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LIMITED TERM PARTIAL BASIN EQUITY ASSESSMENT
EXEMPTION AGREEMENT BETWEEN ORANGE COUNTY WATER DISTRICT
AND CITY OF SANTA ANA
(Santa Ana Well No. 32)
This LIMITED TERM PARTIAL, BASIN EQUITY ASSESSMENT EXEMPTION
AGREEMENT (the "Agreement ") is entered as of January 21, 2014 by and between the
ORANGE COUNTY WATER DISTRICT, a special governmental district organized and
existing pursuant to the Orange County Water District Act, Chapter 924, Statutes of 1933, as
amended ( "OCWD "), and the CITY OF SANTA ANA, a municipal corporation organized and
existing under the laws of the State of California ( "City ").
RECITALS
A. Approximately two- thirds of all drinking water currently used within northern and
central Orange County is provided from growidwater by OCWD. Inasmuch as Orange County is
located in a, semi -arid area, it is essential that all reasonable efforts be put forth to protect the
quality of groundwater supplies and to provide for maximum utilization of that resource.
B, The United States Environmental Protection Agency ("USEPA") and the State of
California Department of Public Health ('`CDPH ") have adopted primary drinking water
standards, which include limits for nitrate. Water containing nitrate concentrations in excess of
45 mgL (expressed as NO3) have been determined by USEPA and CDPH not to be suitable for
municipal or domestic purposes without treatment.
C. The City operates a public water system for the purpose of delivering potable
water to its customers, and obtains most of its water by pumping groundwater from wells for
delivery to its customers. The City, as well as other groundwater producers within the
boundaries of OCWD, has lost the use of some of its groundwater wells due to the presence of
nitrate in quantities exceeding USEPA and CDPH drinking water standards. Santa Ana Well No.
32 ( "Well 32 "), located at Morrison Park near the intersection of Memory Lane and Westwood
Avenue in Santa Ana, has the capacity to produce tip to 4,000 acre feet per year of groundwater;
however, the City has discontinued production of groundwater from Well 32 in 2005 due to its
low operational efficiencies and high nitrate concentrations.
D, The City recently retained an engineering consulting firm to evaluate and
recommend alternatives to reduce high nitrate levels in the water produced by Well 32, After
evaluating alternatives, the City has decided to pursue a water blending alternative as the most
economical option. The City proposes to blend high nitrate water produced by Well 32 with low
nitrate water produced by City of Santa Ana Wells 36 and 39 ( "'Wells 36 and 39 ")in the
reservoirs located at the John Garthe Pump Station Complex. The blending alternative mitigates
the high nitrate levels and allows the City to utilize the groundwater plumping capacity of Well
32 and place the well back in to service (the "Project"). The City's preliminary cost estimate for
the Project is $4,600,000 which includes $920,000 in contingencies (the "Project Cost"), The
City and OCWD will revisit the Project Costs once the construction bids are received to ensure
the program financials are consistent with this Agreement. OCWD has determined that the City's
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conduct of the Project will remove contaminants from the groundwater basin and increase
available groundwater supplies within OCWD's boundaries.
E. The Legislature of the State of California has vested in OCWD the statutory
responsibility to manage, regulate, replenish and to protect the quality of the groundwater
supplies within the boundaries of OCWD.
F. In April of each year, the Board of Directors of OCWD acts in accordance with
Section 31.5 of the Orange County Water District Act ( "OCWD Act ") to find, determine and
establish the basin production percentage (the "BPP "), and sets basin equity assessments (each, a
"BEA ") for each producer within OCWD for the period from July I" through June 30 '1' of the
next succeeding year.
G. Section 2.6.(1.) of the OCWD Act authorizes OCWD to enter into an agreement
with the owner operating a groundwater production facility within OCWD's boundaries to
increase the production of groundwater in lieu of water from an alternative non - tributary source
for the purpose of removing contaminants or pollutants from the groundwater basin, and paying
from OCWD funds that portion of the cost of groundwater production that will encourage the
production for beneficial use of the polluted or contaminated groundwater that is impairing the
quality of the water supplies within OCWD.
H. OCWD and the City mutually desire to enter into this Agreement pursuant to
Section 2.6.(1.) of the OCWD Act to set forth the specific terms and conditions under which the
City will conduct the Project and remove nitrate - impaired groundwater from the Orange County
groundwater basin by producing groundwater from Well 32 and blending that groundwater with
non - impaired groundwater produced from the Wells 36 and 39 for ultimate distribution to City
customers for potable beneficial uses, with the City recovering the Project Cost by means of a
partial exemption of that water from the payment of the BEA. OCWD and they City understand
and agree that this Agreement does not and cannot become effective unless and until the City
files a petition for a partial exemption from the BEA of the water produced from Well 32, and
the Board of Directors of OCWD approves such a partial BEA exemption, in accordance with
Section 38.1 of the OCWD Act.
EXECUTORY AGREEMENTS
NOW, THEREFORE, in consideration of the facts recited above and the covenants,
conditions and promises contained herein, and subject to this Agreement taking effect in
accordance with Section 5 below, OCWD and the City hereby agree as follows:
SECTION 1. LIMITED TERM NITRATE REMOVAL PROJECT
1.1. Once the Project has been constructed, the Project Costs have been reviewed to
ensure they are consistent with this agreement, and the City has filed with OCWD a petition
pursuant to Section 38.1 of the OCWD Act (as outlined in Section 5), this Agreement will be
implemented in the first fiscal year after the Project is complete, beginning July lgt of that year,
and last for up to six fiscal years through June 30`I' of the last year (the "Project Term "). During
the Project Term, the City may produce groundwater in an amount equal to the BPP for that
given year, plus additional groundwater production from Well 32, provided that all of the
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groundwater production above the BPP during the Project Term shall be produced solely from
Well 32 in order to receive partial exemption set forth in Paragraph 2.5 below.
1.2. In order to obtain the partial exemption set forth in Paragraph 2.5 below, the City
shall blend all groundwater produced from Well 32 with groundwater produced from Well 36
and 39 in such proportions that the blended groundwater does not exceed the primary drinking
water standard for nitrate established by USEPA and CDPH, and the City shall deliver the
blended groundwater to its customers or to City facilities for potable beneficial uses.
1.3. The City shall be responsible for all costs incurred in the operation and
maintenance of Well 32, Well 36, Well 39, and all ancillary facilities used for the blending of
groundwater produced from such wells and the distribution of that blended groundwater to City
customers or facilities for potable beneficial use, including but not limited to labor, materials and
power.
1A. The City shall take out and maintain in effect at all times during the term of this
Agreement comprehensive general liability insurance in an amount not less than $2 million per
occurrence, for bodily injury, death and property damage, naming OCWD as an additional
insured under such policy. An endorsement evidencing this insurance coverage shall be
furnished to OCWD prior to the City filing with OCWD a petition pursuant to Section 38.1 of
the OCWD Act (as outlined in Section 5). If the City is, or becomes, partially or fully self -
insured for its public liabilities, a letter executed by the City's Mayor or City Manager stating the
City's self - insured status and acknowledging its responsibility to respond to the indemnification
of OCWD as provided in Paragraph 5.5 below, may be furnished in lieu of the insurance
endorsement. The City shall provide written notice to OCWD of any change in the City's
insured or self-insured status during the Project Term within 30 days of the effective date of such
change.
SECTION 2. PROJECT TERM BASIN EQUITY ASSESSMENT AND
REPLENISHMENT ASSESSMENT PAYMENTS
11. The City shall file water production statements and a basin equity assessment
statement in strict compliance with Sections 29(a) and 31.50) of the OCWD Act, respectively,
for all groundwater produced by the City during the Project Term, including all groundwater
produced from Well 32, Well 36, and Well 39.
2.2. On or before the 15th day of each month, during the Project Term, the City shall
file with OCWD a monthly report reflecting the quantity of groundwater produced by Well 32
through the end of the preceding calendar month, and the total quantity of groundwater produced
by Well 36 and Well 39 to date (through the end of the preceding calendar month) during the
Project Term (a "Monthly Project Production Report ").
23. Concurrently with the filing of the City's basin equity assessment report pursuant
to Section 31.50) of the OCWD Act, the City shall file with OCWD a statement, verified by a
written declaration under penalty of perjury, setting forth the total amount of groundwater
produced from Well 32 during the Project Term (the "Project Production Statement").
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2.4. The City shall pay the replenishment assessment and additional replenishment
assessment levied and imposed pursuant to Sections 27 and 27.1 of the OCWD Act on all
groundwater produced by the City during the Project Term, including all groundwater produced
from Well 32, Well 36 and Well 39, in accordance with Section 29(a) of the OCWD Act.
2.5. To the extent that the City's production of groundwater during the Project Term
does not exceed an amount equal to the BPP plus additional groundwater produced from Well
32, and all of the groundwater produced during the Project Term in excess of the BPP was
produced from Well 32, the City shall be exempt during the Project Term from paying the basin
equity assessment or any surcharge on such grouuldwater production above the BPP from Well
32 during the Project Term to allow the City to recoup the Project Cost, as described in the
Attached Exhibit A attached hereto and by this reference incorporated herein. Notwithstanding
the foregoing, the City shall pay the applicable basin equity assessment and any surcharge for the
following:
2.5.1. The City shall pay the applicable basin equity assessment and surcharge
on all groundwater produced by the City during the Project Term that exceeds an amount
equal to the BPP plus additional groundwater produced from Well 32; and
2.5.2. The City shall pay the applicable basin equity assessment and surcharge
on all groundwater produced by the City during the Project Term in excess of the BPP, if
such groundwater in excess of the BPP is produced from any water production facility
other than Well 32.
SECTION 3. CITY GROUNDWATER PRODUCTION DURING THE PROJECT
REMAINDER TERM
3.1. Following completion of the Project Term, and for ten consecutive years
thereafter, (such ten -year period is hereinafter referred to as the "Project Remainder Term "), the
City shall make its best efforts to continue to operate Well 32 throughout the Project Remainder
Term.
3.2. Beginning the first fiscal year of the Project Remainder Term, and each fiscal year
thereafter during the Project Remainder Term, the City shall pay the then- applicable
replenishment assessment, additional replenishment assessment and, if applicable, the basin
equity assessment and surcharge, on all groundwater produced by the City during that fiscal year,
including all groundwater produced form Well 32, in strict compliance with Sections 29 and 31.5
of the OCWD Act.
3.3. Notwithstanding Paragraphs 3.1 and 3.2 above, in the event that the City was
unable to produce sufficient groundwater from Well 32 during the Project Term to allow the City
to achieve a total groundwater production equal to the BPP plus the additional groundwater
produced from Well 32 so as to recover the Project Cost, the City and OCWD shall meet and
confer to implement the program described in Exhibit A to allow the City to increase production
from Well 32 for additional time to allow the City to achieve the total amount of Well 32
groundwater production that had been intended for the Project Term and thereby recover the
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entirety of the Project Cost (the "Make -Up Production "). In the event that the City undertakes
Make -Up Production:
33.1. The City shall receive a partial basin equity assessment exemption on the
Make -Up Production in accordance with Exhibit A.
3.3.2. The City shall file Monthly Project Production Reports (as described in
Paragraph 2.2) for the Make -Up Production during each calendar month during the
Make -Up Production time.
3.3.3. In addition to all groundwater production reports and statements required
under the OCWD Act, the City shall file a Project Production Statement (as described in
Paragraph 2.3) for the Make -Up Production concurrently with the filing of the City's
basin equity assessment report pursuant to Section 31.50) of the OCWD Act.
SECTION 4. MISCELLANEOUS
4.1. Term. This Agreement shall become effective upon the Board of Directors of
OCWD approving a partial exemption of the BEA for the water produced from Well 32, and
shall continue for a term of twenty years, until June 30, 2033.
4.2. Notices. Any notice, instrument, payment or document required to be given or
delivered under this Agreement shall be given or delivered by personal delivery or by depositing
the same in a United States Mail depository, first class postage prepaid, and addressed as
follows:
If to OCWD: Orange County Water District
18700 Ward Street
Fountain Valley, CA 92708
Attu: General Manager
If to City: City of Santa Ana
20 Civic Center Plaza
Santa Ana, CA 92701
Attn: City Manager
or such other address as either party may direct in writing to the other. Service of any instrument
or document given by mail shall be deemed complete upon receipt if delivered personally, or 48
hours after deposit of such instrument or document in a United States mail depository, first class
postage prepaid, and addressed as set forth above.
4.3. Compliance with Laws. The City shall keep itself informed of all existing and
future state and federal laws and all county, municipal ordinances and regulations, which in any
manner effect its performance of this Agreement. The City shall at all times observe and comply
with all such laws, ordinances and regulations.
4.4. Records and Review. The City shall keep and maintain all records, accounts and
reports relating to this Agreement and its performance hereunder for a period of three years
following the expiration of this Agreement. OCWD shall have access to such records at any
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time during normal business hours upon 48 hours notice to the City. At its cost, OCWD shall
have the right to audit the books, records and accounts of the City relating to its performance of
this Agreement no more than once annually, and the City shall provide reasonable cooperation to
OCWD in this regard.
4.5. Indemnification.
The City shall defend, indemnify and hold OCWD, its officers, directors, employees and
representatives, harmless from and against any and all actions, suits, claims, demands,
judgments, attorney's fees, costs, damages to person or property, losses, penalties, obligations,
expenses or liabilities (collectively, "Costs ") that may be asserted or claimed by any person or
entity arising out of the performance or implementation of this Agreement by City or its officers,
directors, employees or representatives, or the distribution or use of any water produced from
Well 32 or Well No. 36 or Well No. 39. The City shall also defend, indemnify and hold OCWD,
its officers, directors, employees and representatives harmless from and against any and all Costs
that may be asserted or claimed by any person in any administrative or judicial challenge to the
legality or validity of this Agreement or any exemption under Section 38.1 from payment of the
BEA on any portion of the water produced from Well 32, or to any act or determination
(including any finding under Section 38.1 of the OCWD Act or the California Environmental
Quality Act) leading up to or in connection with such a BEA exemption or this Agreement.
4.6. Successors and Assigns. All of the terms, conditions and provisions of this
Agreement shall inure to the benefit of, and be binding upon, OCWD, the City, and their
respective successors and assigns.
4.7. No Implied Waivers. In the event that any term, condition or provision of this
Agreement should be breached by either party and thereafter waived by the other party, such
waiver shall be limited to the specific breach so waived, and shall not be deemed either to be a
continual waiver or to waive any other breach under this Agreement.
4.8. No Representation or Warranty. OCWD and the City each acknowledges that
neither party, nor any of its respective officers, employees, agents or representatives, has made
any written or oral representation, promise or warranty, express or implied, regarding any matter
that is the subject of this Agreement, other than as expressly set forth herein.
4.9. No Obligation to Third Parties. The approval, execution and performance of this
Agreement shall not be deemed to confer any rights upon any person or entity other than OCWD
and the City. There are no third party beneficiaries to this Agreement.
4.10. Nature of Relationship. This Agreement shall not create, and shall not be
construed or deemed to create, any agency, partnership, joint venture, landlord- tenant or other
relationship between OCWD and the City.
4.11. Integration Construction and Amendment. This Agreement represents the entire
understanding of OCWD and the City as to those matters contained herein. No prior oral or
written understanding shall be of any force or effect with respect to those matters covered by this
Agreement. This Agreement shall be construed as if drafted by both OCWD and the City. This
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Agreement may not be modified, altered or amended except in writing signed by authorized
representatives of both OCWD and the City.
SECTION 5. AGREEMENT NOT EFFECTIVE UNTIL PARTIAL BEA EXEMPTION
GRANTED ON WELL 32 WATER PRODUCTION
5.1. This Agreement shall not take effect Lmless and until all of the following actions
occur in accordance with Section 38.1 of the OCWD Act:
5.1.1. City shall have filed with OCWD a petition pursuant to Section 38.1 of the
OCWD Act, for a partial exemption of the basin equity assessment levied under Section
31.5 of the OCWD Act, for all groundwater above the BPP produced from Well 32 and
blended with water from Wells 36 and 29 during the period from July 1, 2014 through
June 30, 2019 (the "Project BEA Exemption "); and
5.1.2. The OCWD Board of Directors shall have received an investigation report
on the petitioned Project BEA Exemption from OCWD's district geologist; and
5.1.3. The OCWD Board shall have conducted a public hearing on the petition
for the Project BEA Exemption, made findings and determinations in accordance with
Section 38.1(d)(2) of the OCWD Act, and granted the City's petition for the Project BEA
Exemption.
52. City understands and aclaiowledges that the OCWD Board of Directors retains
full discretion within the parameters set forth in the OCWD Act to approve or not to approve the
Project BEA Exemption. Nothing in this Agreement shall in any way commit the OCWD Board
of Directors to approve the Project BEA Exemption, to take any other action with respect to the
City's petition for the Project BEA Exemption, or to in any way limit or restrict the discretion of
the Board of Directors of OCWD with respect to an exemption from the payment of the BEA on
water produced from Well 32.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
written above.
APPROVED AS TO FORM: ORANGE COUNTY WATER DISTRICT
RUTAN & TUCKER, LLP
By:
By:
Cathy
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Markus, General Manager
APPROVED AS TO FORM:
By: -�
o i R. C a r v a I h o
C.ty ttorney, City of Santa Ana
City of Santa Ana Agreement
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CITY OF SANTA ANA
By: j /'
David Cavazos
City Manager, City of Santa Ana
Attest:
By: IYIAVV /7 ° l
City Clerk
_g_
Exhibit A
1. Applicable Facts
• Santa Ana's preliminary cost estimate to modify Well #32 = $4,600,000.
• Total Project cost and water savings to be provided to Santa Ana = $716,000
• The savings will be achieved by receiving between $269/af and $383/af of BEA
reduction of approx. 4,000 of of Well #32 pumping above the Basin Production
Percentage (BPP) for each year.
• Santa Ana's Basin Equity Assessment (BEA) in FY13 -14 = $586/af and was
established by Resolution of the OCWD Board following a public hearing held on
April 17, 2013.
2. Project Limits
• All additional groundwater production from Well #32 above the BPP will receive a
BEA reduction. This production is expected to occur in FY15 -16 and last for
approximately 4 years.
• After the $4,600,000 of savings is achieved, the BEA reduction provided by
OCWD will be terminated.
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