02-15-2000 - Final Actions for Sale of City Water System-4
TO: City Manager and City Council
FROM: Jeffrey W. Collier, Director
0
Cfty of West Co " vina
Memooralidum
A G E NiD A
Public Services Department DATE Februgb� 15, 2000
ITEM NO.—C-1 —
SUBJECT: FINAL ACTIONS FOR SALE OF CITY WATER SYSTEM
SUMMARY: During the February 1, 2000 Council meeting, the City Council approved
the Purchase Agreement to sell the City's water system to Suburban Water
Systems. 'The City Council will consider additional actions to complete
this transaction.
BACKGROUND:
On February 1, 2000, the City Council approved the purchase agreement to complete the
sale of the City water system to Suburban Water Systems. In addition, the Council
adopted a resolution approving a reductio n in the rates charged on the water comm 1� odity
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pursuant to the Letter of Intent (LOI) signed with Suburban Water Systems and approved
by customer vote.
DISCUSSION:
During the last City, Council meeting, staff noted that additional actions would be
forthcoming at the February 15 Council meeting in order to complete the transactiod with
Suburban Water Systems. In addition to actions to be taken by the West Covina P I i ublic
Financing Authority, the Ci�y Council must take several additional actions regarding the
acceptance - of open space areas and conveyance of easements in order to close the
transaction with Suburban Water Systems. In addition, the City Council will need to
introduce an ordinance modifying the current franchise agreement to provide fal r an
indefinite franchise term. Lastly, the Council will also need to approve minor
modifications to the "Agreement to Indemnify", which was attached to the purchase
agreement approved on February 1, 2000.
1. Partial AcceDtance of ODen SDace and Grant of Easement
Tract No. 47809 is located north of the BKK. property and easterly of Aroma Drive
and is developed with water facilities that will be transferred as part of the sale of' the
City's water system. Lot 75 of this tract is improved with two water storage tanks,
an access roadway, and water transmission lines. Although, the entire lot 75 is not
finished to the extent that it can be accepted as open space, staff has deterrninedi,that
the portion of lot 75 that is designated for water distribution and storage facilities
purposes on the tract map has had the water improvements completed and is ready to
,be accepted and ' maintained by the City. - Adoption of a resolution partially accepting
the offer made as part of Tract Map No. 47809 is required (See Attachment 1).
The total area to be accepted is approximately 1.59 acres and is made up of three
areas within lot 75. The existing improvements within the three areas consist of an
access road, water distribution pipeline, and water storage. facilities. These th ' ree
areas and facilities are to be turned over to Suburban Water Systems as part of the
sale of the City4s water company. A grant of easement has been prepared to
accomplish that transference (See Attachment 2).
At such time in the future that the City accepts all of Lot 75 for maintenance
purposes, the City and Suburban will prepare and process a parcel map creatm g a
separate lot for the water storage facilities. This separate lot will then be transferred
to Suburban Water Systems at that time.
2. Conveyance of Easement for Galster Park
The City has constructed a water pumpin station on the southeast comer of Galster
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Way and Aroma Drive that must also be transferred to Suburban Water Systems.
SALE OF WATER SYS*1
Paize 2 — February 15, 2000
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.9.
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The facilities located on the site include a:, pump, building enclosure, and water
transmission lines. In order to transfer these facilities located on City park property,
a Declaration of Easements and Agreement has been prepared to accomplish this
(See Attachment 3).
3. Amendment to Term of Water Franchises
Ordinance No. 126 was approved on October 9, 1946 and incorporates provisions for
the water franchises. While amended by Ordinance No. 202, Ordinance No. 126
established a term of 50 years for water franchises and this, term expired in 1996.
Despite..this, the City and Suburban have proceeded under all other terms of the
Ordinance. To correct this condition, a new ordinance amending Section 2 of
Ordinance No. 126 has been prepared to provide for an indefinite franchise term as
set out in Public Utilities Code Section 6264 (See Attachment 4).
4. Minor Amendment to Aueement to Indemni
As part of the approval. of the Purchase Agreement by the Council on February 1,
2000, an Agreement to Indemnify was attached as an exhibit. Smice the approval of
the Purchase Agreement, two minor amendments have been made to the
indemnification agreement. As such, staff has brought the revised indemnification
agreement back for approval (See Attachment 5).
5. AcCCDtance of West Covina Public Financina Authoritv Action
During the February 15, 2000 meeting, the West- Covina Public Financing Authority
will ' be taking action to defease in substance the 1994 Water Revenue Refunding
Bonds, A copy, of the staff report, Item II on the Authority Board Agenda, identifies
and analyzes the action being taken. Since the Authority is a joint power authority
.between the City and Redevelopment Agency, the City must consider and accept the
action taken by the Authority Board..
6. Partial Assim=ent and Substitution Agreement
As part of the purchase of the City's water system, Suburban Water Systems is
requesting that the City execute a Partial Assignment and, Substitution Agreement
(See Attachment 6). This agreement is necessary as Suburban is planning to apply
proceeds from the sale of surplus property toward the purchase of the City's water
system -as part of a 1031 tax deferred exchange.
.The attachments that are a part of this report.are substantially complete however legal
counsel for both the City and Suburban are still in the process of making minor revisions
Staff will provide updated copies of any documents that are revised prior to the Council
meeting.
OPTIONS:
The actions before the City Council are those that are necessary to carryout their stated
intent to sell the water.system pursuant to the LOI, as amended. As 'such, no. other
options are before the City Council.
FISCAL IMPACT:
As established within the purchase agreement approved on February 1, .2000 by the City
Council, the mutually.agreed purchase price of the water system is $11.5 million. As
Walnut Valley Water System is exercising its first right of refusal to acquire, the City's
interest in the Grand Avenue pipeline, they will pay the City .$2,946,143. Suburban
Water Systems will pay the remaining $8,55,3,857 to acquire the balance of the water
system.
Upon the close of escrow, -defeasance, of long term debt, and payment of all fees, the
Finance Director will prepare,back tothe Council with -a report on the final balance of
SALE OF WATER SYSTA
Page 3 — Februga 15, 2000
proceeds from the water system sale. . Additionally, the City will retain certain liquid
assets and liabilities of the Water Company. The net value of these assets held fluctuates
daily, but is estimated to be $2.4 million (including outstanding debt to be defedsed).
Thus, the Finance Department estimates the total benefit to the City to be $119 million
after the defeasance of debt.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1) Adopt the following resolution accepting portions of Lot 75 of Tract No. 47809:
if
RESOLUTION NO!�"l RESOLUTION OF THE
CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA, ACCEPTING PORTIONS OF LOT 75
OF TRACT NO. 47809.
2) Authorize the City Manager and City Clerk to execute a Grant of Easements and
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Agreement to Suburban Water Systems for the water lines and water storage facillities
within Lot 75 of Tract No. 47809.
3) Authorize the City Manager and City Clerk to execute a,Grant of Easements'! and
i�
Agreement to Suburban' Water Systems for the property containing water lines and
water pumping facilities located within Galster Park.
If
e following ordinance amending Ordinance No. 126 relative to the t'erms
For W�a �er >franchises:
ORDINANCE NO. AN ORDINANCE OF THE
CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA, AMENDING. ORDINANCE NO. 126
REGARDING THE TERM OF WATER
FRANCHISES.
5) Approve the amended Agreement to Indemmify.
6) Accept, the action taken by the West Covina Public Financing Authority Board in
regard to Item H on the February 15, 2000 Authority Board agenda.
7) Authorize the Mayor and City Clerk to execute a Partial Assigr-nent and Substitution
Agreement.
W. Collier
Services Director
'Reviewed by:
Margie Tdker
Finance Director
Attachments: .1. Resolution accepting portions of Lot 75 of Tract No. 47809
2. Grant of Easements and Agreement for Lot 75 of Tract No. 47809
3. Grant of Easements and Agreement for Galster Park
4. Ordinance amending Ordinance No. 126
5. Revised Agreement to Indemnify
6. Partial Assignment and Substitution Agreement