HomeMy WebLinkAboutO-1998-2234
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ORDINANCE NO. 98-2234
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OR~GINAL
AN ORDINANCE APPROVING AND AUTHORIZING A CONTRACT BETWEEN THE LA PORTE
AREA WATER AUTHORITY, GULF COAST WATER AUTHORITY, AND THE CITY OF
GALVESTON FOR THE PURCHASE OF WATER CAPACITY AT THE SOUTHEAST WATER
PURIFICATION PLANT; MAKING VARIOUS FINDINGS AND PROVISIONS RELATING TO THE
SUBJECT; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; PROVIDING AN
EFFECTIVE DATE HEREOF.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE:
Section 1 The City Council hereby approves and authorizes the contract, agreement, or other
undertaking described in the title of this ordinance, in substantially the form as shown in the
document which is attached hereto and incorporated herein by this reference. The Mayor is hereby
authorized to execute such document and all related documents on behalf of the City of La Porte.
The City Secretary is hereby authorized to attest to all such signatures and to affix the seal of the
City to all such documents.
Section 2 The City Council officially finds, determines, recites and declares that a sufficient written
notice of the date, hour, place and subject of this meeting of the City Council was posted at a place
convenient to the public at the City Hall of the City for the time required by law preceding this
meeting, as required by the Open Meetings Law, Chapter 551, Texas Govemment Code; and that
this meeting has been open to the public as required by law at all times during which this Ordinance
and the subject matter thereof has been discussed, considered and formally acted upon. The City
Council further ratifies, approves and confirms such written notice and the contents and posting
thereof.
Section 3 This Ordinance shall be in effect from and after its passage and approval.
PASSED AND APPROVED this the 27th day of April, 1998.
CITY OF LA PORTE, TEXAS
{emdA. ~.,./~
rman Malone, Mayor
ATTEST:
~aAJJt~_ J1L1JHj
Ma ha Gillett, City Secratary
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RESOLUTION 98-01
A RESOLUTION APPROVING WATER CAPACITY
PURCHASE AND SALE AGREEMENT
AND ESCROW AGREEMENT
WHEREAS, the Gulf Coast Water Authority (the "Authority"), as a co-owner of .
the City of Houston's Southeast Treatment Plant (the "Southeast Plant"), and the City of
Galveston, Texas ("Galveston") have indicated a desire to sell a'portion of the capacity
in the Southeast Plant in which Galveston has an equitable interest to other parties;
and,
WHEREAS, pursuant to Resolution No. 97-01, approved by the Board of
Directors on August 27, 1997, the La Porte Area Water Authority has previously
expressed an interest in purchasing 3 MGD of such capacity at a price of $1.1688, and
has expressed its desire to contract for the purchase and/or financing of such capacity;
and
WHEREAS, the City of Houston ("Houston") and the La Porte Area Water
Authority have entered into an amendment to the Cost Sharing Water Contract
between such parties dated as of January, 1998 (the "Amendment"), which
Amendment will, upon satisfaction of the conditions contained therein, increase La
Porte Area Water Authority's right to production capacity and pumping capacity from
the Southeast Plant; and
WHEREAS, the Board of Directors has been presented with a Water Capacity
Purchase and Sale Agreement to be entered into among the La Porte Area Water
Authority, the Authority and Galveston, pursuant to which 3 MGD of capacity in the
Southeast Plant will be conveyed from Galveston to La Porte Area Water Authority, and
the Board desires to approve La Porte Area Water Authority's entering into such
agreement and escrow agreement.
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE LA
PORTE AREA WATER AUTHORITY:
Section 1. That the Board of Directors hereby approves the Water Capacity Purchase
and Sale Agreement substantially in the form as presented to the Board of Directors for
their review.
Section 2. That the Board of Directors hereby authorizes the President and
SecretaryfTreasurer of the La Porte Area Water Authority to execute and deliver such
Water Capacity Purchase and Sale Agreement, with such additions, deletions and
other changes by such document as such La Porte Area Water Authority shall approve,
such approval to be conclusively evidenced by their execution and delivery thereof.
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Section 3. That this resolution shall be in full force and effect from and after its
passage and adoption.
PASSED AND ADOPTED this 2ih day of April, 1998.
LA PORTE AREA WATER AUTHORITY
:~EST:~
Albert D. Fields, SecretarylTreasurer
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La Porte Area Water Authority
Interoffice Memorandum
To:
From:
LPAWA Board Members
Robert T. Herrera, General Manager
Steve Gillett, Director of Public Works
~itchfield, Director of Finance
D April 22, 1998
Date:
Subject:
Water Capacity Sale and Purchase Agreement
As discussed at the Water Authority meeting of March18, 1998, staff was still in
negotiations with the other parties to the Water Capacity Sale and Purchase
Agreement trying to arrive at an agreement that we felt comfortable presenting to you.
After several more discussion, Mr. Herrera requested a face to face meeting with all
parties involved. On Friday, April1ih, a meeting was held, via a conference call, with
about 15 parties involved in the process. As a result of that meeting, we have reached
an agreement that we feel comfortable presenting to you. In addition to the agreement,
it is equally important that we discuss the various financing options that are available to
the Authority.
Before going any further, let me reiterate the importance of this project. This is a
commitment of almost $3.5 million dollars to purchase 3 million gallons of water
capacity for use by the three member cities. As we have shared with you in the past,
this water is vital to the continued growth of the member cities. Currently, Shoreacres
and Morgan's Point are at their current allotment while La Porte is at about 80% of
theirs. As shared with you at the last meeting, the impact of this purchase on La Porte
is to provide water for the next 20 to 40 years.
Water Capacity Sale and Purchase Agreement
As verbally discussed at the last meeting, we were very displeased in the offer being
made by the Gulf Coast Water Authority and City of Galveston (hereinafter referred to
collectively as Gulf Coast). In essence, Gulf Coast wanted us to agree to put $500,000
down, pay $500,000 every six months into an escrow until funding was completed. If
for any reason the Authority was unable to complete the funding of the escrow, then the
Authority forfeited all funds they had placed into escrow and received no capacity. The
instructions we received from the Board was to move forward with negotiations to
secure us a favorable agreement while remembering the water purchase is very
important to our future, so do not do anything that would jeopardize the agreement.
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At this time, we believe we have a good agreement, which is as follows:
The Authority agrees to purchase 3 million gallons capacity from Gulf Coast. The
Authority will agree to put up $500,000 out of its current funds as a down payment
towards this purchase. The Authority agrees to fully fund an escrow account with an
additional $2,912,700 over the next 39 months (with no specific deposit schedule being
stated). The cost of water purchased is at 99 cents per gallon for the $500,000 being
paid now and at $1.1688 per gallon for the amounts paid in 39 months. The Authority
gets full credit for all interest paid into the escrow account.
Meeting our Financial Obligation
Since we have determined we would like to pay for the purchase without issuing debt,
the process becomes very complicated. In the next few paragraphs, I will outline the
guidelines that I am working under in order to make this deal become a reality.
First and foremost is the assumption that if, at the end of the term, there are not
sufficient funds to pay for the full purchase price, the issuance of debt will be required.
The debt can be issued either by the Authority or the City of La Porte. Please keep this
in mind as we go through this discussion.
A work sheet has been prepared to walk us through a portion of the funding scenario.
It is attached to this letter.
Currentlv Available Funds
The best place to begin our discussion is to cover funds that are currently available.
The remaining 1988 Bonds Funds are available to pay for this project. The balance of
these funds will be about $339,417 at May 30, 1998. These funds are shown as line
1.a.
The next best source are the funds that we began collecting last fiscal year as Capital
Recovery Fees. These fees were specifically assessed to offset the impact of
purchasing additional capacity. As of May 30, 1998, these funds should have grown to
$306,601. This is depicted on line 1.b.
Next is a source that we have not discussed in any great detail. It is the use of the
operating fund Working Capital Balance. Working Capital is how the City (and most
governmental entities) measure their financial condition. Working capital is very simply
the difference between Current Assets and Current Liabilities. It is important that a
fund maintain a certain level of Working Capital in order to meet financial obligations
during billing and payment cycles as well as handle unforeseen emergencies.
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The City of La Porte operates under financial policies adopted by Council in 1991.
Included in these policies is the definition of the amount of the Working Capital
Reserve for Operating Funds. The simple definition is that the targeted end of year
balance for Working Capital is between 90 to 120 days of operating expenses.
As of September 30,1997, the Working Capital Balance for the Operating Fund was
$496,530. The operating expenses for the year were $628,186. This represents 288
days of Working Capital. The Authority can very easily utilize $341,635 of the available
working capital balance and still have 90 days remaining. This is shown as line 1.c.
The sum of these three currently available resources is $987,653, which is more than
adequate to meet the $500,000 down payment by June 1, 1998 requirement.
Currentlv Proarammed Future Funds
After paying the down payment, the Authority will still have $487,653 available to fund
the project. In addition to this current funding amount, there are other items currently
programmed to generate revenues. First, interest income (at 5.75%) should generate
$97,137 on the $487,653 balance from June 1,1998 to August 1, 2001. This is shown
as line 2.a. Also, the continued billing of the Capital Reserve Amount will generate an
additional $610,724 for the same period. This is shown as line 2.b.
The result of on hand funding and currently programmed funding generates $1,195,514
towards the $2,912,700 to fund the project. This leaves a balance of $1,717,186 for us
to plan funding.
Future Funds
There are several different methods to fund the additional amount that is needed for the
purchase. As previously indicated, either the Authority or the City can issue debt for
the difference. If it was necessary to issue debt, the amount of the annual debt service
payments would be very similar to the amount that is currently being billed as the
Capital Reserve Fee. However, before considering the issuance of $1.7 million in debt,
we need to discuss the impact of refunding.
On December 1, 1998, the Authority can refund the 1988 issue. At that time, a decision
will be made as to how the refunding will occur. There are three different methods of
refunding. Briefly, they are:
Level Annual Savings - a method whereby the savings are spread over the life of the
existing debt. For example, you have annual payments of $825,000 for 18 years.
When you refund you have annual payments of $750,000 over the same 18 years. In
other words, you have level savings from year to year.
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Savings At End - a method where the savings are recognized in the later years of the
debt. For example, you have annual payments of $825,000 for 18 years. When you
refund, you have annual payments of $825,000 but for only 16 more years. In other
words, you have pushed all your savings into the future by shortening the length of
your debt.
Savings Up Front - a method where the savings are recognized early in the process.
For example, you have annual payments of $825,000 for 18 years. When you refund,
you have annual payments of $300 for the first three years then increase to $825,000
for the remaining 15 years. This method allows for the immediate generating of cash
without any ups or downs in cash flows.
I asked Dave Fetzer of Moroney & Beissner to run Analysis and Savings Reports on
the Authorities debt and found that, based on current market conditions, budget dollar
savings (amounts that can be spent towards the purchase of the water) would be
$300,000 for the level annual savings method and a little over $1.2 million for the up
front savings method. In addition to this amount, there should be another $200,000 to
$400,000 of cash freed up by getting out from under the Texas Water Development
Board's reserve requirements.
Finally, the City of La Porte is in a position to pay directly to the Authority funds
necessary to complete the purchase.
Closing and Recommendation
In closing, I believe we have reached a point where a workable contract has been
received from Gulf Coast and recommend it be considered by the Authority. As to the
funding of the purchase price, I would recommend that staff be directed to proceed with
the following plan:
1. Utilize the existing funds that have been identified (left over bond funds, capital
recovery fees and available working capital balance.
2. Utility interest earnings on the above funds and continue with the collection of
the Capital Recovery Fee.
3. Proceed with the refunding of the Authority's existing debt, with consideration of
the Up Front Savings method.
4. In the first quarter of 1999, obtain a commitment from the City for the balance of
the purchase price or proceed to issue new debt to cover the amount.
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WATER CAPACITY PURCHASE AND SALE AGREEMENT
This WATER CAPACITY PURCHASE AND SALE AGREEMENT (this "~Agreement")
is made and entered into as of the 28th day of April, 1998, between GULF COAST WATER
AUTHORITY, a conservation and reclamation district and political subdivision of the State of Texas
created pursuant to Article XVI, Section 59 of the Texas Constitution and with the powers under
Chapters 49 and 54 Texas Water Code, as amended ("GCWA"), the CITY OF GALVESTON,
TEXAS, a municipal corporation located in Galveston County, Texas ("Galveston"), and the LA
PORTE AREA WATER AUTHORITY, a conservation and reclamation district authorized and
created under Article XVI, Section 59 of the Texas Constitution and acting under Chapters 49 and
54, Texas Water Code, as amended ("LPAWA").
WITNESSETH
WHEREAS, The City of Houston, Texas, a municipal corporation located principally in
Harris County, Texas ("Houston"), and GCWA, acting for the benefit of Galveston and the City of
League City, Texas ("League City") are parties to that certain Cost Sharing Water Project Contract,
effective as of April 30, 1987 as amended (the "CGWA Contract"), under the terms of which GCWA
purchased, on behalf of Galveston and League City, an equitable ownership interest in the City of
Houston Southeast Water Purification Plant (as more fully described in the GCWA Contract, the
"Project", but referred to herein as the "Southeast Plant"); and
WHEREAS, the Southeast Plant has a maximum production capacity of 80 MGD and
GCWA's equity ownership interest entitles it to 26.25% of the production capacity of the Southeast
Plant (or 21 MGD) and 10.845% of the pumping capacity of the Southeast Plant (or 24.4 MGD)
(collectively, "GCWA's Interest"); and
WHEREAS, pursuant to Section 2.01 of the GCWA Contract, GCWA conveyed to
Galveston a 76.19% share of GCWA's Interest in the Southeast Plant (16 MGD production
capacity) and related pumping capacity (18.40 MGD) ("Galveston's Interest") and to League City
a 23.81 % share of GCWA's Interest in the Southeast Plant (5 MGD production capacity) and
related pumping capacity (6 MGD); and
WHEREAS, Galveston deems it more efficient and desirable to obtain its treated water
supply from GCWA's Thomas S. Mackey Water Treatment Plant (the "Mackey Plant"), which is
located closer to Galveston; and .
WHEREAS, at the request of Galveston, GCWA has agreed to use its best efforts to issue
a series of contract water revenue bonds for the purpose of financing an addition of capacity to the
Mackey Plant and a pipeline to deliver the water to Galveston and such parties; and
WHEREAS, LPAWA, the Clear Lake City Water Authority, Harris County Municipal Utility
District No. 55 and League City (through GCWA) (collectively the "Participants" or individually, a
"Participant") are present co-owner participants with Houston and others in the Southeast Plant,
and each delivered to GCWA and Galveston resolutions in which their governing bodies expressed
interest in purchasing a portion of Galveston's Interest in the Southeast Plant; and
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WHEREAS, pursuant to Section 6.17 of the GCWA Contract, GCWA and Galveston are
free to sell or dispose of their Pumping Capacity and Production Capacity (both as defined in
the GCWA Contract) in the southeast Plant, and Galveston has indicated to GCWA
Galveston's desire to transfer all of Galveston's Interest to the Participants in the respective
amounts indicated on Exhibit A hereto as evidenced by an executed Conveyance of Interest
substantially in the form of Exhibit B hereto (the "Conveyance of Interesr) and requested
GCWA to take certain actions in order to facilitate the transactions described above; and
WHEREAS, the parties desire that such purchase, sale and transfer of LPAWA's Interest
(as hereinafter defined) to LPAWA shall be effective as of the Transfer Date (as hereinafter
defined); and
WHEREAS, Houston and LPAWA have entered into an amendment to the Cost Sharing
Water Contract between such parties (the "Amendmenr), which Amendment will, upon the
Transfer Date, increase LPAWA's right to production capacity and pumping capacity from the
Southeast Plant by an amount equal to LPAWA's Interest; and
WHEREAS, pursuant to Section 49.211, Section 49.213, Section 49.218, and Section
49.219, Texas Water Code, as amended, and Chapter 791, Texas Government Code, as
amended, LPAWA, Galveston, and GCWA are authorized to enter into the transactions herein
described in order to fulfill their respective public purposes; and
NOW THEREFORE, in consideration of the premises, and for good and valuable
consideration GCWA, Galveston and LPAWA agree as follows:
ARTICLE I
DEFINITIONS
In addition to the defined terms set out above, the following defined terms are assigned
the meanings set forth below: .
"Delivery Date" shall mean the date of issuance and delivery of the Series 1998 South
Project Bonds which shall be a date on or before August 1, 1998.
"Down Payment" shall mean the $500,000 down payment on the Purchase Price for
LPAWA's Interest, to be paid by LPAWA to GCWA.
"Escrow Acent" shall mean Chase Bank of Texas, National Association, its successors
and assigns.
"Escrow Acreement" shall mean that certain Escrow Agreement, dated as of the First
Payment Date, substantially in the form of Exhibit C hereto.
"First Payment Date" shall mean June 1, 1998.
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"Galveston Obligation" means for each 12 month period commencing on the Transfer Date
the amount set forth in Exhibit D, which represents an equivalent amount of debt service owed by
Galveston on the debt incurred by Galveston for the purchase of LPAWA's Interest by Galveston
equivalent to the Purchase Price, multiplied by a fraction, the numerator of which is the Purchase
Price less the Down Payment and the amount paid by the Escrow Agent to GCWA on such date
and the denominator of which is the Purchase Price, except that the amounts set forth in Exhibit
D shall be reduced from time to time to allocate any savings received by Galveston from any
restructuring on such debt.
"LPAWA's Interest" shall mean LPAWA's portion of Galveston's Interest in the Southeast
Plant which LPAWA will purchase on the Transfer Date, as shown on Exhibit A.
"Payment Date" shall mean the date on which LPAWA tenders partial payment of the
Purchase Price for LPAWA's Interest to GCWA in immediately available funds, which shall be any
business day on or after the First Payment Date.
"Purchase Price" shall mean the amount of $3,412,700.
"Series 1998 South Project Bonds" shall mean the initial contract water revenue bonds
issued in one or more series which GCWA shall issue as special project bonds of its Mainland
Division the proceeds of which shall be used to finance the South Project.
"South Proiect" shall mean the approximately 25 MGD expansion of the Mackey Plant and
related distribution facilities.
"Transfer Date" shall mean the earlier of August 1, 2001, unless the South Project cannot
be completed by such date, in which case the Transfer Date shall mean the date on or before May
1, 2002, on which Galveston ceases to take deliveries of water from the Southeast Plant
attributable to LPAWA's Interest.
"Water Capacity Purchase and Sale Agreements" shall mean those separate Water
Capacity Purchase and Sale Agreements between GCWA and each of the Participants (including
LPAWA). dated as of even date herewith.
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ARTICLE II
FINANCING AND CONSTRUCTION OF
SOUTH PROJECT; TRANSER DATE; AND
CONVEYANCE OF INTEREST
Section 2.1: Financina and Construction of South Proiect
(a) GCWA agrees to use its best efforts to issue the Series 1998 South Project
Bonds on or before August 1, 1998. Galveston agrees to enter into a contract to purchase
water from GCWA and to take all actions necessary on its part or reasonably requested by
GCWA related to the issuance of the Series 1998 South Project Bonds.
(b) GCWA agrees to commence design of the South Project within thirty (30) days of
the Delivery Date. GCWA shall use reasonable diligence in constructing and completing the
South Project within three (3) years after the Delivery Date but in no event later than four (4)
years after the Delivery Date.
(c) LPAWA agrees to pay to GCWA the Down Payment not later than the First
Payment Date. In addition, LPAWA will deposit with the Escrow Agent on or before the Transfer
Date the remainder of the Purchase Price. If, on the Transfer Date, there are for any reason
insufficient amounts held by the Escrow Agent for payment of the Purchase Price, then
Galveston shall transfer to LPAWA LPAWA's Interest; provided, however, until the remainder of
the Purchase Price is tendered in whole, LPAWA shall pay directly to Galveston on the Transfer
Date and each anniversary of the Transfer Date, thereafter from the revenues of its water
system the Galveston Obligation, and to secure payment of the Galveston Obligation, Galveston
shall retain a security interest in LPAWA's Interest in a form to be agreed to by the parties.
(d) LPAWA, Galveston and GCWA each hereby represents and warrants that it has
full right, power, and authority to enter into this Sale Agreement and it is the legal, valid, and
binding obligation of such party, such enforceability being subject only to rights of creditors in
bankruptcy and the application of equitable principles generally.
Section 2.2: Convevance of LPAWA's Interest. On or before the Transfer Date, upon
or after payment by LPAWA of the full amount of the Purchase Price, or a partial amount thereof
pursuant to Section 2.1 (c) above, GCWA and Galveston shall deliver to LPAWA, with a copy to
the City of Houston, the executed Conveyance of Interest substantially in the form attached
hereto as Exhibit B. The dated date of such Conveyance of Interest shall be the Transfer Date.
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ARTICLE III
DEFAULT AND REMEDIES
Section 3.1: Default. The following shall be considered a default under this Sale
Agreement:
(a) the failure of LPAWA to pay the Down Payment to GCWA on or before the First
Payment Date; or
(b) the failure of LPAWA to pay the full amount of the Purchase Price to the Escrow
Agent for the account of GCWA, as set forth in Section 2.1 (c) hereof.
(c) the failure of GCWA and/or Galveston to perform and observe in a timely manner
any of the covenants contained in Section 2(a) or (b) of this Sale Agreement if such failure is not
cured within sixty (60) days after notice specifying such default is given to GCWA and
Galveston.
(d) the Transfer Date has not occurred by May 1, 2002.
Section 3.2: Remedies Upon Default
(a) It is not intended hereby to specify (and this Sale Agreement shall not be
construed as specifying) an exclusive remedy for any default, but all remedies existing at law or
in equity (including specific performance) may be availed of by either party and shall be
cumulative.
(b) Notwithstanding the aforesaid, Galveston and LPAWA acknowledge that GCWA
has entered into this Sale Agreement as an accommodation to Galveston, and GCWA, its
officers, directors, agents employees and customers will obtain no individual benefit and have
no individual liability for fulfilling its public purpose of acting as a financing conduit for the benefit
of Galveston. LPAWA's remedies against GCWA for a default under Section 3.1 (c) shall be
limited to specific performance.
(c) Notwithstanding the aforesaid, Galveston and GCWA acknowledge that LPAWA
has entered into this Sale Agreement as an accommodation to the City of La Porte, Texas, and
LPAWA, its officers, directors, agents employees and customers will obtain no individual benefit
and have no individual liability for fulfilling its public purpose of acting as a financing conduit for
the benefit of the City of La Porte. GCWA's remedies against LPAWA for a default under
Section 3.1 (a) or 3.1 (b) shall be limited to specific performance.
(d) Notwithstanding anything in this Section 3.2 to the contrary, in the case of the
occurrence and continuance of a default under Section 3.1 (d), GCWA and Galveston shall not
be required to transfer LPAWA's Interest to LPAWA so long as Galveston is not able to obtain a
supply of potable water from the South Project and GCWA shall immediately refund the Down
Payment paid the by LPAWA plus accrued interest thereon at 5% per annum calculated on a
year of 360 days from date of Down Payment to date of refund. Before proceeding to a suit at
law after a default under Section 3.1 (d) the parties agree to enter into non-binding mediation of
the issues in dispute for a period not to exceed ninety (90) days. The parties shall agree on the
independent mediator.
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(e) In the case of a default under Section 3.1 (a), GCWA and Galveston may, for a
30-day period after such default, offer LPAWA's Interest to the other Participants and then to
other co-owner participants in the Southeast Plant. If another party assumes the rights and
obligations of LPAWA hereunder, LPAWA shall be relieved of its obligations hereunder to the
extent GCWA and Galveston receive payment from the assuming party.
Section 3.3 No Additional Waiver Implied. No waiver or waivers of any breach or
default (or any breaches or defaults) by either party hereto of any term, covenant, condition, or
liability hereunder, or of performance by the other party of any duty or obligation hereunder,
shall be deemed or construed to be a waiver of subsequent breaches or defaults of any kind,
under any circumstance.
Section 3.4: Force Majeure. If Force Majeure (as hereinafter defined) prevents either
party hereto from performing any of its obligations under this Sale Agreement, in whole or in
part, then the obligations of such party, to the extent affected by such Force Majeure, shall be
suspended during the continuance of any inability so caused, so long as such party is exercising
due diligence to resume performance at the earliest practicable time. As soon as reasonably
possible after the occurrence of the Force Majeure relied upon, the party whose contractual
obligations are affected thereby shall give written notice and full particulars of such Force
Majeure to the other party. The term "Force Majeure," as used herein, shall include, without
limitation of the generality thereof, acts of God, strikes, lockouts, or other industrial
disturbances, acts of the public enemy, orders of any kind of the Government of the United
States, or the State of Texas, or of any civil of military authority, epidemics, landslides, drought,
lightning, earthquakes, fires, hurricanes, storms, floods, surface or ground water of unusable
quality, washouts, droughts, arrests, restraint of government and people, civil disturbances,
explosions, breakage or accidents to machinery, pipelines or canals, or failure of supply of raw
water to GCWA from third parties and any other inabilities of either party, whether similar to
those enumerated or otherwise, which are not within the control of the party claiming such
inability, and which such party could not have avoided by the exercise of due diligence and
care. It is understood and agreed that the settlement of strikes and lockouts shall be entirely
within the discretion of the party having the difficulty and that the above requirement that any
Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of
strikes and lockouts by acceding to the demands of the opposing party and parties when such
settlement is unfavorable to it in the judgment of the party having the difficulty.
ARTICLE IV
TERMINATION
GCWA or Galveston may terminate this Sale Agreement by notice in writing if any of the
Participants shall fail to execute and deliver their respective Water Capacity Purchase and Sale
Agreements on or before May 1, 1998. GCWA's and Galveston's option to terminate this Sale
Agreement under this Article IV shall be exercised not later than May 6, 1998. If GCWA
terminates this Sale Agreement pursuant this Article IV, or if the events described in Section
2(a) of the Escrow Agreement occur, GCWA shall immediately refund the Down Payment paid
by the LPAWA plus accrued interest thereon at 5% per annum calculated on a year of 360 days
from date of Down Payment to date of refund.
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ARTICLE V
MISCELLANEOUS
Section 5.1: Addresses and Notice. Unless otherwise provided in this Sale
Agreement, any notice, communication, request, reply, or advice (herein severally and
collectively, for convenience, called "Notice") herein provided or permitted to be given, made, or
accepted by either party to the other must be in writing and may be given or be served by (i)
depositing the same in the United Sates mail postpaid and registered or certified and addressed
to the party to be notified, with return receipt requested, (ii) by delivering the same to an officer
of such party, or (Hi) by overnight delivery, receipt of which is confirmed by the sender by
prepaid telegram, when appropriate, addressed to the party to be notified. Notice shall be
conclusively deemed to be effective upon receipt. Notice given in any other manner shall be
effective only when received by the party to be notified. For the purpose of Notice, the
addresses of the parties shall, until changed as hereinafter provided, be as follows:
If the GCWA, to:
Gulf Coast Water Authority
3630 Highway 1765
Texas City, Texas 77591
Attn: Gordon L, Myers, General Manager
If to Galveston, to:
City to Galveston
823 Rosenberg
Galveston, Texas 77550
Attn: Steve LeBlanc, City Manager
If to LPAWA, to:
La Porte Area Water Authority
604 W. Fairmont Parkway
La Porte, Texas 77571
Attn: Robert T. Herrera, General Manager
The parties shall have the right from time to time and at any time to change their
respective addresses and each shall have to right to specify as its address any other address by
at least five (5) days' written notice to the other parties.
Section 5.2: Modification. This Sale Agreement shall be subject to change or
modification only with the mutual written consent of GCWA, Galveston and the LPAWA.
7
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Section 5.3: Assianabilitv. This Sale Agreement shall not be assignable by any party
without the prior written consent of the other parties hereto. No third party shall be a beneficiary
of this Sale Agreement except permitted assigns.
Section 5.4: Captions. The captions appearing at the first of each numbered article
and section in this Sale Agreement are inserted and included solely for convenience and shall
never be considered or given any effect in construing this Sale Agreement, or any provision
hereof, or in connection with the duties, obligations, or liabilities of the respective parties hereto
or in ascertaining intent, if any question of intent should arise.
Section 5.5: Severabilitv. The provisions of this Sale Agreement are severable, and if
any provision or part of this Sale Agreement or the application thereof to any person or
circumstance shall ever be held by any court or competent jurisdiction to be invalid or
unconstitutional for any reason, the remainder of this Sale Agreement and the application of
such provision or part of this Sale Agreement to other persons or circumstances shall not be
affected thereby.
Section 5.6: Exhibits. The exhibits attached hereto are incorporated herein for all
purposes.
Section 5.7: Meraer. This Sale Agreement constitutes the entire agreement between
the parties relative to the subject matter hereof. There have been and are no agreements,
covenants, representations or warranties between the parties other than those expressly stated
herein or expressly provided for herein.
Section5.8: Counterparts. This Sale Agreement may be executed in any number of
counterparts, and each such counterpart shall be, and shall be deemed to be an original. All
such counterparts shall constitute but one and the same instrument.
8
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IN WITNESS WHEREOF, the parties have executed the Agreement as of the date and
year first written in this Agreement
LA PORTE AREA WATER AUTHORITY
~l~
. ;
,~TTEST: '.'") . .,' .
a;:', '., ~~C.-..
Albert D. Fields, SecretarylTreasurer
THE FOREGOING AGREEMENT HAS
BEEN APPROVED BY THE CITY COUNCIL
OF THE CITY OF LA PORTE, TEXAS
BY ITS ORDINANCE NO. 98- ::J:J.:3Lf
PASSED AND APPROVED APRIL 27, 1998
CITY OF LA PORTE, TEXAS
Bylf~'777~ ~a/a-u.
an Malonc3," Mayor --
By:
ATTEST: ..
BY~lL./41JlrfL
Ma a Gillett, City Secretary
9
ATTEST:
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By:
Name: John W. Knust
Title: Secretary-Treasurer
--
GULF COAST WATER AUTHORITY
BY:W~
Name: W. W. timer
Title: preside1t
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ATTEST:
By: ~...L~ _ _ ~--.~ _ _ __
Name: Barbara Lawrence
Title: City Secretary
!11;~~:J'l.")'rf.lJ~rR\ D.€:' Tn rr:""
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CITY OF GALVESTON,
By: ~eu-l
Name: Ste aBlanc
Title: City Manager
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EXHIBIT B
CONVEYANCE OF INTEREST
For value received, Gulf Coast Water Authority CUGCWA") on behalf of the City of
Galveston, Texas ("Galveston"), pursuant to that certain Water Capacity Purchase and Sale
Agreement (the "Sale Agreement"), dated as of April 28, 1998, between GCWA, Galveston and La
Porte Area Water Authority ("LPAWA"), hereby conveys to LPAWA all of LPAWA's Interest (as
defined in the Purchase and Sale Agreement) in the Southeast Plant. Capitalized terms not
defined herein shall have the meanings assigned in the Purchase and Sale Agreement.
LPAWA's Interest is equal to 14.286% of the production capacity (3 MGD) of Galveston's
Interest in the Southeast Plant and 14.139% of the pumping capacity (3.45 MGD) of Galveston's
Interest in the Southeast Plant.
GULF COAST WATER AUTHORITY
Dated: [TRANSFER DA TEl
CITY OF GALVESTON, TEXAS
Dated: [TRANSFER DA TEl
ACCEPTED BY:
LA PORTE AREA WATER AUTHORITY
13
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EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of the _
day of , 1998, by and among GULF COAST WATER AUTHORITY
("GCWA"), the CITY OF GALVESTON, TEXAS ("Galveston"), LA PORTE AREA WATER
AUTHORITY ("LPAWA"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
("Escrow Agent").
WI I N E SSE I 1:1.:
WHEREAS, GCWA and LPAWA have entered into that certain Water Capacity
Purchase and Sale Agreement, dated as of April 28, 1998 (the "Sale Agreement") by which
LPAWA has agreed to place in escrow with Escrow Agent the amount necessary to pay the
Purchase Price in the amount of $3,412,700, such amount to be paid in installments as set forth
below, for a portion of the interest of the City of Galveston, Texas in the City of Houston's
Southeast Water Purification Plant; and
NOW THEREFORE, the parties agree as follows:
Section 1.
The Escrow Fund.
LPAWA agrees to deposit with GCWA, on June 1, 1998 (the "First Payment Date"), the
amount of $500,000.
LPAWA agrees to pay to the Escrow Agent for the account of GCWA on or before the
Transfer Date (as defined in the Sale Agreement) the remainder of the Purchase Price (as
defined in the Sale Agreement).
The Escrow Fund shall be held by Escrow Agent and shall be disbursed according to
the provisions contained herein.
(d) The Escrow Fund shall be invested by Escrow Agent in an interest-bearing account
containing direct or indirect securities of the United States of America, money market funds rated
"AAA" by S&P or "Aaa" by Moody's Investors Services, Inc. or fully collateralized certificates of
deposit in this Escrow Agreement as directed by LPAWA, or LPAWA's agent, in writing, with the
maturity date of the investments not to exceed three (3) years from the date of this Escrow
Agreement. After the third anniversary date of this Escrow Agreement, investments in the Escrow
Fund shall not have a maturity longer than ninety (90) days. Except as provided below, the interest
thus derived shall become part of the Escrow Fund until the full Purchase Price has been
deposited. Except as provided below, such interest will be the property of LPAWA, even though
the Escrow Fund may be paid to GCWA in accordance with this Escrow Agreement. Escrow Agent
shall pay the interest earned on the investment of the Escrow Fund to LPAWA from time to time
as directed by LPAWA, so long as the value of the Escrow Fund, as determined by the Escrow
Agent, is equal to the amount required by Section 1 (b) to be on deposit at any time. It is
14
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agreed by GCWA, Galveston and LPAWA that on the Transfer Date, the Escrow Fund shall
contain the amount of $2,912,700 and if there is a deficiency in such fund, LPAWA shall pay
such deficiency to the Escrow Agent for deposit in the Escrow Fund if it is to be disbursed
pursuant to Section 2(c).
Section 2. Disbursement of the Escrow Fund. The Escrow Agent shall disburse the
Escrow Fund as follows:
(a) Upon receipt of an affidavit from LPAWA, delivered on or after May 1, 2002, that
GCWA and Galveston have failed to deliver to LPAWA an executed Conveyance of Interest in
the form attached to the Sale Agreement as Exhibit B, Escrow Agent shall disburse the Escrow
Fund to LPAWA.
(b) In the event that LPAWA fails to pay the full amount due and owing on the
Purchase Price to the Escrow Agent, on or before the Transfer Date, upon receipt of a request
from GCWA that the Escrow Agent disburse the funds in the Escrow Fund to GCWA pursuant to
Section 2.1(c) of the Sale Agreement, the Escrow Agent shall disburse the funds in the Escrow
Fund to GCWA.
(c) Upon receipt of a copy of the executed Conveyance of Interest and evidence of
receipt thereof by LPAWA, the Escrow Agent shall disburse the Escrow Fund to GCWA. The
Escrow Agent shall disburse any unpaid interest earned thereon to date to LPA WA.
(d) GCWA and Galveston shall give the Escrow Agent and LPAWA as least thirty
(30) days' prior written notice of the Transfer Date.
Section 3.
The Escrow Aaent's ResDonsibilities.
(a) The Escrow Agent's sole responsibilities shall be:
(i) safekeeping the Escrow Fund;
(ii) investment of the Escrow Fund in accordance with LPAWA's direction;
and
(iii) disbursement of Escrow Fund and interest earned thereon as provided for
in Sections 2(a), (b) or (c).
(b) The Escrow Agent has no duty to determine or inquire into the happening or
occurrence of any event or contingency or the performance or failure of performance of any of
GCWA, Galveston or LPAWA with respect to the Sale Agreement or any other agreement
between the parties. The Escrow Agent may act under this Escrow Agreement upon any written
instruction which the Escrow Agent believes in good faith to be geniune and what it purports to
be. The Escrow Agent shall incur no liability in acting in any way in good faith in accordance
with any of the provisions of this Escrow Agreement.
Section 4. Bill of Interoleader. Should any disagreement occur between GCWA,
Galveston and LPAWA with respect to this Escrow Agreement, or with respect to GCWA or
LPAWA's right to receive the Escrow Fund or the interest earned thereon, Escrow Agent shall
have the right to institute a bill of interpleader in any court of competent jurisdiction to determine
the rights of the parties.
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Section 5.
Term. This Escrow Agreement shall remain in full force and effect until:
(i) Escrow Agent has fully complied with the provisions of Section 2(a), (b) or
(c) ; or
(ii) A court of competent jurisdiction has disposed of the rights and
obligations of the parties pursuant to the provisions of Section 4.
Section 6. Fees. LPAWA, at its sole cost and expense, shall promptly pay all
escrow fees and other charges made by Escrow Agent for its service under this Escrow
Agreement upon receipt of notice from Escrow Agent that such fees and charges are due.
Section 7. LPAWA Representative. The Escrow Agent shall be entitled to rely upon
any written request signed by the General Manager of LPAWA for any action directed by
LPAWA hereunder",
Section 8 . Notice. Any notice provided for or permitted to be given under this
Escrow Agreement must be in writing and may be served by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and registered or certified
with return receipt requested; by delivering same in person to such party; or by prepaid telegram
or telex. Notice given in accordance herewith shall be effective upon receipt For the purposes
of notice, the addresses of the parties shall be as follows:
If to GCWA, to: Gordon L. Myers, General Manager
Gulf Coast Water Authority
3630 Highway 1765
Texas City, Texas n591
If to Galveston, to: Steve LeBlanc, City Manager
City of Galveston
823 Rosenberg
Galveston, Texas 77550
If to LPAWA, to Robert T. Herrera, General Manager
La Porte Area Water Authority
604 W. Fairmont Parkway
La Porte, Texas 77571
If to the Escrow Agent, to: Chase Bank of Texas, National Association
From time to time, any party may designate another address for all purposes of this
Escrow Agreement by giving to the other parties not less than five (5) days advance written
notice of such change of address.
Section 9. Assianment. This Escrow Agreement shall not be assignable by any
party without the prior written consent of the other parties.
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Section 10. Execution. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed to be an original.
Section 11. Entire Aareement. This Escrow Agreement sets forth the entire
agreement between GCWA, Galveston, LPAWA and the Escrow Agent relative to the Escrow
Fund and all prior or written negotiations or agreements are merged herein.
EXECUTED as of this _ day of
,1998.
GULF COAST WATER AUTHORITY
By:
Name: W. W. Latimer, Jr.
Title: President, Board of Directors
ATTEST:
By:
Name: John W. Knust
Title: Secretary-Treasurer
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... A:TEST/) ~
By: ~~~
Albert D. Fields, SecretarylTreasurer
THE FOREGOING AGREEMENT HAS
BEEN APPROVED BY THE CITY COUNCIL
OF THE CITY OF LA PORTE, TEXAS
BY ITS ORDINANCE NO. 98- ~a.3tf
PASSED AND APPROVED APRIL 27, 1998
CITY OF LA PORTE, TEXAS
BY;~~~
rman Malone, Mayor --
DAS TO FORM:
ATTEST:
By: 0'lJ 0kJiJ. J )/.d/U J..
Martha Gillett, City Secretary
e
LA PORTE AREA WATER AUTHORITY
BY:~ ~ MW,tk
Jerry ml~residerit
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ATTEST:
By: ~ L~-u~
Name: Barbara Lawrence
Title: City Secretary
r~:>>VED AS TO fORM
-------~_L~
em itTrORilJEY
F:\PH0614\GCW AISJm'\P5-SS-AG.OS
e
CITY OF GALVESTON, TEXAS
By: ~ ~~
Name: Steve LeBlanc
Title: City Manager
-11-
Vinson & Elkins L.LP.: April 28, 1998
Document No. 1.13
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By its execution hereof, Escrow Agent acknowledges receipt of the Escrow Fund and its
agreement to abide by the tenns hereof.
"ESCROW AGENT"
CHASE BANK OF TEXAS
NATIONAL ASSOCIATION
By:
Name:
Title.
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Exhibit D
Debt Service Allocation
Date Principal Coupon Interest Total Annual Total
1/1 0/02 118,511.25 118,511.25
7/1 0/02 215,000 6.70% 118,511.25 333,511.25 452,022.50
1/1 0/03 111,308.75 111,308.75
7/10/03 230,000 6.80% 111,308.75 341,308.75 452,617.50
1/1 0/04 103,488.75 103,488.75
7/1 0/04 250,000 6.85% 103,488.75 353,488.75 456,977.50
1/1 0/05 94,926.25 94,926.25
7/10/05 265,000 6.90% 94,926.25 359,926.25 454,852.50
1/1 0/06 85,783.75 85,783.75
7/10/06 285,000 6.95% 85,783.75 370,783.75 456,567.50
1/10/07 75,880.00 75,880.00
7/10/07 305,000 6.95% 75,880.00 380,880.00 456,760.00
1/1 0/08 65,281.25 65,281.25
7/1 0/08 325,000 6.95% 65,281.25 390,281.25 455,562.50
1/10/09 53,987.50 53,987.50
7/1 0/09 350,000 6.95% 53,987.50 403,987.50 457,975.00
1/10/10 41,825.00 41,825.00
7/10/10 370,000 7.00% 41,825.00 411,825.00 453,650.00
1/1 0/11 28,875.00 28,875.00
7/1 0/11 400,000 7.00% 28,875.00 428,875.00 457,750.00
1/10/12 14,875.00 14,875.00
7/10/12 425,000 7.00% 14,875.00 439,875.00 454,750.00
3,420,000 1,589,485.00 5,009,485.00 5,009,485.00
21