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1992-122FILE REFERENCE FORM I 92-122 Additional File Exists Additional File Contains Records Not Public, According to the Public Records Act Other FILE(S) Date Initials Amendment to Contract - Ordinance No. 2004-137 05/04/2004 ALL002D7 .' ORDINANCE NO. ~ AN ORDINANCE OF THE CITY OF DENTON AUTHORIZING THE~YOR TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF DENTON, MD THE UPPER TRINITY REGIONAL WATER DISTRICT FOR WATER TREATMENT AND T~NSMISSION SER- VICES; AUTHORIZING THE EXPENDITURE OF FUNDS AS PROVIDED IN SAID AGREEMENT; AND PROVIDING AN EFFECTIVE DATE. SEC~ON I. That the Mayor is authorized to execute an Agree- ment between the city of Denton and Upper Trinity Regional Water District for water treatment and transmission services, under the terms and conditions set forth in the ~reement, a copy of which is attached hereto as Exhibit A. SECTION II. That this ordinance shall become effective immedi- ately upon its passage and approval. ~ ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: DEBRA A. DRAYOVITCH, CITY ATTORNEY ~J~L00297 THE STATE OF TEXAS § CONTRACT BETWEEN CITY OF DENTON § AND UPPER TRINITY REGIONAL WATER § DISTRICT FOR WATER TREATMENT AND This Agreement made this ~/~ d~y .of ~, 1992 by and between the City of Denton, a Municipal C~pora~ion organi- zed under the laws of the State of Texas ("DENTON"), and the Upper Trinity Regional Water District, a conservation and reclamation District created pursuant to Article XVI, Section 59 of the Con- stitution of the State of Texas ("DISTRICT"); WHEREAS, DISTRICT was created by the Texas Legislature to serve various regional water utility purposes including providing wholesale treated water service to participating cities and uti- lities of Denton County and adjacent areas; and WHEREAS, DENTON has an existing water treatment plant, known as the Spencer Water Treatment Plant, and such plant has Treatment Capacity sufficient to serve DENTON'S current water treatment needs, plus capacity to serve additional wholesale customer water treatment needs for a limited period of time; and WHEREAS, DISTRICT desires to contract for the use of water treatment plant services; and WHEREAS, the treatment capacity of DENTON'S existing and pro- posed water treatment plants that is surplus to DENTON'S current needs is available for use by DISTRICT; and WHEREAS, DENTON has water transmission lines with sufficient capacity to serve DENTON'S current needs, plus sufficient trans- mission line capacity for the Primary Term of this Agreement to deliver up to 4.5 mgd of treated water to the DISTRICT; and WHEREAS, DISTRICT is managing a phased development of its Mas- ter Plan and has scheduled the first phase of its wholesale water transmission system to be operational within two years; and WHEREAS, DISTRICT desires to enter into a contract with DENTON for the use of water treatment and water transmission service in accordance with the terms and provisions set out herein; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Parties agree as follows: ARTICLE I DEFINITIONS 1.1 "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 its Regional Water Project, and/or all bonds issued subsequently to improve, extend, operate or maintain the project, and any bonds issued to refund any bonds or to refund any such refunding bonds. 1.15 "consumer Price Index" means the Consumer Price Index For All Urban Consumers, CPI-U, (all items, published by the United States Department of Labor, Bureau of Labor Statistics 1982-1984 = 100) published by the United States Department of Labor, Bureau of Labor Statistics or any successor to such agency. If publication of the agency is disContinued, CPI-U shall refer to comparable sta- tistics with respect to the cost of living for all urban consumers published by any agency of the United States government and mutual- ly agreed to by DISTRICT and DENTON. 1.2 "DENTON'E Transmission System" or ,,Transmission System" means all of DENTON'S water lines twelve (12) inches in diameter or Page 2 larger used to transport treated potable water to its customers. 1.3 "DENTON'S Treatment System" or "Treatment System" means the Spencer Water Treatment Plant, and the Ray Roberts Water Treat- ment Plan, when constructed, including all appurtenances thereto and all existing raw water transmission facilities from the water source to the water treatment plant. 1.35 "DENTON'S Water Utility System" or "water Utility sys- tem'' means all existing and future facilities utilized to provide water to DENTON'S retail and wholesale customers, including, but not limited to, Water Treatment Systems, Transmission Systems, wa- ter storage facilities, distribution systems and administrative and personnel buildings. 1.4 "Fiscal Year" means the period of time from October i of each calendar year through September 30 of the next following cal- endar year. 1.5 "Initial Period" means the period of time that DISTRICT will receive temporary or interim water treatment or transportation service out of DENTON'S excess capacity, which period of time shall commence on the effective date of this Agreement and continue through midnight, May 31, 1998. 1.6 "MGD" is an abbreviation for "million gallons of water per day". 1o65 "Peak Day Volume" means the highest quantity of water used or requested by DISTRICT, whichever is greater, for any single day throughout any Water Year. Peak Day Volume is determined by measuring the cumulative maximum outflow from all points of deliv- ery. Page 3 1.7 "Point(s) of Delivery" means the point(s) designated in this Agreement or by subsequent agreement where water will be de- livered to DISTRICT from the DENTON Transmission System. 1.8 "Take or Pay" shall mean an obligation to pay for the amount of Water Treatment Capacity specified in the Agreement, without regard to the amount of Water Treatment Capacity actually used under this Agreement. 1.81 "Total Peak Day Transmission Volume" means the total peak day volume requested of the Denton Water Transmission System which shall include the City of Denton's peak day volume, the District's Peak Day Volume delivered from Denton's Water Transmission System and any other Denton water transmission customers' peak day volume delivered from Denton's Water Transmission System. 1.85 "Transmission Operating Oosts" means those costs associ- ated with the normal maintenance and repair of the Water Transmis- sion System. 1.9 "Treatment capaoity" means the maximum daily capability to treat raw water, expressed in gallons, that would, if maintained consistently through a period of twenty-four (24) hours, provide the maximum quantity of potable water in any one day of a Water Year. 1.10 "Variable Oosts" means those costs that vary according to the quantity of water treated, pumped or transported, including cost of electricity, chemicals, variable mechanical costs, and like charges that vary with the volume of water. 1.11 "Volume" means quantity of water, in gallons, that DIS- TRICT requests or actually receives from DENTON. Page 4 1.12 ~'Nater Year" means the period of time from June 1 of each calendar year through May 31 of the succeeding year. i~TICLE II INITIAL PERIOD FOR WATER TREATMENT AND TRANSMISSION SERVICES 2.1 Treatment and Transmission Services During the Initial Period, DENTON agrees to treat water for DISTRICT in DENTON'S Water Treatment System, and to transport such treated water to the Point(s) of Delivery subject to the terns and conditions stated herein. DISTRICT agrees to contract for the use of water treatment services and for the use of water transmis- sion services from DENTON subject to the terms and conditions stated herein. 2.2 Raw Water To Be SuDDlied BY District Ail raw water to be treated by DENTON on DISTRICT'S be- half under the terms of this Agreement shall be provided by DIS- TRICT at its sole expense. Such raw water shall be provided out of sources under contract to DISTRICT and delivered or made available to DENTON by DISTRICT in Lake Ray Roberts or Lake Lewisville. This provision specifically includes raw water that is under contract to DENTON and DISTRICT out of Cooper Reservoir in Sulphur River Basin, which water may be made available to Lake Ray Roberts or Lake Lewisville, if authorized by separate agreement with Dallas. De- livery of any other water from outside the Ray Roberts - Lewisville Lake system for treatment by DENTON under this Agreement will re- quire the written permission of DENTON. Except for Cooper Reser- voir water, DENTON shall have no obligation under this agreement to treat any water delivered by DISTRICT from outside the Ray Roberts- Page 5 Lake Lewisville Lake system and DENTON may refuse to accept any other such water at its treatment plants. 2.3 TAm~orar¥ 8ale of Raw Water The provisions of this Article notwithstanding, DISTRICT agrees that DENTON has the right of first refusal to sell raw water on a temporary basis to DISTRICT according to the terms of a sepa- rate raw water agreement. 2.4 ~vail~lit¥ of Treatment and Transmission Services Treatment of raw water provided by DISTRICT under this Agreement is expressly subject to and limited by the available sup- ply of raw water from DISTRICT. DENTON shall exercise due dili- gence to assure that the treatment and deliverability of water is maintained. Should DENTON need to curtail treatment or transportation of water for its customers, DENTON may impose a like curtailment on treatment or deliveries of water under this Agreement to DISTRICT without being in default of the Agreement. Such curtailments shall be limited to the extent that such supplies and service are cur- tailed due to a lack of raw water supply or because of system fail- ure or malfunction, contamination, acts of God, civil disturbances, war or other causes beyond DENTON'S control. DISTRICT will cooper- ate by imposing like curtailment measures upon its sales. 2.5 Equitable Restrictions To the extent DENTON imposes restrictions relating to the curtailment of water delivery and availability, DENTON agrees to impose such restrictions in a non-discriminatory fashion. Page 6 2.6 USe of Wells Nothing in this Agreement shall be construed to impair or affect DISTRICT'S right to use any existing water wells or any wa- ter wells it may drill in the future. ARTICLE III WATER SERVICE 3.1 Volume of Treatment and Tran~m{ssion Service to be Provided for the Initial Period The volume of treatment and transmission service to be made available to DISTRICT by DENTON during the Initial Period for each Water Year shall be established annually as described in this Article. DENTON will make available to DISTRICT, for the Initial Period, up to 4.5 mgd of water treatment and transmission services for water treated by DENTON. DENTON will not transport any water for the DISTRICT during the Initial Period other than water treated in DENTON'S Treatment System. 3.2 District to Give Notice Not less than one hundred and twenty (120) days before the beginning of the first and each successive Water Year, DISTRICT shall give written notice to DENTON concerning the Peak Daily Vol- ume of Treatment Capacity and transmission service being requested. DENTON may, at its sole discretion, waive the one hundred and twenty (120) day notice requirement upon the written request of DISTRICT. Such request and waiver shall be effective only if done in writing. If the requested volume exceeds 4.50 mgd, DENTON shall determine the capacity in DENTON'S Treatment and Transmission Sys- tem expected to be surplus to DENTON'S needs. If, for the upcoming Page 7 Water Year, DENTON determines there is surplus capacity in DENTON'S Water Treatment and Transmission System above 4.50 mgd to provide the DISTRICT with the additional requested treatment and transmis- sion services, DENTON may, under the terms of this Agreement pro- vide such additional treatment services for that Water Year. The parties agree that Exhibit "A", as described in Article 4.1 hereof shall be supplemented each year of the Primary Term of this Agree- ment to reflect the Peak Daily Volume DISTRICT has requested for each Delivery Point. The first Water Year or any portion thereof under this Agree- ment shall be the first year that water is actually delivered by DENTON under this Agreement and taken by DISTRICT. For the first Water Year, the one hundred and twenty (120) day notice referenced above shall be interpreted to mean one hundred and twenty (120) days prior to the date actual delivery of water is requested to begin. Prior to the first Water Year, DISTRICT and DENTON shall coordinate on a regular basis the activities necessary to plan for and commence delivery of treated water. Thereafter, prior to June 1 of each year, DISTRICT shall provide an estimate of the treatment and transmission services it expects to request for the succeeding three-year period. 3.3 Minimum Volume DISTRICT agrees, during each Water Year of the Initial Period, to pay DENTON, on a take or pay basis, for a Minimum Water Volume based upon the Peak Day Volume of treatment and transmission capacity requested or taken, whichever is greater, by DISTRICT for each Water Year. The Minimum Water Volume shall be calculated Page 8 using the following formula: Minimum Water Volume = Peak Day Volume multiplied by 365 multiplied by the applicable percentage*. *The applicable specified percentage for each year of the Initial Period shall be: 1994 1995 1996 1997 1998 70% 70% 60% 55% 55% During the Initial Period, each Water Year's Peak Day Volume shall not be less than any prior Water Year's Peak Day Volume. ARTICLE IV DELIVERYv LOCATION, METERING CONDITIONS 4.1 Delivery and Metering DENTON agrees to deliver the treated water hereunder at Delivery Point(s) shown in Exhibit A, attached hereto and incorpo- rated herein by reference, and at any other such points as may be mutually agreed upon by DISTRICT and DENTON. The cost of acquir- ing, designing, installing and constructing all water delivery and metering equipment or facilities necessary to fulfill this Agree- ment, including, but not limited to, water lines to metering points, meters, meter vaults and associated valves, shall be borne by DISTRICT. Upon completion of construction and acceptance by DENTON, DISTRICT shall dedicate the metering facilities, including the rate-of-flow controllers, to DENTON prior to the initiation of services hereunder. Ail plans for metering facilities and pipe- lines related thereto shall conform to DENTON'S requirements and shall be submitted to DENTON for its written approval prior to installation, which approval will not be unreasonably withheld. Page 9 However, it is anticipated that the existing Points of Delivery for DENTON'S existing wholesale customers will be sufficient if Corinth and LCMUA receive water from the DISTRICT during the Initial Peri- od. This Agreement does not contemplate the installation of dupli- cate metering facilities to measure the water being transported and delivered. Nevertheless, if such additional metering abilities are determined by the Parties to be necessary, they shall be installed under mutually satisfactory terms. DISTRICT represents and covenants that it has acquired, or will acquire, prior to the installation of metering equipment, the necessary easements or right-of-way on which the metering facili- ties and associated appurtenances for all points of delivery will be placed. 4.Z Maintenan~e and Calibration of Meters Ail water furnished shall be measured by meters installed at the Point(s) of Delivery. DENTON agrees to maintain said meters and to cause such repairs and adjustments to be promptly made. DENTON shall test the meter(s) annually. The costs of meter re- pairs and testing shall be included in the Variable Costs. Upon the request of DISTRICT, DENTON shall test the meter(s) more frequently than annually, but such additional test(s) shall be at DISTRICT'S expense, except when an error in metering is found to exceed 2%. If a meter is found to be in error by more than plus or minus two percent (2%), adjustments shall be made accordingly. If either Party at any time observes an apparent error in meter registration or readings, such Party will promptly notify the other Party. DENTON shall arrange for a calibration test and joint Page 10 observation of any adjustment and the same meter or meters shall then be adjusted to accuracy. DENTON shall give DISTRICT at least forty-eight (48) hours notice of the time of all tests of meters so that DISTRICT may conveniently have a representative present. 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 during the period such meters are out of service or out of repair shall be estimated and agreed upon by the Parties hereto upon the basis of the best data available. For such purposes, the best data available shall be deemed to be the registration of any check meter or meters if the same have been installed and are accurately registering. Otherwise, the amount of water delivered during such period may be estimated (i) by correcting the error if the percentage of the er- ror is ascertainable by calibration tests or mathematical calcula- tion, or (ii) estimating the quantity of water by deliveries during the preceding periods under similar conditions when the meter or meters were registering accurately. 4.3 Unit of Measure The unit of measure for water delivery under this Agree- ment shall be 1!000 gallons, U.S. Standard Liquid Measure. 4.4 ~ooess Each Party agrees to provide ingress and egress for the employees and agents of the Party that owns the meter to all its premises inside Party's boundaries as required to install, operate, inspect, test and maintain meter facilities. Page 4.5 Rate of Flow Controller Except as provided below, a rate-of-flow controller shall be installed at each Point of Delivery of water from DENTON to DIS- TRICT where peak rate of flow is expected to exceed 0.5 mgd. DIS- TRICT shall pay for the required rate-of-flow controllers and main- tenance costs. Each rate-of-flow controller shall be set at the DISTRICT'S Peak Day Volume as requested for each Point of Delivery as provided in Article III herein, and shall be set on June i or later of each Water Year. The total of all Peak Day Volume set- tings requested by DISTRICT shall not exceed the Peak Day Volumes requested in accordance with Section 3.2. DENTON and DISTRICT recognize the temporary nature of the treated water service pro- vided for herein. Accordingly, both parties agree to consider achieving the results desired under this paragraph without the ex- pense ordinarily associated with installing a rate of flow controller for such temporary period. 4.6 Delivery/Check Valve DISTRICT shall receive water from DENTON, either through an open discharge into a ground or elevated storage tank, or into a supply line. If delivered into a supply line, an appropriate backflow preventor check valve shall be placed by DISTRICT in the delivery line to assure that no flow of water from DISTRICT'S system can return to DENTON'S system. ~RTICLE V W~TER RIGHTS 5.1 No Conveyance of Water Riqhts DENTON and DISTRICT acknowledge that nothing in this Page 12 Agreement is intended to sell, transfer, or convey any water rights from DENTON to DISTRICT or any other entity and no such rights are sold, transferred, or conveyed. DISTRICT is responsible for making its own provisions for raw water supply and agrees to do so by se- parate action, contract or agreement. If this Agreement is ever construed to effect a sale, transfer, or conveyance of water rights from DENTON to DISTRICT, then it shall be null and void. $.2 Water SUDD1V DENTON and the DISTRICT, individually and respectively, will be responsible for their respective raw water supply needs. ARTICLE VI LONG-TERM WATER TRANSMISSION SERVICE8 6.1 Initial Period Transmission Servioes Water transmission services for the Initial Period shall be provided for in conjunction with water treatment services in ac- cordance with the terms and conditions provided in Articles II and III. 6.2 Long-Term Water Transmission Serviee DENTON agrees to ~provlde the DISTRICT long-term water transmission services from the date of termination of the Initial Period for the remainder of the Primary Period designated in Sec- tion 12.3, subject to the DISTRICT'S compliance with the require- ments of Section 6.3. Such transmission service shall be available to and through the delivery points as listed in Exhibit A, unless other delivery points are agreed to in writing. DENTON agrees to provide up to 1.5 mgd of transmission service to the Corinth meter- ing point and 1.0 mgd of transmission services to the Lake cities Page 13 Municipal Utility Authority (LCMUA) metering point, each location as shown on Exhibit A. Said maximum amounts shall be increased to 4.50 mgd collectively for Corinth and LCMUA upon the completion of DENTON'S otherwise planned expansion of that portion of DENTON'S System, it being agreed that DENTON will not be required to expand such transmission capacity solely for Corinth and LCMUA, unless otherwise needed for DENTON'S System. DENTON shall not be obli- gated to provide such increased maximum amounts unless DISTRICT first pays for the construction of any oversized pipeline for the expansion to serve Corinth and LCMUA, based upon DISTRICT'S pro- portionate share of the overall transmission capacity of the line. ~.~ District to ~ve No~ice Two years before the beginning of the first and each successive Water Year beginning with Water Year 1998, DISTRICT shall give written notice to DENTON concerning the Peak Daily Vol- ume of transmission service being requested. DENTON may, at its sole discretion, waive the two-year notice requirement upon the written request of the DISTRICT. If the requested amount exceeds that amount listed in Exhibit A, DENTON shall determine if such additional capacity is available. If, for the upcoming Water Year, DENTON determines there is suffi- cient additional capacity in Denton's Water Transmission System to provide the DISTRICT with the additional requested transmission services, DENTON may, under the terms of this Agreement, provide such additional transmission services for that Water Year. 6.4 Berv~ee For Sanqer If during the Primary Term of this Agreement, the DIS- Page 14 TRICT proposes to serve the city of Sanger through a pipeline ex- tension from the northwestern portion of DENTON'S water distri- bution system generally along Interstate 35, DENTON will make rea- sonable capacity available, in accordance with Exhibit A for the Primary Term of this Agreement. DENTON may participate, at its option, in the capital and operating cost of said pipeline based upon its proportionate share of the overall transmission capacity of the line, up to the limits of DENTON'S extraterritorial juris- diction. If DISTRICT determines at any future time that such pipeline to the city of Sanger is no longer needed, DENTON shall have an option to purchase DISTRICT'S portion of said pipeline at the original cost thereof, less accumulated straight-line depre- ciation. To provide such service to Sanger, DISTRICT shall have the option to purchase treated water from DENTON at its posted price for wholesale treated water, if such rate exists, or at DENTON'S rate for large industrial customers, or to request DENTON to transport DISTRICT'S water according to the provisions of this Agreement. 6.5 RiGhts to Water Transmission system DENTON and DISTRICT acknowledge that nothing in this Agreement is intended to transfer any rights to water transmission service from DENTON to DISTRICT or any other entity. 6.6 MinimumTransmission Volume DISTRICT agrees, during the 1998 Water Year, and each Water Year thereafter, of the Primary Term of the Agreement, to pay DENTON, on a take-or-pay basis, for a Minimum Transmission Volume based upon the Peak Day Volume of transmission service requested or Page 15 taken, whichever is greater, by DISTRICT for each Water Year. During the Primary Term, or any extension thereof, each Water Year's Minimum Transmission Volume shall not be less than the pre- vious Water Year's Minimum Transmission Volume. The Minimum Transmission Volume for any water year shall be not less than the DISTRICT'S Peak Day Volume multiplied by 365 times 50%. ARTICLE VII RATES /%ND CHARGES FOR SERVICE 7.1 Water Treatment Service - Initial Period DENTON and DISTRICT agree that the services being con- tracted for herein for the Initial Period are limited to tempora- rily surplus capacity and do not contemplate any investment by DENTON to provide services requested by DISTRICT. DENTON and DIS- TRICT agree that existing raw water facilities, existing Treatment Capacity and existing transmission facilities were constructed for the long-term needs of DENTON'S customers, not including the DIS- TRICT. Therefore, DISTRICT will have no right to firm, long-term use of any of said facilities or capacity except as provided in Sections 6.2 and 6.4 and such capacity shall be available through the Primary Term of this Agreement. ?.2 Char~es For Water Treatment and Transportation Service - Initial Period DISTRICT agrees to pay for the temporary services during the Initial Period in the following manner: a) Variable Costs for use of DENTON'S Water Treatment Capacity in proportion to DISTRICT'S use of the Page 16 Treatment Capacity required by DENTON'S retail and wholesale customers; plus b) Variable Costs for use of DENTON'S Water Transmis- sion Capacity in proportion to DISTRICT'S use of the transmission capacity required by DENTON'S retail and wholesale customers; plus c) A Transmission Service Fee of ten cents (10¢) per thousand gallons and a Treatment Fee of forty-five cents (45¢) per thousand gallons of treated water delivered to DISTRICT. These service fees shall be subject to an annual adjustment on or about October 1 of each year, commencing October 1, 1993, to re- flect increases or decreases in costs according to the Consumer Price Index. The current index shall refer to the last bimonthly (if available, if not, the last quarter) Index published prior to the date of adjustment. Subject to the specific exception in the next sentence, "Previous Index" shall refer to the last bimonthly (if available, if not, the last quarterly) Index published just prior to the previous date of adjustment. With respect to the first adjustment, the ,,Previous Index" shall refer to the last bimonthly (if available, if not, the last quarterly) Index published prior to the ef- fective date of this Agreement. These fees shall be adjusted by multiplying the applicable fee times a fraction (the CPI Adjustment Formula), the numer- Page 17 ator of which is the Current Index and the denomi- nator of which is the Previous Index. The charges outlined in this paragraph will be expressed as a total unit price per thousand gallons to be effective for each Fiscal Year. Prior to May 1 of each year, DENTON shall provide to DISTRICT a cost analysis based on actual data for the most recent 12-month period for which such data are available; costs shall be projected to the forthcoming Fiscal Year. DISTRICT shall be grant- ed access to DENTON'S books and records at reasonable times upon reasonable notice to review the cost analysis provided. DENTON may choose to bill DISTRICT each month based on estimated Variable Cost for the month and correct for actual costs in the billing for the succeeding month. 7.3 Char~es for LonG-Term Transmission Service The charges outlined in this paragraph shall be expressed as a total unit price per thousand gallons to be effective for each Fiscal Year. Transportation costs for long-term service shall in- clude operation and maintenance expenses of the Transmission Sys- tem, pumping and energy costs, depreciation expense, and a return on DENTON'S applicable rate base (DENTON'S actual net investment in the Transmission System equal to original cost less depreciation reserve) in its Transmission System, which return shall be equal to the weighted average interest rate on all outstanding debt for DENTON'S Water Utility System plus one and one-half percent (1.5%). A street rental fee equal to four percent (4%) of total transporta- tion cost, may be included in operation and maintenance expenses. Depreciation expense will be based upon the original cost of all Page 18 capital, invested and contributed, which must be replaced by DENTON at a future date in order to maintain service. Pipelines and other facilities paid for by the DISTRICT, Corinth and LCMUA shall not be included in DENTON'S investment cost or calculation of depreciation expense but may be included when calculating operating and mainte- nance expense. Costs to transport water shall be calculated on a system-wide basis, excluding distribution facilities, and shall be limited to the Transmission System which shall not include the cost of transporting water through lines smaller than twelve (12) inches in diameter. The test year for establishing the transportation rate shall be the projected year that the rate is applicable. Test year data shall be obtained from actual data of the second year prior to the test year with adjustments made for known or verifiable changes. The proportion of applicable rate base for which the DISTRICT shall pay a rate of return shall be as follows: District's proportion of rate base = District's Peak Day Volume Total Peak Day Transmission Volume 7.4 &1location of Transmission cost Operating and maintenance expenses of the combined trans- mission and distribution system shall be apportioned, after deduc- ting expenses unrelated to the transportation function, including such activities as retail metering, retail meter shop services, fire hydrants, fire protection, pressure maintenance, customer con- nections or taps, to the Transmission System on an inch-mile basis, taking into account all of the pipelines in DENTON'S system. A Page 19 unit price for transportation of water through the Transmission System shall be calculated by taking into account the total volume pumped by DENTON on an annual basis for all of DENTON'S retail and wholesale customers, including DISTRICT. The charges outlined in this paragraph will be expressed as a total unit price per thousand gallons to be effective for each Fiscal Year. Prior to May 1 of each year, DENTON shall provide to DIS- TRICT a cost analysis based on actual data for the most recent 12- month period for which such data are available; costs shall be pro- jected to the forthcoming Fiscal Year. 7.5 Notice/OpportunitY to comment DENTON shall notify DISTRICT by May i of each year of any intent to change any rates or charges provided for in this Article. DISTRICT shall have at least 60 days notice to review and comment on proposed rates prior to submission of such proposed rates to DENTON city Council for approval. District shall have access to DENTON'S books and records at reasonable times upon reasonable notice to review cost analyses and proposed rates. Revised rates shall become effective in accordance with DENTON'S ordinance estab- lishing such revised rates. 7.6 D~NTON'B oDtion to Purchase Interim Water DISTRICT hereby agrees upon reasonable notice to allow DENTON to purchase interim water out of surplus treatment capacity to be constructed in future by DISTRICT and for transmission ser- vice related thereto. This option may be exercised by DENTON to allow it to defer construction of its own treatment capacity or to minimize the amount of reserve capacity constructed in connection Page 20 therewith. The terms and conditions of such sale by DISTRICT to DENTON shall to the extent applicable be the same as herein, but may be modified by mutual agreement according to the conditions and circumstances then existing. ~RTICLE VIII TRANSFER OF CUSTOMERS 8.1 Transfer of Corinth and LCMUA The DISTRICT acknowledges that the City of Corinth ("Co- rinth'') and the Lake cities Municipal Utility Authority ("LCMUA") are existing wholesale customers of DENTON'S water system. DENTON acknowledges that Corinth and LCMUA have contracted to be Partici- pating Members of DISTRICT'S Regional Water Supply system. DENTON and DISTRICT will cooperate to achieve an orderly transfer of Co- rinth and LCMUA to DISTRICT'S System when the DISTRICT is ready to serve them, but no sooner than when the DISTRICT installs its first pipeline to serve a participant in the Regional Water Supply System other than Corinth or LCMUA, or June 1, 1994, whichever date is later. 8.2 DENTON to Transnort Water Further, DENTON agrees to continue for the Primary Term of this Agreement .to transport water through existing pipelines to Corinth and LCMUA for DISTRICT if requested by DISTRICT and in ac- cordance with the provisions of Section 6.2 and at volumes not to exceed those enumerated in Exhibit A. 8.3 Prerequisites of Transfer DENTON shall not transfer its service to Corinth and LCMUA to DISTRICT unless and until Corinth and LCMUA request that DENTON Page 21 terminate their respective water purchase contracts with DENTON and that they be transferred to DISTRICT as DISTRICT'S customers. Such transfer shall also not take effect if there is, at the time of the proposed date of transfer, any existing or threatened litigation or active disagreement between DISTRICT and DENTON concerning any pro- vision in this or in any other agreement between the two parties, or any existing or threatened litigation or active disagreement be- tween DENTON and Corinth or LCMUA regarding any matter. ARTICLE IX WATER SYSTEM STi~NDARDS AND SUPPLY 9.1 Due Dili~ence to Meet Health Standards For the protection of the health of all consumers supplied with water from the water system of DENTON, DISTRICT and DENTON agree to use due diligence to comply with State of Texas Department of Health standards and to guard carefully against all forms of contamination to their respective water systems. If at any time contamination of DENTON'S Treatment or Transmission System should occur, to the extent that city, state, or federal regulators be- lieve that human health is affected, the water supply to the area or areas affected shall be immediately shut off or regulated and remain so until.such conditions shall have been abated and the wa- ter declared again safe and fit for human consumption by properly constituted governmental health agencies having jurisdiction there- of. If at any time contamination of DISTRICT'S treatment or trans- mission system should occur, to the extent that city, state, or federal regulators believe that human health is affected, DENTON may temporarily discontinue flows from DISTRICT and the water sup- Page 22 ply to the area or areas affected shall be immediately shut off or regulated and remain so until such conditions shall have been abated and the water declared again safe and fit for human consump- tion by properly constituted governmental health agencies having jurisdiction thereof. During such temporary discontinuance, DENTON may provide water supplies from DENTON'S plants, to DISTRICT'S cus- tomers receiving water service through DENTON'S Transmission Sys- tem. Such supply shall be subject to DENTON'S determination, at its discretion, of its ability to provide such service. DISTRICT agrees to pay for such supplies at a price per thousand gallons equal to the average price of DENTON'S largest retail water customer. 9.Z Curtailment DENTON expressly reserves the right to discontinue tem- porarily, after notice to DISTRICT, the supply of water to any of the pipes laid or to be laid by DISTRICT whenever it is necessary to do so to insure proper operation of the DENTON water system, or for noncompliance with any provision of this Agreement. In such instance, no claim for damage for such discontinuance or curtail- ment shall be made by DISTRICT against DENTON. ARTICLE X BILLIN~ AND PAYMENT 10.1 Bills Rendered DENTON shall render bills monthly for treatment and trans- mission charges incurred by DISTRICT under this Agreement by the tenth (10th) day of each month. Bills shall be due and payable upon receipt by DISTRICT. Page 23 10.2 Prompt PaYment and DisPuted Bills DISTRICT shall make payments to DENTON within 20 calendar days of the date a bill for service is rendered. If DISTRICT at any time disputes the amount to be paid by it to DENTON, DISTRICT shall 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 amount shall be promptly adjusted. The charges shall be adjusted in such manner that DISTRICT will recover its overpayment or DENTON will recover the amount due it. Ail amounts due and. owing to any Party shall, if not paid when due, bear interest at the rate of ten per- cent (10%) per annum from the date when due until paid. ARTICLE XI GENEI~%L PROVISIONS 11.1 ReDresentations of the Parties DENTON and the DISTRICT hereby covenant and agree as fol- lows: a) Each Party to this Agreement warrants that its actions in executing and entering into this Agree- ment have been duly authorized in a manner that follows the laws applicable to it. b) Each Party to this Agreement warrants that it shall promptly and with all due diligence, acting jointly or individually as may be appropriate, take all necessary actions and endeavor to obtain all regu- latory approvals, licenses, orders and permits necessary to carry out its obligations under this Page 24 Agreement. 11.2 Service Essential and Necessary DISTRICT represents and warrants to DENTON that the ser- vices to be rendered by DISTRICT to its customers as result of this Agreement are essential and necessary to the operation of its customers. DISTRICT agrees to require in all of its contracts with its customers, the language contained in Exhibit B, which language is intended to protect the tax exempt status of future revenue bonds to be issued by DENTON and DISTRICT. 11.3 Termination and Default Should DISTRICT fail, refuse or neglect to pay any bill for water treatment services or water transmission services within sixty (60) days of the date due or should it refuse, neglect, or fail to comply with or perform any of the conditions on its part required to be compiled with or performed hereunder, the DISTRICT shall be in default. If after such default, DENTON shall deliver to DISTRICT, addressed to the Executive Director of DISTRICT, a notice in writing of its intent to terminate the treatment or transmission of water on account of such failure, refusal or ne- glect, then DENTON shall have the right to terminate the treatment and transmission of water at the expiration of thirty (30) days after the giving of such notice and to terminate this Agreement, unless within thirty (30) days DISTRICT shall make good such failure, refusal or neglect. If DISTRICT pays or performs within the thirty-day (30) period the default shall cease to exist. The termination of this Agreement, as provided herein, shall not re- lease DISTRICT from its obligation to make payments of any amounts Page 25 due or to become due in accordance with the terms hereof. 11.4 If, because of flood, drought, fire, explosions, civil disturbance, war, water system failure or malfunction, acts of God, or other causes beyond the control of either Party, either Party is not able to perform any or all of its obligations under this Agree- ment, then the respective Party's obligations hereunder shall be suspended during such period. 11.5 Liabil~t¥ and claims Except for the actions or inactions described and dis- claimed in paragraph 11.6, which are expressly excluded from this indemnity, DENTON agrees to hold harmless and defend DISTRICT, it officers and employees, from any claim of injuries, damages or losses that arises from any act, omission or negligence of DENTON, its officers or employees, in the operation of any facilities owned by DENTON and used under this Agreement, unless said injuries, dam- ages or losses result from the negligence of DISTRICT. DISTRICT agrees to hold harmless and defend DENTON, its officers and employees, from any claims for injuries, damages or losses that arises from any act, omission or negligence of DIS- TRICT, its officers or employees, arising from the performance of their Agreement, unless said injuries, damages or losses result ~from the ~negligence of DENTON. 11.6 Requlations of Other Aqencies DENTON shall not be liable in any event for the non- availability of treatment services hereunder due to the inability of DENTON to perform any obligation under this Agreement for rea- Page 26 sons beyond its control, including rules or regulations or other governmental agencies. 11.7 Severabil_~it Should this Agreement, or any provision thereof be, or found to be, in violation of any applicable law or regulation, either Party, upon reasonable notice to the other, may terminate this Agreement, or upon the mutual consent of each party, this Agreement may be amended so as to be in compliance with such law or regulation. 11.8 ~ssianment Neither DENTON nor the DISTRICT shall assign or transfer in whole or in part the rights and privileges granted in this Agreement without first obtaining the written consent of the other Party. 11.9 Entire &greement~ Modifioation This Agreement embodies the whole agreement of the Par- ties. There are no promises, terms, conditions, or obligations other than those contained herein. This Agreement shall supersede all previous communications, representations, or agreements, either verbal or written, between the Parties, and all modifications of this Agreement shall be in writing and approved by both Parties. 11.10 Venu9 All amounts due under this Agreement shall be paid and be due in Denton County, Texas. It is specifically agreed among the Parties that Denton County, Texas, is the place of performance of this Agreement. In the event that any legal proceeding is brought to enforce this Agreement or any provision hereof, the same shall Page 27 be brought in Denton County, Texas. 11.11 No Third Party Beneficiaries This Agreement is solely intended for the benefit of the Parties hereto and is not intended to and shall not be construed to be for the benefit of any individual or create any duty on behalf of DENTON or DISTRICT to any third party. 11.12 Notices Any notice, request for information or other document to be given hereunder to any of the Parties hereto by the other Party shall be in writing and shall be hand-delivered or sent by certi- fied or registered mail, postage prepaid, requesting evidence of receipt as follows: a) If to DENTON, Addressed to: city of Denton Attention: city Manager 215 East McKinney city of Denton, Texas 76201 b) If to DISTRICT, Addressed to: Upper Trinity Regional Water District Attention: Executive Director Post office Drawer 305 Lewisville, Texas 75067 Either Party may change the address for notice above by certified mail .to the other Party at any time. 11.13 ~ The captions of the various sections and paragraphs herein are intended for convenience or reference only and shall not define or limit any of the terms or provisions hereof. 11.14 Governin Laws This Agreement shall in all respects be governed by and Page 28 construed in accordance with the laws of the State of Texas, in- cluding all matters of construction, validity and performance. 11.15 Governmental Immunity Not Waived Neither DENTON nor DISTRICT waives, nor shall be deemed hereby to waive, any immunity or defense that would otherwise be available to it against claims made or arising from any act or omission resulting from the Agreement. 11.16 Nonwaiver The waiver by DENTON of any breach of any provision con- tained in this Agreement shall not be deemed to.be a waiver of such provision for any subsequent breach of the same or any other provision. /%RTICLE XII TERM OF CONTRACT 12.1 Effective Date Upon execution by both Parties, this Agreement shall be- come effective upon the date first written above. 12.2 Term for Temporary, Interim Services The provisions for temporary or interim services shall terminate according to the applicable sections of this Agreement and the definition of Interim Period in Article I. The Primary Term of this Agreement shall be twenty (20) years and shall terminate twenty (20) years after the date of this Agreement. This Agreement may be renewed for a subsequent twenty (20) year period (the Renewal Term) if agreed to in writing by both Parties at least five (5) years prior to the termination date; pro- Page 29 vided that either party may terminate the Renewal Term at any time during the Renewal Term by giving the other party five years' no- tice. IN WITNESS WHEREOF, the Parties hereto have caused this Agree- ment to be executed by their respective duly-authorized officers in multiple originals as of the date and year first above written. CITY OF DENTON, TEXAS ATTEST: ~ Jennifer Walters, City Secretary / ' . APpliED ~TO LEGAL FORM. Deb~a A. Drayovitch, City Attorney APPROVED AS TO LEGamFORM. nloy~i Go~k, Fowler,~levins ~m Karlovich, President Board of Directors ATTEST: Tom H~pool, Secretary ~-~ Board of Directors Page 30 APPROVED AS TO ~.EGAL FORM: Hutchison, Boyle, Brooks & Fisher Page 31 EXHIBIT & POINTS OF DELIVERY Hax~mum Location Deliverab~lit~ Interstate Highway 35 & Loop 288 4.0 mgd U.S. Highway 380 & Loop 288 1.0 mgd Interstate Highway 35 & U.S. Highway 77 .5 mgd New Denton Water Plant at Lake Ray Roberts 4.0 mgd (When Complete) U. S. Highway 377 & AT & SF Railroad 1.0 mgd Existing Delivery Point for Corinth 1.5 mgd Existing Delivery Point for Lake cities MUA 1.0 mgd Any changes to the above volumes or delivery points or any addi- tional allocation of transmission service volumes and deliveries shall be subject to written approval by DENTON. The maximum deliverability at each Point of Delivery does not represent the cumulative deliverability for all Points of Delivery. Page 32 EXHIBIT B Each of the Participating Members, respectively, 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. Participating Members, respectively, represent and have determined that the treated water supply to be obtained from the System, including the Project and other System facilities, is absolutely necessary and essential to the present and future operation of its water system and that the System is the best lOng-term source of supply of treated water therefore, and accordingly, all payments required by this Contract to be made by each Participating Member 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 such Participating Member. Each of the Participating Members 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 o~_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 other obligations now or hereafter outstanding, including the amounts required to pay all principal of and interest Page 33 on such bonds and other obligations. 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 fore- going, will be used for any purposes, except those directly relat- ing to the System, and the Bonds as provided in this Contract; pro- vided 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 theret~ in effect on the date of issue or such Bonds. Each of the Participating Members covenants and agrees that it will not use or permit the use of the System in any manner that would cause the interest on any of the Bonds to be or become sub- ject to federal income taxation under the Code or any amendments thereto in effect on the date of such Bonds. Page 34