HomeMy WebLinkAbout13 - Water & Sewer Service Agreement with IRWDITEM 13
TO: Members of the Newport Beach City Council
FROM: Dave Kiff, Deputy City Manager
SUBJECT: Annexation Update and Agreement with the Irvine Ranch Water
District over Water and Sewer Service in the Proposed Annexation
Areas
RECOMMENDED Receive and File the 'Agreement Between Irvine Ranch Water District and City
ACTION: of Newport Beach Relative to Annexation."
EXECUTIVE On October 25,1999, the City Council adopted Resolution 99 -71 (see Attachment
SUMMARY: A). The Resolution allowed the City to file a reorganization application with the
Local Agency Formation Commission ( LAFCO) that would lead to the eventual:
• Annexation of unincorporated area known as Bay Knolls, Santa Ana Heights
(east of Irvine Avenue), Newport Coast and Newport Ridge areas to the City;
• Detachment of certain areas of Bay Knolls from the City of Costa Mesa;
• Detachment of territory from the Irvine Ranch Water District (IRWD).
In January 2000, the City Council directed the City Manager to complete an
Agreement between the City and IRWD that authorized IRWD to continue
service in the Newport Coast and Newport Ridge should the City annex the area.
This Agenda Item includes the executed Agreement with IRWD. After
appropriate public notice, a later Agenda Item will rescind Resolution 99 -71 and
adopt a separate resolution to delete any reference to an IRWD detachment.
BACKGROUND: When the City Council adopted its Resolution of Intent to Reorganize Territory
(Resolution 99 -71, October 25,1999) in anticipation of the annexations of Bay
Knolls, Santa Ana Heights, and Newport Coast /Ridge, City staff intended to
complete at least three tasks before filing a complete reorganization application
to the Local Agency Formation Commission ( LAFCO) and allowing LAFCO to
set the item for hearing. The tasks included:
1 -- Addressing the provision of water, sewer, and reclaimed water to the
Newport Coast and Ridge;
2 -- Getting the County of Oranges formal or informal support for the
annexation of each annexation area via a property tax sharing agreement;
3 -- Reaching some consensus over annexation issues with the affected
residents.
Newport Beach City Council
Page 2
BACKGROUND: Actions on these three issues have been as follows:
(cont'd) I -- IRWD. The City and the Irvine Ranch Water District (IRWD) have
agreed to the following (see the full text of the Agreement in Attachment A):
• Rescission of two earlier agreements between the City and IRWD relating to the
annexation of the Newport Coast executed in 1972 and 1973.
• Receipt of $25 million over six years from IRWD (upon and after annexation of all
or part of the annexation area);
• IRWD would retain the right to provide water and sewer service in the Newport
Coast and Ridge indefinitely (NOTE: this action will require the rescission of
Resolution 99 -71 and the adoption -after proper public notice -- of a new
Resolution that deletes any reference to a detachment from IRWD);
• Newport Coast and Ridge residents within the annexation area would always pay
the same commodity rates (water rates) as residents across IRWD's service area;
• Newport Coast and Ridge residents within the annexation area would be partially
protected from increases in 1RWD's two Improvement Districts in the Newport
Coast and Ridge.
II -- PROPERTY TAX TRANSFER WITH THE COUNTY OF ORANGE.
The City and the County have tentatively addressed property tax transfer
agreements for Bay Knolls and Newport Coast, but not for Santa Ana
Heights. Please see the item entitled Resolution to the Orange County Board of
Supervisors regarding the proposed Annexation of Santa Ana Heights for more
information about this issue.
III - RESIDENT CONSENSUS. City staff believes that we can still reach
consensus and resident approval of the City's annexation efforts in each of
the three annexation areas.
ATTACHMENT: Attachment A - Agreement between the Irvine Ranch Water District and the City of
Newport Beach Relative to Annexation (with Exhibits A, B, and Q.
AGREEMENT BETWEEN IRVINE RANCH WATER DISTRICT
AND CITY OF NEWPORT BEACH RELATIVE TO ANNEXATION
This agreement (AGREEMENT) is made and entered into this day of 1%jc Y
2000, by and between the IRVINE RANCH WATER DISTRICT ( "IRWD ") and the CITY OF NEWPORT
BEACH (the "City ").
WITNESSETH:
WHEREAS, IRWD and the City entered into an agreement on September 11, 1972 relative to
future adjustment of service area boundaries for an area described therein as the "Property," which was
superseded and replaced by a similar agreement executed on September 10, 1973 (the agreements are
collectively referred to as the "1973 Agreement "); and
WHEREAS, the City is currently in the process of preparing to annex unincorporated areas and
territory within its sphere of influence including Bay Knolls, Santa Ana Heights, Newport Coast (including
the Property) and Newport Ridge, all as described in the October 25, 1999 public hearing conducted by
the City. The areas proposed for annexation by the City are, except for Bay Knolls, collectively referred to
as the "Annexation Area" and are depicted in Exhibit "A" which is incorporated by this reference. The
Annexation Area is within IRWD's service area and receives water, sewer and /or reclaimed water service
from IRWD; and
WHEREAS, IRWD has constructed and acquired facilities to provide transmission, storage, and
distribution of water, as well as collection, treatment, reclamation, and disposal of sewage and wastewater
to the Annexation Area as well as other territory within IRWD's service area;
WHEREAS, the facilities constructed and acquired by IRWD in Newport Coast and Newport Ridge
have been financed by means of bonds payable from assessments and property taxes assessed on
property; and
WHEREAS, the City has expended funds and made improvements in contemplation of providing
water and sewer service to all or a portion of the Annexation Area; and
WHEREAS, the parties, through this AGREEMENT, intend to resolve all issues relating to the
meaning and effectiveness of, and to supersede and terminate, the 1973 Agreement. The parties also
intend to clearly establish IRWD's right to provide water, sewer and reclaimed water service to the
Annexation Area, to establish their respective duties with respect to the proposed annexation of the
Annexation Area by the City and to compensate the City for the value of the 1973 Agreement and the
improvements made in reliance on the 1973 Agreement.
NOW, THEREFORE, in light of the Recitals and the mutual covenants and conditions contained in
this AGREEMENT, the parties hereby agree as follows:
Termination of 1973 Agreement. This AGREEMENT, when effective, shall terminate
and supersede the 1973 Agreement. This AGREEMENT shall be effective upon execution and the entry
of a final judgment by a court of competent jurisdiction validating this AGREEMENT.
2. City Annexation of Annexation Area. The City and IRWD agree that the City may
proceed at the City's discretion to pursue the annexation of the Annexation Area, in one or more phases.
The City's annexation proposal(s), including but not limited to any applicable plan for services, shall
specify that water, sewer, and reclaimed water services (existing and to be extended in the future) will be
provided in the Annexation Area by IRWD (except to the extent regional sewer service is provided by the
Orange County Sanitation District), and that the water, sewer, and reclaimed water facilities and utilities
-2-
(existing and to be constructed or extended) serving the Annexation Area shall be owned by IRWD
(except for regional sewer facilities owned by the Orange County Sanitation District). No detachment from
IRWD or reallocation of IRWD's general property tax allocation shall occur in conjunction with or result
from the City's annexation of the Annexation Area.
3. IRWD Support of Annexation. IRWD will support the City's proposal(s) to annex the
Annexation Area when considered by the Local Agency Formation Commission ( "LAFCO ") and any other
public entity. IRWD agrees to oppose any change of organization or reorganization proposal that
competes or conflicts with or precludes the City's annexation of the Annexation Area. The City agrees to
oppose any change of organization or reorganization proposal with respect to the Annexation Area that
includes detachment of any territory from IRWD's service area, the transfer of water, sewer or reclaimed
water services from IRWD to any other public entity, or reallocation of IRWD's general property tax
allocation.
4. IRWD Settlement Payment. Upon completion of the annexation (consistent with Section
2 of this AGREEMENT) of the Annexation Area, or any portion of the Annexation Area, to the City, IRWD
shall pay the City the amount of $25,000,000.00 (Consideration). The Consideration is due and payable in
installments, without interest, in accordance with the following schedule:
Payment No. 1
Thirty (30) days following LAFCO's filing of
$15,000,000.00
Certificate(s) of Completion for the annexation
Payment No. 2
Second (2n°) anniversary of the date Payment
5,000,000.00
No.1 is due
Payment No. 3
Fourth (41) anniversary of the date Payment No.
3,000,000.00
1 is due
Payment No. 4
Sixth (6'") anniversary of the date Payment No. 1
2,000,000.00
is due
TOTAL
$25,000,000.00
-3-
The parties acknowledge that the Consideration and related payment schedule equitably accounts for the
improvements made by the City in contemplation of providing service to the Annexation Area. The parties
also acknowledge that the Consideration and related payment schedule account for the risk to each party
that IRWD's current allocation of the general property tax levy with respect to the Annexation Area may be
changed or discontinued by state legislation. No amount shall be due unless and until the annexation of
the Annexation Area or any portion of the Annexation Area is completed, as evidenced by the recording
and filing of a certificate(s) of completion by LAFCO.
5. Third Party Annexation or Incorporation.
(a) The provisions of Section 4 notwithstanding, it is the intent of the parties that the
Consideration is allocated to specific water and sewer tax rate areas ('IRAs ") for purposes of adjusting
Consideration if any portion of the Annexation Area is incorporated, annexed or otherwise included in a
jurisdiction other than the City ( "Third Party Jurisdiction "), the Third Party Jurisdiction takes over water,
sewer or reclaimed water services from IRWD, and the Third Party Jurisdiction is allocated all or a portion
of IRWD's share of the general property tax levy for such area.
(b) The parties agree that, for the purpose of adjusting the Consideration in the event
of the circumstances described in Subsection a, the Consideration will be allocated by water and sewer
TRA as shown in Exhibit "B" attached hereto and incorporated herein by this reference. In the event the
property tax allocation to IRWD for any TRA is reduced for the reasons described in Subsection a, the
Consideration shall be adjusted and reduced according to a revised TRA table that reflects the change in
property tax allocation for the affected TRA(s) (adjustment). To the extent any installment(s) have been
paid by IRWD prior to the adjustment, the City shall refund the amount of the adjustment(s), without
interest, to IRWD, within ninety (90) days of the effective date of the Third Party Jurisdiction incorporation
or annexation. Any remaining installment(s) will be adjusted in conformance with the revised TRA table. If
the incorporation or annexation by the Third Party Jurisdiction results in the division of TRAs or partial
-4-
reallocation within a TRA or other variation not directly addressed by this Subsection, the parties agree to
adjust the methodology herein to preserve the intent of this Section. An example adjustment calculation is
shown in Exhibit "C" attached hereto and incorporated herein by this reference.
6. Future Jurisdictional and Service Changes. The City agrees that it will not initiate or
support any proceeding or action, through LAFCO or otherwise, for the detachment from IRWD, or other
reorganization, of any portion of IRWD's jurisdiction, including but not limited to unannexed portions of the
Annexation Area, or the transfer of any water, sewer or reclaimed water facilities, services or utilities from
IRWD, without the express consent of IRWD. IRWD agrees that it will not initiate or support any
proceeding or action, through LAFCO or otherwise, for the acquisition of the City's water or sewer
facilities, services or utilities or the adjustment or modification of the City's service area, without the
express consent of the City.
Service and Tax Rates Within the City Annexed Area.
(a) IRWD agrees, effective upon annexation of the entire Annexation Area into the
City, that it will not increase water, sewer or reclaimed water commodity rates or ad valorem debt - service
assessments applicable within the Annexation Area, except increases that are generally applicable and
established in the same manner as such increases are established on a District -wide basis (excluding
areas that are subject to special service contracts or conditions, such as areas other than the Annexation
Area which are annexed into the IRWD service area in the future). All other IRWD fees, charges and
assessments within the Annexation Area, including but not limited to pumping or elevation surcharges,
shall be IRWD's standard fees, charges and assessments, established in the same manner as in other
portions of IRWD.
(b) The provisions of this Section shall not prohibit IRWD from implementing such
rates, charges, assessments, or increases therein as IRWD may deem necessary to prevent or cure any
-5-
default in connection with debt service on bonded indebtedness or to reimburse a credit facility provider as
required by agreement with such provider in the event of its acquisition of unremarketed or defaulted
bonds.
(c) This Section shall not apply within Santa Ana Heights for so long as the IRWD
rates, charges and assessments in such area are governed by the separate agreements entered into in
conjunction with the acquisition of the Santa Ana Heights Water Company by IRWD.
8. Disclosure. The parties agree to prepare a joint statement to disclose the terms of
this AGREEMENT to the public. In addition to such disclosure, the parties acknowledge that this
AGREEMENT shall be released as required by law.
9. Interpretation. Both of the parties have negotiated the provisions of this AGREEMENT
with the assistance of their counsel. Accordingly, the parties waive the effect of California Civil Code
Section 1654 or any other statute or common law principle of similar effect which interprets uncertainties
in a contract against the party who drafted the contract.
10. No Waiver. No failure of either party to exercise any power given that party under this
AGREEMENT or to insist on strict compliance by the other party to its obligations, and no custom or
practice of the parties in variation with the terms of this AGREEMENT will constitute a waiver of any
party's right to demand exact compliance with the terms of this AGREEMENT.
11. Successors and Assigns. The provisions of this AGREEMENT will be binding on and will
inure to the benefit of the parties and their respective heirs, successors, and assigns, except for any public
entity other than the parties which acquires jurisdiction over the Annexation Area or any portion thereof
through any change of organization or reorganization.
0
12. Counterpart s. This AGREEMENT may be executed in one or more counterparts. Each
will be deemed an original and all, taken together, will constitute one and the same instrument.
13. Notices. Any notice, request, demand, consent, approval or other communication
required or permitted pursuant to this AGREEMENT or by law shall be validly given or made only if in
writing and delivered in person or seventy -two (72) hours after deposit in the United States mail, duly
certified or registered (return receipt requested), postage prepaid, and delivered (in the case of personal
delivery) or addressed (in the case of mail delivery) to the Party for whom intended, as follows:
If to IRWD: IRVINE RANCH WATER DISTRICT
15600 Sand Canyon Avenue
P.O. Box 57000
Irvine, CA 92619 -7000
Attention: General Manager
If to the City: CITY OF NEWPORT BEACH
3300 Newport Boulevard
P.O. Box 1768
Newport Beach, CA 92659 -1768
Attention: City Manager
Either party may substitute a different address for its above - stated address by giving written
notice to the other in the manner herein provided.
14. AuthoritV. Each of the undersigned represents and warrants to the other party hereto
that they have the authority to bind the party on behalf of whom they sign. Each of the undersigned
represents that it has all requisite authority to perform each of its obligations hereunder.
15. Entire Agreement. This AGREEMENT constitutes the entire agreement between the
parties concerning the subject matter hereof. All prior agreements, representations, negotiations and
understandings of the parties are superseded and merged in this AGREEMENT. This AGREEMENT shall
be amended only in writing executed by both parties.
-7-
16. No Third Party Beneficiaries. Nothing in this AGREEMENT is intended or shall be
construed to give any person, other than the parties and their respective successors and assigns, any
legal or equitable right, remedy or claim under or in respect of this AGREEMENT or any provision. This
AGREEMENT and each condition and provision is intended to be for the sole and exclusive benefit of the
parties and their respective successors and assigns, and for the benefit of no other person.
17. Mutual Release. It is understood and agreed that this AGREEMENT is a compromise
settlement of a disputed claim and that the furnishing of the consideration for this settlement and general
release shall not be deemed or construed as an admission of liability or responsibility at any time for any
purpose. It is further agreed and understood that this AGREEMENT is intended to constitute a complete
and total release of any and all claims, rights, demands, actions, obligations, liabilities, and causes of
action either party may have with respect to the 1973 Agreement. Accordingly:
IT IS UNDERSTOOD AND AGREED THAT ALL RIGHTS UNDER SECTION 1542 OF THE CIVIL
CODE WHICH PROVIDES AS FOLLOWS,
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
ARE HEREBY EXPRESSLY WAIVED.
18. Specific Performance. The parties agree that the party entitled to receive performance of
each obligation herein other than an obligation to pay money has no adequate remedy at law for the
breach of such obligation and is entitled to specific performance thereof except as prohibited by law.
H/
N
N
!I!
10
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT the day and year
first written above.
APPRO D AS TO FORM:
1. City Attorney
APPROVED AS TO FORM:
for IRWD
0
CITY OF NEWPORT BEACH
By
yor
City Clerk
(SEAL)
IRVINE RANCH WATER DISTRICT
a
0
(SEAL)
Exhibit A
NOTE: EXHIBIT A TO THIS AGREEMENT IS NOT
ATTACHED IN THIS AGENDA ITEM. PLEASE SEE
THE CITY MANAGER'S OFFICE (949/644 -3002) FOR
A COPY OF EXHIBIT A.
THANK YOU.
cu I ssm ss§ SHM
woo
www.11
Q
---------------
:-.Iffi,\
6
ACY,
CD Sv . . ...... .......
LOA
2 IIJ
I ., ...............
.. ................
- ----------------- -
. . . ...................
ELO, " — f — f ..
..... . ......
----------------
IM
... .... ... Pi Vti
pp 9.6
'
6-% V
54 r .Sit L% , \
N-
Sp
..,$ 4 C-4
IYN Ao�y
44 . ...... jtii''i'}, t , - ` x
ce)
LO
Af) O ttii't •. r �' `�1 ```�vrvirw i
CYY
Lo A
4% 4
CY
gg p4 rwvtWw
tap
LO
ll Ln e�
EXHIBIT "C"
Example
New jurisdiction formed inclusive of TRA 55036 water and sewer, 55039 water only and only a
portion of the tax levy and acreage of 55085 water only.
Original TRA Allocation New Jurisdiction IRWD _
TRA (2) Water Sewer Water Sewer Water Sewer
5009
0.0055%
0.0169%
0.0055%
0.0169%
5012
0.0119%
0.0367%
0.0119%
0.0367%
7066
0.0073%
0.0073%
55008
0.0029%
0.0090%
0.0029%
0.0090%
55017
2.7172%
8.4139%
2.7172%
8.4139%
55025
0.0036%
0.0113%
0.0036%
0.0113%
55030
0.2641%
0.8163%
0.2641%
0.8163%
55031
2.1743%
2.1743%
55036
1.4740%
4.5641%
1.4740% 4.5641%
55039
0.7650%
2.3688%
0.7650%
2.3688%
55056
0.2662%
0.2662%
55066
0.0155%
0.0155%
55082
0.6161%
1.9077%
0.6161%
1.9077%
55083
0.0271%
0.0084%
0.0271%
0.0084%
55085 A
3.6077%
11.1714%
2.8862% (1)
0.7215%
11.1714%
55085B
5.4116%
16.7571%
5.4116%
16.7571 %
55085
9.0194%
27.9285%
_
2.8862%
6 .1332%
_
27.9285%
55089
0.0047%
0.0147%
0.0047%
0.0147%
55090
1.4814%
1.4814%
66010
0.0015%
0.0045%
0.0015%
0.0045%
66014
0.0020%
0.0061%
0.0020%
0.0061%
66030
0.2152%
0.6663%
0.2152%
0.6663%
66036
2.1690%
6.7163%
2.1690%
6.7163%
66037
0.0020%
0.0063%
0.0020%
0.0063%
66043
0.0801%
0.2479%
0.0801%
0.2479%
66044
1.4405%
4.4607%
1.4405%
4.4607%
66051
4.6452%
14.3840%
4.6452%
14.3840%
Subtotal
27.4115%
72.5885%
5.1251% 4.5641%
22.2864%
'68.0244%
Add Water,
27.4115%
5.1251%
22.2864%
Total
100.0000%
9.6892%
90.3108%
From New Jurisdiction
9.6892%
Total
100.0000%
(1) - The new jurisdiction includes only 40% of the acreage in TRA 55085 and only 80% of the water tax levy to IRWD.
Therefore the allocation is as follows: (9.0194% * 40% * 80% = 2.8862 %) .
(2) - Not all TRAs located within the agreement area were incuded in this exhibit. If the TRA did not receive a portion
of the general property tax levy then the TRA was excluded from the exhibit.
In this example, the City would return 9.6892% of the $25 million consideration (an amount equal
to $25 million * 9.6892 %, or $2,422,300) to IRWD in accordance with Section 5 of the Agreement.