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05/10/2006 - Packet ONCompleteness Review for Boards, Commissions and Committee Records CITY OF TIGARD Intergovernmental Water Board Name of Board, Commission or Committee a d 2U Date of Meeting To the best of my knowledge this is the complete meeting packet. I was not the meeting organizer nor did I attend the meeting; I am simply the employee preparing the paper record for archiving. This record came from Greer Gaston's office in the Public Works Building. Kristie Peerman Print Name Signature 3-'7 -1.3 Date Intergovernmental Water Board Meeting Sen mg Tigard,King City,Durl"n and Unnunrpmated Ama AGENDA Wednesday,May 10, 2006 5:30 p.m. 1. Call to Order,Roll Call and Introductions Call the meeting to order,staff to take roll call. 2. Public Comments Call for any comments from public. 3. Approval of Minutes—April 12,2006 Motion from Board for minute approval. 4. Asset Ownership Discussion - Commissioner Scheiderich (20 minutes) S. Portland Vater Contract Recommendation -Dennis Koellermeier(20 minutes) 6. Discussion of Meeting Date and Time-Dennis Koellermeier(5 minutes) 7. Property Use Approval for Emergency Drill-Dennis Koellermeier(5 minutes 8. Informational Items-Dennis Koellermeier 9. Non-Agenda Items Call for non-agenda items from Board. 10, Next Meeting-June 14 or June 28,2006, 5:30 p.m. - Water Auditorium 11, Adjournment-Approximate Time 7:00 p.m. Motion for adjournment. A light dinner will be provided. Executive Session: 7helnterWayamwd 1rawBwdn7q)rgo intoExecutite Session Ifan Exp Session is canal to onk7;tl- app vpr ate ORS caLmon will IT annowx&dm*,g bl e applicable statute All diswsions are amfrdemal and t6ow prese tt may disclose nothing fiun tle Session RTresoz&&es of the res ma-ha are allareo l to attend Exeaarx Sessions,as proa dal 1y ORS 192 660(4), but nurst not drsdose aro,infomnaton disaisssad No Exewtiw Session may be held for the purpose of taking any final action rn making arry final dkmon.Exmitm Sessions are closai to the public Sign-in Sheet Intergovernmental Water Board Meeting Date: Name Do you wish If yes, please give your address please print to speak to the Board? John Q. Public Yes 13125 SW Hall Blvd. Tigard OR 97223 �C) sal 141721tIqIV) Tq 1Z S�o S C�,% ti.C1 zz � Agenda Item No.: IWB Meeting Date: to- /+ `L7(p Intergovernmental Water Board Meeting Minutes May 10, 2006 Members Present: Patrick Carroll, Beverly Froude, Bill Scheiderich, and Dick Winn Members Absent: Tom Woodruff Staff Present: Public Works Director Dennis Koellermeier Water Quality&Supply Supervisor John Goodrich IWB Recorder Greer Gaston Visitors: Henrietta Cochrun,Paul Owen, Lisa Hamilton-Treick 1. Call to Order, Roll Call and Introductions The meeting was called to order at 5:30 p.m. 2. Public Comments Lisa Hamilton-Treick, 13565 SW Beef Bend Road, advised the Board about the Metro meeting that occurred last week. She stated the meeting was well attended and helpful Ms.Hamilton-Treick addressed agenda item #4. Given that Tigard's attempt to annex Bull Mountain failed,Ms.Hamilton-Treick asserted this was not a good time to make permanent decisions regarding assets. She indicated she did not believe there was any sense of urgency associated with this decision. She asked the board to delay action until governance of the Bull Mountain area had been determined.Ms.Hamilton-Treick requested an independent attorney represent all parties on the IWB and that any findings be made public. She referred to the letter from Attorney Balfour. She stated she supports using the Canterbury property for a park,but is sensitive to the process that's used to accomplish this.Ms.Hamilton-Treick asked if the historical society had been consulted since the John Tigard house sits on the property. She added she hoped this would be a slow,thoughtful process. 3. Approval of Minutes Commissioner Froude motioned to approve the April 12, 2006,minutes;Commissioner Winn seconded the motion. The motion was approved by unanimous vote. 4. Asset Ownership Discussion Commissioner Scheiderich referenced Attorney Balfour's letter and confirmed the Board did not expect to make a decision on the Canterbury property at tonight's meeting. Intergovemmental Water Board May 10,2006 1 With regard to the water building,Commissioner Scheiderich advised the Board generally agreed with the options planned for the building.Mr. Koellermeier confirmed improvements and operational expenses would be charged to various user groups.Commissioner Scheiderich brought up the question of whether or not the general fund was charging"rent" and would it be credited to the water fund.Mr. Koellermeier referenced an earlier memo from the finance department that explained the methodology.He stated the allocation of cost is done appropriately and the water fund is not subsidizing non-water related uses. Mr. Koellermeier reaffirmed all staff to be housed in the water building were under the public works department. A brief discussion on supplying water to areas 63 and 64 occurred.Mr. Koellermeier commented that Tigard is not obligated to supply water to these areas, although it is the logical provider.Provision of water to these areas would be under separate agreement. With regard to the Canterbury site,Mr. Koellermeier relayed that converting surplus property to a park site was not an urgent issue.Attorney Balfour's letter clarified the IWB is the appropriate decision-making body.The City has not budgeted to make park improvements to the Canterbury property.If the issue of park ownership and neighborhood planning could be addressed this year,park improvements could take place the following year.There is documentation from the City's water&geotechnical engineer saying the property has no other water-related uses other than a possible groundwater well,which could be accommodated via an easement. The well might be used to withdraw aquifer storage and recovery water and groundwater.Mr. Koellermeier proposed,in the next few months, the City of Tigard petition the Board to declare half of the property as surplus and ask for authorization to do a lot line adjustment. The Board briefly discussed the Canterbury asset in the context of Bull Mountain governance. Should Bull Mountain become a city,they would have the option of being represented by the Tigard Water District or could form their own agency.As their own agency,they could withdraw assets inside the corporate city limits. It was noted the Canterbury property is Iocated in Tigard and would not be a Bull Mountain asset. Commissioner Scheiderich suggested another option might be to lease the surface of the property for a park. S. Portland Water Contract Recommendation Mr. Koellermeier summarized a memo distributed at the beginning of the meeting regarding the Portland Wholesale Water Contract.A copy of the memo is included in the IWB record. Commissioner Scheiderich confirmed the contract did not contain any provision preventing Tigard from reselling the mater. Staff is recommending an annual average guaranteed purchase quantity of 4 million gallons per day(mgd)which, at certain times, can be increased with an additional summer peaking Intergovernmental Water Board May 10,2006 2 I factor of 1.5 mgd and a 20 percent variance.This places supply at just over 7 mgd, and slightly below the transmission line capacity of 8 mgd. Mr. Goodrich stated next year the City expected to put 272 million gallons (mg) into aquifer storage and recovery wells and would extract about 250 mg. Commissioner Scheiderich asked what control wholesale customers had over Portland's capital improvements.Mr. Koellermeier indicated the Water Managers Advisory Board provided wholesale customers with a means to address the Portland City Council regarding rate setting and water fund capital improvements. He added that wholesale customers can't be charged until a project is until "built and booked" and most Portland projects are more than 10-years out. Mr. Koellermeier relayed that Tualatin Valley Water District and the City of Tualatin have authorized the 10-year contract. Commissicuier Froude inquired about an additional fee to buy in to the Washington County Supply Line.Mr. Koellermeier replied he didn't know what the expectation would be, but proposed the Tigard Water Service Area's cost savings could be earmarked for some other west side supply project to benefit the WCSL partners. The Board decided each Commissioner should present the agreement to their corresponding city or water district.These presentations are to take place on the following dates: Durham May 23,2006 King City May 17,2006 T dMay 23,2006 Tigard Water District May 22,2006 Commissioner Carroll motioned to enter into the 10-year contract with the City of Portland subject to ratification by the governing bodies represented on the IWB; Commissioner Vrinn seconded the motion.The motion was approved by unanimous vote. I 6. Discussion of Meeting Date and Time Some Commissioners expressed reservations about changing the meeting date.Consensus was to keep the meeting date on the second Wednesday of the month. 7. Property Use Approval for Emergency Drill Mr. Koellermeier briefed the Board on a region wide emergency drill involving a water system asset and confirmed any damage done to the asset would be repaired. Commissioner Carroll motioned to approve the use of the building for the emergency drill; Commissioner Froude seconded the motion.The motion was approved by unanimous vote. Intergovernmental Weer Board Mm,10,2006 3 8. Informational Items Mr. Koellermeier briefed the Commissioners on the Tigard/Lake Oswego study.He noted the consultant selection process had been completed and the study will be underway shortly. 9. Non-Agenda Items:None. 10. Next Meeting - Wednesday,June 14, 5:30 p.m. - Water Auditorium 11. Adjournment:The meeting was adjourned at 6:33 p.m. reer A. Gaston, IWB Recorder Date: I lntergovemmental Water Board May 10,2006 4 i Agenda Item No.: 3 IWB Meeting Date: May 10, 2006 Intergovernmental Water Board Meeting Minutes April 12, 2006 Members Present: Patrick Carroll (5:36 p.m), Beverly Froude (5:32 p.m), Bill Scheiderich,Dick Winn and Sydney Sherwood(alternate for Tom Woodruff) Members Absent: Tom Woodruff Staff Present: Public Works Director Dennis Koellermeier Water Quality&Supply Supervisor John Goodrich IWB Recorder Greer Gaston 1. Call to Order, Roll Call and Introductions The meeting was called to order at 5:30 p.m. 2. Approval of Minutes -March 8, 2006 Commissioner Winn motioned to approve the March 8, 2006, minutes;Commissioner Sherwood seconded the motion.The motion was approved by unanimous vote. 3. Calvin Presbyterian Church Credit for Leak Request Mr. Koellermeier briefed the Board on this item. The church is requesting a credit in the amount of$994.14. Commissioner Sherwood motioned to accept the credit request for Calvin Presbyterian; Commissioner Winn seconded the motion.The motion was approved by unanimous vote. NOTE: C.cirrnrns4mer Fwu&arr iztrl at 5:32 pm. 4. Deering Management Group, Inc. Credit for Leak Request Mr. Goodrich briefed the Board on this item.Deering Management Group is requesting a credit in the amount of$4947.06.The remaining balance will cover the actual cost of the water that was lost through the leak. NOTE. Corr nissiorxr-Carrell an iud at the nwirq at 5:36 p.m. Intergovernmental Water Board April 12,2006 1 Commissioner Sherwood motioned to accept the credit for Deering Management Group for $4947.069;Commissioner Winn seconded the motion.The motion was approved by unanimous vote. S. Proposed FY '05-'06 Budget, Water CIP Mr. Koellermeier summarized the proposed budget. Major highlights of the proposed budget include: ■ Water operations has a little over$1.2 million in personnel services ■ Cost to buy water is the largest budgetary expense at$3.8 million ■ Predicting water demand is challenging and hinges on the weather ■ There are some capital improvement costs related to vehicle replacement ■ Total operating cost is $5.7 million Major highlights related to capital improvements include: ■ Purchase of reservoir sites ■ $400,000 for ASR expansion studies to drill and analyze up to three test wells ■ Long-term source projects - Continue to budget for the Scoggins Dam/Tualatin River project - Lake Oswego feasibility study ■ Water SDC Component - The water SDC component depicts SDC partial or total funding for various projects - The Beaverton connector in the vicinity of Barrows Road would provide a second connection to Beaverton at a different elevation and may allow for a shared reservoir in the future - Finish paying off the Walnut Street waterline contract - Upgraded water mains are needed for the Burnham Street redevelopment process The impact of water source selection and SDC methodology was discussed. Current methodology assumes the City will pay$40 million for source development,but all the options being considered are expected to be greater than this amount.Once the source is selected and the cost is known,the SDC methodology will incorporate the actual cost into the calculations. The SDC portion of capital improvements is calculated using a ratio of the existing population as compared to the future population,with the future population snaking up the SDC component and existing population making up the rate component. Intetgovemmental Water Board April 12,2006 2 6. Willamette River Water Coalition (WRWQ Recommendation Mr. Koellermeier relayed that this item was a follow-up to the Board's joint meeting with Tigard City Council.As a WRWC member,Tigard has an obligation to respond to the Sherwood and Tualatin Valley Water District (TVWD) invitations to partner in their Willamette River projects. Mr. Koellermeier asked the Board to provide him with information that would be incorporated into a letter to be signed by the Board chair and forwarded as a recommendation to the City Council. Mr. Koellermeier stated, from a technical perspective,the Sherwood project is of little interest to Tigard due to problems related to direction and elevation.He suggested if future pipeline right-of-way is being purchased, and the acquisition is beneficial to the group,then Tigard should participate. Sherwood has indicated a willingness to work with its partners in this regard. Mr. Koellermeier believes the TVWD will execute 10-year agreement with Portland and will work toward the Willamette River in that span of time.He expects the original aggressive pace of the TVWD Willamette River project to slow since Portland is now offering the 10 year contract.Mr. Koellermeier proposed the Board recommend participation in the north/south pipeline within the context of the required voter approval needed to utilize the Willamette as a drinking water source.Mr. Koellermeier pointed to past opportunities, like the Washington County supply line and the original Hagg Lake project, in which the Tigard Water District elected not to participate. In hindsight,these decisions have had a negative impact on Tigard's water supply. Mr. Koellermeier predicted that 50 years in the future,the area will need both the Willamette River and the Hagg Lake project to satisfy the region's needs. The Board then entered into a discussion about various water options and water option combinations. There are four routing options for the TVWD pipeline which range from following the railroad tracks to going along Roy Roger's Road to Scholls Ferry.Hydraulics prohibit a route going over Bull Mountain. Commissioner Scheiderich asked if any part of the proposed Wilsonville/Sherwood route would be shared with Tigard. Mr. Koellermeier said it was possible that a very small portion of the initial route could benefit Tigard. Commissioner Scheiderich recommended the City share in any part of these projects which offered economy of scale,including treatment plant expansion.Construction costs will likely increase in the future.He added the charter amendment did not preclude the City from investing in such a project as a proprietary function and such property could be leased to other jurisdictions. Intergovernmental Water Board April 12,2006 3 Other information regarding the TVWD project is as follows: ■ Water from the Willamette treatment plant would be pumped to the 410-foot reservoir which services 60 to 70 percent of the Tigard service area. ■ A 20 million gallon reservoir will likely be constructed on Sexton Mountain at the pipeline terminus. ■ Tigard will also have to consider costs associated with transmitting water from this pipeline to its storage reservoir. Commissioner Sherwood concurred with Commissioner Scheiderich's comments regarding economy of scale. Commissioner Froude stated it was premature to make a decision and added that citizens would make the choice, referring to the charter amendment.Using the Willamette as a drinking water source is a huge issue.Commissioner Sherwood agreed. Mr. Koellermeier commented that the Board, and ultimately the City,was obligated to provide a response to Sherwood and the TVWD in order to keep this option open. Commissioner Froude expressed concern about the amount of money spent to continue to pursue the various water supply options. Mr. Koellermeier stated he needed to get the Board's recommendation to the City Council prior to the Board's next meeting.At Commissioner Scheiderich's suggestion,Mr. Koellermeier agreed to draft a letter and send it out via e-mail. NOTE. Public C wmaz uem heard at this trim Public Comments For future agendas,the Board agreed to move the public comment agenda item to the beginning of the meeting. Lisa Hamilton-Treick, 13565 SW Beef Bend Road, Tigard,Oregon, speaking on behalf of the Friends of Bull Mountain,invited the Board members to participate in a discussion with Metro regarding incorporation issues.The 90-minute meeting is to take place the last week April or first week of May.Ms.Hamilton-Treick indicated the meeting would be informational in nature and no decisions would be made. Possible meeting times would be from 7:30 to 9 a.m.or from 5 to 6:30 p.m. Commissioner Scheiderich indicated he should be able to attend,but noted he could not speak for the Board 7. Discussion of Meeting Date and Time Mr. Koellermeier explained that Commissioner Woodruff is often out of town on the second Wednesday of the month,the Board's meeting date.Mr. Koellenneier asked if the Intergovemmental Water Board April 12,2006 4 Board would like to consider changing their meeting date. Each of the Commissioners relayed their availability as follows: Commissioner Carroll Not available on the 4th Tuesday of the month, otherwise available Commissioner Winn The IWB meeting is coordinated with other commitments,but Mondays may work Commissioner Scheiderich Not available on Mondays and Tuesdays and once a month on Thursdays Commissioner Froude Another Wednesday might work Mr. Koellermeier said Commissioner Woodruff had indicated he could be available on Mondays or any other Wednesday besides the second Wednesday. Commissioner Scheiderich suggested the fourth Wednesday of the month maywork for everyone's schedule. Mr. Koellermeier asked the Commissioners to let him know in the next week or so if they would be available on the fourth Wednesday of the month. In the interim,he will talk with Commissioner Woodruff to confirm the fourth Wednesday will work for his schedule and to verify he intends to continue to serve on the IWB beyond December 2006. 8. Informational Items:None. 9. Public Comments NOTE:Public cavwzts were heard prior to item #7. 10. Non-Agenda Items: None. 11. Next Meeting The next meeting was not identified per agenda item #7. 12. Adjournment The meeting was adjourned at 6:21 p.m. Greer A. Gaston, IWB Recorder Date: Intergovenunental Water Board April 12,2006 5 Agenda Item No.: 4' IWB Meeting Date: mayI&. ,=&p CABLE HUSTON BENEDICT HAAGENSEN & LLOYD LLP ATTORNEYS AT LAW SUITE 2000 1001 SW FIFTH AVENUE PORTLAND,OREGON 97204-1136 TELEPHONE(503)224-3092 FACSIMILE(503)224-3176 CLARK I.BALFOUR cbaifour a chbh.eom www:cablehuston.com April 21, 2006 VIA EMAIL AND REGULAR MAIL George Rhine, President Board of Commissioners Tigard Water District 15361 SW Ashley Drive Tigard, OR 97224 Re: Canterbury Hill Reservoir Dear President Rhine and Board Members: You asked questions regarding the Intergovernmental Agreement Between the City of Tigard and the Tigard Water District for Delivery of Water Service (IGWA) effective January 1, 1994, and the disposition of the real property commonly known as the"Canterbury Hill Reservoir Site." My understanding is that this site was acquired in the name of Tigard Water District. It contains two reservoirs,jointly called"Reservoir No. 1,"and referred to as Asset No. SE-22RES and Pump Station No. 1,referred to as Asset SE-50 PST, in the Tigard Water District's System Assets and Liabilities Final Report dated November, 1994,prepared by Economic Engineering Services, Inc. The City of Tigard subsequently constructed an ASR well on the site. My understanding is that the Tigard Water District is still the record title holder to this single parcel of property. Discussions have been ongoing whether the remainder of the property is necessary for water system purposes or could be used for other uses such as City parks and open space. 1. How is the Real Property Asset defined Under the Intergovernmental Water Agreement(IGWA)? The 1994 IGWA was executed on the heels of the statutory withdrawal of District territory and assets by the Cities of Tigard,Durham, and King City. By ORS 222.540, the City may withdraw the District's assets,except those necessary to serve the remaining area of the District not absorbed by the City. The Water District transferred all assets to the Cities,not just infrastructure, in the 1994 Agreement. The Cities and District in turn pledged the assets to the \\dc03\docs\nijs\My Docununts\cb\27351•TWDVthincL4r2.doc Corvallis Office-582 NW Van Buren,Corvallis,OR 97330(541)754-7477 CABLE HUSTON BENEDICT HAAGF.NSEN&LLOYD LLP George Rhine,President Board of Commissioners of the Tigard Water District April 21, 2006 Page 2 City of Tigard whereby Tigard would manage,operate, and maintain the water system for all parties to the IGWA, including the District. Assets were defined as real,personal and intangible property in Section 4A(1). Assets were divided into two groups: A. System Assets: assets necessary for the operation of Tigard's water supply system throughout the original District,not including those other assets of Tigard. This was further defined as"water mains, service installation, strictures, facilities, improvements or other property necessary for operation of the City of Tigard's water supply system throughout the original District." (See Section 4A(2) (a)). B. Other Assets: "assets not necessary for the operation of the City of Tigard's water supply system throughout the original District. Other assets shall become the property of the jurisdiction in which the asset is located." (See Section 4A(2) (b)). Section 413 goes on to state that all system assets and other assets shall be pledged by the Cities and District to Tigard. All system assets and other assets shall be managed by Tigard and shall be utilized by Tigard in order to provide water services to properties,residences, and businesses in the original District. In our opinion,the subject real property is a system asset. First, it is the parcel upon which are situated major system assets identified in the November, 1994 System Assets and Liabilities Report. The land is integral to the improvement. The Intergovernmental Agreement that I reviewed does not have an exhibit or schedule that states this subject property was deemed a system asset or other asset. However, the system asset study followed closely upon the creation of the Intergovernmental Water Agreement and the parties have treated similar property as system assets over the past 12 years. The parties have designated this as a system asset by its inclusion in the 1994 System Asset Report. Second,past conduct indicates that the site is a system asset. The Intergovernmental Water Board has faced a similar issue on the Mentor Reservoir site(Clute Property)in the summer of 2000. Various and sundry minutes from June 13, 2000 through October, 2000, reflect statements by the City of Tigard and other members of the Intergovernmental Water Board (including District representatives)that it was a system asset,that a portion of the Mentor site was no longer needed and voted to partition the Mentor site and sell the property. The Intergovernmental Water Board authorized the City of Tigard to apply for a minor land partition. The City of Tigard recognized in its Council minutes that the Intergovernmental Water Board needed to make decisions on the disposition of system or capital assets. Upon receipt of partition approval,the City declared the property surplus under its procedures. \\dc03\docs\injs\My Docurnents\cib\27351-TWD\RhineLtr2.doc _. CABLE HUSTON BENEDIC T HAAGENSEN&LLOYD LLP George Rhine,President Board of Commissioners of the Tigard Water District April 21, 2006 Page 3 Therefore, we conclude that the property is a system asset based on the IGWA the System Assets and Liability Report and past practice. The Intergovernmental Water Board should determine whether this portion of the property is needed for water service. However, some things should be verified. For example, if there is more than one legally recognized parcel, and all of the water system assets are on one parcel, leaving the other unencumbered, then an argument could be made that the unencumbered separate tax lot is defined as"other assets"under the IGWA. In that case,the agreement says that other assets become the property of the jurisdiction in which they reside. If so, then the asset could be deemed a City of Tigard asset by virtue of the agreement. My understanding is this is a single parcel and should follow the process of the Menlor property. 2. How is the Decision Made and By Whom? As indicated, if it is a system asset, then the agreement requires that the Intergovernmental Water Board determine whether it should remain so for provision of water service. If not,the Board should determine its disposition. Section 5H of the agreement states that"The parties to this agreement shall not have the right to transfer ownership of or remove system assets or any interest therein received or kept as a result of the City's withdrawal from the original District or any interest in system assets acquired during the term of this agreement without the written consent of the other party." This is not the clearest language. I believe it is intended to say no party may transfer ownership and system assets without consent of the other parties. Section SA provides that"the system assets will be utilized by Tigard in order to provide water service to property residents and businesses in the original District. The District's ownership interest in the assets shall remain though the assets are being utilized by Tigard unless and until transferred to Tigard by agreement or operation of law. The parties agree to execute all documents necessary to allow utilization of the assets by Tigard." Further, there is a mission statement in Section 1 where the parties commit to working together and with other agencies and jurisdictions in a cooperative effort to plan for the future, long-term supply needs of the area. It is a good faith/fair dealing clause. Does it require unanimous consent of the Intergovernmental Water Board members? Typical voting requires three affirmative votes. However,the specific provisions of Section 5H relating to property disposition would seem to require unanimity. The terms of an agreement should be construed together although a specific clause will be given precedence over a general statement. In our opinion,the decision to declare a system asset as surplus and not needed for the ongoing needs of the water system is an Intergovernmental Water Board decision that should be unanimous under Section 5H. However,we believe a court would find no single party can \\dc03\docs\mjs\My Documents\cib\27351-TWD\RhineLu•2.doc CABLE HUSTON BENEDICT HAAGENSEN&LLOYD I.LP George Rhine, President Board of Commissioners of the Tigard Water District April 21, 2006 Page 4 withhold consent and vote no without having a reasonable basis for doing so based upon current and long-term water supply operations. It would be prudent for the Board to seek an opinion of its engineers or consultants. We do not believe this issue was discussed in the Menlor site. We understand the Intergovernmental Water Board voted unanimously to have the City of Tigard move forward with the partition application. Therefore,while past practice shows this type of process,there apparently were no dissents to that action. In this case, there may be some dissent by the Tigard Water Board,which would result in anon-unanimous decision. In that case, one or more of the other parties could seek a judicial determination to declare: (1) The action of a majority Intergovernmental Water Board is sufficient to declare property system assets unnecessary for water system improvements and to transfer it; or (2) If unanimity is required,then the District did not have a reasonable basis to decline. If not, the court could compel consent under the cooperative clauses. This is a system asset. The decision to partition and convert to other uses or sale would require a vote of the Intergovernmental Water Board. Section 5H requires unanimity and past practice seems to give credence to that. But,the decision by a member to decline is not unfettered. It must be based on a reasonable analysis that the system asset is needed in the future and should remain. The opinion of the Water Board's engineer would have great weight. 3. If the City of Bull Mountain is formed over the Remaining Area of the Tigard Water District,can it become a member of the Intergovernmental Water Board? As indicated in the recitals of the 1994 Agreement, the Tigard Water District presently encompasses unincorporated territory that was part of the original District. All of the original territory of the District within Tigard,King City and Durham was withdrawn in 1993, leaving this remnant. If the City of Bull Mountain is formed over the entire remnant territory of the District,the provisions of ORS 522.510 would apply: whenever the entire area of a water district becomes incorporated in or annexed to a City in accordance with law,the District shall be extinguished and the City shall,upon the effective date of such incorporation or annexation, succeed to all the assets and become charged with all the liabilities, obligations and functions of the District. If this occurs,then the new City would succeed to all the rights, obligations and properties of the District. Once again,we come back to paragraph 5H,where it indicates that neither the benefits received by the District or the obligations incurred under the terms of this Agreement are Mdc03\docs\mjs\My Documents\cib\2735I-TWD\RhineLtr2.doc CABLE HUSTON BENEDICT HAAGENSEN&LLOYD LLP George Rhine,President Board of Commissioners of the Tigard Water District April 21, 2006 Page 5 assignable or in any manner transferable by the District without the written consent of the City. I do not believe this clause would stand up in the face of the statutory directive of ORS 222.510, which compels the transfer. However,that would be an issue for the new City of Bull Mountain to take up with the other Cities as part of the Intergovernmental Water Agreement or at the courthouse. I believe the state statute would prevail in this instance. 4. Intergovernmental Water Board Agreement. The parties have worked with this agreement for 12 years. Past minutes reflect that the parties recognize a need to rework the document. The foregoing discussion points to that need and the parties should give this serious consideration to amending the agreement to obtain more clarity. I hope this answers your questions. I look forward to meeting with the Board on April 24, 2006. Very truly yours, i Clark I. Balfour CIB:mjs \\dc03\docs\mjs\N1y Documents\cib\27351=1'WD\RhineLu2.duc Agenda Item No.: S AgreementPortland Water Sales IWB Meeting Date: Mal IO, ZOO(o ProposedComparison Table Between Current and Agreement September 00 Proposed- Significant Provisions Current Agreement Nature of service a Water sold by Portland to wholesalers 0 Water sold by Portland to wholesalers described considered"surplus" and defined as"firm supply" Length of agreement • 25 years with automatic 25-year renewal • 20 years with automatic 10-year renewal • 3- ear notice for non-renewal 0 5-year notice for non-renewal by either party Joint operational guidelines (how the 0 Determined solely by Portland 0 Guidelines established jointly by Portland and wholesale customers and Portland wholesalers through Water Managers Advisory cooperate in operating their respective Board, reviewed, amended (if necessary) and water systems) adopted by Water Bureau Administrator Water Managers Advisory Board . Review of budget and CIP • Establish joint operational and data guidelines • Participate in budget and CIP development/review processes, input to City Council Water quantities 0 Minimum purchase based on percentage of a Guaranteed purchase quantity—a specific, overall water supply, five-year average committed volume to be purchased from Portland • Can buy out of agreement over five years by a May be increased but not decreased except paying minimum purchase"penalty" under special circumstances • No buy out Sale of water to other entities 0 Prohibited unless authorized by Portland • Allowed, unless it creates undue risk to the Portland waters stem Reliability of supply 0 No obligation 6 If Portland fails to meet supply needs more than once in 10 years, purchaser may reduce purchase commitment by up to 10% per year Interruptible water 0 No provisions a Available at Portland discretion • Summer and Winter interruptible water priced at 45%, 20% of regular rate respectively if available Rates a Rate methodology not described in complete 0 Specific methodology based on American Water detail Works Association M1 Manual and Cost of Service Principles • Costs allocated based on customers' use of water system • O&M cost control mechanism Water conservation 0 No reference 0 Water management and conservation plans to conform to State regulations Joint funding for capital improvements • Allowed through agreement in which purchaser • Allowed for new facilities or for major pays its portion of bonded debt for new asset improvements to existing facilities by separate agreement • All terms related to joint funding arrangements determined by separate agreement Dispute resolution None • Three steps: 1) Negotiation, 2) Mediation, 3) Arbitration/litigation * The 10-year contract was not available when this table was prepared,but all terms aside from duration are identical to the 20-year contract. Agenda Item No.: Je- IWB Meeting Date: May IC 200[0 w Regional Water Sales Agreement 10 Year Presented to City of Tigard April 3, 2006 I � REGIONAL WATER SALES AGREEMENT (10 YEAR) TABLE OF CONTENTS Page SECTION I —NATURE OF SERVICE............................................................................................ 2 SECTION 2—WATER REGULATIONS......................................................................................... 3 SECTION 3 —DURATION OF AGREEMENT AND RENEWAL.................................................4 SECTION 4—WATER MANAGERS ADVISORY BOARD.......................................................... 6 SECTION 5 —GUARANTEED PURCHASE WATER QUANTITIES......................................... 10 SECTION 6 - INTERRUPTIBLE WATER.................................................................................... 19 SECTION 7—RATES AND CHARGES FOR GUARANTEED PURCHASE WATER QUANTITY............................................................................................................. 20 SECTION 8 - RATES AND CHARGES FOR INTERRUPTIBLE WATER................................. 31 SECTION 9 - WATER SYSTEM PLANNING AND COOPERATION....................................... 32 SECTION 10 - RESERVATION OF SYSTEM CAPACITY......................................................... 33 SECTION 11 - CONNECTIONS AND METERING..................................................................... 34 SECTION 12 - PURCHASER-SUPPLIED WATER TO CITY RESIDENTS............................... 35 SECTION 13 - WATER RESOURCE CONSERVATION............................................................ 36 SECTION 14—WATER CURTAILMENT AND PROTECTION OF THE WATER SYSTEM.. 39 SECTION 15 —BILLING AND PAYMENT.................................................................................. 41 SECTION 16—JOINT FUNDING OF CAPITAL IMPROVEMENTS........................................... 43 SECTION 17—DISPUTE RESOLUTION..................................................................................... 44 T- EXHIBITS EXHIBIT 1 -GUARANTEED PURCHASE QUANTITY, SEASONAL PEAKING FACTOR, DAILY PEAKING FACTOR, AND PRESSURES EXHIBIT 2-DEFINITION OF WATER SERVICE CHARACTERISTICS EXHIBIT 3-RATE BASE ASSETS EXHIBIT 4-FUNCTIONAL ASSET GROUPS Regional Water Sales Agreement (10 Year) April 3, 2006 Page 1 THIS AGREEMENT is entered into by and between City of Tigard , herein called"Purchaser,"and the CITY OF PORTLAND, a municipal corporation of the State of Oregon, herein called"City." The parties recite: A. Purchaser is a municipal corporation of the State of Oregon and is authorized by its charter or by state law or both to operate a municipal water system. B. City is a municipal corporation of the State of Oregon and is authorized by Chapters 2 and 11 of the Charter of the City of Portland to maintain water works for the furnishing of water to the city, its property, its inhabitants,and to non-inhabitants. The Council of the City is further authorized to enter into contracts for the supply of water by the city and to sell water to persons, public and private, outside the city, on terms and conditions the Council finds appropriate. C. City is further authorized by Section 2-105(a)4 of its Charter to enter into agreements, without limitation as to term, as the Council finds appropriate for cooperation, consolidation and maintenance of services with any other public corporation or unit of government. D. ORS 190.003 to 190.110 authorize units of local government to enter into intergovernmental agreements for the performance of their duties or for the exercise of powers conferred upon them. E. The service and commodity provided by City pursuant to this Agreement are a special contract service and are not provided by City as a common utility service. Regional Water Sales Agreement (10 Year) April 3 2006 Page 2 SECTION 1 —NATURE OF SERVICE A. Subject to the terms and conditions contained herein, City agrees to furnish and sell, and Purchaser agrees to purchase a firm supply of potable water on an annual basis for the life of this Agreement. The City further agrees to furnish and sell an interruptible supply of water to be made available for purchase at the City's discretion subject to terms of this agreement. B. Water is to be delivered to the purchaser at the place or places, at such pressure or pressures, and at such flow rate or flow rates as are set forth on Exhibit 1. Provided that the City is not obligated to meet Purchaser's demands for water during any period of time that Purchaser operates its system not in compliance with operational rules established pursuant to Section 4.13.1. C. The City shall deliver water to the purchaser from the same source or sources of water that City delivers to City inhabitants. The City shall meet all applicable drinking water regulatory requirements up to the purchaser's point of delivery. D. Purchaser's supply of water shall be reduced or terminated only in accordance with the terms of this agreement. E. Purchaser recognizes and agrees that no liability for damages shall attach to the City on account of any failure of supply or changes in pressure, flow rate, or water quality due to circumstances beyond the reasonable control of the City acting in accordance with standards of care common and usual in the municipal water supply industry. Examples of such circumstances include, but are not limited to, natural events such as earthquakes, landslides and floods, and human-caused events such as terrorism, malevolent acts, contamination of the water supply, and acts of war. F. The parties agree and acknowledge that the City of Portland is the owner and operator of the water supply, storage, transmission, and treatment system, and all facilities and infrastructure associated with the storage, treatment,transmission, and distribution systems used in its utility operations. The purchase of water or any other commodity or service under this agreement shall not constitute purchase of ownership rights to water or any portion of the water system owned and operated by the City, except as may be specified herein or may be established by separate agreement. Nothing in this agreement shall preclude the parties from entering separate agreements involving joint ownership or joint operation of system elements. Regional Water Sales Agreement (10 Year) April 3 2006 Page 3 SECTION 2 —WATER REGULATIONS A. Purchaser hereby agrees to abide by and be bound by the terms and provisions of Chapter 21.28 of the Code of the City of Portland, Oregon, as it presently exists or as may be amended to comply with federal and state law, during the life of this agreement, to the extent to which such terms and provisions do not conflict with any material provisions of this agreement. Regional Water Sales Agreement (10 Year) April 3 2006 Page 4 SECTION 3—DURATION OF AGREEMENT AND RENEWAL A. Initial Term This agreement shall become effective on July 1 of 2006 and shall continue in effect thereafter under the terms of this section, unless terminated as provided herein. Each"contract year" shall run from July 1 through June 30. B. Initial Five Year Non-Renewal Notice At any time during the five-year period from July 1, 2011, through June 30,2016, either party may give a written notice of non-renewal. If such notice is issued,the contract will terminate on the next June 30 at least five years but not more than six years from the date of the notice. C. First Renewal in 2016 If neither party gives notice of non-renewal on or after July 1,2011, and prior to July 1, 2016, the contract shall continue for another ten years,through June 30, 2026. D. Subsequent Renewals After June 30,2026 If this contract is renewed pursuant to Subsection 3.C. above, then the contract shall also be repeatedly renewed for ten year intervals after June 30, 2026, and every ten years thereafter, unless one of the parties gives a notice of non-renewal under the terms of Subsection E below. E. Five-Year Non-Renewal Notice Either party may provide a written non-renewal notice any time during the second five years of each ten-year renewal period. If either party gives a notice of non-renewal during the non- renewal notice period,the contract will terminate on the next June 30 at least five years but not more than six years from the date of the notice. For example, if this contract is renewed through June 30,2026,pursuant to Subsection C above, then the non-renewal notice period during that term of the contract shall run from July 1, 2021, through June 30,2026. If either party gives written notice of non-renewal during that period of time,the contract shall terminate on the next June 30 five years or more but less than six years from the date of the notice. If no party gives notice of non-renewal during that period,the contract will be automatically extended through June 30, 2036. If the contract is extended to June 30, 2036, the next non-renewal notice period would then run from July 1, 2031, through June 30, 2036. / 7 Regional Water Sales Agreement (10 Year) April 3, 2006 Page 5 SECTION 3—(Continued) F. Effect of Renewals on Cost Cap and Supply Reliability The five-year period used to judge the City's compliance with the cost cap established by Subsection 7.I. shall be restarted at each renewal of this contract. The ten-year period used in calculating the City compliance with its reliability obligations described in Section 5.F.2 shall be restarted at each renewal of this contract. 1 Regional Water Sales Agreement (10 Year) April 3 2006 Page 6 SECTION 4—WATER MANAGERS ADVISORY BOARD A. General A Water Managers Advisory Board (WMAB)shall be established no later than thirty (30) days after five or more Purchasers have approved a Water Sales Agreement with the City that includes this provision, and will continue during the term of this agreement. Purchaser is eligible for participation in the WMAB. The WMAB shall consist of two representatives of the City Bureau of Water Works, to be named by the Administrator, and one representative of each participating entity that has signed a contract to purchase water from the City containing a provision allowing its participation on the WMAB. The City of Portland Water Bureau will provide staff support to the WMAB and will be responsible for keeping the official records. B. Meetings and Bylaws The WMAB shall meet regularly to communicate with and make recommendations to the Administrator regarding matters relating to the City's sale of water to participating purchasers. The WMAB may adopt such bylaws concerning its organization and governance as a majority of the membership shall see fit. The role of this Board is advisory in nature and, except as specified herein, no rule, bylaw,or action of the WMAB may alter any term of this agreement. C. Committees The WMAB shall be responsible for establishing committees as needed to address ongoing needs, which may include: 1. Water Resource Conservation—Possible responsibilities for such a committee are outlined in Section 13 —Water Resource Conservation; 2. Operations Coordination—Possible responsibilities for such a committee may include coordinating supply system routine and emergency operations among the City and its wholesale Purchaser with the goal of providing efficient and cost- effective system operations; and 3. Other committees, as identified by the WMAB. D. Creation of Operating and Information Standards 1. The WMAB shall recommend to the Administrator standard water system operating practices necessary or advisable to enhance the efficiency, reliability, and cost-effectiveness of the supply, transmission, and storage of water provided under this agreement. These standard operating practices will address issues such as, but not necessarily limited to, forecasting seasonal demands, forecasting peak demands, managing the system to minimize the impact of peak demand periods, Regional Water Sales Agreement (10 Year) April 3, 2006 Page 7 SECTION 4 — (Continued) security and emergency management, use of storage, and timing of deliveries of water. Pending recommendations from the WMAB, the Administrator shall adopt interim operating practices and upon receipt of the recommendations, the Administrator shall adopt the recommendations, with such alterations as he or she deems necessary or advisable. The Purchaser agrees to operate its system in a manner consistent with such established operating practices and in keeping with responsible use of the City's water supply system. 2. The WMAB shall recommend to the Administrator what information and data he or she shall require each participating Purchaser to provide, in order to allow efficient, reliable,and cost-effective provision of water under this Agreement. The Administrator shall adopt these recommended information requirements, with such alterations as he or she deems necessary or advisable. Such information may include, but is not necessarily limited to: (a) System maps with mains, pump stations, tanks, and supply connections; (b) Connections and usage from other supply sources; (c) Total existing and new service connections by category; (d) Key benchmarks to be identified by the Operations Group such as but not limited to standards for operational norms, notification deadlines, protocols for communication; (e) Water quality data; (f) Purchaser facilities' standards for operation to minimize peak and emergency events; and (g) Emergency contact information for each provider and any agreements that have been signed by individual providers to address emergency response. 3. The WMAB shall periodically evaluate Purchasers' compliance with the information requirements and standard operating procedures and shall provide the Water Bureau Administrator with findings and recommendations to assure ongoing compliance. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 8 SECTION 4—(Continued) E. Rate Review In order to provide timely notification to Purchaser of proposed changes in rates, charges, and rate design and an opportunity for Purchaser to evaluate such proposals and be heard before the City Council, City agrees that the following steps shall be taken annually. 1. Capital Improvement Program. (a) On an annual basis, Purchaser,through the WMAB, shall be invited to participate in development of that portion of the Water Bureau's Capital Improvement Plan addressing capital improvements used to serve Purchaser or other participating Purchasers; (b) Capital planning will take place in a manner sufficiently timely to ensure Purchaser effective participation in the City's capital budget deliberations each year; (c) City and WMAB will identify criteria to be considered in prioritizing capital improvement projects. City will also share its proposed ranking of projects for funding and completion and its proposed schedule for such capital improvements. Purchaser will be provided reasonable opportunity to present suggestions and recommendations for changes to the proposed Capital Improvement Plan, specific capital projects, and for improvements in the capital planning and financing process; (d) At a minimum, the City will host at least one meeting a year to discuss the Water Bureau's Capital Improvement Plan on a schedule sufficient to allow Purchaser participation in the City's capital budget deliberations each year. 2. Operation & Maintenance Budget (a) On an annual basis, Purchaser,through the WMAB, shall participate in review of the Water Bureau's Operations and Maintenance budget for the water supply system used to serve Purchaser or other participating Purchasers; (b) Water Bureau O & M budget development and review will take place in a manner sufficiently timely to ensure Purchaser effective participation in the budget deliberations each year; (c) The WMAB will be provided the opportunity to participate in the budget development and review process, including steps such as: Regional Water Sales Agreement (10 Year) April 3, 2006 Page 9 SECTION 4 —(Continued) (i) The Administrator will report to WMAB at the commencement of annual financial plan and budget preparation, and report each month to the WMAB on progress in the budget preparation and any particular budgetary issues or concerns related to that part of the water supply system used to serve the Purchaser and other members of the WMAB. Reports may be in writing or at WMAB meetings. (ii) A reasonable time, but no less than two weeks, prior to submission of the Water Bureau budget to the Mayor, the Administrator shall report to the WMAB on the current state of budget and financial plan preparation and provide his or her best estimate of the final budget for submission to the Mayor related to that part of the water supply system used to serve the Purchaser and other members of the WMAB and shall consult with the WMAB about the budget to be proposed to the Mayor. (iii)The Administrator will provide WMAB a presentation concerning the Water Bureau budget request to the Mayor and the Water Bureau financial plan for the following fiscal year and provide copies of the budget request and financial plan for review and comment. The budget request and the financial plan will be made available to WMAB on or as soon as reasonably possible after the date they are submitted to the Mayor. (iv)The City will advise Purchaser in writing of significant changes in the proposed Water Bureau Budget after its submission to the Mayor. (v) When the City Bureau of Water Works files its annual rate ordinance with the City Council Clerk, a copy of said ordinance will be forwarded to Purchaser, accompanied by a letter giving the dates on which the City Council is scheduled to consider rates. 3. Purchaser, through the WMAB, may offer comments on the annual rate ordinance in writing or in personal testimony before the City Council. F. Protection of Confidential Information Information submitted to or produced by the WMAB or otherwise exchanged by the parties to this Agreement and similar wholesale water agreements may include documents related to the vulnerability or security of water supply systems. The parties agree that if either receives a public document request for such information, the party receiving that request shall, prior to release of any documents, expeditiously notify the entity about whose system information is sought and shall, in addition, assert all applicable exemptions to release of the documents available under the Oregon Public Records Law. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 10 SECTION 5—GUARANTEED PURCHASE WATER QUANTITIES A. General Guaranteed Purchase Payment Obligations Unless excused by some other provision of this Contract, Purchaser agrees to pay City each year a sum of money (its"guaranteed purchase payment")equal to the annual water rate applicable to Purchaser for that year times the Purchaser's "guaranteed purchase" quantity of water. Payments shall be made as provided in Section 15, Billing and Payment. B. Guaranteed Purchase Quantities And Peaking Factors 1. Guaranteed Purchase Quantity. For purposes of calculating annual rates and determining Purchaser's minimum payment, Purchaser's guaranteed purchase quantity (expressed in annual average daily demand and in total monthly demands) shall be the quantity identified in Exhibit 1 to this contract, unless changed pursuant to the terms of this contract. 2. Seasonal Peaking Factor. a. Except as otherwise provided in this agreement, for purposes of calculating monthly demands and annual rates and determining Purchaser's minimum payment, Purchaser's"seasonal peaking factor"shall be the seasonal peaking factor identified in Exhibit 1 to this contract unless changed pursuant to the terms of this contract. "Seasonal peaking factor" is the ratio of the Purchaser's guaranteed purchase average daily demand placed on the City system during the "peak season" to the Purchaser's guaranteed purchase annual average daily demand. For this calculation"peak season" is the period of time from July 1 through September 30. For purposes of ratemaking and calculating monthly demands,the seasonal peaking factor excludes purchases of interruptible water. b. For purposes of Section 5 of this agreement,the Purchaser's "actual seasonal peaking factor" shall be the ratio of the Purchaser's actual average daily demand placed on the City system during the peak season(as determined from City water supply data)to the Purchaser's guaranteed purchase annual average daily demand. 3. Daily Peaking Factor. a. Except as otherwise provided in this agreement, for purposes of calculating annual rates and determining Purchaser's minimum payment, Purchaser's"daily peaking factor" shall be the daily peaking factor identified in Exhibit l to this contract unless changed pursuant to the terms of this contract. "Daily peaking factor" is the ratio of the daily average derived from the Purchaser's highest three consecutive days of purchases to its annual average daily demand for the contract Regional Water Sales Agreement (10 Year) April 3, 2006 Page 11 SECTION 5—(Continued) year. For purposes of ratemaking and calculating monthly demands, the daily peaking factor excludes purchases of interruptible water. b. For purposes of Section 5 of this agreement, the Purchaser's "actual daily peaking factor" shall be ratio of the daily average derived from the Purchaser's actual highest three consecutive days of purchases (based on City data)to its guaranteed purchase annual average daily demand for the contract year. C. Changes In Guaranteed Purchase Quantities 1. Reductions In Guaranteed Purchase Quantities Except as specifically provided for in this contract, Purchaser's guaranteed purchase quantity may not be reduced during the term of this contract except by a contract amendment. 2. Increases in Guaranteed Purchase Quantities On any March 15 during the term of this contract, Purchaser may request that its guaranteed purchase quantity be increased. The Administrator may accept or reject such request, in whole or in part. The Administrator shall respond to any request for an increase in guaranteed purchase by May I of the same year the request is made. Unless otherwise agreed by Purchaser and the City, any increases in guaranteed purchase agreed to under this provision shall be effective for the remaining term of the contract. If on any March 15, more than one Purchaser under a similar wholesale water agreement requests an increase in guaranteed purchase and the Administrator determines that he or she can prudently approve some increase in guaranteed purchases, but cannot approve all pending requests in total, then the Administrator may grant such overall increase in guaranteed purchase as he or she deems prudent, provided that when granting partial approvals of more than one request, the Administrator shall grant such approvals in proportion to the then existing guaranteed purchase quantity of each requesting Purchaser compared to the total of then existing guaranteed purchase quantities of all requesting Purchasers. If the Administrator cannot grant Purchaser's original request in total, the Purchaser may elect to withdraw its requested increase in guaranteed purchase quantity. All increases in guaranteed purchase quantities shall be confirmed in writing and signed by both parties. 3. Transfers of Guaranteed Purchase Quantities With approval of the Administrator, which shall not be unreasonably withheld, Purchaser may alter its guaranteed purchase quantity (and its guaranteed purchase obligation) by transferring all Regional Water Sales Agreement (10 Year) April 3, 2006 Page 12 SECTION 5—(Continued) or some of its guaranteed purchase quantity to another municipal entity with a valid similar wholesale water agreement with the City. Withholding approval shall be deemed reasonable in the following circumstances only: the Administrator determines that the transfer would require changes in the City water system infrastructure or reduce the reliability of the water supply system. In these two circumstances, nonetheless, the Administrator shall endeavor to approve transfers with such conditions as he or she deems necessary or advisable to avoid the need to make changes in the City water system infrastructure or reduction in the reliability of the water supply system. 4. Sale of Guaranteed Purchase Water Purchaser may sell water purchased from the City as part of its guaranteed purchase quantity to other water suppliers, upon approval of the Administrator, which will not be unreasonably withheld. Withholding approval shall be deemed reasonable in the following circumstances only: the Administrator determines that the transfer would require changes in the City water system infrastructure, or reduce the reliability of the water supply system. In these two circumstances, nonetheless, the Administrator shall endeavor to approve sales of water with such conditions as he or she deems necessary or advisable to avoid the need to make changes in the City water system infrastructure,or reduction in the reliability of the water supply system. D. Changes in Seasonal Peaking Factor 1. Requested Changes to Seasonal Peaking Factor Subject to limitations of Section 5.D.2(a) below, at any time prior to December 1 of each year of the second through fifth year of this contract, Purchaser may request in writing that its seasonal peaking factor for Years 3 through 6 of this Contract be changed from that identified for Year 1, as set out in Section 5.13.1(b) above. Purchaser's requested seasonal peaking factor shall be no less than the average of the Purchaser's actual seasonal peaking factor for the previous years under this contract. Prior to December 1 of Contract Year 6 and every year thereafter, Purchaser may request in writing a change in Purchaser's seasonal peaking factor. Any requested change shall take effect on the first day of the next contract year and shall continue as Purchaser's seasonal peaking factor thereafter unless changed pursuant to the terms of this contract. Purchaser's requested seasonal peaking factor shall be no less than the average of the Purchaser's actual seasonal peaking factor for the five previous years under this contract. Upon receiving such a request, the City shall adjust the Purchaser's seasonal peaking factor unless the Administrator determines that to do so would reduce the reliability of the water supply system. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 13 SECTION 5—(Continued) 2. Excess Seasonal peaking factors (a) Except as provided in Section 5.D.2(b) below, if in any year Purchaser's actual seasonal peaking factor exceeds by more than 10%the seasonal peaking factor set by the terms of this contract for the purposes of calculating rates in that year, the Administrator shall recalculate the year's rates and in the next available contract year shall impose on the Purchaser a surcharge equal to the difference in the Purchaser's guaranteed purchase payment under the original rates and the Purchaser's guaranteed purchase payment under the rates as recalculated using the Purchaser's actual seasonal peaking factors. When calculating rates for the year in which the surcharge is to be collected, the City shall treat the surcharge as an offset to the otherwise estimated annual revenue requirements for all wholesale and retail customers of the system. The Administrator may also increase the Purchaser's seasonal peaking factor to the actual excessive seasonal peaking factor for the purpose of calculating rates for a period of five years and the Purchaser shall not be entitled to reduce its seasonal peaking factor as described in Section 5.D.1 during this same five year period. If the Administrator determines that honoring Purchaser's actual excessive seasonal peaking factor for the five year period would reduce the reliability of the system or threaten the water supply of any other wholesale purchaser of water from the City, he or she may refuse to honor the increased seasonal peaking factor and take steps he or she deems necessary or advisable to protect the system and other Purchasers, as provided in Section 5.F, Excess Demand. (b) The provisions of Section 5D.2(a) shall not apply if the excess seasonal peaking factor resulted from the direct result of Acts of God, malevolent acts, contamination of the water supply, or events beyond the Purchaser's control if the consequences of any such circumstance or event could not have been avoided through the exercise of the standards of care common and usual in the municipal water supply industry. E. Changes In Daily Peaking Factor 1. Daily Peaking Factors For Contract Years 2 Through 5 (a) Except as it is changed upon Purchaser's request as provided in Section 5.E.I(b), for rate-making purposes in the second through fifth contract year, Purchaser's peaking factor shall be the average of its actual daily peaking factor for all previous contract years, based on demand data collected by the City. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 14 SECTION 5—(Continued) (b) At any time prior to December 1 of the first through fourth contract years, Purchaser may request that its daily peaking factor for the next year,as calculated in Section 5.E.1.(a), be altered up or down by no more than 20 percent. Except as provided in Section 5.E.3, for ratemaking purposes in the next year,the City shall use the daily peaking factor identified by the Purchaser consistent with this section, unless the Administrator determines that honoring the requested peaking factor would reduce the reliability of the system or threaten the water supply of any other wholesale purchaser of water from the City. 2. Daily Peaking Factors For Contract Years 6 And Thereafter (a) Except as it is changed upon Purchaser's request as provided in Section 5.E.2.(b), for rate-making purposes in the sixth and subsequent contract years, Purchaser's peaking factor shall be the average of its actual daily peaking factor for the five preceding years, based on demand data collected by the City. (b)By December 1 of the fifth contract year and each year thereafter, Purchaser may request that its daily peaking factor for the next year,as calculated in Section 5.E.2.(a) ,be altered up or down by no more than 10 percent. Except as provided in Section 5.E.3., for ratemaking purposes in the next year,the City shall use the daily peaking factor identified by the Purchaser consistent with this section,unless the Administrator determines that honoring the requested peaking factor would reduce the reliability of the system or threaten the water supply of any other wholesale purchaser of water from the City. 3. Excess Daily Peaking Factors (a) Beginning in contract year 3, and for each year thereafter, except as provided in Section 5.E.3(b)below,if in any year Purchaser's actual daily peaking factor exceeds by more than 20%the daily peaking factor set by the terms of this contract for purposes of calculating rates in that year,the Administrator shall recalculate the year's rates and in the next available contract year shall impose on the Purchaser a surcharge equal to the difference in the Purchaser's guaranteed purchase payment under the original rates and the Purchaser's guaranteed purchase payment under the rates as recalculated using the Purchaser's actual daily peaking factors. When calculating rates for the year in which the surcharge is to be collected, the City shall treat the surcharge as an offset to the otherwise estimated annual revenue requirements for all wholesale and retail customers of the system. In addition, for five years after the year in which the Purchaser's actual daily peaking factor exceeds by more than 20%the daily peaking factor set by the terms of this contract for purposes of calculating rates in that year,the Administrator need not honor any request by Purchaser to alter the Purchaser's calculated daily peaking factor pursuant to Sections 5.E.I(b)or 5.E.2(b). Regional Water Sales Agreement (10 Year) April 3, 2006 Page 15 SECTION 5—(Continued) (b) The provisions of Section 5E.3(a)shall not apply if the excess daily peaking factor resulted from the direct result of Acts of God, malevolent acts, contamination of the water supply, or events beyond the Purchaser's control if the consequences of any such circumstance or event could not have been avoided through the exercise of the standards of care common and usual in the municipal water supply industry. F. Release Of Purchaser From Guaranteed Purchase Obligations 1. Changes in Guaranteed Purchase Quantities In Case Of Short-Term Curtailment (a) Reduction or Shift of Guaranteed Purchase Quantity Purchaser's guaranteed purchase quantity (and, as appropriate, its guaranteed purchase annual payment) shall be altered, at Purchaser's request, for any year in which the Purchaser acts on a request by the City to reduce or curtail demand below its established guaranteed purchase quantity for more than five consecutive days. Any request must be made in writing to the City within 30 days after the Purchaser is no longer reducing or curtailing demand upon the City's request. At Purchaser's option,the quantity of water it did not purchase during a reduction or curtailment period of more than 5 consecutive days shall either: (a) be excluded from that year's guaranteed purchase quantity or(b) be shifted to another time of the year when curtailment is not in effect. Provided, however, that the Administrator need not honor a request to shift quantities to other times if he or she determines that to do so would threaten the reliability of the water system. (b) Quantification of Reduction or Shift in Guaranteed Purchase Quantity For purposes of Section 5.F.1, the Administrator shall calculate the reduction in water used by the Purchaser(and, therefore, the amount of the guaranteed purchase quantity reduction or shift) by considering the difference between the Purchaser's actual water usage during the period of curtailment or water use reductions and the Purchaser's guaranteed purchase demand projections for the same period and such other information available to the Administrator that he or she determines can be used to assist in making the calculations. (c) Seasonal Peaking Factor Effects Regional Water Sales Agreement (10 Year) April 3, 2006 Page 16 SECTION 5—(Continued) Reductions or shifts of guaranteed purchase quantities pursuant to Section 5.17.1 shall not alter the Purchaser's seasonal or daily peaking factors for purposes of future ratemaking. 2. Changes in Guaranteed Purchase Quantities In Case of Failure of Supply (a) Except as provided in Section 5.F.2(d)below, if the City fails to supply Purchaser's guaranteed purchase demand for more than 30 consecutive days more than one time in any period of ten consecutive years, the Purchaser may declare its intention to reduce its guaranteed purchase quantity pursuant to this Subsection. (b) For purposes of Section 5.17.2,the Administrator shall determine if there has been a failure to meet guaranteed purchase obligations by considering the difference between the Purchaser's actual water usage during the period of curtailment or reduced water supply and the Purchaser's guaranteed purchase demand projections and such other information available to the Administrator that he or she believes can be used to assist in making the determination. (c) Procedure to Reduce Guaranteed Purchase Quantities i. To reduce its guaranteed purchase quantity under this Subsection, Purchaser must give written notice to the City of its intent to do so. The notice must be given any time after the 31 st day of the failure of supply, but not more than 60 days after supply has been fully reestablished. ii. Having given notice under Subsection 5.F.2(c)i, Purchaser may thereafter reduce its guaranteed purchase from the City by up to 10% of the guaranteed purchase quantity in effect the day before the failure of supply each year for the remaining years of the then current contract term and the next ten year term if the contract is renewed. To reduce its guaranteed purchase for any contract year, Purchaser must provide written notice of the reduction to the City no later than December 31 of the preceding contract year. Provided that to continue reducing its minimum quantity after any contract renewal, Purchaser must give written notice to the City of its intent on or before the date of renewal. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 17 SECTION 5—(Continued) iii. If Purchaser elects to reduce its guaranteed purchase quantities pursuant to the terms of this Subsection, all other terms of the contract shall continue in effect. (d) Purchaser shall not have the option to reduce its guaranteed purchase obligation under this Subsection if the City's failure to supply Purchaser's guaranteed purchase was caused by Acts of God, malevolent acts, contamination of the water supply, or events beyond the City's control if the consequences of any such circumstance or event could not have been avoided through the exercise of the standards of care common and usual in the municipal water supply industry. (e) The ten year period for judging this obligation shall restart at each renewal of this contract. (See Section 3.F.) G. Excess Demands 1. Reduction in Supply Should Purchaser place demands on the system in excess of that agreed to between City and Purchaser or not in compliance with the Operating Standards adopted pursuant to Section 4, WMAB, in a manner that jeopardizes the reliability and safety of the Portland water system or compromises the City's ability to meet its obligations to other customers,the Administrator may take such steps as are necessary or advisable to protect the system. Such actions may include, but are not limited to reducing the supply of water flowing to the Purchaser. If the water system infrastructure does not allow the Administrator to make such supply reductions, the Administrator may construct control devices as may be needed to suitably control Purchaser's demands. The cost of such improvements shall be fully recovered through a surcharge billed to Purchaser and added in equal installments to the Purchaser's monthly invoices during the four months following completion of construction. 2. Calculation of Excess Demands For purposes of Section 5.G, the Administrator shall determine whether Purchaser has imposed excess demands on the system using any information available to the Administrator that he or she determines can be used to assist in making the determination. The Administrator's determination shall be subject to review and comment by the WMAB. H. Increased System Capacity To Meet Increased Guaranteed Purchase Quantities 1. If Purchaser requests an increase in its guaranteed purchase quantity pursuant to Section 5.C.2 that, in the judgment of the Administrator, cannot prudently be granted Regional Water Sales Agreement (10 Year) April 3, 2006 Page 18 SECTION 5—(Continued) because it exceeds the capacity of the system to deliver water to Purchaser, the Purchaser may request that the City undertake a study to determine what, if any, enhancements or alterations to the system, would produce sufficient system capacity to meet the increased guaranteed purchase quantity. 2. Upon Purchaser's written agreement to fund such a study of system enhancements or alterations,the City shall undertake the study. Provided that the City's obligation shall be contingent on the negotiation of a mutually satisfactory intergovernmental agreement between the City and Purchaser establishing the nature, timing, and funding of the study. 3. Upon completion of any system study provided for in this subsection, the Purchaser funding the study may request the City to undertake system enhancements or alterations sufficient to meet the increased Purchaser's proposed increased guaranteed purchase quantity. 4. Upon request for system enhancements or alterations, the City may agree to undertake the enhancements or alterations requested, under such terms and conditions as the City and Purchaser(or others) in writing mutually agree. The parties may utilize joint funding agreements, as provided for under Section 16 of this Agreement, or such other arrangements as are determined to be mutually beneficial at the time. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 19 SECTION 6 - INTERRUPTIBLE WATER A. In General Purchaser may purchase water over and above its guaranteed purchase quantities under the terms and conditions set forth herein. Such water shall be termed interruptible water. Except as provided herein, the City is not obligated to sell interruptible water to Purchaser. Further, City may cease providing interruptible water at any time under procedures of Section 6.F below, even after the Administrator has accepted an offer to purchase interruptible water under procedures of Sections 6.13, 6.0 and 6.13 below. B. Winter Interruptible Water From October 1 through May 31, Purchaser may offer to purchase winter interruptible water on one day's verbal or written notice to the City. The City may provide interruptible water to Purchaser if the Administrator determines it is prudent to do so and if the Administrator accepts the Purchaser's offer either verbally or in writing. C. Summer Interruptible Water 1. From June 1 through September 30, Purchaser may request to purchase summer interruptible water using the procedures established in this Section 6.C. 2. No later than March 15 of each year, Purchaser may submit to the City, in writing, its offer to purchase summer interruptible water supplies. The offer must identify the quantities of water to be purchased, by month, for the next June through September period. 3. No later than April 15, City of each year shall respond in writing to Purchaser's request for interruptible water, based on the Administrator's prudent estimates of system capacity and operational requirements. If the Administrator accepts Purchaser's offer without changes,then the Purchaser is obligated to purchase and the City is obligated to sell the designated quantity of summer interruptible water under the terms of this contract. 4. If the Administrator determines that it would not be prudent to agree to meet all timely requests for summer interruptible water from all Purchasers, he or she shall offer the total quantity of interruptible water he or she deems to be prudent to all requesting Purchasers as follows: each Purchaser shall be offered a quantity of interruptible water proportional to its guaranteed purchase quantity in comparison to the total of the guaranteed purchase quantities of all requesting Purchasers. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 20 SECTION 6—(Continued) 5. If the Administrator offers to supply Purchaser less than the full amount of summer interruptible water requested by the Purchaser, Purchaser must,within 15 days of the Administrator's offer, accept or reject the offer. If Purchaser accepts the offer, then Purchaser is obligated to purchase and the City is obligated to sell that quantity of summer interruptible water under the terms of this contract. D. Additional Sales of Interruptible Water Notwithstanding the other provisions of Section 6,each contract year after the Administrator has confirmed sales of summer interruptible water under Subsection 6.C. above, the Purchaser may buy and the City, acting through the Administrator, may sell additional interruptible water at that year's summer season interruptible rate and on such other terms as are mutually agreeable. E. Confirmed Summer Interruptible Water Payment 1. Purchaser's Obligation to Make Payment Once Purchaser and the City have agreed on a quantity of interruptible water under the terms of this section,and subject to the billing provisions of Section 15 of this Contract, except as provided in Section 6.E. 2 below, the Purchaser shall pay the City for that quantity of water agreed to at the price established by Section 8 of this Contract. The amount due shall be termed the confirmed interruptible water payment. 2. Reduction in Confirmed Interruptible Water Payment If the City fails to deliver any of the confirmed quantity of interruptible water, the Purchaser shall be excused from paying a portion of its confirmed interruptible water payment equal to the quantity of water not delivered times the price of interruptible water. F. Reduction or Elimination of Interruptible Water In the event of an emergency or other condition under which continued supply of interruptible water jeopardizes the reliability of the water system, the City may cease providing interruptible water at any time on one day's written or verbal notice to the Purchaser. Under all other circumstances, the City may cease providing interruptible water at any time on 21 days written or verbal notice to the Purchaser. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 21 SECTION 7— RATES AND CHARGES FOR GUARANTEED PURCHASE WATER QUANTITY A. Rate Making In General 1. The rate structure for Purchaser's guaranteed purchase quantity of water shall consist of(a)a fixed monthly charge calculated using the cost of service of typical non-volumetric services such as, but not limited to, meter reading,billing, meter purchases, meter maintenance, and relevant overhead and (b) a volume charge calculated using volumetric rates established as provided herein times the Purchaser's guaranteed purchase quantity. 2. The City shall annually establish rates and charges for the Purchaser's fixed monthly charge and guaranteed purchase quantities that do not exceed charges calculated using the principles and standards of this Section 7. (a) Determination of revenue requirements using the utility basis of revenue requirements and cost of service principles as described in Manual of Water Supply Practices—M1. Principles of Water Rates, Fees and Charges. Fifth Edition. Denver: 2000 published by the American Water Works Association (hereafter"AWWA Manual M 1") or in such updates as may occur from time to time, except for such deviations from AWWA Manual M 1 as are described or permitted by this contract. A cost of service computer model will be used to calculate the revenue requirements,cost allocations, and resulting rates. (b) The components used to determine the revenue requirements under the utility basis shall be: 1. Operation and Maintenance (hereafter"O & M") costs; 2. Return on Investment; and 3. Depreciation. (c) Purchaser shall not be charged for the costs incurred by the City that are incurred for the sole purpose of serving the City's retail customers. For the costs incurred serving both the Purchaser and the City's retail customers, Purchaser shall be charged an amount that equals its proportionate share of the cost, using standard cost-of-service principles, as generally described in AWWA Manual M1, unless stated otherwise herein. (d) The parties understand that the City may enter into similar wholesale water sale agreements with other water utilities. If the City does so, the charges to Purchaser shall continue to be based on the Purchaser's proportionate Regional Water Sales Agreement (10 Year) April 3, 2006 Page 22 SECTION 7–(Continued) share of the cost to serve the Purchaser, based on the Purchaser's proportionate share of total demand on the system, including demand of other purchasers under similar wholesale water agreements and the City's retail customers. (e) The City shall treat surcharges collected under Section 5.13.2 of this agreement as an offset to the otherwise estimated annual revenue requirements for all wholesale and retail customers of the system. B. Cost Allocations—In General 1. Costs shall be allocated to the Purchaser in accordance with generally accepted ratemaking practices and procedures, as described in AWWA Manual M1, as it may be updated from time to time, except to the extent that the procedures specified herein may deviate from the practices and procedures of AWWA Manual MI. In general, unless specified otherwise in the agreement, costs shall be allocated based on the proportionate share of costs of the assets and other revenue requirements, as provided in AWWA Manual M1. 2. Cost allocation for purposes of this contract shall be based on the "commodity demand" methodology, as defined in AWWA Manual M1, unless otherwise agreed to by Purchaser and the Administrator. C. O & M Cost Allocation 1. Definition For purposes of this agreement O & M expenses include the operations, maintenance, and associated overhead expenses of the City's water supply system as adopted in the City's annual budget process for the year for which the rate will be in effect except that costs for water planning studies that are expensed rather than capitalized shall be included in the O & M expenses at their actual cost rather than budgeted or anticipated costs. When use of actual costs for such studies results in a delay of recovery of costs associated with such studies, Purchaser shall also be charged interest on the funds expended from the time the costs were incurred by the City until the start of the following contract year. The interest rate shall be equivalent to the rate earned on the City's internal investment pool managed by the City Treasurer. 2. Allocations The City shall allocate O & M costs to cost functions applied in accepted cost of service rate- making contemplated by AWWA M-1, such as commodity,peak season demand (referred to as the seasonal peaking factor under this contract), peak three days system-wide demand (referred to as the daily peaking factor under this contract),customer, and equivalent meter service based on Regional Water Sales Agreement (10 Year) April 3, 2006 Page 23 SECTION 7—(Continued) the City's best professional engineering judgment. The City shall then allocate O& M costs allocated to these respective cost functions to the Purchaser based on the Purchaser's proportionate share of retail demand and non-retail guaranteed purchase quantities for annual average demand, peak season demand, total annual non-retail bills, meters,and size of meters respectively. Allocations may also be based on peak day or peak three day demands, but for those purposes the City may include Purchaser's total demands on the Portland water system, including guaranteed purchase quantities and actual purchases of interruptible water. Definitions of allocation factors are found in Exhibit 2, which is hereby incorporated and made part of this Agreement. 3. Special Allocation to Avoid Cost Cap In any year that the Administrator determines that standard allocation of the O & M expenses contained in the City Budget will cause specified O & M expenses to exceed the O & M cost cap as defined in Section 7.I., the Administrator may alter the O & M component of Purchaser's rates in a manner that avoids that result. D. Capital Cost Allocations 1. Capital costs are those expenditures that result in the acquisition of or addition of fixed assets that become part of the rate base. 2. Except as specifically provided herein, capital costs shall be allocated based on Purchaser's guaranteed purchase quantity in a five-step process using best professional judgment. First, system assets included in the rate base shall be allocated to functional asset groups. Second, the resulting system assets by functional asset group shall be allocated to water service characteristics. Third, the assets allocated to each water service characteristic shall be allocated to customer classes based on their respective percentages of the water demands related to each water service characteristic. The City shall classify customer classes as retail and wholesale and shall treat each wholesale customer that serves more than 200 service connections as an individual customer class. Fourth,the asset costs allocated to each customer shall be multiplied by the rate of return to determine the return on investment for each customer class. Fifth, the working capital component of the rate base shall be allocated to customer classes in proportion to the allocation of all other rate base assets. 3. In performing these allocations, items that solely serve the City's retail customers shall be allocated to retail customers. Items that solely serve the Purchaser and other wholesale customers shall be allocated to wholesale customers. Items that serve the City and any wholesale customers shall be allocated proportionately to Regional Water Sales Agreement (10 Year) April 3, 2006 Page 24 SECTION 7—(Continued) the City, based upon its retail water demand, and the respective wholesale customers, based upon each customer's guaranteed purchase amount. 4. For the purposes of these allocations, functional asset groups are collections of common water system assets or facilities that are used to provide water service to customers. The City's functional asset group designations shall be specific enough that customer classes are not allocated costs to support assets or facilities that do not provide service or benefit to them. Definitions of functional asset groups and their allocations to customers shall be consistent with the findings contained in a document entitled Functional Asset Groups unless circumstances change, in which case the allocations will also be changed to reflect the use or benefit of assets and facilities under normal operating conditions. Any changes in definitions of functional asset groups shall be presented to the WMAB for review and comment. The Administrator shall provide a written explanation if WMAB recommendations are not implemented and consult with WMAB regarding his determination. 5. For the purposes of these allocations,water service characteristics may include such things as commodity, peak season demand, peak three days demand, customer, equivalent meter, and fire. For purposes of peak day and peak three day analysis, the City may include Purchaser's total demands on the Portland water system, including guaranteed purchase quantities and Purchaser's actual purchases of interruptible water. Definitions of these water service characteristics are provided in Exhibit 2. 6. The allocations of assets to functional asset groups and subsequently to water service characteristics may vary from time to time as changes to the system and its operation may occur. The revised allocations, if any such revisions occur, shall be used in the annual rate setting process, and if no revisions occur, then the previously adopted allocations shall be used for annual rate setting. The entire set of these allocations, including the initial allocations and any subsequent changes, shall be reviewed in the Cost Allocation Audits, as described in Section 7.E. below. E. Cost Allocation Audits 1. In Contract Year 5 and every five years thereafter during the term of this contract and any extensions, an independent third party shall be retained to conduct an audit of all steps of the then-currently employed process to allocate assets and O & M to customer classes. The expert shall be instructed, as the result of its audit, to recommend any changes necessary to ensure the continued accuracy of the cost allocations consistent with the terms of this contract and the AWWA M-1 manual. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 25 SECTION 7—(Continued) The expert shall be selected by a majority vote of the WMAB and the auditor expense shall be included in O & M expenses and allocated accordingly. The expert's report shall be completed by December 1 of the contract year in which the expert is hired. 2. Expert recommendations for cost allocations shall be reviewed by the WMAB and shall be implemented by the Administrator in the contract year following receipt of the recommendations unless: (1) a majority of the WMAB and the Administrator concur that the recommendations should not be implemented or(2) the Administrator determines that it would be imprudent to adopt any or all of the recommendations. In case the Administrator reaches a determination of imprudence, he or she shall explain his or her determination in writing to the WMAB and consult with WMAB concerning his or her determination. F. Depreciation of Capital Assets 1. Depreciation expense shall be the annual depreciation expense on assets that are used, in total or in part, to serve the Purchaser, either directly or indirectly. Depreciation shall be calculated on the original cost of the assets and on a straight-line basis, using City accounting estimates of the useful lives of the assets in accordance with Generally Accepted Accounting Principles, which may differ from the actual useful lives of those assets. 2. The parties understand and agree that the assets being depreciated for these purposes may include backup facilities and other redundant facilities that may be idle for long periods of time, but which the City has determined still provide a service function to the system and the Purchaser by virtue of their backup and redundancy functions. 3. Depreciation shall not be charged for assets that are no longer able to provide service to the Purchaser or whose accounting life has expired, unless otherwise agreed to by the parties. G. Return On Investment Return on investment shall equal the rate of return multiplied by the value of system assets (the rate base) that serve the Purchaser. 1. Rate of Return The rate of return for each year shall be the percentage rate of the Bond Buyer Revenue Bond Index as published by the newspaper The Bond Buyer on the previous December 1 or the City Water Bureau's embedded cost of debt on the previous December 1, whichever is higher, plus Regional Water Sales Agreement (10 Year) April 3, 2006 Page 26 SECTION 7—(Continued) one percentage point (1.0%). If the Bond Buyer Revenue Bond Index ceases to be available, the Administrator shall notify the Purchaser and consult with WMAB regarding identification of a substitute index. The substitute index shall be selected by the Administrator, in consultation with the WMAB, and shall be widely available to dealers in municipal securities, and measure the interest rate of high quality, long-term, fixed rate municipal securities. If available, an index measuring the interest rates on high quality, long-term, fixed rate municipal revenue bonds will be selected by the Administrator over a comparable general obligation bond index. Upon identification of a substitute index, the rate of return on this contract shall be the percentage rate of a substitute index plus one percentage point(1.0%). 2. Rate Base The rate base shall equal: (a) Working capital, consisting of an amount equal to an average of 45 days of operation and maintenance costs for the water system supply, transmission, storage and pumping facilities that are incurred to provide service directly or indirectly to non-retail customers. (b) The remaining un-depreciated value, i.e., book value, of all assets that provide service, directly or indirectly, in whole or in part, to the Purchaser, including water system supply, transmission, storage, and pumping facilities, equipment, and appurtenances and any other water system assets that provide service directly or indirectly to the general water supply and transmission portion of the water system, thereby providing water supply to non-retail water customers of the City. These assets may include backup facilities and other redundant facilities that may be idle for long periods of time, but which the City has determined still provide a service to the system and Purchaser. For such assets providing water supply benefit to both retail and non-retail customers, the assets included in the rate base shall be allocated proportionately as previously described herein. (c) The assets initially included in the Rate Base, as of the date of this agreement, are listed in Exhibit 3. Each year, the City shall produce a new Rate Base asset list and provide it to Purchaser during the rate-making process as provided in Section 4, WMAB. (d) After the first year of this contract, the assets included in the Rate Base assets shall be updated each year to include all water system capital assets listed and valued in Water Bureau documents used to produce the City's most recent Comprehensive Annual Financial Report and its supporting Regional Water Sales Agreement (10 Year) April 3, 2006 Page 27 SECTION 7—(Continued) documentation, which may include capitalized interest on some or all of the relevant assets. 3. Rate Base Exclusions The Rate Base shall exclude the following items: (a) Construction work in progress. (b) Assets that are fully depreciated, even though such assets may be still in service. H. Prepayment of Capital Cost Share The Purchaser may elect to pay its share of capital cost allocations for new water system assets in a lump sum cash payment or other mutually agreed upon payment terms in lieu of paying annualized rates for depreciation and rate of return for the new facilities. If Purchaser makes such cash payment,the portion of the asset cost being prepaid by the Purchaser shall be deducted from the value of the specified assets in the rate base used to calculate the Purchaser's rates. By making such cash payment, Purchaser does not obtain an ownership interest in the specified assets unless Purchaser and the City have entered into a supplemental joint ownership agreement as specified in Section 16, Joint Funding of Capital Improvements. I. Operations And Maintenance Cost Control To help ensure stability and predictability of wholesale rates and to permit recovery of costs of service, increases in specified O & M expenses shall be subject to limitations described below. These limits do not apply to capital costs, recovery on investment, or O & M expenses that are not specified O & M expenses. 1. O & M Cost Cap The O &M Cost cap is the prior year's specified O & M expense any portion of which was allocated to Purchaser or any other wholesale purchasers under similar water sale agreements increased by the sum of two percentage points (2%) plus the annual rate of change of the selected CPI. (a) Selected CPI shall mean the CPI-Urban, West Urban (ref CUUR0400SAO) for January 1 of the year new rates are calculated, e.g., CPI of January 1, 2006, will be used to assess O & M increases in rates for July 1, 2006. If this referenced index ceases to be available, the Administrator shall notify the Purchaser and consult with WMAB regarding identification of a substitute index. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 28 SECTION 7—(Continued) (b) Specified O & M expenses are those City O & M expenses defined in Subsection 1.3 below, Specified O& M Expenses and Exclusions. 2. Cost Cap Limitation The City may not more than once in any consecutive five year period include in the calculation of Purchaser's rates, specified O & M expenses that exceed the O & M cost cap. If, however, the City's actual O & M spending (including, but not limited to specified O & M expenses) is 90% or less than the City's budgeted O & M expenses for each of the prior four years, the increase in the fifth year shall be limited to the formula of 7.I.1 above. A new five year period shall commence at each renewal of this contract. 3. Specified O & M Expenses And Exclusions Specified O & M expenses shall be those O & M expenses, including associated overhead, incurred by the City's water system to serve directly or indirectly, in whole or in part, the Purchaser and other purchasers under similar wholesale water agreements and any portion of which is properly allocated to Purchaser or any other purchasers under similar wholesale water agreements under the terms of their contracts, except for expenses or classes of expenses excluded by this Section 7.1. The Administrator shall make a determination of specified O & M expenses and exclusions in consultation with the WMAB each year during the ratemaking processes. 4. Specified O & M expenses shall not include and shall therefore, exclude, the following expenses or classes of expenses: (a) Pass-Through Costs. These are costs that the parties agree are generally beyond the reasonable control of the City water system to influence. For purposes of this contract, pass through costs are those listed here. i. Utilities, including electricity, water, sewer, natural gas, garbage and telephone. ii. Equipment rental, such as hoists, excavators, tools and other miscellaneous equipment not included in the City's fleet. iii. Operating supplies, such as treatment chemicals, lubricants and consumables related to system operation and maintenance. iv. Communication Services, including but not limited to telephone, radio, microwave and fiber-optic transmission of data, voice, video and related information. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 29 SECTION 7—(Continued) V. Insurance or the expenses of self-insurance, other than workers compensation, including but not limited to costs for general liability, property, casualty and fleet coverage. vi. Additional costs identified by the Administrator from time to time that are beyond the control of the City to influence in a manner similar to the specific costs listed in this subsection. Provided that the City may not exempt any such additional costs from the cost cap without first presenting proposed additions to the WMAB for review and comment. (b) The costs of PERS Pension Obligation Bonds (POBs) paid by the City of Portland Water Bureau. (c) Costs In Response to Unexpected Events or Circumstances i. These are costs that arise unexpectedly or as the result of Acts of God, malevolent acts,contamination of the water supply, or events beyond the City's control, the consequences of which events or circumstances could not have been avoided through the exercise of the standards of care common and usual in the municipal water supply industry. ii. The City and Purchaser shall, within 120 days of the onset of such unexpected costs commence good faith negotiations to determine what, if any, of the costs of responding to the event or circumstances, which are otherwise excluded, should be included within the Specified O & M expense. (d) Costs Associated With Planning Studies These are costs to pay for City planning studies related to the Water Supply System including those studies in the City's Water Bureau Capital Improvement Program that are expensed rather than capitalized. (e) Costs Associated With New Facilities Or Programs i. These are first time or initial increases to O & M expenses (which may affect more than one fiscal year) associated with operation and maintenance of new facilities or the functioning of new programs. New programs may include such things as responses to new state or federal mandates or regulations, or activities to improve the Regional Water Sales Agreement (10 Year) April 3, 2006 Page 30 SECTION 7—(Continued) efficiency, reliability, security or quality of the water supply. The WMAB will be consulted regarding initial O & M costs of new facilities and new programs. The parties understand and agree that O & M costs may increase in any given year in order to implement new programs or to operate or maintain new facilities without exceeding the cost cap. ii. Once O & M expenses for new programs or facilities are established and have become a routine part of the City's water system budget, however, those of the expenses that are not otherwise excluded from"specified O& M costs," (pass through costs, PERS expenses listed in Subsection 2 above, costs in response to unexpected events or circumstances, or costs associated with planning studies) shall be included in future calculations of the increase in specified O & M expenses. iii. As O & M expenses for new facilities or new programs arise, the Administrator shall consult with WMAB concerning the expenses and then determine which of those expenses should be excluded from cost cap calculations as "new O & M" and which expenses should be included within the cost cap on what schedule. The Administrator shall advise Purchaser and WMAB of his determination. (f) Costs Incurred on Behalf of the Purchaser or WMAB These are costs to be paid by the City by mutual agreement of the City and Purchaser or the City and the WMAB. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 31 SECTION 8 - RATES AND CHARGES FOR INTERRUPTIBLE WATER A. Winter Interruptible Water The price of winter interruptible water shall be twenty percent (20%) of the Purchaser's rate for that year for its guaranteed purchase water quantity, plus any extra delivery costs (such as extra pumping) incurred by the City to deliver the water that are not included within the rate for the guaranteed purchase quantity. B. Summer Interruptible Water The price of summer interruptible water shall be forty-five percent (45%) of the Purchaser's rate for that year for its guaranteed purchase water quantity, plus any extra delivery costs (such as extra pumping) incurred by the City to deliver the water that are not included within the rate for the guaranteed purchase quantity. r Regional Water Sales Agreement (10 Year) April 3, 2006 Page 32 SECTION 9 - WATER SYSTEM PLANNING AND COOPERATION To facilitate regional water planning and resource development, Purchaser and the City agree as follows: A. Purchaser Projected Water Usage 1. Each five years, at a minimum, starting on July 1 of Contract Year 5, Purchaser shall provide to the City estimates of the Purchaser's water demand to be purchased from the City by year,annual seasonal peaking factor, and daily peaking factor for a period of ten years including any anticipated increases in guaranteed purchase quantity. 2. In addition, in any other Contract Year in which unforeseen developments have significantly altered Purchaser's five year estimates, Purchaser shall provide the City with its revised estimates of it preferred use of Portland water for a ten year period. 3. The estimates provided for in this provision are for planning purposes only and do not commit the City or the Purchaser to either buy or supply any particular quantities of water. 4. The City shall provide WMAB a summary of the City's projected demands for all wholesale and retail demands by no later than May 1 of each year. B. City Evaluation of Capacity of Portland Water System 1. Whenever it receives revised demand and peaking factor estimates from the Purchaser, the City shall provide the Purchaser with estimates of the capacity of the Portland water system to meet all projected system loads over the ten year planning horizon. 2. If the City determines that the Portland water system cannot meet the projected demands Purchaser and others have proposed to place on it over the ten year planning horizon, the City and Purchaser(together with other Purchasers who may wish to join the discussions)may initiate negotiations to determine if and how the Portland water system could meet the projected loads, either through reduction in demand or development of additional water system capacity. 3. In no case, however, does this contract obligate the City to sell, or Purchaser to pay for, water beyond the guaranteed purchase quantities established herein. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 33 SECTION 10- RESERVATION OF SYSTEM CAPACITY At any time during the term of this contract, Purchaser and the City may enter a separate reserve capacity agreement. A reserve capacity agreement would enable Purchaser to take a specified amount of additional water from the system at a specified future time. At a time to be specified in the reserve capacity agreement, the quantity of water reserved will be added to the Purchaser's guaranteed purchase quantity under this contract and will be used to calculate the Purchaser's guaranteed purchase payment thereafter. Unless specified otherwise in the reserve capacity agreement, costs for reserve capacity shall be charged at a rate equivalent to the rate of return on the proportionate share of the capital assets that would be used to make such capacity available, and shall be billed to the Purchaser in equal monthly installments. Purchaser will possess no right to use the additional capacity identified in its reserve agreement until the specified future time. The City may use any or all of the reserve capacity prior to the specified future time. Unless specified otherwise in the reserve capacity agreement, Purchaser shall provide the City written notice at least 90 days prior to the specified future time identifying if the Purchaser will (a) exercise its option to use the additional system capacity after the specified future time, (b) allow the reserve capacity agreement to expire without further action, or(c) request a new or amended reserve capacity agreement with a new specified future time. If a request for reserve capacity can only be met by adding new assets to the system, the City will not reserve capacity for the Purchaser until the parties have reached an agreement on the method for financing and the schedule for adding the assets to the system. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 34 SECTION 11 -CONNECTIONS AND METERING A. Meter Ownership and Responsibility Upon execution of this agreement, all existing water meters used to measure the water supplied by the City to the Purchaser, and associated facilities such as vaults, shall become the property of the City. In addition,when a new meter or meters are required, the City shall install on Purchaser's main, at a point near the connection with the City's main,a water meter or meters that will at all times measure the water supplied by City to Purchaser. City shall maintain the meter or meters in proper working condition,including periodic testing, calibration, maintenance and replacement of the meter(s)based on generally accepted industry standards. City agrees to notify Purchaser prior to repairing the meter. B. Meter Costs The cost of replacing the meter or meters and their operations and maintenance shall be included by the City in calculating Purchaser's rates. C. Meter Access The Purchaser shall be allowed reasonable access to meters and facilities for purposes of installing and maintaining telemetry equipment or other equipment related to the metering function. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 35 SECTION 12 - PURCHASER-SUPPLIED WATER TO CITY RESIDENTS A. Water Supplies To City Residents To the extent permitted by law, Purchaser agrees, when requested by the Administrator, to provide water supply to City residents in areas adjacent to Purchaser's water mains subject to limitations of the available capacity of Purchaser's water distribution system. Water so delivered shall be metered by the City at its residents' individual services. B. Master Metering The City and Purchaser shall review each situation where such arrangements exist and attempt to reach agreement on the need and feasibility of installing a master meter or master meters to register the volume of water delivered to City residents. The Purchaser agrees the water delivered to City residents will be from the same source or sources as water that Purchaser delivers to its customers and shall meet all applicable drinking water regulatory requirements. The Purchaser may request the City install a master meter if the local distribution system is shown to have demonstrated leakage or unaccounted water losses in excess of 10% of the average day demand of the City residents served by system or by mutual agreement of the parties. Improvements to the local distribution system shall be made by mutual agreement of the parties. C. Charges For Water 1. The Purchaser may charge the City up to one hundred twenty-five percent (125%)of the guaranteed purchase wholesale water rate the City charges the Purchaser. The City will credit this amount to Purchaser. Such water will not be included in the calculation of total water purchases made by the Purchaser from the City. 2. Notwithstanding the foregoing, the Purchaser may conduct a cost-of-service study to determine the cost of serving City residents. If the cost-of-service exceeds the 125% of the wholesale water rate, Purchaser may adjust the charge to the City accordingly,but not above the actual cost of service. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 36 SECTION 13 - WATER RESOURCE CONSERVATION A. General 1. The obligations in this Section will apply to both the City and Purchaser. Both parties to this agreement intend that water to which the City holds water rights shall be used beneficially, efficiently, and without waste. 2. The parties encourage the development of joint conservation programs where such partnerships are of mutual benefit and produce increased efficiencies in program costs or water savings. Provided, however, that funding for joint conservation programs will be established by separate agreement between the interested parties. B. Water Managers Advisory Board The WMAB will foster and promote efficient use of water and best management practices as outlined further in this Section. It will also be the role of the WMAB to implement the provisions of this Section. In doing so, WMAB may assign tasks to a WMAB committee or to staff of participating purchasers' subject in all cases to WMAB review and approval. C. Water Conservation Obligations and Submission of a Water Conservation Plan 1. The Purchaser must operate water systems that are fully metered at the individual customer level or have an implementation program to complete installation of such meters by the end of the fifth contract year. 2. Unless Purchaser serves a population of 1,000 or less, Purchaser shall, on or before the end of the second contract year, and every five years thereafter, submit a Water Conservation Plan for its water system to the WMAB. 3. If Purchaser is a participant in the ORS 190 Agreement for the Regional Water Providers Consortium, it may submit the regional conservation programs as part of its Conservation Plan, but the Consortium programs, by themselves, do not constitute a Conservation Plan for the individual Purchaser. 4. Each Conservation Plan submitted must include programs specified in State of Oregon Water Resource Department Water Management and Conservation Plan Rules, as they are from time to time amended. D. Review of Conservation Plan 1. The WMAB may, if it deems it advisable, adopt guidelines for the submission of water Conservation Plans. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 37 SECTION 13 —(Continued) 2. Upon receipt of a Purchaser Conservation Plan, the WMAB will review the plan pursuant to the standards of this Section. In reviewing a Conservation Plan, the WMAB shall consider, at a minimum, the following factors: (a) Whether the program contains the following mandatory programs i. Leak detection and repair programs, if required by State Rule, that meet Oregon Administrative Rule (OAR) 690-86-150(4)(e) and, if applicable, Subsection (6)(a). ii. Education and outreach programs required under OAR 690-86- 150(4)(f). iii. Rate structures based on the quantity of water metered at the service connection as required by OAR 690-86-150(4)(d). iv. A meter testing and maintenance program as required by OAR 690-86-150(4)(c). V. An annual water audit as required by OAR 690-86-150(4)(a). (b) Whether the Plan includes the following discretionary programs or a showing that a particular discretionary program is neither feasible nor appropriate to the Purchaser's service area. i. Technical and financial assistance programs to encourage and aid residential, commercial and industrial customers. ii. Supplier financed retrofitting or replacement of existing inefficient water using fixtures, including distribution of residential conservation kits and rebates for customer investments in water conservation. iii. Adoption of rate structures, billing schedules, and other associated programs that support and encourage water conservation. iv. Water reuse, recycling, and non-potable water opportunities. V. Other measures identified by the water supplier that would improve water use efficiency. vi. Operation measures to reduce peak event impacts on the Portland system. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 38 SECTION 13—(Continued) 3. Within 180 days of receipt of the Purchaser's Conservation Plan, the WMAB shall approve or disapprove the Plan and advise the Purchaser in writing of its decision. (a) A Water Management and Conservation Plan approved by and updated as required by the State of Oregon pursuant to the Department of Water Resources Water Management and Conservation Plan Rules will in all cases be deemed sufficient to meet the requirements for a Conservation Plan under this agreement. (b) If the WMAB disapproves the Purchaser's Water Conservation Plan, it shall notify the Purchaser and provide the Purchaser with comments on the Plan's deficiencies. Within 180 days thereafter, Purchaser shall submit a revised Plan for review by the WMAB. E. Periodic Conservation Plan Reporting 1. Purchaser shall report annually to the WMAB regarding the implementation of its Conservation Plan. 2. Each five years after approval of its Conservation Plan, Purchaser shall report to the WMAB the estimated actual water savings from its Conservation Plan. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 39 SECTION 14—WATER CURTAILMENT AND PROTECTION OF THE WATER SYSTEM A. During times when water supplies are not adequate to meet the aggregate of all demands placed upon the Portland water system, the City and participating Purchasers need to have a plan in place to reduce or curtail demands so that fire, life, safety and other high priority needs are met. It is to the benefit of all of the users of the Portland water system that plans for curtailment be agreed upon in advance and that plans for curtailments be coordinated among water providers. B. By signing this agreement, Purchaser and City acknowledge that unforeseen or unavoidable circumstances may limit the amount of water available to City for sale and distribution, whether temporarily or permanently. Should the available supply fall below the aggregate of all demands placed on the City system, or should it be reasonably predicted that supply will fall below demands before other supplies are available, the Administrator of the Bureau of Water Works may declare that a water shortage is in effect. C. WMAB shall develop and recommend to the Administrator a Curtailment Plan. The Administrator shall adopt the recommended Curtailment Plan with such alterations as he or she deems necessary or advisable. The Curtailment Plan shall be designed to accomplish reductions in demand necessary, in the event of a water shortage, to protect the system's capacity to supply water for fire, life, safety, and other high priority needs. The curtailment plan shall establish procedures, as well, whereby two or more participating Purchasers may coordinate their demand reductions to accomplish,jointly, total necessary system demand reductions imposed on them, even if one or more Purchasers individually do not meet the reductions required of its separate system. D. Whenever the Administrator has declared a water shortage, any adopted Curtailment Plan shall be in effect. If there is no adopted Curtailment plan, the Administrator shall require implementation of measures he or she deems necessary or advisable to reduce all demands, retail and wholesale,proportionally based on annual retail usage for the previous contract year and on annual guaranteed purchase quantities (excluding interruptible water) furnished under this agreement for the previous contract year. E. If the Administrator declares a water shortage, Purchaser shall implement measures sufficient to meet the requirements of the Curtailment Plan (or other requirements of the Administrator for proportional reduction in demand if no Curtailment Plan has been adopted). Purchaser may do this through implementation of measures contained in the Curtailment Plan, similarly effective measures found in Purchaser's own plan adopted under OAR Division 86 or required as part of a State declared drought under ORS 536.720-740, or through agreements with other Purchasers of water under similar wholesale water agreements that result,jointly among the agreeing Purchasers, in a total f Regional Water Sales Agreement (10 Year) April 3, 2006 Page 40 SECTION 14—(Continued) reduction in system demand equivalent to that required in the Curtailment Plan or, if there is no Plan, the Administrator's order for proportional reductions. F. The City shall monitor compliance with Curtailment Plan on a schedule established in the Plan or at least every two weeks throughout the duration of the declared water shortage. G. If, after the Administrator declares a water shortage, Purchaser is unable individually, or in cooperation with other purchasers as contemplated by Subsection E. above, to achieve the required reductions in the use of water supplied under this contract, the Administrator may act to reduce the amount of water supplied to the purchaser so that it does not exceed that amount specified under curtailment measures. f Regional Water Sales Agreement (10 Year) April 3, 2006 Page 41 SECTION 15— BILLING AND PAYMENT A. Guaranteed Purchase Payment 1. Monthly Billing The City shall bill Purchaser its fixed monthly service charge plus a portion of its annual guaranteed purchase volumetric payment obligation each month. The monthly volumetric charge shall be the product of the monthly usage estimates, as determined in Sections 15.A.2(a) or(b) below, times that year's rate per unit of water. 2. Monthly Usage Estimates (a)No later than March 15 of each year, Purchaser shall submit to the City a projection of its demands for the next year, by month, which demands must total to the Purchaser's guaranteed purchase quantity and must be consistent with the Purchaser's seasonal peaking factor. It is recognized these demand projections will be estimates and actual demands may vary from projected demands but such departures from estimates do not relieve the Purchaser from obligations such as guaranteed purchase quantity and adherence to seasonal peaking factor, as specified elsewhere in this agreement. (b) If the Purchaser has not by March 15 of each year submitted its projected demands for the next year or if a timely submission is inconsistent with the Purchaser's then current contractual guaranteed purchase quantity and seasonal peaking factor, the Administrator shall consult with Purchaser to obtain new or revised projected demands. If thereafter the Purchaser does not submit projected demands that are consistent with its then current contractual guaranteed purchase quantity and seasonal peaking factors, the Administrator may use the previous year's demand projections or other projections that are consistent with Purchaser's contractual guaranteed purchase quantity and seasonal peaking factors, to make rates and to operate the system. B. Summer Interruptible Water If the Purchaser and City have agreed to the sale of summer interruptible water, the City shall bill the Purchaser for the total confirmed interruptible water payment in four equal amounts for the months of June, July, August, and September. Provided, that if the City fails to deliver interruptible water requested by the Purchaser, the Purchaser shall be excused from paying the portion of its confirmed interruptible water payment equal to the quantity of water not delivered times the price of interruptible water. a Regional Water Sales Agreement (10 Year) April 3, 2006 Page 42 SECTION 15—(Continued) C. Billing for Water Purchases Above Guaranteed Purchase Amounts and Above Confirmed Peak Season Interruptible Water Quantities Within 62 days of the end of each contract year(that is, by September 1), the City shall review the Purchaser's meter records for the previous contract year under this agreement. If the Purchaser has taken water above either its guaranteed purchase amount or its confirmed peak season interruptible water quantities, the City shall bill Purchaser for those water deliveries no later than September 30. Charges shall be calculated as follows: If the Purchaser has taken at least its annual guaranteed purchase quantity over the full contract year, then water supplied to Purchaser from October 1 to May 31 in excess of its estimated monthly guaranteed purchase quantity for those same months shall be charged the appropriate rate for winter interruptible water times the quantity of excess water taken. If the Purchaser has taken at least its annual guaranteed purchase quantity over the full contract year, then water supplied to Purchaser from July 1 through September 30 and from the subsequent June 1 through June 30 in excess of the total of its estimated monthly guaranteed purchase quantity for those same months and its confirmed summer interruptible water quantities (if any) for those same months shall be charged the appropriate standard rate applicable to its guaranteed purchase quantity times the quantity of excess water taken. D. Payment Schedule Bills are due upon receipt,and subject to a collection fee if not paid on or before the thirtieth day following the billing date. Collection fees shall be established each year in the annual City ordinance establishing rates. E. Charges In Case of Meter Failure Should any meter fail to measure accurately the water passing through said meter,the charge for water used during the time the meter is out of service shall be based on the City's estimates of the volume of water supplied based on usage patterns and statistics for prior periods. F. Disputes In the case of disputes over billings for water, Purchaser shall pay the undisputed amount when due and the disputed amount shall be resolved through Dispute Resolution. The Purchaser shall pay interest at a rate equivalent to the rate earned on the City's internal investment pool managed by the City Treasurer on any disputed amounts found through dispute resolution or litigation to be due the City. 00 Regional Water Sales Agreement (10 Year) April 3, 2006 Page 43 SECTION 16—JOINT FUNDING OF CAPITAL IMPROVEMENTS The City and Purchaser or group of Purchasers may enter into separate agreements for the purpose of mutually funding capital improvements where such improvements are determined to be in their mutual interest. The City and Purchasers or others involved in mutually funding capital improvements may also enter into separate agreements for the conditions and pricing of sale for water supplies derived from such mutually funded improvements. Such separate agreements may include provisions for acquisition of ownership of assets and/or capacity by Purchaser. If provided in the joint funding agreement, Purchaser may include its proportionate ownership share of such assets in its calculation of system develop charges and rates. Regional Water Sales Agreement (10 Year) April 3, 2006 Page 44 SECTION 17—DISPUTE RESOLUTION In case of disputes arising out of this agreement, including disputes regarding the interpretation of any provision of the agreement, subject to the terms of this Section, either party may seek all remedies available at law or in equity. The parties agree, however, prior to commencement of any suit, they shall first engage in dispute resolution as provided in the Section. Step 1. Notice of Dispute Prior to commencement of litigation of a dispute, either party must first provide the other with a written notice describing the dispute and submitting the dispute to resolution under this Section. Such notice shall commence the dispute resolution process. Step 2. Negotiation Each party shall designate a person or persons to negotiate the dispute on its behalf, shall make a good faith effort to exchange information and data related to the dispute, and shall meet to negotiate a dispute resolution. If the dispute is resolved at this step, the parties will memorialize the agreement by a written determination of such resolution, signed by the designated representatives of the parties. Step 3. Mediation If the dispute has not been resolved within 45 days of the date of the notice of dispute, or such longer time as is mutually agreed by the parties, the parties shall submit the matter to mediation. The parties shall attempt in good faith to agree on a mediator. If they cannot agree, they shall request a list of five mediators from an entity or firm providing mediation services. The parties shall attempt in good faith mutually to agree on a mediator from the list provided, but if they cannot agree, each party shall select one name. The two selected shall select a third person and the dispute shall be heard by a panel of three mediators. Any common costs of mediation, including the cost of mediation, shall be borne equally by the parties. Each party shall bear its own individual costs therefore. Mediation shall not continue more than 105 days past the initial notice of dispute unless mutually agreed by the parties. If the dispute is resolved at this step, a written determination of such resolution shall be signed by the designated representatives of the parties. Step 4. Arbitration If the dispute has not been resolved through negotiation or mediation with the time set by this agreement, within 15 days of the end of mediation, or such other time as is mutually agreed, the parties may submit the dispute to arbitration under mutually agreeable terms. In the absence of i Regional Water Sales Agreement (10 Year) April 2006 Page 45 SECTION 17—(Continued) such an agreement,the dispute resolution process under this agreement shall be deemed ended and the parties shall be free to pursue other remedies. Any litigation between the parties arising under or regarding this agreement shall be conducted in the Multnomah County Circuit Court of Oregon. In any litigation, each party shall bear its own costs and attorney's fees. Regional Water Sales Agreement (10 Year) Apri 13, 2006 IN WITNESS WHEREOF, Purchaser has, pursuant to official action of its governing body on the day of , 20 ,duly authorizing the same, caused its proper officers to execute this instrument on its behalf and its corporate seal to be affixed hereto, and City has caused this instrument to be signed by its Mayor and Commissioner-in-Charge of the Bureau of Water Works, all of which is in triplicate. PURCHASER: Purchaser By Approved as to form: (Title) Attest Purchaser's Attorney (Title) Date CITY OF PORTLAND: By Mayor Approved as to form: By Commissioner-in-Charge City Attorney Date Regional Water Sales Agreement Exhibits City of Tigard April 3, 2006 Exhibit 1 Water District Usage Characteristics City of Tigard Guaranteed Purchase Quantity 4.5 MGD Peak Season Purchase 6.5 MGD Seasonal Peaking Factor 1.44 Highest Three Consecutive Days 9.1 MGD Daily Peaking Factor 2.02 Purchase Quantities by Month by Fiscal Year Monthly demand data Illustrative only will be refined by purchaser City of Tigard Daily Average — Month Total — AvDraily Month Total MG — MG Month MGD Month MGD July 6.5 200.9 January 3.5 108.5 August 6.5 200.9 February 3.5 98.0 September 6.5 194.4 March 3.5 108.5 October 4.0 124.0 April 3.5 105.0 November 3.5 105.0 May 3.5 108.5 December 3.5 108.5 June 6.0 180.0 Meter data will be available prior to signing contract Existing Meter Connections Location Size Meter# Pressure Regional Water Sales Agreement (20 Year) April 3, 2006 Exhibit 2. Definitions of allocation factors Allocation to Water Service Parameters The functionalized items shall be allocated to the water service parameters listed below by the retail customer,wholesale customer and specific groups following the Commodity Demand method described in the AWWA's Manual MI. Commodity Items tems Commodity items shall be identified as described in the AWWA Manual M 1. These are items whose cost varies almost entirely directly with the amount of water supplied. Peak-Season Demand Items that are designed to meet the peak-season needs of the system shall be allocated as Peak Season Demand. Peak Day or Peak Three-Day Demand Items that are designed to meet the peak day or peak three-day needs of the system shall be allocated as Peak Day or Peak Three-Day Demand, Customer Items allocated to customer shall be allocated based on the number of accounts for each customer class. Equivalent Meter Items allocated to equivalent meter shall be allocated based on the number of equivalent meters. The equivalent meter ratios used to relate meters by size to the number of equivalent meters shall relate to the City's estimated costs of owning and maintaining the meters. Whenever possible, the values listed in the AWWA Manual M1 shall be used. Fire Any cost related to fire(either direct fire or indirect fire)shall be allocated to the parameter of fire. Since fire-related costs are incurred solely for the City,no fire related costs,except for the cost of water passing through the purchaser's meter,shall be included in the cost of water for the purchaser. Draft Regional Water Sales Agreement (20 Year) April 3, 2006 Exhibit 3 Fixed Assets as of June 30,2005 Fixed Asset Cost Pools Rate Base Value Annual Depreciation Arlington Heights 329,363 22,258 Arnold 1,510,800 52,514 Burlingame 643 1,081,402 72,778 Burlingame Regulated 117,331 9,180 Calvary 278,239 9,125 Council Crest 240,711 16,391 Indirect 7,633,800 1,039,261 Joint 117,679,576 5,555,781 Mt. Tabor 411 3,229,474 229,372 Parkrose 261 912,239 32,239 Pipe 176,262,331 4,893,188 Portland Heights 195,271 10,503 Portland Retail 103,610,826 4,277,385 Sam Jackson PS 107,265 6,679 Washington Park 229 763,432 31,804 Washington Park 299 1,91 1,795 98,048 Washington Park Common 2,229,103 192,106 Washington Park PS 585,406 57,830 Totals 418,678,362 16,606,439 Draft Regional Water Sales Agreement (20 Year) April 3, 2006 Exhibit 4 Functional asset groups include the following general categories(see also Cost PoolTable below): • Source of Supply • Terminal Storage and Conduits • Treatment • Treatment Chemicals and Power • Burlingame 643 Pumping and Storage/Power • Arnold Pumping and Storage/Power • Arlington Heights Pumping and Storage/Power • Tabor 411 Storage • Parkrose 261 Storage • Portland Heights Pumping and Storage/Power • Washington Park 229 Storage,Pumping,and Treatment/Power&Chemicals • Council Crest Pumping and Storage/Power • Calvary Pumping and Storage/Power • Burlingame Regulated Pumping and Storage/Power • Washington Park 299 Pumping and Storage/Power • Joint Equivalent Meters • Washington County Supply Line— Portland Only • Retail Direct and Indirect • Indirect Storage/Pipe • Indirect Regional Water Sales Agreement (20 Year) April 3, 2006 Exhibit 4-continued City of Portland-Wholesale Rate Model CustChar 7-Percentage of Customer's Demand Through Cost Pools old Table 14 Mt. Arlington Burlingame Burlingame Council Tabor Customer Heights Arnold 643 Regulated Calvary Crest Joint 411 Service Area I Water Cos. 100% City of Gresham 100% Lusted Water District 100% Pleasant Home Water District 100% Rockwood Water PUD 100% 3% Palatine[fill Water District 100% 100% Burlington Water District 100% 100% Lake Grove Water District 100% 100% 100% 100% City of Tigard 100% 100% 100% Valley View 22% 22% 78% 100% 100% West Slope Water District 100% 100% 100% TVWD 6% 100% 6% Raleigh Water District 2% 100% 2% City of Tualatin 2% 100% 2% City of Portland 3.804'. 1% 8% 2% 3% 0% 100% 95% Parkrosc Portland Portland Sam Jackson Washington Washington Washington Customer 261 Heights Retail PS Park 229 Park 299 Park PS WCSI, Service Area I Water Cos. City of Gresham 3% Lusted Water District Pleasant Home Water District Rockwood Water PUD Palatine Hill Water District 100% 1000/0 Burlington Water District 100% 100% Lake Grove Water District 2% City of Tigard 2% Valley View 78% 70% 100% 30% West Slope Water District 100% 100% TVWD 96% Raleigh Water District 100% City of"fualatin 100% City of Portland 3% 1% 49% 4% 10% 21% 5% 1% D rap( Submitted at the IWB Meeting TT II,, By: -herrn is koeilew-nne-c Date: S•1 D•D Agenda Item No.: Jr MEMORANDUM TIGARD TO: Mayor and City Councilors IWB Commissioners TWD Commissioners FROM: Dennis Koellermeier, Public Works Director RE: Portland Wholesale Water Contract DATE: May 9, 2006 Introduction The Tigard Water Service Area (TWSA) purchases much of its drinking water from the City of Portland and is one of Portland's larger wholesale water customers. The TWSA took over a 25 year contract from the Tigard Water District (TWD) in 1996 when the TWSA was formed. That contract is set to expire June 30, 2007. The purpose of this memo is to explain what was done to negotiate a new contract,to evaluate that contract and its impact on the TWSA, and to make a recommendation on the current Portland Wholesale Water Contract. History The TWSA has purchased water from Portland for 24 years. Originally,water was purchased through a contract negotiated and signed by the TWD. In 1996,when the Cities of Tigard, King City, and Durham withdrew from the district,the contract was assumed by Tigard as the service provider for the newly formed Intergovernmental Water Board (IWB). Both the IWB and the Tigard City Council have expressed their dissatisfaction with the terms of the existing agreement based on the following issues: ■ No Equity Portland has never been willing to offer its wholesale customers equity,or ownership, in its water system. Since system development charge (SDC) monies can only be invested in capital improvements this non-equity position means that Tigard is forced to pass the entire cost of wholesale water onto its customers. ■ Penalty Clauses The TWSA is assessed a substantial financial penalty when water use has exceeded the negotiated daily maximum. ■ No Cost Control The existing wholesale pricing methodology does not follow water industry standards,with several aspects of the methodology clearly slanted in Portland's favor. Wholesale customers have no input or complaint mechanism. I:\PW\GREER\DK CorrespondenceTM Water Contract.doc ■ Minimum Purchasing Requirements The TWSA is required to purchase a minimum of 60 percent of total water used from Portland. ■ Tigard Subsidizes Portland Water Customers Portland subsidizes costs to its ratepayers with revenues from suburban wholesale customers. This practice has kept water rates below the industry standard and lower than the cost of service methodology would support for Portland ratepayers. Alternately, rates to suburban wholesale customers, like Tigard, are artificially high. In the hope of securing a more workable contract, Tigard has joined forces with fellow wholesale customers and negotiated collectively with the Portland Water Bureau. This negotiation process has taken four years, but ultimately resulted in two contract options, a 10-year or 20 year agreement. The terms of both agreements are essentially the same, other than duration and rate of return. Significant Contract Provisions TWSA was an active participant in the negotiations leading to this contract proposal.As is typical with negotiations, compromise on both sides was required in order to reach an "acceptable" agreement. The wholesale customers retained two different financial consultants and an attorney to assist them in the negotiation process. Major issues for the wholesale customers were cost, rate making methodology, and predictability.Portland sought to maintain a consistent revenue stream and retain control of the Bull Run system. I believe each side accomplished most of these objectives. Highlights of the contract terms are as follows: ■ Term Two options exist, a 20-year term and a 10-year term. These agreements are identical with the exception of the rate of return. The 20-year and 10 year contracts have a rate of return set by the Bond Buyer Revenue Bond Index and the Bond Buyer Revenue Bond Index plus one percent respectively. ■ Nature of Service This is a "take or pay" agreement in which the TWSA agrees to pay annually for a specific quantity of water,whether or not it is used. In exchange, Portland is obligated to have the water available. The existing agreement is for surplus water, whereby Portland is not obligated to have water available and is also not obligated to sell it. Portland was adamant about the "take or pay" condition, asserting it is necessary to maintain a consistent revenue stream. I:\PW\GREER\DK Correspondence\P DX Water Contract.doc ■ Conservation A conservation plan was added to the new agreement in order to comply with state requirements. ■ Water Quantity Under the proposed contract,wholesale customers will commit to purchase a certain amount of water,known as the "guaranteed purchase quantity." For the TWSA, staff is proposing this quantity be initially set at an annual average of 4 million gallons per day (mgd). Tigard must pay for this water whether or not it is used and although the guaranteed purchase quantity can be increased, it can not be decreased. ■ Water Quality Portland is obligated to deliver water that "meets all applicable drinking water regulatory requirements" and be from the same source as the water provided to its own customers. ■ Interruptible Water The new agreement allows the TWSA to purchase water above the guaranteed purchase quantity.This water is called "interruptible." Portland is not obligated to sell interruptible water, and may discontinue its availability with little notice. In winter, interruptible water rates are 80 percent lower than the regular water rates. This is critical to the TWSA's water strategy,whereby the discounted interruptible water is used to fill or "recharge" aquifer storage and recovery (ASR) wells. Currently we are anticipating the need to purchase approximately 200 million gallons of water annually for ASR recharge. Tigard's water purchasing strategy is to commit to a low guaranteed purchase quantity in order to maximize the use of inexpensive interruptible water. ■ Rate Setting This is unquestionably the most complicated part of the agreement. The wholesale customers made significant headway in moving to a more traditional AWWA sanctioned rate setting model. Other gains were made in: • cost containment in operations and maintenance • cost allocation between retail and wholesale customers • capital cost allocation • audits • depreciation • the methodology for return on investment These gains will provide greater control over the cost of water throughout the life of the contract. I:\PW\GREER\DK CorrespondenceTM Water Contract.doc ■ Dispute Resolution The current agreement did not have a dispute resolution process. The new agreement includes a traditional three step process including negotiation, mediation and arbitration/litigation. A comparison of the proposed and current contracts is summarized in the attached table (Exhibit 1). Other Wholesale Customers Portland continues to be one of the most expensive source options being considered.Not surprisingly,Tigard and most other westside water providers are exploring the development of alternate sources. Other large wholesale customers have either taken action or are likely to take the following action: Rockwood PUD sign a 20-year agreement Gresham si a 20- ear agreement Tualatin Valley Water District si a 10-year agreement Tualatin si a 10-year agreement West Sloe sign a 20-year agreement The Side Agreement on the Washington County Supply Line (WCSL) TWSA's rates for Portland water average about 30 percent more than Tualatin Valley Water District (TVWD) and City of Tualatin rates. In the 1980s, both TVWD and Tualatin participated in the construction of a gravity fed water transmission pipeline called the Washington County Supply Line (WCSL).At the time,the TWD elected to not participate, because most of the TWSA's water was being supplied by Lake Oswego. Later,when TWSA needed to switch to Portland water,the City had no alternative but to take water from a supply system which pumps the water to a useable elevation. Since there is no energy cost associated with the gravity fed water, it is substantially cheaper than pumped water. Staff has convinced the WCSL partners that surplus capacity existed in the line and has inquired whether Tigard might use this excess capacity.This would involve the construction of a TWSA connection to the WCSL. Subsequent engineering analysis has confirmed that for the next 10-year period, surplus capacity will exist during the winter months. The current partners in the WCSL,Portland, TVWD,Tualatin, and the Raleigh Water District, agree in principal that Tigard should use this extra capacity to conserve energy and reduce costs. Details of this side agreement have not been concluded as of this date. Staff estimates the cost to build the connection at about $500,000 and the potential savings to be as high as $3 million over the life of the 10-year agreement. Additional work is needed to complete this analysis and side agreement. Cost The initial cost of water from this agreement is currently anticipated to be $1 per one hundred cubic feet (ccf). Staff estimates future cost increases at 5 percent annually.This I:\PW\GREER\DK CorrespondenceTM Water Contract.doc assumption is consistent with assumptions made by other westside wholesale customers. Staff has also assumed that Tigard will continue to operate our ASR wells at maximum capacity and plans to increase ASR volume a total of 6 mgd within the next four years. Based on these assumptions the total cost of this contract over a 10-year period is approximately $26,053,359. The Process The 1993 Intergovernmental Agreement (IGA) executed between each of the members of the IWB has specific language relating to the approval process for "long-term" water contracts. Section 5E of the IGA states: "Long-term water supply contracts shall be entered into in accord with the best interests of the water customers within the original District, ignoring city boundaries. Long-term water supply contracts must be approved by the governing bodies of one less than the number of jurisdictions holding an ownership interest in the water system.A governing body may not unreasonably withhold consent to a contract if the contract is supported by sound engineering analysis, is in the best interests of water customers within the original District and consistent with the goal of working together to provide all the residents and property in the original District with a clean, economical water supply. If a proposed long-term water supply contract is not approved as provided for in this subsection, then the governing bodies of any two jurisdictions may request mediation under the provisions of ORS Chapter 36 to determine if approval of the contract has been unreasonably withheld." Staff proposes, for the purposes of this issue, the 10-year contract is not a long-term contract, and that action by the IWB and the Tigard City Council is sufficient to enter into the 10-year contract. Recommendation As a result of Portland's position on ownership, both the IWB and the City Council have consistently stated that Portland would not serve as the TWSA's long-term, primary water source. Since long-term water sources will take years to develop, the 10-year agreement is necessary to bridge the gap between Portland and the TWSA's ultimate long-term water source. Staff recommends the Intergovernmental Water Board and the City Council approve the 10- year agreement and authorize the Tigard City Manager to execute this agreement, subject to final rates falling within 10 percent of the unit price of estimated $1 ccf. Attachments: Exhibit 1 - Comparison Between Current and Proposed Model Wholesale Agreement Exhibit 2 - Proposed 10-Year Portland Water Contract I:1PWIGREERIDK Correspondence\PDX Water Contract.doc ProposedPortland Water Sales Agreement Comparison Table Between Current and Agreement September 29, 00 Proposed - Significant Provisions Current Agreement Nature of service Water sold by Portland to wholesalers Water sold by Portland to wholesalers described considered"surplus" and defined as"firm supply" Length of agreement a 25 years with automatic 25-year renewal 0 20 years with automatic 10-year renewal • 3-year notice for non-renewal 0 5-year notice for non-renewal by either party Joint operational guidelines (how the 0 Determined solely by Portland 0 Guidelines established jointly by Portland and wholesale customers and Portland wholesalers through Water Managers Advisory cooperate in operating their respective Board, reviewed, amended (if necessary) and water systems) adopted by Water Bureau Administrator Water Managers Advisory Board 0 Review of budget and CIP a Establish joint operational and data guidelines • Participate in budget and CIP development/review processes, input to City Council Water quantities Minimum purchase based on percentage of Guaranteed purchase quantity—a specific, overall water supply, five-year average committed volume to be purchased from Portland Can buy out of agreement over five years by 0 May be increased but not decreased except paying minimum purchase"penalty" under special circumstances • No buy out Sale of water to other entities Prohibited unless authorized by Portland 0 Allowed, unless it creates undue risk to the Portland waters stem Reliability of supply 0 No obligation 0 If Portland fails to meet supply needs more than once in 10 years, purchaser may reduce purchase commitment by up to 10%per year Interruptible water 0 No provisions • Available at Portland discretion • Summer and Winter interruptible water priced at 45%, 20% of regular rate respectively if available Rates 0 Rate methodology not described in complete 0 Specific methodology based on American Water detail Works Association M1 Manual and Cost of Service Principles • Costs allocated based on customers' use of water system • O&M cost control mechanism Water conservation 0 No reference a Water management and conservation plans to conform to State regulations Joint funding for capital improvements . Allowed through agreement in which purchaser • Allowed for new facilities or for major pays its portion of bonded debt for new asset improvements to existing facilities by separate agreement • All terms related to joint funding arrangements determined by separate agreement Dispute resolution • None Three steps: 1) Negotiation, 2) Mediation, 3) Arbitration/litigation Agenda Item No.: (o IWB Meeting Date: May 0, _c)nr--. MEMORANDUM TIGARD TO: Dennis Koellermeier, Public Works Director FROM: Greer Gaston,Executive Assistant to Public Works RE: IWB Meeting Day DATE: April 28, 2006 Below are the responses from IWB Commissioners regarding the possible change in meeting day from the second Wednesday of the month to the fourth Wednesday of the month. Commissioner Scheiderich Can meet on any Wednesday evening Commissioner Carroll Not my first choice, Bill and I have City Council on the fourth Tuesday, I really don't want two meetings back to back Commissioner Froude Meeting date change is okay; doesn't matter Commissioner Winn Can do Commissioner Woodruff [Council liaison] assignments have not been made for 2007, but I would like to continue the focus on water issues. I don't want to cause difficulty for the Board, but I am out of state every second Wednesday. The fourth Wednesday night would work fine, but my schedule is not set in stone. pct Lir b TWJ 4 1W,8 bp- r�s Ff f Agenda Item # Meeting Date May 9, 2006 COUNCIL AGENDA ITEM SUMMARY . City Of Tigard,Oregon Issue/Agenda Title Participation in the Proposed Willamette River Water Coalition (uTaIC)Projects Prepared By: Dennis Koellermeier Dept Head Okay City Mg Okay ISSUE BEFORE THE COUNCIL AND KEY FACTS Consider the recommendations of the Intergovernmental Water Board and direct staff to prepare a response regarding the Tigard Water Service Area's (TWSA)participation in the proposed Willamette River Water Coalition (WRWC) projects. ■ The TWSA needs to decide whether it wishes to participate in two proposed WIRWC projects. ■ The Intergovernmental Water Board(IW3)has reviewed the issue and two letters containing the Board's recommendations are attached. STAFF RECOMMENDATION Approve the KUB's recommendations on the proposed WRWC projects and direct staff to prepare a response to the WRWC consistent with IWB recommendations. KEY FACTSAND INFORMATION SUMMARY The City of Sherwood and the Tualatin Valley Water District (n7V/D) have decided to expand the Willamette River water suppb,system and are required to offer fellow WRWC members the opportunity to participate in the proposed expansion.As a WRWC member,the City of Tigard needs to decide whether it wishes to participate in either of these projects. The Sherwood expansion is expected to take three years. Since the TVWD has entered into a ten-year contract with Portland,their project will likely be completed within this time period. On March 21,2006,the City Council and the IWB heard a presentation on the Sherwood and TVWD projects.At their April 12,2006, IWB meeting,the Board discussed TWSA's participation in the Willamette River Water Coalition (WRWC)projects.Two recommendation letters from IV/`B Chairperson Bill Scheiderich are attached Responses regarding the Sherwood and the TVWD expansion projects are due May 10,2006, and May 30,2006, respectively. OTHERALTERNATIVES CONSIDERED The City Council could change the M's recommendations or could choose to not respond at all.Lack of a response would be treated as though the T)`/SA had declined participation. COUNCIL GOALS AND TIGARD BEYOND TOMORROW VISION STATEMENT Tigard City Council,Other Important Goals for 2006 ■ Secure Long-Range Water Source(s) Tigard Beyond Tomorrow,Urban&Public Services • Water&Storm Water Goal #2: "Equity position in a regional water system by 2007." - Strategy #1: "Continue to explore all options open to Tigard where the City can buy into the source and the associated infrastructure and become a part owner of the source/system." ATTACHMENT LIST 1. Letter to the Council regarding Sherwood's Project Proposal to Willamette River Water Coalition Members 2. Letter to the Council regarding Tualatin Valley Water District's Project Proposal to Willamette River Water Coalition Members 3. Notification to the WRWC from the City of Sherwood 4. Cover Letter and Notification to the VIRWC from the T\AXID FISCAL NOTES Should TWSA decide to participate in the either expansion, a project agreement will be adopted. This agreement mill establish a timeline,participation,cost shares,operation and maintenance responsibilities, and governance. Attachment 1 Apri124, 2006 The Tigard City Council 13125 SW Hall Blvd Tigard OR 97223 Dear Mayor Dirksen and City Councilors: Subject: Sherwood's Project Proposal to Willamette River Water Coalition (WRWC)Members The Intergovernmental Water Board (IWB), representing the cities of Durham, King City and Tigard and the Tigard Water District, has met and has considered participation in the City of Sherwood's expansion of the Willamette River Water System.As you know,Tigard is a member of the WRWC.According to the WRWC agreement,any member deciding to expand or modify the Willamette River water supply system is required to provide fellow members with 90-day notice; thus affording those members the opportunity to participate in the proposed expansion.The City of Sherwood has provided such notice. Aside from some limited right-of-way or easement acquisition for shared use for a Sherwood and a regional mater supply pipeline,the IWB recommends the Tigard Water Service Area (TWSA) decline to participate in the Sherwood expansion. Differences in water pressure,elevation,and routing make the Sherwood project of little direct benefit to TWSA customers.However,the Board further recommends Tigard partner with Sherwood and other WRWC members in any right-of-way or easement acquisition,where such acquisitions could provide economy-of-scale cost savings related to the development of a future high pressure pipeline. Should such opportunities exist, Sherwood has indicated its willingness to include WRWC partners in these portions of the project. The Board wishes to thank the Council for its consideration of this matter. Sincerely, r _ Bill Scheiderich Chair, Intergovernmental Water Board 99 c: Craig Prosser, Tigard CityManager Attachment 2 April 24,2006 The Tigard City Council 13125 SW Hall Blvd Tigard OR 97223 Dear Mayor Dirksen and City Councilors: Subject:Tualatin Valley Water District's (TVWD)Project Proposal to Willamette River Mater Coalition (WRWC)Members The Intergovernmental Water Board(IWB),representing the cities of Durham, King City, and Tigard and the Tigard Water District,has met and has considered participation in TVWD's expansion of the Willamette River Water System.As you know,Tigard is a member of the WRWC. According to the WRWC agreement,any member deciding to expand or modify the Willamette River water supply system is required to provide fellow members with 90-day notice;thus affording those members the opportunity to participate in the proposed expansion.The TVWD has provided such notice. The TVWD plans to construct full-scale treatment plant and transmission main improvements. The IWB recommends the Tigard Water Service Area (TWSA)partner with the TVWD on specific components of the project. Of greatest interest to the TWSA are those improvements that need to be constructed to full capacity in order to obtain economy-of-scale cost savings which can only be achieved through a coalition of partners. Specifically,this includes the north/south regional transmission main and a few specific components of the treatment plant expansion. The north/south transmission main was originally envisioned in regional planning and would enable partners to shuttle Portland and Joint Water Commission water south as well as Willamette River water north.This critical line would interconnect three separate water systems,providing the region with more water options and supplemental water sources. The IWB is aware that the City of Tigard has a charter amendment requiring voter approval to use the Willamette River as a drinking water source,but recommends that the City invest in these improvements and,if necessary,recover the investment by leasing the facilities to others. The TWSA will also need to reserve the right to adjust our participation level based on upcoming decisions related to other water sources.The TVWD has indicated its willingness to work with the TWSA within the context of these constraints. Lastly,the IWB members have reflected on earlier decisions to not participate in regionally significant water supply projects and recognize these decisions were shortsighted and not in the best interest of TWSA customers.Water source planning is a long-term process that requires vision and the ability to look beyond short-term political issues. The Board wishes to thank the Council for its consideration of this matter. Sincerely, Bill Scheiderich Chair, Intergovernmental Water Board gg c: Craig Prosser,Tigard City Manager Attachment 3 R- 11 NOTIFICATION TOTHEWILLAMETTE RIFER WATER COALITIO BY THE CITY OF SHE RIVOOD, OREGON A I'ROI'OSAL TO EXPAND AND A1ODIFY THE WILLAMETTE RINE R WATER SUPPLY SYSTEM Distributed to WRWC membership on January 25, 2006 Response by NVRWC members due no later than May 2, 2006 The City of Sherwood, Oregon offers this Proposal to Expand and Modify the Willamette River Water Supply System for consideration by the Willamette River Water Coalition (WRWC) membership pursuant to Section 5.1 of the 2003 'WRWC Intergovernmental Agreement. The goal of this Proposal is to coordinate with the VirRWC members and the City of Wilsonville in developing the Willamette River as a long-term source of high quality drip-Icing water at a competitive cost. Implementation of the proposed improvements (the Project) will provide the Project participants an ownership interest in a water supply system that will provide high quality water at a competitive cost in a manner that is consistent with the Regional Water Supply Plan. This Project will further support the goal of the WRNVC to make efficient use of the water rights held by the uTRWC for the collective benefit of',AaWC members. The City of Sherwood, Oregon proposes to expand and modify the existing NATillamette River Water Supply System, consisting of the existing Willamette River Water Treatment Plant and associated supply, treatment,pumping, storage, and transmission facilities. In sununary, the proposed Project includes; I. Extension of the existing finished water transmission main from the Willamette Water Treatment Plant in Wilsonville to a location approximately half way between the cities of Wilsonville and Sherwood. 2. Construction of a new finished water reservoir at an overflow elevation of approximately 400 ft, to be located approximately half way between the cities of Wilsonville and Sherwood. 3. Constriction of a new finished water transmission main fi-om the proposed new resel-woir to the City of Sherwood's existing Sunset Park reservoir. The final scope, schedule, and budget for the Project are currently under development. It is anticipated that the Project will result M an initial increase in demand on the existing Willamette River Water Supply System of approximately 5 million gallons per day (mgd) to serve the City of Sherwood, plus any additional demands resulting from other participants in the Project. The Project will be sized to serve the future capacity requirements of the City of Sherwood and it is intended that fixture increases in demand will be met using the Willamette Notification to the Willamette River Water Coalition by MT The City of Sherwood, Oregon January 25, 2006 Page 2River Water Supply System. In accordance with the WRWC agreement, the Ww transfer/assign sufficient water rights to the Project to allow it to function at planned capacity. It is anticipated that the City of Sherwood will be the lead agency, responsible for the permitting, design, and construction of the Project. A project agreement will be negotiated between Project participants. Unless, otherwise agreed to by the parties participating in the Project, the participants will own the proposed improvements and the Project will be operated and maintained as outlined in Section 4 of the WRWC Agreement. Section 5.1 of the WRWC Agreement requires WRWC members to notify the WRWC of their acceptance or rejection of the Proposal to Expand and Modify the Willamette River Water Supply System by no later than 90 days following receipt of the notice. Acceptance of this Proposal by a member will be considered acceptance of participation in the Project by that member. Rejection of this Proposal by a member or failure of a member to respond within 90 days will be considered a rejection of participation in the Project by that member. A final project agreement establishing participation, cost shares, operation and maintenance responsibilities, and governance will be adopted following the conclusion of the notice period. The City of Wilsonville and the Tualatin Valley Water District(TVWD) initiated development of the Willamette River as a drinking water supply option. Over the last three years, the Willamette River Water Supply System has proven to be a reliable, cost effective source of high quality water for our communities. It is the goal of the City of Sherwood to become a partner with these agencies and the WRWC to further expand water supply from this important regional water resource. Attachment 4 Tualatin Valley Water District: y ft F.O.Boz 745 •Beaverton, Oregon 97075 •Phone:(503)642-1511 •Fax:(503)649-2733 •wi1A1M.tvwd.org Gregory E.DiLoreto General Manager March 1 2006 ` Bernice Bagn1d] Kelly Ross Chief Financial Amanda Eich Officer Willamette River Water Coalition 12725 SW 66th Ave., Suite 107 Debra Erickson Portland,OR 97223 Manager,Human Resources RE: Tualatin Valley Water District's Notification of Proposal to Expand the Dale Fishback Willamette Water Supply System Manager,Operations &Field Services Dear Belly and Amanda: Todd Heidgeri:en Pursuant to Section 5.1 of the 2003 Willamette River Water Coalition ('WRWC) agreement, Manager, Con:nuuiity the Tualatin Valley Water District(TV)AID) is providing you with a proposal to expand and Intergovernmental modify the Willamette River Water Supply System. Details of the proposal are attached for Relations your consideration. Questions regarding this proposal can be directed to TVWD Project Representative,Stu Davis at 503-848-3025 (direct)or email stu @rvwd.org. Brenda Lennox. Manager, Customer cf Support Services I would request we be included on the agenda for the March 29 WRWC Board meeting in order to provide an overview of the TVVirD project and to answer any questions. Gary Pippin Manager; It is assumed that receipt of this letter and the TVVVE)proposal via email will begin the 90 Engineering Semites day period for SARWC members to declare-their.intentions regarding their participation in this project. Given that time is of the essence in completing the proposed project, TVWD would appreciate responses from the WRWC members in less than the 90 day period, if feasible. Thank you for your consideration of our proposal. .1 can be reached at 503-848-3014 or by email,gree@tNTurd.org should you have any questions. Sincerely, Gr goryE. - reto General Manager cc: WRWC Board Members VArRWC Staff Representatives RATER-not to be taken for granted i,euer tt,wRwC,Kelly Ross&Amanda Ricb,03-01-06.doc/Greg/Pattyr j/3/1/2006 NOTIFICATION TO THE WILLAMETTE RIVER WATER COALITION BY THE TUALATIN VALLEY WATER DISTRICT A PROPOSAL TO EXPAND AND MODIFY THE WILLAMETTE RIVER WATER SUPPLY SYSTEM Distributed to WRWC membership on March 1,2006 Response by WRWC members due no later than May 30, 2006 The Tualatin Valley Water District(TVWD) offers this Proposal to Expand and Modify the Willamette River Water Supply System for consideration by the Willamette River Water Coalition (WRWC)membership pursuant to Section 5.1 of the 2003 WRWC Intergovernmental Agreement. The goal of this Proposal is to coordinate with the WRWC members and the City of Wilsonville in developing the Willamette River as a long-term source of high quality,drinking water at a competitive cost. Implementation of TWAID's proposed Water Supply Improvements Program (the Project)will provide the Project participants an ownership interest in a water supply system that will provide high quality water at a competitive cost in a manner that is consistent with the Regional Water Supply Plan. This Project will further support the goal of the WRWC to make efficient use of the water rights held by the WRWC for the collective benefit of VSrRWC members. The Tualatin Valley Water District proposes to expand and modify the existing Willamette River Water Supply System, consisting of the existing Willamette River Water Treatment Plant and associated supply, intake, treatment,pumping, storage, and transmission facilities. In summary, the proposed Project includes: 1. Expansion of the existing treatment,pumping, clearwell storage, and transmission facilities at the Willamette River Water Treatment Plant in Wilsonville to add approximately 55 mgd of finished water delivery capacity to the existing treatment plant. 2. Construction of a new finished water transmission main with a capacity of approximately 70 mgd from the Willamette River Water Treatment Plant in Wilsonville to a location in the TVWD service area. 3. Possible construction of a new finished water reservoir with a capacity of approximately 20 million gallons at an overflow elevation of approximately 465 feet at the terminus of the proposed new transmission main at a location in or near the TVWD service area. The final scope,schedule, and budget for the Project are currently under development. In addition,the Project may be discontinued or postponed at the discretion of the TVWD Board. t Notification to the Willamette River Water Coalition by The Tualatin Valley Water District March 1,2006 Page 2 The approximate capacities noted above are based on meeting TVWD's requirements. These capacities would need to be increased to meet the requirements of other VATRWC members wishing to participate in the Project. It is anticipated that the WRWC will allocate sufficient water rights to the Project to allow it to function at planned capacity. It is anticipated that TVWD will be the lead agency,responsible for the permitting, design, and construction of the Project. A project agreement will be negotiated between Project participants. Unless, otherwise agreed to by the parties participating in the Project, the participants will own the proposed improvements and the Project will be operated and maintained as outlined in Section 4 of the uTRWC Agreement. Section 5.1 of the WRWC Agreement requires WRWC members to notify the WRWC of their acceptance or rejection of the Proposal to Expand and Modify the Willamette River Water Supply System by no later than 90 days following receipt of the notice. Acceptance of this Proposal by a member will be considered acceptance of participation in the Project by that member. Rejection of this Proposal by a member or failure of a member to respond within 90 days will be considered a rejection of participation in the Project by that member. Final notice of acceptance or rejection by WRWC members in less than 90 days would be especially welcome given that time is of the essence in completing the proposed Project. AProject agreement between participants in the Project will be adopted following the conclusion of the notice period. The Project agreement will establish participation, cost shares, operation and maintenance responsibilities, and governance associated with the proposed Project. The City of Wilsonville and the Tualatin Valley Water District initiated development of the Willamette River as a drinking water supply option. Over the last three years, the Willamette River Water Supply System has proven to be a reliable, cost effective source of high quality water for our communities. TVWD now intends to expand water supply from this important regional water resource to meet the District's current and future water supply requirements. MEMORANDUM TIGARD TO: Intergovernmaental Water Board Commissioners FROM; Mike Lueck, Emergency Management Coordinator ' RE: CONFIDENTIAL: Emergency Response Training Exercise DATE: May 3, 2006 I am requesting the Board's permission to use the vacant residence at 13425 SW 154th (Clute residence). On June 14, 2006, the City of Tigard will participate in an emergency response training exercise. The scenario calls for several simultaneous terrorism actions to be conducted throughout Washington County. This exercise 'will test the current Emergency Operations Plan, the City's Water System Emergency Response Plan, and provide a snap shot of our overall preparedness. The City of Tigard would like to use the Clute residence as part of the exercise. The proposed plan is for law enforcement responders to use the structure as an intelligence gathering location as well as a temporary crime scene. Tigard's Water Division may also use the site as a source of contamination and could implement Water System Emergency Response Plan protocols. This property creates additional challenges because the site, although serviced by the City of Tigard, does not reside within city limits, so city and county officials will need to coordinate their efforts. Neighbors in the area surrounding the Clute property will receive advance notice of the training exercise via door hangers and a reverse 911 phone call. The team that designed the exercise has placed restrictions on certain activities involving the property. For example, no windows or doors will be broken and the outside appearance of the structure will not be changed. I would like to keep the training as realistic as possible and request that information about the exercise and its location be kept confidential. FAX TRANSMITTAL Date May 4, 2006 Number of pages including cover sheet 3 From: Greer Gaston Co: City of Tigard Fax #: 503.684.8840 Ph #: 503.639.4171, ext. 2595 To- The City of King City (Fax No. 503.639.3771) The City of Durham (Fax No. 503.598.8595) Please post the attached meeting notice and agenda for the upcoming meeting of the Intergovernmental Water Board. Thank you. I.�ENGIFAX DOT Intergovernmental mater Board Serving Tigard, ICa'ng City, Durham and Unincorporated Area MEETING NOTICE Wednesday, May 10, 2006 5 :30 p.m. City of Tigard Water Auditorium 8777 SW Burnham Tigard, Oregon 97223 Intergovernmental Water Board Meeting SerrM Ttgart4 Kmg G y,Durham and UnmwWatat Aria AGENDA Wednesday,May 10,2006 5:30 p.m. 1. Call to Order, Roll Call and Introductions Call the meeting to order,staff to take roll call. 2. Public Comments Call for any comments from public. 3. Approval of Minutes-April 12,2006 Motion from Board for minute approval. 4. Asset Ownership Discussion - Commissioner Scheiderich (20 minutes) S. Portland Water Contract Recommendation -Dennis Koellermeier(20 minutes) 6. Discussion of Meeting Date and Time-Dennis Koellermeier(5 minutes) 7. Property Use Approval for Emergency Drill-Dennis Koellermeier(5 minutes) 8. Informational Items-Dennis Koellermeier 9. Non-Agenda Items Call for non-agenda items from Board. 10. Next Meeting-June 14 or June 28, 2006, 5:30 p.m. - Water Auditorium 11. Adjournment-Approximate Time 7:00 p.m. Motion for adjournment. A light dinner will be provided. Executive Session: 7fe 1nk7gpu"rxntd WaterBoardmaygr into Exams Session If cm Exe+aake Session is calld to order,the appropriate OR S citation zevU!x mnnacoxei icderndfymg the applrcalde statute AU duaissiors aro artod&&d l aril Gose present may dudose rodding firm 6e Session Reprrsem=es of the news r»xlra are allouei to auaxl Exeafire Sessions,as proudal by ORS 192 660(4),but must not disclose any irrfm naum dwased No Exeautire Session may be held for the purpose oftaksng arty fano!achm ormakM anyfind dau mn Exeaoke Session are dosed to doe puMc hp officejet 4200 series 4215 Personal Printer/Fax/Copier/Scanner Log for City of Tigard PW 5036848840 5/4/2006 2 : 27PM Last Transaction Date Time Type Identification Duration Pages Result 05/04 02: 26p Fax Sent 1 : 02 3 OK hp officejet 4200 series 4215 Personal Printer/Fax/Copier/Scanner Log for City of Tigard PW 5036848840 5/4/2006 2 : 30PM Last Transaction Date Time Type Identification Duration Pages Result 05/04 02: 29p Fax Sent 5035988595 1 : 05 3 OK