20120101-WaterCostAllocationAgreement proposed
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1 WATER COST ALLOCATION AGREEMENT
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This is a sample comment. This is the proposed city-county cost sharing agreement to pay for the 50-year community water supply plan.
2 Between The
3 CITY OF CHARLOTTESVILLE, VIRGINIA,
4 ALBEMARLE COUNTY SERVICE AUTHORITY,
5 And The
6 RIVANNA WATER AND SEWER AUTHORITY
7 This Agreement made for purposes of identification this 1st day of January, 2012, by and between the CITY OF CHARLOTTESVILLE, VIRGINIA, a municipal corporation (the “City”), the ALBEMARLE COUNTY SERVICE AUTHORITY, a public body politic and corporate (“ACSA”), and the RIVANNA WATER AND SEWER AUTHORITY, a public body politic and corporate (“RWSA”).
8 WITNESSETH:
9 A. RWSA owns and/or operates facilities for the treatment of potable water pursuant to the terms of a Four-Party Agreement dated June 12, 1973, among the City, RWSA, ACSA and the Board of Supervisors of Albemarle County (the “Four-Party Agreement”) and several supplementary agreements.
10 B. The urban water system consists of all water-related facilities within or serving the City of Charlottesville and the urban growth area of Albemarle County surrounding the City of Charlottesville, including water treatment plants and all reservoirs, dams, pipelines, pump stations, storage tanks and other appurtenances connected to the water treatment plants and operated by RWSA (the “Urban Water System”).
11 C. RWSA, in order to increase the available water supply and safe-yield of that water supply, has undertaken a Community Water Supply Plan described in the Permit Support Document dated May 17, 2006 (the “CWS Plan”) approved by the Virginia Department of Environmental Quality by issuance of a Permit dated February 11, 2008, and modified by Virginia Department of Environmental Quality Permit Modification dated December 14, 2011. The CWS Plan estimates the increase in safe-yield at 9.9 million gallons per day (MGD). In addition to providing additional safe-yield to meet an anticipated increase in future demand of 5.9 MGD, the CWS Plan provides additional safe-yield to offset anticipated future losses of safe-yield from siltation of the South Fork Rivanna Reservoir of 4.0 MGD. While the CWS Plan includes other projects forecasted to be constructed in the future, this Agreement only addresses the sharing and allocation of costs for the Project, as such term is defined in Paragraph 1 of the Agreement dated of even date herewith between the City, ASCA and RWSA and recorded in the Clerk’s Office of the County of Albemarle, Virginia (the “Project Agreement”), a copy of which is attached hereto.
12 D. ACSA and the City reached an agreement dated December 1, 2003 (the “December 1, 2003 Agreement”), concerning the allocation of expenses to increase the safe-yield provided by the Urban Water System, by raising the elevation of the South Rivanna Reservoir. RWSA never constructed this project. However, since 2003 RWSA has allocated costs to the City and ACSA for water supply related project costs based upon the December 1, 2003 Agreement’s agreed-upon percentages of 27% to the City and 73% to ACSA. The City and ACSA now want to more accurately reflect future cost allocation for the Project to be undertaken by RWSA.
Here is a link to the Dec. 1 2003 agreement.
http://www.cvillepedia.org/mediawiki/index.php/File
13 NOW THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt of all of which is hereby acknowledged, the City, ACSA and RWSA agree as follows:
14 1. Allocation of Previously Incurred Costs. Except as may have otherwise been previously agreed among the City, ACSA and RWSA, all costs directly incurred by the City and ACSA related to the Project for work performed prior to the date of this Agreement, irrespective of when invoiced or paid, shall be the responsibility of the party incurring such costs. Except as may have otherwise been previously agreed to among the City, ACSA and RWSA, all costs incurred by RWSA related to the Project for work performed or debt service owed for periods prior to the date of this Agreement, irrespective of when invoiced or paid, have been allocated to the City and ACSA through the setting of water rates for each of the City and ASCA using the allocation percentages set forth in the December 1, 1983 Agreement. Costs for work performed and debt service owed related to the Project include the costs of engineering, construction, legal and land costs, administrative, debt service, establishment of reserves and related expenses (hereinafter collectively referred to as the “Debt Service Charges”). RWSA’s water rates have been determined and calculated, and shall continue to be determined and calculated, as provided in Article VII of the Four-Party Agreement and the Working Agreement on Urban Area Wholesale Flow Allocation and Billing Methodology dated January 24, 1983 by and among RWSA, ACSA and the City (the “Working Agreement”), as the same may be amended from time to time.
“Both the City and ACSA have expended a significant amount of money for the planning and permitting of the water supply plan and the design of the dam. Some of these costs have been billed by RWSA on the basis of a 2003 agreement that allocated 73% of the costs to ACSA and 27% of the costs to the City. Other costs have been paid directly by one of the two parties. As part of the negotiations the parties agreed that these costs paid prior to the effective date of the agreement would not be subject to the agreed-upon percentage cost allocation for the dam, which is 85% for ACSA and 15% for the City. Paragraph 1 on page 3 basically states that the book is closed on expenses paid prior to the new agreement.”
This is referring to studies funded by each each party as the water supply plan was revisited from 2008 to 2011. They include the city commissioning Black & Veatch to determine the cost and feasibility of building on the existing Lower Ragged Mountain Dam, as well as the Albemarle County Service Authority paying Schnabel Engineering nearly $900,000 to design the earthen dam.
15 2. Allocation of Future Project Debt Service Charges Related to New Ragged Mountain Dam. Except as otherwise provided in Section 3 below with respect to allocation of Debt Service Charges for the SRR-RMR Pipeline (as defined in Paragraph 1(d) of the Project Agreement), RWSA shall allocate all other Project Debt Service Charges for work performed or debt service owed for periods on or after the date of this Agreement, irrespective of when invoiced or paid, by setting water rates in such a manner as to allocate 15% of such Debt Service Charges to the City, and the remaining 85% of such Debt Service Charges to ACSA, subject to adjustment as provided in Section 5 below. Such Debt Service Charges shall include future debt service on RWSA’s 2005B Bond, which funded the alternatives analysis and the permitting process for the CWS Plan, which debt service prior to the date hereof was allocated pursuant to the percentages set forth in the December 1, 2003 Agreement.
This paragraph establishes the 15% / 85% allocation of future (post-agreement) costs related to the new Ragged Mountain dam. The estimate for the remaining costs for the dam is $29 million; when financed with bonds for a 30 year period, the debt service charges are approximately $59 million. If those numbers are accurate, the City’s ultimate share will be $8.85 million ($59M x 15%), and the ACSA share will be $50.15 million.
16 3. Allocation of Future Costs Related to SRR-RMR Pipeline. RWSA shall allocate all Project Debt Service Charges related to the SRR-RMR Pipeline for work performed or debt service owed for periods on or after the date of this Agreement, irrespective of when invoiced or paid, by setting water rates in such a manner as to allocate 20% of such Debt Service Charges to the City and the remaining 80% of such Debt Service Charges to ACSA, subject to adjustment as provided in Section 5 below.
This paragraph establishes the 20% / 80% allocation of future (post-agreement) costs related to the South Rivanna Reservoir to Ragged Mountain Reservoir pipeline project. The estimate for the costs for that project without debt service is currently $63 million, but it should be emphasized that the costs for the pipeline project are far more uncertain than the dam project. The pipeline project has not been designed, and there is no schedule for its construction.
This Agreement does not alter the existing methodology for allocating costs related to the future maintenance or operational costs that will RWSA will incur as a result of the new dam and pipeline.
17 4. True-Up Reimbursements for Previously Allocated Debt Service Charges Based Upon Increased Future Use. In the event the actual water use of either the City or ACSA exceeds its allocation of the agreed-upon total safe-yield of the Urban Water System set forth in Section 6 below, the party exceeding its allocation shall make a true-up reimbursement payment (a “True-Up Payment”) directly to the other party for a portion of the previously allocated Debt Service Charges related to the Project, to be calculated as set forth below. The amount of such True-Up Payment shall be the sum of (a) the True-Up Payment calculated for the Project excluding the SRR-RMR Pipeline (hereinafter, the “RMR Dam Portion”), plus (b) the True-Up Payment calculated for the SRR-RMR Pipeline (hereinafter, the “SRR-RMR Pipeline Portion”), in each case calculated as provided below. Actual water use shall be measured pursuant to the metering plan provided in Section 7 below and determined based upon the actual annual average daily water demand of the City and ASCA over a trailing twelve (12) consecutive month period. The first such period shall begin on July 1, 2015 and end on June 30, 2016, and continuing for each fiscal year thereafter. The last day of any such period shall be the “True-Up Effective Date” for such period. Each of the RMR Dam Portion and the SRR-RMR Portion of the True-Up Payment shall be calculated by multiplying the sum of (a) all Debt Service Charges for such Portion allocated to both the City and ACSA for all periods on and after the latter of (i) the date of this Agreement or (ii) if one or more True-Up Payments have previously been made, the day following the True-Up Effective Date for the immediately preceding True-Up Payment, through the current True-Up Effective Date plus (b) the RWSA budgeted amount of all Debt Service Charges for such Portion allocated to both the City and ACSA for the fiscal year immediately following the True-Up Effective Date by a fraction, the numerator of which shall be equal to the amount by which such party’s actual water use, expressed as MGD, exceeds its current allocated share of the 18.7 MGD agreed-upon total safe-yield of the Urban Water System from the Project (initially 6.71 MGD for the City and 11.99 MGD for ACSA), and the denominator of which shall be the 9.9 MGD agreed-upon additional safe yield of the Urban Water System from the Project, and then multiplying such amount by a fraction, the numerator of which is the Debt Service Charges allocation percentage for such Portion initially agreed to for such party pursuant to Section 2 above, as may have been previously adjusted pursuant to the second sentence of Section 5 below, and the denominator of which is such party’s initial percentage of agree-upon additional safe-yield pursuant to Section 6 below, as may have been previously adjusted by any increase or decrease to its allocated share of the agreed-upon total safe yield pursuant to the first sentence of Section 5 below. The total cumulative True-Up Payments, if any, owed by either party shall be limited to the sum of (i) fifteen percent (15%) of the total Debt Service Charges for the Project excluding the Debt Service Charges for the SRR-RMR Pipeline and (ii) twenty percent (20%) of the total Debt Service Charges for the SRR-RMR Pipeline. Each True-Up Payment shall be made within twelve (12) months of the True-Up Effective Date for which it was calculated. An example of a True-Up Payment calculation is attached hereto as Exhibit A.
This paragraph and paragraph 5 acknowledge that the parties have allocated the future safe yield of the water supply, and that two things will happen if either party exceeds its allocation: first, a “true up” payment will be made to the other party, and second, the 85% / 15% (dam) and 80% / 20% (pipeline) allocations will change for future debt service payments.
The allocation: (found in paragraph 6, pages 7 – 8) The water supply permit documents project a safe yield in 2055 of 18.7 million gallons per day (MGD). This Agreement sets the City’s allocation at 6.71 MGD, and the County’s allocation at 11.99 MGD. These allocations are based on the projected safe yield, and do not change if the actual safe yield is more or less than 18.7 MGD (see the language at the top of page 8). These allocations do not reflect ownership or entitlement to water; the City still has the right to use as much water as it wants, but unlike the current system the City will have to pay more once its average daily usage on an annual basis exceeds 6.71 MGD.
Here is how the City’s 6.71 MGD was calculated:
* The calculation assumes that the current safe yield of 12.8 MGD will reduce to 8.8 MGD in 2055 due to sedimentation. Since 2002 the City has used approximately 53.70% of the water produced by RWSA.
* 8.8 MGD x 53.70% = 4.73 MGD
* The new water plan will produce an additional 9.9 MGD (this 9.9 plus the 8.8 equals the future safe yield of 18.7). The City’s share of the new 9.9 MGD is 20%, or 1.98 MGD.
* 1.98 MGD + 4.73 MGD = 6.71 MGD
The demand projections done by AECOM indicate that the City’s usage will exceed 6.71 MGD in approximately 2042, which will be much sooner than when ACSA is projected to exceed its allocation.
An example has been appended to the Agreement to indicate how the true up payments and the percentage allocations of future debt service will be calculated once a party exceeds its allocation. The example shows the City paying a true up of $17,677 for usage of 6.81 MGD. That example, however, assumes only $2 million in prior debt service payments when the City exceeds 6.71 MGD. In all likelihood a much higher amount of debt service payments will have been made, since the City is not projected to exceed 6.71 MGD until 2042.
As noted near the end of paragraph 4 on page 6, the maximum amount of true up payments that can be charged under the Agreement is equal to 15% of the total debt service charges for the dam project, and 20% of the total debt service charges for the pipeline project. If AECOM’s projections are relatively accurate I believe that the community water usage will exceed 18.7 MGD well before the City reaches the true-up cap.
18 5. Adjustment of Allocation Base On Increased Future Use. The increase in actual water use used to make each True-Up Payment calculation will be added to then current allocated share of the agreed-upon total safe-yield of such party and subtracted from then current allocated share of the agreed-upon total safe-yield of the other party for purposes of determining future True-Up Payments and for purposes of allocating any future Debt Service Charges for the Project. The allocations of future Debt Service Charges set forth in Sections 2 and 3 above for each of the City and ACSA shall be adjusted to a percentage equal to such party’s newly adjusted percentage of agreed-upon total safe-yield multiplied by a fraction, the numerator of which shall be equal to such party’s then current percentage of Debt Service Charges and the denominator of which shall be equal to such party’s then current percentage of agreed-upon additional safe-yield. Such adjusted percentages shall be used by RWSA to determine and calculate water rates for its first full fiscal year beginning one year after the day following such True-Up Effective Date and for each fiscal year thereafter, until subsequently adjusted following any subsequent True-Up Payment. No further True-Up Payments under Section 4 above or adjustments to safe-yield allocations under this Section 5 shall be made if the result of such adjustments would reduce the allocated safe-yield of any party below such party’s actual water use as measured by average daily demand under the second sentence of Section 4 above.
19 6 . Allocation of Safe-Yield For Purpose of True-Up Reimbursements . For the purpose of calculation of the True-Up Payments required by Section 4 of this Agreement and the adjustments of allocations required by Section 5 of this Agreement, the agreed-upon additional safe-yield and agreed-upon total safe-yield of the Urban Water System anticipated from the Project and initially allocated to the City and ACSA shall be fixed at the numbers set forth in the following chart, irrespective of the actual safe-yield resulting from the Project or any increase or decrease in actual safe-yield as a result of the passage of time or due to any other circumstance :
|
20 A 21 AECOM 22 2010 23 (Information Only) |
24 B 25 Current 26 Supply 27 Split |
28 C 29 Discounted 30 Supply 31 In 2055 32 (8.8 mgd) |
33 D 34 Agreed-upon 35 Additional 36 Safe Yield 37 Split |
38 E 39 Agreed-upon 40 Additional 41 Safe Yield 42 By Share 43 (9.9 mgd) |
44 E 45 Agreed-upon 46 Total 47 Safe Yield 48 Allocated |
|
|
49 (B X 8.8) |
50 (D X 9.9) |
51 (C + E) |
||||
|
52 City |
53 5.13 |
54 53.70% |
55 4.73 |
56 20% |
57 1.98 |
58 6.71 |
|
59 County |
60 4.62 |
61 46.30% |
62 4.07 |
63 80% |
64 7.92 |
65 11.99 |
|
66 Total MGD |
67 9.76 |
68 8.80 |
69 9.90 |
70 18.70 |
||
|
71 City % |
72 52.56% |
73 53.70% |
74 20% |
75 35.88% |
||
|
76 County% |
77 47.35% |
78 46.30% |
79 80% |
80 64.12% |
81 In accordance with the chart, the City’s initial percentage of agreed-upon additional safe-yield is twenty percent (20%) and its initial allocation of agreed-upon total safe yield is 6.71 MGD; and ACSA’s initial percentage of agreed-upon additional safe-yield is 11.99 and its initial allocation of agree-upon total safe yield is 11.99 MGD.
82 7. Data Acquisition (Metering) Plan. Within 36 months of the date of this Agreement, RWSA shall complete a metering program to measure the City, ACSA and University of Virginia water usage the cost of which shall be allocated using the same allocation method used for operational costs as set forth in Section 11 below. RWSA shall install, maintain, read and routinely test and calibrate metering devices to record the quantities of water delivered by RWSA through such meters to the retail distribution systems of the City, ACSA and the University of Virginia not less frequently than monthly and otherwise as agreed to by the City and ACSA.
Currently RWSA can tell how must potable water it produces, and both the City and ACSA can report how much water each sells. The difference between what is produced by RWSA and what is sold by the City and ACSA is “non-revenue” water, and for purposes of measuring usage is allocated between the two parties on a percentage basis. This paragraph obligates RWSA to install a new set of meters that will allow an accurate measurement of how much water is being used by both the City and ACSA. This “data acquisition plan” will enable RWSA to measure and report the average daily usage by both jurisdictions, which is needed for purposes of determining whether a true up is required.
83 8. Water Conservation. The City and ACSA shall engage in aggressive conservation methods, including system-wide water audits meeting AWWA standards; residential home water audits and annual reports on conservation status; outdoor incentives including drought resistant landscapes; irrigation certification; car wash certification; and other incentives for innovative water conservation programs.
This paragraph states the mutual commitment to engage in aggressive water conservation methods.
84 9. Dredging South Fork Rivanna Reservoir. The City and ACSA agree to carry out a maintenance dredging project at the South Fork Reservoir to “target dredge” for Part I (segments 1, 2, 3 as identified in the HDR Engineering Inc. dredging study dated February 17, 2010). This dredging project will be outside the DEQ VWP Permit No. 06-1574. The specific details of the dredging project will be determined by the Board of Directors of RWSA taking into account the City and ACSA’s desire that it be market driven, cost effective and opportunistic. The City and ACSA shall share equally the cost and related debt service charges of this dredging, up to a maximum project cost (excluding debt service charges) of $3.5 million. This dredging is a joint maintenance project. RWSA shall issue a Request for Proposals as the next step in implementation.
This paragraph reflects the parties’ agreement to perform “maintenance dredging” on a portion of the South Fork Rivanna Reservoir, with the costs divided equally between the City and ACSA, up to a maximum cost (excluding debt service) of $3.5 million.
The RWSA has all of these reports on the following page:
http://www.rivanna.org/southfork/progress.htm
85 10. Value of the Ragged Mountain Property. The City and ACSA agree that the value of the City property required for construction of the New Ragged Mountain Dam and which will be inundated by the expansion of the Ragged Mountain Reservoir at the Initial Pool Level and the Additional Pool Level (as those terms are defined in Paragraph 1(a) of the Project Agreement) is $765,000.00, which value shall be paid by ACSA to the City, upon commencement of construction of the New Ragged Mountain Dam.
ACSA has agreed to pay the City $765,000 as compensation for the City allowing its land at Ragged Mountain to be used as part of the community water supply. The City will still own the land, but it will either be inundated or used as the site for the new dam.
86 11. Except as otherwise specifically provided herein, the City and ACSA will continue to pay for routine labor, chemicals, supplies, power, and all other operational costs associated with water production for the Urban Water System on the basis of their percentage volume use as set out in the Four-Party Agreement, as supplemented by (i) Joint Resolution adopted in January 1983 (as such resolution was clarified by Resolution of ACSA dated March 17, 1983, and by Resolution of the City Council dated May 2, 1983, and modified by Joint Resolution adopted in December, 1983), (ii) the Working Agreement; (iii) Agreement dated October 26, 1987, and (iv) the December 1, 2003 Agreement, relating to the operation of RWSA’s Urban Water System and the division of RWSA’s operational costs between the City and ACSA.
87 WITNESS the following duly authorized signatures and seals:
88 [SIGNATURES ON FOLLOWING PAGES]
89 CITY OF CHARLOTTESVILLE
90 By: _____________________________
Alternatives:
Approval of this Agreement by each of the three parties is necessary for RWSA to begin the construction of the new earthen dam at the Ragged Mountain Reservoir. Any of the terms are subject to further negotiation if desired by City Council.
Budgetary Impact:
The budgetary impact from this Agreement is obviously substantial. As noted above, the City’s share of the future dam costs of $59 million is $8.85 million. The 20% share of the projected pipeline costs of $63 million without debt service is $12.6 million. To the extent these costs are not paid “up front” by the City, they will be included by RWSA in the wholesale water rate it charges the City.
Recommendation:
City staff recommends approval of the resolution that authorizes the City Manager to sign the Agreement.
91 Mayor
92 COMMONWEALTH OF VIRGINIA
93 CITY/COUNTY OF ______________________________
94 The foregoing instrument was acknowledged before me this _______ day of ___________________, 20__, by __________________________________.
95 _______________________________
96 Notary Public
97 My commission expires:
98 ID No._______________
99 ALBEMARLE COUNTY SERVICE AUTHORITY
100 By: _____________________________
101 Chairman
102 COMMONWEALTH OF VIRGINIA
103 CITY/COUNTY OF ______________________________
104 The foregoing instrument was acknowledged before me this _______ day of ___________________, 20__, by __________________________________.
105 _______________________________
106 Notary Public
107 My commission expires:
108 ID No.________________
109 RIVANNA WATER AND SEWER AUTHORITY
110 By: _____________________________
111 Chairman
112 COMMONWEALTH OF VIRGINIA
113 CITY/COUNTY OF ______________________________
114 The foregoing instrument was acknowledged before me this _______ day of ___________________, 20__, by __________________________________.
115 _______________________________
116 Notary Public
117 My commission expires:
118 ID No.
119 \35841286.5
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