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HomeMy Public PortalAboutMemo re Agreements 030905 - EDITED 031510MEMORANDUM RE: SEWER DISTRICT - 1 TROUT, WEEKS & NEMEC, PLLC MEMORANDUM TO: City of McCall FROM: Kim J. Trout; David T. Krueck RE: Memorandum Re: Sewer District Issues DATE: 3/9/05 _______________________________________________________________________ INTRODUCTION The City was presented with analyses from both J-U-B Engineers, Inc. and Holladay Engineering Co. in the fall of 2004 concluding that the current wastewater treatment facility does not have the capacity to serve additional users.1 The Sewer District is fully aware of these capacity limitations. Both firms identified the land application portion of the facility as the limiting factor. 2 In spite of this knowledge, the Sewer District recently approved inclusion of two new subdivisions with approximately 211 dwelling units to be added to the facility.3 The City Council wants to explore whether the City should attempt to pursue legal recourse against the Sewer District to limit the inclusion of additional users to the existing treatment facility. On February 24, 2005, the City annexed these two subdivisions into the City of McCall. 1 J-U-B recommended very limited growth (10-20 units per year) while Holladay recommended a moratorium. 2 J-U-B and Holladay provided their written analysis to the Sewer District and Lindley Kirkpatrick notified the Sewer District in writing on these limitations. MEMORANDUM RE: SEWER DISTRICT - 2 FACTUAL BACKGROUND Cooperative Agreement and Amendments In December 1977, the Payette Lakes Water and Sewer District (“Sewer District”) and the City of McCall (“City”) entered into a Cooperative Agreement to establish the rights and duties of the parties for the shared use of the sewage treatment facilities then owned by the City. Section 10 of the Cooperative Agreement, pertaining to Future Improvements, specifically provides: “The District shall participate, in relation to benefit derived, in any future improvements to the sewage treatment facilities of the City to which the parties mutually agree.”4 In December 1978, the City and the Sewer District executed the First Amendment to Cooperative Agreement (“First Amendment”). The purpose of the First Amendment was to establish the allocation of the existing sewage treatment facility.5 Section 16 of the First Amendment states: Exhibit ‘A’ to the First Amendment describes the allocation as being 45% to the City in 1978, 47% in 1988 and 48% in 1998, with the remaining capacity being allocated to the Sewer District. “In the event lands now situate, lying and being within the boundaries of the Payette Lakes Water & Sewer District are from time to time annexed to and become a part of the City of McCall the allocation of capacity of the sewage treatment system of the City of McCall shall be increased to include the capacity necessary to furnish sewage treatment facilities to such annexed lands limited to the densities heretofore applied to such lands by the District.”6 3 Minutes from January 21, 2005, Sewer District Board Meeting and cover page referencing the additional inclusion. 4 Cooperative Agreement, p. 5. 5 Section 15 of the First Amendment states that the total design flow of the system is 2,000,000 gallons per day (2 MGD). Bill Keating has subsequently described the total capacity to have been 1.8 MGD in 1987 and is presently 1.8 MGD. The 2 MGD estimate was based on the presumption that a fifth sand filter would be installed by 1998. 6 First Amendment to Cooperative Agreement, p. 2. MEMORANDUM RE: SEWER DISTRICT - 3 Consequently, as the City annexes property formerly within the Sewer District’s boundaries, the City must serve such customers within its allocation of the treatment facility. In July 1984, the parties entered into the Fourth Amendment to Cooperative Agreement (“Fourth Amendment”).7 The Fourth Amendment directly relates to ownership and capacity rights between the City and the Sewer District, and was entered into as a result of the settlement of a legal dispute regarding flow allocations.8 “These new sections and the agreements contained therein are intended to supercede (sic) any conflicting language or agreements contained in the original Cooperative Agreement and the three previously approved amendments thereto and to the extent that there is any conflict between the language contained herein and the language of the said Cooperative Agreement and the three amendments thereto, the language of this Amendment shall supersede and determine the agreements between the parties.” The Fourth Amendment is intended to supersede previous provisions in the Cooperative Agreement relating to ownership and capacity rights between the City and the Sewer District: 9 The Fourth Amendment created a Joint Powers Board to “administer and be responsible for the operation of the treatment facility.”10 However, through this Fourth Amendment, the City and the Sewer District also granted the Joint Powers Board “the authority to determine whether any proposed expansion [of the existing facility] poses a threat to either party’s use of the existing facility or share in its capacity.”11 7 The Second and Third Amendments to the Cooperative Agreement did not affect capacity or ownership of the treatment facility. Therefore, the Joint Powers Board has the authority to determine whether expansion of the facility 8 Case No. 2483, Fourth Judicial District, Valley County. No pleadings from this lawsuit have been made available for review. 9 Fourth Amendment to Cooperative Agreement p. 2. 10 Fourth Amendment to Cooperative Agreement, Section 20.1, p. 4. 11 Fourth Amendment to Cooperative Agreement, Section 20, p. 4. MEMORANDUM RE: SEWER DISTRICT - 4 impacts either party’s allocated capacity. No further authority is granted to the Joint Powers Board to re-allocate capacity.12 In addition to creating the Joint Powers Board, the Fourth Amendment also sets forth the agreement between the City and the Sewer District pertaining to ownership of various components to the facility and the capacity rights for use of the facility. Section 20 states: “Each party agrees that it will not interfere with or otherwise impede the other party’s plans for expansion of the capacity of the treatment facility, so long as such expansion will not interfere with that other party’s use of the plant or reduce its allocated share of the existing facility’s capacity.”13 (Emphasis added). In the Fourth Amendment, the City and the Sewer District confirmed the flow allocations set forth in Exhibit ‘A’ to the First Amendment to the Cooperative Agreement.14 The parties further agreed that the Joint Powers Board has the authority to “select an engineer or other technical resource person to evaluate actual flow experience to date and analyze anticipated future flow and provide the best data available as to the actual capacity of the facility. “15 The parties agreed to share equally the expenses related to these evaluations, and to make periodic adjustments to their respective allocations to reflect adjusted anticipated future demands.16 Ownership of future assets purchased and utilized in the facility was also described in the Fourth Amendment: “With respect to all personal property and fixtures hereafter purchased for use at the treatment site, title shall vest in the party purchasing and supplying such property. Where such personal property is purchased by utilizing jointly supplied 12 Section 20.1 of the Fourth Amendment states that the parties would enter into a more detailed joint powers agreement for the operation of the treatment facility. It does not appear any further agreements were executed by the parties. 13 Fourth Amendment to Cooperative Agreement, Section 20, p. 4. 14 Fourth Amendment to Cooperative Agreement, Section 22, p. 8. 15 Fourth Amendment to Cooperative Agreement, Section 22, p. 9. 16 Fourth Amendment to Cooperative Agreement, Section 25, p. 15. MEMORANDUM RE: SEWER DISTRICT - 5 funds, title shall vest with the City and District in co-tenancy in proportion to the funds supplied by each. In the event the funds are allocated from other state, federal or local agencies, that proportion so allocated shall be credited to whichever party received the funds. This provision is solely for the purpose of proportioning ownership rights.”17 As part of the Fourth Amendment, the City and the Sewer District altered the allocation of capacity for property annexed by the City. The Fourth Amendment provides, as follows: “The parties also agree that if any property presently within the District is annexed into the City during the term of this agreement, it will remain part of the District, will be billed and taxed for sewer services by the District, will have its sewer collection system maintained by the District, and otherwise remain within the District.”18 In March 1987, the parties executed the Fifth Amendment to Cooperative Agreement (“Fifth Amendment”). The purpose of the Fifth Amendment was to re- allocate the respective shares of treatment capacity of the facility. The City agreed to purchase a portion of the Sewer District’s allocated share, and the City was entitled to an adjusted allocation of 67% of the capacity of the treatment facility.19 The remaining 33% of the existing treatment capacity in 1987 was allocated to the Sewer District. The parties agreed that this allocation “shall remain fixed, unless and until further modifications are agreed to by the parties.”20 Under the terms of the Fifth Amendment, the parties better defined the basis for future adjustments to the allocation of operating costs. The parties agreed that future The parties further agreed to share the costs of operating the treatment facility on the same basis – 67% for the City and 33% for the Sewer District. 17 Fourth Amendment to Cooperative Agreement, Section 21, Par. 5, p. 7. 18 Fourth Amendment to Cooperative Agreement, Section 26, p. 16. 19 This amounts to approximately 1.266 MGD of the existing facility. 20 Fifth Amendment to Cooperative Agreement, p. 5. MEMORANDUM RE: SEWER DISTRICT - 6 adjustments to the operating cost allocations would be made on the basis of “equivalent user hookups,” which is defined under the following provision: “For the purposes of this determination the term equivalent user, or hookup unit, shall be deemed to mean a single family residence (generating 550 gallons per day) as a single equivalent unit hookup; the flow factors used by the Central District Health Department shall be scaled using this base to determine equivalent unit hookups for various other classes of users, e.g., multi-family, commercial and industrial.”21 The parties also entered into two additional Amendments to the Cooperative Agreement, but neither of these Amendments effected the ownership and capacity provisions of the original Cooperative Agreement or subsequent Amendments to the Agreement. 21 Fifth Amendment to Cooperative Agreement, Section 4, p. 4.