HomeMy WebLinkAbout08 - Acquisition of Rule 20A Credits�a�WPORr gyp= CITY OF — H
� <IFORR \P City Council Staff Report Agenda Item No. 8
September 25, 2012
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FRONT: Public Works Department
David A. Webb, Public Works Director
949 - 644 -3311, dawebb @newportbeachca.gov
PREPARED BY: Iris Lee, Senior Civil Engineer
APPROVED: G �(✓h
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TITLE: Acquisition of Rule 20A Credits from the City of Garden Grove
ABSTRACT:
California Public Utilities Commission (CPUC) Rule 20A establishes program funding for
the undergrounding of overhead utilities by municipalities. The City of Garden Grove
(Garden Grove) has $1,847,982.00 of unallocated Rule 20A funds and is offering to sell
them to the City of Newport Beach for $831,591.90. This action will result in a credit to
the City's Southern California Edison (SCE) Rule 20A account of $1,847,982.00.
RECOMMENDATIONS:
1. Authorize the City Manager to execute the Memorandum of Understanding
(MOU) between the City of Newport Beach and City of Garden Grove
documenting details of transaction for the acquisition of rule 20A Credits.
2. Authorize staff to process the $1,847,982.00 in Rule 20A credit transfer between
the City of Newport Beach and City of Garden Grove with SCE for a cash cost of
$831,591.90 to the City.
FUNDING REQUIREMENTS:
The current Capital Improvement Program budget includes sufficient funds in account
7014- C8002022 for this purchase.
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.
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Acquisition of Rule 20A Credits from the City of Garden Grove
September 25, 2012
Page 2
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 Garden Grove inquiring about its unused Rule 20A
allocation. The City of Garden Grove indicated that it has $1,847,982.00 in credits that
they would consider selling to Newport Beach for a cash offer. Staff has negotiated
purchasing this unused credit for $831,591.90. This represents a $0.45 on the dollar
purchase rate, which is comparable to similar Rule 20A acquisition transactions in the
Orange County region. 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 Garden Grove.
The City of Newport Beach's current Rule 20A yearly allocation is $184,291.00. The
City's SCE Rule 20A is anticipated to have a negative balance of - $587,611.00 at the
end of 2012. Should the City Council authorize the purchase the $1,847,982.00 in
credits from the City of Garden Grove, this balance will increase to $1,260,371.00 at the
end of 2012. Additionally, SCE allows an agency to mortgage up to five years of Rule
20A allocation, or in the City's case, up to $921,455.00. With the purchase of Garden
Grove's credits, and the City's ability to mortgage, the City should have an approximate
balance of $2,181,826.00 Rule 20A funds available for undergrounding starting in 2013.
SCE will transfer Garden Grove's available credit to Newport Beach's account upon
receipt of an authorization letter from Garden Grove.
With this new available balance, staff is planning to return to City Council in the near
future to discuss and review the Council's desire for moving forward with the next Rule
20A Underground Utility District(s),
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
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Acquisition of Rule 20A Credits from the City of Garden Grove
September 25, 2012
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:
DaTid A. WE bb `
Public Works Director
Attachment: A. Memorandum of Understanding between Cities of Garden Grove
and Newport Beach
3 ofd
Attachment A
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding (MOU) is entered into as of , 2012 (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 Garden Grove, a California municipal corporation with its
principal place of business at 11222 Acacia Parkway, Garden Grove, California 92840 (Garden
Grove). Newport Beach and Garden Grove 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 $1,847,982 in Rule 20A Funds for the benefit of Garden Grove (Garden Grove
Allocation), and Garden Grove currently has no active projects which can make use of the
Garden Grove Allocation.
D. Newport Beach desires to acquire, for consideration, the Garden Grove Allocation
to use in connection with the Projects, and Garden Grove desires to transfer the Garden Grove
Allocation to Newport Beach to enable the Rule 20A Funds, which have been allocated to
Garden Grove, to be used for their intended purpose of undergrounding electric facilities and to
derive economic benefit from the Garden Grove Allocation.
AGREEMENT
NOW, THEREFORE, the Parties hereto agree as follows;
1. Garden Grove agrees to assign, for use by Newport Beach, its rights and interests
in the Garden Grove Allocation to Newport Beach, and Newport Beach agrees to acquire, for
consideration, the Garden Grove 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 Garden Grove 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 December 31, 2012, then either Party may terminate this MOU on five (5)
4
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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. Reserved.
3. Within fifteen (15) business days of the Effective Date, Newport Beach shall
make a payment to Garden Grove in the amount of Eight Hundred Thirty One Thousand Five
Hundred Ninety One and Ninety Cents ($831,591.90) (Acquisition Price). The Acquisition Price
shall be made in immediately available funds via check or wire transfer to an account designated
by Garden Grove. The Acquisition Price shall constitute full consideration for the transfer and
assignment of the Garden Grove Allocation.
4. Garden Grove agrees to sell the Garden Grove Allocation to Newport Beach at a
purchase rate Forty -Five Cents ($0.45) for every One Dollar ($1.00) of Rule 20A Funds. Within
ten (10) business days of Garden Grove's receipt of the Acquisition Price funds, Garden Grove
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 Garden Grove
Allocation to and for the benefit of Newport Beach. Garden Grove 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, Garden Grove shall return the unused Acquisition
Price funds to Newport Beach within ten (10) business day of Newport Beach's notification to
Garden Grove.
5. Newport Beach acknowledges and agrees that it has conducted its own
investigation as to the applicability and. transferability of the Garden Grove Allocation for use in
the Projects and that Garden Grove has not made any representation or warranty to Newport
Beach with respect to same. The actual use of the Garden Grove 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 Garden Grove, 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 Garden Grove 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, 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, Garden Grove shall return to Newport
Beach that portion of the Acquisition Price funds applicable to that portion of the Garden Grove
Allocation not yet transferred by SCE to Newport Beach.
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8. 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. Reserved.
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.
17. Each Party signing this Agreement explicitly affirms and provides they have the
power and authority to bind their respective Party.
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IN WITNESS WHEREOF, the Parties hereto have executed this MOU as of the dates
indicated below.
CITY OF GARDEN GROVE,
A California municipal corporation
Date:
Matthew J. Fertal
City Manager
ATTEST:
Date:.
Kathy Bailor
City Clerk
APPROVED AS TO FORM:
Date:
Thomas F. Nixon
City Attorney
CITY OF NEWPORT BEACH,
A California municipal corporation
Date:
Dave Miff
City Manager
Date:
Leilani I. Brown
City Clerk
Date: 3( /
Aaron &'lip
City Attorney
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