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1993-076kL-L002D7 ORDINANCE NO. ! 'U / AN ORDINANCE OF THE CITY OF DENTON AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF DENTON AND THE UPPER TRINITY REGIONAL WATER DISTRICT FOR THE CONSTRUCTION OF A TRANSMISSION LINE FROM DENTON'S EXISTING WATER DISTRIBUTION SYSTEM TO OLD ALTON ROAD; AUTHORIZING THE EXPENDITURE OF FUNDS AS PROVIDED IN SAID AGREEMENT; AND PROVIDING AN EFFECTIVE DATE. SECTION I. That the Mayor is authorized to execute an Agree- ment between the City of Denton and Upper Trinity Regional Water District for the construction of a transmission line from Denton's existing water distribution system to old Alton Road, under the terms and conditions set forth in the Agreement, a copy of which is attached hereto as Exhibit A. SECTION II. That the City Council authorizes the expenditure of funds as provided in the attached Agreement. SECTION III. That this ordinance shall become effective immedi- ately upon its passage and approval. PASSED AND APPROVED this the day of , 1993. 61 APPROVED AS TO LEGAL FORM: DEBRA A. DRAYOVITCH, CITY ATTORNEY BY: ~~L' (ALL L CASTLEBERRY, ATTEST: JENNIFER WALTERS, CITY SECRETARY UPPER TRINITY REGIONAL WATER DISTRICT REGIONAL TREATED WATER SYSTEM CONTRACT FOR ADDITIONAL PARTICIPATING MEMBER WITH CITY OF DENTON JOINT TRANSMISSION LINE THE STATE OF TEXAS § COUNTY OF DENTON § THIS JOINT OWNERSHIP AND OPERATIONS CONTRACT (the "Contract") made and entered into as of the day of Q 19 (the "Contract Date"), by and between UPPER TRINITY REGIONAL WATER DISTRICT, (the "District"), a conservation and reclamation district created pursuant to Article XVI, Section 59 of the Constitution of the State of Texas, and the CITY OF DENTON ("Denton"), which party may be referred to herein as "Additional Participating Member" (or Member). WITNESSETH: WHEREAS, Denton is a duly incorporated city of the State of Texas operating under the Constitution and laws of the State of Texas; and WHEREAS, Denton is a governmental entity in Denton County that provides retail utility service to customers within its service area; and WHEREAS, one of the purposes for which the District was created was to provide water transmission service to cities and water distribution utilities of the Denton County area; and WHEREAS, the District proposes to develop a regional treated water system for Participating Members and Customers, which system is planned to include raw water transmission lines, water treatment plants, pump stations, treated water transmission lines, storage tanks and metering facilities; and JFB-HBBF.002-1 WHEREAS, the District proposes to develop the regional treated water system for Participating Members either by constructing and owning such facilities, or through contracts with others; and WHEREAS, Denton desires to participate in one of the transmission lines being built as part of the regional treated water system, which transmission line is referred to herein as the "Joint Transmission Line% and WHEREAS, District has entered into prior contracts with Participating Members (Contract dated November 13, 1990) and with Participating Utilities (Contract dated November 2, 1990), under which contracts the District is authorized to enter into contracts with additional parties such as this Contract; and WHEREAS, the District will manage and operate, or contract with others for the management and operation of the Joint Transmission Line; and WHEREAS, District proposes to construct or develop Phase I of its regional treated water system in general accordance with the engineering reports prepared by Alan Plummer and Associates, Inc. in 1992 and prior years, herein referred to as the "Project"; and WHEREAS, Denton has heretofore executed a Raw Water Supply Contract dated June 10, 1991 with the District, is a Participating Member of the District; and WHEREAS, Denton desires to become an "Additional Participating Member" for the Joint Transmission Line as defined in this Contract; and WHEREAS, Denton will provide for its own treated water service from its own sources which are independent of the District; and WHEREAS, the District and Denton are authorized to enter into this Contract pursuant to the District's enabling statute, H.B. 3112 (1989 regular session of the Texas Legislature) (the "Act") and Vernon's Ann. Tex. Civ. St. Article 4413 (32c) (the "Interlocal Cooperation Act"), and other applicable laws; and ]FB-HBBF.002-1 -2- WHEREAS, the Initial Participating Members heretofore agreed that the District may enter into such a contract as this Contract with Additional Participating Members and other Customers; and WHEREAS, it is expected that as soon as practicable after the execution of this Contract, the District will issue an installment of Bonds to provide part of the money to acquire and construct the Project, including the Joint Transmission Line, and thereafter will issue a subsequent installment or installments of Bonds to complete the acquisition and construction of the Project, including the Joint Transmission Line, with all of said Bonds to be payable from and secured by Annual Payments. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the District agrees to provide transmission service of the Project to Denton under this Contract, and use its best efforts to issue its Bonds and to acquire, construct and complete the Project, including the Joint Transmission Line, upon and subject to the terms and conditions hereinafter set forth, to-wit: ARTICLE I Definitions Section 1.1. The following terms and expressions as used in this Contract, unless the context clearly shows otherwise, shall have the following meanings: 1. "Act" means H.B. 3112 adopted by the Legislature of the State of Texas in the 1989 regular session, which was signed by the Governor and became effective June 16, 1989. 2. "Additional Participating Member" means Denton and any party other than the Initial Participating Members listed herein with which the District makes a contract similar to this Contract for supplying treated water from the Project, provided that after execution of any such contract such party shall become one of the Participating Members for all purposes of this Contract. Additional Participating Members also include Town of Flower Mound and Denton County Fresh Water Supply JFB-HBBF.002.1 -3- District No. 1, both of whom executed contracts with the District after the contract with Initial Participating Members. 3. "Administrative Payment" means the amount of money to be paid to the District by each of the Participating Members, Participating Utilities, Additional Participating Members, Contract Members and Contract Utilities during each Annual Payment Period as their proportionate share of Administration and Planning Expenses of the District. 4. "Adjusted Annual Payment" means the Annual Payment as adjusted by the Board during or after such Annual Payment Period, as provided by this Contract. 5. "Administrative and Planning Expenses" means the general overhead cost and expenses of managing the District, but not including expenses related to capital projects financed by the District; such expenses shall include the administration of the District's general office, the activities and meetings of the Board and the planning activities of the District, to the extent such programs and activities shall be for the general welfare of the District; activities and programs for the benefit of specific parties and for specific capital projects shall, unless otherwise authorized, be the responsibility of the benefitting parties. 6. "Annual Payment" means the amount of money to be paid to the District by Denton during each Annual Payment Period as its proportionate share of the Annual Requirement, which proportionate share will be limited to the Joint Transmission Line. 7. "Annual Payment Period" means the District's fiscal year, which currently begins on October 1 of each calendar year and ends on September 30 of the next following calendar year, but which may be any twelve consecutive month period fixed by the District; and the first Annual Payment Period under this Contract is estimated to be the period of October 1, 1991, through September 30, 1992. 8. "Annual Requirement" means the total amount of money required for District to pay all Operation and Maintenance Expenses of the Joint Transmission Line, and to pay the Bond JFB-HBBF.002-1 -4- Service Component of the Annual Requirement as described hereinafter including debt service on its Bonds, and any sums required to pay or restore any amounts required to be deposited in any special or reserve funds required to be established and/or maintained by the provisions of the Bond Resolutions. 9. "Board" means the governing body of the District. 10. "Boardmember" means a member of the Board. 11. "Bond Resolution" means any resolution of the District which authorizes any Bonds. 12. "Bonds" means all bonds hereafter issued by the District, whether in one or more series or issues, and the interest thereon, to acquire, construct and complete the Project, and any bonds issued to refund any bonds or to refund any such refunding bonds. 13. "Contract Member" means an entity that provides retail utility service or is taking definitive steps to provide retail utility service to customers within its boundaries, that contracts with the District to preserve the option to become a Participating Member prior to June 16, 1999, and that agrees to pay an annual pro rata share of the Administrative and Planning Expenses of the District. 14. "County" means Denton County, Texas. 15. "Customer" means any wholesale user of the water services provided by the District which user provides retail utility service within its boundaries. 16. "Customer Advisory Council" or "Council" means the committee to be created to consult with and advise the District with respect to the Project as provided in this Contract. 17. "District" means the Upper Trinity Regional Water District, a conservation and reclamation district pursuant to Article XVI, Section 59 of the Constitution of the State of Texas created in accordance with the Act. JFB-HBBF.002-1 -5- 18. "Initial Participating Member(s)" means those governmental entities who executed a contract dated November 13, 1990, as amended, namely, City of Corinth, City of Highland Village, Lake Cities Municipal Utility Authority, and City of Sanger. 19. "Joint Transmission Line" means the proposed water transmission line and related facilities (including associated easements and rights of way) that will connect to Denton's existing water distribution system near Interstate Highway 35E and will be extended generally along Lillian Miller Parkway to the vicinity of Old Alton Road as set forth in Exhibit A to this Contract. 20. "MGD" is an abbreviation for "million gallons of water per day". 21. "Operation and Maintenance Expenses" means all administrative and planning expenses and all costs and expenses of operation and maintenance of the Joint Transmission Line, including (for greater certainty but without limiting the generality of the foregoing) repairs and replacements, operating personnel, the cost of utilities, the costs of supervision, engineering, accounting, auditing, legal services, insurance premiums, supplies, services, administration of the Joint Transmission Line, Administrative and Planning Expenses, and equipment necessary for proper operation and maintenance of the Joint Transmission Line, and payments made by District in satisfaction of judgments resulting from claims not covered by District's insurance arising in connection with the acquisition, construction, operation, and maintenance of the Joint Transmission Line. The term also includes the charges of the bank or banks acting as paying agents and/or registrars for any Bonds. The term does not include depreciation expense. 22. "Participating Member" means a governmental entity that provides retail utility service or is taking definitive steps to provide retail utility service to customers within its boundaries that contracts with the District for the acquisition, construction, improvement, enlargement, and payment for the water projects to be financed from time to time by the District, and specifically includes Denton and those entities identified as Initial Participating Members in this Contract. JFB-HBBF.002-1 -6- 23. "Project" means Phase I of the District's regional treated water system, generally as outlined in the engineering report prepared by Alan Plummer and Associates, Inc. dated June 1992. 24. "State" means the State of Texas. 25. "Water Year" means the period of June I of each calendar year through May 31 of the next following calendar year. ARTICLE II Board of Directors Section 2.01. Board Representation. The governing body of each Contract Member, each Participating Member and the County are entitled to appoint a qualified person to serve on the Board. Denton is specifically included in this provision. Section 2.02. Board Votes. Boardmembers appointed by the governing body of Participating Members shall be entitled to vote on all matters coming before the Board. Boardmembers appointed by the governing body of Contract Members shall be entitled to vote on all matters before the Board except those matters that require a weighted vote. The Board has established rules for weighted votes in accordance with the Act for matters concerning authorization of and financial commitments for capital projects. Section 2.03. Terms. Boardmembers shall serve staggered four (4) year terms in accordance with procedures established by the Board. Boardmembers may serve consecutive terms. A Boardmember may be removed at any time by the governing body of the entity that appointed that Boardmember. Section 2.04. Board Compensation. The District will not compensate Boardmembers for serving on the Board, but may reimburse Boardmembers for actual reasonable expenses necessarily incurred on behalf of the District or in the discharge of official duties. JFB-HBBF.002-1 -7- Section 2.05. Board Member Qualifications. A Boardmember must be a qualified voter who resides in the District and may not be an elected official of any governmental entity that has the authority to appoint a member of the Board. ARTICLE III Construction and Issuance of Bonds Section 3.01. Consulting Engineers. The Board will choose the Consulting Engineers for the Project and Joint Transmission Line and may change Consulting Engineers at the option of the Board. Section 3.02. Construction of Project and Joint Transmission Line. The District agrees to use its best efforts to issue its Bonds, payable from and secured by Annual Payments made under this Contract, to acquire and construct the Project, including the Joint Transmission Line, when and as needed, as determined by the District, to supply transmission service to Denton and treated water to other Participating Members and other Customers. It is anticipated that such acquisition and construction of the Project will be in phases and that each phase will be financed by the District through the issuance of one or more series or issues of its Bonds; and the District agrees to use its best efforts to issue its Bonds for such purpose. Bonds also may, at the discretion of the District, be issued to refund any Bonds, and be issued to extend, enlarge, repair, renovate, equip, operate, maintain and otherwise improve the Project. District agrees that such improvements will be made in accordance with generally accepted engineering practices. It is anticipated that such improvement will be financed by the District through the issuance of one or more series or issues of its Bonds payable from and secured by Annual Payments made under this Contract. District and Denton agree that Denton is participating only in that part of the Project referred to herein as the Joint Transmission Line and accordingly, Denton shall have no financial RS-HBBA.002.1 -8- responsibility under this Contract for Bonds or for other expenses of the District other than those related to the Joint Transmission Line. Section 3.03. Bond Proceeds. The proceeds from the sale and delivery of such Bonds may be used to fund to the extent deemed advisable by the District a debt service reserve fund, a contingency fund, and interest on the Bonds during construction; and such proceeds also will be used for the payment of the District's expenses and costs in connection with the Project (including all engineering and design costs and expenses, and the cost of the land and interests therein related to the Project) and the Bonds, including, without limitation, all financing, legal, printing, and other expenses and costs related to the issuance of such Bonds and the Project. Section 3.04. Bond Resolution. Each Bond Resolution of the District shall specify the exact principal amount of the Bonds to be issued thereunder, which shall mature within the maximum period, and shall bear interest at not to exceed the maximum rates then permitted by law, and each Bond Resolution shall create and provide for the maintenance of a revenue fund, an interest and sinking fund, a debt service reserve fund, and any other funds deemed advisable, all in the manner and amounts as provided in such Bond Resolution. Denton agrees that if and when such Bonds are actually issued and delivered to the purchaser thereof, for the purpose of acquiring and constructing the Joint Transmission Line, the Bond Resolution authorizing the Bonds shall for all purposes be deemed to be in compliance with this Contract in all respects, and the Bonds issued thereunder will constitute Bonds as deemed in this Contract for all purposes. Section 3.05. Joint Transmission Line. District and Denton agree that Denton's participation in Project is limited to the Joint Transmission Line planned by the District to connect to the Denton water distribution system at Lillian Miller Parkway and Interstate 35E. Denton will participate on a pro rata basis in oversizing the line in accordance with the limit, size and capacity outlined in Exhibit "A", which is attached hereto and incorporated into this Contract for all purposes. The Joint Transmission Line delineated in Exhibit A hereof shall be constructed and financed by JFB-HBBF.002-1 -9- District. During design and construction, District shall have sole possession and control of the Joint Transmission Line. ARTICLE IV Operating Requirements Section 4.01. Water Sales. In separate contracts, District has agreed to deliver potable water to Customers other than Denton. However, no sales of water by District to Denton are contemplated in this Contract. Section 4.02. Limits of Pipeline. District agrees to provide for the Joint Transmission Line between the points and along the general route and with the capacity delineated in Exhibit A attached hereto. Denton may transport water owned by Denton through the Joint Transmission Line up to the peak day capacity provided for in Exhibit "A". Section 4.03. Metering Equipment. (a) Denton will furnish, install, operate, and maintain at its expense the necessary equipment and devices of standard type required for measuring the total quantity of treated water delivered through the Joint Transmission Line for Denton's benefit. The District will furnish, install, operate, and maintain at its expense the necessary equipment and devices of standard type required to measure the quantity of water delivered to Customers other than Denton. Such meters and other equipment so installed by Denton or District shall remain the property of Denton and the District respectively. Each Party shall inspect, calibrate, and adjust its meters at least annually as necessary to maintain accurate measurements of the quantity of treated water being delivered. Each Member shall have access to the metering equipment for measurement of its water at all reasonable times for inspection and examination, but the reading, calibration, and adjustment thereof shall be done only by employees or agents of the owner of the meter. If requested, the affected party may witness such reading, calibration and adjustment of meters. All readings of meters will be entered upon proper JFB-HBBF.002-1 -10- books of record maintained by Denton and the District. Either party may have access to said record books during normal business hours. (b) Either Denton or the District may request, in writing, that the other party calibrate any meter or meters affecting its cost or charges under this Contract in the presence of the requesting party. Either party will make up to one (1) such calibrations in any fiscal year at no charge to the requesting party. All requested calibrations in excess of one (1) will be made at the expense of the requesting party, except when the accuracy of the meter is beyond the limits of commercial accuracy in which case the owner shall bear such expense. If, for any reason, any meter is out of service or out of repair, or if, upon any test, the percentage of inaccuracy of any meter is found to be in excess of commercial accuracy (which unless otherwise agreed to shall be considered to be plus or minus two 2%) percent, registration thereof shall be corrected for a period of time extending back to the time when such inaccuracy began, if such time is ascertainable, and if not ascertainable, then for a period extending back one-half (1/2) of the time elapsed since the date of the last calibration, but in no event further back than a period of six (6) months. (c) If either party at any time observes an apparent error in meter registration or readings, such party will promptly notify the other party. When agreed, the parties hereto shall then cooperate to procure an immediate calibration test and joint observation of any adjustment and the same meter or meters shall then be adjusted to accuracy. Each party shall give the other party forty-eight (48) hours' notice of the time of all tests of meters so that the other party may conveniently have a representative present. (d) If for any reason any meters are out of repair so that the amount of water delivered cannot be ascertained or computed from the reading thereof, the water delivered through the period such meters are out of service or out of repair shall be estimated and agreed upon by the parties hereto upon the basis of the best data available. For such purpose, the best data available shall be deemed to be the registration of any check meter or meters if the same have been installed and are 7FB-HBBF.002-1 -11- accurately registering. Otherwise, the amount of water delivered during such period may be estimated (i) by correcting the error if the percentage of the error is ascertainable by calibration tests or mathematical calculation, or (11) estimating the quantity of delivery by deliveries during the preceding periods under similar conditions when the meter or meters were registering accurately. Section 4.04. Unit of Measurement. The unit of measurement for treated water delivery from the Joint Transmission Line hereunder shall be 1,000 gallons, U.S. Standard Liquid Measure. Section 4.05. Access. (a) Denton agrees to provide ingress and egress for District employees and agents to all its premises inside Denton's boundaries to install, operate, inspect, test, and maintain facilities owned or maintained by District within corporate or jurisdictional limits of Member. (b) District agrees to provide ingress and egress for Denton's employees and agents to all premises under control of the District to install, operate, inspect, test, and maintain facilities, and read meters owned or maintained by Denton. Section 4.06. Customer Advisory Council. (a) The governing body of each Customer annually may appoint one of the members of its governing body or one of its employees as a member of the Customer Advisory Council for the District, which Council is hereby created and established. The Council shall elect a Chairman, a Vice Chairman, and a Secretary. The Council may establish bylaws governing the election of officers, meeting dates and other matters pertinent to its function. The Council shall consult with and advise the District with regard to the following matters pertaining to the District: (i) The issuance of Bonds; (ii) The operation and maintenance of the Project, including Joint Transmission Line; (iii) Contracts for services to Customers; (iv) The District's Annual Budget, prior to its submission to the Board; and J7B-HB13F.002-1 -12- (v) Improvements and extensions of the Project. The Council shall have access to and may inspect at reasonable times all physical elements of the Project and all records and accounts of the District pertaining to the Project. (b) The term of membership on the Council shall be at the pleasure of each governing body represented, respectively, and each member shall serve until replaced by such governing body. All expenses of the Council in discharging its duties under this Section shall be considered as an Operation and Maintenance Expense of the Project. Section 4.07. Water Conservation Plan and Drought Contingency Plan. (a) Denton and District agree that water transmission services may be limited or curtailed by either Party in its respective share of Joint Transmission Line in the event of an emergency or drought. Denton and District agree to coordinate the implementation of any action to limit transmission services to minimize adverse impact on either party's operation, and on adequacy of service, and to promote public understanding of the need for and terms of such limitation or curtailment. (b) It is the policy of the District to prepare, adopt and maintain a regional water conservation plan which incorporates loss reduction measures and demand management practices which insure that the available supply of water is used in an economically efficient and environmentally sensitive manner. Similarly, it is the policy of the District to prepare, adopt and maintain a drought and emergency contingency plan for water supply to Customers. Each Member that purchases treated water from the Project agrees to cooperate in the implementation of both plans and to adopt and enforce such or similar plans for use within their respective jurisdictions. Section 4.8. Cross Connections. Denton and District agree to provide for and to include in the Joint Transmission Line and facilities connected thereto, adequate cross connection control measures as necessary to meet regulatory requirements, to protect the health of customers and to conform to generally accepted industry standards. JFB-HBBF.002-1 -13- ARTICLE V Fiscal Provisions Section 5.01. Annual Requirements. Subject to the terms and provisions of this Contract, the District will provide and pay for the cost of the acquisition, construction and improvement of the Joint Transmission Line, by issuing its Bonds in amounts which will be sufficient to accomplish such purposes. It is acknowledged and agreed that payments to be made under this Contract and similar contracts with other customers and Additional Participating Members, if any, will be the primary source available to the District to provide the Annual Requirement. In compliance with the District's duty to fix and from time to time to revise the rates and charges for services of the Joint Transmission Line, the Annual Requirement may change from time to time. Each such Annual Requirement shall be allocated between Denton and other Customers of the District as hereinafter provided, and the Annual Requirement for each Annual Payment Period shall be provided for in each Annual Budget and shall at all times be not less than an amount sufficient to pay or provide for the payment of: (a) An "Operation and Maintenance Component" equal to the amount paid or payable for all Operation and Maintenance Expenses of the Joint Transmission Line; and (b) A "Capital Component" related to the Joint Transmission Line equal to: (1) the principal of, redemption premium, if any, and interest on, its Bonds, as such principal, redemption premium, if any, and interest become due, less interest to be paid out of Bond proceeds or from other sources if permitted by any Bond Resolution, and all amounts required to redeem any Bonds prior to maturity when and as provided in any Bond Resolution, plus the fees, expenses and charges of each paying agent/registrar for paying the principal of and interest on the Bonds, and for authenticating, registering and transferring Bonds on the registration books; and JFB-HBBF.002.1 -14- (2) the proportionate amount of any special, contingency or reserve funds required to be accumulated and maintained by the provisions of any Bond Resolution; and (3) an amount in addition thereto sufficient to restore any deficiency in any of such funds required to be accumulated and maintained by the provisions of any Bond Resolution; and (c) An amount deemed appropriate and necessary by the Board to be required as a special reserve for operation and maintenance expenses of the Joint Transmission Line or for capital improvements. Any such reserve shall be used as operating capital for Operation and Maintenance Expenses and for emergency expenses. The normal level of such reserve shall not exceed 25% of the annual Operation and Maintenance Expenses (estimated to be approximately three (3) months expenses). It is specifically agreed that Denton's Share of Annual Requirement shall be limited to that portion applicable to Denton's share of Joint Transmission Line. Section 5.02. Annual Budget. Each Annual Budget of the District shall always provide for amounts sufficient to pay the Annual Requirement. The Annual Budget for the Joint Transmission Line for all or any part of the Annual Payment Period during which the Joint Transmission Line is first placed into operation shall be prepared by the District based on estimates made by the District. On or before June 15 of each year after the Joint Transmission Line is first placed in operation, the District shall furnish to Denton a preliminary estimate of the Annual Payment required from each Member for the next following Annual Payment Period. Not less than forty days before the commencement of the Annual Payment Period after the Joint Transmission Line is fast placed into operation, and not less than forty days before the commencement of each Annual Payment Period thereafter, the District shall cause to be prepared as herein provided its preliminary budget for the Joint Transmission Line and the Project for the next ensuing Annual Payment Period. A copy of JFB-HBBF.002-1 -15- such preliminary budget shall be filed with each Participating Member for review before action by the Board. Any Participating Member may submit comments about the preliminary budget directly to the Board. The Board may adopt the preliminary budget or make such amendments thereto as the Board may deem proper. The budget thus approved by the Board shall be the Annual Budget for the next ensuing Annual Payment Period. The Annual Budget (including the first Annual Budget) may be amended by the District at any time to transfer funds from one account or fund to another account or fund so long as such transfer will not increase the total budget. The amount for any account or fund, or the amount for any purpose, in the Annual Budget may be increased through formal action by the Board even though such action might cause the total amount of the Annual Budget to be exceeded; provided that such action shall be taken only in the event of an emergency or special circumstances which shall be clearly stated in a resolution at the time such action is taken by the Board. Section 5.03. Payments by Denton. For the services to be provided to Denton under this Contract, Denton agrees to pay, at the time and in the manner hereinafter provided, its proportionate share (Annual Payment) of the Annual Requirement. Denton shall pay its part of the Annual Requirement for each Annual Payment Period directly to the District, in monthly installments in accordance with the schedule of payments furnished by the District, as hereinafter provided. Section 5.04. Fiscal Policv. It is provided that in estimating costs for services, the District is specifically authorized, in its discretion, to include in such estimate of costs reasonable contributions to Reserve Funds or to assume that the Annual Payment Period may entail above average operation and maintenance expense due to weather or other factors affecting costs. This fiscal policy is expressly approved by the Participating Members and is deemed by the parties hereto to be beneficial in the fiscal management of the Project, and will assure the timely availability of funds even under unexpected circumstances. Upon receipt during any Annual Payment Period of an amount sufficient to meet the then current Annual Budget of the Project for the remainder of the then current Annual JFa-HBBF.002.1 -16- Payment Period, the District shall deposit subsequent revenues received into appropriate reserve or contingency accounts, unless otherwise specifically hereinafter provided in the event of unexpected or additional Annual Budget requirements. If there is a shortfall in revenues, the District may withdraw from the reserves, adjust the Annual Requirement, revise the payment schedule or do any combination thereof. Section 5.05. Redetermination of Annual Requirements. The Annual Requirement, and each Member's share thereof (Annual Payment), shall be redetermined, after consultation with each Member, at any time during any Annual Payment Period, to the extent deemed necessary or advisable by the District, if- (i) The District commences furnishing services of the Project to an Additional Participating Member or Customer; (ii) Unusual, extraordinary, or unexpected expenditures for operation and maintenance expenses are required which are not provided for in the District's Annual Budget or reserves for the Project; (iii) Operation and maintenance expenses of the Project are substantially less than estimated; (iv) District issues Bonds which require an increase in the capital component of the Annual Payment; or (v) The District receives either significantly more or significantly less revenues or other amounts than those anticipated. If the Annual Requirement is redetermined, Member will be advised of the Adjusted Annual Payment. Section 5.06. Prompt Pavment/Disputed Bills. Denton hereby agrees that it will make payments to the District required by this Contract within 20 days of the date a bill for service is rendered. If Denton at any time disputes the amount to be paid by it to the District, Denton shall J713-Ha11F.W24 nevertheless promptly make such payment or payments; but if it is subsequently determined by agreement or court decision that such disputed payments should have been less, or more, the District shall promptly revise and reallocate the charges in such manner that Denton will recover its overpayment or the District will recover the amount due it. All amounts due and owing to the District by Denton or due and owing to Denton by the District shall, if not paid when due, bear interest at the rate of ten (10) percent per annum from the date when due until paid. Section 5.07. Delinguent Bills. The District shall, to the extent permitted by law, suspend the delivery of services under this Contract to any Member which remains delinquent in any payments due hereunder for a period of sixty days, and shall not resume delivery of services while such Member is so delinquent. However, the District shall pursue all legal remedies against any such delinquent Member to enforce and protect the rights of the District, the other Members, and the holders of the Bonds. The delinquent Member shall not be relieved of the liability to the District for the payment of all amounts which would have been due hereunder had no default occurred or the percentage had not been redetermined as provided in this Section. It is understood that the foregoing provisions are for the benefit of the holders of the Bonds so as to insure that all of the Annual Requirement will be paid by the non-delinquent Members during each Annual Payment Period regardless of the delinquency of a particular Member. If any amount due and owing the District by any Member is placed with an attorney for collection, such Member shall pay to the District all attorneys fees, in addition to all other payments provided for herein, including interest. Section 5.08 Updated Schedule of Payments. If, during any Annual Payment Period, any member's Annual Payment is redetermined in any manner as provided or required in the foregoing sections, the District will promptly furnish such member with an updated schedule of monthly payments reflecting such redetermination. !FB-HBBF.002-1 -18- ARTICLE VI Miscellaneous Provisions and Special Conditions Section 6.01. Operation and Maintenance of Project. The District will continuously operate and maintain the Project in an efficient manner and in accordance with good business and engineering practices, and at reasonable cost and expense. The District recognizes its right and duty to operate the various facilities of the Project in the most prudent and economical manner for the benefit of all Customers. Section 6.02. Project Schedule. It is the intent of the parties that the Project, including the Joint Transmission Line, will be placed in operation as soon as practicable, and the District agrees to proceed diligently with the design and construction of the Project to meet such schedule, subject to the other terms and conditions of this Contract. Section 6.03. Permits. Financing and Applicable Laws. It is understood that any obligations on the part of the District to acquire, construct and complete the Project and to provide treated water from the Project to the Members shall be: (i) conditioned upon the District's ability to obtain all necessary permits, material, labor, and equipment; (ii) conditioned upon the ability of the District to finance the cost of the Project through the actual sale of the District's Bonds; and (iii) subject to all present and future valid laws, orders, rules, and regulations of the United States of America, the State of Texas, and any regulatory body having jurisdiction. Section 6.04. Title to Water: Indemnification. Title to all water in the Joint Transmission Line shall be in the District and Denton respectively in the proportions ultimately delivered to Denton and to other Customers out of water carved in the Joint Transmission Line. The District and Denton shall save and hold each other harmless from all claims, demands, and causes of action which may be asserted by anyone on account of the transportation and delivery of said water while title remains in such party. JFB-HBBF.002.1 -19- Section 6.05. Payments Solely From Revenues. The District shall never have the right to demand payment by Denton of any obligations assumed by it or imposed on it under and by virtue of this Contract from funds raised or to be raised by taxes, and the obligations under this Contract shall never be construed to be a debt of such kind as to require Denton to levy and collect a tax to discharge such obligation. Nonetheless, Denton may make payments from its water and wastewater (sewer) system revenues, or from any other lawful source. Section 6.06. Operating Expenses. Denton represents and covenants that all payments to be made by it under this Contract shall constitute reasonable and necessary "operating expenses" of its combined waterworks and sewer system, as defined in Vernon's Ann. Tex. Civ. St. Article 1113, and that all such payments will be made from the revenues of its combined waterworks and sewer system or any other lawful source. Denton represents and has determined that its participation in the Joint Transmission Line is absolutely necessary and essential to the present and future operation of its water system, and, accordingly, all payments required by this Contract to be made by Denton shall constitute reasonable and necessary operating expenses of its respective system as described above, with the effect that the obligation to make such payments from revenues of such systems shall have priority over any obligation to make any payments from such revenues (whether of principal, interest, or otherwise) with respect to all bonds or other obligations heretofore or hereafter issued by Denton. Section 6.07. Rates for Water and Wastewater Services. Denton agrees throughout the term of this Contract to continuously operate and maintain its waterworks system, its wastewater (sewer) system or both, and to fix and collect such rates and charges for water services, wastewater (sewer) services or both to be supplied by its system or systems as aforesaid as will produce revenues in an amount equal to at least (i) all of the expenses of operation and maintenance expenses of such system or systems, including specifically, its payments under this Contract, and (ii) all other amounts as required by law and the provisions of the ordinance or resolutions authorizing its revenue bonds or JFB-HBBF.002.1 -20- other obligations now or hereafter outstanding, including the amounts required to pay all principal of and interest on such bonds and other obligations. Section 6.08. Use of Funds and Project The District covenants and agrees that neither the proceeds from the sale of the Bonds, nor the moneys paid it pursuant to this Contract, nor any earnings from the investment of any of the foregoing, will be used for any purposes, except those directly relating to the Project, including the Joint Transmission Line, and the Bonds as provided in this Contract; provided that the District may rebate any excess arbitrage earnings from such investment earnings to the United States of America in order to prevent any Bonds from becoming "arbitrage bonds" within the meaning of the Internal Revenue Code of 1986 (the "Code") or any amendments thereto in effect on the date of issue of such Bonds. Denton covenants and agrees that it will not use or permit the use of the Joint Transmission Line in any manner that would cause the interest on any of the Bonds to be or become subject to federal income taxation under the Code or any amendments thereto in effect on the date of issue of such Bonds. Section 6.09. Rights-of-Way. Denton hereby grants to the District without additional cost to the District, the perpetual use of the streets, easements, and rights-of-way under its control for the construction, operation, and maintenance of the Joint Transmission Line pursuant to attached Exhibit "A", plus the line proposed to be connected thereto to serve the City of Corinth and Lake Cities Municipal Utility Authority. As a condition of use of such streets, easements and rights-of-way, District shall make the necessary repairs to restore the streets, alleys or public rights of way to their original condition. Section 6.10. Unconditional Obligation to Make Payments. Recognizing the fact that Denton desires the facilities and services of the Joint Transmission Line, and that such facilities and services are essential and necessary for actual use and for standby purposes, and recognizing the fact that the District will use payments received from Denton to pay and secure its Bonds, it is hereby agreed by Denton that it shall be unconditionally obligated to pay, without offset or counterclaim, its JFB-HBBF.002-1 -21- proportionate share of the Annual Requirement, as provided and determined in this Contract regardless of whether or not the District actually acquires, constructs or completes the Project, including the Joint Transmission Line, or whether or not the District or Denton is able to deliver water through the Joint Transmission Line, whether due to Force Majeure or any other reason whatsoever, regardless of any other provisions of this or any other contract or agreement between any of the parties hereto. This covenant by Denton shall be for the benefit of and enforceable by the holders of the Bonds as well as the District. Section 6.11. Insurance. The District agrees to carry and arrange for fire, casualty, public liability, and/or other insurance, including self insurance, on the Project for purposes and in amounts which, as determined by the District, ordinarily would be carried by a privately owned utility company owning and operating such facilities, except that the District shall not be required to provide liability insurance except to insure itself against risk of loss due to claims for which it can, in the opinion of the District's legal counsel, be liable under the Texas Tort Claims Act or any similar law or judicial decision. Such insurance will provide, to the extent feasible and practicable, for the restoration of damaged or destroyed properties and equipment, to minimize the interruption of the services of such facilities. All premiums for such insurance shall constitute an Operation and Maintenance Expense of the Project. Section 6.12. Special Provisions. The parties hereto acknowledge and agree to the Special Provisions which are set forth in Exhibit B hereto which Exhibit is incorporated herein for all purposes. The Special Provisions for this Contract reflect circumstances or issues for Denton which may be different from those of other Customers and therefore constitute a modification of or requirement in addition to the standard provisions otherwise contained in this Contract. ARTICLE VII Section 7.01. Force Majeure. If by reason of force majeure any party hereto shall be rendered unable wholly or in part to carry out its obligations under this Contract, other than the H13-HBBA.002-1 -22- obligation of each Participating Member to make the payments required under this Contract, then if such party shall give notice and full particulars of such force majeure in writing to the other parties within a reasonable time after occurrence of the event or cause relied on, the obligation of the party giving such notice, so far as it is affected by such force majeure, shall be suspended during the continuance of the inability then claimed, but for no longer period, and any such party shall endeavor to remove or overcome such inability with all reasonable dispatch. The term "Force Majeure" as employed herein shall mean acts of God, strikes, lockouts or other industrial disturbances, acts of public enemy, orders of any kind of the Government of the United States or the State of Texas, or any Civil or military authority, insurrection, riots, epidemics, landslides, lightning, earthquake, fires, hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, partial or entire failure of water supply, or on account of any other causes not reasonably within the control of the party claiming such inability. Section 7.02. Term of Contract. This Contract shall be effective on and from the Contract Date, and shall continue in force and effect for thirty (30) years or for such period of time that Bonds issued by the District for the Joint Transmission Line remain outstanding, whichever is greater; provided, however, the term of the Contract and the expiration date may be extended for a period not to exceed 20 years at the option of the Participating Member, upon the mutual agreement of the Participating Member and the District as to the terms and conditions. The District's obligation to provide the contracted for services shall commence from the date that the District, in writing, deems the Joint Transmission Line to be operational and functional. This Contract constitutes the sole agreement between the parties hereto with respect to the Joint Transmission Line. Section 7.03. Modification. No change, amendment or modification of this Contract shall be made or be effective which will affect adversely the prompt payment when due of all moneys MI-HUR002-1 -23- required to be paid by Denton under this Contract and no such change, amendment or modification shall be made or be effective which would cause a violation of any provisions of any Bond Resolution. Section 7.04. Addresses and Notice. Unless otherwise provided herein, any notice, communication, request, reply or advice (herein severally and collectively, for convenience, called "Notice") herein provided or permitted to be given, made or accepted by any party to any other party must be in writing and may be given or be served by depositing the same in the United States mail postpaid and registered or certified and addressed to the party to be notified, with return receipt requested, or by delivering the same to an officer of such party, or by prepaid telegram when appropriate, addressed to the party to be notified. Notice deposited in the mail in the manner hereinabove described shall be conclusively deemed to be effective, unless otherwise stated herein, from and after the expiration of three days after it is so deposited. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the parties shall, until changed as hereinafter provided, be as follows: If to the District, to: Upper Trinity Regional Water District 396 W. Main Street P. O. Drawer 305 Lewisville, Texas 75067 If to City of Denton, to: Executive Director of Utilities City of Denton 215 East McKinney Street Denton, Texas 76201 The parties hereto shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least fifteen (15) days' written notice to the other parties hereto. Section 7.05. State or Federal Laws. Rules. Orders or Regulations. This Contract is subject to all applicable Federal and state laws and any applicable permits, ordinances, rules, orders and IMHBBA.002.1 -24- regulations of any local, state or federal governmental authority having or asserting jurisdiction, but nothing contained herein shall be construed as a waiver of any right to question or contest any such law, ordinance, order, rule or regulation in any forum having jurisdiction. Section 7.06. Remedies Upon Default. It is not intended hereby to specify (and this Contract shall not be considered as specifying) an exclusive remedy for any default, but all such other remedies (other than termination) existing at law or in equity may be availed of by any party hereto and shall be cumulative. Recognizing however, that the District's undertaking to provide and maintain the Project is an obligation, failure in the performance of which cannot be adequately compensated in money damages alone, the District agrees, in the event of any default on its part, that each Participating Member shall have available to it the equitable remedy of mandamus and specific performance in addition to any other legal or equitable remedies (other than termination) which may also be available. Recognizing that failure in the performance of any Participating Member's obligations hereunder could not be adequately compensated in money damages alone, each Participating Member agrees in the event of any default on its part that the District shall have available to it the equitable remedy of mandamus and specific performance in addition to any other legal or equitable remedies (other than termination) which may also be available to the District. Notwithstanding anything to the contrary contained in this Contract, any right or remedy or any default hereunder, except the right of the District to receive the Annual Payment which shall never be determined to be waived, shall be deemed to be conclusively waived unless asserted by a proper proceeding at law or in equity within two (2) years plus on (1) day after the occurrence of such default. No waiver or waivers of any breach or default (or any breaches or defaults) by any party hereto or of performance by any other party of any duty or obligation hereunder shall be deemed a waiver thereof in the future, nor shall any such waiver or waivers be deemed or construed to be a waiver of subsequent breaches or defaults of any kind, character or description, under any circumstance. nT-HBBF.W2.1 -25- Section 7.07. Severabilitv. The parties hereto specifically agree that in case any one or more of the sections, subsections, provisions, clauses or words of this Contract or the application of such sections, subsections, provisions, clauses or words to any situation or circumstance should be, or should be held to be, for any reason, invalid or unconstitutional, under the laws or constitutions of the State or the United States of America, or in contravention of any such laws or constitutions, such invalidity, unconstitutionality or contravention shall not affect any other sections, subsections, provisions, clauses or words of this Contract or the application of such sections, subsections, provisions, clauses or words to any other situation or circumstance, and it is intended that this Contract shall be severable and shall be construed and applied as if any such invalid or unconstitutional section, subsection, provision, clause or word had not been included herein, and the rights and obligations of the parties hereto shall be construed and remain in force accordingly. Section 7.08. Venue. All amounts due under this Contract, including, but not limited to, payments due under this Contract or damages for the breach of this Contract, shall be paid and be due in Denton County, Texas, which is the County in which the principal administrative offices of the District are located. It is specifically agreed among the parties to this Contract that Denton County, Texas, is the place of performance of this Contract; and in the event that any legal proceeding is brought to enforce this Contract or any provision hereof, the same shall be brought in Denton County, Texas. IN WITNESS WHEREOF, the parties hereto acting under authority of their respective governing bodies have caused this Contract to be duly executed in several counterparts, each of which shall constitute an original, all as of the day and year first above written, which is the date of this Contract. J2B-HBBF.M2-1 -26- UPPER TRINITY REGIONAL WATER DISTRICT BY: President, Board of Directors ATTEST: S retary, oard of rectors (AUTHORITY SEAL) APPROVED AS TO FORM AND LEGALITY: LE-u-nsel for the Dist r' ATTEST: JENNIFER WALTERS, CITY SECRETARY By. W 77 AP OVED AS TO LEGAL FORM: DEBRA A. DRAYOVITCH, CITY ATTORNEY By JFB-HBBF.002-1 -27- EXHIBIT B TO CONTRACT BETWEEN CITY OF DENTON AND UPPER TRINITY REGIONAL WATER DISTRICT FOR PARTICIPATION IN A JOINT TRANSMISSION LINE SPECIAL PROVISIONS The provisions of this Exhibit B form a part of the Contract and are applicable to the Upper Trinity Regional Water District (the "District") and to the City of Denton ("Denton") as if set forth in their entirety in the body of the Contract. 1. The District will construct the Joint Transmission Line as a part of the Project as defined in this Contract. The District will own the Joint Transmission Line, including the right-of- way, except as otherwise provided herein. The District will coordinate routing, design and right-of- way acquisition with Denton. Within the City Limits of Denton, the District's improvements shall not unduly conflict with any Denton master plan for land development. District and Denton agree to coordinate future joint use of said rights-of-way within Denton for underground utilities. District and Denton agree to coordinate arrangements for parallel or adjoining easements and other rights-of- way, including reciprocal use of such easements for temporary use during construction and for other mutually beneficial purposes. 2. The District will provide the funds to design and construct the Joint Transmission Line, including rights-of-way. The Annual Payment by Denton to District will be based on Denton participating in the Joint Transmission Line on a proportionate basis of rated capacity of the pipeline according to Exhibit A. The balance of the Annual Requirement related to the Joint Transmission Line will be paid by other Customers of the District. 3. Capital costs will be assigned to Denton and the other Customers in proportion to respective shares of rated capacity of the pipeline according to Exhibit A. 4. In accordance with the contract between Denton and District dated July 21, 1992, providing for "Water Treatment and Transmission Services," the cost of transporting water through the Joint Transmission Line during the Initial Period (as defined in said contract) shall be included in the cost of water charged to District. No additional costs associated with this Joint Transmission Line will be included in said cost charged to District. 5. After the Initial Period, District shall compensate Denton for transporting water through the Joint Transmission Line in accordance with said July 21, 1992 contract. 6. If requested in writing by the District and agreed to by Denton, Denton may acquire or purchase easements or rights-of-way within the City Limits of Denton on behalf of the District for the Joint Transmission Line. The District will reimburse Denton for all direct cost associated with Denton's efforts to acquire the easement regardless of whether the easement is actually purchased by either party. If requested by District and agreed to by Denton, Denton may exercise its power of eminent domain on behalf of the District. 7. On behalf of Denton and District, Denton agrees to operate the Joint Transmission Line and to be responsible for normal and routine maintenance of the Joint Transmission Line • according to the standards of Denton's own water transmission and distribution system. Denton will maintain records of the actual cost of such maintenance and will send periodic reports of cost to District for reimbursement of cost in proportion to respective share of rated capacity of the pipeline IM-HBBP.002-1 B-1 according to Exhibit A. District shall have reasonable access to Denton's records to verify such costs. District hereby agrees that it will make payments to Denton according to the provisions of Sections 5.06 and 5.07 of this contract, which sections are otherwise applicable to Denton. If, in the opinion of Denton, extraordinary maintenance such as pipeline replacement exceeding 1% of the length of the pipeline is required, Denton shall give written notice of such to District and District and Denton shall mutually determine which party shall take appropriate steps to accomplish such extraordinary maintenance. 8. Prior to completion of construction of the Joint Transmission Line, Denton's Executive Director shall develop a mutually satisfactory written procedure for coordinating the operation and maintenance of the Joint Transmission Line and for notifying each other of any activities which may affect the operations of the other party's system. 9. Until approximately 1998, Denton expects to deliver treated water to District through the Joint Transmission Line for the benefit of other Customers of District. Thereafter, the District expects to deliver treated water to Denton for transmission through Denton's transmission and distribution system to City of Corinth, Lake Cities Municipal Utility Authority, and other Customers of District. In either case, the point of delivery of such water shall be at a mutually agreeable location at the south end of the Joint Transmission Line at the approximate location shown on Exhibit A. 10. Through the useful life of the Joint Transmission Line, Denton and District agree to make the capacity of the pipeline available for emergency exchange of water for the mutual benefit of both parties. To implement arrangements for emergency exchange of water, Denton's Executive Director of Utilities and District's Executive Director shall develop a mutually satisfactory written protocol for such emergency exchange of water. 11. Until the original capital costs are fully retired, Denton shall pay its share of the Capital Component (as defined in Section 5.01 of this Contract) of the Joint Transmission Line, including future capital improvements or replacements related thereto. After such capital costs are fully paid, Denton shall thereafter continue to pay its share of all other costs defined to be part of the Annual Requirement. 12. Denton may purchase the District's rights in the Joint Transmission Line according to the following circumstances and conditions: (a) Upon receiving notice from District at any future time that its share of the Joint Transmission Line is no longer needed for District purposes; or (b) After the District completes construction of its own water treatment plant, and the District is no longer purchasing treated water from Denton. In such case, Denton must give notice of its desire to purchase the District's share of the Joint Transmission Line from District. 13. Denton shall purchase the rights of the District in the Joint Transmission Line according to the following circumstances and conditions: (a) When Denton needs or uses more capacity in the Joint Transmission Line than its share according to Exhibit A, it shall purchase the District's entire share of the pipeline, unless otherwise agreed to by Denton and District. RS-HBBP.002.1 B-2 (b) At the end of the initial term of this Contract, Denton shall purchase the District's entire share of the Joint Transmission Line. 14. The price to be paid to District by Denton to purchase the District's share of the Joint Transmission Line under paragraphs 12 or 13 above shall be equal to the original cost thereof for the District's share, less accumulated depreciation plus a credit (not to exceed said purchase price) for revenues received by District from Denton and other public utilities for use of the rights-of-way included in the Joint Transmission Line. Depreciation expense will be computed on a straight line basis over a period not to exceed thirty (30) years. For that portion of the pipeline owned by District, devoted to public service. For that portion of the pipeline owned by TWDB under a participation agreement, depreciation expense shall start when the District purchases the TWDB's interest or five (5) years from date pipeline was first used for public service, whichever date occurs fast. 15. If Denton purchases the District's share of the Joint Transmission Line under any of the provisions of this Exhibit B, District shall continue to enjoy the rights provided in this contract or as provided in other contracts between Denton and District: (1) to receive water from Denton; (2) to deliver water to Denton; and (3) to have the right of emergency exchange of water through the pipeline. 16. If Denton desires and requests the District to construct improvements or install appurtenances for Denton as part of the Joint Transmission Line, which improvements or appurtenances are not otherwise needed by District, the District shall issue its Bonds to finance such improvements; and, Denton shall pay the entire Annual Requirement associated with such improvements or appurtenances installed for the sole benefit of Denton. 17. Notwithstanding any provision in this Contract, Denton shall have no responsibility for any portion of the Project other than the Joint Transmission Line. HS-HBBROM-I B-3