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Home My WebLink AboutResolution 98-010 01/05/1998 Resolution No. ss-lo NC.S. of the City of Petaluma, California 1 2 3 4 5 6 7 8 A RESOLUTION CLARIFYING PROVISIONS OF THE WASTEWATER 10 PRIVATIZATION SERVICE AGREEMENT BASED ON RECOMMENDATIONS 11 IN THE FARNKOPF REPORT 12 13 ] 4 WHEREAS, the City of Petaluma contracted with the firm of Hilton, Farnkopf & 15 Hobson to provide an independent, third-party evaluation of the terms and conditions of 16 the Draft Wastewater Privatization Agreement; 17 18 WHEREAS, Hilton, Farnkopf & Hobson provided its review of the Draft Wastewater 19 Privatization Agreement in the reporC titled'Draft 4Yastewater Privatization Service 20 Agreement Service Fee & Compensation Evaluation (Farnkopf Report) dated October 20, 21 1997; 22 23 WHEREAS, the Petaluma City Council directed Staff to refer the. Farnkopf Report to the 24 Citizen's Wastewater Advisory Committee for the Committee's review and 25 recommendation; 27 WHEREAS, the Citizens' Wastewater Advisory Committee's recommendations were 28 provided to the City Council in a memorandum dated December 3, 1997 and discussed 29 with the City Council during a joint Study Session on December 8, 1997; 30 31 NOW THEREFORE IT BE RESOLVED by the Petaluma City Council that the 32 following items, based on recommendations provided in the Farnkopf Report, be 33 incorporated into the Wastewater Privatization Service Agreement to clarify the 34 Agreement: c:AcitycounA1998\resoA0105986.doc 98-~~ Pag'2 1 of 2 Res. No N.C.S. 1 2 L Include Debt and Equity Costs Only In FCI. The drafr Wastewater 3 Privatization Service Agreement (Agreement) provides for this, but did 4 not'explicitly require. Therefore, the FCl portion of the Service Fee shall 5 explicitly include debt and equity costs only. 6 7 2. City Finance Costs of Plant Expansion. The draft Agreement allows the 8 City to do this. The draft Agreement also allows the expansion costs to be 9 financed by the Company with a corresponding adjustment to the FCI and 10 FC2 portions of the Service Fee. Therefore, the City shall maintain the 11 option of financing the costs for expansion of the New Treatment Facility 12 through City-sponsored financing. 13 14 3. Specify Unit Cost Reconciliation Process. Section 5.5.2 of the 15 Agreement specifies the procedure for the initial 3-year and thereafter 5- 16 year amendments to the economic adjustment mechanism of the Service 17 Fee. This procedure needs further clarification. Therefore, specific 18 language and examples shall be added to the agreement which specifically 19 and precisely describe how the unit cost reconciliation process shall be 20 conducted. 21 22 NOW THEREFORE BE IT FURTHER RESOLVED by thePetaluma City Council 23 that the framework for the Unit Cost Reconciliation process be as indicated in Exhibit A. Under the power and authority cenferred upon this Council by the Charter of said City. REFERENCE: I hereby certify the foregoing Resolution was introduced .and adopted by the Approved as to Council of the City of Petaluma at a (Regular) (A4~Jdt)FX~BgXt?f))~75si1) meeting f on the ._5.t11.._............ day of .......s~.aAlAa1;Y......-- 19..9.8. by the following vote: y ~ to ~y AYES: Torliatt, Keller, Hamilton, Read, Stompe, Vice Mayor Maguire, Mayor Hilligoss NOES: None ABSENT: None ~ ~ - i` ~ ~ G f / i S ATTEST: ~1, ~L,~~!l (1!, , a~~JG~I%~~~~/'~:~. J~ c. 1,'vEounel~998\reso\p 105986.doc Mayor ' ~ cb~<a FuG........._ page ~2 of 2 1 EXHIBIT A 2 (Resolution No. 98-10 NCS) 3 4 WASTEWATER PRIVATIZATION SERVICE AGREEMENT 5 6 5.5.8 Unit Cost Reconciliation.. As of July 1 every year, commencing on July 1, 7 20_ [the second July 1 after the Commencement Date], the annual economic 8 adjustment made to the Service Fee under Subsection 5.5.2 .of this Agreement shall be 9 reconciled with the actual unit costs incurred by the Company for the immediately prior ] 0 fiscal yearin accordance with the procedures and' methodologies set forth in this Section 11 5.5.8 and in Appendix L -Unit Cost Reconciliation. Aiiy adjustments to the Service Fee 12 made in accordance with this Section 5.5.8 and Appendix L -Unit Cost Reconciliation 13 shall be retrospective, and the total amount of any such adjustment calculated for the 14 prior one -year period ("Reconciliation Amount") shall be made as an addition to, or a 15 reduction in, the Service Fee amount payable for the month immediately following the 16 City's written approval of the Reconciliation Amount. No later than July 30 of every 17 year (starting with the year 20~; the Company shall submit to the City a proposed 18 calculation of the Reconciliation Amount and detailed documentation as may be 19 requested by the City, including but not limited to invoices and proof of payments to 20 document the actual cost per unit incurred by'the Company during the prior one -year 21 period for each Unit Cost Item set forth in Table L-1 of Appendix L -Unit Cost 22 Reconciliation. The Reconciliation Amount shall be calculated in accordance with the 23 methodology set forth in Appendix L -Unit Cost Reconciliation. The Unit Cost 24 Reconciliation procedure shall be conducted annually unless directed otherwise by the 25 City. 26 27 c:\rfpwwtp\wpsa\zppl.doc Reso. 98-10 NCS 1. WASTEWATER PRIVATIZATION. SERVICE AGREEMENT APPENDIX L -UNIT COST RECONCILIATION The Reconciliation Amount, which may be a positive or negative number, shall be calculated as follows, providing-that if any Unit Cost Item(s) on Table L-1 is purchased from or otherwise involves a transaction with an Affiliate, then the amount(s) to be reconciled for such Unit.Cost:Item(s)+shall be excluded from Elie Reconciliation Amount if such amount(s) is positive: RA=(0:80)x'(A+B+C+D+E+F+G+H+[+J) Where: RA =the Reconciliation Amount A = the positive or negative amountao bexeconciled for Unit Cost Item A on Table L-1, which hall be calculated as follows: A = (AA - AI) x AQ x AV AA =the actual unit cost incurred by Company for Unit Cost Item A on Table L-l, based on.a "weighted;ayerage" ofactual unit costs during the prior one -year period (such "weighted' average"shall be calculated by taking-into account the actual quantities purchased by the Company and the respective unit prices actually paid by the Company) AI = the index-adjusted unit cost for Unit Cost Item. A, based on the annual economic adjustment index under.Subsection 5.5.2 of this Agreement for the treatment. parameter on Table L-1 for Unit Cost Item A applied to the Current Base Unit Cost on Table L-1 for the prior one -year period AQ =the Fixed Unit Qua~tityon Table L-1 for Unit Cost Item A AV =the-total volume of units for the Treatment Parameter on Table L-1 for Unit.Cost Item A utilized as the basis for the Service Fee actually paid by the City during'theprior one -year period B through J represent the positive or negative amounts to be reconciled for Unit Cost Items B through J on Table L-1, each of which shall be calculated according to the above formula for A by substituting~each of B through J for A, respectively. c\rfpwwtp\wpsa\appl.doc Reso. 98-10 NCS APPENDIXZ -UNIT COST RECONCILIATION (cont:) EXAMPLE CALCULATION The following example calculation is provided to illustrate how the Reconciliation Amount would be calculated fora single Unit Cost Item based on the assumed values for Unit Cost Item A on Table L-1 and the following assumed data for the prior"one-year period (July 1, 2000, through June 3Q 2001). Assumed actual costs incurred by Company for purchase of Cost Item A during fzscalyear00/01: Date Purchased Volume Purchased Unit Price Per Pound (pounds) 8/15/00 10,000 $0.88 11/30/00 12,000 $0.91 2/12/01 8,000 $0.82 5/3/01 14,000 $1.01 Total 44,000 Index changes: 7/1/00 through 6/30/01 3.0 Total volume of.units for Parameter: 4,000,000 lbs. of SS treated Calcidation~ofReconciliation Amount for Unit Costltem A: AA = actual unit cost incurred by Company for Unit Cost Item A ~lo,ooo X $o.sa)+~12,00o X $o.9i)+~s,ooo X $o.az)+~14,00o X $~1.01).divided by 44,000 lbs _ $0.9186 /Ib AI = index-adjusted unit cost for Unit Cost Item A _ ($0.85) x (1.030) _ $0.8755 /lb c:\rfpwwtp\wpsa\appl.doc Reso. 98-10 NCS A = .reconciliation amount.foYUnit CostItem.A (.80) x ($09186 - $0.8755)~:x (0.02)' x (4,000;000) _ $2,758:40 c:Grpwwry~wpsz~appcaoc Reso. 98-1-0 NCS Table L-I UnitCost Reconciliation Unit Cost Current Fixed Parameter Item Base'Unit Unit:Qbantity, "Cost AQ A. Polymer ($0.83/Ib) (0.0.2_ lb/Ib,SS) (Suspended Solids (SS)) B'. Chemical B C. Chemical C D. Electricity Usage 'E. Biosolids Disposal Fees F. Biosolids Beneficial Reuse Fees G. Peiforrnance,Bond H. Insurance L Contract Laboratory J..Other ` NOTES: ~ - 1. The Current Base Unit Co_ st for.each Unit Cost Item wi]Ibe adjusted everyone yearto equal the actual unit cost for the prior one-year period as determined by the Reconciliation,Amount approvedby the City. The Current,Base Unit Cost is direct cost only and does nofinclude profits overhead or other_markup~by Company. 2. The Fixed Unit Quantity°for each Unit Cost Item sfiallnot be adjusted, unless required by a Change in Applicable Law, Capital Project, or Force Majeure. c:\tfpwwtp\wpsa\zppl~.doc' $250. y$-IO NC.S'