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HomeMy WebLinkAbout11/2/2005 - STAFF REPORTS (12) ..OQ?ALM S.. i2 V u * q<�FORa` City Council Staff Report DATE: November 2, 2005 Consent Calendar >UBJECT: Short-Term Extension of Wastewater Services Agreement with Veolia FROM: David H. Ready, City Manager BY: City Manager's Office SUMMARY The City has heretofore entered into an agreement with Veolia (formerly US Filter) for the operations and management of the City's Wastewater Treatment Plant. This agreement, which was originally for a five year term expiring on June 30, 2005, has been extended several times over the past several months to facilitate negotiations with Veolia on a longer term extension. The current extension will expire on November 2nd While staff and Veolia have made substantial process and nearly finalized a long-term extension of the agreement, one issue remains unresolved. Staff believes that an additional short-term extension should be granted to allow the parties to resolve this issue and to explore the possibility of negotiating an even longer-term agreement. RECOMMENDATION: 1. Adopt a Minute Order approving the Sixth Amendment to Agreement 4123 with Veolia Water North America-West, LLC. (formerly US Filter Operating Services Incorporated) extending the term of the agreement from July 1, 2005 through June 30, 2006 and making certain other modifications to the original agreement. 2. Authorize the City Manager to execute all documents necessary to effectuate the agreement. 3. Expand the role of the Wastewater Treatment Plant Subcommittee (Mayor Oden and Councilmember Pougnet) to work with staff to negotiate a longer term extension with Veolia. STAFF ANALYSIS: In 1999, the City entered into an agreement with US Filter to operate and manage the City's Wastewater Treatment Plant and sewage collection system. The term of this agreement was for a five year term expiring on June 30, 2005. ITEM NO.�1 City Council Staff Report November 2, 2005 -- Page 2 Extension to Wastewater Services Agreement with Veolia In light of the pending sale of the Wastewater Treatment Plant to the Desert Water Agency (DWA), the City has delayed granting a long term extension to the existing agreement. Unfortunately, the sale of the Wastewater Treatment Plant has not yet occurred as originally contemplated. In order to maintain current operations at the Wastewater Treatment Plant, the City Council has approved several amendments extending the term of the existing agreement to enable staff and Veolia to negotiate an extension to the existing agreement. The current extension, which was approved on October 7, 2005, expires on November 2, 2005. Although staff and Veolia have worked very hard over the past few months and have nearly finalized a new amendment to extend the agreement, a significant issue arose just prior to the last City Council meeting that could not be immediately resolved. The parties have attempted to reach a mutually acceptable resolution to this issue; however, there is not sufficient time to complete negotiations prior to the expiration of the current extension. Staff is confident that an agreement can be reached with Veolia on the unresolved issue within the next thirty (30) days. However, in light of the Governor's veto of SB 557, which would have facilitated the sale of the Wastewater Treatment Plant to DWA, staff now feels that the current agreement should be extended through the end of the fiscal year to allow the parties to explore and discuss various options, including an even longer term agreement. In order to foster further dialog with Veolia, staff is requesting that the role of the Wastewater Treatment Plant Subcommittee, consisting of Mayor Oden and Council Member Pougnet, be expanded to allow the Subcommittee to work directly with staff on these options. The proposed amendment will extend the O&M agreement with Veolia through June 30, 2006. While the terms and conditions of the existing agreement will remain virtually intact, staff is recommending the following key changes: .e� Septage Upon execution of the amendment, Veolia will equally share with City all gross revenues that are generated from the delivery of septage to the Wastewater Treatment Plant. ,6�; Capital Recovery Fee The current monthly management fee paid to Veolia consists of several components, including a capital recovery component which is assessed to reimburse Veolia for their capital investment in the Wastewater Treatment Plant. Since the original capital investment made by Veolia has been fully amortized, this fee should be reduced by $5,000 per month. This reduction, which would be retroactive to July Ist will save the Wastewater Treatment Plant fund approximately $60,000 this fiscal year. City Council Staff Report November 2, 2005 -- Page 3 Extension to Wastewater Services Agreement with Veolia Finally, staff recommends certain modifications to various definitions (e.g., Septage) and the deletion of unnecessary provisions in the existing agreement that no longer have any force or effect. Staff has discussed these changes with Veolia. However, as of the publication date of this report, Veolia has not accepted staff's recommended changes to the amendment. Staff will continue to work with Veolia over the next few days and advise the City Council at the meeting whether these changes have been accepted by Veolia or not. FISCAL IMPACT: Under the proposed amendment, the operator's monthly management fee will be reduced by approximately $5,000 per month. Although the actual amount of revenue from the receipt of septage at the Wastewater Treatment Plant is not entirely known at this time, based on information obtained from Veolia, the amount could range from $5,000 to $50,000 per month depending on volume. ALTERNATIVES: IF desired, the City Council could approve a shorter extension (e.g., 30, 60, 90 days) of time to the existing O&M Agreement. If the City Council elects a shorter term, it is recommended that the City Attorney be directed to make the necessary modifications to the amendment. Troy L. Butzlaff, Asystan i u Jvlanager David H. Ready,Cii , Sager Attachments: 1. Minute Order 2. Sixth Amendment to O&M Agreement (under separate cover) MINUTE ORDER NO. APPROVING THE SIXTH AMENDMENT TO AGREEMENT 4123 WITH VEOLIA WATER NORTH AMERICA-WEST, LLC. (FORMERLY US FILTER OPERATING SERVICES INCOPORATED) EXTENDING THE TERM OF THE AGREEMENT FROM JULY 1, 2005 THROUGH JUNE 30, 2006 AND MAKING CERTAIN OTHER MODIFICATIONS TO THE ORIGINAL AGREEMENT. I HEREBY CERTIFY that this Minute Order, approving the Sixth Amendment to Agreement 4123 with Veolia Water North America-West, LLC. (formerly US Filter Operating Services Incorporated) extending the term of the agreement from July 1, 2005 through June 30, 2006 and making certain other modifications to the original agreement, was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 2"d day of November, 2005. James Thompson, City Clerk SIXTH AMENDMENT TO WASTEWATER SERVICES AGREEMENT (O&M) THIS SIXTH AMENDMENT TO WASTEWATER SERVICES AGREEMENT (O&M) ("Amendment') is made and entered into as of this 2nd day of November, 2005, by and between the CITY OF PALM SPRINGS, a California municipal corporation ("City") and VEOLIA WATER NORTH AMERICA-WEST, LLC., a Delaware limited liability company ("Veolia"). RECITALS A. Pursuant to a request for proposal issued by the City in November 1998 pursuant to California Government Code Section 5956.1 et. seq. and Chapter 3.12 of the Palm Springs Municipal Code, the City and Filter entered into that certain Wastewater Services Agreement No. 4123, dated as of July 30, 1999 (the "Agreement'), for the provision by Filter to City of certain operations and maintenance services related to the Treatment Facility, Sewage Collection System and Down and Under System, as those terms are defined in, and pursuant to the terms of, the Agreement. Initially capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. B. On or about May 16, 2001, City and Filter entered into that certain Amendment No. 1 to Agreement No. 4123 (herein "First Amendment), for the provision of certain capital project administration parameters all related to the improvement of the Treatment Facility. C. On February 2, 2004, Filter officially became known as Veolia Water North America Operating Services, Inc. ("Veolia Water NA"). Through an inter- company reorganization and set of inter-company assignments, Veolia has acquired and succeeded to the right, title and interest in and to the Agreement. Veolia is the wholly owned-subsidiary and West Coast operating arm of Veolia Water North America Operating Services, LLC ("Veolia Water NA LLC"), which was formerly known as Veolia Water NA. D. The original term of the Agreement was for five (5) years, such that the original Agreement would have expired on June 30, 2005. E. City continues to require the services of Veolia to operate and maintain the Wastewater Treatment Facility and Sewage Collection System and has been actively negotiating with Veolia to extend the term of the Agreement. F. On June 29, 2005, City and Veolia entered into the "Second Amendment to the Agreement for Wastewater Services Agreement (O&M)" ("Second Amendment'), which extended the term of the Agreement an additional 11/2/2005 1 Final Document `Wm a V�x thirty (30) days, to allow the parties to continue their negotiations on a new agreement. G. On July 20, 2005, City and Veolia entered into the "Third Amendment to the Agreement for Wastewater Services Agreement (O&M)" ("Third Amendment") which extended the term of the agreement through September 7, 2005 to allow the Desert Water Agency an opportunity to review and comment upon the draft agreement. H. On September 7, 2005, City and Veolia entered into the "Fourth Amendment to the Agreement for Wastewater Services Agreement (O&M)" ("Fourth Amendment") which extended the term of the agreement for an additional thirty (30) days to enable the parties to properly draft and finalize a new agreement. I. On October 5, 2005, City and Veolia entered into the "Fifth Amendment to the Agreement for Wastewater Services Agreement (O&M)" ("Fifth Amendment') which extended the term of the agreement for an additional thirty (30) days to facilitate continued negotiations between the parties. J. The Fifth Amendment will expire on November 5, 2005. K. The City and Veolia have attempted in good faith to complete their negotiations prior to the expiration of the current amendment. L. Due to a number of extenuating circumstances including the Governor's veto of Senate Bill 557, the City and Veolia now agree that the existing O&M Agreement should be extended through the end of the fiscal year to allow the parties to explore and discuss a long term extension to the Agreement. M. This Amendment is entered into pursuant to both of California Government Code Section 5956.1 et. sea. and Chapter 3.12 of the Palm Springs Municipal Code. Each of the foregoing statutes constitutes an independent authority for the City to enter into this Amendment and procure the services with respect to the Treatment Facility, the Sewage Collection System, and the Down and Under System as described herein and in the Agreement. NOW THEREFORE, in consideration for promises and covenants contained herein, the above recitals, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. "Veolia" and "Filter". All references in the Agreement to Filter shall be replaced with Veolia. 11/2/2005 2 Final Document 2. Assignment to Veolia. The City acknowledges the assignment of the Agreement to Veolia and Veolia's assumption of all obligations under the Agreement. The City agrees that Veolia Water NA and Veolia Water NA LLC shall have no further obligations, responsibilities or liabilities under the Agreement and is hereby released, discharged and acquitted therefrom. 3. Effectiveness of Amendment. This Amendment shall be effective upon the approval by the City of this Amendment, pursuant to a Palm Springs City Council resolution, and the execution hereof by the City and Veolia. The City shall deliver to Veolia a certified record of the public proceedings of the Palm Springs City Council approving the execution and delivery of this Amendment. 4. Repair and Modification of Down and Under Facilities. Subject to Section 11 of this Amendment below, in addition to Veolia's obligations under Section 5.4(f) of the Agreement, Veolia shall, at its cost, repair and perform mutually agreed upon modifications to Down and Unders that are mutually designated by the City and Veolia, up to a maximum amount equal to $80,000 for fiscal year 2005-06 (July 1, 2005 through June 30, 2006). Unused amounts of the $80,000 annual budget shall be rolled over and available for use under this Section in ensuing years of the Term of the Agreement. If the Agreement is terminated for a reason other than City default prior to the expenditure of the unused portion, such unused funds shall be paid to the City for the purposes provided in this Section. The foregoing amounts and obligations are in addition to Veolia's obligations under Section 5.4(f). 5. Definitions. Section 1.1 of the Agreement shall be revised as follows: The definition of "Septage" is amended and restated in its entirety as follows: "'Septage' means liquid or solid material removed from a septic tank, cesspool, portable toilet, Type III marine sanitation device, or similar treatment works that receives only Domestic Sewage or other waste fully compatible with the treatment processes and receiving facilities at the Treatment Facility. Septage does not include commercial or industrial wastewater incompatible with the treatment processes or receiving facilities at the Treatment Facility." 6. Term. Section 4.1 of the Agreement, entitled "Term", shall be amended in its entirety to read as follows: "Section 4.1 Term. The term of this Agreement shall be extended to June 30, 2006, unless earlier terminated in accordance with Section 12.10 of this Agreement, or until this Agreement has been superseded by an amended and restated agreement. Subject to the other provisions of this Agreement, the City, in its discretion and, upon mutual agreement by Veolia, in its discretion, may enter 11/2/2005 3 Final Document into additional extensions of the Term of this Agreement beyond June 30, 2006." 7. Section 4.2. Section 4.2 of the Agreement is hereby deleted and shall be of no further force and effect. 8. Septage. Section 5.7(c) of the Agreement is hereby amended and restated in its entirety as follows: "(c) Septage. Veolia and the City agree to allow licensed septic tank pumping contractors to deliver Septage to the Treatment Facility at delivery points approved by Veolia, provided that (1) the Septage is free from Regulated Substances or other Abnormal Substances that cannot be treated or removed by current Treatment Facility processes; and (2) the total quantity of septage does not exceed an amount determined by Veolia that may be treated within the design capacity of the Treatment Facility. Veolia shall charge such contractors fees that are no greater than those fees specified in Schedule R, which fees have been directed, approved and authorized by the City. Veolia shall have no ratemaking authority with respect to Septage fees. Prior to October 1, 2005, Veolia shall be entitled to retain all revenues arising out of the Septage fees. Commencing on October 1, 2005 and continuing through the expiration of the Term, as the same may be extended, all gross revenues shall be shared equally by the City and Veolia. Veolia shall reflect the City's share of any gross revenues under this Section as a one-time credit on its Billing Statement for each month in which the City is entitled to any gross revenues. Veolia shall, on a monthly basis commencing November 1, 2005 (with respect to the month of October 2005), provide City with a statement of(x) month to date and year to date gallons of Septage treated, (y) the monthly and annual gross revenues generated by Septage fees; and (z) the monthly and annual gross revenues, if any, available and payable to the City under this Section." 9. Service Fee — O&M Annual Capital Recovery Component and O&M Fixed Component. Sections 7.1(b)(i) and 7.1 b ii of the Agreement are hereby amended and restated in their entirety as follows: (i) "O&M Annual Capital Recovery. The annual capital recovery charge (the "O&M Annual Capital Recovery") equal to $41,502 per year ($3,458 per month) plus the amortized cost over the term of this Agreement of any Capital Projects that Veolia finances as set forth in Section 7.4(a). The O&M Annual Capital Recovery may be increased as provided in Section 7.4. 11/2/2005 4 Final Document (ii) O&M Fixed Component. The fixed component of the O&M Fee (the "O&M Fixed Component") (which includes the coverage of fixed operation and maintenance expenses and other fixed costs) shall be $2,270,608 for the period of July 1, 2005 until June 30, 2006 ($189,217 per month). The O&M Fixed Component may be increased as provided in Section 7.4. (iii) Operator Credit. Not withstanding the City's obiligation to pay the service fees identified in paragraphs (i) and (ii) above, Veolia shall deduct monthly the amount of$12,051 from the monthly statement remitted to City for each month beginning December 1, 2005 through June 30, 2006. 10.Down and Unders. If, at any time during the Term of the Agreement, as the same may be extended, the City assigns the Agreement in accordance with the terms thereof, from and after the effective date of the assignment, (i) Veolia shall have no further obligations or responsibilities under the Agreement with respect to the Down and Unders and (ii) the assignee shall have no obligations to operate the Down and Unders or make payments to Veolia with respect to the Down and Unders for the period after the effective date of the assignment. 11.Schedule A. Schedule A is hereby amended and restated in its entirety by the attached Schedule A. 12.Schedule D. Schedule D is hereby amended and restated in its entirety by the attached Schedule D. 13.Schedule N. Schedule N is hereby amended and restated in its entirety by the attached Schedule N. 14,Schedule U. Schedule U is hereby amended and restated in its entirety by the attached Schedule U. 15.Amendment Costs. Within sixty (60) days after the execution date of this Amendment, Veolia shall pay to City a non-refundable amount equal to $20,000, representing reimbursement of the City's incurred legal and administrative costs for negotiating and entering into this Amendment. 16.Full Force and Effect. The parties agree that, except as specifically provided in this Amendment, the terms of the Agreement shall remain unchanged and in full force and effect. 17.Counterparts. This Amendment may be executed in counterparts each of which shall be considered an original. 18.Advice of Counsel. Each of the parties has received the advice of legal counsel prior to signing this Amendment. Each party acknowledges no 11/2/2005 5 Final Document other party or agent or attorney has made a promise, representation, or warranty whatsoever, express or implied, not contained herein concerning the subject matter herein to induce another party to execute this Amendment. The Parties agree no provision or provisions may be subject to any rules of construction based upon any party being considered the party "drafting" this Amendment. 19.Governing Law. The validity, interpretation and effect of this Amendment are governed by and shall be construed in accordance with the laws of the State of California. 20.Severability. If any provision hereof is held invalid or unenforceable for any reason, this holding or action shall be strictly construed and shall not affect the validity or effect of any other provision hereof. To the extent permitted by law, the parties waive, to the maximum extent permissible, any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 21.Entire Agreement. This Amendment and the Agreement represent the full and entire agreement between the parties with respect to the matters covered herein. 22.Authorization. The person(s) executing this Amendment on behalf of the parties hereto warrant that (i) such party is duly organized and existing, (ii) they are dully authorized to execute and deliver this Amendment on behalf of said party, (iii) by so executing this Amendment, such party is formally bound to the provisions of this Amendment, and (iv) the entering into this Amendment does not violate any provision of any other agreement to which said party is bound. 23.Except as modified by this Fifth Amendment, all other terms and conditions of the Agreement are hereby ratified and confirmed by the parties. [signatures on next page] 11/2/2005 6 Final Document IN WITNESS WHEREOF, the parties hereto executed this Sixth Amendment to be effective as of the date first written above. ,,City" ATTEST: CITY OF PALM SPRINGS, a California municipal corporation By City Clerk City Manager APPROVED AS TO FORM: City Attorney "Veolia" VEOLIA WATER NORTH AMERICA - WEST, LLC a Delaware limited liability company By Signature Name Title End of Signatures 11/2/2005 7 Final Document