corporation
14
will initiate that process upon receipt of the notice from SAWS under Section 1.06 A
of this Contract.
Section 1.07. Points of Deliverv. Subject to the terms and conditions of this Contract, the
Corporation and SAWS agree to interconnect their water systems at the locations described in
this Contract (collectively referred to as the "Point of Delivery" or "Points of Delivery"). The
Points of Delivery will be located as follows:
A. SAWS Point of Deliverv. The SAWS Point of Delivery shall be at the Corporation's
existing Water Treatment Plant in Gonzales County.
B. Corporation's Point of Deliverv. The Corporation's Point of Delivery shall be at or
near a proposed SAWS pump station and ground storage tank site to be located in the
general vicinity of the Corporation's existing ground storage tank located in Schertz,
it being the intent of the Parties as of the date this Contract is signed for SAWS to
install its own pump station and ground storage tank close to the existing Schertz
Pump Station/Storage Tank Facility and to construct the piping and related facilities
and equipment to take the water from the Corporation's Point of Delivery to the
SAWS' proposed pump station and ground storage tank facility near the
Corporation's Point of Delivery.
C. Emergenc~Interconnect Point of Deliverv. The point of delivery for the Emergency
Interconnect shall be at or near the Corporation's Point of Delivery.
Section 1.08. Metering Station. The parties to this Contract acknowledge and agree that
the meter stations located at the Points of Delivery will be located so the Corporation and SAWS
will both have unrestricted access to the metering station, but the entity receiving the water at the
Point of Delivery may not alter any measuring or recording device without the approval of the
designated representative of the other party to this Contract, which approval shall not be
unreasonably withheld.
Section 1.09. Deliverv Facilities. Using proceeds, or subject to reimbursement, from the
sale of Contract Revenue Bonds, the Corporation shall design, construct and install all facilities
and equipment required for the Points of Delivery, including any required, tapping of the main,
piping, meters, conh•ol devices and systems and appurtenances at both the SAWS Point of
Delivery and at the Corporation's Point of Delivery. The materials and equipment required will
be determined by the Corporation's engineers. SAWS may at its own expense review and
approve the design, equipment and materials submitted by the Corporation's engineer. No
construction shall begin until SAWS' engineer has reviewed and approved the design and plans
and confirmed that the design and plans are compatible with the SAWS facilities on the SAWS
side of the Point of Delivery. A SAWS engineer shall review and approve the plans or provide
written comments within thirty (30) days of receipt from the Corporation. All such materials and
equipment that are not on the Corporation's side of the meter shall be funded directly by SAWS
and will become the property of SAWS.
15
Section 1 10 Water Conservation Drought Continaencv and other Required Plans.
Each party's obligations under this Contract shall be subject to water conservation plans, drought
contingency plans, or any other plan adopted by such party and required by the TCEQ, the Texas
Water Development Board, or any other federal, state, or local regulatory authority (other than a
party to this Contract) with power to require or approve water conservation and drought
contingency plans. As required by rules of the TCEQ in effect on the Effective Date of this
Contract, all parties have developed and implemented a water conservation plan or water
conservation measures using the standards established by the TCEQ. If required by order of the
TCEQ, each party to this Contract may be required to implement water conservation strategies
and if such party is so ordered, the other parties to this Contract will cooperate and consent to the
implementation by the other parties of such water conservation strategies required by the TCEQ.
As required by TCEQ rules in effect on the effective date of this Contract, in case of a shortage
of water resulting from drought, the water to be distributed by the Corporation to SAWS will be
distributed in accordance with the provisions of this Contract, or to the extent required by law. In
the event that SAWS is called upon to deliver water to the Corporation during an emergency
pursuant to Section 1.15 of this Contract, the Cities agree to adopt water conservation measures
no less restrictive than those then adopted by the City of San Antonio for the duration of the
emergency. hr accordance with TCEQ rules in effect on the Effective Date, the Corporation and
SAWS agree that each has, or will, develop and implement a water conservation plan or water
conservation measures using the applicable elements of the TCEQ rules and each agrees that if it
resells the water delivered under this Contract, each successive contract for the resale of the
water rnust have water conservation requirements so that each successive customer in the resale
of the water will be required to implement water conservation measures in accordance with the
provisions of the TCEQ rules in 30 Texas Administrative Code Chapter 288.
Section 1 11 Water Quality.
A. SAWS to Corporation. The water that SAWS delivers to the Corporation at the
SAWS Point of Delivery will be untreated water produced from the Carrizo Aquifer
formation, and the quality of the untreated groundwater will not exceed an
instantaneous grab sample of 500 mg/1 total dissolved solids. The Corporation shall
have no obligation to accept delivery of untreated water from SAWS' distribution
system that does not conform to this water quality requirement and Corporation's
obligation to deliver potable water to SAWS will be reduced to the amount of
untreated water delivered by SAWS that meets the quality requirements set forth
above. If the Corporation chooses from time to time to accept water that exceeds 500
mg/1 total dissolved solids, the Corporation may impose a surcharge equal to 1.5
times the then-applicable rate charged by the Corporation to SAWS for potable water
delivered at the Corporation's Point of Delivery.
B. Corporation to SAWS. The water that the Corporation delivers to SAWS at the
Corporation's Point of Delivery shall be treated water suitable for public water supply
and shall meet the quality criteria prescribed by the TCEQ Drinking Water Standards
Governing Drinking Water Quality and Reporting Requirements for Public Water
Systems, 30 Texas Administrative Code Chapter 290 subchapter F. SAWS shall have
16
no obligation to accept or pay for delivery of heated water for introduction into the
SAWS distribution system that does not conform to the water quality requirements
described herein. If SAWS accepts or receives the water into the SAWS System,
SAWS is obligated to pay the Corporation for the amount of water received even if
the water does not satisfy the quality requirements of this subsection B.
C. Emer~ency to Cornoration. The water that SAWS delivers to the Corporation at the
Emergency Interconnect will be treated water meeting the standards described in
subsection B above.
D. Additional Treatment. To the extent any additional, or alternative treatment or
processing is required to make the water delivered by the Corporation to SAWS at the
Corporation's Point of Delivery, suitable, compatible, or of a quality for introduction
into the SAWS distribution system with the water then-within SAWS distribution
system, SAWS is responsible, at its sole cost, for installing any additional facilities or
processes within the SAWS Water System for any additional treatment, conditioning
or processing.
Section 1 12 Control and Resonsibility. Subject to the terms of this Contract, the party
in possession of water hereunder shall have control of and responsibility for that water. Control
and responsibility shall transfer from (i) SAWS to the Corporation on the discharge side of the
meters located at the SAWS Point of Delivery and the Emergency Interconnect (ii) the
Corporation to SAWS on the discharge side of the meter located at the Corporation's Point of
Delivery. The obligations of the Corporation to SAWS and the rights of SAWS when the
Corporation has control of and responsibility of water delivered by SAWS to the Corporation
shall be described solely in this Contract, and SAWS expressly waives and releases any and all
rights, claims, or causes of action, if any, that SAWS may have under the statutes or common
law arising from or relating to the Corporation having the control of and the responsibility for
water delivered by SAWS to the Corporation.
Section 1.13. hrdemnity.
A. SAWS. To the fullest extent allowed by law, SAWS agrees on behalf of itself and its
successors and assigns to defend, save and hold harmless the Corporation and the
Corporation's officers, directors, and employees from and against any and all claims,
losses, expenses, costs, demands, judgments, causes of action, suits, and liability in
tort, contract or any other basis and of every kind and character whatsoever (including
but not limited to all costs of defense, such as fees and charges of attorneys, expert
witnesses, and other professionals and all court or other dispute resolution costs)
arising out of or incident to the transportation and delivery of water pursuant to this
Contract while possession remains in SAWS and/or arising from failure by SAWS to
timely pay to Corporation the amounts equal to the amounts payable by the
Corporation for the debt service payments and other pecuniary obligations required
on the Contract Revenue Bonds. SAWS acknowledges that all payments under this
Contract are paid fiom the gross revenues of its utility system which is a separate
17
fund of the City of San Antonio and that no payments, including payments under this
subsection, are payable from ad valorem taxes.
B. Corporation. To the fullest extent allowed by law, the Corporation agrees on behalf of
itself and its successors and assigns to defend, save and hold harmless SAWS and
SAWS trustees, officers, directors, and employees from and against any and all
claims, losses, expenses, costs, demands, judgments, causes of action, suits, and
liability in tort, contract or any other basis and of every kind and character
whatsoever (including but not limited to all costs of defense, such as fees and charges
of attorneys, expert witnesses, and other professionals and all court or other dispute
resolution costs) arising out of or incident to the transportation, treatment and
delivery of water pursuant to this Contract while possession remains in the
Corporation; provided, however, this indemnity shall not include any claim, loss,
expense, judgment or cause of action relating to or arising from failure by SAWS
failure to timely pay to Corporation the amounts equal to the amounts payable by the
Corporation to pay the debt service payments or other pecuniary obligations required
on the Contract Revenue Bonds or to fully comply with the requirements of the
Conhact Revenue Bonds.
Section 1.14. Approvals. Unless otherwise required by law, each consent, approval, or
other official action required of either party to this Contract by any provision of this Contract
shall be deemed in compliance with this Conhact when written evidence of such action, signed
by the respective authorized representative is delivered to the party who is to receive evidence of
such action. The parties to this Contract will cooperate with the each other in the design and
construction of the Points of Delivery and in obtaining, amending and maintaining all
groundwater district permits or other regulatory authorizations necessary for the delivery and
treatment of water under this Contract or under the Corporation's contracts with the Cities and
Initial Customers. The parties to this Contract will not take any action or fail to take any action
(including, without limitation, any exercise or denial of its consent or approval of any action
proposed to be taken by the party or any of its agents hereunder), if taking or failing to take such
action, respectively, would unreasonably delay or obshuct the delivery of water under this
Contract, unless the cessation of delivery is due to non-payment of charges pursuant to this
Contract, or the water delivered does not comply with the requirements set forth in this Contract
relating to volume, rate of flow, or quality.
Section 1 15 Emergency Interconnect. As described iu this Contract, the Corporation
shall use due diligence to install and construct an emergency interconnect between the SAWS
Water System and the Schertz Water System. The location and design shall be subject to the
approval of Schertz, acting by its City Manager. Upon notification by the Corporation to SAWS
that an emergency exists, SAWS, subject to reasonable availability, shall allow the Corporation
to obtain treated water from SAWS through the Corporation's Point of Delivery or obtain
untreated water from SAWS through the SAWS Point of Delivery, By signing this Contract,
Schertz agrees to allow the Corporation and SAWS to use the Schertz water distribution system
to transport water from the emergency interconnect to the Corporation's Water System, or to the
location where the water is needed, without charge to the Corporation or to SAWS. An
18
emergency is defined as a sudden, generally unexpected occurrence or set of circumstances
demanding immediate action to prevent a serious health hazard or unreasonable economic loss.
The Corporation shall pay SAWS for water received from SAWS during such emergency at the
rate set forth in this Contract and not from any funds paid by SAWS relating to the Contract
Revenue Bonds. The Corporation shall make all required reports to the TCEQ for water
purchased from SAWS during the emergency. SAWS' obligation to provide emergency service
pursuant to this Section during any single emergency event shall not extend more than six (6)
months beyond the date of notification of the emergency.
Section 1 16 Air Gau. The water delivered by the Corporation to SAWS will be
delivered through an air gap into the SAWS Water System (the "Air Gap") at a location
upstream of any SAWS' customer as required by TCEQ rules. The treated water delivered by
SAWS to the Corporation through the emergency interconnect described in Section 1.15 will be
delivered through an air gap into the Corporation Water System at a location upstream of any
Corporation customer as required by TCEQ rules.
Section 1.17. Reports.
A. Monthly Reports. Beginning with the initiation of the Preliminary Engineering
Report, the Corporation will provide SAWS a monthly report describing the status of
the project. The monthly reports may cease once construction of the Expansion is
substantially complete (as that term is generally defined, understood, and used in the
water utility construction industry). SAWS and the Corporation agree to cause their
respective consulting engineers and employees to be available as maybe required to
exchange information required to design the Expansion. The Corporation grants
SAWS and SAWS engineers, agents and employees a right of access to observe
construction of the Expansion, but SAWS agrees that it will cause to be observed all
safety precautions required by the Corporation and its contractors, and SAWS
releases, indemnifies, and holds harmless the Corporation from any and all claims and
causes of action arising out of or incident to the negligent conduct of SAWS'
engineers, agents or employees during the observation of construction of the
expansion funded by SAWS.
B. Consultation. After substantial completion by the Corporation of the Expansion and
by SAWS of its well field in western Gonzales County, the Corporation and SAWS
agree to make each other's employees of these projects available for consultation and
available for periodic and special meetings as may be necessary for the convenient
and proper operation of the treatment plant and the well field. The Corporation and
SAWS shall each designate in writing to the other a designated operator (the
"Designated Operator's who shall be the initial point of contact for all operational
issues arising under this Contract. The Designated Operators shall meet at least once
each month to review operations and address issues of concern, but such Designated
Operators shall not have the authority to waive the requirements of Contract or to
amend this Contract.
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ARTICLE II
PAYMENTS
Section 2.01. Contract Revenue Bonds.
A. SAWS Unconditional Agreement. By requesting the Corporation to issue Contract
Revenue Bonds pursuant to Section 1.06.E, SAWS unconditionally agrees, on a take-
or-pay basis, to pay the Corporation an amount equal to the debt service payments on
the Contract Revenue Bonds issued by the Corporation and the other customary
pecuniary obligations set forth in the Corporation's resolution approved by SAWS
authorizing the issuance of the Contract Revenue Bonds. SAWS hereby agrees to
make, or cause to be made, each such payment, as and when due, for the benefit of
the holders of the Contract Revenue Bonds.
B. Use of Rroceeds by Comoration. The Corporation agrees to use the proceeds of the
sale of the Contract Revenue Bonds only for the purposes set forth in Section 1.06.E.
of this Contract.
C. No Leaal or Equitable Interest. SAWS acknowledges and agrees that the issuance of
the Contract Revenue Bonds and the unconditional obligation of SAWS to make
payments to the Corporation equal to the debt service payments on the Contract
Revenue Bonds and the other customary pecuniary obligations set forth in the
Corporation's resolution approved by SAWS authorizing the issuance of the Contract
Revenue Bonds does not and is not intended to create any legal or equitable interest
in the land or equipment to be purchased by the Corporation with the proceeds from
the sale of the Contract Revenue Bonds.
D. Comoration Resolution. SAWS shall have the right to approve the Corporation's
resolution authorizing the issuance of the Contract Revenue Bonds prior to its
adoption by the Corporation. Subject to such approval, all customary covenants and
provisions in the Corporation's resolution authorizing the issuance of the Contract
Revenue Bonds affecting, or purporting to bind, the Corporation, SAWS, Seguin
and/or Schertz, shall, upon the delivery of the Contract Revenue Bonds, become
absolute, unconditional, valid, and binding covenants and obligations of the
Corporation, SAWS, Seguin and/or Schertz, respectively, so long as any Contract
Revenue Bonds and interest thereon are outstanding and unpaid, and maybe enforced
as provided in this Contract and the Corporation's resolution, as approved by SAWS,
authorizing the issuance of the Contract Revenue Bonds. Particularly, the obligation
of SAWS to make, promptly when due, all payments specified in this Contract and all
payments described in Sections 2.01 and 2.02B hereof shall be absolute and
unconditional, and such obligation maybe enforced as provided in this Contract.
E. Assignment of Corporation's Rielrts. The parties to this Contract are advised and
recognize that as security for the payment of the Contract Revenue Bonds, the
20
Corporation may assign to a trustee bank, pursuant to one or more trust indentures to
be authorized by the Corporation's resolution, as approved by SAWS, authorizing the
issuance of the Contract Revenue Bonds, certain of the Corporation's rights under
this Contract, including the right to receive the payments hereunder, including the
amounts described in Sections 2.01 and 2.02B hereof. The parties to this Contract
hereby assent to such assignment and SAWS may make the payments described in
Sections 2.01 and 2.02B hereof directly to the trustee bank without defense or set-off
by reason of any dispute between the parties to this Contract and the Corporation or
the trustee bank. All rights against the parties to this Contract arising under this
Contract or the Corporation's resolution, as approved by SAWS, authorizing the
issuance of the Contract Revenue Bonds and assigned to the trustee bank may be
enforced by the trustee bank, or the holders of the Contract Revenue Bonds, to the
extent provided in the Corporation's resolution, as approved by SAWS, authorizing
the issuance of the Contract Revenue Bonds, and the trustee bank, or the holders of
the Contract Revenue Bonds, shall be entitled to bring any suit, action, or proceeding
against the Corporation or SAWS, as applicable, to the extent provided in the
Corporation's resolution, as approved by SAWS, authorizing the issuance of the
Contract Revenue Bonds, for the enforcement of this Contract, and it shall not be
necessary in any such suit, action, or proceeding to make the Corporation a party
thereto.
Section 2.02. Monthl~Payments, As consideration for the services to be provided by
each party to this Contract to the other parties to this Contract, each party agrees to pay the other
parties as follows:
A. Surplus Water. Subject to annual reconciliation as provided in Section 1.O1.E, SAWS
agrees to pay the Corporation's monthly charges for Surplus Water based upon the
rate established in Section 2.03.B for water actually measured by the meter in
increments of thousand gallons at the Corporation's Point of Delivery less the SAWS
Water.
B. Contract Revenue Bonds. Beginning the month that the capitalized interest from the
proceeds of the Contract Revenue Bonds is exhausted, SAWS shall make monthly
payments to the Corporation in an amount equal to one-twelfth of the annual debt
service payment on the Contract Revenue Bonds issued by the Corporation in
accordance with Section 2.01 of this Contract and the other customary pecuniary
obligations set forth in the Corporation's resolution approved by SAWS authorizing
the issuance of the Contract Revenue Bonds; provided, however, that the amount of
the monthly payments may be adjusted by the Corporation to ensure that it has
received from SAWS a sufficient amount of funds so that fire Corporation may pay
the next semiannual debt service payment orr the Contract Revenue Bonds. SAWS
agrees to make these monthly payments regardless of whether SAWS takes any water
from the Corporation. The obligation of SAWS to make these monthly payments
shall continue as long as the Contract Revenue Bonds issued by the Corporation or
any SAWS approved refunding of those Contract Revenue Bonds remains
21
outstanding. To the extent any reserve fund or other fund mandated by the
Corporation's resolution authorizing the issuance of the Contract Revenue Bonds
needs to be supplemented by additional deposits, then SAWS unconditionally agrees
to make such additional deposits as needed from time to time under the terms of the
Contract Revenue Bonds at least one business day prior to the date such funds are
required to be paid by the Corporation. Neither the Corporation nor the Cities shall
have any obligation whatsoever to make any payments required by the Contract
Revenue Bonds, except from payments made hereunder by SAWS to the Corporation.
C. Emergency Water. The Corporation agrees to pay, from other lawfully available
funds, the monthly charges of SAWS for Emergency Water based upon the rate as
established in Section 2.03.C then in effect per thousand gallons times gallons
actually measured by the meter at the Corporation's Point of Delivery measured in
increments of thousand gallons.
D. SAWS Water. SAWS agrees to pay the Corporation's monthly charges for treatment
and transportation of SAWS Water based upon the annual adjusted rate as established
in Section 2.03.A. SAWS shall notify the Corporation in writing on or before May 1
of each year during the term of this Contract of the amount of groundwater SAWS
and its sources will be authorized by the GCUWCD to pump in the following
calendar year (the "Annual Authorized Pumping Amount"). The Corporation's
Operation and Maintenance charges, as defined in Section 2.03.D. of this Contract,
shall be detennined annually by applying the annual adjusted rate to the Annual
Authorized Pumping Amount less the Corporation's estimated Annual Water Loss as
defined in Section 1.OS.A, regardless of the amount of untreated water that SAWS
delivers to the Corporation for treatment and transportation. The Corporation's
charges shall be assessed in twelve (12) equal monthly installments. The Corporation
shall credit SAWS during the next calendar year for any water that the Corporation is
unable to deliver because it does not satisfy the water quality requirements set forth in
Section 1.11.B. This subsection does not apply to the armual debt service payments
on the Contract Revenue Bonds and the other customary pecuniary obligations set
forth in the Corporation's resolution approved by SAWS authorizing the issuance of
the Contract Revenue Bonds which SAWS unconditionally agrees to pay in monthly
installments without demand by Corporation.
Section 2.03. Rate.
A. Rate Paid ~ SAWS for Treatment and Transportation of SAWS Water. The annual
adjusted rate per thousand gallons paid by SAWS for treatment and transportation of
SAWS Water shall equal the Corporation's cost per thousand gallons for Operation
and Maintenance (excluding all water lease costs) and Used and Useful Facilities
Debt Service, all as defined in subsection D below. This subsection A only relates to
the determination of Operation and Maintenance Charges and does not relate in any
way to the debt service on the Contract Revenue Bonds and the other customary
22
pecuniary obligations set forth in the Corporation's resolution approved by SAWS
authorizing the issuance of the Contract Revemie Bonds.
B. Rate Paid by SAWS for Surnlus Water. The annual rate paid by SAWS for the
Surplus Water shall be the Corporation's rate per thousand gallons then in effect for
water sold by the Corporation to the Cities.
C. Rate Paid by Cornoration for Emergency Water. The annual rate per thousand gallons
paid by the Corporation to SAWS for Emergency Water delivered to the Corporation
from SAWS shall be the Corporation's rate per thousand gallons then in effect for
water sold by the Corporation to the Cities.
D. Definitions. For purposes of this Section:
1. "Water Treatment Plant" shall mean the Corporation's water treatment plant
located at 2130 CR 127, Nixon, Texas.
2. "Facilities" shall mean the Corporation's water transportation infrastruchue
connecting the Water Treatment Plant to the Corporation's Point of Delivery,
together with related water storage tanks, pump stations, chlorination stations,
electronic monitoring equipment, and transmission pipelines, and land, rights of
way, and peirnits where Facilities may be located.
"Used and Useful Facilities Debt Service" shall mean the Corporation's annual
principal and interest payments to discharge debt incurred for construction,
expansion, repair, or replacement of Facilities that are used and useful for the
receipt, treatment, storage, pumping, and transport of SAWS Water, other than
debt evidenced by the Contract Revenue Bonds, plus transfers to reserve funds as
permitted or required by the applicable bond resolutions, and for debt service
coverage in an amount not to exceed 150%. The parties specifically agree that the
term shall include payments of $596,026 attributable to use of capacity in the
existing Corporation pipeline fiom the Corporation's treatment plant to the
Corporation's ground storage tank in Schertz, including existing pump stations
and storage tank capacity.
4. "Operation and Maintenance" shall mean operation and maintenance in
accordance with commonly accepted prudent public utility standards. Water lease
costs will be excluded from Operation and Maintenance costs paid by SAWS for
SAWS Water. Operation and Maintenance costs as currently anticipated by the
parties are identified in the report entitled Schertz-Seguin Local Government
Corporation 2010 Rate Study and Long-Term Financial Plan by Economists.com
as updated December 27, 2010 which is incorporated by reference info this
Contract, and both SAWS and the Corporation acknowledge receipt of the report.
However, SAWS recognizes and acknowledges that the costs represented in the
23
report are intended only as a representative example and will not be considered
definitive of costs required by prudent utility standards in the future.
E. Assets Excluded from Cost. The Corporation's cost to SAWS under this Contract for
treatment and transportation of SAWS Water shall not include debt service or debt
service coverage on any bonds issued by Corporation to acquire land or interests in
land used solely for the production of groundwater for the benefit of Corporation's
customers, or capital outlays or royalty payments related thereto, or for construction
of facilities owned by the Corporation or persons other than SAWS and used to
produce groundwater and deliver the groundwater to the Corporation's treatment
plant. The parties specifically agree that all costs incurred by the Corporation,
whether for facilities debt service, operation and maintenance, or otherwise,
associated with a second Corporation transmission pipeline from the Corporation's
treatment plant to the Corporation's ground storage tank in Schertz, shall be excluded
from cost hereunder.
F. AWWA methodologies. All rates set by any party under this Contract shall be
consistent with AWWA rate-making methodologies, except to the extent those
methodologies maybe inconsistent with the express provisions of this section of the
Contract.
G. Annual Projected Volume. Each year on or before May 1, after SAWS exercises its
Option corder Section 1.02 of this Contract, SAWS will notify the Corporation in
writing of the amount of untreated SAWS Water that SAWS expects to deliver to the
SAWS Point of Delivery for the following January 1 through December 31 time
period and the total estimated amount of heated -water that SAWS plans to receive
fi~om the Corporation. Each year on or before July 1, after SAWS exercises its
Option, the Corporation shall provide written notice to SAWS of the adjusted rates
for the following calendar year. The written notice shall include supporting
information and documentation to enable SAWS to evaluate the basis for any
adjustments. Within fourteen (14) days of receipt of the notice by SAWS, SAWS will
notify the Corporation in writing of any objections to the proposed adjustments.
Within fourteen (14) days of receipt by the Corporation of the written objections, the
parties shall meet and attempt to resolve any objections by SAWS. This subsection G
relates only to the determination of Operation and Maintenance Charges and does not
relate in any way to the debt service on the Contract Revenue Bonds.
H. Rate Adjustment. The Corporation will use its best efforts to adjust rates once per
year effective beginning October 1, but the Corporation reserves the right to adjust
rates from time to time and at any time the Corporation deems necessary to address
costs that were not expected at the time the rates were set, such as an unexpected
significant increases for electric power and chemicals, production, transport, or other
fees assessed by local groundwater districts or the State, or water lease payments
(applicable only to the Surplus Water). The Corporation will provide SAWS with as
much notice of a rate change as may be practical under the circumstances.
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Section 2.04. Due Date. Bills will be rendered by the 25'h day of the month for amounts
due under this Contract by any party. The monthly charges shall be paid in full on or before the
thirtieth (30"') calendar day after receipt.
Section 2 O5. Other Charges. In the event any sales or use taxes, or taxes, assessments,
production fees or charges of any similar nature are imposed by a federal, state, or local authority
(other than a party to this Contract) on production, storing, delivering, gathering, impounding,
taking, selling, using, or consuming the water received by a party to this Contract, the amount of
tax, assessment, or charge shall be borne by that party, in addition to all other charges, and
whenever a party shall be required to pay, collect, or remit any tax, assessment, or charge on
water received by such party, then the obligated party shall promptly pay or reimbruse such party
for the tax, assessment, or charge in the manner directed by such party.
Section 2 06. Default in Payments. All amounts due and owing to a party to this Contract
by another party to this Contract shall, if not paid when due, bear interest at the Texas post-
judgment interest rate under Texas law from the date when due until paid, provided that such rate
shall never be usurious or exceed the maximum rate as permitted by law as set forth in Chapter
1204, as amended, Texas Government Code. If any amount due and owing by one party to
another party is placed with an attorney for collection, the party owing the amount shall pay to
the other party, in addition to all other payments provided by this Contract, including interest, the
other party's collection expenses, including court costs and attorneys' fees as may be order the
court or tribunal. The party who is owed the money may, to the extent permitted by law,
suspend delivery of water to the other party if the other party remains delinquent in any
payments due hereunder for a period of sixty (60) days, and is not required to resume delivery of
water while the party is so delinquent. Either party may pursue all legal remedies against the
other party to enforce and protect the rights of the party under this Contract.
Section 2.07. Pledge of Gross Revenue. Each party to this Contract represents and
covenants to the other parties that all payments to be made by it under this Contract shall
constitute reasonable and necessary."operating expenses" of its utility system, and that all such
payments will be made from the gross revenues of its utility system. Each party represents and
has determined that the water supply to be obtained from the other parties is absolutely necessary
and essential to the present arrd future operation of its utility system, and, accordingly all
payments required by this Contract to be made by the party shall constitute reasonable and
necessary operating expenses of the party's utility system as described above with the effect that
the obligation to make such payments from gross revenues of such utility system or systems shall
have priority over any obligation to make any payments from such revenues, whether of
principal, interest, or otherwise, with respect to all bonds heretofore or hereafter issued by the
party. Each party agrees throughout the term of this Contract to continuously operate and
maintain its utility system and to fix and collect such rates and charges for water services to be
supplied by its utility system as will produce gross revenues in an amount equal to at least all of
its payments under this Contract.
A party to this Contract shall never have the right to demand payment by another patty of
any obligations assrrmed by or imposed upon that party under or by virtue of this Contract fiom
25
any funds raised or to be raised by taxation, and a party's obligation under this Agreement shall
never be construed to be a debt of the party of such kind as to require it under the Constitution
and laws of the State to levy and collect an ad valorem tax to discharge such obligation.
Section 2.08. Payment under Protest. If a party at any time disputes the amount to be paid
by it to another party, the party shall nevertheless promptly make the disputed payment or
payments, but if it is subsequently determined by agreement or court decision that the disputed
amount paid by the party should have been less, or more, the other party shall promptly revise
the monthly payment in a manner that the party, will recover the amount due within six (6)
months.
Section 2.09. Stipulations. By signing this Contract, each party stipulates and agrees that
another party will be prejudiced if a party avoids the obligation to furnish water while accepting
the benefits of payments, or avoids the obligation to pay the rates for water specified in this
Contract while accepting the benefits of obtaining water, from the other party. Nothing in this
Contract shall be construed as constituting an undertaking by a party to furnish water to another
party except pursuant to the terms of this Conh~act.
Section 2.10. Ri¢hts Reeardina Books and Records. The Corporation shall permit SAWS
upon reasonable notice to examine and copy all the books and records kept by the Corporation
regarding this Contract and the Corporation's Water System. hr addition, upon reasonable prior
written notice to the Corporation, SAWS may conduct a complete audit of the books and records
kept by the Corporation regarding this Contract and the Corporation's Water System as well as
upon the information and documentation used to prepare the books and records. Any such audit
shall be at SAWS' sole expense and shall be prepared by a certified public accounting firm. If
the audit report discloses actual errors in the books and records such that the charges assessed to
SAWS are in error then such error shall be corrected for the period up to four years after the
erroneous charge was paid by SAWS and all payments reconciled over the subsequent twelve
month period beginning with the Corporation's fiscal year. If the error identified in the audit is
greater than the cost of the audit, the Corporation shall reimburse SAWS the cost of the audit.
ARTICLE III
TERM OF CONTRACT AND REMEDIES
Section 3.01. Tenn. This Contract shall be effective on January 1, 2011 (the "Effective
Date"), and shall continue in effect for a period of forty years fiom the Effective Date and for so
long thereafter as the Corporation may have Contract Revenue Bonds, or refunding bonds,
outstanding that were issued for the exclusive purpose of financing or refinancing the
construction of the Expansion.
Section 3.02. Renewal. This Contract will automatically renew for successive terms of
five (5) years after the expiration of the term set forth in Section 3.01 unless the Corporation,
SAWS, Schertz or Seguin gives written notice that the party issuing the notice objects to the
26
renewal of this Contract. The notice of the objection to renewal must be given at least three (3)
years prior to the termination date of this Contract.
Section 3 03 Termination by SAWS. SAWS may terminate this Contract at any time
prior to exercising its Option described in Section 1.02 by providing written notice to the
Corporation. However, if SAWS exercises its option by authorizing the Corporation to issue
Contract Revenue Bonds, SAWS may not terminate this Contract for any reason until the
Contract Revenue Bonds and any SAWS-approved refunding bonds are paid in full or a
procedure is mutually agreed upon that provides for the full payment of the Contract Revenue
Bonds and any SAWS-approved refunding bonds, and the other customary pecuniary obligations
set forth in the Corporation's resolution approved by SAWS authorizing the issuance of the
Contract Revenue Bonds without adverse impacts upon the holders of the Contract Revenue
Bonds or SAWS-approved refunding bonds. Whether or not SAWS elects to exercise the Option
described in Section 1.02, the rights and obligations of the parties with regard to Surplus Water
as described in Section 1.01 shall continue in full force and effect unless and until this Contract
is terminated.
Section 3 04 Oblieations Upon Termination of Contract. Upon termination of this
Contract, no party will haue any obligation to another party except each party will:
A. Remove its facilities from property owned or controlled by the other party.
B. Pay or reimburse the other party all amounts that may be due upon the date of
termination.
SAWS acknowledges that the facilities, equipment, and improvements made to Corporation's
Water System pursuant to this Contract belong entirely to the Corporation, and SAWS has no
right or obligation to remove any such facilities, equipment, or improvements.
Section 3.05. Remedies. Recognizing that failure in the performance of any party's
obligations hereunder could not be adequately compensated in money damages alone, each party
agrees in the event of any default on its part that each party shall have available to it the
equitable remedy of mandamus and/or specific performance, but not termination as long as the
Contract Revenue Bonds, or any refunding of the Contract Revenue Bonds, is outstanding. It is
the' intent of the parties to this Contract that any default shall be subject to the remedy of specific
performance and/or mandamus to the extent that specific performance and/or mandamus is
possible under the existing circumstances. The remedy of specific performance and/or
mandamus shall be first requested by either party in the event of default by the other party.
However, if, despite SAWS' request for specific performance or mandamus, a court determines
that the Corporation has breached this Conhact by failing to deliver treated water as required
hereunder, but the court declines to order specific performance as a remedy, the aggregate
damages available to SAWS shall be limited to recovery of a sum equal to the balarrce of the
debt service payments on the Contract Revenue Bonds then outstanding plus the depreciated
value at the time of default of the SAWS pump station, pipeline and related conveyance facilities
connecting the Corporation's Point of Delivery to the SAWS Pump Station located near the
27
intersection of Nacogdoches Road and O'Connor Road in San Antonio. SAWS will not be
entitled to any punitive, incidental, indirect, special or consequential damages resulting from or
arising out of any claims against the Corporation, including damages for lost revenues, income,
or profits. If a court determines that SAWS has breached this Contract, but the court declines to
order specific performance as a remedy, the damages available to the Corporation shall be
limited to recovery of a sum equal to the balance of the debt service payments on, and other
pecuniary obligations relating to, the Contract Revenue Bonds then outstanding. In either event,
the prevailing party may recover court costs, attorneys' fees, and witness fees.
If the Expansion is not substantially completed by the Corporation due to its negligence
before the capitalized interest on the Contract Revenue Bonds and proceeds from the builders
risk insurance, if any, are exhausted, and SAWS must begin to make payments to the
Corporation under Section 2.02.B, then the Corporation shall be liable to SAWS for those
payments made prior to the substantial completion of the Expansion, unless SAWS chooses to
exercise its rights to assume the construction contracts, in which case the Corporation shall not
be liable to SAWS.
Section 3.06. Use of Expansion by Corporation. Notwithstanding any other provision of
this Contract, in the event that SAWS is unable for any reason to deliver water to the Corporation
for treatment and the Corporation utilizes the Expansion to treat water for itself or other parties,
the Corporation shall reimburse SAWS for payments under Section 2.02.B made by SAWS to
the Corporation. The Corporation's reimbursement payments shall be made on the same terms
and conditions as payments from SAWS to the Corporation under this Contract. In no event shall
Corporation's obligation to reimburse SAWS exceed the amount of revenue received by the
Corporation for the use of the Expansion.
Section 3.07. Default -Notice and Opporiunity to Cure. If any party fails to perform any
obligation or make any payment in the required amount when due under this Contract (except for
SAWS' payment obligations set forth in Section 2.01 and 2.02.B), the other parties may, without
prejudice to any other right or remedy it may have under this Contract, provide written notice of
default to the non-performing party. The non-performing party has sixty (60) days fiom receipt
of the notice within which to remedy the default (the "Cure Period").
Provided, however, the Corporation may reduce delivery of treated water to SAWS to
reflect any and all reductions in SAWS' delivery of untreated water to the Corporation without
the need for notice and providing an opportunity for cure.
Provided, however, the requirement for notice and the sixty (60) day opportunity to cure
does not apply to SAWS' obligations to pay the Corporation for Contract Revenue Bonds or for
water delivered to SAWS under this Contract and the amount due the Corporation shall be paid
by SAWS by the due date specified in Section 2.04 of this Contract.
Section 3.08. Mediation. In the event any controversy arising under this Contract (other
than a controversy arising from payments under Section 2.01 or Section 2.02.B. of this Contract
or for rates charged under this Contract) is not resolved by informal negotiations between the
28
Corporation and SAWS within thirty (30) days after any party requests negotiations, then, upon
the request of any party, the controversy shall be referred to the voluntary settlement procedure
known as mediation, which process shall be governed by the Texas Civi] Practice and Remedies
Code, Section 154.002, et seq., or its successor statute. The parties shall attempt to select a
mutually acceptable mediator. Failing identification of a mutually acceptable mediator, the
parties shall request the presiding judge of the State District Courts of Travis County, Texas, to
appoint a mediator. The mediation process shall continue until the controversy is resolved, the
mediator makes a fmding that there is no possibility of settlement through mediation, or either
party chooses not to continue further. All costs and expenses of the mediation (including the
mediator's fees) shall be shared equally by the parties involved in the mediation; provided
however, that costs incurred by each party shall be costs solely of such party, but the
Corporation's costs and expenses relating to such mediation shall be included as a system-wide
cost within the Corporation's operation and maintenance expense.
ARTICLE IV
METERING AND MEASUREMENT
Section 4.01. Unit of Measurement. The unit of measurement for water delivered
hereunder shall be 1,000 gallons of water, U. S. Standard Liquid Measure.
Section 4 02. Measuring_Equipment. Irr accordance with Sections 1.08 and 1.09 of this
Contract, the each party shall furnish, and install at least one water meter of standard type for
measuring properly the quantity of water delivered under this Contract (the "delivery meter or
meters"). Such meter and other equipment so installed shall remain the property of the party
installing the meter. The other parties shall have access to such metering equipment at all
reasonable times, but the reading, calibration, and adjustment thereof shall be done only by the
employees or agents of the party that owns the meter. For the purpose of this Contract. the
original record or reading of the meter or meters shall be the joumal or other record book of the
party installing the meter in its office in which the records of the employees or agents of the
party who take readings are or maybe transcribed. Upon written request of another party, the
party owning the meter will give the other party a copy of such journal or record book, or permit
the other party to have access to the same in the office of the party during reasonable business
hours.
Each party at the party's expense shall annually test its meter(s) at the point of delivery,
if requested in writing by another other party to do so, in the presence of a representative of the
other party, and the parties shalljointly observe any adjustments which are made to the meters in
case any adjustments shall be necessary, and if the check meters hereinafter provided for have
been installed by the party, the same shall also be calibrated by the party in the presence of a
representative of the other party and the parties shall jointly observe any adjustment in case any
adjustment is necessary. The party will provide to the other parties a copy of the meter
calibration test to the party for its sanitary inspection reports. If the party shall in writing request
another party to calibrate its meters and the other patty shall give the party notice of the time
when any such calibration is to be made and a representative of the party is not present at the
29
time set, the other party may proceed with calibration and adjustment in the absence of any
representative of the party.
If any party at any time observes a variation between the delivery meter or meters and the
check meter or meters, if any such check meter or meters shall be installed, such party will
promptly notify the other parties, and the parties hereto shall then cooperate to procure an
immediate calibration test and joint observation of any adjustment and the said meter or meters
shall then be adjusted to accuracy. Each party shall give the other party forty- eight (48) hours'
notice of the time of all tests of meters so that the other parties may conveniently have a
representative present.
If upon airy test, the percentage of inaccuracy of any metering equipment is found to be
in excess of accuracy limits as established in AW WA Manual 6 -Testing of Meters, registration
thereof shall be corrected for a period extending back to the time when such inaccuracy began, if
such time is ascertainable, and if such time is not ascertainable, then for a period extending back
one -half (%Z) of the time elapsed since the last date of calibration. If for any reason any meters
are out of service or out of repair so that the amount of water delivered cannot be ascertained or
computed from the reading thereof, the water delivered during the period such meters are out of
service or out of repair shall be estimated and agreed upon by the parties hereto upon the basis of
the best data available. For such purpose, the best data available shall be deemed to be the
registration of any check meter or• meters if the same have been installed and are accurately
registering. Otherwise the amount of water delivered during such period may be estimated (i) by
conecting the error if the percentage of the error is ascertainable by calibration tests or
mathematical calculation, or (ii) by estimating the quantity of delivery by deliveries during the
preceding periods under similar conditions when the meter or meters were registering accwately.
Each party may, at the party's option and expense, install and operate a check meter to
check each meter installed by another party, but the measurement of water for the purpose of this
Contract shall be solely by the party's meters, except in the cases hereinabove specifically
provided to the contrary. All such check meters shall be of standard make and shall be subject at
all reasonable times to inspection and examination by any employee or agent of the other party,
but the reading, calibration and adjustment thereof shall be made only by the party who owns the
meter. During any period when a check meter may be used under the provisions hereof for
measuring the amount of water delivered, in which case the reading, calibration and adjustment
thereof shall be made by the party with representation from the other party.
If a party requests another party to test the other party's meter, either more fi~equently
than once every year required by this section or because the other party's meter and the party's
check meter show different readings, the party requesting the test will pay the cost of the test if
the test shows that the meter is within the accuracy limits as established in AWWA Manual 6 -
Testing of Meters (within two percent registration), but if the test shows that the meter is not
accurate (in excess of accuracy limits as established in AWWA Manual 6 -Testing of Meters),
then the other party will pay the costs for conducting the test.
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ARTICLE V
INTERPRETATIONS AND CORPORATION BONDS
Section 5 Ol. hrterpretation. The table of contents and caption headings of this Contract
are for reference purposes only and shall not affect its interpretation in any respect. Unless the
context otherwise requires, words of the masculine gender shall be construed to include
correlative words of the feminine and neuter genders and vice versa. This Contract and all the
terms and provisions shall be liberally construed to effectuate the purpose set forth herein and to
sustain the validity of this Contract.
Section 5 02 Schertz Seguin SAWS and Corooration Bonds. Each party expressly
acknowledges, agrees, and warrants that it will take no action to adversely affect the tax-exempt
status of the tax-exempt bonds or other obligations of another party hereto. Each party hereto
acknowledges that any SAWS bonds or other obligations are issued by the City Council of the
City of San Antonio, Texas.
Section S 03 Subordination of Cities' Rights. Under the Corporation/City Conhacts,
Schertz and Soguin each have a right to receive fifty percent (50%) of the water produced by the
Corporation. Subject to the terms and conditions of this Contract, including but not limited to
Section 1.O1C, Schertz and Seguin each subordinate their right to receive water in equal amounts
from the Corporation so that the Corporation may supply water to SAWS in accordance with this
Contract. Schertz and Seguin shall both remain unconditionally obligated to pay the Corporation
the amount due under the Corporation/City Conhacts, but the Corporation, Schertz and Seguin
acknowledge and agree that the amounts payable by Schertz and Seguin to the Corporation (except
for payments due on any Contract Revenue Bonds) shall be reduced by the Corporation's actual
receipt of the amounts paid by SAWS under this Contract, so as between the Corporation, Schertz
and Seguin and for the purposes of Section 3.01 of the Corporation/City Contracts, the amounts
paid by SAWS to the Corporation shall be considered to be proportionate payments of the Annual
Payments required to be paid by Schertz and Seguin under the CorporationlCity Contract.
ARTICLE VI
GENERAL PROVISIONS
Section 6 Ol Participation by the Parties. Each party to this Contract represents to the
others that it is empowered bylaw to execute this Contract and other agreements and documents
as are or may hereafter be required to accomplish the same; and that its execution of this
Contract has been duly authorized by action of its govenring body.
Section 6.02. Force Majeure. If by reason of Force Majeure any party hereto shall be
rendered unable wholly or in part to carry out its obligations under this Contract, other than the
obligation of SAWS to make the payments required under this Contract with respect to any
payment obligation on Contract Revenue Bonds, then if such party shall give notice and full
particulars of such Force Majeure in writing to the other parties within a reasonable time after the
31
occurrence of the event or cause relied on, the obligation of the party giving such notice, so far as
it is affected by such Force Majeure, shall be suspended during the continuance of the inability
then claimed, but for no longer period, and any such party shall endeavor to remove or overcome
such inability with all reasonable dispatch. 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, or regulatory
restrictions by a groundwater district, any civil or military authority, insurrection, riots,
epidemics, landslides, lightning, earthquake, foes, hurricanes, tornados, 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 Corporation to deliver water for any reason, or on
account of any other causes not reasonably within the conhol of the party claiming such
inability.
Section 6.03. Modification. No change, amendment, or modification of this Contract
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 Contract.
Section 6.04. Addresses and Notice. Unless otherwise provided herein, 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 the 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, or by prepaid
telegram when appropriate, addressed to the party to be notified. Notice deposited in the mail in
the manner hereinabove described shall be conclusively deemed to be effective, unless otheitivise
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 the Corporation:
General Manager
SchertzJSeguin Local Government Corporation
P.O. Box 833/600 River Drive West
Seguin, Texas 78156-0833
If to the SAWS:
President/ChiefExecotive Officer
San Antonio Water System
P.O. Box 2449/2800 U.S. Hwy. 281 North
San Antonio, Texas 78298
If to the Cities:
32
City Manager
City of Schertz, Texas
1400 Schertz Parkway
Schertz, Texas 78154
City Manager
City of Seguin, Texas
210 East Gonzales
Seguin, Texas 78155
The Corporation, SAWS and the Cities 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.
Section 6 O5. State or Federal Laws, Rules, Orders, or ReQUlations. This Contract 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 ]aw, 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 Contract.
Section 6.06. Severability. The parties hereto specifically agree that in case any one or
more of the sections, subsections, provisions, clauses, or words of this Conh•act or the application
of such sections, subsections, provisions, clauses, or words to any situation or circumstance
should be, or should be held to be, for any reason, invalid or unconstitutional, under the laws or
constitutions of the State or the United States of America, or in contravention of any such laws or
constitutions, such invalidity, unconstitutionality, or contravention shall not affect any other
sections, subsections, provisions, clauses, or words of this Contract or the application of such
actions, subsections, provisions, clauses, or words to any other situation or circumstance, and it
is intended that this Contract shall be severable and shall be constmed and applied as if any such
invalid or unconstitutional section, subsection, provision, clause, or word had not been included
herein, and the rights and obligations of the parties hereto shall be construed and remain in force
accordingly.
Section 6.07. Waiver. Notwithstanding anything to the contrary contained in this
Contract, 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
33
waivers be deemed or construed to be a waiver of subsequent breaches or defaults of any kind,
character or description, under any circumstances.
Section 6.08. Venue. A]1 amounts due to the Corporation from SAWS under this
Contract, including, but not limited to, payments due under this Contract, shall be paid and be
due in Guadalupe County, Texas, which is the County in which the principal administrative
offices of the Corporation are located. All amounts due to SAWS from the Corporation under
this Contract, including, but not limited to, payments due under this Conhact, shall be paid and
be due in Bexar County, Texas, which is the County in which the principal administrative offices
of SAWS are located. It is specifically agreed among the parties to this Contract that in the event
that any legal proceeding is brought to enforce this Contract or any provision hereof, the same
shall be brought in Travis County, Texas.
Section 6 09 Succession and Assi~unent. This Contract is binding on and inures to the
benefit of the parties hereto and their respective successors, representatives, and assigns. This
Contract may not be assigned by any party hereto without prior written notice to and approval by
the other parties, which consent may be withheld without cause. The provisions of this Section
do not affect the assignment of the Corporation's rights under this Contract to the hustee bank for
the Contract Revenue Bonds.
Section 6.10. Entire Contract. This Contract constitutes the entire agreement among the
parties with respect to the matters described herein.
Section 611. Applicable Law. This Contract 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 orjurisdiction, except for applicable federal laws, rules, and regulations.
Section 6.12. Counterparts. This Contract 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.
Section 6 13 Officers and Agents. No officer or agent of the parties is authorized to
waive or modify any provision of the Contract. No modifications to or rescission of this
Contract may be made except by a written documents signed by the parties' authorized
representatives.
Section 6.14. Recitals. The parties agree that the recitals in this Contract are true and
conect and are incorporated into the terms of this Contract.
Section 6 15 Aonroval by Parties. Attached as Exhibit E are the official actions of
Schertz, Seguin and the Corporation evidencing approval of and consent to this Contract as
required by the terms of the Corporation/City Contracts.
Section 6.16. Condition Precedents. The Corporation's obligations under this Contract
are contingent upon approval of this Contract by the Corporation, Schertz, and Seguin.
34
Section 6.17. Goods and Services. The parties agree that the mutual commitments stated
in this Contract to provide water, emergency water service, water treatment services, and funding
for utility system improvements constitute an agreement by each party for providing goods and
services to the other parties, and that this Contract is subject to Chapter 271, Subchapter I, of the
Texas Local Government Code.
Section 6 18 No Third Party Beneficiary No Partnership. This Contract is not intended
to confer any rights, privileges or causes of action upon any third party other than the Cities, the
Corporation, and SAWS. The relationship of the parties under this Contract 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 contractor relationship. 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.
Section 6.19. Continuin>? Disclosure of Information.
Defmitions.
As used in this Section, the following terms have the meanings ascribed to such terms
below:
Rule means SEC Rule 15c2-12, as amended from time to time.
SEC means the United States Securities and Exchange Commission.
The Contract Revenue Bonds will likely be publically offered, and SAWS agrees to
comply with the continuing disclosure requirements set forth in the SEC Rule relating to the
Contract Revenue Bonds in the time, form, and manner set forth in the Corporation's resolution
as approved by SAWS authorizing the issuance of the Conhact Revenue Bonds.
IN WITNESS WHEREOF, the parties hereto acting under authority of their respective
governing bodies have caused this Contractoo be duly executed as of the Effective Date.
35
SCHERTZ/SEGUIN LOCAL GOVERNMENT
CORPO~R~A~T~ION G'
By: ti3~'Y ~~F~/!/~~
President, Board of Directors
/Atte~_ ~.
1~~~-,r-~-.'..
Secretary, Board of Dire tors
~..
pAULINE VILLAGRA
S '","' °`~%•• , State of Taxas
4 °'•~ ;~ _ Notary Public
1R My Commission Expires
~+ ~ August 20, 2012
,,_„~
Attesf: /// ~J/~
~iiAlnt~ l/,t.LL __
-z
A
r
City Secretary
Attest: ~~Q
~/1
City Secretary
SAN ANTO O/WATER YSTEM
By; llj~~
Robert R. Puente
President/CluefExecutfve Officer
CITY OF SCHERTZ, TEXAS
By:
City Manage
CITY OF SEGUIN, TEXAS
By: ~~~~ ~~'~~.
City anager
36
Exhibits:
Exhibit A - hnprovements Known as of the Effective Date and Estimated Costs (Section
1.04.A)
Exhibit B -Facility Site in Schertz (Section 1.04.C.2)
Exhibit C -Pump Station Site (Section 1.04.C.4)
Exhibit D -Agreements and Insurance (Section 1.06.C)
Exhibit E -Official Actions (Section 6.15)
37
EXHIBIT A
Improvements Known as of the Effective Date and Estimated Costs (Section
1.04.A)
Improvement Facility Estimated
Cost
Water Treatment Plant Expansion
$8,500,000
Water Treatment Plant High Service Pump Station Expansion
$1,400,000
Water Treatment Plant Chemical Feed Modifications/Expansions
$1,200,000
Mid-line Booster Pump Station Improvements/Expansion
$3,400,000
SCADA Expansion $220,000
SAWS Point of Delivery at Water Treatment Plant Expansion*
$90,000
Corporation Point of Delivery in Schertz* 120 000
TOTAL ESTIMATED COST FOR EXPANSION IMPROVEMENTS** $14,930,000
* Points of Delivery are on the Corporation's property
** Total cosi does not include cost of capitalized interest during construction
NOTE: The actual improvements will not be known until the preliminary
engineering report described in the Contract is completed and actual cost
of the improvements will not be known until bids from contractors are
received.
38
City of Schertz
Olher Owner
,may, o o.,ze o.zs os EXHIBIT B
,1' M'ie6 Facility Site in Schertz (Section 1.04.C.2) ~'
39
Exhibit "D"
Agreements and Insurance (Section 1.06.C)
1. Commercial Insurance Snecificatlons:
a. Commencing on the date of this Contract, the CONTRACTOR shall, at his own expense, purchase,
maintain and keep in force such lines of insurance coverage as will protect him and the
Schertz~Seguin Local Government Corporation ("the CORPORATION") and their employees and
agents from claims, which may arise out of or result from his operations under this Contract, whether
such operations are by himself, by any Sub-contractor, supplier or by anyone directly or indirectly
employed by any of them or by anyone for whose acts any of them may be liable, including, without
limitation, the following lines of insurance coverage:
1) Workers' Compensation (WC) insurance that will protect the CONTRACTOR and the
CORPORATION from claims under statutory Workers' Compensation laws, disability laws or
such other employee benefit laws and that will fulfill the requirements of the jurisdiction in
which the work is to be performed.
The minimum policy limits of liability for this line of insurance coverage shall be statutory
limits.
This line of insurance coverage shall be endorsed to provide a Waiver of Subrogation in favor
of the CORPORATION with respect to both this line of insurance coverage and the Employers'
Liability (EL) insurance (as specified immediately below in section 1.a.2)).
2) Employers' Liability (EL) insurance (Part 2 under a standard Workers' Compensation policy)
that will protect the CONTRACTOR and the CORPORATION for damages because of bodily
injury, sickness, disease of vendor's employees apart from that imposed by Workers'
Compensation laws.
This line of insurance coverage shall have minimum policy limits of liability of not less than:
$ 1,000,000.00 Bodily Injury by Accident
1,000,000.00 Bodily Injury byDisease -Bach Employee
1,000,000.00 Bodily Injury by Disease -Policy Limit
3) Commercial General Liability (CGL) insurance that will protect the CONTRACTOR and the
CORPORATION from claims for damages because of bodily injury, personal injury, sickness,
disease or death and insurance that will protect the CONTRACTOR and the CORPORATION
from claims for damages to or destruction of tangible property of others, including loss of use
thereof.
40
This line of insurance coverage shall:
Cover independent contractors;
• Not include any exclusions relating to blasting, explosion, collapse of buildings or damage to
underground property;
Afford coverage for Products Liability and/or Completed Operations and, Contractual
Liability.
The minimum policy limits of liability for this line of insurance coverage shall be:
$ 1,000,000.00 Occurrence Limit
2,000,000.00 General Aggregate
2,000,000.00 Products/Completed Operations Aggregate
1,000,000.00 Personal and Advertising Injury
1,000,000.00 Contractual Liability
This line of insurance coverage shall be endorsed:
• Naming the CORPORATION as an Additioual Insured; and
To provide a Waiver of Subrogation in favor of the CORPORATION.
Commer•cial/Business Automobile Liability (AL) insurance that will protect the CONTRACTOR
and the CORPORATION from claims for damages arising out of the maintenance, operation, or
use of any owned, non-owned or hired vehicles.
Minimum policy limits of liability for this line of insurance coverage for bodily injury and
property damage combined shall be not less than $1,000,000.00 per each occurrence,
This line of insurance coverage shall be endorsed:
• Naming the CORPORATION as an Additioual Insured; and
• To provide a Waiver of Subrogation in favor of the CORPORATION.
5) Excess/Umbrella Liability (UL) insurance in the amount of $2,000,000.00. This policy shall be
of an "Occurrence" type and the limit of liability shall be concurrent with (following form) and
in excess of the EL, CGL, and AL lines of insurance coverage as described iu paragraphs 1.a.2);
1.a.3), and 1.a.4) listed above.
41
NOTE -For the ExcesslUmbrella Liability policy, describe in the Description of Operations
section of the Certificate of Liability Insurance ("Certificate"), the coverage form under which
this line ofcoverage iswritten -either:
• Umbrella form; or
• Other Than Umbrella form.
6) Contractor's Pollution Liability Insurance with limits of $2,000,000 per
claimloccurrence!$2,000,000 in the aggregate.
The policy shall provide either a "claims made" or• an occurrence based coverage for all claims,
liabilities, damages, costs, fees, and expenses of any kind or character arising out of any
Pollution Condition(s) (as defined below) that is in any way related to CONTRACTOR'S
operations, actions or inactions, and completed operations associated with any work performed
by CONTRACTOR, its subcontractors, or any of their respective employees, agents,
representatives, or officers under this Contract.
If the Policy is "claims made" based, coverage must be maintained for a minimum of twenty-
four (24) months after the date that a Certificate of Completion is issued, or if the Contract is
terminated for any reason, for a minimum of twenty-four (24) months following the date of
termination.
The "claims made" policy retroactive date will be no later than the Contract date or the project
commencement date, whichever is earliest.
Pollution Condition(s) means the discharge, dispersal, release or escape of any solid, liquid,
gaseous or thermal irritant or contaminant, including, but not limited to, smoke, sewage, vapors,
soot, fumes, acids, alkalis, toxic chemicals, medical waste and waste materials into or upon land,
the atmosphere or any watercourse or body of water, including groundwater, provided such
conditions are not naturally present in the environment in the amounts or concentrations
discovered.
The Contractor's Pollution Liability Insurance will pay on behalf of the CONTRACTOR and
the CORPORATION all claims, demands, damages, liabilities, costs, fees, and expenses of any
kind or character for bodily injury or death, property damage, environmental or natural resource
damage, and any fines, fees, assessments or penalties of any kind assessed by any governmental
department, agency or commission that result from or are related to a Pollution Condition(s).
Coverage will include all subcontractors hired by CONTRACTOR to perform any work on the
Project or under this Contract.
The policy shall also include the following provisions:
a) Coverage for bodily injury to include physical injury, sickness, disease, mental anguish acrd
emotional distress sustained by any person, including death;
42
b) All costs that are related to or that arise out of or from the investigation or adjustment of any
claim or in connection with any court, arbitration, mediation, state administrative hearing, or
other proceeding of any kind, including attorneys fees, expert witness fees, costs, charges and
expenses of any kind or character, that arise out of or that are related to a Pollution
Condition(s);
c) Coverage shall be Primary and in addition to any other valid and collectible insurance carried
by the CORPORATION and the City of San Antonio as respects to this Contract;
d) Coverage for Natural Resource Damages and any fines, fees penalties or assessments by any
governmental agency, commission or department related to any Pollution Condition(s);
e) Insured versus Insured exclusion, if found in the policy, shall not apply to a claim by an
Insured who qualifies as a Client of the Named Insured under the policy;
f) If Non-Owned Disposal sites are used for disposal of wastes, these sites shall be specifically
included under the Contractors Pollution Liability Insurance policy; and
g) Coverage for punitive, exemplary, and multiple damages.
CommercialBusiness Automobile Liability policy of CONTRACTOR hauling excavated spoil
shall either be endorsed to provide coverage under the CA9948 endorsement or the
Contractor's Pollution Liability Insurance policy shall be endorsed to provide transportation
coverage beyond the boundaries of the job site.
NOTE -For the Contractor's Pollution Liability, declare on the Certificate of Liability
Insurance ("Certificate") the coverage form under which this line of insurance is written -
either:
a) Claims-made form - if the coverage form declared on the Certificate is the Claims-made
form, also include on the Certificate the "Retra-date" when this line of coverage was first
written or started; or
b) Occurrence basis - no additional wording required.
b. CONTRACTOR shall require all Sub-contractors to carry lines of insurance coverage appropriate to
their scope of Work.
c. CONTRACTOR agrees that with respect to the above required lines of insurance, all insurance
policies are to contain or be endorsed to the extent, not inconsistent with the requirements of the
issuing insurance carrier, to provide for an endorsement that the "other insurance" clause shall not
apply where the CORPORATION is an Additional Insured shown on the policy if such endorserent
is permitted by law and regulations.
43
d. CONTRACTOR shall, upon request of the CORPORATION, provide copies of all insurance
policies and endorsements required under Contract.
e. CONTRACTOR is responsible for the deductibles under all lines of insurance coverage required by
these Specifications.
The stated policy limits of each line of insurance coverage required by these Specifications are
MINIMUM ONLY and it shall be the CONTRACTOR's responsibility to determine what policy
limits az~e adequate and the length of time each line of insurance coverage shall be maintained;
insurance policy limits are not a limit of the CONTRACTOR'S liability.
g. These minimum limits of insurance coverage maybe either basic policy limits of the WC/ EL, CGL
and AL or any combination of basic limits or umbrella limits.
h. The CORPORATION'S acceptance of Certificate(s) of Liability Insurance that in any respect, do not
comply with these Specifications does not release the CONTRACTOR from compliance herewith.
i. Within five (5) calendar days of a suspension, cancellation or non-renewal of coverage, the
CONTRACTOR shall provide a replacement Certificate of Liability Insurance and applicable
endorsements to the CORPORATION. The CORPORATION shall have the option to suspend the
CONTRACTOR'S performance should there be a lapse in coverage at any time during this Contract.
j. Failure to provide and to maintain the required lines of insurance coverage shall constitute a material
breach of this contract.
k. In addition to any other remedies the CORPORATION may have upon the CONTRACTOR'S failure
to provide and maintain any insurance or policy endorsements to the extent and within the time
herein required, the CORPORATION shall have the right to order the CONTRACTOR to stop
performing services hereunder and/or withhold any payment(s) which become due to the
CONTRACTOR hereunder until the CONTRACTOR demonstrates compliance with the
specifications lrereof.
Nothing herein contained shall be construed as limiting in any way the extent to which the
CONTRACTOR may be held responsible for payments of damages to persons or property resulting
from the CONTRACTOR 's or its Sub-contractor's performance of the services covered under this
Contract.
m. It is agreed that the CONTRACTOR'S insurance shall be deemed primary and non-contributory with
respect to any insurance or self insurance carried by the CORPORATION, the City and their
employees and agents for liability arising out of operations under this Contract.
n. CONTRACTOR agrees that all lines of insurance coverage required by these Specifications shall be
with insurance companies, firms or entities that have an A.M. Best rating of "A- ("A"- minus)" and
a Phrancial Size Category of a "VII" or better. All lines of insurance coverage shall be of an
"Occurrence" type except for the Contractor's Pollution Liability line of insurance coverage.
44
The CORPORATION will accept worker's compensation coverage written by the Texas Workers
Compensation Insurance Fund.
o. The CORPORATION reserves the right to review the above stated insurance specifications during
the effective period of this Contract and any extension or renewal hereof and to request modiftcation
of lines of insurance coverage and their respective liability limits when deemed necessary and
prudent by the CORPORATION based upon changes in statutory law, court decisions, or
circumstances surrounding this Contract.
In no instance will the CORPORATION allow modification whereupon the CORPORATION may
incur increased risk exposure.
2. Certificate(s) of Liabili Insurance ("Certificate") Requirements
Prior to the commencement of any work under this Contract and once notified by the CORPORATION
that your Company has been selected as the apparent, lowest responsive Bidder, pending Board final
approval, and you will be requested to submit your Company's Certificate(s) of Liability Insurance, that
Certificate(s) must meet all of the following requirements:
a. The CONTRACTOR shall have completed by its insurance agent(s), a Certificate(s) providing
evidence of the lines of insurance coverage pursuant to Section l.a.l) through 1.a.6) listed above.
b. The original Certificate(s) or form must include the agent's original signature, including the signer's
company affiliation, mailing address, Office and FAX phone numbers, email address, and contact
person's name; and, be mailed, with copies of all applicable endorsements, directly from the
insurer's authorized representative in strictly compliance with sections 2.g. (Certificate Holder) and
2.h. (Distribution of Completed Certificates) below.
c. The CORPORATION will not accept Mernorandum of Insurance or Binders as proof of insurance.
d. The CORPORATION shall have no duty to pay or perform under this Agreement until such
certificate(s) and endorsements have been received, reviewed and deemed 100% compliant with the
CORPORATION's Bid document Insurance Specifications by the CORPORATION. No one other
than the CORPORATION shall have authority to waive any part of this requirement.
e. The CORPORATION Bid number(s) and the Bid name shall be included in the Description of
Operations section located in the bottom half of the standard ACORD Certificate of Liability
Insurance forms.
f. Certificate Holder -The CORPORATION shall be shown as the Certificate Holder in the
Certificate Holder section located in the bottom half of the standard ACORD Certificate of Liability
Insurance forms styled in the following manner:
45
The Corporation
P.O. Box 833/600 River Drive West
Seguin, Texas 78156-0833
g. Distribution of Completed Certificates -Completed Certificate(s) of Liability Insurance shall be
distributed by the CONTRACTOR within 5 days after receipt of written confirmation of being
notified as the lowest, responsive Bidder pending final CORPORATION approval, as follows:
1) Send Original to:
The Corporation
P.O. Box 833/600 River Drive West
Seguin, Texas 78156-0833
2) Send Copy by mail to:
San Antonio Water System
Attention: Project Engineer- Water Supply Projects
P.O. Box 2449
San Antonio, TX 78298-2449
h. CONTRACTOR shall be responsible for obtaining Certificates of Liability Insurance fiom the first
tier Sub-conhactor, and upon request furnish copies to the CORPORATION.
3. SURVIVAL
Any and all representations, conditions and warranties made by CONTRACTOR under this Contract
including, without limitation, the provisions of Section 1.a.2), 1.a.3) and 1.a.4) of these Insurance
Specifications are of the essence of this Contract and shall survive the execution and delivery of it, and
all statements contained in any document required by the CORPORATION whether delivered at the
time of the execution, or at a later date, shall constitute representations and warranties hereunder.
4. PERFORMANCE BOND
a. Definition: The security furnished by the Contractor through the Surety in the full amount of the
Contract Sum as a guaranty that the Work will be faithfully performed and completed and that the
46
Owner will be saved harmless from all costs and damages which the Owner may suffer by reason of
the Contractor's default or failure to perform the Work. If the contract amount does not exceed
$25,000, a Performance Bond is not required.
b. CONTRACTOR shall furnish Performance Bond in favor of CORPORATION in an amount equal
to 100% of the total construction cost under this Contract. Total construction costs are defined as the
entire cost of materials and their installation, and include, but are not limited to, the cost of labor,
equiprnent, supplies, materials and additional construction costs. The Performance Bond shall: (1)
guarantee the completion of the entire construction herein identified in conformity with the Plans
and Specification approved by CORPORATION, and (2) guarantee the work against defects in
workmanship and materials for a period of twenty four (24) months after acceptance of the work by
the CORPORATION. The bond shall have corporate Sureties that are licensed to conduct business
in Texas. The contractor agrees that the following shall apply to bonds provided by a surety:
If any bond is in an amount in excess of 10 percent of the surety company's capital
and surplus, the CORPORATION shall require, as a condition to accepting the bond,
written certification that the surety company has reinsured the portion of the risk that
exceeds 10 percent of the surety company's capital and surplus with one or more
reinsurers who are duly authorized, accredited, or trusted to do business in this state.
The amount reinsured by any reinsurer may not exceed 10 percent of the reinsurer's
capital and surplus.
If the amount of the bond exceeds $100,000, the surety must also:
(1) hold a certificate of authority fiom the United States secretary of the treasury to
qualify as a surety on obligations permitted or required under federal law; or
(2) have obtained reinsurance for any liability in excess of $100,000 from a
reinsurer that is authorized and admitted as a reinsurer in this state and is the
holder of a certificate of authority from the United States secretary of the
treasury to qualify as a surety or reinsurer on obligations permitted or required
under federal law.
c. If the surety on any bond furnished by the CONTRACTOR to the CORPORATION is
declared bankrupt or becomes insolvent, or has its right to do business revoked in the State
of Texas, then the CONTRACTOR will have ten 10 days to substitute another bond and
surety therefore which shall be acceptable to SAWS and which shall be at the expense of
the CONTRACTOR.
47
CERTIFICATE OF SECRETARY
THE STATE OF TEXAS
COUNTY OF GUADALUPE
I, the undersigned, Secretary for the Schertz/Seguin Local Government Corporation (the
"Corporation") do hereby certify as follows:
1. That on the 13~h day of January 2011, a regular meeting of the Board of Directors
was held at its regular meeting place in Schertz, Texas; the duly constituted members of
the board of directors being as follows:
Ken Greenwald, President Robin Dwyer, Vice President
Patricia Ramirez, Secretary Andrew Koenig, Treasurer
Jim Wolverton, Director Hon. Betty Ann Matthies, Ex-Officio
Hon. Hal Baldwin, Ex-Officio
and all ~~id persons were present at said meeting, except
Among other business considered at said meeting, the following motion was made
"Move to approve a written contract captioned "MUTUAL REGIONAL WATER SUPPLY
CONTRACT" among the Schertz/Seguin Local Government Corporation, the City of
Schertz, Texas, the City of Seguin, Texas, and the City of San Antonio, Texas, ahome-
rule city, acting by and through its San Antonio Water System and to authorize the officers
to sign the contract on behalf of the Schertz/Seguin Local Government Corporation."
and submitted to the Board of Directors for passage and adoption. After presentations by
the General Manager, the General Counsel, the Project Manager, the Corporation's
consulting engineer, and other financial and technical consultants of the Corporation, and
with the advice and consent of the city managers of the cities of Schertz and Seguin, and
due deliberation of the motion by the board of directors, the motion was duly passed and
adopted by the board of directors by the following vote:
voted "For' Q voted "Against" _ abstained
all as shown in the official Minutes of the Board of Directors for the meeting held on the
aforesaid date.
2. The duly qualified and acting members of the Board of Directors on the date of the
aforesaid meeting are those persons shown above and, according to the records of my
office, advance notice of the time, place and purpose of said meeting was given to each
member of the board of directors; and that said meeting, and deliberation of the aforesaid
public business, was open to the public and written notice of said meeting, including the
subject of the motion, was posted and given in advance thereof in compliance with the
provisions of Chapter 551 of the Texas Government Code.
Page 1 of 2
IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal
of said Schertz/Seguin Local Government Corporation, this 13T" day of January, 2011.
[Seal] Patricia Ramirez, P. .,
Secretary
THE STATE OF TEXAS §
COUNTY OF GUADALUPE §
This instrument was acknowledged before me on the 13T" day of January, 2011 by
Patricia Ramirez, P.E., Secretary of Schertz/Seguin Local Government Corporation, a
Texas public, non-profit Corporation, on behalf of said corporation.
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Page 2 of 2
CERTIFICATE OF CITY SECRETARY
THE STATE OF TEXAS
COUNTY OF GUADALUPE
CITY OF SEGUIN
THE UNDERSIGNED HEREBY CERTIFIES that:
1. On the 18th day of January, 2011, the City Council (the Council of the City of Seguin,
Texas (the City) convened in regular session at its regular meeting place at the City Hall (the Meeting),
the duly constituted members of the Council being as follows:
Betty Ann Matthies
Bob Pees
Manuel E. Cevallos
Maty Louise Gonzales
Nick Carrillo
Tomas V. Castellon Jr.
Carlos Medrano
Don Kei I
Stephen Tschoepe
Mayor
Mayor Pro Tem
Councilmember
Councilmember
Councilmember
Councilmember
Councilmember
Councilmember
Councilmember
and all of such persons were present at the Meeting, except the following: n/a ,thus
constituting a quorum. Among other business considered at the Meeting, the attached resolution
(the Resolution) entitled:
A RESOLUTION APPROVING A CONTRACT WITH
THE SAN ANTONIO WATER SYSTEM BY THE
SCHERTZ-SEGUIN LOCAL GOVERNMENT
CORPORATION, THE CITY OF SEGUIN, AND THE
CITY OF SCHERTZ
was introduced and submitted to the Council for passage and adoption. After presentation and discussion
of the Resolution, a motion was made by Councilmember Don Keil that the Resolution be finally passed
and adopted. The motion was seconded by Councilmember Nick Carrillo and carried by the following
vote:
8 voted "For" 0 voted "Against" 0 abstained
all as shown in the official Minutes of the Council for the Meeting.
2. The attached Resolution is a true and correct copy of the original on file in the official
records of the Council; the duly qualified and acting members of the Council on the date of the Meeting
are those persons shown above, and, according to the records of my office, each member of the Council
was given actual notice of the time, place, and purpose of the Meeting and had actual notice that the
Resolution would be considered; and the Meeting and deliberation of the aforesaid public business,
Error! Unknown document property name.
including the subject of the Resolution, was posted and given in advance thereof in compliance with the
provisions of Chapter 551, as amended, Texas Government Code.
IN WITNESS WHEREOF, I have signed my name officially and affixed the seal of the City
Council, this 18th day of January, 2011.
~~Tl~tlG~cL alia Patlan Stautzenberger --'~
City Secretary
City of Seguin, Texas
(SEAL)
Error! Unknmvn document property nnme. 2
-~ CITY OF SEGUIN
RESOLUTION NO.11R-07
STATE OF TEXAS
A RESOLUTION APPROVING A CONTRACT WITH
THE SAN ANTONIO WATER SYSTEM BY THE
SCHERTZ-SEGUIN LOCAL GOVERNMENT
CORPORATION, THE CITY OF SEGUIN, AND THE
CITY OF SCHERTZ
WHEREAS, the City Council authorized, in conjunction with the City of Schertz, the creation of
the Schertz/Seguin Local Government Corporation (the "SSLGC"), a public non-profit corporation,
to act on behalf of the two cities to develop a supplemental water supply for the two cities from the
Carrizo formation; and
WHEREAS, the City Council reserved the right to approve all water supply contracts by the
SSLGC and the SSLGC has asked the City Council to approve a water supply contract with the San
Antonio Water System by the SSLGC, the City of Seguin and the City of Schertz; and
WHEREAS, the City Council finds that the terms and conditions of the contract are in the best
interest of the City of Seguin.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Seguin, Texas, as
follows:
SECTION 1. The water supply contract with the San Antonio Water System bythe Schertz/Seguin
Local Government Corporation, the City of Seguin, and the City of Schertz is approved. The
contract is attached to this resolution.
SECTION 2. The City Manager is hereby authorized to execute the contract and any and all legal
documents necessary to fulfill the purpose and intent of this Resolution.
SECTION 3. This Resolution shall be effective immediately upon the passage hereof.
PASSED AND APPROVED THIS 18th DAY OF JANUARY A.D. 2011.
- ,
Betty n Matthies
Mayor
ATTEST:
1~_>~~~
Thalia Patlan Stautzenberger, City Secre
1-18-2011 11R-07
CERTIFICATE OF CITY SECRETARY
THE UNDERSIGNED HEREBY CERTIFIES that:
1. On the 18th day of January, 2011, the City Council (tlte "Council") of the City of
Schertz, Texas (the "City") convened in regular session in the regular meeting place of the City at the
City Hall (the "Meeting"), the duly constihrted members of the Council behtg as follows:
Harold D. Baldwin Mayor
Michael Carpenter Mayor Pro Tem
David Scagliola Couucihnember
GeorgeAntuua Couucihnember
Cedric Edwards Sr. Couucihnember
Jim Fowler Couucihnember
/
!
,thus
and all of such persons were present at the Meeting, except the following:
r business considered at the Meeting, the attached Resolution (the
th
e
constitutbtg a quorum. Among o
"Resolutiou") entitled:
A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS
AUTHORIZING A MUTUAL REGIONAL WATER SUPPLY CONTRACT, AND
OTHERMATTERS IN CONNECTION THEREWITH
was introduced and submitted to the Council for passage and a opti n. After pres tl at tthe Resolutiontbe
of the Resolution, a motion was made by Councilmembe
finally passed and ado~rted in accordance with the Ciry's Home Rule Charter. The motion was seconded
by Councilmember ~''~ nT~ `~ °- and carried by thefollowingvote:
,~ voted "For" (voted "Agahist" ~ abstained
all as shown iu the official Minutes of fhe Council for the Meeting.
2. The attached Resolution is a true and correct copy of the a•iginal on file in the official
records of the City; the duly qualified and acting members of the Council on the date of the Meeting are
those persons shown above, and, according to the records of my office, each member of the Council was
given achial notice of the thee, place, and purpose of the Meeting and had achial notice that fhe
Resolution would be considered; and the Meeting and deliberation of the aforesaid public business,
including the subject of the Resolution, was posted and given in advance thereof iu compliance with the
provisions of Chapter 551, as amended, Texas Government Code.
[N WITNESS WHEREOF, I have signed my came officially and affixed the seal of the City, this
l 8th day of January, 2011.
~'; City Secretary
` ;~: ;[t:
~,-`, ~ i
. ~ti ~ i ~ ,
;,, .,_
' -_
:,.(CITY SEAL)
`Y
~~~-:_ ~
~l~l, !f`it~~
„' ;~~`
RESOLUTION NO. 11-R-02
A RESOLUTION BY THE CITY COUNCIL OF THE CITY OR
SUPPLY ZCONTRAS CTI, AND OTHER MATTE R INI CONN);CTION
THEREWITH
WI~EREAS, the City staff of the City o£ Schertz (the "City") has recommended that the
City enter into a Mutual Regional Water Supply Contract (the "Contract") with the City of
Seguin, the Schertz Seguin Local Government Corporation (the "SSLGC"), and the San Antonio
Water System ("SAWS") relating to the sale of surplus SSLGC water and the construction of
facilities and installation of equipment necessary for water treatment and transport; and
WHEREAS, the City Council has determined that it is in the best interest of the City to
contract with Seguin, the SSLGC, and SAWS pursuant to the Contract attached hereto as
Exhibit A,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS
THAT:
Section 1. The City Council hereby authorizes the City Manager to execute and
deliver the Contract with Seguin, the SSLGC, and SAWS in substantially the for73r set forth on
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 constnted and enforced in accordance with the
laws of the State of Texas and the United States of America.
Section S. 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 lime, place, and subject
matter of the public business to be considered at such meeting, including this Resolution, was
given, al] as required by Chapter SSI, Texas Govermnent Code, as amended.
5038L1IA.I
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 18°i clay of January, 20//11.
CITY OF S HER, TEXAS /
~.~~ / . ,
l~ )Tc-/-G•vv~-
ATTEST:
' >;
_ ~ ~f~R nnt~ ('7~ ~ Pt\ YC~ I\
-/` C,itySecretary.
(CITY SEAL)
,,,,.
50781114.1
EXHIBIT A
MUTUAL REGIONAL WATER SUPPLY CONTRACT
so3s>> w.i A-1
S~~ ~'
r o c n r o o v r n s F+ r u r c n n r n n n i r n rr
RATE STUDY AND
LONG-TERM FINANCIAL FORECAST
UPDATE
December 2010
Prepared by:
' ,~
Pm•tlaud -Dallas
Dallas ONice Address:
5500 Democracy Drive, Sle. 130
Plano, Texas 75024
(972)378-6588
(972) 378-6g88 (ax
www.economisls.com
Project Manager: Dan V. Jackson
.~
Schertz~Seguin Local Government Corporation 2010 Rale Slutly -UPDATE -Dec 27 2010
During the course of this rate study, several SSLGC employees expended considerable lime and e(lorl in
assisting the project learn. These employees include the Board of Directors, Executive Committee, Mr. Alan
Cockerell, Ms. Georgia Hanks, Mr. Crockett Camp, Mr. John Winkler, and Mr. Patrick Lindner of Davison and
Troilo. The project team owes a debt of gratitude to the hard work, dedication and professionalism of These
individuals, without whom This project would not have been successfully completed.
The project team has relied upon the extensive data supplied by SSLGC. Tlius, the integrity of the study is
largely dependent upon the accuracy of This financial and volumetric data. Every effort has been made by the
project team to validate and confirm the information contained herein prior to the preparation of the final study
documents. This report presents no assurance or guarantee that the (orecasl contained herein will be
consistent with actual results or performances.
These represent forecasts based on a series of assumptions about future behavior, and are not guarantees.
Predominant among these is the assumption Thal weather patterns will he normal in each year of the next
decade. Significant deviations in weather palters from the norm may result the need for signilicanl revisions in
this forecast. Any changes in other assumptions or actual events may also result insignificant revisions to lfle
forecast and its conclusions.
The cash flow projections and debt service coverage calculations are not intended to present overall financial
positions, results of operations, andlor cash (lows (or the periods indicated, in conformity with guidelines (or
presentation of a (orecasl established by Ilse American Institute o(Cerli(ied Public Accountants.
Page: 2
Schedz•Seguln Local Government Corporation 2010 Rale Study- UPDATE -Dec 27 2010
Background
In April 2010 the Scllertz•Seguin Local Government Corporation ("SSLGC") engaged Economists.com to
conduct a comprehensive water tale study and long•lerm financial plan. SSLGC identified numerous objectives
for this study, including but not limited to the following:
• A comprehensive analysis and evaluation of 111e syslells current and forecast cost of service and
revenue requirements
• An estimate o(currenl and forecast wafer production and sales for each identified customer
• A thorough review of the system's known capital improvement needs, as well as a determination of the
need for funding capital requirements through the issuance of long-term debt
• A review of the adequacy and appropriateness of existing monlllly rates for each customer
• An analysis of a scenario whereby San Antonio Water System ("SAWS") becomes the largest customer
of SSLGC, and the impact of this scenario both on the overall cost of service and file monthly rates (or
each customer
Tt1e project team completed a final draft of Ihis study in July 2010 and presented it to SSLGC's Board of
Directors. Subsequent to July 2010, SSLGC and SAWS engaged in further negotiations for SAWS to purchase
treated water Irom SSLGC. The parties agreed to a series of changes in the original assumptions for
developing the cost of service under file SAWS scenario. This update outlines those changes and presents a
revised set of assumptions and cost forecast under bolls scenarios.
Customer Base and Prior Rates
Table ES•1 presents tales in place as of July 2010 for each of SSLGC's identified customers.
TABLE ES•1
SCHERTZ-SEGUIN LOCAL GOVERNMENT CORPORATION
JULY 2010 WATER RATES --PER 1,000 GALLONS
Scheriz Seguin Universal Cily Selma
Springs Hill
Debt Service 5 UAP.. $ n.UU S 1.05
~
08M 0.72 0.72 U.7J 0.72 /'[
U.
water Leese UA7 U A7 O.A7 O.T/ 0.47
Repair and Replacement 0.14 0.14 0.14 0.14 0.14
Future DOVelopmenl O.I4 O.IA U.14 U.IA 0.1A
Transporlalion O.UU 0.70
Clues Dlsldhullon (l.lfi O.IIi 0.10
Total r 2.46 I' 2.46 I" 2.01 P Y.Ot 1' Y.6a
Total Excluding Dehl Service 1.47 1.47 ~` 2.01 /- 2.01 i.G3
Page: 3
Schenz•Seguln Local Government Corporation 2010 Rale Stucly -UPDATE -Dec 27 2010
Cost of Service •• Methodology
The calculation of a revenue requirement differs from a utility's budget in Ihat it represents only that amount that
inusl be raised through SSLGC's user rates. This means that non-rate revenue (such as impact fees and
interest) must be subtracted from the budgeted operating and capital expenditures to determine the net revenue
requirement lobe raised from rates.
The project team recommends lital SSLGC's system revenue requirements be developed using fire American
Water Works Association's Cash Basis of ralemaking. Under the cash basis, as defined by llte AWWA Manual
M-1, system revenue requirements consist o(cash expendiktres and other financial commitments (such as debt
service coverage or reserves) Ihal must be ntel Ihrough system operating revenues and outer revenue sources.
The cash basis is employed by thousands of publicly owned water and wastewater utilities throughout the United
Stales.
The following specific items are included in SSLGC's revenue requirements raised from rates:
0&M expenses
Capital Outlays Funded /rorn Rates
Debt service --Current
Debt Service -Forecast
Debt Service Coverage
Importantly, under the Cash Basis of raletnaking, SSLGC is allowed to recover capital outlays and debt principal
payments. These are cash payments Thal are typically not included on an income statement. In addition,
SSLGC's rates are designed under this cash basis to achieve a debt service coverage ratio of 1.25 or greater,
as this is a typical benchmark used by lenders and bond advisors to determine the financial Itealllt of a utility
borrower. Finally, depreciation is excluded front consideration under the Casft Basis, as if is replaced by debt
principal, capital outlays and debt coverage.
Rate Design Scenario 1- "Status Quo"
As described in detail in Section I of this rate study and long-term financial forecast, the project team has
examined two cost of service and rate scenarios for SSLGC. The first is Ilse "Status Quo' scenario, as it
assumes (here are tto significant new customers or volumes to SSLGC's system in Ilte next decade.
In forecasting syslent growllt over the next decade, the projec( team faclorecl in the significant economic
downturn that has affected Texas and the rest of the country. The economic downturn has resulted in less
growlit and lower consumed volumes for residential and commercial customers in many cities throughout the
stale.
~~ Page: 5
Schortz•Seguln Local Government Corporation 2810 Rale Slutly -UPDATE -Dec 27 2010
Tlie (able presents the projects by line item and by phase, as idenlilied by SSLGC staff. All projects in Phase 1
are assumed to have been lulidetl by SSLGC's FY 2010 bond issue. Because SAWS is not a cuslolner of
SSLGC under this scenario, Phases 2 and 4 are assumed to not be funded. The projects in Phase 3 are to be
funded with future debt issues.
TABLE ES•6
LOCAL GOVERNMENT CORPORATION
Funded(
Unlunded
Conslrucllon Wells 9-12 Gonzalez County S 10,900,000 Funded
4VI'P1 Access Rd. 676,200 Funded
GVEC Power 300,000 Funded
2 MGD Tank WrP 1 1,800,000 Funded
5 MG Tank BPS 2,700,000 Funded
Surge Tank 1,200,000 Funded
SCADA Expansion 800,000 Funded
SCADAImprovements - Unfunded
Adminislralivo Building - Unfunded
Booster Pump Slalion Imp - Unfunded
NRPt Expansion - Unlunded
Conslrucllon Vt?P2 Guadelupe Co. 12,000,000 Unlunded
Construction 8 Wells Guadelupe Co. 9,400,000 Unfunded
GVEC Power 000,000 Unfunded
2-2 MG Tanks WrP2 3,500,000 Unlunded
6 Wells - Unfunded
2 MG Tank - Unlundod
Pump Slalion - Unlunded
Pipeline - Unlunded
Power - Unlunded
Tole( Capital hnprovement Plan
44,156,200
Table ES•7 presents the forecast revenues Irom each customer under this proposed rate plan. Table ES•8
swnmarizes the financial plan and forecast revenues and cost of service for the ten-year period FY 2011 - FY
2020. Details behind these calculations can be found in Ilse rate model presented in Appendix A of this report.
Page: 7
SchortrSeguin Local Govornmont Cog7ora11on 2010 Rale Study -UPDATE -Dec 27 2010
TABLE ES•S
SCNERT2•SEGUIN LOCAL GOVERNMENT CORPORATION
Scon: t ~~ Slalus Ouo Dac 2070 Uptlalo
Foreaaet Revenues from Weler Rate Recommende0one
1" 2009 FY fY FV PY FY
Acwel 2077 2072 2013 2014 2016
ScheUz
Forecast Volume
I.d58,5B7,000
1.305,178,815
1.408,193,059
1,41],241,301
1,428,3[11 548
I,A30,200.48]
Forecast Ravanue 5 ?51?115 S 3,646,152 $ 3.]31,940 $ 4,060.387 5 4,164,529 5 5,16],124
Seguln
Foreeesl VOlama
1,504.844000
7,274.007,100
1,302,607,060
1,371.762,061
1,359,873.730
1,38],004,550
ForecE4l ROVenue S 163E 750 5 3.468.214 5 3.674,493 5 3,910.BOD $ 4.040,009 S 5,061,077
Unlvereal Clly
Forecast Volume
5.725,000
20,428.000
20,470,070
20,530,288
20,601.593
20.633,047
Forewsl Revanua S 10,¢77 S 41,080 S 42,382 5 d],220 5 48,984 5 52.408
Seinle
Forecast Volume
82,]52,000
fi4,621,000
84.782.557
64,944,500
85,106,870
65,269.677
Forawsl Revenue 5 125.467 5 129,888 5 134,100 5 740.372 5 159,854 5 105,]85
$p11095 VIII
Folerasl Volume
84,04],000
182,500000
7B?500,000
182.500,000
181,50],000
182,500,000
Fgecasl Revenue S 489.IOn 5 487.475 S 508,425 5 550.400 S 665,OOD 5 694,20D
SAWS
0
0
0
0
0
0
Forerasl VOloma
FOrewsl Revenue $ - S O 5 0 $ 0 $ 0 5 0
Total
Forecast Voume
3.116,351.000
2,976,780,915
2,916,55B,55D
3.018,705.041
3p58.18J,i41
3,095,497,106
Customer Revenue 5 7,835,517 S 7,782,789 $ 7.991.358 $ 8,117.9]9 5 B,B14,A66 5 11,Od6,594
NomRala ftevenua G68,•IGI 681.523 108.149 128,393 151,215 777,813
Total Revenu0 5 8,617,878 $ 8,470,712 S 8,689,607 5 8,447,372 S 8,126,141 $ 17,810,407
Rate Design Scenario 2 - "SAWS"
The second scenario is the "SAWS" scenario, as it assumes Ihal beginning in October 2012 SAWS purchases
water Irom SSLGC. As a consequence, SSLGC will Piave to complete Please II capital improvements and will
experience significant increases in other operating costs.
Table ES•9 presents fhe project team's forecast of total consumption for each customer (or the period FY 2011-
FY 2020. Details behind the assumptions used in 111is forecast can be found in Section 3.
r Page: 9
Sched2•Seguln Local fiovemmonl Corporation 2010 Rale Study- UPDATE -Dec 27 2010
This project and Ille accompanying debt service is used and useful to SAWS. In Ille meantime, al lllis lime debt
service for Pllase 3 is assigned 50°/a to Sclleriz and 50% to Seguin. Finally, under this scenario Phase 4 is
assumed to not be funded.
TABLE ES•11
SCHERTZ•SEGUIN LOCAL GOVERNMENT CORPORATION
-s
SCENARIO: SAW Contract •- Dec 2010 Update
Fundetll
Phase Proloct Total UnluntleU
1 Construction Wells 9.12 Gonzalez County $ 10,000,000 Funded
1 WTP7 Access Rd. G76,200 Funded
1 GVEC Power 300,000 Funded
1 2 MGD Tank WrP 1 1,800,000 Funded
1 5 MG Tank BPS 2,700,000 Funded
1 Surge Tank 1,200,000 Funded
1 SCADA Expansion 880,000 Funded
2 SCADAImprovements 260,000 Unfunded
2 Administrative Building 650,000 Unfunded
2 Booster Pump Slalion Imp 1,700,000 Unfunded
2 VJrPt Expansion 12,000,000 Unlundatl
0 Conslrriclion V/rP2 Guadelupe Co. 72,000,000 Unluntled
3 Construction 8 Wells Guadelupe Co. 9,400,000 Unfunded
3 GVEC Power 800,000 Unfunded
3 2-2 MG Tanks VJlP2 3,500,000 Unfunded
4 8 Wells - Unfunded
4 2 MG Tank - Unfunded
4 Pump Slalion - Unfunded
4 Pipeline ~ Unlundetl
4 Power ~ Un(untletl
Total Capllal Improvement Plan ~ 68,706,200
Table ES•12 presents the forecast revenues from each customer under this proposed rate plan for Scenario 2.
Table ES•13 summarizes llle financial plan and forecast revenues and cost of service (or the ten-year period FY
2011 - FY 2020. Details behind These calculations can be found in the tale model presented in Appendix B of
this report.
F~ Page: 11
Scher(z•Seguln Local Government Corporation 2010 Rate Study- UPDATC -Dec 27 2010
TABLE ES•13
SCHERT2~$EGUIN LOCAL GOVERNMENT CORPORATION
3cen: SAWS Contract • • DBC 2010 Update
~ ForecaeFRevenuee from Weler Rele RecommendeUone
h 2008 FV FY FY FY FY
Actual 2011 2012 2017 2014 2016
Sche Ht
Fgacesl VO!ume 1,458.587,000 1,385,138,815 1.406,197,059 1.417.24].707 1,428,301,648 1,438,200,983
Fwewsl Revenue 5 's.573715 S 3,646,152 $ 3.]71,098 5 3,195,475 5 3.281 065 S 4, 112,878
SoBUIn
Fwerssl VOlama 1,504,644,OOD 1,2]4,093,100 1,701,607,889 1,371,102,881 1759.673,730 1,38].894.558
Foracest Revenue 3.G7G,35R 5 3.968.214 5 3.5]4,497 $ 3,080,122 5 3.185,8]2 5 4.0]7,045
Uelversal C11y
Forecast Voiuma 6)25,000 20,428,000 20,d79,070 20,530,288 20.587.59) 20.873.047
Folecesl Revenue 5 10,07] 5 41,O6D 5 92,392 5 39,008 5 40,546 $ 42,710
Selma
FOr¢cesl VOiunle 82,752,000 89,821,000 84.782,659 84,944,509 65,106,870 85,280,83]
FefeCasl Revenue ., 125,467 5 129,888 $ 734,100 5 127,395 5 128.201 5 135,108
Springs H111
Forewsl Volume 84,84].000 182,500,000 182,500,000 182,600,000 102,500,000 182,500,000
Forecast Ravenna 5 489.104 5 497,975 S 508,425 5 477.400 $ 480.175 5 508,425
saws
Fger»sl Voume 0 0 0 3,820,452,0]4 3,820,452,074 3.828,452,074
Fgewsl ROVenoe 3 ~ 5 0 S 0 5 4.378,374 5 4,531,166 $ A,997,165
Tolel
Fwecasl VOLme 3,116,351,000 2, 936.780.915 2, 976,658,550 fi,894,837,n5 6,804,015815 8,927,948,700
Customer Revenuo $ 7.035,51] 5 ],782,]89 5 7,991,358 $ 11,283.733 5 17,656,065 S 13,033,432
NomRale Revenue 608401 88],523 ]OB, 149 728,397 751.2]5 7]3,813
Tolel Revenue $ 8,623,978 5 8,470,312 $ 8,698,607 $ 12,023,126 $ 72,408,160 $ 14,607,246
P Page: 73
Seclioit I
Schertz•Seguhl Local Govenuneut Corporation 2010 Rate Study- UPDATE- Dec 27 2010
Report Organization
This report is organized into the following sections
Section I -Introduction and Background -outlines llle background, objectives and scope of this rate study
and long-term financial plan. Also presents a background on SSLGC, its arrrenl Board of Directors and
Management, SSLGC's current rate structure and local revenues from each customer.
Section II - Scenarlo 1 -• Volumes, Revenue Requirements and Rate Plan -analyzes SSLGC's current and
forecast customer base, volumes and revenue requirements under Scenario 1 -Status Quo. This scenario
assumes that there are no significant new customers added to SSLGC's system in the next decade. TI1is
section also presents a proposed rate plan and forecast of future revenues from each customer.
Section III -Scenario 2 •• Volumes, Revenue Requirements and Rate Plan -analyzes SSLGC's current and
forecast customer base, volumes and revenue requirements under Scenario 2 -SAWS. This scenario assumes
lhai SAWS becomes SSLGC's largest single customer, which will result in additional revenues, operating costs
and capital improvements. This section also presents a proposed rate plan and forecast of future revenues from
each customer under Ibis scenario.
Appendix A - presents a hard copy prinloul of the irlleraclive Microsoft Excel spreadsheet model developed for
SSLGC to calculate current and future revenue requirements under Scenario 1. The model automatically
generates all calculations based on a set of defined user inputs.
Appendix B - presents a Bard copy prinloul of the interactive Microsoft Excel spreadsheet model developed for
SSLGC to calculate current and future revenue requirements under Scenario 2. The model automatically
generates all calculations based on a set of defined user inputs.
Appendix C -presents the detailed assumptions and calculations the project team employed to calculate the
total debt service and assignment of cost to each customer class under Ilse SAWS scenario.
~"~. ~.~"
l O C A I 0 0 V f R H h1 r H T C p g P 0 it l1 i t O N
Page: 16
Schertz•Seguin Local Governroenl Corporation 2010 Rato Study- UPDATE -Dec 27 2010
Customer Base and Current Rates
At present SSLGC provides Irealed wafer to five identified customers:
Clly of Scherfz
Clty of Seguin
Springs HIII Water Supply Corporation
City of Universal C1ty
City of Selma
TI1e rate structure in effect as of July 2010 contains several components, including OEM, Debl Service, Water
Lease payments, Repair and Replacement Reserve, Future Development Reserve, Transporlalion and
Dislribulion within Cities. The rate structure is presented in Table I.2. As will be shown later in This study,
SSLGC's Board of Directors revised this rate structure effective October 2010.
As the table reveals, llle Cities of Scherfz and Seguin are primarily responsible for existing debt service, which is
presently calculated as a rate per 1,000 gallons. Repair and Replacenlenl Costs, and Future Development
Costs, are intended to reimburse SSLGC for depreciation-related expenses. Cities distribution charges are
intended to reimburse SSLGC for 111e cost of electricity within each city's distribution system for water used by
other customers.
TABLE I.2
SCHERTZ-SEGUIN LOCAL GOVERNMENT CORPORATION
JULY 2010 WATER RATES -PER 1,000 GALLONS
Scherfz Seguin Universal Cily Selma
Springs Hill
Debr Service S 0.00 3 O.gO 5 1.05
08M 0.77. 0.%2 0.72 072 e.72
Water Lease 0.47 0.47 OA7 0.47 0.47
Repair and Replacement 0.14 0.tn 0.14 0.14 0.14
Future Development 0.14 0.14 0.14 0.14 0.14
Transporlalion 0.30 0.30
Cities Dislribulion 0.1G 0.10 0,1(i
Total r 2.46 ~ 2.46 R 2,01 w 2.01 ~~ 2.68
Total Excluding Debl Service 1.47 1.47 r 2.01 P 2.01 1.83
Page: 18
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4
Scheriz•Seguln LGCaI Government Corporation 2010 Ralo Study -UPDATE- Dec 27 2010
Table I.6 and Chaff b7 present historical revenues from each o(SSLGCs current customers.
TABLE I.6
SCNERTZ~SEGUIN LOCAL GOVERNMENT CORPORATION
WATER REVENUES 10052010
ScheUz Seguln Springs Hill Unlvorsal City Selma Total
FY 2005 S ~ S ~ $ ~ S ~ $ ~ $
FY 2006 ~ - ~ ~ 2,283 2,283
FY 2007 1,248,944 2,369.646 353,250 75,469 66,051 5,163,566
FY 2008 3,031,153 3,000,570 447,311 ~ 145,52G 6,624,960
FY 2009 3,573,715 3,636,358 489,100 10,877 125,467 7,535,517
Las112 Mlhs 3,523.465 3,557,130 489,100 40,430 128,697 7,766,822
CHART I.7
Schertz-Seguin Local Govt. Corp.
Water Revenues FY 2009
$4,000,000 $3,573,715 $3,636,358
$3,500,000
$3,000,000 -
$2,500,000
$2,000,000
$1,500,000
$l,ooo,ooo $4a9,loo
$500,000 ~ $10 877 $125,467
Schertz Seguin Springs Hill Universal Selma
Clty
F` Page: 20
Scheriz•Seguln Local Government Cogloral)on 2010 Rale Study -UPDATE -Dec 27 2010
CHART I.8
SCHERTZISEGUIN LOCAL GOVERNMENT CORPORATION
IiISTORICAL FINANCIAL STATEMENT SUMMARY
2009 2008 2007
2000
INCOME STATEMENT
456 $ 7,144,571 $
444
$ 8
4,999,038 $
4,747,283
Operating Revenue ,
,
729,810 6,849,975
7 5,944,540 5,965,104
Operating Expense ,
Operating Income (Loss) 714,646 294,596 (945,502) (1,217,821)
Total O111er Income I Expense 79,523 292,857 597,157 700,525
~........e ,.r a....n,.,,nc nvnr Expenses 794,169 687,463 (348,346) (617,299)
BALANCE SHEET
$
130,611 $
4
3,062,697 $
2,734,922 $
2,653,509
Current Assets ,
952
554
4 5,859,660 6,567,156 577,039
Restricted Assets ,
,
688
631
49 49,255,115 48,690,844 49,086,351
Net Property,Planl,Equipmenl ,
,
989,747
1 2,1811,572 2,335,727 1,560,636
Other Assets ,
306,998
60 60,166,044 80,328,649 63,878,416
Total Assets ,
223
254
2 2,271,128 2,411,326 2,158,367
Curren) Liabllilies ,
.
346
420
53 54,058,656 54,666,516 48,120,896
Revenue Bonds Payable ,
,
674,669
66 66,327,78A 67,077,842 60,279,263
Total Lia11111t1es ,
Talal Net Assets 4,632,429 3,838,260 3,260,807 3,699,162
Total Llalrllllles & Capllal 60,306,998 80,786,040. 60,326,640 63,878,416
FINANCIAL RATIOS
Casl1 Provldedl(Used) by Operelforls
4,966,837
3,873,743
2,929,427
2,682,366
1
83 1.36 1.13 1.23
Current Ratio .
02
12 14.68 17.66 13.07
DehUEqully Rallo
.
Page: 22
SchednSeguln Local Government Corporation 2010 Rale SUuly -UPDATE -Dec 27 2010
Cost of Service -• Methodology
In the next two sections of SSLGC's rate study and long-term financial plan, test year and forecast utility revenue
requirements are developed. The lest year consists of SSLGC's fiscal year beginning October 1, 2010 and
ending September 30, 2011. The estimates presented in Phis section are based on SSLGC's FY 2011 budget,
as well as a forecast of future capital improvements.
The calculation of a revenue requirement differs from a utility's budget in that it represents only Mat amount tlral
must be raised Through SSLGC's user rates. This means that non-rate revenue (such as impact fees and
interest) must be subtracted from the budgeted operating and capital expenditures to determine 111e net revenue
requirement to be raised from rates.
The project team recommends that SSLGC's system revenue requirements be developed using the American
Water Works Association's Cash Basis of ralemaking. Under the cash basis, as defined by the AWWA Manual
M-1, system revenue requirements consist of cash expenditures and oilier financial commitments (such as debt
service coverage or reserves) Thal must be met through system operating revenues and other revenue sources.
The cash basis is employed by thousands of publicly owned water and wastewater utilities throughout the United
Stales.
The following specific items are included in SSLGC's revenue requirements raised from rates:
0&M expenses
Capital Outlays Funded /rorn Rates
Debt service -- Current
Debt Service -Forecast
Debt Service Coverage
Importantly, under the Cash Basis of ralemaking, SSLGC is allowed to recover capital outlays and debt principal
payments. These are cash payments Ifral are typically not included on an income statement. In addition,
SSLGC's rates are designed under This cash basis to achieve a debt service coverage ratio of 1.25 or greater,
as this is a typical benchmark used by lenders and bond advisors to determine Ilse financial health of a utility
borrower. Finally, depreciation is excluded from consideration under llle Cash Basis, as it is replaced by debt
principal, capital outlays and debt coverage.
All data used in the development of the revenue requirements was obtained from the financial statements,
budgets and other information provided by SSLGC staff. The revenue requirements presented in Section II are
for 111e rate scenario to be labeled in this study as Scenario #1, while the revenue requirements presented in
Section III are for the rate scenario to be labeled in this siu<ly as Scenario #2.
Page: 24
Schertz•Seguin 4ocal Government Corporallon 2010 Ralo Study -UPDATE -Dec 27 2010
SECTION II
As described in Section I of Ihis rate study and long-term financial forecast, the project team has examined two
cost of service and rate scenarios for SSLGC. The lirsl scenario is the "Status Quo' scenario, as it assumes Thal
Illere are no significant new customers or volumes to SSLGC's system in the next decade. This section
examines this scenario in detail. Scenario 2, entitled the "SAWS° scenario, is presented in the next section.
This section begins by presenting a forecast of consumption by each customer for the next decade. This is
followed by a detailed forecast of SSLGC's cost of service for the period FY 2011 - FY 2020, which includes an
examination of operating expenses, debt service, capital improvements, and future bond issues. At the end of
Ihis section, a set of recommended rates for each customer based on volumes and cost of service is presented
for the test year FY 2011 and the forecast period. The rate model conlaineri in Appendix A presents all
calculations under this scenario in detail.
Production and Consumption -Test Year & Ten Year Forecast
In forecasting system growth over the next decade, the project team factored in the significant economic
downturn that leas affected Texas and the rest of the country. The economic downturn has resulted in less
growth and lower consumed volumes for residential and commercial customers in many cities throughout the
slate.
Table 111 presents the project team's forecast of total production and consumpliolT for IITe period FY 2011 - FY
2020. The project team considers Ihis to be a highly conservative forecast, but reasonable given the magnitude
of the economic downturn. The forecast assumes Ihal water loss percentages remain consistent at
approximately 7.4% of total protlllclion.
TABLE II.1
SCHERT2•SEGUINL AL OYERHI3ENT CORPORATION
FORECAST PRODUCTION AND CONSUh1PTI0N
Water Producllon
Gallons Acre~Feel
4G0
Water COnsump0on
Gallons Aue~Feel
4CD
Percent
Water loss
2011 3,173A28,356 9,730 0.69 2,936,700,916 9,013 8.05 7.4%
2012 3,216.W5,878 9,870 8.81 2,976,550,557 9,135 0.15 7.4%
2013 3,259,036,184 10.002 8.93 3,016,385,W2 9.257 B26 7.4%
2014 3.3D2,014,856 10,134 9.05 3,056,163,742 9.379 837 7.4%
2015 3.344.513,016 10,264 9.16 3,095,497,707 9,500 8.48 7.4%
2016 3.375,223.335 10.358 9.25 3,123,921,492 9.587 8-56 7.4%
2017 3,40.5,906,267 10,452 9.33 3,152,319,927 9,674 864 Z4"/°
2018 3,436,537,561 10.546 9.42 3,180,670,576 9,761 8.71 7.4%
2019 3,467,249,625 10,641 9.50 3,203,095,976 9,848 8.79 7.4 ie
2020 3,497,505,424 10.733 9.58 3.237,099,083 9,934 8.87 7.4 %
~~ Page: 25
Scheriz•Soguln Local Government Cogroralion 2010 Rate Study -UPDATE -Dec 27 2010
Operating Expenses and Capital Outlays-Test Year
Table II.3 below summarizes 1)1e lest year FY 2010 operating expenses and capital outlays (or SSLGC. These
totals are derived from SSLGC's FY 2011 budget. Details behind 111e line items can be found in the rate model
presented in Appendix A.
TABLE II.3
SCHERTZ•SEGUIN LOCAL GOVERNMENT
Operating Expenses
Personnel
Benefits
Professional Services
Technical Services
Utilities Services •• O&M
Utilities Services -- Cities Distribution
RepairslMainlenance
Rental
Insurance
General Supplies
Energy and Fuel
Miscellaneous
Education and Public Relations
Total Operating Expense
Capital Outlays
Budget
Debt Coverage Rgml
Total Capital Outlays
TOTAL OPERATINGICAP OUTLAYS
FY 2010
Budget AdJushnenls
$ 285,000 $ - $
106,500 -
273,500 -
158,725 -
937,400 (41,850)
- 41,850
225,60D -
1,800,500 -
11,000 -
318,A20 -
12,500 -
20,250
4,149,396
28,000
122,000
150,000
4,299,395
4,299,396
Net
285,000
106,500
273,500
158,725
895,550
41,850
225,600
1,800,500
11,000
318,420
12,500
20,250
4,149,395
- 20,000
- 122,000
160,000
F Page' 27
Sc11eH2Seguln Local Govcrnmonl Corporation 2010 Rale Study -UPDATE -Doc 27 2010
Current Debt Service
SSLGC currently maintains (our otllslanding bond issue (a fi(I11, series 2010, is compiled within Future Debl
Service contained later in This section). Annual debt service for each of These clebl issues, as well as their
allocation to each customer, is presented in Table II.5.
TABLE II.5
SCHERTZ-SEGUIN LOCAL GOVERNMENT CORPORATION
SCENARIO: 1 -• Status Ouo Dec 2010 Update
~~unentDebtS arvlde
Series 1999 Sarles 2001 Series 2006 Series 2007 Total
2011 5 3f 7,944 5 808,366 S 401,148 S 1,863,137 $ 7,790,696
2012 - 806,230 722,604 1,880,230 7,789,070
2013 - 520,000 727,417 2, 141,336 7,388,767
2014 - 520,000 726,036 2,141,138 7,787,172
2015 - 520,000 728,436 2,140,136 7,788,572
2016 - 520,000 734,936 2,136,336 7,797,272
2017 - 520,000 735,536 2,135,736 7,791,272
2018 - 520,000 740,238 2.127,436 7,787,872
2019 - 520,000 779,036 2,133.236 7,792,272
2020 - 520,000 737,038 2,128.036 3,786,072
jAllopallon.to:
Schortz ~ - Sapuln Universal Clly Selma Springs HIII SAWS Total
2011 S 1,595,298 S 1,595,296 S - S - S 200,000 S - $ 7,700,696
2012 1,594,575 1,594,535 - - 200,000 - 7,7118,070
2013 1,59A,377 1,594,377 - - 200,000 - 3,388,763
2014 1,593,588 1,593,586 - - 200,000 - 7,787,172
2015 1,594,286 1,594,286 - - 200,000 - 3,788,672
2016 1,596,836 1,596,836 - - 200,000 - 3,797,272
2017 1,595,638 1,595.636 - - 200,000 - 7,391,272
2018 1,593,838 1,593,!136 - - 200,000 - 7,787,672
2019 1,596,136 1,596,176 - - 200,000 - 7,792,272
2020 1,592,536 1,592,536 - - 200,000 - 3,785,072
Page: 29
Schella.Seguln Local Govenunenl Corporallon 2010 Rate Study -UPDATE -Dec 27 2010
Forecast Debtlssues
As shown in Table II.7 below, in order to fully fund the CIP under Scenario 1, SSLGC is forecast to complete
several bond issues in the next decade. Tl1e Series 2010 total o(~23,515,000 ilas already been completed, and
SSLGC is forecast to issue adtlilionai debt in FY 2016 and FY 2017 to fund Phase 4 capital improvements. The
debt is forecast to have an interest rate of 4.50% and a term of 25 years. Table II•ES summarizes the forecast
annual debt service.
TABLE II.7
Schertz-Seguln Local Govt. Corp.
Scen. 1 -- Future Debt Issues
$25,000,000 ~I $23,515,000
$20,000,000
$15,000,000 -
$12,000,000 $12,000,000
$10,000,000
Ss,ooo,ooo -
$- ,
2011 2012 2073 201A 2015 201(i 2017 2018 2019 2020
TABLE II.B
SCHERTZ•SEGUIN LOCAL GOVERNMENT CORPORATION
e- e
SCENARIO: 1 --Status quo Dec 2010 Update
Future Total
Serlos Debt Forecast
2010 Service Debl Service
2011 05 - S - $
2012 -
2013 - ~ -
2014 - -
2015 1,532,794 1,532,794
2016 1,534,089 ~ 1,634,068
2017 1,529,869 874,010 2,403,978
2016 1,534,181 1,748,020 3,282,201
2019 1,530,318 1,7414,020 3,270,338
2020 1,534,419 1,748,020 3,282,430
~~ Page: 31
Schedr5eguin Lacal Governm°nl Corporation 2010 Rate Study -UPDATE -Dec 27 2010
Proposed Rate Plan -Scenario 1
Rate design involves delennining charges for each class of customers that will generate a desired level of
revenue. Over the course of the engagement, the project team has participated in numerous conversations and
meetings with SSLGC representatives and staff. As a result of these conversations and work sessions, the
project team has developed the rate plan presented in this section. This rate recommendation is designed to
enable SSLGC to recover sufficient and equivalent revenues to meet all operating and capital obligations,
including llle debt service required to fund SSLGC's forecast capital improvements.
Table II.10 presents a detailed summary of the rate plan proposed for SSLGC under Scenario 1. Table II.11
presents the forecast revenues from each customer under this proposed rate plan. Table II.12 summarizes the
financial plan and forecast revenues and cost of service (or the ten-year period FY 2011 - FY 2020. Details
behind Ihese calculations can be found in 111e rate model presented in Appendix A of this report.
The following is isolable about This rate design:
• The rate design is composed of Iwo elements - a fixed debt service charge, and an operating rate per
1,000 gallons for all water sold.
• The operating rate per 1,000 gallons is composed o(three elements - 0&M, lease payments, and Cities
Distribution.
• The cities of Selma arid Universal Cily, as well as Springs Hill Water Supply Corporation, are assessed
the Cities Distribution charge. Selma and Universal Cily are also assessed a Transportation Charge.
• There is no longer a Repair and Replacement Charge, or a Future Development Charge. These
charges are replaced by the application of the Cash Basis ralemaking methodology in the calculation of
the cost of service and rate design by customer class.
• The rate design ensures Thal rates will recover the cost of service for all years of the forecast period.
• Rale changes are implemented in October of each year.
• Meets a minimum debt coverage requirement of 1.25 in every year of the forecast.
• Under Scenario 1, all future debt service is assumed to be financed 50% by the Cily of Scheriz and 50%
by the Cily of Seguin.
Il should be noted that the SSLGC Board of Directors adopted the recommended tale schedule for FY 2011 only
effective October 2010. The rate schedule for FY 2011 is the same under either Scenario I or Scenario II.
r Page: 33
Schertz•Seguln Local Government Corporation 2010 Rale Study-UPDATE -Dec 2•I 2010
TABLE II.11
:RTZ•SEOUIN LOCAL OOVERNIAENT CORPORATION
Ston: 7 -~ 5161us Ouo D ec 2070 UpOele
~ ForeoaBt Revenuaa Irom Weter Rele Relwmmend~llons
1" 2008 FY FY FV fY FY
At01el 2077 2012 201J 207A 2016
Scllenz
ForeCaal Volume 1,468,683,000 1,395,138,816 1,AOG,193,059 f 417,247,303 1,428,301,698 7,930,200,463
Forerasl Revenue S 3573,]15 S 3,846,752 5 3,737,940 S 4,080,387 S 4,164.529 S 5,187,124
Senuln
Folerasl Volume 7,504,844,000 7,274,093,100 1,502,003,060 1,331,162,961 1,359,873,730 1,387,094,550
Forecast Revenue 5 3,636,358 S 3,488,214 S 3.674,483 5 3,870,800 S 4,040,008 5 5,007,077
Univarael Illy
Forecast Volume 5,726,000 20,A2B,OD0 20,479.070 20,630,260 20,bB1,69J 20,833,047
Forecast Revenue S 10,877 S 41,080 5 42.382 5 47,220 5 48,884 5 62,908
Selma
FOreCeSl Volume 62,752,OOD 04,621,OOD 84,782,553 84,944,509 65.708,070 85,269,637
Forewsl Revenue S 125.AG7 5 128.088 5 134,100 S 740,372 5 154,959 $ 785,705
SprlnBS NIII
Farecasl Volume 84.647,000 182,500,000 102,500,000 IB2,b00,000 782,600,000 182.600,000
Farerasl Revenue 5 489,100 5 487,975 5 508,42b S 660,400 S 665.000 5 59A,200
SAWS
Forecast Volume 0 0 0 0 0 0
Forecast Revenue .. - 5 0 5 0 S 0 5 0 S 0
Total
Forecast Volume 3.116,351,000 2,936,700,915 2,976,558,550 3,016.305,041 3,058,183,741 3,OD5,A97,700
Customer Revenue S 7.036,517 5 7?02,789 S 7,981,350 S 8,777,979 5 8,874,A6G S 11,048,599
NomRale Revenue GBB,ASI 887.523 708,749 729,393 751,276 773,013
Total Revenue S 0,623,970 S 0,470,312 S 8,699,607 5 8,447,372 S 9,726,741 S ii,B20,A07
,p Page: 35
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Scheriz-Seguin Local Govornmenl CogTOraIIGN 2010 Rale Study-UPDATE -Dec 27 2010
SECTION III
As described in Section I of this rate study and long-term financial forecast, the project team has examined two
cost of service and rate scenarios for SSLGC. The second scenario is the "SAWS" scenario, as it assumes Thal
beginning in 2012 SAWS purchases water from SSLGC. This water is originally produced al SAWS' wells and is
heated by SSLGC. As a consequence, SSLGC will have to complete Phase II capital improvements and will
experience significant increases in other operating costs. However, as will be illustrated in this section, the
addition of SAWS as a customer potentially leads to significant economies of scale and rate benefits (or
SSLGC's other customers.
This section begins by presenting a forecast of consumption by each customer for the next decade. This is
followed by a detailed forecast of SSLGC's cost of service for the period FY 2011 - FY 2020, which includes an
examination of operating expenses, debt service, capital improvements, and future bond issues. Al the end of
This section, a set of recommended rates for each customer based on volumes and cost of service is presented
for the test year FY 2011 and 111e forecast period. TI1e rate model contained in Appendix B presents all
calculations under this scenario in detail.
Production and Consumption -Test Year & Ten Year Forecast
In forecasting syslefn growth over the next decade, the project team factored in IITe significant economic
downturn that has affected Texas and llle rest of the country. The economic downturn has resulted in less
growth and lower consumed volumes for residential and commercial customers in many cities throughout the
state.
Table III.1 presents IITe project team's forecast of total production and consumption for the period FY 2011 - FY
2020 under Scenario 2. The project team considers this to be a highly conservative forecast, but reasonable
given the magnitude of the economic downturn. The forecast assumes Ihal water loss percentages remain
consistent al approximately 7.4% of total production.
TABLE III.1
SCHERT2•SE UINL CAL GOVERNI,fENT CORPORATION
FORECAST PRODUCIIONANDCONSUTAPTION
SCEN: SAWS Contract ••Dec 2010 Update
Water Producllon
Gallons Acre•Feel
GD
ater COnsump9on
Gallons Acre-feet
GD
ercent
Water Loss
2011 3,173,020,356 9,738 869 2,936,780,915 9,017 805 7.4%
2012 7,216,005,878 9,870 8.81 2,976,558,550 9.135 8.15 7.4
2017 7,795.465,600 22,696 20.26 6,814,837,n5 21,00b 10.75 7.4%
2014 7,438p44,280 22,828 20.70 6,884,615,815 21,128 1086 7.4%
2015 7,4,942,441 22,958 20,W 6,927,949,780 21,249 18.97 7.4%
2016 7,511,652,759 17,052 20.58 6.952,773.565 21,336 19.05 7.4 %
2017 7,542,375,687 23,147 20.66 6,98).771.999 21,423 19.13 7.4%
2018 7,572,966,985 27,241 20.75 7,OCG,f22,649 21,510 19.20 7.4%
2019 7,6N,679.049 23.735 2083 7,037,518,049 21,597 19.28 7.4"/0
2020 7,633,934,848 23.428 2091 7,065.551,156 21,683 19.36 7.44e
P Page: 3G
ScherlrSeguln Local Government Corporation 2010 Rale Study -UPDATE -Dec 27 2010
Operating Expenses and Capital Outlays -Test Year
Table III.3 below summarizes the lest year FY 2010 operating expenses and capital outlays for SSLGC under
Scenario 2. These totals are derived from SSLGC's proposed FY 2011 budget. Details behind the line items can
be found in the rate model presented in Appendix B.
w•a
SCHERTZ-SEGUIN LOCAL GOVERNMENT CORPORATION
SCEN: SAWS Contract -- Dec 2010 UpUate
FY 2010 Net
Operating Expenses
Personnel $ 285,000 $ - $ 285,000
Benefits 100,500 - 108,500
Professional Services 273 X00 - 273,500
Technical Services 158,725 - 158,725
Ulililies Services -- ORM 937,400 (41,850) 895,550
Ulililies Services --Cities Distribution - 41,850 41,850
RepairslMalnlenance 225,000 - 225,600
Rental 1,800,500 - 1,800,500
Insurance 11,000 - 11,000
General Supplies 318,420 - 318,420
Energy and Fuel 12,500 - 12,500
Miscellaneous - - -
Educalion and Public Relations 20,250 - 20,250
Total Operatlny Expense 4,149,396 - 4,148,396
Capital Outlays
Budget 20,000 - 26,000
Debt Coverage Rgntl 122,000 - 122,000
Total Capllal Outlays 150,000 - 160,000
TOTAL OPERATINGlCAP OUTLAYS 4,299,395 - A,299,395
P Page: 38
Scheriz•Seguln Local Government Cog1or91(on 2070 Rate Study-UPDATE -Dec 27 2010
Current Debt Service
SSLGC alrrenlly Inainlains tour oulslanding bond issues (a fifth, series 2010, is compiled within Future Debl
Service contained later in this section). One of the assumptions from llle July 2010 study was That none of the
current system was used and useful to SAWS. Further analysis by SSLGC staff and engineers revealed That a
portion o(the existing system was used and useful to SAWS.
Under the cash basis of ratemaking, debt service is assigned to each customer class based on 111e degree to
which the assets purchased with Thal debt are used and useful to that customer class. The calculations
employed by the project team to assign debt service from the four oulslanding bond issues and the 2010 issue
contained in the future debt category are presented in detail in Appendix C. All calculations and assumptions
behind These allocations are presenlecf in This appendix. The anmlal debt service and allocation to each
customer class is summarized in Table III.5.
TABLE III.S
SCNERTZ-SEQUIN LOCAL GOVERNMENT CORPORATION
SCENARIO: SAWS Contract •• Dec 2010 Updalo
ICUrrenrDegt9orvloo -
Serlas 1989 Sarles 2001 Series 2006 Sarles 2007 Total
2011 S 317,994 5 808,366 S 401,148 S 1,863,137 S 3,390,696
2012 - 806,230 722,804 7,860,236 3,389,070
2073 - 520,000 727,417 2,147,336 3,388,7b3
2014 - 520,000 728,036 2,141,136 3,387,172
2015 - 520,000 728,A36 2,740,136 3,389,672
2078 - 520,000 734,938 2,738,338 3,393,272
2017 - 520,000 735,538 2,735,738 3,391,272
2078 - 520,000 740,236 2,727,438 3,397,872
2079 - 620.000 739,038 2,133,236 3,382,272
2020 - 520.000 737.038 2,126,036 3,386,072
iAlloaell4tl.3al
Scheriz - SaOuln Universal Clly Selina SprlnBe HIII SAWS Total
2011 $ 1,595,298 S 1,595,298 S - $ - $ 200,000 $ - $ 3,300,696
2012 1,594,535 1,594,535 - - 200,OOD - 3,309,070
2073 1,296,383 7,296.363 - - 200,000 596,026 3,388,763
2074 7,295,728 1,295,728 - - 200,000 595,720 3,387,172
2075 1,296,270 1,206.270 - - 200,000 596,032 3,309,672
2016 1,298.123 1,298.123 - - 200,000 597,026 3,393,272
2017 1,297.275 1,297,275 - - 200,000 598,721 3,381,272
2010 1,285.887 1,205,687 - - 200.000 596,290 3,387,672
2019 1,297,833 1,297,833 - - 200,000 587,007 3,392,272
2020 1,294,655 7,294,655 - - 20D,OD0 595,763 3,396,072
Page: 40
Schenx•Seguln Local Government Corporallml 2010 Ralo Study- UPDATE -Dec 27 7.010
Forecast Debt Issues
As shown in Table III.7 below, in order to fully fund the CIP under Scenario 2, SSLGC is forecast to complete
several bond issues in the next decade. The Series 2010 total of $23,515,000 has already been completed, and
SSLGC is forecast to issue additional debt in FY 2016 and FY 2017 to fund Phase 4 capital improvements. The
debt is forecast to Have an interest rate of 4.50% and a term of 25 years. Table III.8 summarizes llle forecast
annual debt service.
TABLE III.7
Schertz-Seguln Local Govt. Corp.
Scen. 2 •• Future Debt Issues
$25,000,000 $23,515,000
$20,OOD,000 -
$15,000,000 - $14,610,000
$12,000,000 $12,000,000
$10,000,000 -
$5,000,000 -
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
TABLE III.8
SCHERTZ-SEQUIN LOCAL GOVERNMENT CORPORATION
rr• ~
SCENARIO: AWS Cmrlracl •-Dec 2010 Update
Future Total
Serles Debi Forecast
2010 Service Debt Sarvlce
2071 r'S - 5 - S -
2012 - - -
2073 - 1,064,107 7,064,107
2074 - 1,064,107 1,OfiA,107
2015 1,532,79A 1,064,107 2,696,901
2016 1,534,068 1,064,107 2,598,176
2077 1,529,968 1,938,117 3,468,085
2018 1,534,187 2,012,127 4,348,308
2019 1,530,318 2,812,127 4,342,445
2020 1,534,419 2,872,127 4,346,648
R Page: 42
Schedz•Seguln Local Government Corporation 2010 Rale Study- UPDATE -Dec 27 2010
Proposed Rate Plan -Scenario 2
Rate design involves determining charges (or each class of customers Thal will generate a desired level of
revenue. Over the course of the engagement, the project team has participated in numerous conversations and
meetings with SSLGC representatives and staff. The project team has also participated in contract negotiations
between SSLGC and SAWS representatives. As a result of These conversations and work sessions, the project
team has developed the rate plan presented in This section. This rate recommendation is designed to enable
SSLGC to recover sufficient and equivalent revenues fo meet all operating and capital obligations, including the
debt service required to fund SSLGC's forecast capital improvements.
Table III.10 presents a tletalled summary of the rate plan proposed for SSLGC under Scenario 2. Table III.11
presents the lorecasl revenues from each customer under this proposed rate plan. Table III.12 summarizes the
financial plan and forecast revenues and cost of service (or the ten-year period FY 2011 - FY 2020. Details
behind these calculations can be found in the rate model presented in Appendix B of This report.
The following is notable about This rate design
• The primary rate design is composed of two elements - a fixed debt service charge, and an operating
rate per 7,000 gallons for all wafer sold.
• The operating rate per 1,000 gallons is composed of three eleinenls - 0&M, lease payments, and Cities
Dislribufion.
• The cities of Selma and Universal Cily, as well as Springs Hill Water Supply Corporation, are assessed
the Cities Disfribulion charge. Selma and Universal Cily are also assessed a Transportation Charge.
• There is no longer a Repair and Replacement Charge, or a Future Development Charge. These
charges are replaced by the application of the Cash Basis ratemaking melllotlology in Ilse calculation of
the cost of service and rate design by customer class.
• The rate design ensures that tales will recover the cost of service (or all years of the lorecasl period.
• Rale changes are implemented in October of each year.
• Meets a minimum debt coverage requirement of 1.25 in every year of the forecast.
Further, the following is specifically notable about the rate assessed to SAWS:
• The rate is intended to recover the cost of service incurred by SSLGC in the provision of treated water to
SAWS.
• Because SAWS is having its own water treated by SSLGC under this scenario, SAWS is not assigned
any lease costs.
• The 0&M rate per 1,000 gallons is calculated in This scenario to be a uniform rate (or all SSLGC's
customer classes. In October 2012, when SAWS is assumed to begin purchasing water from SSLGC<
the O&M rate (or all customer classes is forecast to be $0.71 per 1,000 gallons.
• If circumstances change significantly in the future, the project team will revision the assumption of a
uniform 0&M rate per 1,000 gallons (or all customers. However, any changes in this policy would he
subject to review and approval by SSLGC staff and the Board.
A Page: 44
Schertz•Seguln Local Government Corporation 2010 RaIR Study -UPDATE -Dec 27 2010
TABLE III.11
SCHERTZ~SECUIN LOCAL GOVERNMENT CORPORATION
Scan SAWS Conlrad • ~Dec 2010 Updela
( oreoaat Revenues fmm
~ Water RetelRecommantlauone
_
T 2068 FY FY FY FY FY
Actual 2077 2012 2017 2014 2016
Schoriz
forecast Vdume 1.458,589.000 1.395,138,815 1,406.193.058 1.417,247,303 1,428.301,548 1.4J9,200.A83
Foierasl Revenue 5 ~ W"7,715 5 3,646,152 5 3,771,840 $ 3,785,476 5 3.281,065 S 4,112,978
Sepuln
Foieoesl Volume 1.504,644,000 1,274,087,100 1.702.603,889 1,371,162.861 t,359,873.73D 1,387.894,658
Foiecesl Revenue 5 yGJG.756 5 7,488,214 5 7,514,483 5 3.080,122 5 3.785,672 S 4.037,045
Universal Clly
Forecast Vdume 5,726,000 20.428,000 20.479,070 20,570.288 20,581,68) 20.673,047
Foiecasl Revenue S 10,077 5 41,080 5 42,392 5 39,008 $ 40.546 5 42,710
Selma
Forewsl Vdunle 82,752.000 64,621,000 84,782,553 64,944,609 85,106,870 05,269.837
forecast Rovenue S 125 4G7 5 129,888 S 174,100 $ 127.785 5 128,287 S 135.108
Spdngs HIII
Forecast Vdume 84.647,000 182,SOD.000 782,500,000 182,SOO,OOD 182,SOO,OOD 182.600,000
Forecast Rovenue S AB0,100 S 497,A75 S 508,425 $ 477.400 S 490,175 S 508.426
SAWS
Forecast Vdume 0 0 0 3,828,452.O7A 3,828.452,0]4 J,828.452,O7A
Forecast Revenue S - 5 0 5 0 5 4.378,374 S 4.531,166 S 4,897,165
Total
Forecast Volume 3,116,357.000 2.978,780.915 2,976,558,550 6.844,837,115 6,88q,615,815 6,927,948.780
CValOmel Ravenna 5 7,B35,SV $ 7,782,789 S 7.981.358 S 11.297.733 S 11.056,885 S 13,873,432
Non~Rale Revenue G90461 687,523 708,149 729,387 751,275 773,873
Talal Revenue 5 8,623,978 $ 8,470,312 5 8,698,607 5 12,023,728 5 12,408,160 $ 74,607,248
Page: 4G
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Dale: 12127110
SCHERTZ•SEGUIN LOCAL GOVf:RNIJENT CORPORATION
CALCULATION OE SAWS SHARE OF E1fIST111G DEBT SERVICE
I. Bonrl Issuos UsodlUsalril to SAWS
Oonrl lssue5
Series 1999
Series 2001
Sedes 2005
Sedes 2997
Sedes 2010
Total
Sedes 1899 Oonil &Sorlos 2001 Bond
Oriplnal
SSLOC Rafe fdode1120810 SAWS COnlracl.xls SA1'7S Nlocalion
S 10,000,000
41,040.000
0,500,000
30,425,000
23,515.000
121,480,000
iolal Dolil
Sedes 1999 S 10,000,000
Series 2001 41,040,000
Total 51,040,000
Total SAWS
Conslruc0on 33,38G.t2A 7,833,859
Erglneedng Desgn 2,262,422
Englneemg Admin 1,214,251
3,496,673 820,205
Rghl of Way 2,340,487 128,949
Pro;ecl Coordination 500,000
Legal 180.000
General 1,500,000
2,180,000 511,550
Water Rights 5.A64,089 -
Sub-Total A6,8G7,373 9,294,563 19.8'h
Pro(ecl Coordination 500,000
Elecldc Prover 492,525
River Crossiig 29,800
ldiscellaneous 84,613
Insurance Inleresl8 Calls 4,272,484
Investment Income (1,208,795)
4,172,627 627,500 19.8%
Total BOrMs Issued 51,040,000 10,122,063 19.8`/.
SOURCE: 1?I02fl01,!eeG~ Notes
Sorlos 2005 Bond
Total Oabl
Series 2005 S 6,500,000
Perconl SAWS of Total Da9l 19.8%,
NOTE: This boM eras used to rotund porlbnso11999 and 2001 debt; Iherelore
same percentage of used and usalul assets applies to SAWS
SOURCE: 1 210 7110 19eeling Notes i ~i id(YI~P711~1~
~' _'i
Page:1 ~
Portland ~ . ~ ~ ~ ' i
: ~~ ~~ ~~~~~~1~. ~;~ ~~. (ill
Dallas
L'conon»c curd Finnncird C'arsnpiug
MEMORANDUM
Dale: December 2 2010
To: File
From: Dan V. Jackson
Re: John Winkler
Alan Cockerel)
Patrick Lindner
We need to do a revision of the model calculations (or debt service and leases.
New assumptions:
1) We need to reallocate debt service to ensure that all assets used and useful to SAWS are being
properly allocated to them.
2) We need to remove lease costs from SAWS' calculations.
There are 5 bond issues in total:
1999 -- X10,000,000
2001 -- X41,040,000
2005 -- X8,500,000
2007 -- X38,425,000
2010 -- ~v23,515,000
1999 issue
X10.0 million was for leases and rights o(way.
5500 Democracy Drive S1e.130 Plano TX 75024 (972) 378.6588 (972) 378•G988 fax Jackson economists.com
web slte: wvrvr.oconomists.com
f~ 1 /;~. ti.._r. I ~
SSLGC Original Bonds and Costs
Total Bonds Issued 551,040,000
Insurance, Interest & Costs -$4,272,484
Investment income $1,206,795
Funds Available $47,974,311
of Total
General $1,500,000 r 3%
Repair&Replacemenl $500,000+ 1%
Legal 5180,000 ~ 0%
Water Rights 55,464,089 ~ 11
Protect Coord 5500,000 1%
Right of Way 52,340,487 c 5%
Engineering 52,282,422 ° 5%
Eloclric Power $492,525 1%
River Crossing $29,800 ~ g%
Conslruclion Admin 51,214,251 ~ 3%
Conslruclion $33,386,124, 70%
Total 547,889,698 100%
All Other Than Conslruclion 514,503,574' 30%
Construction Detail % of Total Other• Costs Total % of l'otal
Well Collection Lines 5854,447 3% 5371,188 51,225,635 3%
Main Pipeline 518,616,332 56% 58,087,293 526,703,625 5G%
WTP & BPS 56,915,614 21% 53,004,276 59,919,890 21%
Filters 51,631,664 5% 5708,826 52,340,490 5%
Ground Storage Tanks 51,205,591 4% 5523,732 51,729,323 4%
Wells & Pumps 53,727,474 11% 51,619,286 55,346,760 11%
Misc 5100,000 0% 543,442 5143,442 0%
Contingencies 5335,000 1% 5145,530 5480,530 1%
Total 533,366,122 100% $14,503,574 547,899,696 100%
\ugusi 17, 2010
Pngc 2
E. Soft Cnst
I. Engineering Cost
Design $2,282;122
Admire 51214,251
"1'olnl $3,496,673
Engineering %_ $3; 196,673/$33,3SG,12d
= 10.•{7
SA\VS L• ngincering Share = $7,833,559 ^` 10.47
= 5820,205
2. KO\V Cost
Segment Ler~pth Easement (ac) %S.\\CrS Use SA\C~S Cost
#I 110,000 75.76 38.90 $58,9.11
#2 18,000 12A0 O.UO 0
#3 96,000 GGJ2 52.94 $70008
Sub Total 5128,949
3. hliscellnneous Costs
Project Coordumtiou
Legal
General
TOTAL
$500,000
$150,000
S 1.500,000
$2,150,000
\lisccllancous
_ $2,150,000/$33,386,124
= 6.53 °/a
SA\\5 hGscellaneous Cost = $7,833,859 ~ 6.53
= 5511, SSO
r. SA\Y~S Pipeline Sbaee.
Capitol Cost $7,833,559
Enghtcering $820,205
RO\Ct 5128,949
nlisccllaucous. ~ 51$ 1 550
TOTAL 59,29.4,563
Friday, December 3, 2010 7:36:13 AM CT
~ __ ~"1
Subject: RC: Clarification on Allocations j`I'I ~~'~''~~"'r
Date: Friday, December 3, 2010 7:31:12 AM CT
From: John Winkler
To: Dan Jackson
On the first question on the original calculation for the 1909 and 2001 bonds, the $9.8 million was based on
my calculation of SAWS portion of the used and useful components of Iha system. So the answer is yes Ihey
will be using all of assets exclusively.
On the second question, Ilte $7 million for the storage tanks, that is Ilse total cost of Ilse new tanks. SAWS
will be using only a portion of those facilities. I will have to calculate to gel an accurate number but is would
say about 35% of the storage component will be fully used and useful to SAWS.
From: Dan Jackson [mallto:djackson@economists.cont]
Sent: Friday, December 03, 2010 7:26 AM
To: John Winkler
Subject: Clarlflcatlon on Allocations
Importance: High
John:
I have a question regarding the allocations of assets used and usehd [o SAWS that we discussed yesterday. On
the 1999 and 2001 bonds you had calculated that the value of assets used and useful to SAWS was about
$9,843,335 of the %51,040,000 total debt. Given the magnitude o(the volume of water SAWS will be
purchasing (greater than all other customers combined), is it fair to say that these $9.8 million in assets will be
used almost exclusively by SAWS, or will water purchased by the other entities also use these assets?
Same question with the 2010 bond Issue, where we determined that $7.0 million of the $23 million was for
stm age tanks used and useful to SAWS. Again, will SAWS almost exclusively use these tanks, or will water From
the other entitles also use these tanks?
Let me know. Thanks.
Dan V. Jackson
Managlny Director
Economisls.com
5500 Democracy Drive Sle. 130
Plano TX 75024
(972) 378-6588
(972) 378.8988 lax
(972) 998-0417 cell
dJackson c~ ecomm~isls.com
www.economisls.com
Skype: dan.v.jackson
Oovoo: danvJackson
Page 1 of 1
SCUCR'T7/S>/GUIN L0CALG0VL:RNA4CNTCORPORAT1ON
nl!,I3T SI;I2VIC1; SOIS'il'[ARS' OP'
51;12iES 2007 R1;rUNDING PLUS S~7 500 000 NI',\V IIONliV
resent. Less rllis rlns
YEAR OWSlmrding Serie52001 Refunded Series 2007 ReGnuling Series 2007 Mea' 3'0TAl.
70~Scu Debt Service Debl Sen~ice Debl Service S7 500 000 (p)
2007 3,056,110.00 974,951.26 961; 175.16 13,026.11 ),2SD,S~15:1I (b)
2008 3,055,573.13 I,i2G; 151.26 1,425,575.00 437,462.50 3,392,159.37
2009 3,058,075.76 1,526,451.26 1;122,575.00 435,162.50 3,392,365.00
2010 3,053,910.00 1,526,•151.26 1,424;175.00 •133,662.50 3,390,S9G.2~I
2011 3,055,286.25 1,526,451.26 I, 121,271.00 438,962.50 3,359,072.49
2012 7,057,343.75 1,509,926.26 1,707,175.00 73.1,162.50 3,388,754.99
2013 3,057,384.35 I,S 11,348.13 1,706,875.00 434,262.50 3,387
173.75
2014 3,050,146.25 1,502,010.00 1,701,075.00 -039,062.50 ,
3,358,573.75
2015 7,056,561.25 1,801,925.00 1,699,775.00 438,562.50 3,393,273.75
2016 7,056,161.25 1,500,625.00 1,697,873.00 •137,862.50 3,391,273.75
2017 3,053,611.25 1,793,375.00 1,690,475.00 436,962.50 3,337,673.75
2013 3,059,236.25 1,800,250.00 1,697,375.00 435,862.50 3,392,273.75
2019 3,052,917.50 1,795,381.25 1,693,475.00 434,562.50 3,355
073.75
2020 3,054,225.00 1,795,331.25 1,693,56250 437,556.25 ,
3,39D
262.50
2021 3,0.17,646.37 1,758,153.13 1,652,412.50 •135,631.25 ,
3,177
237A9
2022 3,043,133.73 1,759,937.51 1,635,206.25 437,951.25 ,
3
331
388.7.1
2023 3,050,813.12 1,790,075.13 1,636,977.50 •133,012.50 ,
,
3,382
68.1.99
2024 ,1,050,536.23 1,758,875.00 1,657,606.25 436,725.00 ,
3,385
992.50
2025 3,052,053.12 1,791,193.75 1,657,212.50 433,012,50 ,
3
336
08437
2026 3,095,265.62 2,575,265.63 2,473,650.00 433,575.00 ,
,
3
432
524.99
2027 3,094,381.25 2,574,83 L2G 2,469,700.00 434,137.50 ,
,
3,423
437.49
2028 3,095,331.25 2,575,331.26 2,470,225.00 435,6%5.00 ,
3;123
599.99
2029 3,096,346.57 2,376,3-06.88 2; 172,557.50 d37,W0.00 ,
3
430
537
49
2030 3,092,793.73 2,172,793.75 2,467,257.50 436,175.00 ,
,
.
J; 123; 162.50
2031 3,105,705.00 337,375.00 773,250.00 434,250.00 3,435
830.00
2032 3,109,765.00 837,375.00 732,350.00 •136,762.50 ,
3,4.11
502.50
2033 3,103,625.00 537,171.00 731,450.00 438,600.00 ,
441
3
700.00
2074 3,107,155.00 837,375.00 735;177.50 •134,875.00 ,
,
3
410
092.50
2035 3,109,965.00 337,775.00 734,312.50 435,587.50 ,
,
3,442;190.00
2036 3,096;175.00 3,096,175.00 2,991,21250 435,625.00 3
126
837
30
2037 3,096,393.75 3,096,393.75 2,997,662.50 434,937.50 ,
,
.
3
428
650
00
2035 3,099,487.50 3,099,487.SU 2,996,050.00 433,562.50 ,
,
.
3;134
612.50
2039 3,100,362.>0 3,100,362.50 2,998,150.00 •136,350.00 ,
3;134
500.00
2040 3,098,756.25 3,098,756.25 2,994,850.00 438,350.00 ,
3;133
200
00
2041 3,099,275.00 3 099,275.00 2,995921.00 434 562.10 ,
.
3,•130,437.50
107,633,266.57 67,592.259.49 64,362,413.06 14,362,819.56 119 191,125.30
(n) Iha new money portion is sized nl 57,690,000 to gcuemte 57,500,000 in rrojecl funds fa'the Cor romiion.
(h) This lolnl de bt sen~ice gives credit far the pccmed interest ol'5224,SS5 .
Finmminl ddrlsors /o /he Carporn/Ipn
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