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Home My WebLink About07 - Acquisition of Rule 20A CreditsCITY OF NEWPORT BEACH Q aE�+IPORT `7�,FOaN'P City Council Staff Report Agenda Item No. 7 July 23, 2013 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Public Works Department David A. Webb, Public Works Director 949 - 644 -3311, dawebb @newportbeachca.gov PREPARED BY: Iris Lee, Senior Civil Engineer 949 - 644 -3323, ilee @newportbeachca.gov APPROVED: TITLE: Acquisition of Rule 2%A Credits from the City of Mission Viejo ABSTRACT: California Public Utilities Commission (CPUC) Rule 20A establishes program funding for the undergrounding of overhead utilities by municipalities. The City of Mission Viejo (Mission Viejo) has unallocated Rule 20A funds and is offering to sell them to the City of Newport Beach for $93,482.40. This action will result in a $169,968.00 credit to the City's Southern California Edison (SCE) Rule 20A account. RECOMMENDATIONS: 1. Authorize the City Manager to execute the Memorandum of Understanding (MOU) between the City of Newport Beach and City of Mission Viejo documenting details of transaction for the Rule 20A credit acquisition and to provide the City of Newport Beach first right of refusal to purchase additional Rule 20A credits from the City of Mission Viejo, as it becomes available, at a purchase rate of $0.55 on the dollar. 2. Authorize staff to process the Rule 20A credit transfer between the City of Newport Beach and City of Mission Viejo with SCE. FUNDING REQUIREMENTS: The current Capital Improvement Program budget includes sufficient funds in account 7014- C8002022 for this purchase. Acquisition of Rule 20A Credits from the City of Mission Viejo July 23, 2013 Page 2 DISCUSSION: CPUC sets Rule 20 policies and procedures for the conversion of overhead utility facilities to underground. Under Rule 20, underground utility projects may be financed by utility rate money, combined rate funds and local tax proceeds; depending on whether the project is classified under the Rule 20A, Rule 20B, or Rule 20C provision. Rule 20A projects are paid for by the utility's ratepayers. To qualify for funding through these proceeds, projects must produce a benefit to the general public, not just customers in the affected area, by satisfying one or more of the following criteria: • The location has an unusually heavy concentration of overhead facilities; • The location is heavily traveled; • The location is an arterial or major collector road in a city's general plan; and /or • The overhead equipment must be located within or pass through a civic, recreational, or scenic area. City staff approached the City of Mission Viejo inquiring about its unused Rule 20A allocation. The City of Mission Viejo indicated they had $169,968.00 in available credits and would consider selling these to Newport Beach. Staff negotiated purchasing the credits at a rate of $0.55 on the dollar for a total of $93,482.40. This purchase is comparable to other Rule 20A transactions within the Orange County region. The City of Mission Viejo would also consider transferring future Rule 20A allocations to the City of Newport Beach at the same purchase rate should the City desire additional Rule 20A funds in the future. SCE will transfer Mission Viejo's available credit to Newport Beach's account upon receipt of an authorization letter from Mission Viejo. The City of Newport Beach's 2013 Rule 20A allocation is $274,961.00, and the current balance in the City's Rule 20A account with SCE is $1,535,332.00. Should the City Council authorize the purchase of $169,968.00 in credits from the City of Mission Viejo, the City's balance will increase to $1,705,300.00. SCE allows an agency to mortgage up to five years of Rule 20A allocation, or in the City's case, up to $1,374,805.00. With the purchase of Mission Viejo's credits, and the City's ability to mortgage, the City will have approximately $3,080,105.00 of Rule 20A funds available for undergrounding through 2018. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or Acquisition of Rule 20A Credits from the City of Mission Viejo July 23, 2013 Page 3 indirectly. In addition, any undergrounding project funded by the acquired Rule 20A funds will be subject to environmental review. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted by: w, David A. Webb-) Public Works Director Attachment: A. Memorandum of Understanding between Cities of Mission Viejo and Newport Beach ATTACHMENT A MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding (MOU) is entered into as of , 2013 (Effective Date), by and between the City of Newport Beach, a California municipal corporation with its principal place of business at 100 Civic Center Drive, Newport Beach, California 92660 (Newport Beach), and the City of Mission Viejo, a California municipal corporation with its principal place of business at 200 Civic Center, Mission Viejo, California, 92691 (Mission Viejo). Newport Beach and Mission Viejo are sometimes individually referred to herein as "Party" and collectively as "Parties ". RECITALS A. Electric Utilities collect and annually allocate funds to communities to convert overhead electric facilities to underground electric facilities (Rule 20A Funds). B. Newport Beach is actively planning one or more projects to underground overhead electric facilities that qualify for the application of California Public Utilities Commission (CPUC) Rule 20A Funds (Projects). Newport Beach desires to obtain additional Rule 20A Funds allocation to finance such Projects. C. Southern California Edison (SCE) currently has designated and dedicated a balance of $169,968.00 in Rule 20A Funds for the benefit of Mission Viejo (Mission Viejo Allocation), and Mission Viejo currently has no active projects which can make use of the Mission Viejo Allocation. D. Newport Beach desires to acquire, for consideration, the Mission Viejo Allocation to use in connection with the Projects, and Mission Viejo desires to transfer the Mission Viejo Allocation to Newport Beach to enable the Rule 20A Funds, which have been allocated to Mission Viejo, to be used for their intended purpose of undergrounding electric facilities and to derive economic benefit from the Mission Viejo Allocation. AGREEMENT NOW, THEREFORE, the Parties hereto agree as follows: 1. Mission Viejo agrees to assign, for use by Newport Beach, its rights and interests in the Mission Viejo Allocation to Newport Beach, and Newport Beach agrees to acquire, for consideration, the Mission Viejo Allocation in accordance with the tenns of this MOU. This MOU shall be subject to the approval of each the City Council of Newport Beach and the City Council of Mission Viejo and shall become effective on-the date when both such approvals have been obtained (Effective Date). Notwithstanding the foregoing, if this MOU has not become effective as of September 30, 2013, then either Party may terminate this MOU on five (5) C\0ocumems and Setlingspleell -c al Settings \Temporary Intern at Files \Contenl.Outiook\ALJ3ZRN3 \Rule 20 -A MOU -CNB and MV (5- 13- 13).docx -1- business days' written notice to the other Party without incurring any liability, costs or further obligations to the other party or any third party. 2. Within fifteen (15) business days of the Effective Date, Newport Beach shall make a payment to Mission Viejo in the amount of Ninety Three Thousand, Four Hundred Bighty Two and Forty Cents ($93,482.40) (Acquisition Price). The Acquisition Price shall be made in immediately available funds via check or wire transfer to an account designated by Mission Viejo. The Acquisition Price shall constitute full consideration for the transfer and assignment of the Mission Viejo Allocation. 3. Mission Viejo agrees to sell the Mission Viejo Allocation to Newport Beach at a purchase rate Fifty -Five Cents ($0.55) for every One Dollar ($1.00) of Rule 20A Funds. Within ten (10) business days of Mission Viejo's receipt of the Acquisition Price funds, Mission Viejo shall deliver a written request to SCE, with a copy to Newport Beach, making a formal request to transfer and assign the entire balance of the Rule 20A Funds contained in the Mission Viejo Allocation to and for the benefit of Newport Beach. Mission Viejo shall cooperate in good faith with Newport Beach to provide any additional documentation or information that is reasonably requested by SCE to complete the transfer. In the event that SCE is unable to complete the transfer, or only complete a partial transfer, Mission Viejo shall return the unused Acquisition Price funds to Newport Beach within ten (10) business day of Newport Beach's notification to Mission Viejo, 4. Newport Beach acknowledges and agrees that it has conducted its own investigation as to the applicability and transferability of the Mission Viejo Allocation for use in the Projects and that Mission Viejo has not made any representation or warranty to Newport Beach with respect to same. The actual use of the Mission Viejo Allocation by Newport Beach shall be subject to the rules and procedures adopted by SCE, CPUC, and such other conditions or requirements as are set forth in the Public Utilities Code. 5. Newport Beach shall indemnify, defend, and hold harmless Mission Viejo, its elected officials, officers, employees, and agents, from any claim, damage or liability arising in connection with the use of Rule 20A Funds from the Mission Viejo Allocation in connection with the construction of the Projects, including legal challenges of all types or natures, including but not limited to administrative, judicial, or legislative actions. 6. In the event that either Party is in breach of its obligations as set forth in this MOU, then the non - defaulting Party shall have the right to terminate this Agreement on ten (10) business days' written notice to the defaulting Party unless the default is cured, or cure has commenced, within the notice period. Upon termination for breach, the non - defaulting Party may exercise any right or remedy which it may have under applicable law. Within ten (10) business days of termination pursuant to this Section 7, Mission Viejo shall return to Newport Beach that portion of the Acquisition Price funds applicable to that portion of the Mission Viejo Allocation not yet transferred by SCE to Newport Beach. C: \Documents and SettingsIdleel6ocal SeltingsWemporary Intern et Flles%Content.OUllookVU.J3ZRN3 \Rule 20,4 MOU -CNB and MV (5- 13.13).docx -2- 7. All notices to be given pursuant to this MOU shall be delivered in person or by commercial overnight delivery to the address of the Party set forth above, and addressed to the City Manager of such Party and shall be effective upon receipt. 8. This MOU shall be governed and construed in accordance with the laws of the State of California, and any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange. 9. Each Party shall at its own cost and expense comply with all statutes, ordinances, regulations and requirements of all governmental entities, including federal, state, county or municipal, whether now in force or hereinafter enacted. 10. A waiver by either Party of any breach, of any term, covenant or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, whether of the same or a different character. 11. Mission Viejo agrees to provide Newport Beach first right of refusal to purchase future Rule 20A allocations between July 1, 2013 and July 1, 2015. If Mission Viejo intends to transfer its Rule 20A allocation within said dates it shall notify Newport Beach of fund availability and the proposed purchase price by another city if another city is proposing a purchase price higher than the purchase rate of Fifty -Five Cents ($0.55) for every One Dollar ($1,00) of Rule 20A Funds. If Newport Beach desires to acquire said allocations by matching the price proposed by another city it shall respond within fifteen (15) business days of Mission Viejo's notification stating intent to purchase said allocations at the proposed purchase price. Newport Beach agrees to enter into an MOU with Mission Viejo to complete the transfer within 90 days of said notification to Mission Viejo. 12. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either Party by reason of the authorship of the Agreement or any other rile of construction which might otherwise apply. 13. If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. 14. In the event of any dispute or legal action arising guider this Agreement, the prevailing Party shall not be entitled to attorney's fees. 15. This Agreement may be executed in two or more conmterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 16. Each Party signing this Agreement explicitly affirms and provides they have the power and authority to bind their respective Party. CADOCUnaents and SeNngsA eelLocal SeWngsVemporarylnternet Files \ConteLOutlookVdJ3ZRN3\ Rule 20 -A. MOU -CNB and MV(5- 13- 13).docx -3- IN WITNESS WHEREOF, the Patties hereto have executed this MOU as of the dates indicated below. CITY OF MISSION VIEJO, A California municipal corporation Date: Dennis Wilberg City Manager ATTEST: Date: Karen Hamman City Clerk APPROVED AS TO FORM: Date: William P. Curley III City Attorney CITY OF NEWPORT BEACH, A California municipal corporation Date: Dave Kiff City Manager Date: Leilani L Brown City Clerk Date: Aaron C. Harp City Attorney C: \Documents and SettingslileelLocal Settings \Temporary Internet Piles \Contenl.0utlook\ALJ3ZRN3 \Rule 20 -A MOU -CNB and MV (5- 13- 13).dccx -4-