EXHIBIT 2-B (2)
SUPPLEMENTAL FINANCING AGREEMENT
between the
MONTEREY PENINSULA WATER MANAGEMENT DISTRICT
and
PEBBLE BEACH COMPANY
supplementing (but
not superseding) the
WASTEWATER RECLAMATION PROJECT
FISCAL SPONSORSHIP AGREEMENT
Dated as of October 3, 1989
between the parties
(July 23October 10,
2003 version)
SUBJECT TO REVISION
SUPPLEMENTAL FINANCING AGREEMENT
This Supplemental Financing Agreement is entered into as of , 2003, by and between the Monterey Peninsula Water Management District, a California public agency (“MPWMD”), and Pebble Beach Company, a California general partnership (“PBC”).
RECITALS
A. MPWMD was created in 1977 and authorized to manage and regulate the use, reuse, and conservation of water on the Monterey Peninsula and the bond financing of related public works projects.
B. In
furtherance of this authority, in 1989 MPWMD adopted Ordinance No.
39, and in accordance with Ordinance No. 39, subsequently adopted Resolution
No. 89-21 approving a plan for the construction, financing, and operation of a
wastewater reclamation project and executed a Wastewater Reclamation
Project Fiscal Sponsorship Agreement with PBC dated as of October 3,
1989 (which, as amended, is referred to as the “Fiscal Sponsorship Agreement”),
and in the following years executed a
series of related agreements with the Carmel Sanitary District, succeeded
in all respects by now known as the
Carmel Area Wastewater District (“CAWD”), the Pebble Beach Community Services
District (“PBCSD”), and with the various users of recycled
water., and
C. iIn
1992, consistent with the Resolution and the Fiscal
Sponsorship Agreement, MPWMD issued Certificates of Participation
in the amount of $33.9 million to finance the design and construction of water
recycling facilities, designed and intended by all parties to
be capable of producing, from the secondary effluent emitted from CAWD’s
existing wastewater treatment plant, at least 800 acre feet per year of
recycled water suitable for irrigation of vegetated areas within the Del Monte
Forest on the Monterey Peninsula(“Recycled
Water Irrigation Areas”), and related
distribution system and irrigation systems, with the intention of “freeing up”
potable water that would otherwise be used to irrigate such Recycled Water
Irrigation Aareas
for other uses and purposes on the Monterey Peninsula.
D. The facilities
contemplated by and described in the Fiscal Sponsorship Agreement were
completed in 1994 and are operational (the “Original Project”), and the
financing plan specified in the Fiscal Sponsorship Agreement is in effect. PBC was granted a Water Entitlement by MPWMD
in the amount of 365 acre feet annually in the Fiscal Sponsorship Agreement,
and MPWMD issued to PBC on December 10, 1992 a Water Use Permit pursuant to
MPWMD Ordinance No. 39 evidencing such Water Entitlement. The parties have carried out and satisfied
to date all of their obligations under the Fiscal Sponsorship Agreement.
CE. The performance of the
Original Project has recycled water
facilities did not met the expectations perform
to the satisfaction of any of the parties either with regard to
quantity or quality due to a number of factors beyond the consideration [or
control] of any of the parties
participating in the Original initial recycled water Pproject. Prominent among these factors are the
salt-sensitivity of the dominant species planted in the greens of many of the
golf courses, inadequacy of the drainage facilities to conduct accumulated
salts away from the greens, smaller than anticipated amounts of secondary
effluent due to decreased flows of influent
to the CAWD wastewater plant (resulting in part to from consumers’
water conservation efforts), increased amount of salinity added by water
softening units (the demand for which increased as the source water became more
saline), increased amount of salinity in the recycled water
due to decreased influent flows
caused by water conservation efforts, internal wastewater plant
processes contributing additional salinity loading, the lack of sufficient data
concerning the composition of the secondary effluent produced by the CAWD
Wastewater Treatment Plant or concerning the water quality and water quantity
requirements for golf course irrigation, and deferring construction the
absence of any tank for seasonal
storage of recycled water.
DF. MPWMD has requested
that PBC is willing to assist, and MPWMD
desires that PBC is willing to assist, with the
implementation and financing of improvements to the
Expanded
Original Project (such improvements as
further defined herein being the “Project Expansion”) in
consideration of MPWMD’s agreement to a
financing plan therefor. Such financing
plan, as authorized by MPWMD Ordinance No. 109, and as specifically set forth in
this Agreement, provides that PBC shall have the right to sell and convey a
portion of its confirming entitlements to an aggregate of 380 acre
feet per year of potable water, some of which is in the form of Water
Entitlements to be dedicated to an
expended class of Benefited properties, for such consideration as PBC may
determine, with the proceeds of such sales and conveyances
to be devoted first to the Capital Costs of the Project Expansion and
thereafter to the costs of the Original Project and the remainder of
which is in the form of Water Use Permits actually issued, for use on property
in the Del Monte Forest (as further defined in Exhibit E [PBC
will need to assist in defining this area, perhaps by reference to the LUP]).
EG. This Agreement constitutes an integral
part of a joint financing arrangement among PBC, MPWMD, CAWD and PBCSD and
other entities to provide a reliable, high-quality recycled water supply for
irrigation of golf courses and other vegetated Recycled
Water Irrigation Aareas, and thereby to eliminate to
the maximum extent practicable the use of potable water for
irrigation of the golf courses and other vegetated areas in
the Del Monte Forest on the Monterey Peninsula.
NOW, THEREFORE, in consideration of the foregoing recitals of fact, and the covenants and representations and warranties set forth in this Agreement, the parties have agreed as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings set forth below.
The definitions set forth
below are the same as those set forth in the Fiscal Sponsorship Agreement for
such terms, except to the extent any such meanings are modified by Ordinance
No. 109 or herein and to the extent additional terms are defined
herein :
1.1 “Ancillary Project Costs” means net
revenues (gross revenues less allocable operation and maintenance costs and
administrative and general costs, as such terms are defined in accordance with
generally accepted utility practices), with respect to the potable water,
subject, from time to time, to the Water Entitlement or Water Use Permits,
which Cal-Am does not receive by reason of operation of the Project, all as
more fully described in the Service Agreement. Ancillary Such costs
shall not include any return on assets of Cal-Am which have been removed from the
water distribution system rate base by reason of the Project. Such Ancillary
cCosts
shall be reduced over time by net revenues received by Cal-Am by reason of
sales of potable Cal-Am water
(with
respect to the Benefited Properties)
following the Commercial Operation first
Ddate of
Project operation.
1.2 “Benefited Properties” means those
properties described on Exhibit “A” hereto within the Cal-Am service area ton
which a portion of the Water Entitlement applies (or did apply
before the issuance of a Water Use Permit) and upon which potable water may
be utilized either as authorized by a Water Use Permit
confirmed by this Agreement or upon issuance of a Water Use Permit authorizing
such use subsequent to this Agreement. All Benefited Properties are located in the
unincorporated portion of the Del Monte Forest (the area shown on Exhibit “B”)
except as otherwise noted in Exhibit “A.”
1.3 “Board” means the Board of Directors of MPWMD.
1.4 “COP Carrying Costs” means the following costs incurred with respect to the Certificates of Participation (“COP”)or additional certificates of participation or bonds: fees and expenses of trustees, remarketing agents, tender agents and paying agents, arbitrage rebate calculation fees, costs incurred in connection with renewals of the COP Letter of Credit or additional letter of credit (including COP, MPWMD and bank counsel fees and rating agency fees), fees for preparing or updating offering circulars, auditor or accounting fees, bond counsel and other counsel fees generally, and other similar ordinary and necessary costs, incurred with respect to the Certificates of Participation or additional certificates of participation or bonds.
1.5 “COP Documents” means the COP documents and the terms and conditions of all COP issuance documentation, including, without limitation, the authorizing indenture or resolution, lease or installment sale agreement, purchase agreement and COP Letter of Credit.
1.6 “COP Requisite Credit Rating” means a credit rating in one of the rating categories of AAA or AA or Aaa or Aa without reference to plus or minus subcategories, from either Moodys or S & P, respectively, for certificates of participation or bonds issued by public agencies.
1.7 “Certificates of Participation” and
“COP” each mean the Certificates of Participation issued by MPWMD in
1992 in the amount of $33.9 million to finance the Capital Costs of the
Original Project, as more fully described in Section 3. 2. 1 hereof.
1.8 “Business Day” means any weekday which is not a Federal or California state holiday.
1.9 “Cal-Am” means the California American Water Company, a California corporation, and its successors and assigns.
1.10 “Capital Costs,” as applied to the Project or any portion thereof, means all or any part of:
(a) the cost of acquisition by CAWD or PBCSD of
all lands, structures, real or personal property, rights-of-way, franchises,
easements, and interests acquired or used for the Project, inclusive of fees
and commissions for acquisition;
(b) the cost of construction of the Project, including, without
limitation, demolition, modification, replacement or renovation of existing
structures, facilities, fixtures or equipment essential to the construction and
operation of the Project; cost of improvements and materials; direct and
indirect Public Participant construction and administration expenses properly
allocable to the Project in accordance with generally accepted accounting
principles; cost of painting, decorating, furnishing and landscaping;
contractor and subcontractor profit; and costs related, by reason of the
Project, to plumbing, mains, tanks, or pipes which are modified, replaced or
renovated, whether owned by Public Participants or others;
(c) the cost of demolishing or removing any buildings, fixtures, equipment, or structures on land so acquired, including, without limitation, the cost of acquiring any lands to which such buildings or structures may be moved;
(d) the cost of all new machinery, piping, equipment and furnishings
and the lesser of (i) the fair market value, or (ii) depreciated value for
purposes of the applicable rate base, of machinery, piping, equipment and
furnishings made obsolete or unusable to Cal-Am, or any
of the Public Participants, or others by reason of the Project
to the extent not replaced by the Project;
(e) costs of selling and issuing the Certificates of Participation, including, without limitation, the underwriter's discount and any other applicable financing charges;
(f) interest on any funds advanced to permit payment of any of the
Capital Costs prior to, during, and for a reasonable period after completion of
the construction of the Project as determined by PBC and MPWMD,
including, without limitation, capitalized interest on the Certificates of
Participation;
(i) the cost of architectural, engineering, planning, environmental
analysis, financial, accounting, auditing and legal services, plans, specifications,
estimates, administrative expenses, permits, fees, adverse claims, personnel
and overhead costs (both direct and indirect, to the extent properly
allocable to the Project in accordance with generally accepted accounting
principles), and other expenses necessary or incident to determining the
feasibility of construction of the Project or incident to the planning,
construction, acquisition, or financing of any portion of the Project,
including, without limitation:
(1) payment
during the construction
period of the premiums for all title and other insurance, bonds, or
undertakings required to be obtained and maintained with respect to any part of
the Project, to the extent such amounts are not paid by any contractor who
constructs or installs any portion of the Project;
(2) payment
of the taxes, assessments and other fees or charges, if any, that may become
payable during the construction period with respect to any portion of the
Project, or reimbursements thereof; and
(3) payment
of expenses incurred
in seeking to enforce any remedy against any contractor or subcontractor in
respect of any default under a contract relating to the acquisition,
construction or installation of any portion of the Project.
(4) payment
of any expenses
incurred concerning
asserted deficiencies in the Project and related matters beginning on January
1, 1995 in April 2002, and
continuing through the drafting, negotiation, and execution of any and all
agreements necessary or desirable to implement the design, construction, operation,
and maintenance of the Expanded Project Expansion and any
modifications thereof or thereto, to the
extent that corresponding expenses concerning the implementation of the
Original Project were treated as reimbursable.
(5) payment
of any expenses
incurred to track and
record changes in the Water Entitlements following issuance of new Water Use
Permits or Water Permits, to verify water use capacity pursuant to Subsection E
of MPWMD Rule 23, to otherwise monitor compliance with or to
enforce actual water usage
pursuant to such laws, ordinances, and regulations as are generally applicable
to persons actually using water from the Cal-Am water distribution systemWater Use
Permits, to determine from time to
time the amount if any remaining in the Water Entitlement, and to make
such determinations
concerning adjustments, and to
implement the adjustments, to Water Use
Permits (or Water Permits issued pursuant to
MPWMD Rule 23.5) that may be required in 2075.
1.11 “Commercial
Operation Date” means the
date on
which the Project is capable of operating at its designed capacity on a
continuing basis, as determined by the Management Committee; in good faith and
on any reasonable basis, after all required testing of the Project is
completed, as evidenced by the issuance by the Management Committee of a certificate
setting forth its determination of such date“Completed” with
respect to the Project Expansion shall mean that (1) all required permits or
other approvals have been obtained, (2) all construction activities for the
advanced treatment components (being added to the tertiary treatment plant
facilities of the Original Project), Forest Lake Reservoir, and all treatment,
and distribution facilities associated therewith, have been completed and
tested in accordance
with their respective approved plans, permits and other approvals, (3) Forest
Lake Reservoir has been filled to capacity with “Recycled Water” suitable for
irrigation of all portions of the Recycled Water Irrigation Areas without the
addition of any
potable water thereto and otherwise meeting all regulatory and health standards
for such usage, and (4) all portions of the distribution system are capable of
delivering such Recycled Water to the Recycled Water Irrigation Areas.
1.12 “CAWD” means the Carmel Area
Wastewater District, formerly the Carmel Sanitary District, a public agency.
1.13 “Emergency” means one or more a sudden,
unexpected occurrences, beyond the
reasonable control of the entity
having operation and maintenance responsibilities of a particular facility comprising
part of the ProjectCAWD and/or
PBCSD, and not
resulting from regular or planned maintenance, repair, or replacement
activities, which occurrence causes the severe reduction or total loss of
production, distribution, or storage of that
interrupt the supply of Recycled Water to the
Recycled Water Irrigation Areas, demanding immediate and diligent action by such
entity to
restore such
supplyprevent or mitigate the interruption or cessation of
Recycled Water service. Under no circumstances
shall an Emergency last longer than the period of time reasonably required to
promptly and diligently complete the repair or replacement activitiesNotwithstanding
the preceding sentence, such occurrence(s) shall only comprise an Emergency for purposes of
this Agreement for a maximum of 30 days within any 180 consecutive day period.
1.14 “Del
Monte Forest” means the area of
unincorporated Monterey County … as described and/or depicted on Exhibit
“E.”
[PBC will need
to assist in defining this area, perhaps by reference to the LUP]
1.15 “Financial
Commitment”
means the commitment of PBC, as the
Fiscal Sponsor, or any subsequent Fiscal Sponsor, to assume and guarantee
payment of (1) the Capital Costs of the Project (including the payment of the principal
of and interest on the Certificates of Participation or any bonds or other
obligations issued by any Public Participant to finance such costs), and (2)
the Net Operating Deficiencies of the Project until the Certificates of
Participation (and any
bonds or other obligations issued by any Public Participant to finance such
costs) have been paid in full (or for any shorter periods as permitted by
MPWMD), and (3) payment of all Ancillary Project Costs to raise the
funds necessary to pay for the design and construction of the Expanded Project and to pay
all other capital, operating and financing costs thereof, all in the manner
described in Section 3.1 hereof, and to continue to provide for payment of (a)
the Capital Costs of the Project, (b) the Net Operating Deficiencies of the
Project, and (c) the Ancillary Project Costs, all in the manner described in
Sections 3.2.2 through 3.2.5 hereof.
1.16 “Financial
Institution Requisite Credit Rating” means a credit rating, with
respect to long-term unsecured obligations of a corporation, in one of the rating
categories of AAA or AA or Aaa or Aa, without reference to plus or minus
subcategories, from either Moodys or S & P, respectively.
1.17 “Griffin” means the Hester Hyde Griffin Trust, dated October 31, 1988.
1.18 “Interest Reserve” means the amount of interest on the Certificates of Participation or additional certificates of participation or bonds required to be covered by the COP Letter of Credit or additional letter of credit, respectively, in order to obtain and maintain the COP Requisite Credit Rating.
1.19 “Interruption,” for the purposes
of Rule 23.5 and Ordinance No. 109, means an interruption for longer than {
[hours] [days]} in the supply of Recycled Water to a Recycled Water
Irrigation Area. The use of potable water
for irrigation of a Recycled Water Irrigation Area shall not extend for any
longer than the period of time reasonably required to promptly and diligently
complete repair or replacement activities
necessary to restore Recycled Water service except as determined in accordance
with subsection F of MPWMD Rule 23.5Not Used.
1.20 “Issuer,” with regard to the Certificates of Participation issued in 1992, means MPWMD, and with regard to any refunding certificates of participation or bonds, means the Public Participant which issues the refunding certificates of participation or bonds.
1.21 “Lohr” means J. Lohr Properties, Inc., a California corporation, in conjunction with the Winifred H. Braun Charitable Annuity Trust, dated December 1, 1980.
1.22 “Management Agreement” means the agreement between CAWD and PBCSD dated , 19 which established and allocated the rights and responsibilities of CAWD and PBCSD with respect to the construction, ownership and operation of the Original Project.
1.23 “Management Committee” means a
committee, composed of (a) two representatives of CSAWD, (b) two
representatives of PBCSD, and (c) so long as PBC is required to
deliver a NOD Letter of Credit, as defined in Section 3.2.3 hereof, one
representative of PBC, and (d) one, non-voting representative of IRWUG (to
become a voting member after the Certificates of Participation are fully paid
and retired). The Management Committee which
will, pursuant to the Supplemental
Construction and Operation Aagreement
described in Section 1.35(a) hereof, cause to be developed, and approve, a
budget for, and direct budgeting for and the management,
construction and operation of, the Project, all as more fully
described in such agreement.
1.24 “Moodys” means Moody’s Investors Service Inc.
1.25 “Net Operating Deficiency,” as applied to the Project, means, for any fiscal year, or portion thereof, of the Public Participant operating the Project, the amount by which the Operation and Maintenance Expenses for such period exceed the Operating Revenues for such period.
1.26 “Recycled Water Irrigation Areas”
means the golf courses and other recycled water
irrigation vegetated areas located within the Del
Monte Forest that now or in the future may be irrigated with Recycled Water
supplied by the Projectnamed on Exhibit “B”
hereto.
1.27 “Operating Reserve” means a reserve maintained
for the purpose of paying for operations, consisting of five
years (or such shorter period as may be requested by PBC) of projected Net Operating
Deficiencies, for providing working capital,
and paying for routine and extraordinary
repairs and replacements.
1.28 “Operating
Revenues,” as applied to the Project, means all income, rents, rates, fees,
charges and other moneys derived by the Public Participants from the ownership
or operation of the Project, including, without limitation, (a) all income,
rents, rates, fees, charges or other moneys derived from the sale, furnishing
and supplying of Recycled Water (or from
potable water supplied in lieu thereof (but only to the extent
the use of potable water is permitted under Ordinance No. 109in an
Emergency as defined herein),
(b) insurance and condemnation proceeds resulting from damage to or destruction
of any of the Project’s facilities or from the condemnation of any of such
facilities, and (c) interest earned on all revenues referenced in (a) or (b)
above, on the Operating Reserve or on any other fund or account relating to the
Project (excluding any amounts required to be rebated to the United States
pursuant to Section 148 of the Internal Revenue Code); provided, however, that the such term
“Operating
Reserve” shall not include customers’ deposits or any other
deposits subject to refund until such deposits are no longer subject to refund
and have become the property of one of the Public Participants.
1.29 “Operation and Maintenance Expenses,”
as applied to the Project, means all expenses and costs of management,
operation, maintenance and repair of the Project, including; without limitation,
payments to be made by the Public Participants under agreements with Cal-Am for
the purchase of potable water and all incidental costs, fees and expenses
incurred for such purpose properly chargeable to the Project in accordance with
generally acceptable accounting principles, subject, however, to
the limitation with respect to depreciation, amortization and obsolescence
described in Section 3.2.8(a) hereof.
1.30 “Ordinance”
means Ordinance No. 109 as adopted by the Board on
,
2003, amending superseding and
replacing Ordinance No. 39, as approved by the Board on February
13, 1989, and as subsequently amended.
1.31 “PBCSD” means the Pebble Beach Community Services District, a public agency.
1.32 “Project” means the tertiary
treatment facilities, distribution facilities, and storage facilities used since 1995 to create, distribute, and
store Recycled Water, comprising the Original Project as defined
in subsection 1.3.2 (a) hereof, and the reverse osmosis
desalination unit located at the CAWD treatment
plant site and
the refurbished Forest Lake Reservoir located within PBCSD, together comprising
the Expanded Project Expansion as
defined in subsection 1.3.2 (b) hereof.
(a) The “Original Project” means and consists of (1) a tertiary treatment facility at the present CAWD treatment plant site, designed to produce at least 800 acre feet per year of disinfected recycled water suitable for irrigation of the Recycled Water Irrigation Areas, as more specifically described on Exhibit “C” hereto, (2) a distribution system which is capable of distributing the recycled water from the facility to a point of distribution in the Del Monte Forest for further distribution to the Recycled Water Irrigation Areas, as more specifically described on Exhibit “C” hereto, and (3) recycled water irrigation systems on each of the Recycled Water Irrigation Areas.
(b) The “Expanded
Project Expansion” means and consists
of the addition of advanced treatment components reverse
osmosis desalination unit to the tertiary treatment
plant
facilities of the Original Project, to produce thereby
producing “Recycled Water” as defined in section 1.34 herein, and the addition of storage,
treatment, and distribution facilities resulting from
refurbishment of at or associated with the Forest Lake
Reservoir located within the
Del Monte Forest and owned by PBCSD, as such desalination
unit and other facilities are more specifically described on Exhibit “D” hereto
[PBC to identify any
additional components (e.g.
additional distribution facilities) and to provide Exhibit
“D”].
1.33 “Public Participant” means any one or more of the following: MPWMD, CAWD, PBCSD, or any successor public agency, including, without limitation, any joint powers agency formed by one or more of such agencies.
1.34 The
meaning of the term “Recycled Water” depends upon whether or not the
Project Expansion is Completed:
(a) Before the Project Expansion
is Completed, “Recycled Water” means water originating from
the tertiary treatment facilities of as secondary effluent
produced by the CAWD wastewater treatment plant.
(b) After the Project Expansion is Completed, “Recycled Water” shall mean water produced by the
Project and receiving further treatment so as to be
suitable for irrigation of all portions of the Recycled Water
Irrigation Areas without the addition of any potable water thereto (except during an
Interruption for an aggregate of 30 or fewer days within any 180
consecutive day period in the case of an Emergencyas defined
herein)
and otherwise meeting all regulatory and health standards for such usage.
1.35 “Related Agreements” means the
agreements, in form and substance satisfactory to PBC and MPWMD, between or
among two or more of CAWD, PBCSD, MPWMD, Cal-Am, an owner of one or more of the
Recycled Water Irrigation Areas and PBC, as the case may be, as
contemplated by the Ordinance and this Agreement, or otherwise reasonably
necessary to implement the Project, and addressing all matters related to the
Project as the parties may deem necessary or advisable, including, without
limitation, the following agreements:
(a) Fiscal Sponsorship
Agreement between MPWMD and PBC;
(b) the Supplemental Construction and Operation Agreement Among PBC, MPWMD and CAWD/PBCSD Relating to the Construction and Operation of the Project - the agreement pursuant to which MPWMD will be entitled to own all Recycled Water produced by the Project in exchange for the payment of all Capital Costs and Net Operating Deficiencies of the Original Project; CAWD and PBCSD will undertake to construct and manage the Project; and PBC will be given certain rights to review and participate in decisions with respect to such construction and management.
(cb)
Sale Agreements Between MPWMD and Owners of Recycled Water Irrigation Areas -
the long-term sale agreement with respect to the sale and delivery of the
Recycled Water to the Recycled Water Irrigation Areas.
(d) Specifically excluded from the
definition of “Related Agreements” are 1.36 “Existing Agreements” includes,
without limitation, the following agreements:
(ia)
“Service Agreement” means the agreement dated , 19 between Cal-Am and PBC pursuant to
which Cal-Am agreed to reserve the necessary water supply and to serve the
Benefited Properties and PBC agrees to pay the Ancillary Project Costs.
(iib)
“Delivery Agreement” means the agreement dated ,
19 among CAWD or CAWD/PBCSD,
MPWMD, and Cal-Am - the agreement which defines the rights and responsibilities
of each of the parties with respect to the operation and maintenance of all distribution
systems for Recycled Water, distribution of the Recycled Water to the users
thereof, and the billing and collecting of the charges for use of the Recycled
Water.
1.36 “Supplemental Financial Commitment” means the funds that PBC will raise through the sale of such portions of its Water Entitlement pursuant to Subsection C of Section Three of Ordinance No. 109 (combined with any funds which may be independently committed by PBC, IRWUG, CAWD, PBCSD, or any other entity willing to commit funds to the Capital Costs of the Project Expansion). Pursuant to Subsection E of Section Three of Ordinance No. 109, any proceeds received by PBC from the sales of portions of PBC’s Water Entitlement pursuant to Subsection C thereof shall be applied to payment of the Capital Costs of the Project Expansion (including repayment of any funds independently committed by PBC, IRWUG, CAWD, PBCSD, or any other entity as a part of the Supplemental Financial Commitment), and any proceeds from such sales in excess of the Capital Costs of the Project Expansion shall be applied to the Net Operating Deficiencies of the Project or the Capital Costs of the Original Project.
1.37
“S & P” means Standard & Poor’s
Corporation.
1.38 “Terminate” means the withdrawal, without formal MPWMD
action,
of authority to act as previously provided by a valid permit or water service
connection, whichever is applicable.
1.39 “Water Entitlement” means an
aggregate of 380 acre feet per year (less the aggregate amounts of Water Use Permits
actually issued at
any particular time) of “freed up” potable
water which is has been dedicated (as evidenced
by Water Use Permits issued pursuant to Ordinance No. 39, the Resolution, and
the Fiscal Sponsorship Agreement) to land within
the jurisdiction of MPWMD for the purpose of provided
for the payment of the Capital Cost, Ancillary Project Cost, and Net Operating
Deficiencies of the Project. Ordinance
No. 109 provides a process by which a portion of the Water Entitlement held by
PBC may be separately sold and conveyed and thereby be dedicated to
other land within the jurisdiction of MPWMD with the proceeds therefrom to be
applied to the costs of the Project Expansion and the Original Project as more
specifically described thereinfuture use on
the Benefited Properties located within the Del Monte Forest as more fully
described in Section 4. 1 hereof.
1.40 “Water
Permit” means a permit issued by MPWMD authorizing the expansion/extension of
the Cal-Am water distribution system pursuant to a Water Entitlement (as
evidenced
by a Water Use Permit issued pursuant to MPWMD Rule 23.5). Upon compliance with Subsection F of Rule
23.5, MPWMD shall by non-discretionary ministerial action, cause the present
Expansion/Extension of the Cal-Am water distribution for Benefitted Properties. A Water Permit shall take the place of and
be used instead of any Expansion/Extension Permit (as defined pursuant to Rule
23) upon any Benefited Property as relates to the use of a specified portion of
the Water Entitlement.
1.41 “Water
Use Permit”
means a writing from MPWMD which
evidences the dedication of the Water Entitlement as a present vested
property right enuring to the use and benefit of one or more of
the Benefited Properties. A Water Use Permit shall, by non-discretionary
ministerial action, cause the present expansion/extension of the Cal-Am water
distribution system for the Benefited Properties, upon designation of the
location of use, and upon payment of applicable connection fees and charges, by
the owner thereof, as more fully described in Section 4.3 hereof.
A Water Use Permit shall take the place of, and be used in lieu of, any
expansion/extension permit upon any Benefited Property as relates to
the use of any portion of the Water Entitlement.
2. The Project
Expansion Roles of Participants and Use of Recycled Water .
2.1 Description
“Project
Expansion” refers generally to the addition of
advanced treatment components to the treatment facilities of the Original
Project to produce “Recycled Water,” and the addition of storage, treatment, and
distribution facilities at or associated with the Forest Lake Reservoir located
within the Del Monte Forest and owned by PBCSD. [further
description to be provided by PBC, CAWD, or PBCSD]
2.2 Respective Roles
of Participants.
(a) In connection with the
continued operation of the Original Project:
(i) As
further specified in the Fiscal Sponsorship Agreement, MPWMD shall
continue to:
(A) own
the Recycled Water produced by the Original Project,;
shall
[CAWD
& PBCSD will probably desire limitations on this ownership]
(B) cause
the Recycled Water to be sold and distributed to the owners of the Recycled
Water Irrigation Areas and other users,;
shall
(C)
bill and collect from the owners of the Recycled Water Irrigation Areas and
other users of the Recycled Water the purchase price of such water; MPWMD shall continue to
(D) use
the revenues from such Recycled Water sales to repay the
Certificates of Participation issued to finance the Original Project with
the revenues from such Recycled Water sales (or by drawing
down the COP Letter of Credit, as required if such revenues are insufficient
for such purpose),; and and
shall continue to
(E) pay any Net Operating Deficiencies from the Operating Reserve established for this purpose or from the NOD Letter of Credit, as required if the Operating Reserve is insufficient for such purpose.
(ii)
As
further specified in the Supplemental
Construction and Operation Agreement, CAWD
and PBCSD shall continue to own, and operate, and
maintain the Original Project.
(b) In connection with the construction and operation of the Expanded Project:
(i) PBC shall, through sales of
portions of its potable water entitlement (to individual Del Monte Forest
residential property owners who have agreed to invest in the Project) in
accordance with section 3.2 of this Agreement and the Ordinance,
raise the funds necessary to pay for the design and construction of the
Expanded Project and to pay all other capital, operating and financing costs
thereof. All such funds shall be held
in a Project Escrow Account set up by CAWD, PBCSD, and PBC and will be used
solely to pay costs associated with the Expanded Project as
further described in section 3.2 of this Agreement and the Ordinance.
(ii) MPWMD shall:
(A) own
the Recycled Water produced by the Expanded Project,;
[CAWD
& PBCSD will probably desire limitations on this ownership]
(B) shall
cause the Recycled Water to be sold and distributed to the owners of the Recycled Water Irrigation Areas
and other users,;
shall
(C) bill
and collect from the owners of the Recycled Water Irrigation Areas and other users of the recycled water
the purchase price of such Recycled Water.: MPWMD shall use the revenues from such
Recycled Water sales to
(D) repay
the Certificates of Participation issued to finance the Original Project with
the revenues from such Recycled Water sales (or by drawing
down the COP Letter of Credit, as required if sales revenues are insufficient
for such purpose),; and
shall
(E) pay any Net Operating Deficiencies from the Operating Reserve established for this purpose or from the NOD Letter of Credit, as required if the Operating Reserve is insufficient for such purpose.
(iii) As further specified in the Supplemental
Construction and Operation Agreement, CAWD and PBCSD shall
construct, own and operate the Expanded
Project Expansion in conjunction with their
operation of the Original Project, all as
further described herein and in
the agreements referenced herein.
2.2 Use of Recycled Water.
MPWMD shall sell Recycled Water to each of the owners of the Recycled
Water Irrigation Areas in such quantities as each such owner shall require for
irrigation purposes, from time to time, in lieu of the potable water previously
utilized by such Recycled Water Irrigation Areas for irrigation purposes, both
before and after the Original Project, all as more fully described in the
respective Sale Agreement between MPWMD and such owner. In addition, the owner of each Recycled
Water Irrigation Area shall have a pro-rata right-of-first-refusal with respect
to the purchase of surplus Recycled Water (Recycled Water produced by the Expanded
Project Expansion in excess of the
requirements of the Recycled Water Irrigation Areas) for use on its Recycled
Water Irrigation Areas.
So long as the
Financial Commitment is in effect, Aall
Recycled Water sold for use on the Recycled Water Irrigation Areas shall be
sold at charges which are not in excess of Cal-Am’s charges for potable water,
in similar quantities for similar uses and to similar users, from time to time,
except as the owners of the Recycled Water Irrigation Areas may agree in
writing otherwise. After
the expiration of the Financial Commitment of the Fiscal Sponsor, the rates
and charges for Recycled Water shall be sufficient
to maximize payment for Operation and Maintenance Expenses and Capital Costs of
the Reclamation Project, subject to the limitation set forth in Water Code
section 13550 that the price for Recycled Water shall be comparable to the cost
of supplying potable domestic water except as the owners
of the Recycled Water Irrigation Areas may agree in writing
otherwise.
3. Financing
of Expanded Project and Original the Project
3.1 Financing
of Expanded Project. PBC shall, through sales of portions of its
potable water entitlement (to individual Del Monte Forest residential property
owners who have agreed to invest in the Project), raise the funds necessary to
pay for the design and construction of the Expanded Project and to pay all
other capital, operating and financing costs thereof. All such funds shall be held in a Project Escrow Account set up
by CAWD, PBCSD, and PBC and will be used solely to pay costs associated with
the Expanded Project.
3.2 Financing
of the Original Project. MPWMD selected
PBC as the Fiscal Sponsor pursuant to Part II of Ordinance No. 39 and granted
the Water Entitlement (as described in more detail in Section 4 of this
Agreement) based upon the irrevocable commitment of PBC to
underwrite, be responsible for, assure and guarantee the full payment of the
Financial Commitment (Capital Costs and Net Operating Deficiencies and
Ancillary Project Costs of the Original Project as set forth in the Fiscal
Sponsorship Agreement. In 1992, MPWMD issued
Certificates of Participation in the amount of $33.9 million to finance the
design and construction of the Original Project. MPWMD and
PBC shall continue performing their respective obligations under the Fiscal
Sponsorship Agreement, which have the effect of securing the
Certificates of Participation as set forth in this
section 3.2.
3.2 Financing of the
Project Expansion
(a) Addition
of new Benefited Properties The
parties primarily involved in the planning of the Project Expansion (CAWD,
PBCSD, PBC, and IRWUG) have conferred with MPWMD and have concluded that the
most effective means of financing and implementing of the Project Expansion
without public funds is to expand the scope of the Benefited Properties within
the Del Monte Forest, and to allow PBC, on terms and conditions set forth in
the following Subsections of
this Agreement, to separately sell and convey portions of its
existing Water Entitlement solely for dedication to the Benefited Properties
(as defined in this Ordinance) not owned by PBC as of the date that this
ordinance is adopted. PBC will devote
and apply the proceeds of such sales and conveyances to the costs of the
Project Expansion and the Original Project as more specifically described in
Subsections 3.2(d) and 3.2(e) of this Agreement.
(b)
Authorization
for PBC to Sell and Convey PBC’s Water Entitlement In recognition of PBC’s
Supplemental Financial Commitment concerning the Project Expansion through the
sale of portions of its Water Entitlement (subject to the terms and conditions
specified in the Ordinance and in MPWMD Rule
23.5), PBC is hereby authorized to separately sell and convey to other owners
of land within Del Monte Forest, for such consideration and upon such terms and
conditions as PBC in its discretion may determine, such portions of its Water
Entitlement as it may choose, provided that no such conveyance shall be
effective unless and until PBC has provided the Supplemental Financial
Commitment as described in Subsections (d) and
(e) of this Section 3.2; and
provided further that each portion of the PBC Water Entitlement thus
conveyed shall be subject to the conditions set forth in
section 4.5 of this Agreement and the Ordinance.
(c) Good
Faith Efforts and Accounting
for Proceeds PBC
will use its good faith efforts to sell such portions of its Water Entitlement
pursuant to this Section 3.2 as
PBC in its discretion may determine to raise
the funds necessary to cover the Capital Costs of the Project Expansion. At the end of each month after the
effective date of this Ordinance, PBC shall report to MPWMD, in a manner that
shall not adversely impact its continuing ability to sell such portions of its Water Entitlement
pursuant to this Section 3.2 and the Ordinance, on
PBC’s progress in raising the Supplemental Financial Commitment.
(d) Application
of Proceeds All proceeds received
by PBC from any separate sale or conveyance of a portion of PBC’s Water
Entitlement as described in Subsection C of this Section Three shall be used to
pay for, in the first instance, the Capital Costs of the Project Expansion. Any proceeds from such
sales in excess of the Capital Costs of the Project Expansion shall be used to
pay the Net Operating Deficiencies of the
Project or the Capital Costs of the Original Project.
(e) Providing
the Supplemental Financial Commitment The
Capital Costs of the Project Expansion are currently estimated as of the date
of this Agreement at $22 million but may exceed this estimated amount. At such
time as the proceeds received by PBC for the separate sale of portions of its
Water Entitlement pursuant to Subsection C of this Section Three (combined with
any funds which may be independently committed by PBC, IRWUG, CAWD, PBCSD, or
any other entity willing to commit funds to the Capital Costs of the Project
Expansion) which funds are
collectively called the “Supplemental Financial Commitment,” are, in the
judgment of PBC, sufficient to pay for the Capital Costs of the Project
Expansion, and CAWD and PBCSD each concur in writing that the Supplemental
Financial Commitment is available for their use and that each is prepared
forthwith to commence construction of the Project Expansion, PBC will give
notice to MPWMD that the Supplemental Financial Commitment has been provided,
together with evidence of CAWD’s and PBCSD’s respective intent to forthwith to commence construction
of the Project Expansion.
(f) Effect
on Existing Rights Nothing
in this section 3.2 shall affect the right and ability of PBC to use and apply,
on Benefited Properties owned by PBC as of the date that the Ordinance
is adopted, such quantity of PBC’s Water Entitlement as has not been sold and
conveyed by PBC pursuant to this Section 3.2 and the Ordinance Three. PBC may sell and convey a parcel of land
that it owns together with a portion of PBC’s remaining Water Entitlement
without being required to apply any consideration received therefor to the
Supplemental Financial Commitment further described in Subsections I and J of
this Section Three. However, as a
condition for the preceding sentence, PBC shall provide such information as is
necessary for MPWMD to demonstrate that no money or other valuable
consideration has been separately given or received for the portion of the
Water Entitlement conveyed with the land (other than reimbursement for the MPWMD
Rule 24 connection fee or other Cal-Am or MPWMD
fees or charges paid by PBC).
3.
2. 1 Certificates of Participation.
MPWMD has issued Certificates of Participation (the interest on which is
currently excludable from income for Federal income tax purposes) for the
purpose of financing the Capital Costs of the Original Project. The maturity
date of the Certificates of Participation is 30 years from the closing of the
sale thereof. The Certificates of Participation bear interest on a variable
rate basis, and have other terms and conditions approved in writing by PBC and
compatible with the maintenance of the COP Requisite Credit Rating. Each COP
Document prepared or provided by MPWMD or PBC shall be submitted to MPWMD and
PBC for their respective review and comment a reasonable number of days prior to
such COP Document becoming effective or being distributed or delivered in
connection with the offering of the Certificates of Participation. MPWMD and
PBC shall each have the right to approve each of the COP Documents not prepared
or provided by it solely for the purpose of ensuring that such COP Document is
not inconsistent with the terms and conditions of this Agreement or any of the
Related Agreements and is in compliance with applicable law. The underwriter
for the Certificates of Participation and all costs of issuance thereof shall
be subject to the prior written approval of PBC, which approval shall not be
unreasonably withheld. Disbursement of Certificate of Participation proceeds
shall continue to be limited to .payment of authorized Capital Costs of the
Project, the establishment of the Operating Reserve and the funding of a debt
service reserve to be held under the trust indenture for the Certificates of
Participation.
3.2.2 COP Letter of Credit. PBC
has provided and shall continue to provide for payment of the principal amount
of, and interest on, the Certificates of Participation by delivering to MPWMD,
on or before the closing with respect to the sale of the Certificates of
Participation, a renewed letter of credit (the “COP Letter of Credit”) in the
amount of the principal amount of the Certificates of Participation plus the
Interest Reserve. The COP Letter of Credit shall be issued by a banking or
other financial institution, the long-term unsecured obligations of which are
rated within the Financial Institution Requisite Credit Rating. The terms and
conditions of the COP Letter of Credit, as well as its payment provisions,
whether standby or direct pay, shall be adequate to obtain the COP Requisite
Credit Rating for the Certificates of Participation, and shall otherwise be
reasonably acceptable to each of PBC and MPWMD and not inconsistent with this
Agreement or any of the Related Agreements.
3.2.3 Net
Operating Deficiencies Letter of Credit. PBC has provided and
shall continue to provide for the payment of projected Net Operating
Deficiencies, as determined in the manner described in Section 3.2.8(a) hereof,
in excess of the Operating Reserve, by delivering to MPWMD a renewed letter of
credit, in the amount of such excess (the "NOD Letter of Credit").
The NOD Letter of Credit shall be issued by a banking or other financial
institution, the long-term unsecured obligations of which are rated within the
Financial Institution Requisite Credit Rating, and shall otherwise include such
terms and conditions as are reasonably acceptable to each of PBC and MPWMD and
not inconsistent with this Agreement or any of the Related Agreements. PBC
shall be required to deliver a NOD Letter of Credit with respect to each year
for which a Net Operating Deficiency has been projected within 30 days after
its receipt of a written notice from the Management Committee setting forth
such projected Net Operating Deficiency. Each NOD Letter of Credit shall be in
the amount of the projected Net Operating Deficiency for the year with respect
to which it is delivered. Each NOD Letter of Credit shall have a term which
expires 90 days after the end of the year with respect to which it is
delivered. Except as provided in Section 3.2.6 hereof, PBC shall be obligated
to provide a NOD Letter of Credit pursuant to the terms of this Section 3.2.3
so long as the Certificates of Participation remain outstanding. In the event
PBC is not obligated to provide a NOD Letter of Credit for any year, MPWMD
shall promptly thereafter cause the beneficiary under the NOD Letter of Credit
to return the NOD Letter of Credit to PBC.
3.2.4 Letters of Credit. The
COP Letter of Credit and the NOD Letter of Credit (collectively, the “Letters
of Credit”) shall be irrevocable and unconditional and shall be renewable at
such intervals (but in any event not less than one year) as determined by PBC.
Each of the Letters of Credit shall provide that the beneficiary of such Letter
of Credit (or its designated representative) may draw upon it in the event PBC
does not provide such beneficiary with written confirmation of its renewal, in
the case of the COP Letter of Credit, or of the issuance of a new Letter of
Credit, if applicable, in the appropriate amount, in the case of the NOD Letter
of Credit, upon its expiration, from the issuing financial institution at least
30 days prior to its expiration. Except as provided in the immediately
preceding sentence, the beneficiary under a Letter of Credit (or its designated
representative) may draw on such Letter of Credit only to the extent necessary
to ensure that, in the case of the COP Letter of Credit, the principal amount
of, and interest on, the Certificates of Participation is timely paid and, in
the case of the NOD Letter of Credit, any Net Operating Deficiency is timely
paid. Each renewal of the COP Letter of
Credit need only be in an amount equal to the then unpaid principal balance of
the Certificates of Participation plus the Interest Reserve. Notwithstanding
any implication to the contrary herein, prior to any proposed draw on any
Letter of Credit, such beneficiary shall, in reasonable anticipation of the
need to draw on such Letter of Credit, provide PBC with written notice of its
intention to draw on such Letter of Credit, which notice shall set forth the
amount of such draw and the date of such draw, at least ten days prior to such
draw, and PBC shall have the right to pay to such beneficiary a sum equal to
the amount of such draw, at least two Business Days prior to such date, in lieu
of such beneficiary (or its designated representative) making such draw. PBC
shall only be required to provide one COP Letter of Credit and one NOD Letter
of Credit at a time, with the appropriate beneficiaries thereof to be
determined by the Issuer at the time of issuance of the Certificates of
Participation. PBC shall have the right to substitute, from time to time, for
either letter of credit, a letter or letters of credit issued by any banking or
other financial institution with the Financial Institution Requisite Credit
Rating and otherwise including terms and conditions substantially the same as
the then outstanding Letter of Credit, provided the COP Requisite Credit Rating
is not thereby adversely affected.
3.2.5 Ancillary Project Costs. PBC
shall provide for the payment of Ancillary Project Costs pursuant to the
Service Agreement, which shall provide that PBC shall pay the Ancillary Project
Costs directly to Cal-Am.
3.2.6 Termination of
Financial Commitment. PBC shall have the
right to cease providing the COP Letter of Credit if all principal and interest
on the Certificates of Participation (and all expenses necessary to defease the
indenture or trust agreement under which the Certificates of Participation are
issued) have been paid or an amount, in cash or other eligible securities,
equal to the aggregate of the unpaid principal on the Certificates of
Participation, such expenses and the Interest Reserve has been set aside, in a
trust account (which may be drawn on only to repay the Certificates of
Participation), for payment of the Certificates of Participation. PBC shall
have the right to cease providing the NOD Letter of Credit upon the first to
occur of either of the following events: (a) the Operating Revenues for the
preceding three years for which financial data is then available equal or
exceed 125% of Operation and Maintenance Expenses for each such year; or (b) 30
years after the issuance of the Certificates of Participation. In the event
PBC’s obligation to provide either of the Letters of Credit ceases pursuant to
this Section 3.2.6, MPWMD shall promptly thereafter cause such Letter of Credit
to be returned to PBC.
3.32.7 Capital
Costs. CAWD and PBCSD had and shall continue to have
responsibility for construction of the Original Project, subject to the
Management Committee’s right to approve decisions relating to the design and
construction of the Original Project Expansion,
including, without limitation, with respect to the matters described in this
Section 3.32.7.
(a)
With respect to design and construction of the Original Project
Expansion, each member of the Management Committee shall be given
advance written notice, in reasonable detail, and a reasonable period of time
after its receipt of such notice to comment on, and make suggestions with
respect to, each of the following actions prior, as applicable, to such action
becoming effective or complete: (i) initial design plans for the Original
Project Expansion; (ii) cost estimates for
the Original Project Expansion as
set forth in a construction budget and other writings, including the setting of
a contingency; (iii) the approval of final design plans for the Original
Project Expansion; (iv) the establishment of
bid criteria for all construction contracts and subcontracts for the Original
Project Expansion; (v) the preparation of all
construction contracts for the Original Project Expansion;
(vi) the letting and approval of all such contracts and the related
subcontracts; (vii) the establishment of the construction schedule; (viii) all
construction disbursements; and (ix) the adequacy of all payment and
performance bonds and insurance requirements. [The preceding sentence
needs to be harmonized with the corresponding provisions of the Supplemental
Construction and Operation Agreement.] The
right to comment on, and make suggestions with respect to, the construction
disbursements shall be provided, in part, by each member of the Management
Committee being given the opportunity to participate in the periodic (but at
least monthly) meetings, between the general contractor(s) for the Original
Project Expansion and the construction
engineer(s) retained by CAWD and
PBCSD to supervise the construction of the Original Project
Expansion, with respect to the status of construction of the Original
Project Expansion and the approval of the
payment of each construction disbursement.
[(b) Without the written approval of PBC, which shall
not be unreasonably withheld or delayed, (i) upon and after the approval by the
Management Committee of the final design and scope of, and construction
schedule for, the Project Expansion (upon which the Capital Costs have been
determined), no material change to such design, scope or construction schedule
shall be made by the Management Committee, and (ii) upon and after the net
effect of all change
orders having aggregated an amount which exceeds 5% of the construction budget
(upon which the Capital Costs have been determined), without reference to the
contingency, no additional change order in excess of $5,000 may be approved by
the Management
Committee. Each entity with
representation on the Management Committee shall be designated a third party
beneficiary of all construction contracts, all payment and performance bonds
and all insurance policies in connection with the Project Expansion providing
coverage with respect to the construction of the Project Expansion.]
3.42.8
Calculation and Monitoring of Net Operating Deficiencies of the Project.
(a) The calculation of the projected Net Operating Deficiency, if any, for each year, shall be made by reference to the annual budget for the Project for each year. The Management Committee shall cause to be developed, and shall approve, an annual budget for the Project for each year at least 30 days prior to the commencement of such year. In calculating the projected and actual Net Operating Deficiencies for any year: (i) no item of administrative or other overhead expense of the Public Participants, other than such reasonable expenses which relate to the Project, shall be included in the calculation of Operation and Maintenance Expenses without the prior written consent of each of the members of the Management Committee who is not a representative of such Public Participant, with the exact amount of any such includable expenses to be determined by the Management Committee; (ii) Operation and Maintenance Expenses shall only include an allowance for depreciation, amortization and obsolescence (established in the first annual budget for the Project) which is determined pursuant to generally accepted utility practices, but is limited to an amount sufficient to create, over the original term of the Certificates of Participation, a sinking fund for replacement and renovation which shall not exceed $1,000,000, and such allowance shall not be modified if the Certificates of Participation are prepaid for any reason; and (iii) no debt service obligation on the Certificates of Participation, covered by the COP Letter of Credit shall be included.
(b) CAWD and PBCSD have had and shall continue to have responsibility for management and operation of the Project, subject to the rights of each member of the Management Committee to receive financial data (both projected and historical) concerning the Project, and to review, and comment upon, decisions related to such financial data and the management and operation of the Project, including, without limitation, with respect to the matters described in this subsection (b):
(i) Each of the members of the Management Committee has had and shall continue to have the right to participate in the development of an annual budget for the Project, which shall include projected Operating Revenues and Operation and Maintenance Expenses for such year. Only expenses, provided in a budget for the Project, or approved in writing by each member of the Management Committee, shall be deemed to constitute Operation and Maintenance Expenses. CAWD shall submit to each member of the Management Committee (A) for each fiscal year, if, during the immediately prior fiscal year, the actual Net Operating Deficiency exceeded the budgeted Net Operating Deficiency, if any, for such year, unaudited monthly financial statements of the Project, accompanied by an unqualified certificate of the chief financial officer of the Public Participant which owns the Project (an “Officer’s Certificate”), on or before the 15th day after each such month, (B) with respect to each fiscal year for the Project not described in clause (A) above, unaudited quarterly financial statements of the Project, accompanied by an Officer’s Certificate, on or before the 30th after each such quarter, (C) with respect to each fiscal year of the Project, audited annual financial statements of the Project, accompanied by an unqualified certificate of the auditing firm approved by the Management Committee, on or before the 45th day after the end of each fiscal year, and (D) such other written information with respect to the Project as may be reasonably requested by such person, including, without limitation, such information as may be necessary to make a proper accounting to PBC with respect to its obligations in connection with the Financial Commitment, within a reasonable period of time after it is requested. Each of such financial statements shall consist of a balance sheet, as of the end of the applicable period, and an income statement and statement of changes in financial position, for such applicable period, and shall be prepared in accordance-with generally accepted accounting principles consistently applied.
(ii) Each of the members of the Management Committee has had and shall continue to have the right to (A) receive initial drafts of each annual budget with respect to the Project at the same time such draft is first submitted to the General Manager or Board of Directors of the Public Participant which owns the Project, (B) the proposed final draft of each such annual budget at least 30 days before it is submitted to the Management Committee for its approval, (C) make comments to such General Manager and the Management Committee with respect to each such draft of the annual budget and each of the financial statements for the Project which it has the right to receive, and (D) review and audit, or cause its designated representatives to review and audit, the books and records with respect to the Project, at its own expense, during the business hours of such Public Participant, upon reasonable advance notice of its intention to do so having been given to such Public Participant.
(iii) Any member of the Management Committee has had and shall continue to have the right to request, from time to time, the General Manager of CAWD to prepare projections of the operating results of the Project through the end of the then fiscal year of the Project. Upon receiving such request, such General Manager shall engage in best efforts to prepare and deliver such projections to each member of the Management Committee within 30 days of receiving such request. In the event that any such projections reveal that it is likely that the operating results for such year will involve a Net Operating Deficiency and either no Net Operating Deficiency was included in the budget for such year or such projected Net Operating Deficiency was in excess of the Net Operating Deficiency included in the budget for such year, at the request of any member of the Management Committee, the Management Committee shall retain a consulting engineer to review the operation and maintenance of the Project and to make recommendations with respect thereto. If requested by PBC, the Management Committee shall cause the Project to promptly comply with all such recommendations which are reasonable. The charges of such consulting engineer shall be paid by the Project and shall be deemed to be an Operation and Maintenance Expense.
(iv) Notwithstanding subparagraph (i) above, in the event the results of operations (i.e. difference between the Operating and Maintenance Expenses and Operating Revenues) for a fiscal year of the Project, based upon the results of operations of the Project through the first nine months of such year projected through the end of such year, reflects a $100,000, or greater, negative difference from the results of operations projected in the budget for such year, PBC shall have the right to approve the budget for the immediately succeeding fiscal year of the Project.
(c) CAWD and PBCSD and MPWMD shall each maintain separate accounts and budgets with respect to Operating Revenues and Operation and Maintenance Expenses.
(d) The Project shall be owned, operated, maintained and serviced in accordance with applicable regulations, good engineering practice and prudent business practices. Recycled Water produced by the Project shall be suitable for irrigation of vegetated areas (including golf courses) and otherwise meet all regulatory and health standards for such usage.
(e) The Public Participant which owns the Project shall cause an annual inspection of the Project to be performed, during the last month of each fiscal year of the Project, by a consulting engineer acceptable to the Management Committee, and a report of such engineer to be delivered to each member of the Management Committee, on or before the 45th day of the ensuing year. In the event that operating or other deficiencies are disclosed in any such report, at the request of PBC, such Public Participant shall promptly cause measures necessary to correct such deficiencies to be implemented. The charges of such consulting engineer shall be paid by the Project and shall be deemed to be an Operation and Maintenance Expense.
(f) The Public
Participant which owns the Project has maintained and shall continue to obtain
and maintain in effect insurance for the Project, with such coverages
(including with respect to risks, amounts and deductibles), and with such
insurance companies, as are acceptable to each member of the Management
Committee, which approval shall not be unreasonably withheld or delayed. In
recognition that the Project is dependent upon the continued operation of the
existing wastewater treatment plant owned by CAWD or PBCSD which
produce secondary effluent, CAWD and PBCSD shall
each continue to (i) make all reasonable efforts to maintain in place its
present insurance coverages (including with respect to risks, amounts and
deductibles) for such facilities, (ii) promptly provide to all members of the
Management Committee such information concerning the insurance in place with
respect to such facilities, and the risks of operating such facilities, as may
be reasonably requested, from time to time, by any member of the Management
Committee, and (iii) purchase such additional insurance with respect to such
facilities as may be available in the marketplace and is requested by PBC, with
the incremental additional cost for such additional insurance to be paid by the
Project and deemed to be an Operation and Maintenance Expense. Each such
insurance policy shall (i) name each entity which has a representative on the
Management Committee and which has an insurable interest thereunder as an
additional insured thereunder, and (ii) shall provide that it may not be
terminated or amended or otherwise modified, in any material respect, without
each additional insured thereunder being given at least 30 days prior written
notice of such termination, amendment or modification. Upon the renewal of each
such insurance policy and upon the request of any member of the Management
Committee, such Public Participants shall provide such person with written
evidence, in the form of policies or certificates o£ insurance, of such
insurance.
(g) The generation of Operating Revenues and the application thereof shall include the following:
(i) The price charged by MPWMD for the Recycled Water sold for use on other than the Recycled Water Irrigation Areas, at all times that any portion of the Financial Commitment is in effect, shall be as described in Section 2.2 hereof.
(ii) All of the Recycled Water Irrigation Areas shall be obligated for the purchase of Recycled Water for a term not less than the term of the Certificates of Participation. MPWMD will engage in best efforts to maximize the sales, and the revenues derived therefrom, of Recycled Water, to the extent not required by the Recycled Water Irrigation Areas, to other users.
(iii) MPWMD, or Cal-Am on behalf of MPWMD, shall efficiently bill and collect water charges from, and enforce its agreements with, the Recycled Water Irrigation Areas and other purchasers of Recycled Water and (in the case of Cal-Am) shall promptly remit all Operating Revenues to MPWMD.
3.52.9
Application of Surplus Revenue. All Operating Revenues in excess of
Operation and Maintenance Expenses (“Net Operating Income”) has been and shall
continue to be applied against any principal and interest payments on the
Certificates of Participation which come due, from time to time, any COP
Carrying Costs not constituting a Capital Cost and any Ancillary Project Costs,
in that order, and the balance of any such excess (“Surplus Revenue”) shall, at
the election of PBC, be applied to (a) the early payment or redemption of the Certificates
of Participation or set aside, in a trust account, irrevocably for such
purpose, or (b) the Operating Reserve. In the event that the
Certificates of Participation are fully paid prior to their maturity date, as
soon as the Financial Commitment with respect to Net Operating Deficiencies is
terminated, the price of Recycled Water charged to the Recycled Water
Irrigation Areas shall be reduced to a level that assures, to the extent
practicable, that Operating Revenues do not exceed reasonable Operation and
Maintenance Expenses, until the date the Certificates of Participation would
have matured had they not been paid prior to such date.
3.62.10
Investment of Operating Revenues. All Operating Revenues of the Project
and all amounts in any reserve with respect to the Project, including, without
limitation, the Operating Reserve, have been and shall continue to be invested
in a manner designed to maximize the investment return on such amounts, subject
to applicable legal investment and/or tax law limitations and investment
criteria to be agreed upon by the parties.
3. 2.11 Refunding. In
the event that general interest rates that prevail in the market at the time
the Certificates of Participation are sold should decrease, MPWMD shall, at the
request of PBC, from time to time, offer and sell refunding certificates of participation or bonds,
pursuant to the same terms and conditions of this Agreement as are applicable
to the sale of the Certificates of Participation, in an amount equal to the
aggregate of the then principal balance thereon, any accrued, but unpaid,
interest thereon, and the costs of offering and selling such refunding
certificates of participation or bonds. Upon the closing of the sale of the
refunding certificates of participation or bonds, the net proceeds of such sale
shall first be applied to redeem the Certificates of Participation, and
thereafter, for all purposes under this Agreement, the refunding certificates
of participation or bonds shall be deemed to constitute the “Certificates of
Participation.” Notwithstanding the foregoing, MPWMD shall have no obligation
to offer and sell refunding certificates of participation or bonds unless the
present value saving that is projected to result from the decrease in the
aggregate amount of interest payments on the Certificates of Participation
exceeds the projected costs of offering and selling the refunding certificates
of participation or bonds, as determined by PBC, by at least one percent of the
principal amount of the Certificates of Participation.
3.2.12 COP
Carrying Costs. If, at the time any COP Carrying Cost not
constituting a Capital Cost becomes due and payable, and the Net Operating
Income not previously applied pursuant to Section 3.2.9 hereof is insufficient
to fully cover any payment of principal or interest on the Certificates of
Participation then due and payable and such COP Carrying Cost, PBC shall pay
such COP Carrying Cost, to the extent not covered from such sources, within ten
days of receiving an invoice therefor, describing such COP Carrying Cost in
reasonable detail. Thereafter, at such time as such Net Operating Income is
sufficient to fully cover any payment of principal or interest on the
Certificates of Participation then due and payable, MPWMD shall cause PBC to be
promptly reimbursed from such source for the portion of such COP Carrying Cost
which it paid.
4. Potable
Water Entitlement and Water Use Permits.
4.1 Confirmation of Water Entitlement and Water
Use Permits Issued to Date. In section 4.1 of the
Fiscal Sponsorship Agreement, consideration for PBC’s
commitment to finance the Expanded Project, MPWMD hereby confirms the vesting
in granted to PBC,
Lohr and Griffin of certain binding entitlements to
potable water (herein called the “Water Entitlement”),
for use on any properties within the Del Monte Forest (hereinafter called the
“Benefited Properties”) in the respective quantities and properties set forth
on Exhibit “A” hereto during each water year (October 1st through
the following September 30th), subject to (i) payment of all fees
and charges therefor, (ii) compliance with all MPWMD rules, regulations, and
ordinances, (iii) reductions in usage as described in section 4.4 of
that Agreement, and (iv) termination as described in section 4.5 of
that Agreement.
4.2 Confirmation of Water Use Permits.
(a)
To
evidence the Water Entitlement, the
General Manager of MPWMD has issued Water Use Permits to PBC, Lohr &
Griffin authorizing the expansion and extension of the Cal-Am water
distribution system to provide water service and connections for the Benefited
Properties as described in Exhibit “A” to the Fiscal Sponsorship Agreement
as amended). Upon execution
by PBC of this Agreement irrevocably committing to underwrite, be responsible
for, assure and guarantee payment of the Financial Commitment (Capital Costs
and Net Operating Deficiencies and Ancillary Project Costs of the
Project) and the execution by all parties of the Related Agreements, MPWMD
shall confirm the Water Use Permits issued to PBC (and other potable water
users identified in the Fiscal Sponsor/Sponsorship
Agreement dated as of October 3, 1989). [A sentence is to be
added here – to be proposed by PBC – to assure that the Expanded Project will
become operational as soon as reasonably possible, perhaps by limiting the
quantum of Water Use Permits that can be issued.]Each Water Use
Permit has shall granted a present vested
irrevocable
(except as provided in Section 4.5 hereto) property interest right upon one or more
of the Benefited Properties for the use and benefit of a specified quantity of
potable water per year (in acre feet) produced by the
Cal-Am water
distribution system, and shall authorizes the expansion
and extension of the Cal-Am water distribution system as necessary to provide water
service to and connections for the benefit of such Benefited Property.
(b) Each Water
Use Permit issued by MPWMD for water
subject to the Water Entitlement is and shall, be subject to the
restrictions and limitations set forth in Rule 23.5, many
of which are identified below. Section 4.4 and
elsewhere in this Agreement, enable present use of water upon the designated
Benefited Property in the amounts and for the purposes authorized thereby, and
shall reduce the Water Entitlement by the amount of water authorized to be so
used .
(1) the permit shall not limit the power of MPWMD to
curtail water use in the event of any emergency caused by drought, or other threatened or
existing water shortage, as defined in Section 332 of the Monterey Peninsula
Water Management Act, including without limitation the power of MPWMD to
terminate water service as a consequence of a violation of water use restrictions;
(2) the permit shall not relieve or reduce any obligation
of the recipient of water to pay customary fees, connection charges, user fees,
surcharges, taxes, utility taxes, and/or any other customary monetary
obligation
which may be imposed by the California Public Utilities Commission, Cal-Am,
MPWMD, or other Public Participants upon water users of the same class within
the Cal-Am service area,
including but not limited to fees and charges due and payable to MPWMD by reason of Rule 24
of MPWMD’s Rules and Regulation, nor shall such permit limit the authority of
Cal-Am or MPWMD to terminate water use for non-payment of such fees and
charges;
(3) the permit shall enable present use of the Water
Entitlement by PBC only upon the continuing financial assurance or guarantee by the
Fiscal Sponsor/Sponsor(s) relating to the payment of Net Operating Deficiencies
for the Project; and
(4) notwithstanding any other provision of this Agreement or Rule 23.5:
(a) the Water
Entitlement
allocated to the Benefited Properties as a whole shall not exceed 380 AF,
(b) the water
usage under the Water Entitlement on any Benefited Property shall not exceed
the aggregate amount of the Water Entitlement allocated to such Benefited
Property,
(c) water usage of
the Benefited Properties shall be calculated by MPWMD in the manner set forth
in Subsections C.4 and C.5 of MPWMD Rule 23.
(c) A Water Use Permit issued
with respect to a Benefited Property may be assigned, in whole or in part, in
connection with a transfer of title to all or any portion of such Benefited
Property in the manner and under the circumstances
described in Subsections A and E of MPWMD Rule 23.5. Upon
any such transfer, the holder-assignor of the Water Use Permit shall notify the
General Manager of MPWMD of such assignment, and the General Manager shall (i)
issue a separate and distinct Water Use Permit to the assignee for that portion
of the Benefited Property transferred, and (ii) make such notations or
adjustments to the Water Use Permit held by the assignor as are required to
reflect such assignment. Upon a transfer of any portion of a Benefited Property
and assignment of all or any portion of a Water Use Permit to such portion of a
Benefited Property, the portion of the permitted water use described in the
assignment of the Water Use Permit shall be deemed allocated to the portion of
the Benefited Property so transferred, and such portion of the Benefited
Property so transferred shall be deemed for all purposes to be a “Benefited
Property” under this Agreement.
4.3 Cal-Am System
Expansion/Extension Pursuant to Water Use Permits.
(da) The owner of a
Benefited Property who is the holder of a Water Use Permit or a Water
Permit for
that property shall be entitled to request and receive potable water service from the
Cal-Am water distribution system for such Benefited Property, including,
without limitation, the installation of water meters and mains as necessary, in the manner
and under the circumstances described in Subsections A and E of MPWMD
Rule 23.5upon presentation to MPWMD of the following:
(i) A written statement of the
annual capacity of water that such holder intends to use in connection with the
related Benefited Property through such expansion/extension of the Cal-Am water
distribution system, and the nature of the uses to which such water is intended
to be applied in the future;
(ii) Documentation sufficient for
MPWMD to independently determine the quantity and the capacity for annual water
use upon the Benefited Property
and the number and type of each requested connection; and
(iii) The payment of any customary
fees and connection charges required by both Cal-Am and MPWMD of water users
within the Cal-Am service area, calculated upon the basis of the annual water usage
capacity on the Benefited Property set forth in such holder’s statement,
including, without limitation, fees and charges due by reason of Rule 24 of
MPWMD’s Rules and Regulations, subject to (i) compliance with all MPWMD rules,
regulations, and ordinances,
(ii) reductions in usage as described in section 4.4, and (iii) termination as
described in section 4.5.
(b) Upon the filing of the information, and payment of the
fees required above, the General Manager of MPWMD shall authorize Cal-Am to
expand and
extend the water distribution system as necessary to provide water service and
connections for the benefit of such Benefited Property.
(c) Each holder of a Water Use Permit shall be entitled to
request an increase in the annual water use for the related Benefited Property, up to the
amount of the permitted water usage evidenced by such Water Use Permit;
provided, however, that any such increases in water use for such Benefited
Property shall not, when aggregated with the permitted water usage either for all of the
Benefited Properties owned by such holder, or for all of the Benefited
Properties, exceed the total Water Entitlement of such holder, or for all of
the Benefited Properties, respectively.
4.34 Effect of this Agreement
on Water Use
Permits Issued to PBC,
Lohr, and Griffin. Nothing in this Agreement shall affect the right and
ability of PBC, Lohr, or Griffin (or their respective successors of interest to
title of a parcel
located within the Benefited Properties as described in
Exhibit “A” to
the Fiscal Sponsorship Agreement as amended to which a
portion of the Water Entitlement has been dedicated) to use and
apply the quantity of
water dedicated for use on that parcel, or their
respective rights to sell and convey
a parcel of land located within the
Benefited Properties as described in Exhibit “A” to the Fiscal Sponsorship
Agreement as amended that it owns
together with the portion
of the Water Entitlement that
has been dedicated to the parcelThe
holder of a Water Use Permit shall be entitled to use the full amount of water
authorized by such Water Use Permit free from reallocation pursuant to MPWMD
Rule 30, and without regard to any water moratorium or other curtailment on the
setting of meters for the Cal-Am water system, but such Permit shall be subject
to revocation, termination, or diminishment as provided in Section 4.5 hereof.
Water Use Permits shall be subject to the following limitations: (i) the permit
shall not limit the power of MPWMD to curtail water use in the event of a
emergency caused by drought, or other threatened or existing water shortage, as
defined in Section 332 of the Monterey Peninsula Water Management Act; (ii) the
permit shall not relieve or reduce any
obligation of the holder of a Water Use Permit to pay customary fees,
connection charges, user fees, surcharges, taxes, utility taxes, and/or any
other customary monetary obligation which may be imposed by the Public
Utilities Commission, Cal-Am, MPWMD, or other Public Participants upon water
users of the same class as such holder, including, without limitation, fees and
charges due and payable to MPWMD by reason of Rule 24 of MPWMD’s Rules and
Regulations; (iii) the Permit shall
enable present use of water upon the
continuing financial assurance or guarantee by the Fiscal Sponsor/Sponsors
relating to the payment of Net Operating Deficiencies for the Reclamation
Project and the Expanded Project; and (iv) once a new water connection is
established through usage of any portion of the water authorized under the
Permit, the water user shall be treated in a manner equal to any other Cal-Am
water user and shall not be entitled to preferential access to water over any
other water user of the Cal-Am water distribution system.
4.45 Revocation and Termination of
Water Use Permits.
(a) Each Water
Use Permit may be revoked, and terminated, or
modified by MPWMD in the manner and under
the circumstances described in Subsection D of MPWMD Rule
23.5event that PBC fails to meet, in any material
respect, any of its financial obligations in connection with either the
Original Project or the Expanded Project under section 3 hereof; provided,
however, that nothing herein shall preclude PBC from disputing in good faith
any claim of default made by MPWMD, nor shall MPWMD terminate or revoke any Water
Use Permit unless PBC shall have been given notice and a reasonable opportunity
to cure any such default, so long as such opportunity to cure shall not result
in any payment default to the holders of the Certificates of Participation.
Each Water Use Permit which, on or after January 1, 2075, purports to authorize
water usage in excess of the requirements for planned land uses on the related
Benefited Property or the constitutional limitation to reasonable and
beneficial use shall be subject to modification, in the sole discretion of
MPWMD, such that it thereafter authorizes water usage which is not in excess of
such requirements and limitation. Prior to the proposed termination or
revocation of any Water Use Permit pursuant to this Section 4.5, PBC and the
holder of such Water Use Permit shall be entitled to notice and a hearing, and
any termination shall be subject to appeal to the Board by PBC and such holder
pursuant to Rule 70 of MPWMD’s Rules and Regulations. A Water Permit may be
revoked or terminated only through the procedures specifically provided in this
Section 4.5(a).
(b)
Notwithstanding Section 4.5(a) above or any other provision of this Agreement,
the revocation and termination of any Water Use Permit with respect to a
Benefited Property, shall not diminish or otherwise adversely affect such
rights to the extent that they confirm actual water usage through a prior
expansion or extension of the Cal-Am water distribution system and a water
meter issued for the specific Benefited Property in question predating the
completion of the Original Project.
4.5 Conditions
on Separate
Conveyance of portion of Water Entitlement by PBC
(a) Any
portion of the Water Entitlement separately conveyed by PBC pursuant
to this Agreement and the Ordinance
shall not be effective unless
and until PBC has provided the Supplemental
Financial Commitment as described in this Agreement; and provided further that each
portion of the PBC Water Entitlement thus conveyed:
(i) shall be
dedicated solely to property within the Del Monte Forest that is not owned
by PBC as of the date that that this ordinance is adopted;
(ii) shall be put solely to
Residential use through a Residential Connection
(as those capitalized terms are defined in Rule 11), and at no time
shall any portion
of such water be classified in any User Category other than Residential (as
defined in Rule 11);
(iii) shall be
offered on a right of first refusal basis to persons on the Monterey County
waiting list for approved residential development projects awaiting water
availability within the Del Monte Forest whose intended use is consistent with
the preceding two subparagraphs (a)(i) and (a)(ii), and
(iv) the proceeds
therefrom shall be applied to the costs of the Project Expansion and the
Original Project as more
specifically described in Section 3.2 of
this Agreement.
(b) Any portion of the
Water Entitlement of PBC separately conveyed pursuant to this
Agreement and the Ordinance may be used only on the
specific property to which it is first dedicated following the conveyance, and
the water shall be put solely to Residential use through a Residential
Connection (as those capitalized terms are defined in Rule 11), and
at no time shall any portion of such water be classified in any User Category other than Residential (as defined in Rule
11).
In addition, the quantity of water acquired pursuant to Subsection C of
this Section Three (i.e., the portion of the PBC Water Entitlement thus
conveyed) and actually used shall not exceed the quantity set forth in the
Water Permit issued pursuant to Subsection D of this Section Three. Each of these restrictions of use shall be
set forth on the face of the Water
Permit, and notice thereof shall be recorded in the form of a deed
restriction against the Benefited Property to which the conveyed Water
Entitlement is dedicated.
(c) As of the date that PBC
provides the Supplemental Financial Commitment, each recipient of a portion of
PBC’s Water Entitlement separately sold
and conveyed pursuant to this Agreement and the
Ordinance shall be entitled to issuance by the General
Manager of a Water Permit, the face of which shall limit uses to those
permitted under the User Category entitled “Residential” (as these terms are
defined in Rule 11), for such amount of the
Water Entitlement as is documented in the conveyance documentation presented to
the General Manager. The General
Manager shall simultaneously note, on the face of the Water Permit issued
pursuant to Rule 23.5 (and Rule 23 to the extent consistent with Rule 23.5),
the quantity of the Water Entitlement thus conveyed and shall simultaneously
account for a commensurate reduction in the aggregate amounts of the Water
Entitlement thereafter held by PBC.
(d) All Water Use Permits or Water Permits issued to evidence the portions of the Water Entitlement separately conveyed by PBC, all pursuant to this Section 4.5, shall not be Revoked (as defined in MPWMD Rule 11) or Terminated as defined in MPWMD Rule 23.5 with respect to the entire Water Entitlement so conveyed; provided, however, in each case, that the actual use of water on each of the properties to which a portion of the Water Entitlement is dedicated (after conveyance by PBC pursuant to this Section 4.5) shall at all times remain subject to the limitations and restrictions referenced in MPWMD Rule 23.5 on the same basis as other customers of Cal-Am, and that such water use rights shall be subject to modification after year 2075 as provided in this ordinance and in Ordinance No. 39.
4.6 Water Charges. The potable water shall be sold to the owners of each of the Benefited Properties at charges which are not in excess of Cal-Am’s charges for potable water, in similar quantities and sold to similar users for similar uses, from time to time. Nothing in this or any other provision of this Agreement shall be construed as a limitation upon amounts that PBC may charge individual Del Monte Forest residential property owners for sales of portions of its potable water entitlement separate and apart from the property benefited thereby. When PBC sells and conveys a parcel of land that it owns together with a portion of PBC’s remaining Water Entitlement, PBC shall provide such information as is necessary for MPWMD to demonstrate that no money or other valuable consideration has been separately given or received for the portion of the Water Entitlement conveyed with the land (other than reimbursement for the Rule 24 connection fee or other Cal-Am or MPWMD fees or charges paid by PBC).
4.7 Agreements with Recycled Water Irrigation Areas. MPWMD has used and shall continue to use its powers and authority to cause each owner of a Recycled Water Irrigation Area to purchase Recycled water for irrigation of the Recycled Water Irrigation Areas it owns, as contemplated by Sections 13500, et seq. of the California Water Code, on terms and conditions which are the same, in all material respects, as the terms and conditions of the agreements that each of the other owners of the Recycled Water Irrigation Areas enter into with respect to the purchase of Recycled Water for use on the Recycled Water Irrigation Areas it owns. Such terms and conditions shall prohibit the use of potable water for irrigation, except during an Emergency as defined herein.
5. Advance of Costs. PBC,
MPWMD, CAWD, PBCSD, and IRWUG hasve each advanced
funds for expenditures with respect to design, engineering and other matters
incident and preparatory to the Expanded Project
Expansion, including, without limitation, legal and consulting
fees and costs associated with the Expanded Project
Expansion
and its implementation and this Agreement and each Related
Agreement, and shall have the right, but not the obligation, to continue to
advance funds for such expenditures. As
described in section 3.1, PBC has raised these funds through sales of portions
of its potable water entitlement (to individual Del Monte Forest residential
property owners who have agreed to invest in the Project). Accordingly, all
such expenditures incurred by PBC shall not be
eligible for reimbursement as Capital Costs of the Expanded Project Expansion from
the proceeds of sales of Recycled Water. Nothing in the preceding sentence shall be
construed to apply to Operating Costs of the Expanded Project, provided that
doing so does not in any way adversely affect repayment of the Certificates of
Participation.
6. Representations and Warranties.
6.1 Material Representations and Warranties. PBC and MPWMD each hereby represents and warrants to the other that:
(a) the execution and delivery of this Agreement and each of the Related Agreements by it, and the performance of its obligations under this Agreement and each of the Related Agreements, have been duly authorized by all necessary action on its part, and it has full power, right and authority to enter into this Agreement and each of the Related Agreements and to perform its obligations hereunder and thereunder;
(b) neither the execution and delivery of this Agreement nor any of the Related Agreements by it, nor the performance by it of any of its obligations under this Agreement or any of the Related Agreements, violates any applicable Federal, state or local law, whether statutory or common, or regulation or, with respect to PBC, partnership agreement, or constitutes a violation of, or a breach or default under, any agreement or instrument, or judgment or order of any court or governmental authority, to which it is a party or to which it or any of its property is subject;
(c) this Agreement and each of the Related Agreements is a valid and binding obligation of it, enforceable against it in accordance with its terms, except as such enforceability may be limited by equitable principles or by bankruptcy or other laws affecting creditors' rights generally; and
(d) no consent, approval, order or authorization of any person, entity, court or governmental authority is required on its part in connection with the execution and delivery of this Agreement or any of the Related Agreements or the performance by it of any of its obligations hereunder or thereunder.
6.2
Representations and Warranties of MPWMD. MPWMD hereby further represents
and warrants to PBC that [
(a) Subject to the terms and
conditions of this Agreement, each owner of a Benefited Property upon
dedication of a portion of the Water Entitlement thereto, shall be vested with
all
right, title and interest to an irrevocable (except as expressly provided in
Section 4.5 hereof) property right and interest in the portion of the Water
Entitlement and the Water Use Permits which benefits the Benefited Property it
owns, free and clear of
any liens, claims or encumbrances, statutory or otherwise, including, without
limitation, the right to transfer its portion of the Water Entitlement, all as
described in Sections 4.1 and 4.2 hereof; and
(b) Each of the Water
Entitlements and the Water Use Permits granted pursuant to the terms and
conditions of this Agreement shall constitute a valid and binding vested
property right and interest, as described in sections 4.1 and 4.2 hereof, to
the potable water subject to such enforceability may be limited by
equitable principles or by bankruptcy or other laws affecting creditor’s rights
generally.
(c)] the terms and conditions of this Agreement are in compliance, in all material respects, with the terms and conditions of the Ordinance.
7. Covenants.
7.1 Other Agreements. Each of the parties shall, within 30 days after the effectiveness of this Agreement, execute, and deliver to the other parties thereto, each of the Related Agreements to which it is a party and engage in reasonable efforts to cause each of the parties to each such agreement, other than it, to execute, and deliver to each of the other parties thereto, such agreement.
7.2 Conflicting Agreements or Actions. Neither party shall enter
into any agreements, or take any actions, which may (1) injure the right of
each other Party to receive the benefits of this Agreement, (2) frustrate the
purpose for which this Agreement was executed, (3) adversely affect or impair
the right, title and interest of the holders of the Certificates of
Participation, or (4) except in accordance with the procedures set forth in the
Ordinance or this Agreement, adversely affect or impact the right,
title and interest of the owner ability
of any holder portion of
any
the Water Use Permit to legally put to
use the water authorized thereby on the Benefited Properties it owns[,
including, without limitation, any amendment, repeal or revocation of the
Ordinance].
7.3 Validation Proceeding. PBC shall have the right to initiate and prosecute, in MPWMD’s name, an action, in a court of competent jurisdiction, for the purpose of having this Agreement validated under California law. MPWMD shall cooperate with PBC in its efforts in connection with such action. PBC shall reimburse MPWMD for the reasonable out-of-pocket expenses it incurs in connection with such action. PBC shall be represented by such counsel in connection with such proceeding as is reasonably acceptable to MPWMD.
8. Effectiveness. This Agreement shall become effective upon its execution and delivery by each party. Notwithstanding any implication to the contrary herein, this Agreement may be terminated by either party, if all of the Related Agreements shall not have been executed, and delivered to each of the other parties thereto on or before , 2003. Upon any such termination, neither party hereto shall have any further obligation hereunder to the other party or any other person or entity.
9. Termination of Agreement.
9.1 Termination for Breach. In the event that either party fails to perform, in any material respect, any of its obligations under this Agreement, the other party shall have the right, in addition to all other remedies it may have under law or in equity, to terminate this Agreement, within 30 days after the breaching party receives written notice of such termination, if such failure is not cured by the breaching party prior to such date; provided, however, if such cure cannot practicably be effected within such 30 day period, and the breaching party, upon receiving such written notice, promptly initiates efforts to cure such failure and diligently pursues such cure, the other party shall not have the right to terminate this Agreement unless such cure is not effected within 90 days after the breaching party receives such written notice.
9.2 Remedies for MPWMD Breach. In the event MPWMD breaches any of its representations and warranties or covenants in this Agreement with respect to the Water Entitlement or the Water Use Permits such that, after such breach, an owner of a Benefited Property is entitled to less potable water for use on such Benefited Property than is contemplated by this Agreement or ceases to be entitled to a Water Use Permit for such Benefited Property, to the extent contemplated by this Agreement, MPWMD shall utilize its regulatory powers to the fullest extent to immediately ensure that the owner of such Benefited Property is entitled to receive, and does receive, potable water at such times, in such quantities and pursuant to such terms and conditions as are substantially equivalent to its rights with respect to potable water specified in this Agreement.
10. Indemnification.
10.1 Protection of Parties. Subject to the limitations in this Section 10, each party shall defend and indemnify, and hold harmless, the other party from and against any and all damages, liabilities, losses, and costs and expenses suffered or incurred by the other party, arising out of, or resulting from, any breach of its representations, warranties or agreements set forth in this Agreement.
10.2 Procedure for Indemnification. In the event that any legal proceedings are instituted, or any claim or demand is asserted, by any third party which may give rise to any damage, liability, loss, or cost or expense in respect of which either party has indemnified the other party under Section 10.1 hereof, the indemnified party shall give the indemnifying party written notice of the institution of such proceedings, or the assertion of such claim or demand, promptly after the indemnified party first becomes aware thereof; provided, however, any failure by the indemnified party to give such notice on such prompt basis shall not affect any of its rights to indemnification hereunder unless such failure materially and adversely affects the ability of the indemnifying party to defend such proceeding. The indemnifying party shall have the right, at its option and at its own expense, to utilize counsel of its choice in connection with such proceeding, claim or demand, subject to the approval of the indemnified party, which approval shall not be unreasonably withheld or delayed, and to defend against, negotiate with respect to, settle or otherwise deal with such proceeding, claim or demand; provided, however, that no settlement of such proceeding, claim or demand shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, unless, pursuant to the terms and conditions of such settlement, the indemnified party shall be released from any liability or other exposure with respect to such proceeding, claim or demand; and provided, further, that the indemnified party may participate in any such proceeding with counsel of its choice at its own expense. In the event, or to the extent, the indemnifying party elects not to, or fails to, defend such proceeding, claim or demand and the indemnified party defends against, settles or otherwise deals with any such proceeding, claim or demand, any settlement thereof may be made without the consent of the indemnifying party if it is given written notice of the material terms and conditions of such settlement at least ten days prior to a binding agreement with respect to such settlement being reached. Each of the parties agrees to cooperate fully with each other in connection with the defense, negotiation or settlement of any such proceeding, claim or demand.
10.3 Payment of Indemnified Claims. Upon a final judgment or award with respect to any proceeding of the nature described in Section 10.2 hereof having been rendered by a court, arbitration board or administrative agency of competent jurisdiction and the expiration of the time in which an appeal therefrom may be made (a “Final Judgment”), or a settlement of such proceeding, claim or demand having been consummated, on the parties having arrived at a mutually binding agreement with respect to each separate matter indemnified hereunder, the indemnifying party shall forthwith pay all of the sums so owing to the indemnified party. In the event any such proceeding is brought, in which allegations of fault are made against both of the parties, the extent of any indemnification shall be determined in accordance with the findings of the court as to the relative contribution by each of the parties to the damage suffered by the party seeking indemnity with respect to such proceeding.
10.4 Securities Law Indemnification. Subject to the limitations in this Section 10, each party shall defend and indemnify, and hold harmless, the other party from and against any and all expenses suffered or incurred by, the other party as a result of any written information provided by the indemnifying party for inclusion in any of the COP Documents, or any COP Document prepared by the indemnifying party (except with respect to the portion thereof prepared based on written information provided by the other party for inclusion in such COP Document), containing any untrue statement of a material fact or omitting to state a material fact necessary to make such written information or COP Document not misleading.
11. Miscellaneous.
11.1 Further Assurances. Each of the parties agrees to execute, and deliver to the other party, such documents and instruments, and take such actions, as may reasonably be required to effectuate the terms and conditions of this Agreement; provided, however, such covenant shall not have the effect of increasing the obligations of any party pursuant to this Agreement or require any representations and warranties by any party in addition to those of such party set forth herein.
11.2 Relationship of the Parties. Nothing in this Agreement shall create a joint venture, partnership or principal-agent relationship between the parties.
11.3 Notices. Whenever any matter herein provides for notice or other communication to be given to either of the parties, such notice shall be in writing and given to the persons, and at the addresses, designated below for such party, or to such other person or other address as such party shall provide, in writing, to the other party. All notices may be given by being personally delivered, placed in the United States mail, postage prepaid, certified or registered mail, or sent by overnight, prepaid air freight, addressed to the party to whom notice is to be given. Each such notice shall be deemed to be effective upon receipt, if personally delivered or sent by air freight, or five days after being so mailed.
If to PBC: If to MPWMD:
Pebble Beach Company Monterey Peninsula Water Management District
P.O. Box 1767 P.O. Box 85
Pebble Beach, CA 93953 Monterey, CA 93942-0085
Attn: Mark Stillwell Attn: General Manager
David C. Laredo
Delay & Laredo
606 Forest Avenue
Pacific Grove, CA 93950
11.4 Exhibits All exhibits referred to in this Agreement and attached hereto are hereby incorporated herein and made a part of this Agreement, for all purposes, by this reference.
11.5 Assignment. This Agreement shall be binding upon, and inure
to the benefit of, the successors and permitted assigns of the parties.
Notwithstanding the foregoing, (a) MPWMD may assign any of its rights or obligations
hereunder to CAWD, PBCSD, a joint powers agency in which either or both
agencies are members, or any successor agency thereto, and (b) PBC and any
successor assignee may at any time assign any of its rights hereunder and/or
may assign any of its obligations hereunder to any person or entity which
assumes such obligations in writing. In the event any permitted assignment
occurs, the assignor shall thereafter have no further responsibility with
respect to such obligation. Notwithstanding
the preceding
sentence, neither party may assign or transfer its rights or obligations if to
do so would: (1) impair the ability or right of any other party to receive the
benefits of this Agreement, or (2) frustrate the purpose for which this
Agreement was executed. Nothing
herein shall be construed to give any rights or benefits to anyone other than
the parties to this Agreement or to the Related Agreements as defined herein,
or to their respective successors and permitted assigns.
11.6 Cumulative Remedies. Except as specifically provided to the contrary herein, no remedy or election hereunder shall be deemed exclusive, but shall be cumulative with all other remedies at law or in equity.
11.7 Severability. Although it is the intent of the parties that
each obligation of the parties in this Agreement, including, without
limitation, the financial responsibilities of PBC pursuant to Section 3 hereof
and the grant of the Water Entitlement by MPWMD pursuant to Section 4 hereof,
be valid and enforceable, should any provision of this Agreement (other
than Sections 3 and 4, which are not severable from each other)
be declared invalid or unenforceable in any jurisdiction by a court of
competent jurisdiction, then such portion or provision shall be deemed to be
severable, to the extent invalid or unenforceable, from this Agreement as to
such jurisdiction (but, to the extent permitted by law, not elsewhere) and
shall not affect the remainder hereof. Notwithstanding the foregoing, (a) such
provision of this Agreement shall be interpreted by the parties and by any such
court, to the extent possible, in such a manner that such provision shall be
deemed to be valid and enforceable, and (b) such court shall have the right to
make such modifications to any provision of this Agreement as do not materially
affect the rights or obligations of either of the parties and as may be
necessary in order for such provision to be valid and enforceable.
11.8 Waiver. No waiver of any obligation of either of the parties shall be effective unless in a writing, specifying such waiver, executed by the other party. No waiver of any right of either of the parties shall be effective unless in a writing, specifying such waiver, executed by such party. A waiver by either of the parties of any of its rights or remedies under this Agreement on any occasion shall not be a bar to the exercise of the same right or remedy on any subsequent occasion Or of any other right or remedy at any time.
11.9 Headings and Titles. The designation of a title, or a caption or a heading, for each section of this Agreement is for the purpose of convenience only and shall not be used to limit or construe the contents of this Agreement.
11.10 Presumptions. Because both parties have participated in preparing this Agreement, there shall be no presumption against any party on the ground that such party was responsible for preparing this Agreement or any part hereof.
11.11 Amendment or Modification. This Agreement may be amended, altered, or modified only by a writing, specifying such amendment, alteration or modification, executed by both parties.
11.12 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
11.13 Entire Agreement. This Agreement and the Related Agreements constitute the entire agreement between the parties regarding the subject matter hereof and thereof, and supersede all prior or contemporaneous negotiations, understandings or agreements of the parties, whether written or oral, with respect to such subject matter, including, without limitation, the Memorandum.
IN WITNESS WHEREOF, this Agreement has been executed by the officers of each of the parties effective the date first shown above.
Pebble Beach Company Monterey Peninsula Water
Management District
By: _________________________ By: ___________________
Its: _________________________ Its: ____________________
REVISED EXHIBIT A
|
OWNER
|
|
ORIGINAL WATER ENTITLEMENT(af/yr) |
|
QUANTITY OF WATER
ENTITLEMENTFOR WHICH WATER HAVE BEEN ISSUED [1] (af/yr) |
|
QUANTITY OF WATER ENTITLEMENT FOR
WHICH WATER PERMITS HAVE NOT BEEN ISSUED 1
(af/yr) |
|
Pebble Beach Company |
|
365.000 |
|
9. |
|
355. |
|
Macomber Estates |
|
10.000 |
|
9.654 |
|
0.346 |
|
Griffin Trust |
|
|
3.716 |
|
1.285 |
BENEFITED PROPERTIES
The Water Entitlement is listed in acre feet per
year(AF/YR)
[PBC
will need to update and provide the pertinent legal descriptions].
[PLACEHOLDER EXHIBIT B]
RECYCLED WATER IRRIGATION AREAS
Pebble Beach Golf Course
Cypress Point Golf Course
Spyglass Hill Golf Course
Poppy Hills Golf Course
Monterey Peninsula Country Club Dunes Course
Monterey Peninsula Country Club Shore Course
Spanish Bay Golf Course
Peter Hay Par 3 Golf Course
Collins Field
Pebble Beach Practice Fairway
Robert Louis Stevenson School athletic fields
[any updates require input from PBC]
[Copied from Exhibit A to Construction &
Management Agreement]
EXHIBIT C
DESCRIPTION OF ORIGINAL PROJECT
The Original Project consists of the following components:
(1) The 9,000 square foot tertiary treatment plant located at the CAWD wastewater treatment plant immediately south of the Carmel River and west of California State Highway One, capable of producing 1.5 million gallons per day (MGD) of tertiary treated recycled water. The existing tertiary treatment facility diverts and treats secondary level effluent from the CAWD wastewater treatment plant for reuse as irrigation water using a treatment process consisting of: secondary effluent flow equalization; influent pumping; polymer and alum addition with rapid mixing for coagulation; low energy mixing for flocculation; filtration; chlorination; dechlorination; and pumping.
(2) The improvements within the existing CAWD wastewater treatment plant facilities to assure a consistent supply of secondary effluent from the existing CAWD plant diverted to the tertiary treatment plant. These improvements include a secondary clarifier flow split control and replacement of the existing mechanical aeration diffusers.
(3) The recycled water distribution system consisting of approximately 38,000 feet of distribution pipeline and a steel water storage tank (described in item (4) below) in Del Monte Forest beginning at the tertiary treatment plant and terminating at the southern portion of the Spanish Bay Golf Course and Resort in Del Monte Forest. The pipeline is located primarily within existing roads and road rights-of-way extending through the City of Carmel-by-the-Sea and unincorporated areas of Monterey County, including areas of Del Monte Forest. The distribution system also includes a connection adjacent to the storage tank (described in item (4) below) for furnishing an emergency potable water supply in the event of failure of the tertiary treatment plant or distribution pump station.
(4) The 2.5 million gallon recycled water storage tank located adjacent to the Poppy Hills Golf Course maintenance yard north of Viscaino Road in Del Monte Forest.
[“Base version” copied from Exhibit B to Construction & Management Agreement]
[PLACEHOLDER EXHIBIT D]
DESCRIPTION
OF EXPANDED PROJECT EXPANSION
The Expanded
Project Expansion consists of the following
components:
[to be
furnished by PBC, CAWD, or PBCSD]
[PLACEHOLDER EXHIBIT E]
DEL MONTE FOREST
[PBC will need to provide the current legal
description of the Del Monte
Forest].
[This
map in large form shall be available at the public hearing on first
reading. A photo-reduced version shall
be appended to this Agreement]
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