HomeMy WebLinkAboutUkiah Valley Sanitation District 2018-10-01 - Settlement COU NO. 1819-120
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Settlement Agreement") is entered
on October 1, 2018 ("Effective Date") by and between UKIAH VALLEY SANITATION
DISTRICT, a county sanitation district ("DISTRICT"), on the one hand, and CITY
OF UKIAH, a general law municipal corporation ("CITY"), on the other hand. The
parties are, at times, collectively referred to herein as the "Parties."
RECITALS
A. A proceeding between the Parties is presently pending in Sonoma County
Superior Court entitled Ukiah Valley Sanitation District u. City of Ukiah, case no. SCV
256737 ('the Action").
B. In the Action, the DISTRICT filed a complaint against CITY, as amended,
and CITY filed a cross complaint against DISTRICT, both of which are pending.
C. CITY filed an application(s) with Mendocino LAFCO for a change in
organization, including detachment of portions of the DISTRICT commonly known as
the "Overlap Area." Said proceeding(s) is referred to hereafter as "Detachment
Proceedings."
D. The Parties intend to execute, contemporaneously with this Settlement
Agreement, the document entitled the Operating Agreement for the Combined Sewer
System Serving the Ukiah Valley Sanitation District and the City of Ukiah ("Operating
Agreement"), a true and correct copy of which is attached hereto and incorporated
herein by reference as Exhibit 1 (this Settlement Agreement is in turn attached as
Exhibit 1 to the Operating Agreement).
E. Except as described in this Settlement Agreement and in the Operating
Agreement, the Parties desire and intend to resolve all claims either had or may have
against the other related to the Action and to dismiss, discharge, and release all
claims arising therefrom.
F. These Recitals shall be deemed incorporated by reference into all
portions, including the Terms, of this Settlement Agreement.
NOW, THEREFORE, in consideration of the Recitals and Terms of this
Settlement Agreement and for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the Parties agree as follows.
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TERMS
1. Operating Agreement. Contemporaneous with execution of this
Settlement Agreement, the Parties, and each of them, shall execute the Operating
Agreement.
2. CITY Payment to DISTRICT. CITY shall transfer funds and pay to
DISTRICT the monetary sum in combination totaling Seven Million Five Hundred
Thousand Dollars ($7,500,000.00), which is in addition to any other sums previously
paid or transferred to DISTRICT, as follows:
a. CITY Transfers and Payments
(1) $2,515,689.80 shall be transferred and deposited by the
CITY for the DISTRICT's use and benefit within thirty (30) days of the Effective Date
("Payment Deadline") in accordance with section 2.b.(1);
(2) $984,310.20 shall be paid by CITY directly to DISTRICT
within thirty (30) days of the Payment Deadline as specified in section 2.b.(2);
(3) $4,000,000 shall be paid by CITY directly to DISTRICT in
equal annual installments commencing on the one-year anniversary of the Payment
Deadline as specified in section 2.b.(3).
b. Terms and Conditions of the Transfer and Payments Required
by Section 2 (a).
(1) The CITY maintains approximately $4,837,865.13 in
unspent proceeds of the 2006 Bonds, as defined in the Operating Agreement,
including interest accrued on said funds through August 31, 2018. Those proceeds
are presently reported by CITY in its Sewer Bond Debt Service Fund (Fund No. 841).
Each party is entitled to the full use and benefit of a share of said funds for purposes
of prepaying its share of the bond debt. As of August 31, 2018, the DISTRICT share is
52% of the funds in Fund 841, totaling $2,515,689.80 ("DISTRICT Share") and the
CITY share is 48%, totaling $2,322,175.33 ("CITY Share"). The DISTRICT's and CITY's
debt service obligation as of the Effective Date is 52% and 48%, respectively. The CITY
shall transfer the entire balance in Fund 841 together with interest accrued as of
August 31, 2018, totaling $4,837,865.13, together with any additional interest
properly credited to those funds through the date of transfer,I to the City of Ukiah
2006 Installment Payment Fund held by the Bond Trustee pursuant to Section 4.4(b)
'The total amount transferred shall be finalized upon issuance of the 2017-18 audit but shall not affect
the amount of the City's payment under Section 2.a(2). Said interest shall be applied to prepay bonds but
shall not be credited to either the DISTRICT's or CITY's Share.
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of the Installment Sales Agreement as defined in the Operating Agreement ("ISA"), to
be used exclusively to make optional prepayments of the principal amount due on
Installment Payments pursuant to Section 7.2 of the ISA in accordance with Section
2.03 of the Indenture of Trust between ABAG and Wells Fargo Bank, dated March 1,
2006 ("Indenture"). Other CITY and DISTRICT funds must be used to pay any accrued
interest due on prepaid bonds. The Bond Trustee shall be irrevocably instructed not to
disburse the deposited funds for any purpose or in any manner other than as specified
herein. Bond prepayments shall occur in connection with a refinancing of the 2006
Bonds or, in the absence of a refinancing, at the earliest date specified by either the
CITY or the DISTRICT. Notwithstanding the prepayment of bond debt as provided
herein, the Parties shall share debt service as provided Section II.D.2.b of the
Operating Agreement; provided, however, that in the event a reorganization is
proposed, including through the Detachment Proceedings, the Parties shall ensure, as
provided in Section 6.b, that the DISTRICT and CITY shall each receive the full benefit
and use of the DISTRICT's Share and CITY's Share, respectively, against the total
principal amount of bond debt for which that party is obligated.
(2) By no later than the Payment Deadline the monetary sum
equal to (a) $7,500,000 less (b) $4,000,000 less (c) the sum transferred for the
DISTRICT's Share (the sum of which equals $984,310.20) shall be paid by the CITY
directly to the DISTRICT from CITY funds in which CITY, and not DISTRICT, has the
sole legal interest ("CITY funds").
(3) The CITY shall pay the DISTRICT$4,000,000 in equal
annual payments of$1,000,000 each, commencing one year after the Payment
Deadline and continuing on the same day and month each year thereafter until the
balance plus intertest is paid in full. So long as timely paid, interest shall accrue on
the entire unpaid balance at the rate of three percent (32%) per annum commencing on
the one-year anniversary of the Payment Deadline. CITY payments shall be made
solely from CITY funds. If the initial installment is not paid when due, interest at the
3°o annual percentage rate shall accrue on that installment from the Payment
Deadline until that installment is paid in full. If any subsequent installment payment
is not paid when due, interest on the unpaid portion of that installment payment shall
accrue from the payment due date until that installment is paid in full at the legal
rate.
3. Dismissal of Action with Reservation of Jurisdiction. Within five (5)
business days of the Court entering an order on joint request of the Parties to
maintain jurisdiction to enforce this Settlement Agreement notwithstanding dismissal,
the Parties shall jointly execute a dismissal of the entire action with prejudice of all
parties and all causes of action. The Parties agree that said dismissal shall not
prejudice or otherwise affect either party's rights as provided in Section 6. Further,
notwithstanding the dismissal, the court in which the Action is proceeding shall
maintain jurisdiction, pursuant to Code of Civil Procedure section 664.6, to enforce the
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terms of this Settlement Agreement to the extent dispute resolution is not otherwise
provided in this Agreement.
4. Releases.
a. CITY Release. Except as otherwise provided in this Settlement
Agreement and except with respect to DISTRICT's obligations under this Settlement
Agreement and in the Operating Agreement, CITY (including its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns), hereby releases DISTRICT (and all its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns) from any and all claims, demands, obligations, costs,
expenses, liabilities, causes of action, or rights or interests otherwise—however any of
the same may be characterized ("Claims")—which CITY now has or may have against
DISTRICT regarding, relating to, or arising from the Action.
b. DISTRICT Release. Except as otherwise provided in this
Settlement Agreement and except with respect to CITY's obligations under this
Settlement Agreement and in the Operating Agreement, DISTRICT (including its
agents, representatives, officers, directors, employees, affiliates, principals,
predecessors, successors, and assigns), hereby releases CITY (and all its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns) from any and all Claims which DISTRICT now has or may
have against CITY regarding, relating to, or arising from the Action.
C. The releases contained herein are collectively referred to as
"Released Claims."
5. Unknown Claims. Except as excluded in this Settlement Agreement and
except with regard to the Parties'respective obligations under this Settlement
Agreement and in the Operating Agreement, the Parties, and each of them,
acknowledge reading and advisement of the provisions of California Civil Code section
1542 (and similar laws of other jurisdictions) and extend the Released Claims to
unknown claims otherwise excluded by that section, which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR
HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
With respect to the Released Claims, each party acknowledges there is a risk
that, subsequent to the execution of this Settlement Agreement, it will or may incur
damage or loss that it may deem in some way attributable to the Released Claims, but
which are unknown and unanticipated at the time this Settlement Agreement is
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executed, or that damages presently known may become progressive, greater,
different, or more serious than is now known, expected or anticipated, or that
facts related to the Released Claims are found hereafter to be in addition to or
different from the facts now believed true. Each party accepts such risks and
agrees this Settlement Agreement, including these releases, shall remain effective
notwithstanding such risks should they materialize.
6. Exclusion from Releases.
The releases contained in this Settlement Agreement, including the Released
Claims, shall not extend to:
a. any Claims based on matters revealed by, or adjusted in the process
of producing, the 2016-2017 or 2017-2018 CITY audits of the CITY's Wastewater
Enterprise, and which were not plainly revealed, in the absence of said audits, by
financial or other records obtained by the DISTRICT prior to the Effective Date of this
Settlement Agreement. The releases shall apply to and preclude Claims included in the
Binder A-2 (Work Product Binder) produced by William Holder for his deposition and
shall preclude Claims by either Party for revenue from sewer service fees paid by the
County for sewer service to the County jail through fiscal year ending June 30, 2018
(CITY represents DISTRICT has been credited with such revenue from July 1, 2015-
June 30, 2018);
b. either party exercising the provisions of the Operating Agreement that
authorize them to oppose on any legal, equitable, or factual basis a reorganization
proposed by either party, including the Detachment Proceedings and to prevent any
diminution in the financial benefit to either party under Section 2.a(1) and 2.b(l)
resulting from a proposed reorganization, including the Detachment Proceedings.
Any such dispute under Section 6.b shall be resolved as provided in Section F
of the Operating Agreement and under Section 6.a pursuant to Section iI.G.2 of the
Operating Agreement.
Except as provided in the attached Exhibit 1, this release does not apply to or
preclude any Claims by either party regarding any conduct, including conduct similar
to or the same as that embraced by the Action, occurring after the Effective Date.
7. Attorney's Fees & Costs. CITY and DISTRICT shall each bear its own
attorneys'fees, costs, and expenses incurred related to the Action.
8. Warranty of Authority. The Parties, and each of them, warrant and
represent that it has not initiated or heretofore assigned or transferred, or purported
to assign or transfer, to any person or entity not a party hereto, any Released Claim
(or any part or portion thereof) and agrees to indemnify and hold the other harmless
from and against any claim based on, related to, in connection with, or arising out
of any such assignment or transfer or purported or claimed assignment or transfer.
Individuals executing this Settlement Agreement represent and warrant they maintain
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express authority of the party they represent to execute this Settlement Agreement
and thereby bind said party to its terms.
9. Disclaimer of Liability. The Parties have entered this Agreement to
avoid the further expense and uncertainty of litigation and acknowledge and agree
that execution of this Settlement Agreement is the result of their compromise of
disputed claims and defenses and shall not be considered or admissible as an
admission of liability or wrongdoing for any purpose.
10. Binding Effect. This Settlement Agreement shall be binding on and
inure to the benefit of the successors and assigns of the Parties hereto. Nothing in
this Settlement Agreement, express or implied, is intended to confer upon any
person or entity other than the Parties hereto or their respective successors and
assigns, any rights or benefits under or by reason of this Settlement Agreement.
11. Severability. In the event a provision of this Settlement Agreement, or
portion thereof, is determined unenforceable, the remainder hereof shall not be
affected thereby and each remaining provision or portion thereof shall continue to
be valid and effective and shall be enforceable to the fullest extent permitted by law,
except that no release of any kind shall be effective absent compliance with sections 1-
2 above.
12. Cooperation. The Parties, and each of them, shall promptly act to
facilitate the provisions of this Settlement Agreement and will promptly comply with all
reasonable requests necessary to carry out its terms.
13. Survival of Rights. Notwithstanding the releases contained herein, all
rights and obligations of the Parties, and each of them, created under or pursuant to
this Settlement Agreement and/or the Operating Agreement, shall survive execution of
this Settlement Agreement.
14, Integration Clause. This Settlement Agreement represents and
contains the entire agreement and understanding among the Parties hereto with
respect to the subject matter of this Settlement Agreement, and supersedes any
and all prior oral and written agreements and understandings, and no
representation, warranty, condition, understanding or agreement of any kind with
respect to the subject matter hereof shall be relied upon by the Parties unless
incorporated herein or contained in the Operating Agreement. This Settlement
Agreement may not be amended or modified except by an express written
agreement signed by the Parties.
15. Construction. This Settlement Agreement shall be interpreted under
the laws of the State of California, except that no law, statutory or otherwise, that
would construe language against a drafting party shall be applied or effective.
This Settlement Agreement shall be construed as, and shall be deemed, drafted by
each party hereto.
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16. Representation. The Parties, and each of them, acknowledge entering
this Settlement Agreement voluntarily and of their own free will, absent coercion or
duress and, further, with legal representation of that party's choice.
17. Execution. This Settlement Agreement shall be executed in duplicate
form thereby ensuring an original of it is maintained by each party.
IN WITNESS WHEREOF, the Parties have entered this Settlement Agreement on
the Effective Date and have executed this Settlement Agreement on the dates indicated
below.
CITY OF UKIAH
Dated: October,,?--, 2018
K VAN p06 --MAY
Dated: October , 2018 O TEST:
KRISTINE WLER-cfT�f �� ltlr
UKIAH VALLEY SANITATION DISTRICT
f C
Dated: October , 2018
Dated: October , 2018 '
Als 1"ea9u - p' Ct Clerk
Approved as to form:
Dated: October :+} , 2018
RT, C �IE1f
Dated: October , 2018
UGC. �t
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EXHIBIT 1
OPERATING
AGREEMENT FOR THE
COMBINED SEWER
SYSTEM SERVING THE
UKIAH VALLEY
SANITATION DISTRICT
AND THE CITY OF UKIAH
Table of Contents
1.RECITAL -.............. ... ... .... ..... ..... . .....................................................................................
11.TERMS.............................---.................... ............. ........ ............................................ ---3
A. DEFINITIONS..... .............
B. BILLING AND COLLECTION OF REVENUE—DTSTRTCT CUSTOMERS.............................................5
I Transfer of Records.................. ......... .............................................. ....... ......-.5
2. Transfer of Responsibility fbr Billing and Collection
3. Awornblity for Wifing and Collection Services Vnom CTI-Y Continues Billing&Collection
Functions for Combined CITY(DISTRICT Sewer System.......................---..........---......—...
4. Implemwitation of DISTRICT Assuming Billing and Collection Fwwtion.............................................7
5. Proltibidom w Further CITY Charges.................. .................... ........................................... ..........7
C. OPERATIONS AND MAINTENANCE..............................................................--.-................----.7
L DSS and CSS(Collectim Symms)and Trunk Line...............--.......................—..............................7
9. Transfar of Reowds.----........--------------.......--........................................---,...........7
b, Traureir of ResponWbility to Opmw and Maintain DSS wW Trunk Line..,....- .........................
c- Responsibility to Perforin Openawo and Mak"we.........................................................................8
& Provision o(InfonnuiJKm to Dewmiiw Wheha to Assume Opemion and Maintenance of
DSSaDdfor Trunk Une.—.........--------------------------- ..-..--.-.,.-...-•-»»•.•------•-,..,.««.—------------9
e. Liziplemenuion of DISTRICT Assuming Operation and Mainmw=Function...........................9
f. I'whibilion on Fwtber CFTY ...........................................--................--.—----------9
it DISTRICT obligation to knish CITY vdtb moaf&--....................................................................... .9
2. CWWTP.............................................—........................................................................................................... 10
a, Ttawliff of Rowrds..............................................................................................................................— 10
K DISTRICT's Utilization of CWWTP.....--------------------------------------------------............................ 10
C. Responsibility to Perform Operations and Maimenutce....--..............................................—,.-11
3. Perforituaw Suadards&Infixamion Sharing...................—..........--.........................—...................... I I
a, Performiuve Swdard&.............. .........---......I...—...........11................--..I I
b, Trilbrat0ion Sharing................................................................................................................................—I I
D- COST ALLOCATION....................................... ......----......--.................................... .........................I I
I, Operations wW Maia*enance Costs of CWWTP.Trunk Line,DSS&CSS.....................---.............................--I I
a. Cost Allocation,—__---------_--•.................................................................................................... I I
(1) CWWTP,I)S%CSS&Tnmk L-h=..............—.—---1.11............................................................................ 11
(2) DSS A CSS Cost SqMoioa..................... ........................................................................................... 14
K Exclusions.Exceptions&Other Adjustments to the Cost A.1kcation.----........ ........................
(1) Custonm&W Connedions Excluded&M Allocalion WhD&logy............ .................................4.....14
(2) Custom m and Connections Trawfemi*d......................................................—..................... 14
(3) Billing&Collcoion Services Costs.................................................................. ............. ...... ................... 15
(4) Cow Assmi"with Operations and Maintenance orCss and UW......................................................15
(5) Capital improvement Costs Exctujed—,_.................------------------------------........................................ 16
(6) Recycled W810 Pnp eCL...........-»».....................-----•-•a•».-....................................................................... 16
2. Bond Debi Service... ........................—.................. ............—.......---........—.................................. 16
0. Ekackgwnd..........................................................................................................—.........................--,16
b, Installment Payments..................... ............................................................... .............................----17
r- Bond NN Refirancing................................... ...................................................................................-..17
d- Limitatiow on DISTRICT Assumption and CFTY Uismikmwm d Fowlkma;...................................... 17
3, Capital IH3pMVeMen1 COM--, .......................................................................
0. Shwed Capital Impm"nmt Cosm.............................---........................ ...............................20
b. Capital Improventeiita to DSS and CSS. ..........................----....................................—----.---I I
C. Capital Improvemeum to the Trunk Unz ...................•-----..................----...................»«----.---21
4, Reponir4 AlUmmed Coats ..................1111-.................-.1.1-11.1......................................--...............................—,21
& Budgeted Costs.......»....................................................... .....................—........................-.-...........21
b, Actual OWI.Truel)p..................»............—...............,...».....................................................................22
5. 11IR11=60n.Sharing,................. ...................---a-a.............—,—.................................23
6. Rate Studies...........—........................ ------------------------------------........................................23
E. ALLOCATION OF REMAINING CWWTP CAPACITY-PROJECT CAPACITY....................................23
1, Capacity ................ .................--------------------—--------------------------.......................................23
2. .............--............................................... IS
UVSD-CITY 002
E C|[ANGESOF ORGANIZATION AND DISMCT REGIONAL WASTEWATER
TREATMENT PLANTS(D8W6-1-P),',',,'_',.,',_',,'_.—,,.,',,.,'__,..,.,'___.,'.,',,'.,..,',,,__.........26
|' .--.26
2, DRVmTpoevr 26
3, ..---.,17
4, Jtwmskr*[ClAp"rity9n*v Through mChmor*fOrpnizWkonwr**a0RWWnP.................2?
a. ESSJN"=*imalValue.................................................................................................. ..........................27
b, 27
' 0. Eftl offmns(or*wCost AlloceWon. __ 28
d, Effect wfTransfer on Remaining CVvVTP CWacily Projod Capacity AlkwaLian. .............
C. DISTPJCrsTransfer wf ES8L6 Widti`C11Y Limits --28
5. ?randc,*f Nom-Capm6/rProject M0&— .......... .......................................................................— ......................28
*. 88@DMmmmh**|\aatue.........----...............................................................................---....................29
I>, Moo of Tran*l�roft Cost AUocaUwm...... ..............................................................................................29
r. EM-0 of Tnwfer on.RemainingCw@x*Proi*tCapacity................................................ .....2n
o. Use u[cYvWTP Capacity Following Trwmwrem........ ....—-----------------------_.............. ............-------------------_29
�l A�8|3D��N]�'--.--'----------_- ........._----_._,-----_—,,,_,'___--___..30
'. pout'omckaJmmmtive Dispute Ag*mluUon.-_---------------------------------------_.............................--._ ...........--.3$
a. Notice, 3*
h. ....... —............. ---------....... -------...... —........................----........ .....30
o. G*wW'fW,beffort w`mwlve._---- .............---................... ..............................__.......................30
d' Binding AxlAnmimom......................................................................... ................................ —...................30
ArNtrwom 30
2. Amb|wrW*n*f"erukpua....-. ....~-.- ...............~................................................................. ......................3|
gL ____ .... ',,,,,~,,~~_~, ~~',_,..,..,'.,',,.............
,,,.,',,.,,,,,,,.,.,..,,._.,,,..,��
|. Entire 31
2. Effect on Participation n@weerwn4mmAnem&] ........... 31
1 ]ndenm|Gcm|mu—.........—............— .........—.............. —............ ........... ............................... --................31
*. Duration*f»gemmmw.............................................................. ---............ .................................. —..............32
S. M* ......................................... ..........---............. .............................--- ..............32
*` Toone isofthe Essen". ..................... ..... .............. .........................................................................................32
7� 32
& 32
9' Cunstnkc8mn..... ......... ......_~-_',~—___............_----.... ............................................~,,,----..........32
|o. Mdkce&--.................. ............ ---_--............ -------__........................... ......................32
OPERATING AGREEMENT FOR THE COMBINED SEWER SYSTEM
SERVING THE UKIAH VALLEY SANITATION DISTRICT AND THE
CITY OF UKIAH
This Operating Agreement for the Combined Sewer System Serving the Ukiah Valley
Sanitation District and the City of Ukiah ("Agreement") is made and entered into in Ukiah,
California,on the date last executed below("Effective Date"), by and between the City of Ukiah
("CITY"), a general law municipal corporation, and the Ukiah Valley Sanitation District,a
county sanitation district("DISTRICT"). DISTRICT and CITY are,at times, collectively
referred to hereafter as the"Parties."
1. RECITALS•
1. A proceeding between the Parties is presently pending in Sonoma County
Superior Court entitled Ukiah Valley Sanitation District v. City of Ukiah, case no. SCV 256737
("the Action").
2. The Parties entered a Participation Agreement, dated July 19, 1995 ("Participation
Agreement"), as amended on March 24, 1999 ("Amendment No. l")and again December 15,
2004("Amendment No. 2), collectively the"Participation Agreement,"which set forth, among
other things, the Parties' responsibilities regarding,and the terms under which the Parties
provide,wastewater collection and treatment services to their respective ratepayers and residents.
3. Under the Participation Agreement,the CITY operates the Combined
CITY/DISTRICT Sewer System(as defined herein)as one system with the combined treatment
and collection costs apportioned between the CITY and the DISTRICT based on the ratio of
CITY to DISTRICT Equivalent Sewer Service Units("ESSUs") for each year of operation. The
CITY also is the paying and receiving agent for the DISTRICT,performs all billing and
collection services for the Combined CITY/DISTRICT Sewer System, and accounts to the
DISTRICT for the funds it collects from DISTRICT ratepayers.
4. The sewer services the CITY performs can be fairly characterized as three
functions ("Sewer Services"): (1)billing/collection of sewer service and connection fees, and
disbursement of funds collected on behalf of the DISTRICT for payment to CITY for
DISTRICT's allocated share of certain sewer system operations,maintenance, capital
improvement,and financing costs, and accounting to the DISTRICT for the funds collected or
spent; (2)operations and maintenance of the CITY wastewater collection facilities and the
DISTRICT wastewater collection facilities, including the Trunk Line(defined below); and (3)
operations and maintenance of CITY's wastewater treatment plant(defined below as CWWTP).
5. The Participation Agreement recites that CITY owns the CWWTP and
predecessor agreements of the Parties recite that DISTRICT constructed the Trunk Line and the
DISTRICT claims ownership thereof. The CITY contends that it owns wastewater collection
facilities within its sewer-service jurisdictional boundaries (defined below collectively as CSS).
The DISTRICT contends that it owns wastewater collection facilities within its sewer-service
jurisdictional boundaries and the Trunk Line located within both the CSS and DSS that
Operating Agreement Page 1 of 33
UVSD-CITY 004
transports all wastewater from the Parties' respective wastewater collection facilities to
CWWTP.
6. In connection with the issuance of$75,060,000 aggregate principal amount of the
Association of Bay Area Governments 2006 Water and Wastewater Revenue Bonds, Series A
(the"2006 Bonds")to finance a project("CWWTP Project")to rehabilitate 1 upgrade and
increase the capacity of the CWWTP, (A)the Parties entered Amendment No. 2 and a Financing
Agreement,dated March 2,2006 ("Financing Agreement"), (B)the CITY entered an Installment
Sale Agreement,dated as of March 1,2006 ("2006 ISA")with the Association of Bay Area
Governments("ABAG")and Wells Fargo National Bank, as bond trustee("Bond Trustee"),and
(C)ABAG and the Bond Trustee entered into an Indenture of Trust, dated as of March 1,2006
("2006 Indenture"). Under the 2006 ISA, the CITY agreed to repay the 2006 Bonds by making
installment payments("2006 Installment Payments"). The purpose of the Financing Agreement
was to apportion a portion of the 2006 Installment Payments to the DISTRICT in accordance
with the methodology set forth in the Participation Agreement. Under the Financing Agreement,
the DISTRICT agreed to set rates for services and facilities furnished by the DISTRICT's
portion of the Combined CITY/DISTRICT Sewer System during each fiscal year that are
sufficient,after making allowance for contingencies and error in the estimates,to yield net
revenues (being total revenues less all costs apportioned to the DISTRICT under the
Participation Agreement for the operation,maintenance and repair of the DISTRICT's portion of
the Combined CITY/DISTRICT Sewer System)which are at least equal to 120%of the
DISTRICT's allocated share of the 2006 Installment Payments for that fiscal year. In addition,
the Financing Agreement provides that the CITY, as the DISTRICT's collecting and paying
agent,apply revenue it collects on the DISTRICT's behalf to pay the DISTRICT's allocated
share of the 2006 Installment Payments.
7. The CITY and the DISTRICT mutually desire to pursue a refinancing of the 2006
Bonds to obtain debt service savings and to accommodate the DISTRICT's elections under this
Agreement("Refinancing"). The Refinancing will require transparency and full cooperation
between the Parties and, as set forth herein, both CITY and DISTRICT agree that each shall be
included in all written and oral communications relating to the Refinancing involving third
parties (e.g. underwriters, investors,rating agencies,advisors). The Parties agree to make good
faith efforts to undertake the Refinancing in a timely manner,acknowledging the same will
require an unconditional commitment by both the CITY and the DISTRICT to pay their
respective share of the debt service for the Refinancing in accordance,and in keeping, with this
Agreement and the requirements of underwriters, bond insurers and bond counsel to obtain the
most favorable bond rating and interest rate available under the market conditions for tax free
revenue bonds existing at the time of the Refinancing
$. The Parties enter this Agreement for the following purposes:
a. to settle the claims asserted in the Action in accordance with the Settlement
Agreement and Release, attached hereto as Exhibit 1;
Operating Agreement Page 2 of 33
UVSD-CITY 005
b. to set forth the terms under which the DISTRICT may assume, at its election,
all or part of the first two Sewer Services functions currently performed by the CITY pursuant to
the Participation Agreement;
c. to amend the terms of the Participation Agreement. The Parties agree in section
ILH.2. that,in the event of any inconsistency between any provision of this Agreement and the
Participation Agreement, this Agreement shall control.
II. TERMS
A. DEFINITIONS
1. "2006 Bonds"means the$75,060,000 aggregate principal amount of the
Association of Bay Area Governments,2006 Water and Wastewater Revenue Bonds, Series A
issued pursuant to the 2006 Indenture.
2. "Capacity Project"means the"project to increase the capacity of the wastewater
treatment plant to permit additional new connections in both the DISTRICT and the CITY for
treatment of wastewater in the CWWTP, as more particularly described in paragraph 7,page 2 of
Amendment No. 2.
3. "Capacity Project ESSUs"means the 2,400 ESSUs made available in the
CWWTP by the Capacity Project for new Connections or increased use by existing Connections.
4. "Capital Improvement"means the addition of a permanent structural change or
the restoration, repair, or replacement of some aspect of a facility that will either enhance the
asset's overall value, increase its useful life or adapt it to new uses
5. "CITY Customer"means any Customer with a Connection to the CSS.
6. "CITY Combined Sewer Budget"means the annual fiscal year budget(July 1-
June 30)adopted by the City Council, in accordance with this Agreement, for the Combined
Sewer System.
7. "City Sewer System" or"CSS" means all portions of the sewer collection system
located within the CITY's sewer-service jurisdictional boundaries, including, but not limited to,
all sewer laterals, mains, and related facilities that are part of the combined sewer system. For
purposes of this Agreement, the CSS shall extend to include any additional portions of the sewer
collection system located within boundaries to which the CITY's sewer-service jurisdiction may
extend through future changes in organization.Notwithstanding any contrary provision,the Trunk
Line shall not be a part of the CSS.
8. "Combined CITY/DISTRICT Sewer System" means the CSS, DSS, Trunk Line
and CWWTP, and any combination of all or part of the foregoing, the Direct and Indirect costs of
which are shared by the Parties in accordance with this Agreement.
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9. "Connection(s)" means the lateral sewer line that serves to transport wastewater
directly from any property or structure(residential,commercial,industrial,or otherwise)to a sewer
main located within the DSS or CSS.
10. "Connection fee" means the fee for a connection based on the ESSUs assigned to
the Connection in accordance with section II.E.
11. "Customer(s)"means any customer(whether individuals,businesses,
governmental entities or otherwise)or property maintaining a Connection to the DSS or CSS.
12. "CWWTP"means the CITY's wastewater treatment plant.
13. "Direct Costs"means all costs specifically and completely attributable to the
Combined CITY/DISTRICT Sewer System but specifically excluding Indirect Costs.
14. "DISTRICT Combined Sewer Budget"means the annual fiscal year budget
adopted by the DISTRICT's board, in accordance with this Agreement, for the Combined
CITY/DISTRICT Sewer System.
15. "DISTRICT Customer"means any Customer with a Connection to the DSS.
16. "DISTRICT Sewer System"or"DSS"means all portions of the sewer collection
system located within DISTRICT's boundaries, including,but not limited to, all sewer laterals,
mains, and related facilities that are part of the combined sewer system. DSS does not include the
Trunk Line,although it is owned by the DISTRICT. For purposes of this Agreement,the DSS
shall extend to include any additional portions of the sewer collection system located within
boundaries to which the DISTRICT's sewer-service jurisdiction may extend through future
changes in organization.
17. "DRW WTP"means any future DISTRICT regional wastewater treatment plant(s)
and includes any non-CITY facility utilized by DISTRICT to treat sewer wastewater.
18. "ESSU(s)"means the equivalent sewer service units assigned to a Connection or
reserved for a Connection(residential, commercial, industrial,or otherwise) for the purpose of
charging a Connection fee and used to determine the number of the 2,400 Capacity Project
ESSUs used by each party and the number of ESSUs assigned to a Connection for purposes of
transferring ESSUs from one party to the other.
19. "Effective Date"means the date set forth in the opening paragraph hereof.
20. "Financing Agreement" means that certain agreement executed by CITY and
DISTRICT on March 2, 2006, as amended or supplemented.
21. "Indirect Costs" means all costs used by or which support the Combined
CITY/DISTRICT Sewer System that are not Direct Costs. Indirect Costs include, but are not
limited to,billing and collections, general services allocation, administration,and overhead costs.
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22. "Installment Payments" means the payments required under the 2006 Installment
Sale Agreement,or any agreement entered in connection with the Refinancing.
23. "2006 Installment Sale Agreement"means that certain agreement entered by CITY,
ABAG, and the Bond Trustee, dated March 1,2006, as amended or supplemented.
24. "Overlap Area" means that portion of the DISTRICT's jurisdictional boundaries
that is within the City limits of CITY.
25. "Participation Agreement" means the Participation Agreement entered into by the
Parties on July 19, 1995, and includes, unless otherwise specified, Amendment No. I to the
Participation Agreement, dated March 24, 1999 ("Amendment No. I"), and Amendment No. 2 to
the Participation Agreement("Amendment No. 2"),dated December 15, 2004.
26. "Settlement Agreement" means the Settlement Agreement and Release, attached
hereto as Exhibit 1.
27. "Sewer service jurisdictional boundaries" means the area within the boundaries of
the CITY or the DISTICT within which the CITY or the DISTRICT maintains jurisdiction to
provide sewer services.
28. "Trunk Line" means the main sewer line running to the CWWTP into which all
sewage from the Combined CITY/DISTRICT Sewer System enters. The Trunk Line is owned by
the DISTRICT.
29. "Upgrade/Rehabilitation Project" means the "project to rehabilitate and upgrade
the wastewater treatment plant," as more particularly described in paragraph 7, page 2 of
Amendment No. 2 to the Participation Agreement.
B. BILLING AND COLLECTION OF REVENUE DISTRICT CUSTOMERS
1. Transfer of Records. Within sixty (60) days after written request from the
DISTRICT,CITY shall provide DISTRICT the same or reasonably similar access to CITY billing
and collection records and information, in the form maintained by the CITY,as the CITY staff has
to those records and information, including all such billing and collection records maintained by
CITY, its agents,or third parties who hold,maintain,or use the same to perform sewer billing and
collection services for CITY. Absent agreement of the Parties,the CITY shall have no obligation
to convert records or information into another format or electronic form. The purpose of this
provision is to timely provide DISTRICT complete access to all such records, information, and
materials so DISTRICT may promptly and fully perform billing and collection services on its own
behalf for DISTRICT Customers in a manner consistent with that done by CITY and for continuity
of such service during and following the transition of services provided for herein. CITY shall use
its best efforts to cooperate with the DISTRICT, to timely transfer customer account information
and billing and collection records to DISTRICT,and to otherwise comply with this provision.The
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Parties each acknowledge and agree they are required to maintain confidentiality of Customer
account information and to take adequate security measures to protect against identity theft.
2. Transfer of Responsibility for Billing and Collection Services. Subject to
section II.D.2.d.,on not less than twelve(12)months written notice to CITY,or such other period
of notice as agreed upon by the Parties,DISTRICT may, in its sole discretion,elect to discontinue
all of the billing and collection services provided to DISTRICT by CITY. Upon assuming its own
billing and collection services DISTRICT shall establish or utilize its own billing systems to send
bills and collect revenues and financial accounts in which to deposit and manage such funds. If
DISTRICT wishes to discontinue only a portion of the billing and collection services provided to
DISTRICT by CITY: DISTRICT's written notice to CITY shall include a description of which
portion of the billing and collection services it is assuming;DISTRICT may do so only with CITY
approval, in CITY's sole discretion; and, CITY shall notify DISTRICT in writing within 45 days
of its decision concerning DISTRICT's partial assumption request--otherwise partial
discontinuance shall be deemed approved. Subject to section II.D.2.d. on not less than eighteen
(18) months written notice to DISTRICT, and not less than twelve (12) months after CITY
transfers to DISTRICT all billing and collections records as required by section II.B.I.,CITY may
discontinue performing DISTRICT's billing and collection functions. If CITY wishes to
discontinue performing only a portion of DISTRICT's billing and collection functions: CITY's
written notice to DISTRICT shall include a description of the portion of the billing and collection
services it wishes to discontinue; CITY may do so only with DISTRICT's approval, in
DISTRICT's sole discretion; and, DISTRICT shall notify CITY in writing within 45 days of its
decision concerning CITY's partial assumption request--otherwise partial discontinuance shall be
deemed approved. The Parties acknowledge and agree they shall use best efforts to cooperate with
each other so as to efficiently and accurately set rates.
3. Responsibility for Billing and Collection Services Where CITY Continues
Billing & Collection Functions for Combined CITY/DISTRICT Sewer System.
Notwithstanding section II.B.1, unless or until discontinued as provided in section I1.B.2, CITY
shall continue to provide all billing and collection of revenue services for the Combined
CITY/DISTRICT Sewer System, including provision of such services to DISTRICT Customers.
The CITY shall continue to account for DISTRICT revenues and expenditures in accordance with
GASB guidelines and generally accepted accounting standards, which accounting shall be
segregated from CITY's accounting of its own revenues and expenditures when identifiable as
such. Notwithstanding section II.B.I., as long as the CITY continues to perform billing and
collection services to the DISTRICT, CITY shall provide DISTRICT with access to requested
billing and collection records pertaining to DISTRICT Customers (in the same medium, manner,
and form as otherwise required under section II.B.I.), including, but not limited to, Customer
list(s),Customer balance detail,Customer payment detail,Customer invoices,accounts receivable
detail,general ledger,income and expense statements,trial balances,deposits to DISTRICT and/or
funds/accounts in which DISTRICT funds are held, transfers from such funds/accounts, and any
other such information in the CITY's possession or under its control requested by DISTRICT,
including without limitation that related to: (1) the amount of revenue collected from DISTRICT
Customers; (2) the operations and maintenance costs of the DSS, CSS, and Trunk Line; (3) the
DISTRICT's allocated portion of operations and maintenance costs of the CWWTP; (4) Capital
Improvement costs of the Combined CITY/DISTRICT Sewer System, including those portions
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properly allocated to DISTRICT; and, (5) DISTRICT's allocable share of the Installment
Payments(or any Refinancing thereof).
4. Implementation of DISTRICT Assuming Billing and Collection Function.
Upon any notice of discontinuance pursuant to Section II.B.2, if either party desires to discuss
details or issues associated with transferring all or any portion of the billing and collection function
to the DISTRICT,the Parties or their representatives shall meet to undertake that discussion within
30 days of the notice. If a dispute arises concerning those details or issues,unless otherwise agreed
in writing, the Parties shall each identify the disputed details or issues, along with a proposed
resolution,in a writing provided to the other not later than sixty(60)days after the notice required
by section II.B.2. is given. Should the dispute persist, the matter shall be submitted to dispute
resolution as provided in Section II.G.1 within seventy-five(75) days after the notice required by
section II.B.2. is given, unless the Parties agree to extend the time. For purposes of this provision,
if the arbitrator determines a party unreasonably proposed or opposed disputed items, the other
party in such proceeding shall be entitled to recover from the party found unreasonable its
attorney's fees, costs, and expenses incurred therein. Nothing in this provision shall be deemed to
alter, modify, or limit the DISTRICT's right under this Agreement to receive records and
information under section II.B.1 or, subject to Section II.D.2.d., assume its own billing and
collection functions.
5. Prohibition on Further CITY Charges. Effective on, and prorated to, the date
DISTRICT begins performing all or any portion of its own billing and collection services, CITY
shall be prohibited from charging DISTRICT for any costs, however characterized, for or
associated with the billing and collection services assumed by DISTRICT, except for services
expressly requested by DISTRICT in support of DISTRICT performing its own billing and
collection services.
C. OPERATIONS AND MAINTENANCE
1. DSS and CSS(Collection Systems)and Trunk Line.
a. Transfer of Records. Within sixty (60) days after the CITY receives a
written request from the DISTRICT, CITY shall provide DISTRICT the same or reasonably
similar access to operations and maintenance records and information, in whatever form
maintained by the CITY,as the CITY staff has to those records and information,including all such
records and information maintained by CITY, its agents, or third parties who hold, maintain, or
use the same to perform services that are material to the DISTRICT's assumption of operation and
maintenance of the DSS and/or Trunk Line. Such records shall include information and materials
material to CITY's operations and maintenance of the DSS (as well as information and material
concerning the CSS and CWWTP which are necessary or beneficial in the performance of
operations and maintenance of the DSS), the Trunk Line, and the DISTRICT's allocated portion
of operations and maintenance costs of the CWWTP,Trunk Line and DSS. The CITY shall not be
in breach of this Section II.C.La,if,beyond CITY's reasonable control,third parties fail to produce
the records within the time required herein or are not legally required to provide the information
at the CITY's direction. The records shall be transferred in usable, digital, form, if reasonably
feasible, and in hard copy form where appropriate or necessary or otherwise requested by
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DISTRICT. CITY may elect to satisfy this requirement by providing DISTRICT with access to
such records as maintained by the CITY in the ordinary course of business. Absent agreement of
the Parties, the CITY shall have no obligation to convert records or information into another
format. The purpose of this provision is to timely provide DISTRICT with such records(or access
thereto),information,and materials so DISTRICT may promptly and fully perform operations and
maintenance functions for the DSS and/or Trunk Line in a manner consistent with that done by
CITY and to provide continuity of such service during and following the transition of services
provided for herein. Consistent with the provisions of this section II.C.La,CITY shall use its best
efforts to cooperate with the DISTRICT, to timely transfer or provide access to such records and
information to the DISTRICT, and to otherwise comply with this provision.
b. Transfer of Responsibility to Operate and Maintain DSS and Trunk
Line. Subject to section II.D.2.d., DISTRICT may, in its sole discretion, elect to discontinue all
of the operations and maintenance services provided to DISTRICT by CITY for the DSS and 1`or
Trunk Line upon not less than twelve(12)months written notice to CITY,unless otherwise agreed
by the Parties. If DISTRICT wishes to discontinue only a portion of the operations and
maintenance services provided by the CITY to DISTRICT for the DSS or Trunk Line:
DISTRICT's written notice to CITY shall include a description of the portion of the operation and
maintenance services it is assuming; DISTRICT may do so only with CITY approval, in CITY's
sole discretion;and,CITY shall notify DISTRICT in writing within ninety(90)days of its decision
concerning DISTRICT's partial assumption request--otherwise partial discontinuance shall be
deemed approved. Subject to section I1.D.2.d., on not less than twenty-four(24) months written
notice to DISTRICT,and not less than eighteen(18)months after the CITY transfers to DISTRICT
operations and maintenance records as required by section II.C.I.a., CITY may discontinue
performing operations and maintenance of the DSS or Trunk Line. If CITY wishes to discontinue
performing only a portion of such operations and maintenance functions: CITY's written notice to
DISTRICT shall include a description of the portion of the operation and maintenance services it
wishes to discontinue; CITY may do so only with DISTRICT's approval, in DISTRICT's sole
discretion; and, DISTRICT shall notify CITY in writing within ninety (90) days of its decision
concerning CITY's partial assumption request--otherwise partial discontinuance shall be deemed
approved. In any event, unless otherwise agreed, discontinuance of such service shall not occur
until DISTRICT provides CITY with a copy of the completed application DISTRICT has filed
with the North Coast Regional Water Quality Control Board("NCRWQCB")for a NPDES/Waste
Discharge permit, to the extent required, for the portion of the DSS or Trunk Line DISTRICT
would operate and maintain ("Waste Discharge Permit"). The DISTRICT may not assume the
operations and maintenance of the DSS less than six (6) months after the NCRWQCB has issued
the Waste Discharge Permit, to the extent a permit is required. Notwithstanding any other
provision in this Agreement, CITY may not discontinue operation and maintenance functions for
the DISTRICT unless DISTRICT is then permitted to assume its own billing and collection
functions.
C. Responsibility to Perform Operations and Maintenance.
Notwithstanding section II.C.La., unless and until discontinued as provided in section II.C.Lb.,
CITY shall continue to provide all operations and maintenance services for the DSS, CSS, and
Trunk Line in accordance with the Participation Agreement and the standards in Section II.C.3.a.,
as well as the information and materials required by section Il.B.3.
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d. Provision of Information to Determine Whether to Assume Operation
and Maintenance of DSS and/or Trunk Line. CITY shall promptly provide DISTRICT with
any information and records within CITY's custody or control reasonably requested by DISTRICT
to evaluate the relative cost and benefit to the DISTRICT of assuming in whole or in part the
operation and maintenance of the DSS and/or Trunk Line and the means of undertaking such
operation and maintenance and setting rates to cover such costs.
e. Implementation of DISTRICT Assuming Operation and Maintenance
Function. Upon any notice of discontinuance pursuant to section B.C.Lb., if either party desires
to discuss details or issues associated with transferring all or any portion of the operation and
maintenance function of the DSS or Trunk Line to the DISTRICT, the Parties or their
representatives shall meet to undertake that discussion within 30 days of the notice. If a dispute
arises concerning those details or issues, the Parties shall each identify the disputed details or
issues,along with a proposed resolution,in a writing provided to the other not later than sixty(60)
days after the notice required by section II.C.Lb. is given. Should a party fail to meet and confer
regarding said details or should the dispute persist, the matter shall be submitted to dispute
resolution as provided in Section II.G.1 within seventy-five (75)days after the notice required by
section II.C.Lb.is given unless the Parties agree to extend the time. For purposes of this provision,
if the arbitrator determines a party unreasonably proposed or opposed disputed items, the other
party in such proceeding shall be entitled to recover from the party found unreasonable its
attorney's fees,costs, and expenses incurred therein. Nothing in this provision shall be deemed to
alter, modify, or limit the DISTRICT's right under this Agreement to receive records and
information under section II.C.La.or assume operations and maintenance functions of the DSS or
Trunk Line. CITY shall maintain the right to continued use of the Trunk Line in accordance with
Section II.C.2.b.
f. Prohibition on Further CITY Charges. Effective on,and prorated to,the
date DISTRICT begins performing its own operations and maintenance services, CITY shall (1)
have no obligation to incur any expense or provide any assistance to DISTRICT in connection
with the operation or maintenance of the DSS(except continued compliance with section II.C.l.a.)
and (2) shall be prohibited from charging DISTRICT for any costs, however characterized,
associated with or for operations and maintenance of the DSS, CSS, or Trunk Line assumed by
DISTRICT, except for services expressly requested by DISTRICT in support of DISTRICT
performing operations and maintenance functions.
g. DISTRICT obligation to furnish CITY with records. Within sixty (60)
days after the DISTRICT assumes operations and maintenance of all or a portion of the DSS or
Trunk Sewer, and within any future request for such information by CITY, DISTRICT shall
provide CITY the same or reasonably similar access to operations and maintenance records and
information, in whatever form maintained by the DISTRICT, as the DISTRICT staff has to those
records and information, including all such records and information maintained by DISTRICT,its
agents, or third parties who hold, maintain, or use the same to perform services that are material
to the DISTRICT's assumption of operation and maintenance of the DSS and/or Trunk Line and
the CITY's operation and maintenance of the CSS, CWWTP, and/or Trunk Line. Such records
shall include information and materials material to DISTRICT's operations and maintenance of
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the DSS or Trunk Line. The DISTRICT shall not be in breach of this Section II.C.Lg, if, beyond
DISTRICT's reasonable control, third parties fail to produce the records within the time required
herein or are not legally required to provide the information at the DISTRICT's direction. The
records shall be transferred in usable, digital, form, if reasonably feasible, and in hard copy form
where appropriate or necessary or otherwise requested by CITY. DISTRICT may elect to satisfy
this requirement by providing CITY with access to such records as maintained by the DISTRICT
in the ordinary course of business. Absent agreement of the Parties, the DISTRICT shall have no
obligation to convert records or information into another format. The purpose of this provision is
to timely provide CITY with such records, information,and materials so CITY may promptly and
fully perform operations and maintenance functions for the CSS and/or Trunk Line or the
CWWTP. Consistent with the provisions of this subsection II.C.l.g, DISTRICT shall use its best
efforts to cooperate with the CITY, to timely provide access to such records and information to
the CITY,and to otherwise comply with this provision.
Nothing in this Agreement shall be deemed to restrict the right of CITY to continue
utilization of the Trunk Line for transmission of sewage from the CSS to the CWWTP, inclusive
of its rights to discharge additional wastewater into the Trunk Line from present or future
Customers and Connections.
2. CWWTP.
a. Transfer of Records. Within sixty (60) days after the CITY receives a
written request from the DISTRICT, CITY shall provide to DISTRICT access to all records and
information in the CITY's possession or under its control concerning the CWWTP. Such records
shall include all information and materials associated with CITY's operations and maintenance of
the CWWTP, inclusive of each Party's allocated portion of operations and maintenance and
Capital Improvement costs of the CWWTP, maintained by CITY, its agents, or third parties who
hold, maintain, or use such information and materials to perform operations and maintenance of
the CWWTP, provided such third parties are legally obligated to provide the information at the
CITY's direction. The records shall be made available or transferred in usable, digital, form, if
feasible and not in violation of any applicable software license, and in hard copy form where
appropriate or necessary or otherwise requested by DISTRICT. Absent further agreement of the
Parties, CITY shall have no obligation to provide electronic records other than in the form
maintained by the CITY. CITY shall make paper records available as maintained in the ordinary
course of business for DISTRICT inspection and copying. DISTRICT shall not be charged for
CITY time or other costs associated with producing copies beyond copying charges permitted by
the California Public Records Act. (Govt. Code, §§ 6250 et seq.) The purpose of this provision
is to timely provide DISTRICT complete access to all such records, information, and materials so
DISTRICT may promptly and fully assess the CWWTP and its operational, maintenance, and
capital costs. Consistent with the provisions of this subsection II.C.2.a, CITY shall use its best
efforts to cooperate with the DISTRICT, to timely transfer or provide access to such records and
information to the DISTRICT, and to otherwise comply with this provision.
b. DISTRICT's Utilization of CWWTP.Nothing in this Agreement shall be
deemed to restrict the right of DISTRICT to continue utilization of the existing capacity of the
CWWTP,inclusive of its rights to discharge additional wastewater into the CWWTP from present
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or future Customers and Connections in accordance with the terms of this Agreement. The Parties'
respective rights and ability to discharge additional wastewater 1 ESSUs to the CWWTP is more
particularly described below in this Agreement and may be modified, in accordance with
requirements for amending this Agreement, including if the capacity of the CWWTP is increased
by a project jointly funded by CITY and DISTRICT to receive and process additional sewage.
C. Responsibility to Perform Operations and Maintenance. CITY shall
perform all operations and maintenance functions associated with the CWWTP. DISTRICT shall
have no obligation whatsoever to perform such functions.
3. Performance Standards & Information Sharing.
a. Performance Standards. The performance of all operations and
maintenance on and to the Parties'respective systems the DSS and Trunk Line(DISTRICT)and
CSS and CWWTP (CITY)--shall at all times be done in a timely manner and in keeping with, or
exceeding, industry standards for the operation and maintenance of a municipal or county sewer
district wastewater sewer collection system of the same nature and type as the subject system. To
the extent either party is responsible or undertakes responsibility for operations and maintenance
of any part of the CWWTP, Trunk Line, CSS, or DSS, that party shall comply with any permits
issued for such facilities and operations, as well as applicable provisions of state and federal law,
which regulate the subject sewer operations;provided,however,fines and penalties resulting from
a discharge from the CWWTP that exceed a specific discharge limit shall be treated as an expense
subject to allocation in accordance with Section II.D, unless the violation results from the gross
negligence or willful misconduct of the CITY, its employees, contractors, or agents in the
operation of the CWWTP, in which case such expense shall be paid exclusively by CITY.
b. Information Sharing. The Parties shall jointly implement an information-
sharing system and protocol, the purpose of which is to allow one party to reasonably ascertain
whether the other party is operating and maintaining the system in the manner consistent with the
performance standards referenced above. In any event, each party shall promptly share such
information and materials upon reasonable request from the other party.
D. COST ALLOCATION
1. Operations and Maintenance Costs of CWWTP,Trunk Line, DSS & CSS
a. Cost Allocation.
(1) CWWTP, DSS, CSS & Trunk Line: CITY and DISTRICT shall
each pay a certain allocated share of the costs of the Combined CITYIDISTRICT Sewer System.
CITY and DISTRICT shall annually create a budget for the Combined CITY/DISTRICT Sewer
System, consisting of the CITY Combined Sewer Budget and DISTRICT Combined Sewer
Budget, as approved in accordance with this section II.D. The Parties shall budget such costs in
compliance with California state laws and regulations, generally accepted accounting principles
and GASB guidelines. The Indirect Costs of CITY and DISTRICT shall be budgeted and applied
on a logical, consistent, reasonable, and rational basis. Each year, not later than sixty (60) days
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prior to the start of its fiscal year, the Parties shall exchange their respective draft budgets for the
Combined CITY/DISTRICT Sewer System and shall also provide any allocation plan and draft
budgets of any department or fund of a party that is in turn allocating costs to that party's combined
sewer budget.
The Parties will have thirty (30) days to review the draft budgets, pose questions,
comments, and concems and to provide the other Party with written objections to specific budget
items or allocations and the basis for the objection to each such item. The Parties shall timely meet
and confer in good faith in an effort to resolve all questions, concerns, and disputes. Any budget
item not specifically identified in the timely-exchanged written list of objections that includes the
specific basis for each objection, shall be deemed approved. A blanket objection to the entire
budget shall not preserve the party's right to object to budget items as provided herein. Pending
agreement or dispute resolution (as noted below), unresolved items in the budgets that are not
deemed approved as provided herein shall not be subject to allocation but may be included in the
listing-party's budget as the sole expense of that party. Remaining disputes shall be resolved by
binding Fast Track arbitration under section II.G.1. Each party shall pay its respective share of
the final combined budgeted costs under this section II.D.l.a.(1),subject to reconciliation and true-
up as provided in section II.D.4.b. On the Effective Date, the Parties' initial allocated share of
such combined budgeted costs shall be fifty-three (53%) CITY and forty-seven percent (47%)
DISTRICT,which shall remain unchanged through June 30, 2019.
Upon not less than 15 days' written notice to the other party,either party may make budget
amendments, respectively, to the CITY Combined Sewer Budget or the DISTRICT Combined
Sewer Budget. The notice shall include the proposed budget amendment and an explanation of the
reason for it. The budget amendments may be made by either party without approval from the
other party,unless:(1)the amendment increases the total annual amount budgeted in either budget;
(2) increases Direct Costs in any line item within a budget by more than the dollar limit specified
in Ukiah City Code Section 1522.B.1, as revised by Resolution No. 2012-13, currently $30,000,
or any successor resolution; (3) increases any Indirect Cost; or (4) adds or subtracts line items
within a budget. Either party may object to a budget amendment that does not require approval as
set forth above by giving written notice of its objection and the reasons therefor within 15 days of
the date notice of the budget amendment was given. If the objection is not resolved within fifteen
(15)days after notice of the objection is given,the dispute shall be subject to Fast Track arbitration
under Section II.G.1. Approval of the other party shall be required for a budget amendment that:
(1) increases the total annual amount budgeted in either budget; (2) increases Direct Costs in any
line item within a budget by more than the dollar limit specified in Ukiah City Code Section
1522.B.1, as revised by Resolution No. 2012-13, currently $30,000, or any successor resolution;
(3) increases any Indirect Cost; or, (4) adds or subtracts line items within a budget. The process
for requesting budget amendments requiring approval shall be the same process detailed in the
preceding paragraph for the annual budget after notice of the budget amendment is given. In an
emergency where a budget amendment is necessary to address an emergency condition which, if
not addressed immediately could result in personal injury, property damage or violation of waste
discharge requirements or other laws or regulations, such budget amendments may be made
without approval, but shall remain subject to the notice, objection, informal resolution, and Fast-
Track arbitration provisions otherwise set forth in this paragraph.
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Commencing July 1, 2019, or as soon thereafter as any disputes over the Allocation
Methodology are resolved by agreement or Fast Track arbitration, and on July 1 of each year
thereafter, the allocation of such combined budgeted costs shall be adjusted and based on each
party's proportionate use of the CWWTP as measured by water consumption and relative strength
of sewage discharged to the CWWTP by each party's Customers. Water consumption shall be the
average quantity of water used by such customers in the winter months (January, February, and
March or some combination thereof) as determined from the records of the water system serving
the Customer(e.g.,at present,Millview,and Willow County Water Districts,the CITY and Regina
Water Company). Relative strength shall be based on the class of connection residential,
minimum, low,moderate and high discharge commercial and industrial, or other—with each class
assigned a numerical factor. The numerical factor so assigned shall be designed to fairly capture
the relative strength of discharge of the class of connection as compared to other classes. Each
Customer's water consumption shall be multiplied by the numerical factor assigned the
Customer's Connection. The ratio of the sum of those calculations for the Parties' respective
Customers and Connections shall be used to establish each party's proportionate use of the
CWWTP for purpose of allocating combined budgeted costs for the next fiscal year under this
section II.D.I.a.("Allocation Methodology").This calculation shall be performed annually within
sixty (60) days of the date on which the referenced water consumption data is obtained. Within
one(1) year of the Effective Date, the Parties shall meet and confer in good faith to establish the
month or months to be utilized for the water consumption calculation(as it now stands,CITY uses
January only and DISTICT uses average consumption during January through March),the classes
of connections,and the numerical factor to be assigned each connection class. The purpose of this
provision is to arrive at a fair method to calculate the Parties' respective contribution of discharge
for treatment in the CWWTP. If the Parties are unable to arrive at an agreement through this
process, either party may initiate arbitration under section II.G.I to resolve the dispute. The
Allocation Methodology calculation,and all information and records on which it is based,shall be
promptly exchanged between the Parties in a manner and medium that permits a timely review and
analysis. The Parties shall meet and confer in good faith to resolve any disputes related to the
calculations within 45 days of the exchange. If the dispute persists after that time, it shall be
resolved through dispute resolution under section II.G.1. As of the Effective Date, the Allocation
Methodology shall be deemed as follows: CITY 53%; and, DISTRICT 47%.
While the CITY continues to perform billing and collection for the DISTRICT, the water
use data shall be collected by the CITY and calculations shall be performed by CITY using the
CITY's billing software. CITY shall promptly provide DISTRICT with the data used to make the
calculations and disputes shall be resolved as provided in the preceding paragraph. DISTRICT
may, but is not required to, perform its own calculations and provide them to CITY, which the
CITY may,but is not required to use,when determining customers' sewer bills for the fiscal year.
At such time that either party gives notice of discontinuance under Section II.B.2,the Parties shall
meet and confer to devise a method for jointly performing the calculations for the Allocation
Methodology, the purpose of which is to promote continuity since both CITY and DISTRICT
would then be performing billing and collection functions and, additionally, calculations for the
Allocation Methodology. If they have failed to agree on the method within sixty (60) days after
such notice has been given, the matter shall be resolved through dispute resolution under Section
II.G.1. Nothing in this provision shall be deemed to alter, modify, or limit the DISTRICT's right
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under this Agreement to receive records and information under section II.B.I or assume its own
billing and collection functions.
The proportion of water consumption and relative strength of discharge attributable to the
Parties,respectively,as determined by the Allocation Methodology each year shall,in turn,be that
party's allocated share of such combined budgeted costs for the next fiscal year. Commencing
with the 2020 fiscal year, the Parties may mutually select a neutral third-party professional to
perform an allocation study, the purpose of which would be to assess the Parties' allocation of
Indirect Costs to the Combined CITY/DISTRICT Sewer System and thereby aid the budget
process prescribed by this Agreement.
(2) DSS & CSS Cost Segregation. As further provided in this Section
D.l.a.(2), CITY shall segregate and separately track the costs for the CWWTP,Trunk Line,CSS,
and DSS,respectively,with all information,materials,analysis,and other supporting data bearing
on the matter to be timely provided to DISTRICT. Within one (1) year of the Effective Date of
this Agreement, the Parties shall make a good faith effort to agree on the costs of the DSS and the
CSS to be tracked,the manner in which said segregated costs are to be tracked and how and what
information,materials,analysis,and other supporting data is to be shared on a continuous basis. If
they fail to agree within said time period, either party may initiate Fast Track arbitration under
section II.G.1 to resolve the dispute. The purpose of this provision is to: assess the costs of the
CSS and DSS, respectively, separate and apart from the other costs of the Combined
CITY/DISTRICT Sewer System; and, to assess whether a material deviation over a mutually
agreed period of time would result in a material deviation from the allocation of costs using the
Allocation Methodology if each party's share of operations and maintenance costs of the collection
systems (DSS and CSS) absorbed only the costs of that party's collection system and not those
costs of the other party's collection system. The Parties may use this information derived from the
assessments to determine whether they want to change the method of apportioning these costs. if
a material deviation results, the Parties shall meet and confer in an effort to appropriately modify
the Allocation Methodology in light of the deviation and if within ninety (90) days of the
commencement of those efforts the Parties fail to reach an agreement,either party may within sixty
(60)days thereof initiate arbitration under section II.G.1.
b. Exclusions, Exceptions & Other Adjustments to the Cost Allocation.
Notwithstanding the terms above in section II.D.1.a, certain exclusions and exceptions to the cost
allocation referenced there shall apply.
(1) Customers and Connections Excluded from Allocation
Methodology. The Allocation Methodology shall exclude costs associated with the CWWTP for
DISTRICT Customers or Connections who, or which, has wastewater treated by a DRWWTP or
by means other than the CWWTP and,to the extent the CITY does not perform such functions for
those Customers or Connections, costs associated with billing and collection or operations and
maintenance functions.
(2) Customers and Connections Transferred. In the event a
Customer or Connection of one party is transferred from that party's sewer-service jurisdictional
boundaries to that of the other party ("Receiving Party"), said Customer's i Connection's water
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consumption and relative strength of sewage discharge,used to calculate each party's proportionate
use of the Combined CITY,'DISTRICT Sewer System in order to allocate costs in accordance with
the Allocation Methodology, described above in section II.D.I.a.(1), shall be assigned to the
Receiving Party effective on,and prorated to,the date of transfer.
(3) Billing & Collection Services Costs. In accordance with section
11.13, in the event DISTRICT assumes its own billing and collection services, whether in whole or
part: CITY shall be exclusively responsible for one hundred percent(100%)of all costs, however
characterized,for or associated with billing and collection services;CITY shall be prohibited from
charging DISTRICT for any share of costs, however characterized, for or associated with billing
and collection services;and,such costs shall not be considered either a Direct Cost or Indirect Cost
or otherwise included among those costs subject to allocation between the Parties. However, in the
event DISTRICT only partially assumes its own billing and collection services and CITY
continues providing such services in part for DISTRICT,then in order to account for DISTRICT's
share of the Combined CITY/DISTRICT Sewer System billing and collection services costs, as
budgeted (or segregated) in accordance with section II.D.La.(1)(2) (in either event subject to the
Indirect Costs limitation set forth in section II.D.l.a.(1))it shall pay an amount of such costs equal
to that ratio which the total number of DISTRICT Connections that then remains subject to CITY's
billing and collection services bears to the total number of all sewer Connections within the
Combined CITY/DISTRICT Sewer System then subject to CITY's billing and collection services.
(4) Costs Associated with Operations and Maintenance of CSS and
DSS. In accordance with section II.C., in the event DISTRICT assumes operations and
maintenance of the DSS, whether in whole or in part: CITY shall be exclusively responsible for
one hundred percent (100%) of all costs, however characterized, for or associated with the CSS;
CITY shall be prohibited from charging DISTRICT for any share of costs,however characterized,
for or associated with operations and maintenance of the CSS or DSS; and, no such costs for or
associated with operations and maintenance of the CSS shall be considered either a Direct Cost or
Indirect Cost or otherwise included among those costs subject to allocation between the Parties
(i.e. the costs otherwise subject to allocation under this Agreement shall be limited to Direct Costs
and Indirect Costs(subject to the limitations in section II.D.I.a.)of the CWWTP and Trunk Line).
However, in the event DISTRICT only partially assumes its own operations and maintenance of
the DSS and CITY continues providing such services in part for DISTRICT within the DSS, then
in order to account for DISTRICT's share of costs associated with CITY's continued operations
and maintenance within the DSS,DISTRICT shall pay a share of Direct Costs and Indirect Costs
(subject to the limitations in section II.D.I.a.) for the operations and maintenance of that portion
of the DSS for which CITY continues providing such services, with the costs subject to such
allocation being as budgeted or segregated in accordance with section II.D.I.a.(1)(2),conditioned
on the Indirect Costs limitation set forth in section II.D.I.a.(1). If the DISTRICT only assumes a
portion of the operation and maintenance of the DSS: its share of those costs shall be the result of
an equation where the numerator is the total water consumption and relative strength of discharge
to the CWWTP sourced from those DISTRICT Customers located in the portion of the DSS for
which CITY continues providing such services and the denominator is the total water consumption
and relative strength of discharge to the CWWTP from such DISTRICT Customers and all CITY
Customers; or, if segregated under section II.D.La.(2), its share of those costs shall be limited to
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the costs properly segregated to the remaining portion of the DSS for which CITY continues
providing operation and maintenance services.
(5) Capital Improvement Costs Excluded.Notwithstanding any other
provision contained herein, the shared costs subject to allocation under section II.D.1. shall not
include Capital Improvement costs, except as authorized in Section II.D.3. Allocation of Capital
Improvement costs shall be made in accordance with section II.D.3.
(6) Recycled Water Project. CITY approved a recycled water project
to be constructed in four phases. The CITY represents that it: has received a combination of loan
and grant funds under Proposition 1 from the California Water Resources Control Board ("Water
Board") for estimated project costs up to$32,085,000.00 of which$10,276,000.00 is estimated to
be a grant; the estimated amount of principal due to the State Water Board under the Installment
Sale Agreement is $21,809,000.00; the CITY has entered a contract with Ghilotti Construction to
construct phases 1-3 of the recycled water project for $22,357,358; a change order was
subsequently approved for approximately $4,000,000 for an expanded chlorine contact basin at
the CWTTP; the loan from the Water Board is secured and payable from the CITY's water utility,
but will dispose of treated wastewater without discharging that water to percolation ponds or
directly to the Russian River as well as produce recycled water for irrigation use; and, the CITY
anticipates applying for additional funding from the Water Board as loan and grant funds to
complete phase 4 at an estimated cost of$20,000,000. Commencing in fiscal year 2019-2020, the
CITY intends to charge the wastewater system for the cost of disposing of wastewater through the
recycled water project and, therefore, to include those costs in the proposed CITY Combined
Sewer Budget, in accordance with and subject to Section II.D.1 and II.D.3. The CITY agrees that
costs, however characterized, related to the recycled water project shall only be included in the
combined final sewer system budget of the Parties in compliance with this Agreement and law,
including the California Constitution (e.g. Proposition 218 [Cal. Const., Art. XIII.D]). The
DISTRICT retains its rights to dispute including any cost,whether sewage disposal(i.e.operations
and maintenance)or Capital Improvement,related to the recycled water project, or any portion or
amount thereof, as a cost subject to allocation between the Parties under this Agreement.
Unresolved disputes shall be subject to the procedures and dispute resolution provisions in Section
ILD.1.
2. Bond Debt Service
a. Background. In Amendment No. 2, the Parties agreed it was necessary to
increase the CWWTP's treatment capacity as it then existed (Capacity Project) and to rehabilitate
and upgrade the CWWTP as it then existed(Upgrade/Rehabilitation Project). See Recital 6 for a
description of the 2006 Bond transaction. The two projects were funded with $75,060,000 from
the 2006 Bonds. In Amendment No.2,the Parties agreed to allocate those costs of the two projects
as follows: Capacity Project -DISTRICT 65% and CITY 35%; and, Upgrade/Rehabilitation
Project—based on the ratio of CITY and DISTRICT ESSUs as determined and adjusted annually.
A dispute has arisen between the Parties concerning the percentage of debt service
allocated to the Upgrade/Rehabilitation Project and the Capacity Project. To resolve that dispute,
the Parties agree to apportion 74.1586%of the debt service to the Upgrade/Rehabilitation Project
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and 25.8414%to the Capacity Project. Based on that,the Installment Payments shall be calculated
as provided in section II.D.2.b.
b. Installment Payments. Subject to the terms and conditions of the
Refinancing:
(1) In fiscal years 2018-2019 and 2019-2020, the DISTRICT shall pay
52%and the CITY 48%of the combined debt service for the Upgrade/Rehabilitation Project and
Capacity Project. Commencing in fiscal years 2020 and in subsequent fiscal years, the CITY and
the DISTRICT shall pay their respective share of the combined debt service as provided in
sections II.D.2.b.(2)-(3).
(2) Adjustment in Allocation of Capacity Project Installment
Payment Obligations. The Parties'respective obligations to pay Installment Payments associated
with the Capacity Project shall be proportionately adjusted from 65%DISTRICT and 35%CITY
based on changes in the allocated share of Capacity Project ESSUs by: any transfer by one party
to the other of any number of the transferring party's remaining Capacity Project ESSUs as
described in section II.E; and/or, DISTRICT's transfer to CITY of ESSUs as described in section
II.F. The adjustment shall take effect immediately upon any such transfer(s), with the Parties'
respective obligations for Installment Payments associated with the Capacity Project prorated
accordingly.
(3) Adjustment in Allocation of Rehabilitation / Upgrade Project
Installment Payments. The Parties' respective obligations for the Installment Payments
associated with the Upgrade/Rehabilitation Project shall be that party's proportionate share of
water consumption and relative strength of sewage discharge to the CWWTP by the Parties'
respective Customers, as determined in accordance with the cost allocation and Allocation
Methodology terms, including exclusions and exceptions, in section II.D.I., as annually adjusted.
C. Bond Debt Refinancing. The Parties shall use best efforts to close the
Refinancing as soon as possible. CITY and DISTRICT shall make a good faith effort to complete
the Refinancing to obtain the most favorable debt service savings obtainable and to accommodate
the DISTRICT's elections and to apportion debt service in accordance with this Agreement.
DISTRICT and CITY will work cooperatively and in a timely manner with one another in making
those efforts to maximize the benefits of any Refinancing.
d. Limitations on DISTRICT Assumption and CITY Discontinuance of
Functions: The following applies regarding the DISTRICT's assumption of and CITY's
discontinuance of its own billing and collection or operations and maintenance functions under
sections II.B.2 and II.C.I.b:
(1) In the event of any Refinancing:
(a) The DISTRICT may assume its own billing and collection
or operations and maintenance functions, as authorized in this Agreement, if not otherwise
prohibited under the applicable terms of the Refinancing and in accordance with the applicable
terms of the Refinancing;
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(b) DISTRICT reserves its right to refinance its portion of the
bond indebtedness with its own debt unless otherwise expressly prohibited I limited in an
agreement made part of such Refinancing of which DISTRICT is a party and signatory; and,
(c) In pursuing the current Refinancing jointly, CITY and
DISTRICT agree that they will include each other in all written and oral communications to or
from third parties, unless the communication is subject to the attorney/client privilege or a third
party requires separate communications,in which case the non-communicating party shall be given
notice and the purpose thereof. The Parties agree to make good faith efforts to undertake the
Refinancing in a timely manner, acknowledging the same will require an unconditional
commitment by both CITY and DISTRICT to pay their respective share of the debt service for the
Refinancing in accordance, and in keeping, with terms of the Refinancing agreements and this
Agreement to obtain the most favorable bond rating and interest rate available under the market
conditions for tax free revenue bonds existing at the time of the Refinancing.
(2) In the absence of a Refinancing, DISTRICT's assumption of its
billing and collecting and/or operations and maintenance functions while the 2006 Bonds are
outstanding is subject to the following:
(a) DISTRICT and CITY jointly give the Association of Bay Area
Governments ("ABAG"), Syncora Guarantee, Inc., the Bond Trustee and each rating agency then
rating the 2006 Bonds ("rating agencies") the form of an amendment to the Financing Agreement
and a copy of this Agreement together with written notice that:
i. Under Section II.B.2, DISTRICT may elect to take over
all or a portion of its billing and collecting functions for its ratepayers on a date described in the
notice(that is at least one hundred eighty(180)days after the notice in section II.B.2. is provided);
ii.Under this Agreement and the proposed amendment to the
Financing Agreement, if DISTRICT elects to take over all or a portion of its billing and collection
functions for its ratepayers, the DISTRICT will pledge to the CITY or the Bond Trustee its Net
Revenues (as defined in the proposed amendment to the Financing Agreement) and DISTRICT
will establish a wastewater fund, securing repayment of the 2006 Bonds, into which it shall be
required to deposit all its Gross Revenues(as defined in the proposed amendment to the Financing
Agreement) and from which it will agree to make District Payments as required under the
Financing Agreement and to otherwise comply with the payment priorities required by Section
4.5(b)of the Installment Sales Agreement;
iii. The proposed amendment to the Financing Agreement
will provide that ABAG, Syncora Guarantee, Inc., and Bond Trustee are third-party beneficiaries
to the DISTRICT's pledge;
iv. No other amendments to the Financing Agreement are
contemplated; and
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v. DISTRICT and CITY request (1) written consent from
Syncora to the proposed amendments to the Financing Agreement and the DISTRICT's
assumption of billing and collection functions or opetations and maintenance of its wastewater
collection system, as authorized by this Agreement, (2)written confirmation from the ABAG and
the Bond Trustee that the proposed amendments to the Financing Agreement and the DISTRICT's
assumption of billing and collection functions or operations and maintenance of its wastewater
system, as authorized by this Agreement will not materially adversely affect the interests of the
Bond Owners in violation of Section 5.12 of the Installment Sale Agreement, and (3) a
determination from each of the rating agencies that the proposed amendments to the Financing
Agreement and the DISTRICT's assumption of billing and collection functions or operations and
maintenance of its wastewater collection system, as authorized by this Agreement,will not,in and
of themselves, cause any rating on the 2006 Bonds to be lowered, in each case, within sixty(60)
days after the written notice was given. ABAG consent is not required, if ABAG has assigned its
right to consent to changes to the Financing Agreement and the Participation Agreement to the
Bond Trustee.
(b) CITY shall not intentionally encourage non-consent or an
objection by rating agencies, ABAG, Syncora Guarantee, Inc. or the Bond Trustee. This shall not
prohibit the CITY from responding accurately and completely to requests for information from the
rating agencies, ABAG, Syncora Guarantee, Inc. or the Bond Trustee. All communications with
the parties to whom notice is given under this provision shall at all times include both CITY and
DISTRICT. The Parties shall make good faith efforts to obtain necessary consents.
(c) If the written consents/confirmations of Syncora Guarantee,
Inc. and the Bond Trustee are obtained and a determination from each of the rating agencies has
been made that the DISTRICT's assumption of billing and collection functions and/or the
operation and maintenance of its wastewater collection system, as authorized by this Agreement,
and the proposed amendments to the Financing Agreement will not, in and of themselves, cause
any rating on the 2006 Bonds to be lowered, then CITY shall promptly execute the amendments
to the Financing Agreement with the DISTRICT(to include any other covenants required by such
entities and agencies,with the addition of any such covenants not to be unreasonably withheld by
the Parties in consideration of the terms and purposes of this Agreement),which shall in any event
be within thirty(30)days of receipt of such consents and rating agency determination.
(d) If the consents/confirmations of Syncora Guarantee,Inc.and
the Bond Trustee are not obtained and a determination from each of the rating agencies has not
been made that the DISTRICT's assumption of billing and collection functions or the operation
and maintenance of its wastewater collection system, as authorized by this Agreement, and the
proposed amendments to the Financing Agreement will not,in and of themselves,cause any rating
on the 2006 Bonds to be lowered,and if the DISTRICT takes the position that such lack of consents
or determination was unreasonable, the Parties shall, at DISTRICT's election, cooperate to
facilitate a declaratory relief action or other legal determination on the subject by the DISTRICT
with DISTRICT bearing all fees, costs, and expenses associated therewith, including fees of
attorneys,experts,consultants,and investigators and all other litigation expenses of the DISTRICT
and the CITY (provided that any such expenses incurred by the CITY are necessarily and
reasonably incurred) and any other costs, damages or expenses incurred by the CITY in
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cooperating with such an action. If any such determination or action cannot be brought,unless the
CITY is named as a party, the CITY may be named as a party.
(e) In the absence of(1)written approval by Syncora Guarantee,
Inc. and the Bond Trustee and the required determination by each of the rating agencies, or(2) a
final, non-appealable Declaratory Judgment that such approvals and rating determinations were
unreasonably withheld, DISTRICT may not take over its billing and collections or operation and
maintenance of the DSS.
(f) If the required written consents / confirmations r
determinations are given or obtained,and the DISTRICT elects to discontinue the CITY's billing
and collection and/or operations and maintenance functions, the DISTRICT shall indemnify and
defend the CITY from any subsequent claim or lawsuit by an owner or owners of 2006 Bonds,
including any class claim on their behalf,which seeks damages or other legal remedies against the
CITY based on the amendments to the Participation Agreement that allow and govern the
DISTRICT's assumption of its billing and collection function or operation and maintenance of its
wastewater collection facilities as authorized by this Agreement or the approved amendments to
the Financing Agreement. Upon notice to DISTRICT of the claim or lawsuit from CITY, the
DISTRICT shall assume and pay all costs, damages or liability arising out of any such claim or
lawsuit. In the event that any such claim or lawsuit is filed or served on the CITY, the DISTRICT
shall provide for the defense of that claim or lawsuit through legal counsel procured by DISTRICT
and approved by CITY, which approval shall not be unreasonably withheld, and shall pay all of
the defense costs, including, but not limited to, fees of attorneys, investigators, experts, and
consultants,and all other litigation related expenses.CITY shall fully and promptly cooperate with
DISTRICT in undertaking any such undertaking. The DISTRICT shall pay the full cost of any
settlement or judgment resulting from any such claim or lawsuit. With respect to any other claim
that the CITY breached section 5.12 of the 2006 Installment Sale Agreement by agreeing to the
terms of this Agreement,the DISTRICT and CITY agree to share the costs of defense and payment
of any settlement or judgment as they shall agree,subject to dispute resolution under section II.G.2.
3. Capital Improvement Costs.
a. Shared Capital Improvement Costs. Subject to section II.D.3.a.(1) and
section II.D.Lb.(6), Capital Improvement costs for the CWWTP, DSS, or CSS that benefit both
the DISTRICT and CITY shall be subject to allocation between the Parties as provided in this
section II.D.3.a. Capital Improvement costs for the CWWTP may be included in the CITY's
Sewer System Budget so long as they don't exceed $200,000.00 in any fiscal year and reasonable
Capital Improvement costs for the Trunk Line may be included in the CITY Combined Sewer
Budget and/or DISTRICT Combined Sewer Budget, all in accordance with Section D.1. subject
to cost allocation using the Allocation Methodology. Nothing in this section shall be deemed to
modify section II.D.l.b.(6).Other Capital Improvements to the CWWTP("Other CWWTP Capital
Improvements"), other Trunk Line Capital Improvements, or any Capital Improvements to the
DSS or CSS that are claimed to benefit both Parties shall be approved in writing before such costs
are required to be shared. Absent such approval,either party may initiate the procedures in section
II.D.3.a.(1) by providing written notice of the same to the other. Capital Improvement costs that
are claimed to benefit both Parties and that are incurred in emergency or other circumstances, the
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timing of which does not reasonably and practically allow for prior written approval, shall be
resolved through the procedures in section II.D.3.a.(1), unless otherwise agreed.
(1) Further Required Negotiations and Arbitration. Prior to
charging a party with any share of an unapproved Capital Improvement cost pursuant to section
II.D.3.a, including Other CWWTP Capital Improvements, other Trunk Line Capital
Improvements, or any Capital Improvements to the DSS or CSS that are claimed to benefit both
Parties, the Parties shall promptly: exchange all information and materials associated with such
Capital Improvement costs to allow the other to fully and completely review,evaluate,and analyze
the Capital Improvement and its costs;and, subsequently, meet to negotiate the detailed terms for
sharing the Capital Improvement cost in accordance with this Agreement. At the request of either
party,the DISTRICT's Board and CITY's City Council shall meet in joint session(s),as they shall
agree. If they fail to reach agreement within sixty(60)days,or such longer period as agreed by the
Parties, of a written request from the party seeking to share the cost of the Capital Improvement,
they shall undertake the dispute resolution procedure as provided in Section II.G.1.
b. Capital Improvements to DSS and CSS. Except as provided in this
Agreement, any Capital Improvement to the DSS, regardless of the percentage increase in the
asset's value or useful life, shall be entirely paid by the DISTRICT, unless the Parties agree
otherwise as to a specific project, and a Capital Improvement to the CSS, regardless of the
percentage increase in the asset's value or useful life, shall be paid entirely by the CITY, unless
the parties agree otherwise as to a specific project. At least ninety (90) days prior to a party
undertaking a Capital Improvement that such party intends will be paid in whole or part by the
other party, or within ninety(90)days of performing the work in the case of emergencies or other
circumstances, the timing of which does not reasonably and practically allow for prior written
approval,the undertaking party shall give written notice to the other party. Where a party contends
that a Capital Improvement to the DSS or CSS should not be undertaken as noticed or that it
benefits both parties and should be jointly paid,resolution of any disagreement between the Parties
concerning that Capital Improvement shall be subject to Section II.D.3.a.(1),above.
C. Capital Improvements to the Trunk Line. Capital Improvement costs to
the Trunk Line shall be shared, regardless of the improvement's physical location, in accordance
with the Allocation Methodology; i.e., such costs shall be shared notwithstanding that an
improvement to the Trunk Line is within, or the majority of it is within, the Sewer services
jurisdictional boundaries of one party as opposed to the other. However,the capital improvements
must be approved in accordance with Section I1.D.3.
4. Reporting Allocated Costs.
a. Budgeted Costs. Except as otherwise required by the Refinancing, within
ten(10)days of the end of each month,commencing in the third full month following the Effective
Date, the CITY shall give the DISTRICT a statement showing the approved expenses, actually
incurred, in the preceding month under the CITY Combined Sewer Budget plus 1112 of the
DISTRICT's share of debt service on outstanding bonds, and the DISTRICT revenue received in
that month. DISTRICT revenue shall be the sum of all sewer-related revenues received from
Customers and Connections within the DISTRICT's sewer-service jurisdictional boundaries. By
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the same deadline,the DISTRICT shall give the CITY a statement showing the approved expenses,
actually incurred, in the preceding month under the DISTRICT Combined Sewer Budget. The
respective statements shall append reports from the Parties accounting systems of the actual
expenses incurred and percentage expended of each budgeted expense.
The DISTRICT's share of CITY's expenses shall be offset by the CITY's share of
DISTRICT expenses as reported and then 1112 of the DISTRICT's share of annual bond debt
service shall be added to that figure. ("DISTRICT's Net Expenses"). The DISTRICT's Net
Expenses shall be deducted from DISTRICT's revenue received in the same month. If a surplus
results, the CITY shall remit and transfer the surplus sum to DISTRICT. If a deficiency results,
the DISTRICT shall remit and transfer the deficient sum to CITY. All such remittances by the
CITY or the DISTRICT must be calculated and paid quarterly,commencing January 1,2019.The
parties must receive the payments within 15 days of quarter end,even if they dispute the statement.
Any disputes must be resolved during the true up process as provided in Section II.D.4. If either
party fails to make a timely payment, it shall be liable for interest on the unpaid balance of the
amount due until paid in full at a monthly rate of 1.5%, not to exceed the maximum rate allowed
by law.
b. Actual Cast True Up.The purpose of this provision is to allow the Parties
to verify whether the other party's claimed charges were budgeted and actually incurred. if a party
disputes a statement from the other party, the dispute shall not excuse the party from paying the
amount in the statement, and the Parties shall undertake the Fast Track dispute resolution process
in section II.G.1. The party prevailing through dispute resolution shall receive a refund from the
other party of any overpayment, including any interest earned on the overpaid amount, or the
amount of earnings the prevailing party demonstrates was lost on the overpaid amount, from the
date paid until refunded.
Not later than 180 days following the end of the fiscal year, CITY and DISTRICT shall
each provide the other with copies of their respective audited financial statements. The deadline
for exchanging audits may be extended not more than twice by either party for up to an additional
90 days for each of the two extensions.Further,each will provide financial reports on its respective
portions of the Combined CITY/DISTRICT Sewer System, derived from its financial reporting
system(s), after all end-of-year and audit adjustments have been recorded, along with supporting
materials and information requested in accordance with Section D.S., the purpose of which is to
determine and reconcile actual costs incurred on items budgeted in accordance with section II.D.1.
and II.D.3. Each party shall have sixty (60) days to review the audit and all supporting materials
and information. A reconciliation of actual costs expended on budgeted items shall occur whereby
each party shall be reimbursed for any amounts paid on such budgeted items that exceed actual
cost; and, pay additional amounts on items for which the actual cost exceeded the budget, to the
extent not already done. Any credits due from CITY shall, at DISTRICT's discretion, either be
applied to reduce the amount billed to the DISTRICT based on the approved budget for the current
fiscal year or refunded in whole or in part to DISTRICT within fifteen(15)days,and any amounts
due to CITY from DISTRICT shall increase the amount invoiced to the DISTRICT based on the
approved budget for the current fiscal year payable in accordance with Section II.DA.a. Disputes
shall be subject to arbitration under section II.G.2.
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C. While it continues the billing and collection functions for the DISTRICT,
the CITY will apply DISTRICT revenue to DISTRICT's allocated share of costs under section
II.D.1. and to DISTRICT's share of bond debt service, under section II.D.2., on a monthly basis,
with payment of DISTRICT's share of bond debt service on a semi-annual basis unless otherwise
required by the Refinancing. The provisions in this section II.D.4. shall continue to apply,except
to the extent they are inconsistent with the terms of the Refinancing.DISTRICT funds held by the
CITY shall receive a proportionate share of any returns earned on funds held by the CITY.
5. Information Sharing.Commencing six(6)months after the Effective Date,for all
funds/accounts associated with revenue and expenditures, including transfers, of the Combined
CITY/DISTRICT Sewer System, the Parties shall provide each other:
a. On a monthly basis with: (1) a summary general ledger report containing
debit and credit balances of the current month and year-to-date; (2) a detail general ledger report
for the month.
b. On a quarterly basis with a summary general ledger report with debit and
credit balances of the current quarter and year-to-date; and,
C. On an annual basis with: (1) the combining trial balance through the
reporting period;(2)basic financial statements,to include(i)statement of net assets,(ii)statement
of revenues, expenses, and changes in fund net assets and (iii) statement of cash flows; (3) all
adjusting, post-closing, and audit adjustment journal entries; (4) details of all adjusting, post-
closing, and audit adjustments; and, (5) copy of draft and final audited financial statements,
including the required communication regarding internal controls over financial reporting.
In addition to any other information sharing requirements in this Agreement, each party
shall, within ten(10)business days of any request by the other,provide access to any information
or materials within the requestee's knowledge,custody or control,as may be reasonably requested
and adequately described,to enable the requesting party to timely and fully evaluate,analyze, and
verify the other's invoices / expenditures for the requesting party's share of allocated costs as
provided in this section II.D., including, but not limited to, Direct Costs, Indirect Costs, water
consumption and relative strength of discharge, billing, collection, Customers, Connections,
ESSUs, financing,bond indebtedness, Refinancing(if done), and Capital Improvements.
6. Rate Studies.Unless otherwise agreed by the Parties,in fiscal year 2019-2020,and
every fifth fiscal year thereafter, the CITY and DISTRICT shall undertake and share equally the
cost of a rate study for the Combined CITY/DISTRICT Sewer System using a qualified consultant
with expertise in compliance with Proposition 218 (Cal. Const.,Article XIII.D.)
E. ALLOCATION OF REMAINING CWWTP CAPACITY-PROJECT CAPACITY.
1. Capacity Allocation. In Amendment No. 2, the Parties agreed that the Capacity
Project, inclusive of CEPT, increased the capacity of the CWWTP by 2,400 ESSUs of which
DISTRICT is entitled to use sixty-five percent(65°0),or 1,560 ESSUs(the"DISTRICT Dedicated
Capacity"), and CITY is entitled to use thirty-five percent (35%), or 840 ESSUs (the "CITY
Dedicated Capacity"). The Parties agree the DISTRICT owns the DISTRICT Dedicated Capacity
Operating Agreement Page 23 of 33
UVSD-CITY 026
and the CITY owns the CITY Dedicated Capacity. The pre-Capacity Project wastewater treatment
capacity(e.g. ESSUs) of the CWWTP has been used by the Parties, and the Parties agree to treat
the unused Capacity Project ESSUs as the measure of the remaining wastewater treatment capacity
in the CWWTP.
The Parties recognize that the North Coast Regional Water Quality Control Board
("NCRWQCB")uses dry weather flow to determine the treatment capacity of the WWTP and has
established its discharge limits, in part, based thereon. ESSUs are used to estimate the amount of
treatment capacity consumed by a sewer connection. If the 2,400 ESSUs have been used, but the
dry weather flow into the CWWTP is below the amount authorized in the Waste Discharge Permit
for the CWWTP then in effect, the Parties shall meet and confer for not more than ninety (90)
days, unless they agree to extend the time, to determine how to allocate any remaining treatment
capacity between them. if they fail to agree within that time, either party may initiate dispute
resolution under Section II.G.1. The purpose of this provision is to provide for allocation of any
such additional remaining treatment capacity in a manner consistent with this Agreement.
A dispute between the Parties currently exists concerning (a) the quantity of ESSUs
actually used to date by each party from the 2,400 ESSUs made available through the Capacity
Project and,in turn,(b)the remaining ESSUs available to each party through the Capacity Project.
Subject to the limits on the remedies available to the Parties as stated below in this Section 11.E.1,
this dispute is excluded from the waiver and release of claims resulting from the Settlement
Agreement (Exhibit 1 hereto.) To resolve this dispute, the Parties shall promptly exchange all
available information and materials related to the dispute and otherwise diligently work to resolve
it. In the event a signed, written, agreement on this dispute is not reached within one hundred
eighty (180) days of the Effective Date, the matter may be submitted by either or both parties to
binding arbitration under section II.G.1. The resolution of the dispute by agreement or arbitration
shall be limited to determining the remaining ESSUs available to each Party for new connections
and to establishing a record of each Connection having a Capacity Project ESSU and the number
of such ESSUs attributable to each such connection. All other remedies associated the resolution
of this dispute, including damages and equitable relief are subject to the release of claims in
accordance with the Settlement Agreement, except that, in the event actual ESSU capacity of the
CITY or the DISTRICT,as determined by agreement or arbitration,exceeds its allocated quantity
of Capacity Project ESSUs,then there shall be an adjustment of remaining Capacity Project ESSUs
to maintain the ratio of such capacity to which each party is entitled as specified above. If such an
adjustment is not possible, then the imbalance in ESSUs shall be treated as if it were a transfer
under section II.F.4. with corresponding payments and reallocations.
Except as otherwise provided in this Agreement or agreed to in writing by the Parties,
neither party may add new ESSUs for treatment in the CWWTP beyond their respective allocated
share of remaining Capacity Project ESSUs as determined in the first paragraph of this section(or,
regarding non-Capacity Project capacity, as determined in section II.F). The Parties may agree to
transfer all or any portion of one party's allocated share of remaining Capacity Project ESSUs to
the other party with a corresponding adjustment to their respective remaining capacity in the
CWTTP and reallocation of Installment Payments associated with the Capacity Project (subject to
Refinancing agreements), and on terms and conditions otherwise agreed.
Operating Agreement Page 24 of 33
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2. Calculating Consumption of Remaining ESSUs. Each party may add ESSUs for
treatment in the CWWTP up to its remaining allocated share of Capacity Project ESSUs described
in section II.E.1. ESSUs may be used by the creation of a new Connection within the sewer-
service jurisdictional boundaries of either party or the remodel or change in use of a structure with
an existing Connection within said boundaries. In most cases a remodel or change in use will
increase the ESSUs consumed by the Connection (which increases the ESSUs then assigned to
that Connection). Once the ESSU attributable to a new Connection or the remodel or change in
use of a structure with an existing Connection is determined—in accordance with the procedures
below—that party's share of remaining ESSUs that may be added for treatment in the CWWTP
shall be increased or reduced by a corresponding amount.
For residential properties, ESSUs will be calculated based on the number of bedrooms in
the residence. ESSUs will be assigned as follows:
One Bedroom Residence: 0.9 ESSUs
Two Bedroom Residence: 1.0 ESSUs
Three Bedroom Residence: 1.1 ESSUs
For each additional bedroom: Additional 0.1 ESSUs
For commercial and industrial properties, all such new ESSUs shall be calculated using
drainage fixture unit(DFU)values as set in Chapter 7 Sanitary Drainage,Table 702.1 of the 2016
California Plumbing Code. For commercial and industrial accounts 26 DFUs equal I ESSU.
Each party shall have the right to set the ESSUs to be assigned to such a new Connection,
or to an existing Connection upon a remodel or change in use, in a manner that deviates from the
referenced DFU calculation if reasonably required to properly capture the actual anticipated
discharge characteristics of the Connection, such as flow, biochemical oxygen demand (BOD),
total suspended solids, and other sewage characteristics. Any such deviations shall be based on
ESSUs for commercial and industrial properties having an annual average daily wastewater flow
of 210 gallons per day, with BOD and TSS concentrations of 200 mg/L. When ESSUs are to be
calculated,the following formula shall be used:
Calculated ESSUs= [(Expected TSS in mg/L)i'(200 mg/L)
(1/3)] + [(Expected BOD in mg/L)..-'(200 mg/L) * (1/3)] +
[(Expected annual average flow in gpd)r'(210 gpd) * (I/3)]
For commercial and industrial Connections, at no point will the components used to
calculate ESSUs be a value that is less than 200 mg-BOD/L, 200 mg TSS/L,or 210 gpd of annual
average flow. Any deviations from the ESSU calculation method for commercial or industrial
shall be considered on a case by case basis subject to the following process.
When a building permit application is fled with the CITY Building Department or the
Mendocino County Building Department for a (1) project that will require the payment of a
Connection fee,or(2)the remodel or change in use of a structure with an existing Connection,the
building department will refer the application to the CITY to prepare an assessment of the number
of ESSUs and the associated fee for that property. By the end of business on the day the assessment
Operating Agreement Page 25 of 33
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is completed, the CITY shall forward by email a copy of the proposed permit and the assessment
(inclusive of the calculation and all supporting details, facts, and information used to perform the
calculation and all documents supporting and relating to the calculation) of ESSUs to the
DISTRICT. CITY shall provide information to DISTRICT either by certified mail or tracked
email in order to verify delivery and receipt. Within ten (10) business days of its receipt of the
permit application and the assessment from the CITY, the DISTRICT shall respond to the CITY
with any questions, disputes, or modifications to the assessment or Connection fee. If CITY and
DISTRICT do not concur on the assessment or Connection fee, the CITY and DISTRICT shall
meet and/or exchange information as necessary. If the Parties fail to resolve the dispute within ten
(10)business days of the CITY's receipt of the DISTRICT's written questions or disputes,or such
further time as the Parties may agree, the dispute shall be resolved as provided in Section II.G.1.
Failure of the District to respond to the receipt of the assessment and Connection fee sent by the
CITY will be assumed to mean that the DISTRICT does not object to the CITY's assessment or
the Connection fee.
F. CHANGES OF ORGANIZATION AND DISTRICT REGIONAL WASTE WATER
TREATMENT PLANTS (DRWWTP).
1. Changes of Organization. Subject to and in compliance with the requirements of the
Refinancing and Refinancing agreements and, pending Refinancing, the agreements associated
with the 2006 Bonds, either party may apply to and obtain a decision by the Mendocino Local
Agency Formation Commission("LAFCO")for a change of organization using the procedures in
the District Reorganization Act("DRA';Gov't Code§56000 et seq.,as amended)and as otherwise
allowed by law, including, but not limited to, any and all amendments to a sphere of influence,
annexations and detachments, including,but not limited to,detachment from the DISTRICT of all
or any portion of the Overlap Area. The filing by the CITY of an application by itself.—to
LAFCO to detach all or any portion of the Overlap Area shall not be deemed a breach of this
Agreement or the Participation Agreement. Nothing in this Section II.F. excuses the Parties from
exhausting their administrative or judicial remedies as required by law and nothing herein impairs
the Parties' rights to seek relief as allowed by law. Nothing herein shall be deemed consent by
DISTRICT of or for any such detachment or by either party of any other proposed change of
organization by the other party. Except as otherwise determined by LAFCO in acting on a petition
or application for a change of organization or by other lawful procedures,both Parties reserve their
right to provide sewer service within their respective sewer-service boundaries as they now exist
or may exist in the future.
2. DRWWTP Development. The DISTRICT does and shall have the right to apply for
permits and take other action to establish one or more new wastewater treatment facilities and to
construct, operate and maintain said facilities. Subject to and in compliance with the requirements
of the Refinancing and Refinancing agreements, or once the Installment Payments allocated to
DISTRICT are paid or defeased,the DISTRICT may divert DISTRICT Connections or Customers
connected to the CWWTP to a DRWWTP or any other treatment facility in accordance with this
Agreement.
Operating Agreement Page 26 of 33
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3. Obligation to meet and confer. Both parties reserve their right to oppose the other
party's application for a reorganization,including but not limited detachment from the DISTRICT
of all or any portion of the Overlap Area or the DISTRICT's development or operation of a
DRWWTP, on any legal, equitable, or factual basis. Prior to taking action embraced by section
II.F.1. or 2., the party intending to take such action shall give the other party at least sixty (60)
days written notice of the same; such notice shall describe in detail the intended action and the
anticipated effect of that action on this Agreement. If either party has objections or concerns about
the other party's LAFCO application or the DISTRICT's proposal to establish a separate
wastewater treatment facility, it will be required to notify the other party of those objections and
concerns in writing and the Parties shall engage in good faith negotiations to resolve the other
party's concerns. Either party may request and the Parties may schedule joint meetings of the
DISTRICT's Board and CITY's City Council to address these concerns. However, those
negotiations shall not delay or alter the LAFCO or DRWWTP process or procedures,except to the
extent agreements are reached that affect the same. Subject to the legally required exhaustion of
administrative or judicial remedies,unresolved disputes concerning reorganizations,which are not
subject to the jurisdiction of LAFCO,or disputes concerning a DISTRICT proposal to establish or
use a DRWWTP which are not subject to the jurisdiction of Mendocino County, the NCRWQCB
or any other agency or regulatory body with approval authority over the project, shall be resolved
according to the procedures in section II.G.2.
4. Transfer of Capacity Project ESSU-Connections Through a Change of
Organization or to a DRWWTP. If a change in organization by one party ("Receiving Party")
results in that party modifying its sewer-service jurisdictional boundaries to include, and which
effectively transfers, Customers and Connections assigned Capacity Project ESSUs that were
within the other party's ("Transferring Party") sewer-service jurisdictional boundaries, or if the
DISTRICT transfers wastewater treatment services for a Connection assigned Capacity Project
ESSUs within its sewer-service jurisdictional boundaries from the CWWTP to any DRWWTP(in
which case DISTRICT is the Transferring Party and CITY the Receiving Party), and in either case
assuming such a transfer is permitted under the terms of the Refinancing, or as to a transfer of a
connection from the CWWTP to any DRWWTP,in the absence of Refinancing, upon payment or
defeasement of the 2006 Bonds, then, subject to Section II.F.1.-2 and covenants imposed as part
of the Refinancing, the following provisions shall apply.
a. ESSU Numerical Value. Each Connection so transferred shall be assigned
a numerical ESSU value. As to an existing Connection, the number of ESSUs shall be as
previously calculated, barring apparent error. The number of ESSUs assigned future connections
shall be determined in accordance with section II.E.
b. Payment of Transferred Connections Assigned Capacity Project
ESSUs. For any Connection assigned Capacity Project ESSUs transferred by the DISTRICT to a
DRWWTP or other facility,the Receiving Party shall pay the Transferring Party the monetary sum
("the Calculated Amount")determined by multiplying(a)the number of ESSUs transferred by(b)
the debt service paid for them by the Transferring Party to the date of transfer. If a Connection
Fee was paid for the Capacity Project ESSUs before they are transferred, the Transferring Party
shall pay the Receiving Party the amount by which the Connection Fee exceeds the Calculated
Amount or the Receiving Party shall pay the Transferring Party the amount by which the
Operating Agreement Page 27 of 33
UVSD-CITY 030
Calculated Amount exceeds the Connection Fee. Prior to any such transfer being effective, the
Parties shall meet and confer in good faith to establish the terms on which such payment shall be
made, with disputes concerning the same subject to binding Fast Track arbitration under section
II.G.1. Regarding a change in organization, the Calculated Amount shall not apply to transfers of
Connections assigned Capacity Project ESSUs. Nothing in this Agreement shall determine the
Parties' right to payment or compensation otherwise upon a change in organization
C. Effect of Transfer on Cost Allocation. For any Customer or Connection
so transferred, figures associated with any such Customer or Connection (water use and relative
strength) that would otherwise be used in the Allocation Methodology to determine the Parties'
respective share of costs subject to allocation, described in section II.D.I., and the adjustments to
debt-service obligations (number of Capacity Project ESSUs assigned a transferred Connection),
described in section II.D.2., shall be made and assigned to the Receiving Party, effective on, and
prorated to, the date of transfer, subject to the terms of the agreements entered as part of the
Refinancing (no such transfer shall be allowed unless permitted under, and done in accordance
with, the terms of the Refinancing).
d. Effect of Transfer on Remaining CWWTP Capacity Project Capacity
Allocation. Each Connection assigned a Capacity Project ESSU transferred by DISTRICT to a
DRWWTP pursuant to this section II.F.4 shall result in a corresponding deduction to Transferring
Party's allocated share, and an increase to Receiving Party's allocated share, of remaining
CWWTP Capacity Project ESSUs as otherwise described in section ILE, effective on the date of
transfer.A transfer of a Connection assigned a Capacity Project ESSUs resulting from a change in
organization shall have no effect on the Parties'allocated share of the remaining CCWTP Capacity
Project Allocation, including pursuant to section II.E.
e. DISTRICT's Transfer of ESSUs Within CITY Limits. In the event
DISTRICT seeks to transfer a Connection (regardless of whether it is assigned Capacity Project
ESSUs)that is within DISTRICT's sewer-service jurisdictional boundaries but also CITY's general
jurisdictional boundaries(i.e. city limits), the transfer cannot occur unless the CITY approves the
transfer, such approval not to be unreasonably withheld considering the advantages and
disadvantages of using a DRWWTP to serve the connection against the impact of the transfer on
the CITY's interest in providing sewer service within its city limits. The Parties shall promptly
exchange all information and materials on the matter. If the CITY has failed to approve the transfer
within sixty (60) days of DISTRICT giving the CITY a written request for such approval, the
DISTRICT may commence dispute resolution under section IIG.1 so long as notice under said
section II.G.1. is given within 120 days of the DISTRICT's written request for approval under this
section.
5. Transfer of Non-Capacity Project ESSUs: If the DISTRICT transfers wastewater
treatment services for a Connection not wholly assigned Capacity Project ESSUs within its sewer-
service jurisdictional boundaries from the CWWTP to any DRWWTP or such a Connection is
transferred from one party to the other through a change in organization, and in either case
assuming such a transfer is permitted under the terms of the Refinancing, then, subject to section
F.1-2 and the covenants imposed as part of the Refinancing, the following provisions shall apply:
Operating Agreement Page 28 of 33
UVSD-CITY 031
a. ESSU Numerical Value. Each Connection so transferred shall be assigned
a numerical ESSU value for purposes of determining remaining capacity in the CWWTP available
to the party.That numerical value shall be determined in the same manner as for a Capacity Project
ESSU in accordance with Section II.E. It is the Parties' understanding that there are no Non-
Capacity Project Connections for which ESSUs have been calculated or assigned(to the extent the
case is otherwise, as to an existing Connection, the number of ESSUs shall be as previously
calculated,barring apparent error).
b. Effect of Transfer on Cost Allocation. To the extent a transfer is of non-
Capacity Project ESSUs, figures associated with any such Customer or Connection(water use and
relative strength) (prorated for non-Capacity Project ESSUs if the subject Connection is assigned
both Capacity, and non-Capacity Project ESSUs) that would otherwise be used in the Allocation
Methodology to determine the DISTRICT's respective share of costs subject to allocation,
described in section II.D.1., shall be eliminated, and adjustments to debt-service obligations,
described in section II.D.2, made, effective on, and prorated to, the date of transfer, subject to the
terms of the agreements entered as part of the Refinancing(no such transfer shall be allowed unless
permitted under,and done in accordance with,the terms of the Refinancing).
C. Effect of Transfer on Remaining CWWTP Capacity Project Capacity.
Subject to section I1.F.6., for any Customer or Connection so transferred, the number of non-
Capacity Project ESSUs attributable to the same shall have no effect on the Parties'allocated share
of the remaining CCWTP Capacity Project Allocation, including pursuant to section II.E.
6. Use of CWWTP Capacity Following Transfers. With respect to Capacity and
non-Capacity Project ESSUs assigned to Connections or Customers transferred by DISTRICT to
a DRWWTP ("Transferred ESSUs"), the resulting increased capacity of the CWWTP shall be
allocated as follows. The remaining Capacity Project ESSUs of each party, not counting
Transferred ESSUs, shall be used first by new Customers or Connections of the party. If a party
has no more Capacity Project ESSUs to serve a Connection,the party may use Transferred ESSUs
that have not been used by a new Connection. Transferred ESSUs may not be reserved by either
party and shall be assigned and used in accordance with Section II.E.2. CITY shall pay DISTRICT
for any Transferred ESSUs assigned to the new CITY connection the amount, if any, of debt
service paid by DISTRICT for that ESSU (to the extent it is a Capacity Project ESSU or
attributable to financing used to increase CWWTP plant capacity). Figures associated with any
such Customer or Connection associated with a Transferred ESSU that would otherwise be used
in the Allocation Methodology to determine the DISTRICT's share of costs subject to allocation,
described in section II.D.I., and the adjustments to debt-service obligations , described in section
II.D.2., shall be assigned to the CITY, effective on, and prorated to, the date of transfer, all of
which are subject to the terms of the agreements entered as part of the Refinancing (no such
transfer shall be allowed unless permitted under, and done in accordance with, the terms of the
Refinancing or if the subject bond indebtedness is paid or defeased).
Operating Agreement Page i of 33
UVSD-CITY 032
G. ARBITRATION
1. Fast-Track Alternative Dispute Resolution. In the event a dispute arises between the
Parties concerning the matters to which this section II.G.I. applies as referenced above, and the
Parties are unable to resolve the dispute within the prescribed time periods in such sections, then
either party may commence the Fast-Track alternative dispute resolution process in this section
II.G.1.
a. Notice. A Party may initiate this dispute resolution by a written notice
delivered to the other Party. The notice shall identify in detail the issues that are the subject of the
dispute. In the event the dispute concerns a matter for which a proposed resolution cannot be
reasonably made (e.g. where information or materials underlying the matter were not properly
exchanged), the notice shall state the same.
b. Response. Fifteen (15) days after written notice is given under section
II.G.La., the Parties shall simultaneously exchange, in writing, a proposed resolution of the
dispute, with reference to the reasons, information, and materials supporting the proposed
resolution. Copies of all supporting materials shall accompany the counter-proposal. In the event
the dispute concerns a matter for which a proposed resolution cannot be reasonably made (e.g.
where information or materials underlying the matter were not properly exchanged),the exchange
shall state the same.
C. Good-faith effort to resolve. Unless otherwise agreed in writing, within
fifteen(15)days of the exchanges in section II.G.I.b., the Parties shall make good faith efforts to
resolve the dispute.
d. Binding Arbitration. If the Parties are unable to resolve the dispute within
fifteen (15)days of the exchanges in section II.G.Lb., then, absent written agreement otherwise,
they shall submit the dispute to binding arbitration.
(1) Arbitrators. Within thirty (30) days of the exchanges in section
II.G.Lb,each party shall select and submit to the other party in writing the name of one individual
or entity to serve as the arbitrator. A selected arbitrator shall be completely neutral and, unless
otherwise agreed by the Parties, shall not be,or have been: employed by the CITY or DISTRICT,
other than as an arbitrator under this Agreement; have a family or business relationship with any
person who is, or has been, employed by the CITY or DISTRICT; a customer of the CITY or
DISTRICT; or,an owner or occupant of property located in the CSS or DSS. Proposed arbitrators
shall be qualified to assess the subject matter of the dispute. If the Parties are unable to agree on
an arbitrator, the two arbitrators shall, within seven (7) days, select a mutually-acceptable
alternative arbitrator.
(2) Arbitration.Either party may initiate binding arbitration under this
section II.G.I.d. by submitting a written request for dispute resolution to the arbitrator, with copy
to the other party, containing the notice and exchanges, inclusive of all proposals, reasoning, and
information and materials provided therewith, under section II.G.La-b. Within fifteen (15) days
of the receipt of the written request for dispute resolution or such longer period as determined by
Operating Agreement Page 30 of 33
UVSD-CIN 033
the arbitrator for good cause or as agreed by the Parties, the arbitrator shall conduct a hearing at
which the parties and their representatives may appear and be heard. If the Parties fail to agree to
a resolution of the dispute at the hearing or within any additional period of time allowed by the
arbitrator for good cause or agreed by the Parties ("continued hearing"), within fifteen (15) days
after the conclusion of the hearing, the arbitrator may issue and serve on each party a proposed
decision that combines elements in each Party's proposal. If the Parties fail to agree to the
suggested terms within ten(10)days of such written proposed decision,the arbitrator shall issue a
final decision which may approve the proposal that the arbitrator determines to be the most
reasonable or a combination of the proposals submitted by the Parties that the arbitrator determines
represents a fair and reasonable resolution of the dispute. The arbitrator's final decision shall be
effective immediately and shall be binding and enforceable on the Parties. Notwithstanding that,
either party may appeal or obtain relief from the courts otherwise on an arbitrator's final decision
if and only if it is contrary to the California Constitution or state law governing or limiting the
exercise of local government powers by either the DISTRICT or the CITY. Each party shall pay
one half the costs of arbitration under this section II.G.1.
2. Arbitration of other disputes.Any controversy or claim arising out of, seeking to
enforce or interpret,or otherwise relating to this Agreement not subject to dispute resolution under
Section II.G.1, shall be settled by binding arbitration administered by a single arbitrator or
arbitration service approved by both Parties in accordance with the arbitration rules of the agreed
upon arbitration service or contained in Code of Civil Procedure Sections 1280 et seq.,if the Parties
use a single arbitrator not provided through an arbitration service. if the Parties fail to agree on an
arbitrator within thirty(30)days of a Party's written notice for arbitration, either Party may apply
to a court pursuant to Code Civ. Proc. §1281.6 to appoint an arbitrator. Judgment on the arbitration
decision rendered may be entered in any court having jurisdiction thereof. Each party shall pay
one-half of the fees and charges associated with arbitration under this section II.G.2. The
arbitration shall be conducted in Ukiah,California,or as close thereto as reasonably practical.Any
controversy or claim subject to arbitration must be made in the manner and within the time
otherwise required by law,including,but not limited to the California Tort Claims Act(Gov.Code
Sec. 810 et seq.), applicable statutes of limitation and other laws and judicial principles requiring
the prompt adjudication of claims. Each party shall bear its own attorney's fees, costs, and other
expenses related to the arbitration proceeding.
H. MISCELLANEOUS
1. Entire Agreement Conditional. This Agreement is expressly conditioned on
execution and full performance by the Parties of the Settlement Agreement and Mutual Release
concerning the Action,a copy of which is attached hereto and incorporated herein by reference as
Exhibit 1.
2. Effect on Participation Agreement,As Amended. To the extent this Agreement
may conflict in any manner with the Participation Agreement, this Agreement supersedes and
replaces any such conflicting provisions and shall control.
3. Indemnification. Each party shall indemnify and defend the other party from and
against any claim for damages by a third party against the indemnified party caused by or due to
Operating Agreement Page 31 of 33
UVSD-CITY 034
actions or inactions of the first party, including but not limited to fines or other financial penalties
imposed by a regulatory agency and for any expenses or liability of any kind. Such expenses shall
include defense costs incurred by the indemnified party, where the indemnifying party fails to
provide an adequate or timely defense to any such claim. The obligation to indemnify and defend
shall arise, when the claim, expense or liability is based on or arises out of the failure of the
indemnifying party to perform its obligations in accordance with Section II.C.1a of this
Agreement.
4. Duration of Agreement.This Agreement shall remain in effect while any portion
of the DISTRICT'S allocated share of debt service on bonds issued to fund the CWWTP
Rehabilitation/Upgrade and Capacity Projects remains outstanding. Thereafter, the Agreement
may be terminated by either Party with five (5) years advance written notice to the other Party,
where the notice is accompanied by a certified copy of a resolution adopted by the Party's
governing body authorizing notice and termination of the Agreement.
5. No Third-Party Beneficiaries. The Parties intend this Agreement is for the sole
benefit of the Parties and do not intend to confer any rights hereunder to any third party, except to
the extent third party beneficiaries are required in connection with the Refinancing.
6. Time is of the Essence.Time is of the essence regarding the Parties' performance
and other obligations under this Agreement.
7. Integration Clause. This Agreement, the Settlement Agreement attached hereto
and incorporated herein by reference as Exhibit 1, the provisions of the Participation Agreement
and Financing Agreement not effectively amended or replaced by the provisions of this
Agreement, constitute the entire agreement between the Parties concerning the subject matter
hereof. They supersede and replace any other or prior agreements, representations, statements or
understanding concerning the same. This Agreement may only be amended by written agreement
executed by the Parties.
S. Cooperation Clause.The Parties, and each of them, shall promptly take all steps
reasonably required to perform and carry out the terms of this Agreement.
9. Construction. This Agreement shall be interpreted under the laws of the State
of California,except that no law, statutory or otherwise, that construes a term in this Agreement
against a drafting party shall be applied or effective. This Agreement shall be construed,
and shall be deemed, drafted by each party hereto.
10. Notices. Whenever written notice is required or permitted by this Agreement, it
shall be deemed given when actually received, if delivered by personal delivery, fax or email,
when receipt of the fax or the email is acknowledged, registered or certified mail or overnight
courier, or 48 hours after deposit in the United States Mail with proper first-class postage affixed
thereto,when addressed or sent as follows:
Operating Agreement Page 32 of 33
UVSD-CITY 035
CITY OF UKIAH UKIAH VALLEY SANITATION
Attention: CITY Manager DISTRICT
Ukiah Civic Center Attn: General Manager
300 Seminary Avenue 151 Laws Ave., Ste. B
Ukiah, CA. 95482 Ukiah,CA 95482
FAX: FAX:
Email: Email:
Either party may change the address, fax number or email address to which notices and other
communications must be given by giving written notice as provided in this section.
11. Counterparts. Two or more copies of this agreement may be executed by the
Parties. Each such copy, bearing the original signatures of the Parties, shall be considered an
original, admissible in any administrative or judicial proceedings as evidence of the agreement
between the Parties.
WHEREFORE,the Parties enter this Agreement effective on the date last executed
below.
CITY OF UKIAH UKIAH VALLEY SANITATION
DISTRICT
y:94161560le By: Theresa McNerlin
M or Chair
Dated:,2018 Dated:��,2018
ATTEST:
�SL&Jt,'-
-e
Kristine Lawler, City Clerk C h vll T q u 1 wi(,4 c ie f is
_
Dated: { 3 ,2018 J
10[05 1 20113
A7i�p to form:
Davi pport,Attrney es ttorney
CITY of Ulah Ukiah Valle Sanitation DISTRICT
Dated: r ,2018 Dated: /D� -_,2018
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EXHIBIT I
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COU NO. 1819-120
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Settlement Agreement") is entered
on October 1, 2018 ("Effective Date") by and between UKIAH VALLEY SANITATION
DISTRICT, a county sanitation district ("DISTRICT"),'on the one hand, and CITY
OF UKIAH, a general law municipal corporation ("CITY"), on the other hand. The
parties are, at times, collectively referred to herein as the "Parties."
RECITALS
A. A proceeding between the Parties is presently pending in Sonoma County
Superior Court entitled Ukiah Valley Sanitation District v. City of Ukiah, case no. SCV
256737 ("the Action").
B. In the Action, the DISTRICT filed a complaint against CITY, as amended,
and CITY filed a cross complaint against DISTRICT, both of which are pending.
C. CITY filed an application(s) with Mendocino LAFCO for a change in
organization, including detachment of portions of the DISTRICT commonly known as
the "Overlap Area." Said proceedings) is referred to hereafter as "Detachment
Proceedings."
D. The Parties intend to execute, contemporaneously with this Settlement
Agreement, the document entitled the Operating Agreement for the Combined Sewer
System Serving the Ukiah Valley Sanitation District and the City of Ukiah ("Operating
Agreement"), a true and correct copy of which is attached hereto and incorporated
herein by reference as Exhibit 1 (this Settlement Agreement is in turn attached as
Exhibit 1 to the Operating Agreement).
E. Except as described in this Settlement Agreement and in the Operating
Agreement, the Parties desire and intend to resolve all claims either had or may have
against the other related to the Action and to dismiss, discharge, and release all
claims arising therefrom.
F. These Recitals shall be deemed incorporated by reference into all
portions, including the Terms, of this Settlement Agreement.
NOW, THEREFORE, in consideration of the Recitals and Terms of this
Settlement Agreement and for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the Parties agree as follows.
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TERMS
1. Operating Agreement. Contemporaneous with execution of this
Settlement Agreement, the Parties, and each of them, shall execute the Operating
Agreement.
2. CITY Payment to DISTRICT. CITY shall transfer funds and pay to
DISTRICT the monetary sum in combination totaling Seven Million Five Hundred
Thousand Dollars ($7,500,000.00), which is in addition to any other sums previously
paid or transferred to DISTRICT, as follows:
a. CITY Transfers and Payments
(1) $2,515,689.80 shall be transferred and deposited by the
CITY for the DISTRICT's use and benefit within thirty (30) days of the Effective Date
("Payment Deadline") in accordance with section 2.b.(1);
(2) $984,310.20 shall be paid by CITY directly to DISTRICT
within thirty (30) days of the Payment Deadline as specified in section 2.b.(2);
(3) $4,000,000 shall be paid by CITY directly to DISTRICT in
equal annual installments commencing on the one-year anniversary of the Payment
Deadline as specified in section 2.b.(3).
b. Terms and Conditions of the Transfer and Payments Required
by Section 2 (a).
(1) The CITY maintains approximately$4,837,865.13 in
unspent proceeds of the 2006 Bonds, as defined in the Operating Agreement,
including interest accrued on said funds through August 31, 2018. Those proceeds
are presently reported by CITY in its Sewer Bond Debt Service P and (Fund No. 841).
Each party is entitled to the full use and benefit of a share of said funds for purposes
of prepaying its share of the bond debt. As of August 31, 2018, the DISTRICT share is
52% of the funds in Fund 841, totaling$2,515,689.80 ("DISTRICT Share") and the
CITY share is 48%, totaling$2,322,175.33 ("CITY Share"). The DISTRICT's and CITY's
debt service obligation as of the Effective Date is 521X, and 48%, respectively. The CITY
shall transfer the entire balance in Fund 841 together with interest accrued as of
August 31, 2018,totaling$4,837,865.13, together with any additional interest
properly credited to those funds through the date of transfer,I to the City of Uldah
2006 Installment Payment Fund held by the Bond Trustee pursuant to Section 4.4(b)
'The total amount transferred shall be finalized upon issuance of the 2017 IS audit but shall not affect
the amount of the City's payment under Section 2.a(2). Said interest shall be applied to prepay bonds but
shall not be credited to either the DISTRICT's or CITY's Share.
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of the Installment Sales Agreement as defined in the Operating Agreement ("ISA"), to
be used exclusively to make optional prepayments of the principal amount due on
Installment Payments pursuant to Section 7.2 of the ISA in accordance with Section
2.03 of the Indenture of Trust between ABAG and Wells Fargo Bank, dated March 1,
2006 ("Indenture"). Other CITY and DISTRICT funds must be used to pay any accrued
interest due on prepaid bonds. The Bond Trustee shall be irrevocably instructed not to
disburse the deposited funds for any purpose or in any manner other than as specified
herein. Bond prepayments shall occur in connection with a refinancing of the 2006
Bonds or, in the absence of a refinancing, at the earliest date specified by either the
CITY or the DISTRICT. Notwithstanding the prepayment of bond debt as provided
herein, the Parties shall share debt service as provided Section II.D.2.b of the
Operating Agreement; provided, however, that in the event a reorganization is
proposed, including through the Detachment Proceedings, the Parties shall ensure, as
provided in Section 6.b, that the DISTRICT and CITY shall each receive the full benefit
and use of the DISTRICT's Share and CITY's Share, respectively, against the total
principal amount of bond debt for which that party is obligated.
(2) By no later than the Payment Deadline the monetary sum
equal to (a) $7,500,000 less (b) $4,000,000 less (c) the sum transferred for the
DISTRICT's Share (the sum of which equals $984,310.20) shall be paid by the CITY
directly to the DISTRICT from CITY funds in which CITY, and not DISTRICT, has the
sole legal interest ("CITY funds").
(3) The CITY shall pay the DISTRICT$4,000,000 in equal
annual payments of$1,000,000 each, commencing one year after the Payment
Deadline and continuing on the same day and month each year thereafter until the
balance plus intertest is paid in full. So long as timely paid, interest shall accrue on
the entire unpaid balance at the rate of three percent (3%) per annum commencing on
the one-year anniversary of the Payment Deadline. CITY payments shall be made
solely from CITY funds. If the initial installment is not paid when due, interest at the
3% annual percentage rate shall accrue on that installment from the Payment
Deadline until that installment is paid in full. If any subsequent installment payment
is not paid when due,interest on the unpaid portion of that installment payment shall
accrue from the payment due date until that installment is paid in full at the legal
rate.
3. Dismissal of Action with Reservation of Jurisdiction. Within five (5)
business days of the Court entering an order on joint request of the Parties to
maintain jurisdiction to enforce this Settlement Agreement notwithstanding dismissal,
the Parties shall jointly execute a dismissal of the entire action with prejudice of all
parties and all causes of action. The Parties agree that said dismissal shall not
prejudice or otherwise affect either party's rights as provided in Section 6. Further,
notwithstanding the dismissal, the court in which the Action is proceeding shall
maintain jurisdiction, pursuant to Code of Civil Procedure section 664.6, to enforce the
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terms of this Settlement Agreement to the extent dispute resolution is not otherwise
provided in this Agreement.
4. Releases.
a. CITY Release. Except as otherwise provided in this Settlement
Agreement and except with respect to DISTRICT's obligations under this Settlement
Agreement and in the Operating Agreement, CITY (including its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns), hereby releases DISTRICT (and all its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns) from any and all claims, demands, obligations, costs,
expenses, liabilities, causes of action, or rights or interests otherwise—however any of
the same may be characterized ("Claims")—which CITY now has or may have against
DISTRICT regarding, relating to, or arising from. the Action.
b. DISTRICT Release. Except as otherwise provided in this
Settlement Agreement and except with respect to CITY's obligations under this
Settlement Agreement and in the Operating Agreement, DISTRICT (including its
agents, representatives, officers, directors, employees, affiliates, principals,
predecessors, successors, and assigns), hereby releases CITY (and all its agents,
representatives, officers, directors, employees, affiliates, principals, predecessors,
successors, and assigns) from any and all Claims which DISTRICT now has or may
have against CITY regarding, relating to, or arising from the Action.
C. The releases contained herein are collectively referred to as
"Released Claims."
5. Unknown Claims. Except as excluded in this Settlement Agreement and
except with regard to the Parties'respective obligations under this Settlement
Agreement and in the Operating Agreement, the Parties, and each of them,
acknowledge reading and advisement of the provisions of California Civil Code section
1542 (and similar laws of other jurisdictions) and extend the Released Claims to
unknown claims otherwise excluded by that section, which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR
HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
With respect to the Released Claims, each party ai.knowledges there is a risk
that, subsequent to the execution of this Settlement Agreement, it will or may incur
damage or loss that it may deem in some way attributable to the Released Claims, but
which are unknown and unanticipated at the time this Settlement Agreement: is
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executed, or that damages presently known may become progressive, greater,
different, or more serious than is now known, expected or anticipated, or that
facts related to the Released Claims are found hereafter to be in addition to or
different from the facts now believed true. Each party accepts such risks and
agrees this Settlement Agreement, including these releases, shall remain effective
notwithstanding such risks should they materialize.
6. Exclusion frorn Releases.
The releases contained in this Settlement Agreement, including the Released
Claims, shall not extend to:
a. any Claims based on matters revealed by, or adjusted in the process
of producing, the 2016-2017 or 2017.2018 CITY audits of the CITY's Wastewater
Enterprise, and which were not plainly revealed, in the absence of said audits, by
financial or other records obtained by the DISTRICT prior to the Effective Date of this
Settlement Agreement. The releases shall apply to and preclude Claims included in the
Binder A-2 (Work Product Binder) produced by William Holder for his deposition and
shall preclude Claims by either Party for revenue from sewer service fees paid by the
County for sewer service to the County jail through fiscal year ending June 30, 2018
(CITY represents DISTRICT has been credited with such revenue from July 1, 2015-
June 30, 2018);
b. either party exercising the provisions of the Operating Agreement that
authorize them to oppose on any legal, equitable, or factual basis a reorganization
proposed by either party, including the Detachment Proceedings and to prevent any
diminution in the financial benefit to either party under Section 2.a(1) and 2.b(1)
resulting from a proposed reorganization, including the Detachment Proceedings.
Any such dispute under Section 6.b shall be resolved as provided in Section F
of the Operating Agreement and under Section 6.a pursuant to Section II.G.2 of the
Operating Agreement.
Except as provided in the attached Exhibit 1, this release does not apply to or
preclude any Claims by either party regarding any conduct, including conduct similar
to or the same as that embraced by the Action, occurring after the Effective Date.
7. Attorney's Fees & Costs. CITY and DISTRICT shall each bear its own
attorneys'fees, costs, and expenses incurred related to the Action.
8. Warranty of Authority. The Parties, and each of them, warrant and
represent that it has not initiated or heretofore assigned or transferred, or purported
to assign or transfer, to any person or entity not a party hereto, any Released Claim
(or any part or portion thereof} and agrees to indemnify and hold the other harmless j
from and against any claim based on, related to, in connection with, or arising out
of any such assignment or transfer or purported or claimed assignment or transfer.
Individuals executing this Settlement Agreement represent and warrant they maintain
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express authority of the party they represent to execute this Settlement Agreement
and thereby bind said party to its terms.
9. Disclaimer of Liability. The Parties have entered this Agreement to
avoid the further expense and uncertainty of litigation and acknowledge and agree
that execution of this Settlement Agreement is the result of their compromise of
disputed claims and defenses and shall not be considered or admissible as an
admission of liability or wrongdoing for any purpose.
10. Binding Effect. This Settlement Agreement shall be binding on and
inure to the benefit of the successors and assigns of the Parties hereto. Nothing in
this Settlement Agreement, express or implied, is intended to confer upon any
person or entity other than the Parties hereto or their respective successors and
assigns, any rights or benefits under or by reason of this Settlement Agreement.
11. Severability. In the event a provision of this Settlement Agreement, or
portion thereof, is determined unenforceable, the remainder hereof shall not be
affected thereby and each remaining provision or portion thereof shall continue to
be valid and effective and shall be enforceable to the fullest extent permitted by law,
except that no release of any kind shall be effective absent compliance with sections 1-
2 above.
12. Cooperation. The Parties, and each of them, shall promptly act to
facilitate the provisions of this Settlement Agreement and will promptly comply with all
reasonable requests necessary to carry out.its terms.
13. Survival of Rights. Notwithstanding the releases contained herein, all
rights and obligations of the Parties, and each of them, created under or pursuant to
this Settlement Agreement and/or the Operating Agreement, shall survive execution of
this Settlement Agreement.
14. Integration Clause. This Settlement Agreement represents and
contains the entire agreement and understanding among the Parties hereto with
respect to the subject matter of this Settlement Agreement, and supersedes any
and all prior oral and written agreements and understandings, and no
representation, warranty, condition, understanding or agreement of any kind with
respect to the subject matter hereof shall be relied upon by the Parties unless
incorporated herein or contained in the Operating Agreement. This Settlement
Agreement may not be amended or modified except by an express written
agreement signed by the Parties.
15. Construction. This Settlement Agreement shall be interpreted under
the laws of the State of California, except that no law, statutory or otherwise, that
would construe language against a drafting party shall be applied or effective. j
This Settlement Agreement shall be construed as, and shall be deemed, drafted by f
each party hereto.
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16. Representation. The Parties, and each of them, acknowledge entering
this Settlement Agreement voluntarily and of their own free will, absent coercion or
duress and, further, with legal representation of that party's choice.
17. Execution. This Settlement Agreement shall be executed in duplicate
form thereby ensuring an original of it is maintained by each party.
IN WITNESS WHEREOF, the Parties have entered this Settlement Agreement on
the Effective Date and have executed this Settlement Agreement on the dates indicated
below.
CITY OF UKIAH
Dated: October 2018
K&VIN AYSk
Dated: October = , 2018 MTF—ST: E�r,) X\zLl-
r.PLISTINE "69-C17Y dL k
UKIAH VALLEY SANITATION DISTRICT
Dated: October , 2018 C r
Dated: October 2018
�` `- -
e1.Se 7"ea9 u - 1 Ct Clerk
Approved as to form:
Dated: October , 2018 ,
lD IoeTT c oIZNEy
Dated: October , 2018
(Alimi VII l an IPtk�'f1i Li'
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