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2004-137ORDINANCE NO. 2004- AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS APPROVING A FURTHER AMENDMENT TO THE CONTRACT FOR WATER TREATMENT AND TRANSMISSION SERVICES - DATED JULY 21, 1992, WHICH CONTRACT WAS EXECUTED BY AND BETWEEN THE CITY OF DENTON, TEXAS AND THE UPPER TRINITY REGIONAL WATER DISTRICT RESPECTING THE SALE OF WATER ON A WHOLESALE BASIS TO SANGER, TEXAS; WHICH AMENDED CONTRACT PERTAINS TO THE SALE OF WATER ON A WHOLESALE BASIS FROM THE CITY OF DENTON, TEXAS TO THE UPPER TRINITY REGIONAL WATER DISTRICT FOR AN INTERIM PERIOD OF TIME FOR THE RESALE AND DEL1VERY THEREOF TO THE CITY OF KRUM, TEXAS AND FOR THE PARTICIPATION OF THE CITY OF DENTON, TEXAS IN THE KRUM TRANSMISSION LINE TO BE CONSTRUCTED BY UPPER TRINITY REGIONAL WATER DISTRICT; AUTHORIZING THE CITY MANAGER TO EXECUTE SAID AMENDMENT TO CONTRACT FOR WATER TREATMENT AND TRANSMISSION SERVICES; AUTHORIZING THE EXECUTION BY THE CITY MANAGER OF ANY AND ALL ANCILLARY AND FURTHER DOCUMENTS NECESSARY TO EFFECT THE TERMS OF THIS ORDINANCE; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. That the City Manager is hereby authorized to execute on behalf of the City, a further "Amendment to the Contract for Water Treatment and Transmission Services" (the "Amended Contract") respecting the agreement of the City and the Upper Trinity Regional Water District (the "District") for the interim sale of water on a wholesale basis to the District for the resale and delivery thereof to the City of Kmm, Texas, and further providing for the participation of the City in the Krum Transmission Line to be constructed by the District; substantially in accordance with the Amended Contract which is attached hereto and incorporated by reference herein. SECTION 2. That the expenditure of rinds as set forth in the Amended Contract is hereby authorized. SECTION 3. That the City Manager is hereby empowered to execute and deliver any and all ancillary and further documents necessary to effect the terms of this ordinance. .SECTION 4. That this ordinance shall become effective immediately upon its passage and approval. EULINE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY B _ lox APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY S:\Our Documents\Ordinances\04\UTRWD-Amendment to K-Krum-lntefim Sale of Wholesale Water to UTRWD.doc UPPER TRINITY REGIONAL WATER DISTRICT CITY OF DENTON AMENDMENT TO CONTRACT FOR WATER TREATMENT AND TRANSMISSION SERVICES THE STATE OF TEXAS § COUNTY OF DENTON § This AMENDMENT ("Amendment") to the Contract for Water Treatment and Transmission ~.~Lrv~es dated JuLv j~;I,, 1992, as amended, (the "Contract") is made and entered into as of the day of L//'//~X~/.'~ , 2004 ("Effective Date"), by and between UPPER TRINITY REGIONAL WATER(-DIEifFRICT (the "District"), a conservation and reclamation district created pursuant to Article XVl, Section 59 of the Constitution of the State of Texas, and the CITY OF DENTON ("Denton"), a municipal corporation, which Contract provides for the District to purchase treated water on a wholesale basis from Denton. WHEREAS, Denton and the District entered into the Contract to provide for the sale of treated water on a wholesale basis by Denton to the District, and for transmission and delivery by Denton of limited amounts of treated water from specified points to certain customers of the District; and WHEREAS, Denton is currently selling water on a wholesale basis to the District for resale to the City of Sanger, pursuant to the Contract; and WHEREAS, the District has entered into a Participating Member Contract with the City of Krum ("Krum") for its participation in the District's Regional Treated Water System ("System"),under which contract Krum agrees to purchase treated water on a wholesale basis from District for service to its retail customers; and WHEREAS, the District desires to purchase water on a wholesale basis from Denton for resale and delivery to Krum for an interim period of time until the District can provide direct service from its water transmission system to Krum; and WHEREAS, Denton has constructed a new-elevated storage facility in the northwest portion of its service area, and has determined there to be sufficient capacity in Denton's water distribution system, including said storage facility, for water service to District for resale to Krum; and WHEREAS, the District is planning to construct a water transmission line (the "Krum Transmission Line") from Denton's new-elevated storage facility to the delivery point for Krum on Masch Branch Road, as illustrated in Exhibit A, generally in accordance with the April 2002 "Feasibility Study for Water Service to Cities of Justin, Northlake, Ponder and Krum" prepared by Biggs and Mathews, Inc, together with other facilities determined by the District to be necessary to provide said services to Krum; and Upper Trinity Regional Water District City of Denton Amendment to Contract for Water Treatment and Transmission Services Page 2 of 10 WHEREAS, up to the limits of Denton's ETJ boundary agreement with Krum (Krum's delivery point on Masch Branch Road, as illustrated in Exhibit A), Denton desires to participate in the capacity and proportionate cost of the Krum Transmission Line to be constructed by the District; and WHEREAS, Denton and the District desire to enable such participation in the Krum Transmission Line by this Amendment and for the District to purchase treated water on a wholesale basis from Denton at the established wholesale rates, as such published rates may fluctuate from time to time, as provided in the Contract; and WHEREAS, the services herein described to be provided by Denton, including the additional Delivery Point, for the District are authorized by Section 6.2 of the Contract. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the District agrees to use its best efforts to design, construct and complete the Krum Transmission Line upon and subject to the terms of the Contract and this Amendment as hereinafter set forth, to-wit: AGREEMENT Section t. Adoption of Preamble. All of the matters stated in the preamble of this Amendment are true and correct and are hereby incorporated into the body of the Amendment as though fully set forth in their entirety herein. Section 2. Sale of Treated Water. Denton hereby agrees to deliver treated water through the Krum Transmission Line to the District at a mutually agreeable location on the Krum Transmission Line (herein "Delivery Point"), as illustrated in Exhibit A hereto, for resale to Krum. Such sale of water by Denton to the District shall be on a wholesale basis in accordance with the Contract, as amended or supplemented, and this Amendment. Section 3. Quantity to be Delivered. For the first Water Year of operation during which water is delivered under this Amendment to the Delivery Point, the initial amount of treated water to be delivered by Denton shall not exceed four hundred thousand gallons per day (0.40 MGD). After the first Water Year of operation, District may request increased quantity up to a maximum of 2.0 MGD to be delivered by Denton. District shall give written notice to Denton at least one hundred twenty (120) days prior to the beginning of a Water Year concerning the Peak Daily Volume of treated water being requested. Denton may, at its sole discretion, waive the written notice requirement upon written request of District. If the requested peak Daily Volume exceeds four hundred thousand gallons per day (0.40 MGD) for all years of this amendment other than the first, Denton shall determine if such additional water and such capacity to deliver the water are available. If, for the second and subsequent Water Years, Denton determines there is sufficient additional capacity and sufficient additional water to provide the District with the requested Peak Daily volume, Denton may, under terms of this Amendment and the Contract, provide such additional volume (or any portion thereof) for that Water Year. Denton will not unreasonably deny District's request for additional water up to the maximum amount provided for in this Section. However, the District understands, and Denton expressly reserves the right to implement its drought plan, as filed with the TCEQ, should the need arise, and such implementation of the plan might result in a pro-rata cut-back of water supply to both retail and wholesale water customers of Denton. Upper Trinity Regional Water District City of Denton Amendment to Contract for Water Treatment and Transmission Services Page 3 of 10 Section 4. Participation in the Krum Transmission Line. Denton agrees to participate on a pro rata basis in the Krum Transmission Line up to the Delivery Point in accordance with the limits, size and capacities specified in Exhibit A and with cost participation as specified in Exhibit B, hereto, which Exhibits are incorporated into this Amendment and the Contract for all purposes. The Krum Transmission Line shall be designed and constructed by the District. Section 5. Extent of Participation. District agrees to provide for the Krum Transmission Line between the points and along the general route and for the capacities delineated in Exhibit A. Denton may transport water for its own use through the Krum Transmission Line up to the peak day capacities provided for in Exhibit A. Section 6. Special Provisions. Denton and the District acknowledge and agree to the special provisions related to the Krum Transmission Line which are set forth in the Exhibit B. Section 7. Contract Provisions. All other provisions of the Contract, as amended, shall continue in full fome and effect. Section 8. Notice to Denton. Under its participation contract with the District, Krum agrees that it will not sell water purchased from the District to any person or entity outside its service area unless Krum has received prior written approval from the District. Since the District is providing Krum with water purchased from Denton, District agrees to obtain written permission from Denton prior to the District's consideration of approval of such resale request by Krum; likewise, the District shall obtain Denton's approval prior to resale by the District to parties other than Krum. Failure by the District to obtain written permission from the Denton shall constitute a breach of the terms and conditions of this Amendment and shall remove any obligation by the Denton to provide treated water supply under this Amendment. The preceding sentence notwithstanding, no such denial by Denton or no such failure by District shall act as a waiver of Denton's obligation to pay for its share of the Krum Transmission Line pursuant to this Amendment and specifically Exhibit B hereto. Section 9. Term. This Initial Term of this Amendment shall be for a period of nine (9) years. It shall be effective on and after the Effective Date. The terms of any renewal shall be negotiated in good faith by Denton and the District. If timely requested in writing by District, as specified below, Denton agrees to continued service under this amendment beyond the Initial Term subject to negotiation of all material terms of such service. However, the parties understand that any additional renewal term following the initial nine-year term, is expressly subject to there being water treatment plant capacity available. The District must provide Denton with written notice of its desire and intention to negotiate a continuation of the term of this Amendment once this Amendment has been in effect for seven and one-half years. Otherwise, if no written notice of the District's desire to negotiate a continuation of the term is delivered to Denton before the eighth anniversary of the Effective Date of this Amendment, this Amendment shall cease on the ninth anniversary of its Effective Date. The District recognizes that the City of Denton has adopted impact fees to help finance water and wastewater system improvements for providing service to their new customers. The District recognizes that that the prior wholesale contracts between the City of Denton and the District were negotiated and entered into prior to the City of Denton's adoption of impact fees (September 14, 1998). Further, Denton has entered into wholesale wastewater contracts with other parties subsequent to the adoption of impact fees, and has required the contracting party Upper Trinity Regional Water District City of Denton Amenriment to Contract for Water Treatment and Transmission Sen/ices Page 4 of 10 to make payments of impact fees to the City of Denton for all new connections at a cost per connection compatible with current impact fees charged for all new connections to the City of Denton's retail service lines. The City of Denton recognizes that the District has entered into a contract with Krum to supply treated water on a wholesale basis, consistent with the District's wholesale service contracts and rates that do not require impact fees to be paid for new connections within the retail service area of their wholesale customers. The City of Denton also recognizes that impact fees are appropriate for new wholesale customers that are long term customers but may not be appropriate for wholesale customers that are temporary; provided that the City of Denton is able to provide such temporary service from excess capacity that may exist in Denton's system The current planning forecast by Denton projects that excess water treatment plant capacity will be available to provide water service to the District until the summer of 2013. Denton also agrees to provide a minimum advanced written notice of eighteen months of their intention to terminate water service under this Amendment after the Initial Term to allow the District sufficient time to plan alternative water service arrangements to serve Krum or any other customer served directly or indirectly under this Amendment. Denton may provide the District with such advance written notice of eighteen months after the expiration of seven and a half years of the nine-year term hereof. The District's ownership in and right to beneficially use the Krum Transmission Line shall survive the Contract and this Amendment, subject to Denton's right to purchase the District's share thereof pursuant to Exhibit B hereto. Upper Trinity Regional Water Dlstdct City of Denton Amendment to Contract for Water Treatment and Transmission Services Page 5 of 10 IN WITNESS WHEREOF, the parties hereto acting under the authority of their respective governing bodies have caused this Amendment to be duly executed in several counterparts, each of which shall constitute an original, all as of the day and year first written above, which is the Effective Date. UPPER TRINITY REGIONAL WATER DISTRICT Oscar Burchard, President, Board of Directors ATTEST: Marth~ Mason, Secretary, Board of Directors (District Seal) APPROVED AS TO FORM: John F. Boyle, J CITY OF DENTON Euline Brock, Mayor ATTEST: ~. \ 5-~ ~. ~..,~¢ ~(L\~-~ ~ ~ , C ty Secretary (City Seal) APPROVED AS TO FORM: , Counsel to Denton UpperTdni~ Regional Water Di~ri~ Ci~ of DenOn Amendment toContra~forWa~r Treatmentand Transmission Se~ices Page 6of10 EXHIBIT A Point of Delivery To be inserted later to illustrate (1) The proposed route of the Krum Transmission Line (2) The delivery point from Denton to the District (3) Proportionate capacity share ofthe transmission line Upper Trinity Regional Water District City of Denton Amendment to Contract for Water Treatment and Transmission Services Page 7 of 10 EXHIBIT B AMENDMENT BETWEEN CITY OF DENTON AND UPPER TRINITY REGIONAL WATER DISTRICT FOR PARTICIPATION IN THE KRUM TRANSMISSION LINE SPECIAL PROVISIONS REGARDING PARTICIPATION The provisions of this "Exhibit B" regarding construction of the Krum Transmission Line form a part of the Amendment 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 Amendment. 1. Participation I Construction Cost. Denton agrees to participate in the construction of the Krum Transmission Line up to the Delivery Point on a capacity shared basis, generally in accordance with Exhibit A. The Krum Transmission Line shall be designed and constructed by the District; and the District agrees to design and construct said line between the points and generally along the general route and for the nominal capacities and sizes delineated in Exhibit A. District agrees to coordinate the routing, design and rights-of-way acquisition of the Krum Transmission Line with Denton. Within the retail service area of Denton, as defined by Denton's existing Certificate of Convenience and Necessity (CCN), the District's improvements shall not conflict with Denton's master plan for land development. The District agrees to coordinate any and all plan reviews and approvals with the City of Denton and will obtain written concurrence of plan approval from Denton, prior to the District's advertisement for bids for construction. However, if the District has not received written approval from Denton within thirty (30) days of Denton's first receipt of final draft of plans, the plans shall be considered approved and District may advertise for construction bids. 2. RiRhts-of-Way. The District agrees to purchase or acquire easements or rights-of-way within the Extra Territorial Jurisdiction (ET J) and/or CCN of Denton for the Krum Transmission Line up to the Delivery Point. Since the City of Denton is legally authorized to provide retail water service from the Krum Transmission line along this route, the District agrees that the ownership of these easements will be jointly with the City of Denton and the District. Denton hereby agrees that the District may exercise its power of eminent domain if necessary to obtain the needed rights-of-way for the Krum Transmission Line within Denton city limits; alternatively, if requested by the District and agreed to by Denton, Denton may exercise its power of eminent domain on behalf of the District. Further, District and Denton agree to coordinate future joint use of said rights-of-way for the Krum Transmission Line 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 and rights-of-ways for temporary use during construction, routine operational maintenance and for other mutually beneficial purposes. It is mutually agreed that, within its share of the easement or rights-of-way for the Krum Transmission Line, Denton shall have the right to install and maintain other water lines, as well as sewer, underground electric and telecommunication facilities owned by Denton. 3. Determination of Cost Share. After preparation of final design and prior to construction of the Krum Transmission Line, the parties will finalize the respective share of costs for said Line, which costs will be based on the general concept outlined in Exhibit A. The final cost to be shared by the parties will include cost of design, construction cost, construction inspection and management, rights-of-ways and a reasonable share of the overhead cost of the District Upper Trinity Regional Water District City of Denton Amendment to Contract for Water Treatment and Transmission Services Page 8 of 10 applicable to the Krum Transmission Line. Upon completion of construction, District will prepare a report of total costs and respective shares thereof pursuant to each party's pro rata share of the Krum Transmission Line. District agrees that overhead and management charges of the District applicable to the project will not exceed 6% of the construction contract amount. However, District agrees that Denton may elect to perform inspection of construction for the project and if so performed, the District will not allocate any overhead charges of the District to Denton's portion of the costs. 4. Internal Usage. Denton may transport, deliver and meter water'for its own use along and through the Krum Transmission Line within its service area up to its respective capacity in said line according to Exhibit A. 5. Payment for Construction Cost. After design of the Krum Transmission Line has been completed and after concurrence by Denton, the District shall take competitive bids for construction. After receipt of bids and before a contract (or contracts) for construction is awarded, the District shall give Denton written notice of the District's intention for award of contract(s) and of Denton's share of the proposed contract to be awarded. Unless Denton elects the financing option described in Paragraph 6 following, Denton shall deposit with the District, within forty-five (45) days, its pro rata share of the proposed construction cost for the Krum Transmission Line, plus the cost of special appurtenances, if any, requested by and for Denton. The funds so deposited by Denton for construction shall be placed in an interest bearing construction account by District. The District may only withdraw funds from the construction account as required to make progress and final payment according to the construction contract awarded for the Krum Transmission Line. The District shall maintain an accounting of all direct expenditures for rights of way and for design and construction of the Krum Transmission Line, including engineering and geotechnical services during construction. Upon completion of construction, Denton agrees to pay its share, if any, of the contract change orders, direct services during construction, or extra costs required to complete the Krum Transmission Line. After payment for change orders, services during construction or extra costs, any surplus funds remaining in the interest bearing account shall be returned to Denton at completion of the contract(s). 6. Payment Option. If Denton elects not to deposit its share of the construction cost as required in the above paragraph, District will provide the necessary funds for construction of the project. Denton agrees to pay the debt service, applicable fees and other charges for its pro rata share of the Krum Transmission Line according to a payment schedule to be prepared by the District at the completion of the project, which payment schedule shall be attached hereto and incorporated herein as Exhibit C. The District agrees that the initial payment schedule shall not exceed the Initial Term of this Amendment and the annual payments will not exceed the total amount of water sold by Denton to the District. If the District fails to provide the City of Denton with sufficient water sales revenue as a result of their contract agreement with Krum to make the financing payments for Denton's share of the Krum Transmission Line, the District agrees to limit billing to Denton to the total amount of water sales revenue provided to Denton under this Amendment. Recognizing the foregoing limitations on annual payments, Denton agrees that it will continue to make payments to the District for as long as necessary to fully amortize its share of the cost of the Krum Transmission Line, even if water sales to District are discontinued or limited for any reason. 7. Appurtenances and Facilities for Either Party. If Denton desires and requests the District to construct improvements or install appurtenances such as fittings for connection to Upper Trinity Regional Water Distdct City of Denton Amendment to Contract for Water Treatment and Transmission Selvices Page 9 of 10 Denton's distribution system as part of the cost of the Krum Transmission Line, which improvements or appurtenances are not otherwise needed by the District, Denton shall be responsible for the entire cost of such improvements or appurtenances installed for the sole benefit of Denton. The District agrees to provide appropriate isolation valves and terminal flushing hydrants as requested by Denton for proper operation and maintenance of the pipeline recognizing that the City of Denton's participation in the pipeline project with the District results in a lower transmission line cost than would be available to the District if the City of Denton was not participating in the project. Likewise, if the District requests the construction of facilities, solely needed for District purposes, then District shall be responsible for the entire costs of such improvements installed for the sole benefit of District. 8. Operating Responsibility. On behalf of Denton and District, Denton agrees to operate the Krum Transmission Line up to the Delivery Point and to be responsible for normal and routine maintenance of said Krum 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 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 for its proportionate share of the operation and maintenance costs within forty-five (45) days after receipt of invoice from Denton. If, in the opinion of Denton, extraordinary maintenance such as pipeline replacement exceeding five percent (5%) of the length of the pipeline is required, Denton shall give written notice of such needed replacement to District, and District and Denton shall mutually determine which party shall take appropriate steps to accomplish such extraordinary maintenance. 9. Coordination Procedure. Prior to completion of construction of the Krum Transmission Line, Denton's Assistant City Manager, Utilities shall develop a mutually satisfactory written procedure for coordinating the operation and maintenance of the Krum Transmission Line and for each party to notify the other party of any activities which may affect the operations of the other party's system. The parties agree to review said procedures for coordination and operation from time to time and to make appropriate revisions to the written procedures. 10. Delivery Point. The Delivery Point for water by Denton to District shall be at the Delivery Point to Krum on Masch Branch Road as shown on Exhibit A. Further, the District shall pay for and install appropriate meter facilities, including rate of flow controller and approved back-flow prevention device (air gap into Krum's Ground Storage Tank ) at the end of the Krum Transmission Line. District will own the metering facilities and Denton will provide normal maintenance and calibration according to Section 4.2 of the Contract, the costs of which are eligible for inclusion in service rates. '1'1. Repurchase of District's Share of Line. Denton may purchase the District's rights, in whole or part, in the Krum Transmission Line if District, at any future time, gives notice that its share of the line is no longer needed for District purposes. The price to be paid by Denton if it elects to exercise it's option to purchase any portion of the District's share of the Krum Transmission Line shall be equal to the original cost thereof for the District's share, less accumulated depreciation. 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. If Denton purchases the District's share or any portion thereof of the Krum Transmission Line under the provisions of this Exhibit, District shall continue to have access to emergency Upper Trinity Regional Water District City of Denton Amenriment to Contract for Water Treatment and Transmission Services Page 10 of 10 exchange of water between Denton and District through the pipeline subject to mutual agreements by both parties. 12. Early Payment. Denton, without penalty, may pay or prepay the entire remaining balance, or any portion thereof, of its share of capital cost participation in the Krum Transmission Line at any time. The amount of such early payment will be equal to the unpaid principal, or portion thereof, including any deferred amounts.