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HomeMy WebLinkAbout08 - Rule 20A Credits�EW `Rr CITY OF NEWPORT BEACH City Council Staff Report Agenda Item No. 8 October 11, 2011 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Public Works Department Stephen G. Badum, Public Works Director 949 - 644 -3311, sbadum @newportbeachca.gov PREPARED BY: David Webb, Deputy Public Works Director /City Engineer Iris Lee, Senior Civil Engineer APPROVED: A TITLE: Acquisition of Rule 20A 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 $94,127.50. This action will result in a $188,255.00 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 acquisition of Rule 20A Credits and to provide the City of Newport Beach priority to acquire additional Rule 20A credits from the City of Mission Viejo, as it becomes available, at a purchase rate of $0.50 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. 1 Acquisition of Rule 20A Credits from the City of Mission Viejo October 11, 2011 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 that it has $188,255.00 in credits that they would consider selling to Newport Beach. Staff has negotiated purchasing this unused credit for $94,127.50. This represents a $0.50 on the dollar purchase rate, which is comparable to similar Rule 20A acquisition transactions in 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. Given the number of potential Rule 20A utility undergrounding projects in Newport Beach, and City Council's desire to underground overhead utilities where feasible, staff recommends the acquisition of these unused Rule 20A funds from the City of Mission Viejo. The City of Newport Beach's current Rule 20A yearly allocation is $249,766. The City's SCE Rule 20A is anticipated to have a negative balance of - $960,157.00 at the end of 2011. Should the City Council authorize the purchase the $188,255.00 in credits from the City of Mission Viejo, this balance will decrease to a negative - $771,902 at the end of 2011. SCE allows an agency to mortgage up to five years of Rule 20A allocation, or in the City's case, up to $1,248,830. With the purchase of Mission Viejo's credits, and the City's ability to mortgage, the City will net approximately $476,928 of Rule 20A funds available for undergrounding in 2016. SCE will transfer Mission Viejo's available credit to Newport Beach's account upon receipt of an authorization letter from Mission Viejo. 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 2 Acquisition of Rule 20A Credits from the City of Mission Viejo October 11, 2011 Page 3 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 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: Director A. Memorandum of Understanding between Cities of Mission Viejo and Newport Beach F 1) MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding (MOU) is entered into as of , 2011 (Effective Date), by and between the City of Newport Beach, a California municipal corporation with its principal place of business at 3300 Newport Boulevard, Newport Beach, California 92663 (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 $188,255 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 terms 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 October 28, 2011, then either Party may terminate this MOU on five (5) business days' written notice to the other Party without incurring any liability, costs or further obligations to the other party or any third party. 4 C: \Documenu and Settings \NPayne \local5ettingz \Temporary Internet FlleslCon tent.6utlooMZC50ABHU1Rule 20 -A MOU -CNB and MV.DOCX -1- 2. Mission Viejo agrees to provide acquisition priority to Newport Beach for Rule 20A allocations between January 1, 2012 and December 31, 2015, at a purchase rate of Fifty Cents ($0.50) for every One Dollar ($1.00) Rule 20A funds. Mission Viejo shall notify Newport Beach of fund availability within fifteen (15) business days of receiving Rule 20A allocation. Newport Beach shall respond within fifteen (15) business days of Mission Viejo's notification to Newport Beach. Mission Viejo reserves the right to transfer its Rule 20A allocations to other agencies at rates greater than that offered by Newport Beach. 3. Within five (5) business days of the Effective Date, Newport Beach shall make a payment to Mission Viejo in the amount of Ninety Four Thousand One Hundred Twenty Seven and Fifty Cents ($94,127.50) (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. 4. Within five (5) 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, Mission Viejo shall return the Acquisition Price funds to Newport Beach within ten (10) business day of Newport Beach's notification to Mission Viejo. 5. 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. 6. 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. 7. 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 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 the Acquisition Price funds to Newport Beach. 5 C: \Documents and Settings \NPayne \Local Settings \Temporary Internet Files \Content.Outlook1ZC50ABHUXRule 20 -A MOU -CNB and MV.DOCX -2- h S. 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. 9. 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. 10. 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. 11. 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. 12. In the event there are any conflicts or inconsistencies between this Agreement and the Scope of Services or any other attachments attached hereto, the terms of this Agreement shall govern. 13. 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 rule of construction which might otherwise apply. 14. 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. 15. In the event of any dispute or legal action arising under this Agreement, the prevailing Party shall not be entitled to attorney's fees. 16. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. C: \Documents and Settings \NPayne \Local Settings \Temporary Internet Files \Content.Outlook2C5OABHU1Rule 20 -A MOU -CNB and MvDOCX -3- IN WITNESS WHEREOF, the Parties 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 ATTEST: Date: Leilani I. Brown City Clerk APPROVED AS TOfORM: Date: Leone Mulvihill Assistant City Attorney �tAT C: \Documents and Settings \Wayne\ Local Settings \Temporary Internet Files \Content.Outlook\ZC5OABHU \Rule 20 -A MOU -CNB and MV.DOCX 4- 7 7