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Beaverton, CWS, Forest Grove, Washington, County, Hillsboro ~ CITY OF HILLSBORO Water Department �EGE�v�D Date: August 20, 2008 p�G 2 5 200 To: Mayor Rob Drake, City of Beaverton Of S''JaCd Craig Prosser, City of Tigard161stra�+fir Bill Gaffi, Clean Water Service P,01 Jim Love, TVID Michael Sykes, City of Forest Grove Greg DiLoreto, TVWD Robert Davis, Washington County From: Tonya Bilderbeck on behalf of Kevin Hanway Attached is your copy of the final signed MOA from the Title Transfer group that was approved last Fall. Kevin apologizes for his delay in gathering the signatures and distributing it to everyone. Enclosure Cc: David Winship, City of Beaverton Rob Foster, City of Forest Grove Dennis Koellermeier, City of Tigard Tom VanderPlaat, Clean Water Services TUALATIN BASIN WATER SUPPLY PARTNERSHIP MEMORANDUM OF AGREEMENT OCTOBER 31 , 2007 ',,f�f-ami.�� �� ,,:�:%".i`�"��,-,< %:�".:.:- `�,.w,,,�;rr• >-�, ��i13<�, :its.•• ;'�af«s �"' `,'.,,,:, .. ,fit=e, �,y�� ;�f, ax°�� ..'°:£� `�&'• ��.'e'.z'��:,- .. 't�.,*�.;�,�". a r' x: .e,•-'�'J�,�iki_4c3_,�,,: ��� AV :F: .'.':° ��'y�.S��`:; y, d3y°, :;,g• k' tri" 2. ,'a, ,,xe°, o%"� "laf���n5. ��'-�s.-."o-,'., :%F�:•^.,� �.'�\�y�n�yroini��u,i. 3`y'.k.,. �P. L,�?;;r ����a �,(," `=5.,".•'•3,.; ��:'-i °-a•.°..a'?Str mss',' � Sit°"'••r�,s}. F}+e4.,'.i:-:+„ `"gr:is H? �se� �E� .,s�..:. ,.a,«'� � ::.7? ': �5s•, �� � � 'u.ate,. N?.P'?�''S:%;'fin x .�2s ��'��z��,��� .,a��' •(. =•,i" '�i'�st-%s.� `Sr'2�;, n '-.'C- .«caye,�./ �^�'' 07 - e Table of Contents 1) Introduction..............................................................................................................1 2) Areas of Agreement ...................................................................................................2 3) Principles of Agreement..............................................................................................4 Backgroundon the Project.............................................................................................................4 Benefit Statements and Principles of Agreement......................................................................5 Ten Principles of Agreement for the Title Transfer...................................................................7 Four Additional Principles of Agreement for the Water Supply Project...........................10 4) Governance Structure and Operating Framework..........................................................12 Section One: Management and Operations........................................................................... 12 Section Two: Allocation of Water and Water Rights........................................................... 17 SectionThree: Ownership of Assets.......................................................................................... 17 Section Four: Project Funding..................................................................................................... 18 Section Five: Assumption of Liability ........................................................................................20 Section Six: Sales of Excess Water Supply............................................................................20 Section Seven: Provisions for Drought Management.............................................................22 Section Eight: Addition and Withdrawal of Partners............................................................23 Section Nine: Dispute Resolution...............................................................................................23 5) Signatures..............................................................................................................25 Appendix: Statement of Proposed Action 1 ) INTRODUCTION After several months of preliminary discussions, representatives of the Tualatin Basin eater Supply Partners began meeting as a "Governance Task Group." The Task Group was responsible for selecting a governance structure and framework that.would serve to cohesively bind the group together in a manner that will allow for efficient. and effective ownership and management of the Tualatin project. The Task Group inet ten times between June and October 2007. The final product of the Task Group is this Memorandum of Agreement (MOA). The group began its work by clarifying the goals, perceptions, issues, and concerns of each of the represented organizations. This led to the completion, in July 2007, of the Task Group's Principles of Agreement, which are part of this MOA. The Task Group reviewed and evaluated a number of potential governance models as part: of its work; and after significant discussion and debate, determined that a structure similar in form and function to the area's Joint Water Commission would be a governance structure most suited to, and politically accepted by, the partnering agencies. This Governance Structure and Operating Framework is also included in this MOA. '.I.'he participating agencies selected the Tualatin Basin Water Supply Partnership as the title for their new, collaborative management. structure. This Memorandum of Agreentent, which has been signed by all of the represented organizations, is meant to serve as the basis for a more legalistic Intergovernmental Agreement, which will follow. This memorandum contains five agreements among the rhualatin Partners: I. An agreement to continue Lo pursue title transfer of the TualaLirt Project.. 2. An agreementto continue to pursue Lhe potential expansion of the Tnalatirt Project.. 3. An agreement. to abide by the Principles of Agreement as developed by the Governance Task Groep. zk An agreement to abide by the Got%erna.nce Structure n.n.d Operating 1,ramework as developed by the Governance Task Group. S. Art agreement. to coutinue Lo work collaboratively on the "next steps ' required to enact. this TMOA. Memorandum of Agreement 1 Tualatin Basin Water Supply Partnership October 31, 2007 2) AREAS OF AGREEMENT We, the undersigned, as Partners in the Tualatin Basin `dater Supply Partnership, agree to the following: AGREEMENT ONE: THE PARTNERS WILL CONTINUE TO PURSUE TITLE TRANSFER OF THE TUALATIN PROJECT. The Partners recognize the benefits of local ownership and control of the Tualatin Project, which includes Scoggins Dam and its associated facilities. The Partners will continue to work together to foster the successful transfer of the project from the U.S. Bureau of Reclamation to the Tualatin Partnership. This will include participation in meetings and discussions, review of evaluative information as it becomes available, and general good will and political support for the transfer of title. The Partners agree to work actively to ensure that title transfer is successfully completed by March 2008. The Partners recognize that. final decisions on title transfer cannot be made until additional assessments have been completed. These include an assessment of the potential environmental impacts and benefits of the transfer, the costs associated with the transfer, and the liabilities the Tualatin Partnership will assume as a result of title transfer. These evaluations are due to be completed in December 2007. Upon their completion, the Partners will meet to review the data and make the decisions necessary and appropriate regarding the transfer of title. AGREEMENT TWO: THE PARTNERS WILL CONTINUE TO PURSUE THE TUALATIN WATER BASIN SUPPLY PROJECT. The Partners recognize that:there could be significant benefits in increasing the amount of water stored behind Scoggins Dam, and in improving the infrastructure necessary to supply that water to the entities that make up the Tualatin Partnership. The Partners recognize there are a number of unknowns associated with the supply project, including cost, potential environmental impacts and benefits, water allocations, pricing, and numerous other issues. Nonetheless, the Partners agree that the project. is a wortbwhile pursuit. Tim Partners pledge &at My will continue to work in good faith with one another to pursue the project to it successful conclusion. Memorandum of Agreement 2 Tualatin Basin Water Supply Partnership October 31, 2007 AGREEMENT THREE: THE PARTNERS WILL ABIDE BY THE PRINCIPLES OF AGREEMENT THEY HAVE CRAFTED TOGETHER. The Partners acknowledge that they worked in a collaborative; open, incl participative manner to develop the Principles of,4greement included in this 1'10A. The Partners acknowledge that tlue Principles were written to address the nun►erous issues; concerns, and priorities of the various Partners. The Partners pledge that they will uphold these Principles as title transfer and the water supply project continue to be pursued. AGREEMENT FOUR: THE PARTNERS WILL ABIDE BY THE GOVERNANCE STRUCTURE AND OPERATING FRAMEWORK THEY HAVE CRAFTED TOGETHER. The Partners acknowledge that they worked in a collaborative, open, and participative manner to select a governance model that best serves the needs of the entire Partnership. Discussions on that model led to the development of the Governance Structure and Operating Framework included in this MOA. The Partners pledge that, they will uphold the decisions that led to the development of this Governance Structure, and further pledge that the Intergovernmental Agreement will incorporate the precepts included in the Governance Structure. AGREEMENT FIVE: THE PARTNERS WILL ACTIVELY PARTICIPATE IN THE "NEXT STEPS" REQUIRED FOR IMPLEMENTATION OF THE ELEMENTS OUTLINED IN THIS MOA. Those action items include: The formation of an intergovernmental agreement that will incorporate the precepts provided by this Memoranchun of Agreement.. i .Review oC and decisions related to the environmental, cost; and liability impacts associated Nvitb tittle transfer. Continued meetings among Ibe Partners to review new information; developments. outstanding issues, and activities associated with title transfer and tie siipply project. Continued villin ucss tomeet with and brief pemakers at. all levels regarding the 'I'ualat.in Project. and Partnership. Memorandum of Agreement 3 Tualatin Basin Water Supply Partnership October 31, 2007 3) PRINCIPLES OF AGREEMENT BACKGROUND ON THE PROJECT The Tualatin Partnership is currently comprised of the cities of Beaverton, Forest. Grove, Millsboro and Tigard, Clean Water Services, the Tualatin Valley Water District (TVID), the Tualatin Valley Irrigation District., Washington County, and the Lake Oswego Corporation. These nine Partners have worked together over the past year to develop a governance agreement that will enable them to assume ownership of the Tualatin Project - Scoggins Dain and its associated facilities - from the U.S. Bureau of Reclamation. While numerous benefits will be achieved through title transfer alone, a number of the Partners are actively pursuing, and hope to invest in, the Tualatin Water Supply Project, which would raise the level of Scoggins Dam, and would provide a substantial new source of water supply. Each of the Partners appointed representatives to the Tualatin Partners Governance Task Group, which began working together in June 2007 to collaborate, and agree on, a new governance structure. The Task Group developed these draft Principles of Agreement during July 2007. These Principles were followed, in turn by the development of a Governance Structure and Operating Framework, which is also included in this Memorandum of Agreement. As background on the overall effort, it is helpful to first understand the interests of the various parties involved. Currently The Tualatin Valley Irrigation District. is contracted to use 27,022 acre/feet of the stored hater in Flagg Lake (the water reservoir behind Scoggins Dain). TVLD is satisfied with its existing contracts with the Bureau of Reclamation. TV[1) does not need additional water and has no plans to invest in the new water supply project. Likewise, the Lake Oswego Corporal ion, which has an existing contract with the Bureau for 500 acre/feet of the stored watervolmne, has not committed funding toward the new water supply project at this point. Memorandum of Agreement 4 Tualatin Basin Water Supply Partnership October 31, 2007 Washington County does riot have contracts for any of the stored water in Flagg Lake, but.it does lease property front the Bureau of Reclamation for County park facilities. It. does not plan to invest in the wager supply project, and will want assurances from the Partnership that t.lte original project.purpose of recreation continues to be recognized, and that those park facilities will be replaced if the dlaut is raised. These three entities are commonly referred to as "repayinent contractors," since they have remaining loan payments to, and existing contracts with. the Bureau of Reclan►ation. The other Partners plan to invest in the new water supply project, which is currently estimated to cost.between $300-$400 million. The Tualatin Valley Water District (TVWD) proposes to invest the most inoney; current plans are for the TVWD to own up to 44% of the new Nvater supply project. The other investors in the new water supply project include the cities of Hillsboro, Beaverton, Tigard and Forest. Grove, as well as Clean Water Services. With the exception of Tigard and TVWD, all of these entities also have existing water supply contracts Nvith the Bnrcan of Reclamation for water stored in .Flagg Lake. The proposed percentage of their new investments in the water supply project varies front 1-50%, based on the volume of water that. Nvill be available once the dam is raised. TVWD, Hillsboro, Beaverton, and Tigard are in need of new water supplies in the imnnedliate future, ranging from 2016 to 2020. Forest Grove will not need additional water for an estimated 30-35 years. Clean Water Services (CWS) is a public utility committed to protecting water resources in the Tualatin Watershed. In order to protect watershed health, CWS releases water from Hagg Lake to enhance the ecological functions of the Tualatin River and its tributaries. It regnires that. there, be adequate storage capacity in Hagg Lake to ensure sufficient ecological stream flows throughout. the basin during cri►.ical periods of the year. C\\7S is cnrrent.ly under contract with the Bureau for 12,618 acre/feet. of the stored water at Flagg Lalce. In a sense, then, it is nseful to view the part.ners through two different lenses— those with existing_ contracts and nto immediate need for additional supplies— the "repavment contractors" and those we u►ight terns new investors," which an, the entities that, are actively pursuing both t.hr, title transfer and the water supply project. BENEFIT STATEMENTS AND PRINCIPLES OF AGREEMENT These Principles ofA reennent. will serve as a fram►eworlc for hoNv the nine Partners will world together over the long terms Lo manage the water supply provided by the Cualat.in Project. 'Chew Principles also served as the starting point for the Task Group's Governance Structure and Operating Framework, which was completed in Memorandum of Agreement 5 Tualatin Basin Water Supply Partnership October 31, 2007 September 2007. As it initiated its work, the Task Group also developed a number of benefit statements associated with► the title transfer and tl►e water supply project.. Benefit Statement: What will the Tualatin Basin gain through title transfer? Even without the new water supply project, tittle transfer of the Tualat in project will be beneficial: i It will provide the participating entities with local control over the source of supply. ➢ It will build ownership equity in the Scoggins Dan► system. The local Partners will own the system, rather than lease water from the .Bureau of Reclamation. It allows for the entities with existing contracts, and sorne amount of excess water, to buy, sell, lease, and/or trade that water directly to the other Partners. i Title transfer enables the participating Partners to greatly increase the flexibility with which they can manage their water resources, enabling them to move water where and when it: is needed the most for a wide variety of needs, ranging from drinking water to irrigation to the improvement of water quality in the Tualatin River. Local ownership will allow the Tualatin Partners to integrate the operation of Scoggins Dam with other water supply resources for enhanced efficiency. ➢ Title transfer allows the Partners to obtain ownership of a water supply system at a very low relative cost.. It is also likely to allow those Partners to make structural and other improvements to the existing dam more quickly, efficiently and inexpensively than could be achieved through the current: arrangement.with the federal government. i In general, title transfer will enable the.partners to manage the dam and its associated facilities with greater cost and operational efficiency. i Local ownership will enable the Partners to significantly increase their ability to share and trade staff resources, expertise. and technological cal:►abihties among all of the entities involved. Benefit Statement: What will the Tualatin Basin gain through the new water supply project? If the new water supply project is built., all of t.he'benefit.s associated with 1.1de transfer will continue to remain in effect.. In addition, the water supply project. will benefit the Partners by: i It, will significantly increase the voluu►e of NVat:cr available t.o the entities which need that. water. i The project will enhance, the overall reliability of the water supply; and will greatly increase operational flexibility— there �Vlll be more supply to n►eet the growing needs of tl►c region. Memorandum of Agreement 6 Tualatin Basin Water Supply Partnership October 31, 2007 Design and construction of the new dam can be achieved at a substantial cost and time savings if it is accomplished through a locally-controlled management authority. Current estimates are that the project can be designed and built within six years; which is estimated to be three years shorter in duration than the construction time required with the federal governnnent in control. Current estiniates of the potential cost: savings achievable through local control range from $30-$40 million. TEN PRINCIPLES OF AGREEMENT FOR THE TITLE TRANSFER The nine participating Partners have agreed to the following ten principles related to title transfer: 1) All Partners will be made whole. The benefits and costs of each Partner's participation in the long-term water supply Partnership will be thoroughly evaluated. All Partners will be made whole—that is, no Partner will be asked to sacrifice an existing water supply, pay a disproportionate share for their water, or otherwise -lose" any existing benefit by participating in the Partnership. By joining the Partnership for the long term, no single entity is going to be worse off than they are today, and the ultimate goal of the Partnership is to ensure that those entities enjoy substantial benefits. This is a bottom-line criterion for the entire Tualatin Basin Water Supply Partnership. The Partnership will continually question and check itself: /lave all of the Partners been made whole as ive are moving ahead? 2) The Tualatin Partnership will provide liability protection. .Existing repayinent contractors will be protected against liability to the same degree they are currently protected throl.igh the Bureau of Reclamation. For example, all entities wit h current contracts are protected from lawsuits that. could occur related to earthquake or flood damage. Protection against. those disasters, as NNIell as any other risl: protection currently provided by the Burean, will be maintained by the Tualatin Partnership. Sonne risks are notcln'rently protected by the Bureau, and those risks will continue to remain 1ulprotect.ed. For example, if drought conditions prohibit. Clic (1,1111 from being filled, neither the Bureau nor the Tualatin Valley Irrigation District can be held liable for the financial losses that might. be associated with crop failure. Likewise, the Tualatin Partnership will not. provide anv type of liability protection that. is currently not provided by the 1311reau of Reclainal:ion. Existing responsibilities will also remain in force and will not be covered by the Tualatin Partnership. For example, Washington County is responsible for Memorandum of Agreement 7 Tualatin Basin Water Supply Partnership October 31, 2007 insuring itself against any lawsuits that could arise if park users are injured. The County's risk responsibilities, as well as the current risk responsibilities of any of the other entities, will not change under the tide transfer. Bottoun line: Liability risks that are currently protected by the Bureau of Recla►nation Nvill continue to be covered by the Tualatin Partnership. Liability risks that are currently the responsibility of the individual partner entities will remain the responsibility of those entities. This Principle has also been included in the Governance Structure and Operating Framework. fork Nvill continue between October-December 2007 to further define the risks, liabilities, and insurance necessary to manage the liability associated with title transfer. 3) Power costs will remain stable. Federal law allows the Tualatin Valley Irrigation District access to power from the Bonneville PoNver Administration at cost, plus a I'ec for wheeling the power to the TVID by a local utility. This is a significant. cost benefit for the TVID, and one that will continue to be maintained in the future. The Tualatin Partnership will Nvork closely with the Bureau of Reclamation to understand the options related to power supply costs as the title transfer transaction is developed. Through these negotiations, the Tualatin Partnership will find a way to assure the TVID of its current power rate, plus or minus any normal changes to the BPA and wheeling costs. This is implicit through Principle #1, which is to make all of the Partners whole. l.nvestigatioits will continue throughout 2007 to determine whether the BPA subsidy will be available after title transfer. lythe subsidy will not be available, Lhe Partnership will work to determine how those power costs can be assn►ned as part. of'overall project costs. 4) Access to fundamental water supplies will he protected. Every participating entity will have guaranteed access t-o the same proportion of water it. noNv has under contract. with the Burean. Furthermore, dial access Nvill be guaranteed in the same prioril.y order ciirrewfy in place through the BUI-Can of Reclaination contracts. Details o1't.hese water allocations are included in the Governance Stractare arid Operatin,) Framework. 5) Regulatory and other obligations will he, fulfilled. The Bureau of Reclamation currently abides by it uuniber ol'regulatory mandates Him govern hoNv the dans is managed and operated. These include federal and state statutes, as well as cuvironnicntal obligations, for example habitat mitigation and the protection of fish species and elle herds. Any and all regulatory obligations currently fulfilled by the Bureau of'Reclamation will Memorandum of Agreement 8 Tualatin Basin Water Supply Partnership October 31, 2007 continue to be fulfilled by the Tualatin Partnership. These obligations are identified in the Governance Structttre and Operating Fra.rnework. 6) Washington Connty's recreational resources will be ►maintained. Currently, the public has access to recreational resources arolmd Flagg Lake, Nvhich Washington County maintains. Under title transfer, the Tualatin Partnership will support access to these existing recreational resources. Likewise, the Partners have connnit.ted to a strong, ongoing communication effort with homeowners in close proximity to the lake. The communication program will be instrumental in sustaining positive relationships with the public. The details of public access to Lite park and recreational facilities at Hagg Lake are included in the Governance Structure and Operating Framework. 7) Drought plans will be established. A central question for the Partnership is.what happens if and when Scoggins Dain cannot be completely filled dne to drought, conditions. Which of the Partners will take cuts in their water allocations, and how will those decisions be made? The principles for a drought management plan are included in the Governance Structure and Operating Framework. As the Partners continue to work together in managing and operating the Tualatin Project., they will frnrther refine this drought. management, plan. 8) Water sales and transfers will be facilitated through the Partnershiu. One of the major benefits of the Partnership is to share and transfer water to where it, is needed the inose. The Partnership agreement has been st.rucnired in away that, allows for chc sale, transfer, and wheeling of water from one Partner to another. WIt.h local control and collaboration, it is anticipated that the Partners will be able to i►ore readily move water to acconunodate the needs of the region as it whole— whether it. be for drinking water, other municipal water uses, irrigation; or wat.cr quality. Core eleireits of water leasing, sales, and transfers are included in I lie Covernance Structhtre acrd Operating Framework. As I Ire Partners cont.ir►ue 1.0 work t.ogct her in managing and operating the Tualatin Project., they will farther refine the details of these agreements. 9) Partners can enter and exit as necessary. Although the title transfer is being accomplished through the Partners ciirrent:ly at the table, it. is ant.ieipat.ed that other entities iiay be added to the Tualatin Partnership as tune passes, and especially if the water supply project is pursued. The governance agreement agreed to by the Partnership includes Memorandum of Agreement 9 Tualatin Basin Water Supply Partnership October 31, 2007 the flexibility for new entities to join, and for existing Partners to exit should they find it necessary to do so. Basic principles related to new and/or exiting members of the Partnership are included in the, Governance Structure and Operating Frarneiuork. 10)Partners will have the first right of refusal. This will occur on two different levels. First., if any of the Partners have water available to lease or sell, the governance agreement requires them to offer the water first to the other Partners, before pursuing outside buyers. Secondly, if an entity wishes to exit the Partnership altogether, the governance agreement requires that entity to offer its ownership shares first to other Partners; before pursuing an outside buyer. This Principle is included in the Governance Structure and Operating Framework. FOUR ADDITIONAL PRINCIPLES OF AGREEMENT FOR THE WATER SUPPLY PROJECT The Partners have agreed to the following four principles related to the water supply project: 1) Title Transfer principles will remain in force. All of the principles that have been agreed to for the tittle transfer will be adhered to for any new projects or other improvements associated with Scoggins Dam. 2)Park reconstruction costs will be paid for by the new entity. If the darn is raised,the ability of-Washington County to provide access to park facilities at. [-Tagg Lake will be inipact.ed. The Partnership agrees that it will pay for the design and construction costs io replace these park facilities. The Partnership~rill also compensate the County for any revenue losses it experiences during construction of the new dans and new part: facilities. Details of the financing, design, and construction required for park replacement will be deterinined as part. of Ole overall cost. esii►nat.ing for the dans raise. 3) Otber water rights will be protected. The Tualatin Partnership recognizes Ihai sonic of the individual Partners may_ have existing or pending water rights in the region. 'I'he Partners will work in collaboration with one another to address issues and opportunities related to these water rights. One exa►nple of tliis is the pending Gales Creek wager right certification currently being pursued by the City of Forest Grove. Forest. Grove and Clean Water Services will work together to find a mutually 1 Memorandum of Agreement 10 Tualatin Basin Water Supply Partnership October 31, 2007 beneficial arrangement that meets Forest Grove's future water supply needs; as well as Clean eater Services' environmental goals. Other such water right decisions are likely to arise from time to time throughout tl►e life of the Partnership, and will continue to be addressed on a case-by-base basis. 4) "New water/old water"agreements will be forged in advance of the darn raise. If the dam is raised, there will be a significant new amount. of"new water" available to the Partners. A primary concern among the Partners has been the way in which►water rates for the existing entities vs. the new investors would be determined. Another concern has been the overall reliability of the new supply—what, happens in those years when we cannot completely fill the dam? Would those entities with existing contracts be fully guaranteed their supplies, and would the supply for new investors be interrupted as a result? Conversely- how onversely_ ,how will overuse be monitored and enforced? '.l'o answer ►.hese concerns, the Partners will continue to explore various mechanis►ns for how to identify and allocate the water that will be available once the dam is raised. During their August. 2007 meetings, the Partners determined that the final details of these allocations can be worked out after title transfer has been completed, especially with the reassurance provided b, Agreement. 'I'wo, that. the,Partnership would continue to act in good faith to pursue the water supply project together. Memorandum of Agreement 1 1 Tualatin Basin Water Supply Partnership October 31, 2007 4) GOVERNANCE STRUCTURE AND OPERATING FRAMEWORK SECTION ONE: MANAGEMENT AND OPERATIONS 1) Purpose The Tualatin Basin Water Supply Partnership has been formed for the following purposes: ➢ Assume ownership of the Tualatin Project (Scoggins Dam and its associated facilities) from the U.S. Bureau of Reclamation. Manage and operate Scoggins Dam according to the best interests of all of'the Partners. At a minimum, this means that the Partners Will have the right to continue to receive the amount of water they are currently allocated from Hagg Lake, and that they will be able to continue to lease any excess water for their own financial benefit. i Comply with the regulatory, iningation, and operational responsibilities as detailed in the Statement of Proposed Action between the Partnership and the Bureau of Reclamation. The Proposed Action is attached as art appendix to the Memorandum of Agreement. i Establish a drought management plan. It. %vill be a primary responsibility of the Partnership to develop and implement a drought management plan that will guide water distribution in years of'sbort supply. i Conduct all operations according to the Principles of Agreement that have been developed by the .Partnership. TI►e Principles of Agreement are included in this Memorandum of Agreement. .� Pursue additional water supplies in the future to meet the economic and ecological needs of the 'I'ualat.in Watersbed. One option under consideration is cite expansion of Scoggins Dain/Hagg Lake. 2) Partner Signatories to the Intergovernmental Agreement 'I'bc Tualatin Basin Nater Supple Partnership is comprised of'tbe 1'01lowing Partners: i Tualatin Valle- Irrigation District. i Tualatin Valley Water District. %- Cit.- of Hillsboro City of Beaverton i Cite of Tigard i City of Forest Grove i Clean Nater Services i- Washington County Memorandum of Agreement 12 Tualatin Basin Water Supply Partnership October 31, 2007 Under this governance structure, all of the Partners will work collaboratively to manage the water supply stored in Hagg Lake, including distribution and leasing for municipal water supplies; for irrigation, and for ecological instream flows that support. the health of tl►e Tualatin Watershed. Lake Oswego Corporation will have a seat on the board as a non-voting representative, not: counted for quorum pnrposes. 3) Structure for Shared Ownership The Tualatin Partnership has entered into a "shared ownership agreement" that is structured according to the following: i A governing body consisting of appointed representatives of each Governing member agency to provide broad policy oversight and to provide a Body public forum for discussion of 1SSUCS. i A management committee with general manager level Management representatives from each agency to negotiate policy and to establish Committee planning priorities. A technical/operations committee with representatives of eachPC, perations agency to develop the irnplernentation details of budgets, operationsommittee and projects; and witl► management provided by a managing agency, selected fron► among the member agencies. Each of the Partners will hold an interest. in the Tualatin Project's facilities and land once title transfer has been completed. 4) Continued Exploration of Regional Ownership Although the governance structure outlined in this document has been agreed to by the Tualatin Partnership, the Partners also recognize the potential for possible benefits t hrough the establishment of a separate "supply agency" governance st.ri►ct.tn•e. In acknowledgen►ent of tl►ese possible benefits, the Partners will continue 1.0 explore the financial and management feasibility ol'such a snpply agency, or of any other governance, stru(A.iire that.can best. meet, Lite long-ter111 water management. interest's and dcu►ands tbroughow the region. Work to evaluat.e the potential benefits and costs ol'such it structure will commence in 2008. 5) Functions of the Governing Body 'I'be governing Iaody for the Tualatin Basin Water S►ipply Partnership will consist of one voting member and no u►ore than two alternates frons each of the participating Partners. These nienibers n►ust. be appoint.ecl by cael► of tl►e Partners. Nlembers of 1.11e governing body must have the authority froin their appointing agencies Lo approve t.be highest.-level policy and financial decisions that may be made by t.l►c Partnership. At. least one representative from each of the Partners ►oust. be in at.t.endance at. nicet.ings ofthe governing body in order to constitute a quorum of the Memorandum of Agreement 13 Tualatin Basin Water Supply Partnership October 31, 2007 governing body. The governing body will meet as needed; at a minimum on a quarterly basis. Although mane decisions from the governing body will be determined through a simple majority vote, some of the group's decisions must have unanimous approval in order to be enacted. The Partners have tentatively identified the following list of those items that will reclnire nnanimous approval. This list 1v111 continue to be refined tbronghont the development of the Intergovernmental Agreement. ➢ The annual budget of the .Partnership ➢ Annual work plan and capital improvement plan ➢ Selection of the managing agency for the Partnership ➢ Recommendations for changes to the Partnership's Intergovernmental Agreement ➢ Changes to contracts let by the Partnership to various parties ➢ Sales of real estate or other Partnership assets ➢ Changes to the members of the Partnership ➢ Permanent changes to the water allocations for various Partners ➢ Drought management. plan ➢ Policies related to, and leases of, excess water It.is recognized that new, major capital investments will be necessary should the Partnership decide to expand the capacity of Scoggins Darn and/or its related facilities. If these capital investments are pursued, only those Partners that will invest in and benefit from the improvements will vote on those capital expenditures. As noted in the "made whole" concept embedded in the Partnership's Principles of A,reement, any new facilities cannot be built or operated to tyre detriment.of'any of the Partners associated with this agreement. There call be no firture impairments to the assets and rights that. are guaranteed under current contractual agreements with the l3►u•ean of Reclamation. The Partnership rna), find that; as Scoggins Dam is being expanded, and after the improve►nents have been made, farther ref'inenicnt.s to the voting procedures of'tl►c Partnership's governing bode are required. II'necdcd, and by mutual consent, the Partnership will review the role of the governing bod), and make these adjlist mient.s. 6) Functions of the Managing Agency hhe governing body of'the Tnalatin Partuersl►ip niay appoint a 1Vlanaging Agency fro►n among t he Partners, or may elect. to hire a General Manager and associated staff to serve in tl►e Management role. The lllanaging Agency/General Manager will bane I'll(- power to approve contracts and change orders consistent with adopt.ed purchasing rules, take actions that are reasonable and necessary during an emergency, and assume any other powers the Tnalatin Partnership u►ay grant. Memorandum of Agreement 14 Tualatin Basin Water Supply Partnership October 31, 2007 7) Functions of the Management Committee Each of the Partners will appoint its Chief Executive Officer or their designee to serve on the Nfanagement. Committee. The Management Committee will review the business operations of the Tnalatin Partnership, such as planning and operations. and will make recommendations to the General Manager. The Management Committee will meet as needed, at a minimum on a gnarterly basis. Lake Oswego Corporation will have a seat on the Management. Committee as a non- voting representative, not counted for quornin purposes. 8) Functions of the Operations Committee Each of the Partners will appoint at least one person to the Operations Coin mittee. Each Partner will have one vote in making a recommendation to the Management Committee. Lake Oswego Corporation will appoint a non-voting member to the Operations Committee. The Operations Committee will meet as needed: at a minimum on a gnarterly basis. 9) Asset Management Program The Partnership will thoroughly inventory all of the assets associated with the Tnalatin Project; including physical facilities and real estate holdings. The Partnership will create an asset management program that describes the current conditions of these facilities, their current valne, and repairs and replacements that may be necessary. The program will include a schedule for repairs and replacement of the project's facilities. The Partnership will create policies that guide this repair and replacement as part of the asset management program. 10) Operations Manual The Partners will write and agree on an Operations Manual for the System, which will include protocols and methodology to provide for the egnit.able, effective, and efficient. operation of the Tnalatin Project.. The existing Burean of Reclamation uiannal will be modified as necessary and adopted wilhin two months of the assumpt.ion of title. transfer, and will be npdated periodically thereafter as needed, with not less than two years between updates. 1 1 ) Contract with Washington County The Partnership will maintain a contract. with Washington Connty for the ongoing maintenance of the recreational facilities at Scoggins Vallcy Park. The Partnership and Washington Connty may elect to adopt. the existing contract as established between Washington Comity and the Bureau of' Reelain lit 1011. or to negotiate it new contract. Either way. the Comity's role in managing t he facilit ies and park areas will Memorandum of Agreement 15 Tualatin Basin Water Supply Partnership October 31, 2007 not: be diminished. If Scoggins Dam is raised and the recreational facilities need to be replaced, the Tnalatin Partnership will pay for this replacement. 12) Interests of the Lake Oswego Corporation The Partnership will continue discussions about, the appropriate structure for its relationship with the Lake Oswego Corporation. In addition to the options of assigning to the Partnership Lhe existing contract between the Lake Oswego Corporation and the Bureau of Reclamation or of creating a new contract with the Partnership, other options for the involvement of the Lake Oswego Corporation in the governance structure will be discussed. 13) Agreement to Abide by all Other Existing Contracts and/or Obligations The U.S. Bureau of Reclamation currently maintains operational and other contractual obligations with a variety of agencies, including, but not limited to, the following: :- Dam Operations contract with TVID i Water Service contracts - Pumpkin Ridge, The Reserve Golf Course and Stimson Lumber i License Agreement for Soil Disposal with Washington County i Flood Control Agreement - Army Corps of Engineers i Electrical Power - wheeling contract with PGE and TVID Existing Operations Mitigation contract with Tualatin Basin Watershed Council and Washington County i Existing Elk Mitigation Contract i National Historic Preservation Act, National Environmental Protection Act., .Endangered Species Act., Indian Trust Resources; Safe Drinking Water Act. The rights and obligations inherent in these contracts will continue to be fulfilled by Hie Partnership. Tlie Partnership will work with the Bin-eau of' Reclamation Lo deternmic how to best. assnme these obligations. either through the assignment of existing contracts, or through the creation of new contracts with the various entities involved. Memorandum of Agreement 16 Tualatin Basin Water Supply Partnership October 31, 2007 SECTION TWO: ALLOCATION OF WATER AND WATER RIGHTS 1) Allocation of Water Under this agreement, all of the Tualatin Partners currently receiving water from Scoggins Dam will continue to have the right to receive that water in the allocations they are currently contracted for with the Bureau of Reclamation. These Hagg Lake "stored water" allocations—out of a total of 53,640 acre/feet -- include: i Tualatin Valley Irrigation District: 27,022 acre/feet ➢ Clean Water Services: 12,618 acre/feet ➢ City of Hillsboro: 5,000 acre/feet Y City of Forest Grove: 4,500 acre/feet City of Beaverton: 4,000 acre/feet ➢ Lake OsNvego Corporation: 500 acre/feet These numbers do not account, for the natural and return flows allocated to TVID and CWS, which contribute to the total allocated stored Nvater amount of 53,640 acre/feet. The current. allocations of natural flows to CWS and TVID will not change. 2) Water Rights The primary natural flow and stored water rights currently owned by the Bureau of Reclamation will be assigned to the Tualatin Partnership. The Partnership will continue to own these water rights in perpetuity. SECTION THREE: OWNERSHIP OF ASSETS 1) Owned Assets The Tualatin Project consists ofthree tangible assets for the Partnership. 1) a blocl: of stored water in Flagg Lake (as described in Section Two): 2) a number of physical facilities (listed below); and 3) Hagg Lake and the adjacent. property, (also described below). Ownership of Scoggins Dani and Henry Hagg Lake will need to be negotiated before title transfer. As identified below, the Patton Valley and Spring 1-1111 plants are single-pnrpose facilities whose ownership will, most likely, remain the same after title transfer. The assets known at this time include: i Patton Valley Pumping Plant (single purpose): Real estate parcels, five vertical shaft. turbine pumps, fish screens, a steel discharge line., regulating tank. and a 3.5-utile gravity-fed distribution pipeline. Memorandum of Agreement 17 Tualatin Basin Water Supply Partnership October 31, 2007 j ➢ Spring Hill Pumping Plant (single purpose): Real estate parcels, nine irrigation pumps, four municipal/industrial pumps (currently owned by JWC); fish screens; it discharge line, regulating tank; and a 95mile buried pressure pipeline distribution system. Scoggins Dam (multiple purpose): a 1.51-foot-high zoned earthfill structure. its spil]Nvay, intake structure and outlet Nvorks. A fish collection facility at tie dam bas been partially removed and is not currently in rise. Henry Hagg Lake and its adjaeent property: A 1.182-acre water reservoir, surrounding lands in Federal ownership. including elk mitigation lands; recreational facilities and a perimeter road (currently operated and maintained by Washington County). As noted in Section One of this agreement, an Asset Management Program will be established to inventory and quantify the value of these, and any other assets that: are included in the Tualatin Project. These assets will be jointly owned by the Partnership. SECTION FOUR: PROJECT FUNDING 1) Background The Partners endeavor to develop an equitable method to allocate the costs of title transfer. In order for the benefits of title transfer to outNveigh the costs in the long run; including costs of financial resources, risks and new assumed liabilities.the Partners agree the method of allocating costs for title transfer must also give consideration to raising Scoggins Darn. While there are potential benefits to title transfer without raising Scoggins Dam. the principal benefits accrne in terms of the cost savings of raising Scoggins Dari. Recognizing that. one shared pool is more aclvantageorrs to the Partners acquiring water or significanl.ly increasing Iheir current water allocation, die parties agree that. sonic 1,01-111 of conrpensatioi for I he current. nnulicipal water right holders is appropriate. Therefore, the two projects of transferring title and raising Scoggius Dank are conrbiicd in the discussion of a cost allocation methodology. There are four foundational components to consider in developing a cost. allocation methodology: 1) the amount paid by Partners for their contracted water allocations; 2) the debt outstanding by Partners for Iheir contracted water allocations; 3) the percent of water held by each Partner behind the current 'dam: 4.) [lie percentof water that will potentially be held by I.he Partners who invest in the raising o 'Scoggins darn. Memorandum of Agreement 18 Tualatin Basin Water Supply Partnership October 31, 2007 The costs to be allocated can be broken down into the following categories: Y Debt outstanding from the existing water allocation contracts; i Costs for refinancing this debt to pay the Bureau of Reclamatiou; i Potential costs for capital improvements on the current dam; i Other costs associated with title transfer (e.g. environmental review, legal costs, etc); i Payment to the Bureau of Reclamation for revenue foregone on contracts; i Estimated cost to raise Scoggins Dam. 2) Funding Principles The Tualatin Partners have established the following principles related to funding: 1) The Partnership recognizes that repayment contractors have already made investments in Scoggins Dam. For those repayment contractors that are participating in the dam raise project, some amount of credit.toward the construction of the clam raise will be allocated to those repayment contractors. The credit will be funded by the "new partners" in the dam raise project (partners who are not currently repayment contractors). For example, as a new partner, TVWD will pay $2.7 million toward this credit. If the members of the Partnership change, or if water allocations between Partners change,the manner in which the credits are funded may also be subject to change. 2) Repayment contractors will be required to continue payments according to the amount they current]), owe t.o the U.S. Bureau of Reclamation. While the Partnership will be paying off all remaining debt to the Bureau, the Partnership, in effect, becomes the "bank" that is loaning the money to the repayment contractors. The new bands will expect to be repaid for this loan; repayment contractors will make their payments to a new, single entity, which is the Partnership. 3) Repayment contractors will continue to pay on these loans att the same interest rate, and on the swine payment schedule, as they are currently paying. The Partnership will not raise the interest rate, even though, as it assumes the remaining debt ioilte Bureau, it is likely to do so at a higher interest rate than what is currently being paid. 4) The money that k collected as a result of these loans will be paid back to those who invest in the title transfer in proportion to their investments. That is, the "cash ]low" resulting from loan repayments will be allocates] to each entity in proportion to what. t.hev have paid for title transfer. 5) Those who are investing for the first time in Scoggins Dam (the new Partucrs) do not want to move forward with their investment unless they can be assured that, once the dam is raised, all water from the expansion reservoir volume and from the original Memorandum of Agreement 19 Tualatin Basin Water Supply Partnership October 31, 2007 reservoir volume held by those original repaymea contractors who share in the credit payment will be available as a '`single pool". This means that all participating entities will share the "gain" of the additional water supply, as N�,ell as the "pain" should any curtailments be necessary in the fi.rture due to drought. conditions. While the single pool remains the ulti►nate goal of the Partnership, it is recognized that several issues must be resolved before a single pool can be agreed to by all of the Partners. One example of this is the pending Gales Creek water right certification currently being pursued by the City of Forest Grove. Forest Grove and Clean Water Services will work together to find a mutually beneficial arrangement that meets Forest Grove's future water supply needs, as well as Clean Nater Services' environmental goals. `.Chose discussions are underway now, and a final resolution to this issue will be achieved between Forest. Grove and CWS by January 31, 2008. Likewise, other Partners have questions about how a "single pool" will be defined, particularly in relation to the pumpback water, flood control releases, and curtailments. For example, what will "share the pain" mean, and how will curtailments in response to drought conditions be determined? These and other questions are all important, and must be addressed prior to title transfer. All Partners will continue to work on resolution to these and any additional issues related to a single pool, and are committed to having final solutions to these issues in place by January 31, 2008. SECTION FIVE: ASSUMPTION OF LIABILITY Existing repayment contractors will be protected against. liability to the same degree they are currently protected through the Bureau of Reclamation. For example, all entities widt current. contracts are protected from la%vsuits that could occur related to earthquake or flood damage. Protection against those disasters, as well as any other risk protection currently provided by the Bmvau, will be maintained by the Tualatin Partnership. Some risks are not currently protected by the Bureau, and those risks will continue to remain unprotecl.ed. For example, Tdroughtconditions prohibit the dau► from being filled. neither the Bureau nor the Tnalatin Valley Irrigation District can be held liable for the financial losses that. Wright be associated with crop failure. Likewise, the TnaGM Partnership will ►►ot provide any type of liability prot.ec6on that is currently not provided by the Bureau of Reclamation. Existing responsibilities will also remain in force and will not be covered by the Tualatin Partnership. For example, Washington Count.), is responsible for insuring itself against any lawsuits that- could arise if pail: risers arc injured. The County's risk responsibilities, as well as the cru rent. risk responsibilities of any of the other entities, will not change under the title transfer. Memorandum of Agreement 20 Tualatin Basin Water Supply Partnership October 31, 2007 Bottom line: Liability risks that are currently protected by the Bureau of Reclamation will continue to be covered by the Tualatin Partnership. Liability risks that are currently the responsibility of the individual partner entities will remain the responsibility of those entities. This Principle has also been included in the Governance Structure(vtd Operating Frarn.ework. Work will continue between October-December 2007 to fumler define the risks, liabilities, and insurance necessary to manage the liability associated with title transfer. SECTION SIX: SALES OF EXCESS WATER SUPPLY 1) Long-Term Leases The Partners agree that mandatory leasing between Partners of excess stored water capacity allows the Partners to defer expansion or construction of new facilities: Each Partner will have the right. to lease its unused capacity above the Partner's stored water requirements for the term of the lease. If more than one Partner has excess capacity available to lease, those Partners will combine their excess water into a single pool. Through a unanimous vote of the governing body, the Partnership will determine the leasing rage for this water, which will generally be based on the cost,of producing that. water. Individual Partners will then receive revenue for these leases based on the amount of water they contributed to the pool. Example: TVID desires to lease 5,000 acre/feet of excess water capacil:y. The Cities of Hillsboro and Forest Grove each desire to lease 2,500 acre/feet.. This excess water is combined for an available leasing pool of' 10,000 acre/feet.. 8,000 out. of this 1.0,000 acre/feet is actually leased, and becomes a source of revenue for the Partnership. After overhead and distribution costs are subtracted, the net proceeds frons the leased water are. divided among TVI D, Hd1shoro, and (sorest. Grove. TVID receives % of these net proceeds, with [I illsboro and Forest Grove each receiving % of these net proceeds, coi n iensurate with the voh"ne of water they initially contributed to the leasing pool. The TnAat in Partners will have first right of refusal for any leasing agreciond; that is, Partners with excess capacity nurst offer that water first to other Partners before going outside of the Partnership. And, as noted previously in this document, leases by any Part.ncr to entities outside on he Partnership must be approved by a unanimous vote of the governing bode. The maxk"mi lease terra is 10 years. The lease rate will be calculated every 5 years for leases with terms exceeding"5 years. Memorandum of Agreement 21 Tualatin Basin Water Supply Partnership October 31, 2007 2) Spot-Market Sales The Partnership recognizes that there may be opportunities to sell excess water through a "spot, market" system that will be shorter in duration than the lease arrangements described above. This system will be designed to respond to short-term. immediate needs. Example: ]'here may be a period of particularly serious low flows in the Tualatin Fiver which conld be ameliorated through the infusion of snore %�,atcr into the river system. In this case, Clean Water Services may ask to purchase water from the Partnership in order to improve these stream flows. As with leasing, the Partnership will act collectively to determine which of the Partners may have excess capacity to sell on a spot market, how much water is available, and what the rate for that water should be. Similar to the leasing arrangements described above. the net proceeds from this water will be proportionally divided among those Partners that initially contributed to the spot-market pool. SECTION SEVEN: PROVISIONS FOR DROUGHT MANAGEMENT 1) Curtailment Plan with Existing Scoggins Dam Facilities The potential curtailinent of water supplies during hot, dry conditions will be planned for and enacted according to three different stages: Stage One: Water Shortage Potential. A water shortage potential is identified when storage supplies begin to drop and weather forecasts predict trot., dry weather over a period of several days. At this stage, the goal is to reduce overall demand on the syst.t:rn by 5%,. This will be achieved by alerting the public ()[1.11C need to cut back on water Ilse. Stage Two: Serious Water Shortage. Storage level drops to 60% of nornial. Weather forecast. is hot, dry. By 11Iay L Flagg Lake is not filled to capacity. Ai. this stage, the 'I'ualarin Valley Irrigation District and Clean Water Services crirtail not more than 15% of their total contracted amount. Stage Three: Critical Nater Shortage. Storage level drops below 60% of normal, and further curtailurents are necessary. All of the Partners would then share equally in Ihese additional curtailments. 2) Curtailment Plan with Expanded Scoggins Dam Facilities If and when Scoggins Dam is expanded, the Part.nerslhil) vv,ill work in collaboration to craft. a new curtailment plan that. incorporates the neer water supply and associated Partner needs and interests. Memorandum of Agreement 22 Tualatin Basin Water Supply Partnership October 31, 2007 SECTION EIGHT: ADDITION AND WITHDRAWAL OF PARTNERS Addition of Partners: Entities interested in joining the Tualatin Basin Water Supply Partnership may do so by application in writing to the Partnership. New members must. agree to abide by the overall governance framework, management and operational requirements of the Part.nersinip. Potential new n►cinbers must. be able to demonstrate their financial stability, willingness and ability 1.0 invest in the water supply facilities, and must. have it proven track record of safe and legal operations. New members must be able to demonstrate the benefits of their participation in the Partnership from both an individual and basin-wide perspective. Applications for new ►neinbership must be received a minim►un of three years prior to the time at which those prospective members hope to receive wager supply from the Tualatin Project. Withdrawal of Partners: Entities wishing to withdraw from tine Partnership may do so voluntarily. However, as a general principle, it is the intent of the Partnership that withdrawal be difficult. In order to withdraw, a Partner must notify the Partnership two years prior to the termination of membership. Terminating members must notify all of the other participating Partners of their intent to terminate. In order to prevent a fiscal crisis, any Partner with a 25% or greater ownership share in the system must remain a Partner until ghat. ownership share can be reduced to at. least 15%. Or, the Partnership may agree to buy that ownership share in a more expedient manner from the withdrawing Partner. Any outstanding debt on the project owed by the withdrawing partner must be entirely defeased or assumed voluntarily by another partner(s) in exchange for the project: assets of the withdrawing partner. Existing Partners have the right. of first refusal to purchase the shares of withdrawing Partners. SECTION NINE: DISPUTE RESOLUTION 'I'll(, Partners agree to abide by the following dispute resolution process: Step One: Negotiation. The Partners who are party to the dispute will appoint it representative to uegot.iate on behalf of each Partner in an at.t.enipt 1.0 resolve the issue. Step Two: Mediation. If the dispute caunoi be resolved within 30 days t.hrough negotiation. the disputing Pal'l.m;rs will sub►uit the matter to non-binding mediation. Tbc disputing Partners will mutually agree on it mediator, and all costs of mediation will be borne equally by those Partners. Step Three: Non-Bitndin,,Arbitration. If mediation is not successful, the disputes will be subluitled to non-binding arbitration snider the rifles and processes of U.S. Arbitration and Mediation of Portland, Oregon. All costs of arbit.ratiou will be borne equally ainong the disputing Partners. Memorandum of Agreement 23 Tualatin Basin Wafer Supply Partnership October 31, 2007 Step Four: Legal Action. After exhaustion of the preceding processes, the disputing Partners may initiate litigation in the Circuit Court of the State of Oregon for Washington County. Each Partner will bear its own legal and expert witness fees. Memorandum of Agreement 24 Tualatin Basin Water Supply Partnership October 31, 2007 5) SIGNATURES We, the undersigned, are in full accord Nvitli the precepts as they are detailed in this Alemorau►dum of Agreement. For tl4e Citvof Beaverton For the TV-of-, i r? l f i—j7 Rob Drake CralYl!t osser Mayor Citynager For Clean Water ryices ForAhe Tualatin Valley Irrigation District r Bill Gaffii Love General Manager resident, Board of Directors or the i r Gr6e r the alatin Valley WaterDistrict Michael SykesV reg DiLoreto City Manager General Manager For the City of Hillsboro ra l n t n Cotrutv Will Crandall, Cliair Obert. Davis Utilities C0111tnission County Administrator Memorandum of Agreement 25