HomeMy WebLinkAboutR-1988-13
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RESOLUTION NO. 92 - /3
A RESOLUTION AUTHORIZING AND APPROVING A CONTRACT BY AND BETWEEN
THE CITY OF LA PORTE AND THE LA PORTE AREA WATER AUTHORITY FOR THE
SUPPLY OF WATER AND THE CONSTRUCTION, FINANCING AND OPERATION OF
WATER TREATMENT TRANSMISSION AND DISTRIBUTION FACILITIES.
WHEREAS, the City of La Porte has been mandated by the Harris-
Galveston Coastal Subsidence District to convert to surface water
by the year 1990~
WHEREAS, the Authority has heretofore entered into Contracts
for the Supply of Potable Water and the Construction, Financing and
Operation of Water Transmission Facilities with the City of
Morgan's Point, the City of Shoreacres, the Bayshore Municipal
Utility District and all such Contracts and this Contract (collec-
tively, the "Water Sales Contracts") are substantially the same in
all material respects in their terms, conditions and provisions~
WHEREAS, the City Council of the City of La Porte met in open
session on the 23rd day of November, 1987, and considered the
adoption of the Water Sales Contract between the La Porte Area
Water Authority and the City of La Porte~ and
WHEREAS, the Water Sales Contract between the La Porte Area
Water Authority and the City of La Porte was approved and adopted
by the City Council of the City of La Porte at said meeting~ and
the Mayor of the City of La Porte and the City Secretary of the
City of La Porte were authorized to sign and attest said Contract
in their respective capacities~ and
WHEREAS, the Authority and the City of La Porte are authorized
to enter into this Contract pursuant to Chapter 729, page 2678,
Acts of the 67th Legislature of the State of Texas, Regular
Session, 1981, V.A.T.C.S. Article 4413 (32c), and other applicable
laws, now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL
OF THE CITY OF LA PORTE, THAT:
Section 1.
That a contract by and between the City of La
Porte and the La Porte Area Water Authority, a copy of which is
attached hereto as Exhibit "A" and incorporated by reference
herein, be and is hereby authorized, ratified and approved and the
signatures of the Mayor of the City of La Porte and the City Page
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2, Resolution No. ~5'- /3
Secretary of the City of La Porte and thereby authorized, ratified,
and adopted as official~
Section 2. That the City Council officially finds, deter-
mines, 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 offices of
City of La Porte for the time required by law preceding this
meeting, as required by the Open Meetings Law, Article 6252-17,
Texas Revised Civil Statutes Annotated~ and that this meeting has
been open to the public as required by law at all times during
which this resolution 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.
That this resolution shall take effect and be in
full force immediately upon and after its adoption.
PASSED, APPROVED, AND ADOPTED THIS THE I~~AY OF ~ '
19 fS .
CITI PORTE
By: '/).n,~7M
No an Malone
Mayor
ATTEST:
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THE STATE OF TEXAS )
COUNTY OF HARRIS )
CITY OF LA PORTE )
~
I hereby certify that the attached document is a true
and correct copy of the Contract for the Supply of Potable
Water and the Construction, Financing and Operation of Water
Treatment Transmission and Distribution Facilities, entered
into between the La Porte Area Water Authority and the City
of La Porte, Texas, on November 23, 1987.
To certify which, witness my hand and Seal of Office,
this the 30th day of August, 1988.
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'11".'1,1"'"11)" \" Cherie Black, City Secretary
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City of La Porte, Texas
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THIS CONTRACT IS SUBJECT TO ARBITRATION
UNDER THE TEXAS GENERAL ARBITRATION ACT
CONTRACT FOR THE SUPPLY OF POTABLE WATER AND THE
CONSTRUCTION, FINANCING AND OPERATION OF WATER TREATMENT
TRANSMISSION AND DISTRIBUTION FACILITIES
THIS CONTRACT (the
~
Z. ~ day
"Contract") made and entered
into as of
the
of .AJ~' , 191f4 by and between La Porte Area Water
"Authori ty.), a conservation and reclamation district
Authority ,(the
in Harris County, Texas, and a governmental agency and a body politic
and corporate, created by Chapter 729, page 2678, .~cts of the 67th
Leg islature of the State of Texas, Regular Sess ion, 1981 (the "Act"),
and the City of La Porte, Texas, a municipal corporation of the State
of Texas (the "City"),
WIT N E SSE T H:
WHEREAS, the Harris-Galveston Coastal Subsidence District
(the "Subsidence District"), was created by the Legislature of Texas
in 1975 for the purpose of regulating the withdrawal of groundwater
from the area wi thin the boundaries of Harris County and Galveston
County in order to end subsidence which contributes to or precipitates
flooding, inundation or overflow of any area within the District~
WHEREAS, the Subsidence District is charged with the duty
and has the power to control and prevent subsidence within its
boundaries by reducing the amount of groundwater withdrawals from
all wells wi thin the Subsidence District which produce groundwater,
including those owned and operated by corporations, governmental
subdivisions or agencies and other organizations~
wHEREAS, the City and other Participants named in Section
2.01 hereof are required by the rules and regulations of the Subsidence
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District to reduce their respective wi thdrawals of groundwater from
their wells and replace such wi thdrawals wi th surface wa ter which has
been properly treated for domestic use~
iffiEREAS, the Authority was created primarily for the purpose
of providing water treatment and transmission facili ties necessary to
serve municipal corporations, political subdivisions and others within
an area described in Sect ion 3 of the Act, and may prov ide such fac i lit ies
to persons, corporations, municipal corporations, political subdivi-
sions and others within an area described within Section 5(b) of the Act~
WHEREAS, under the Act the Authority has specific power,
among others, to (a) acquire surface Water supplies from sources inside
and outside its boundaries, (b) treat, purify, transport, distribute,
sell and deliver Water (as defined herein) to corporations, municipal
corporations, political subdivisions of the State of Texas and others,
(c) purchase, construct or otherwise acquire facilities and improvements
n~cessary to carry out its powers, and (d) issue and sell its revenue
bonds, wi thout the necess i ty of an elect ion, for the purpose, among
others, of paying the cost of such facilities and improvements;
WHERE_~,.s, at the request and for the benef i t of t.he City and
such other Part ic ipan ts, the Au thor i ty proposes (a) to enter in to a
contract with the City of Houston, Harris County, Texas, a municipal
corporation organized and existing under the laws of the State of Texas,
for the purchase of an undivided interest in the Pumping and production
Capacity of the City of Houston's Southeast Water Purification Plant
(hereinafter called the "Southeast Plant") and potable surface Water
from the City of Houston's Southeast Plant, in an aggregate amount suf-
ficient to supply the estimated potable surface Water requirements of
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the Participants through the year 1994~ and (b) (i) to purchase and con-
struct the Water p~mping, transmission, distribution, metering and all
other related facilities necessary to transport potable surface Water
from the Southeast Plant to the Authori ty. and the Water Distribution
Systems of the Participants, including the City~ and (ii) to issue, sell
and deliver its revenue bonds in an aggregate principal amount sufficient
to pay in full (x) the costs of acquiring the Authority's share of the
Southeast Plant, the Transmiss ion System and the Distribution System
and (y) other related costs including the cost of issuing such bonds~
WHEREAS, the Authority has heretofore entered into or will
enter into Contracts for the Supply of Potable \~ater and the Construction,
Financing and Operation of Water Transmission and Distribution Facilities
with all of the Participants other than the City and all such Contracts
and this Contract (collectively, the "\~ater Sales Contracts") will be
substantially the same in all material respects in their terms, condi tions
and provisions~
\mEREAS, in order to comply with the rules and regulations of
the Subsidence District at the earliest feasible date, the City desires
to purchase Na ter
from the Authority on the terms and conditions
herein set forth and the Authority is willing to sell Water to the City
upon the same terms and conditions; and
WHERE.I~.s, the Authority and the City are authorized to enter
into this Contract pursuant to the Act, V.A.T.C.S. Article 4413 (32c),
and other applicable laws~
NOW, THEREFORE, in consideration of the mutual premises and
covenants and agreements herein contained, the Authori ty and the Ci ty
hereby agree as follows:
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ARTICLE I
Definition of Terms
Section 1.01 Unless the context requires otherwise, the
following terms and phrases shall have meanings as follows:
(1) Act - Chapter 729, page 2678 et seq., Acts of the 67th
legislature of the State of Texas, Regular Session,
1981.
(2) Authority - The La Porte Area Water Authority.
(3) Authority Director - the General Manager of the La Porte
Area Water Authority, or his designated representative.
(4) Board
The Board of Directors of the Authority.
(5) Bond Resolution - any resolution or order of the Author-
. ity, duly approved by the City, which authorizes the
issuance of any Bonds.
( 6 ) Bonds - any revenue bonds issued by the Au thor i ty, as
authorized by this Contract and any Bond Resolution,
whether one or more issues, and the interest appertaining
thereto, to finance the Authority's participation in the
Southeast Plant, the Transmission System, and the Distri-
bution System, including all improvements, enlargements,
and expansions thereof, and any Bonds issued to refund
such bonds.
(7) City - the City of La Porte, Harris County, Texas.
( 8 )
City System - the City's
sewer system, together
extensions, additions,
thereto.
existing waterworks and sanitary
with all present and future
replacements and improvements
(9) Code - the Internal Revenue Code of 1986, as amended.
(10) CWA - the Coastal Water Authority, previously known as
the Coastal Industrial Water Authority.
(11) Demand Allocation Factor - the percentage of the prOduc-
tion capacity of the Southeast Plant which the Authority
is entitled to use at any given time. The initial Demand
Allocation Factor for the Authority will be the percentage
of the actual production construction cost paid by the
Authori ty divided by the total actual production construc-
tion cost, as specified in Section 2.01 of the Houston
Contract. The initial Demand Allocation Factor is 5.25%.
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(12) Distribution System - those facilities used to transport
treated surface Water from the termination of the trans-
mission facilities shown on Exhibit "C", attached hereto,
and fully incorporated by reference herein, to
each Participant's take point.
(13) Excess Product ion Fee - the rate to be charged to the
City by the Authority for use of production capacity
above the City's share of committed capacity from the
Southeast Plant which shall be payable in the amounts
and at the times as set forth in Section 4.05 of the
Houston Contract.
(14) Excess Pumoage Fee - the rate to be charged to the City
by the Authority for use of ~umping facilities associated
with the Southeast Plant in excess of the City's share
of commi t ted capac i ty for the ?roj ect, whi ch shall be
payable in the amounts and at the times as set forth in
Section 4.05 of the ~ouston Contract.
(15) Fiscal Year the Fiscal Year of the Au thor i ty, as
designated in Section 16(b} of the Act, which is from
October 1 to Se~tember 30 of the following year, unless
and until changed ~y the Board.
(16) Houston - the City of nouston, Harris County, Texas.
(Ii) Houston Contract - the contract between the Authority and
Houston, which shall be in all material ~espects in accor-
dance with the terms and provisions of the contract at-
tached to th is Con tract as Exhibi t "A", i ncorpora ted by
reference herein as if recited in this Contract verbatim,
providing for the purchase by the Authority of: an
undivided interest in the Southeast Plant as well as
potable treated surface Water from the Southeast Plant.
(18) Houston Director - the Director of the City of Houston's
Department of ?ublic Works and Engineering or any other
person designated ~y such Director.
(19) La Porte - the City of La Porte, Harris County, Texas.
(20) "MGD" - an abbreviation for million gallons per day. As
used in this Contract, "~tGD" refers to a quanti ty of
Water during a period of time expressed for convenience
in terms of an average daily quantity during a calendar
month (unless a different period of time is s~ecified).
The volume of two MGD for a calendar month, for example,
is calculated as follows: Two million gallons multiplied
by the number of days in such calendar month.
(21)
Operation and Maintenance Expenses - all
viding Water to Participants under the
costs of pro-
Water Sales
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Contracts, except for costs funded by Bond proceeds;
debt serv ice on the Authority's Bonds and amounts re-
quired to fund any reserve fund, contingency fund,
rebate fund, or any other fund establ ished under any
Bond Resolution, including without limitation all Opera-
t'ion and l-1aintenance Costs billed to the Authority by
Houston, all Opera ting and Ma intenance Costs incurred
by the Authority related to the Transmission System and
the Distribution System, and all administrative costs
incurred by the Authority (including insurance).
(22) "Part ic i oants" - the Ci ty and all of the other part ies
named in Section 2.01 hereof who have executed a Contract
substantially similar to this Contract. The term also
includes any customer who executes a Water Sales Contract
pursuant to the provisions of Section 11.09 hereof from
and after such execution.
(23) Production Capacity - the maximum rate of production of
treated surface \vater from the Southeast Plant, which
equals 80 MGD.
(24) Pumoing Allocation Factor - the percentage of the South-
east Plant I S pumping and related treated Water storage
capacity which the Authority is entitled to use at any
given time. The initial Pumping AllocatiQ.n Factor f';)r
the Authori ty will equal the actual construction. cost
of the pumping and storage facilities paid by the Author-
i ty divided by the total actual cons+:ruction cost for
such pumping and storage facilities. The initial Pumping
Allocation Factor is 2.33%.
(25) Pumping Caoacity the maximum r3te of delivery of
treated surface Water from the Southeast Plant, which
equals 225 MGD (expressed as a peak hour pumping rate).
(26) Service Area - that area described in Sections 3 and
5(0) of the .~ct.
(27) Southeast Plant - the Project described in the Houston
Contract generally, and specifically described in Exhibit
"B" to the Houston Contract.
(28) Subsidence District - the Harris-Galveston Coastal Sub-
_ sidence District.
(29) Transmission System - those facilities, including pipe-
lines, easements, pumping, and other devices to deliver
treated surface Water from the take point at the Southeast
Plant, shown on Exhibit nAn attached to the Houston
Contract, to that point shown on Exhibit "c" of this
Contract, which includes necessary storage and pumping
facilities to deliver treated surface water to each
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Participant.
(30) "Water" - the term "Water" means potable treated surface
viater that has been supplied by Houston in accordance
with the Houston Contract.
(31) Water Sales Contracts this Contract, the contracts
between the .~uthority and the other Participants named
in Section 2.01 of this Contract, and any Contract
between the Authority and a new Participant. All Water
Sales Contracts are and shall be in a form substantially
similar to this one.
ARTICLE II
Purchase and Construction of the Authority's Share
of the Southeast Plant and Transmission System:
Execution of Contracts
Section 2.01 With the full cooperation of the City (and the
other Participants) the Authority agrees to purchase an initial Demand
Allocation Factor of 5.25% and an initial Pumping Allocation Factor of
2.33% in the Southeast Plant, in accordance with the Houston Contract,
attached hereto as Exh~bit "An. Each Participant's share of the initial
Demand Allocation Factor and initial Pumping Allocation Factor are set
forth below opposite the name of each party.
% SHARE SHARE % SHARE SHARE
PARTICIP.b,.NT OF IDAF* OF IDAF* OF I P.b,.F* * OF IPAF**
City of La Porte 83.30% 4.375% 83.30% 1.94%
Bayshore MUD 7.67% 0.400% 7.67% 0.18%
City of Shoreacres 4.74% 0.250% 4.74% 0.11%
City of Morgans Point 4.29% 0.225% 4.29% 0.10%
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lOAF - Initial Demand Allocation Factor
IPAF - Initial Pumping Allocation Factor
Section 2.02 Promptly after the execution and delivery of
this Contract, and after the execution and delivery of the Houston Con-
tract by the Authority and Houston, the Authority shall proceed promptly
to (a) acquire sufficient land for all easements or rights-of-way neces-
sary to deliver Water from the Southeast Plant to the Participants as
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(~cause its engineers to prttare detailed plans and
specifications for the construction of the Transmission System and
Distribution System~ and (c) obtain the approval of all such plans and
specifications by the Texas Department of Health and all other govern-
mental agencies having jurisdiction.
Section 2.03 The pro rata share of each Participant in the
actual construction cost of the Transmission System and ~he Distribution
System shall be calculated when sufficient engineering and cost data
are available to the Authority. Each Participant, including the City,
shall approve the finalized construction cost formula and the City's
share of the actual construction cost for the Transmission System and
Distribution System to be paid by the City and the other Participants,
t:>rior to the .a.uthority's sale of bonds to finance the Distribution
System and Transmission System.
Section. 2.04 It is ext:>ressly understood and agreed t.hat
the acquisition of land, easements, and rights-of-way, the awarcing of
Contracts, the apt:>roval of plans and specifications and the approval of
changes in said plans and specifications, and the supervision of
construct ion of the Southeast Plant, the Transmiss ion System, and the
Distribution System are solely within the discretion and control of the
Authority.
Section 2.05 It is expressly understood and agreed that any
obligation on the part of the Authority to acquire, construct, improve,
enlarge, extend, repair, complete or operate the Authority's share of
the Southeast Plant, the Transmission System, and the Distribution
System shall be subject to:
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(a) The availability of sufficient funds timely to pay all
of the cOsts of construction of the Authority's share of
the Southeast Plant and the Transmission System and the
Distribution System~
(b) The Authority's ability to obtain all sites, rights-
of way, easements, labor, equipment and materials as
required for the construction of the Authority's share
of the Southeast Plant, Transmission System, and Distri-
bution System~ and
(c) The Authority's obtaining all permits, licenses and ap-
provals required to construct and operate the Authority's
share of the Southeast Plant, the Transmission System,
and the Distribution System, provided the Authority
shall exercise its best efforts at reasonable expense so
to do.
Section 2.06 Any duly designated representative of the City
shall, subject to making suitable arrangements through the Authority
Director and the Houston Director, and subject to reasonable safety
re;Julations, have access during normal working hours to the Southeast
Plant, the Transmission System and the Distribution System during
construction in progress and thereafter, and may make such inspe~tions
thereof as may be deemed necessary or desirable. Such representatives
of the Ci ty shall also have full access during normal business hours,
upon reasonable notice, to all of the Authority's contracts, books,
records and other data relating to the construction or operation of
the Authority's share of the Southeast Plant, the Transmission System,
and the Distribution System.
Sect ion 2.07 The Ci ty recognizes that the Houston Contract
may be amended from time to time, particularly in regards to the rates
for the sale, transportation, and delivery of potable water charged by
Houston to the Authority. The City agrees to be bound by such amendments
as they may occur. The Authority shall use its best efforts to negotiate
said amendments so as to benefit all Participants in the Authority's
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share of the Southeast Plant, the Transmission System and the distribu-
tion system. In any event, no amendment to the Houston Contract shall
supersede or diminish the obligation of the City to adhere to the pro-
visions of this Contract or the City's obligation to pay for its share
of the debt service attributable to any Bonds issued pursuant he~eto,
or otherwise to adhere to the Bond Resolution authorizing the sale of
such Bonds.
Section 2.08 The City recognizes that the Water to be
delivered by the Authori ty hereunder will be potable treated surface
water (i) that has been purchased by and delivered to the Authority by
Houston as the opera tor of the Southeast Plan t ~ and (i i) that shall
meet all applicable purity standards at the point of delivery to the
participant of the Texas Department of Health and all other governmental
agencies with appropriate jurisdiction, as specified in Exhi:,it ".~"".
The City has satisfied itself that such water will be suitable for its
needs. THERE ARE NO WARRANTIES, EXPRESS OR I~PLIED, \mICH EXTEND
BEYOND THE DESCRIPTION ABOVE.
Section 2.09 The City may have the right to sell and deliver
vlater to bulk purchasers thereof or other Participants who are not
customers of the City System, provided (a) all Water sold and delivered
to any such purchaser or Participant, for all purposes of this Contract,
shall be treated as a part of the Water delivered by the Authority to
the City hereunder, (b) the City shall not be relieved of its obligations
hereunder to pay for all such Water~ (c) the Authority shall never be
required, without the written approval of all other Participants, to
deliver to the City any Water in excess of that resulting from the
Ci ty' s share of the Demand Allocation or Pumping Allocation Factor in
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the Southeast Plant~ and (d) the City will not enter into any take-or-
pay contract whereby a person agrees to take, or to take or pay for
Water provided to the City under this Contract or otherwise agrees to
purchase any Water provided to the City under this Contract wi thout
the prior written consent and approval of the Authority.
ARTICLE II I
Issuance of Bonds
Section 3.01 At such time as the Board deems it appropriate,
after considering the advice of its financial advisor and after the
Authority has entered into Water Sales Contracts with all of the
Par tic ipants, the Au thor i ty will exerc ise its best efforts to issue,
se 11 and del i ver, in one or more series, its Bonds, payable sole ly
from the charges of the Authority payable under such Water Sales Con-
tracts, in the aggregate principal amount of $
or such
lesser amount as may :>e necessary or desira:>le in the op:nion of the
Board to pay for the cost. of acquisition, purchase or constru.:;tion of
the Authori ty' s share of the Southeast Plant, the Transmission System
and the Distribution System and all related costs including without
limitation initial Operation and Haintenance Expenses, all financing,
accounting, engineering, legal, printing and other expenses and costs
incurred in i ssu ing such Bonds, interest on the Bond s and opera t ing
and maintenance expenses of the Authority's share of the Southeast
Plant and the Transmission System and the Distribution System during
the period of construction, and amounts necessary to fund the interest
on and sinking fund established to provide for the payment of the in-
terest on and the principal of, the Bonds and any reserve fund, contin-
gency fund, operating reserve fund or other fund provided for in the
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Bond Resolution, plus an amount sufficient to pay and reimburse the La
Porte for the Authority's administrative and overhead expenses thereto-
fore incurred and directly attributable and chargeable to the acquisi-
tion of the Authority's share of the Southeast Plant, the Transmission
System and the Distribution System.
Section 3.02 \vhen the Authority desires to issue Bonds, it
shall deliver to the City and to La Porte for their approval as to
substance and form a proposed Bond Resolution (complete except for
interest rates, name of the ini tia1 purchaser or purchasers of the
Bonds and the discount or premium thereon) and the Authority's estimate
of the amount requi red to (a) payor prov ide for the payment of (i)
all interest on, and princ ipa1 of, the Bonds as and when the same
sha 11 become due and payable and (i i) all reserve, cont i ngency and/or
other funds prov ided for in such Bond Reso1 ut ion and (b) : u1 f i 11 the
te!:"r:ts of any agreement or covenant made by the Authori ty ",.i th the
owners of such Bonds or any person on their behalf.
If the City con-
sents to such Bond Resolution or fails to object thereto as provided in
Section 3.03 hereof, the Authority shall thereafter be fully authorized
to issue such Bonds and to charge and collect the monthly minimum charge
specif ied in Section 7.01 hereof from the Ci ty in respect thereof.
Section 3.03 Within fifteen (15) days of the receipt of the
Authori ty' s proposed Bond Resolution, the Ci ty shall ei ther consent
thereto (as evidenced by the adoption of an ordinance or resolution of
its City Council) or institute arbitration proceedings as provided here-
in to settle any claim, objection or controversy which the City might
raise concerning the form of the proposed Bond Resolution, otherwise
any such claim, objection or controversy shall be deemed waived. Issu-
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ance of the Bonds shall not occur until arbi tration, if any, is concluded.
Section 3.04 Promptly after the City and La Porte approve
the proposed Bond Resolution, the Authority shall proceed with the
preparation of such data, materials and documents as may be necessary
in the opinion of its financial advisor to facilitate the sale and
delivery of the Bonds, and the Ci ty agrees promptly to furnish the
Aut.hori ty wi th all such financial information and other data as may
reasonably be requ i red by the .b,u thori ty in the sale of the Bonds in
compliance wi th all appl icable laws, rules and regulat ions: prov ided,
however, that no representation, covenant or warranty of the Ci ty,
except as contained in this Contract, shall be included by the Authority
in any sales documents in connection with the sale of the Bonds without
the approval of the City. Following the sale and delivery of the Bonds,
the .b,uthority shall "furnish the City ",'ith a debt service schedule
sh:)wing the amounts required to pay all interest on and principal of
the Bonds as the same shall become due and payable.
Section 3.05 All Bonds shall be authorized, executed, issued,
sold and delivered in su~stantial compliance with the provisions of the
Act, including v;ithout limitation Section 13 thereof, and the Texas
Bond Procedures Act of 1981, as supplemented and amended. The proceeds
of sale of the Bonds, after deducting the costs of issuance and funding
any debt service, reserve, contingency, escrow or other funds which
are required by the Bond Resolution to be funded from such proceeds,
shall be deposited into the special construction fund provided for in
the Bond Resolution and used to pay the costs of acquisition, purchase
and construction of the Authori ty' s share of the Southeast Plant, the
Transmission System and the Distribution System.
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Section 3.06 In case of any deficiency in such special con-
struction fund to payor provide for the timely payment of the costs
of acquisition and construction of the Authority's share of the Southeast
Plant, the Transmission System and the Distribution System, the Authori ty
shall proceed in the manner provided above to issue, sell and deliver
such further or additional series of its Bonds, as may be necessary to
prov ide funds for such purpose, and the City agrees to ass is t and
cooperate wi th the .Z\.uthori ty in whatever means reasonably ;>ossible to
expedite such issuance and sale of additional Bonds and to avoid delays
in construction or defaults of construction payments.
.l:\ny surplus
funds on hand in such s;>ecial construction fund, after payment of all
costs of acquisition or construction of the Authority's share of the
Southeast Plant, the Transmission System and the Distribution System,
and all ex;>enses of issuing such bonds, and after funding all reserve,
escrow, sinking or other funds required by the Bond Resolutions(s) to
~e so funded, shall be transferred to and de;>osited in the debt service
fund or sinking fund created by the Bond Resolution to provide for the
?ayment of the principal of, and interest on, such 3onds.
.Z\.RTICLE IV
Operation of the Southeast Plant: Sale and Deliverv of Water
Sect ion 4.01 The City recogn i zes tha t, ;>ursuant to the terms of
the Houston Contract, the Authority is not entitled to operate the
Southeast Plant, but rather is a customer and equi table owner of a
portion of said plant. The Author~ty shall be responsible for operating
and maintaining the Transmission System and the Distribution System.
Section 4.02 In accordance with the terms and subject to the
conditions as set forth in this Contract and the Houston Contract, the
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Authority shall sell and deliver (or cause to be delivered) to the City
at the points of delivery hereinafter specified, and the City agrees to
purchase from and pay the Authority for the potable Water used by the
Ci ty. The Ci ty is required to make payments to the Authori ty even if
no Water is delivered to the City by the Authority in accordance with
the provisions of Section 6.05.
The unit of measurement for Water delivered hereunder shall be
1,000 gallons of water U. S. Standard Liquid Measure.
Subject to the first paragraph of this section, the Ci ty shall
be enti tled to receive the entire amount of the Ci ty' s share of the
Demand Allocation Factor and Pumping Allocation Factor. The City may
take Water from the Southeast Plant through the Authority Transmission
System, but may not take Water from the Southeast Plant that exceeds
the City's share of production Capacity of the Southeast Plant multi-
plied by City's then current share of the Demand Allocation Factor,
nor may City take Water from the Southeast Plant through the Authority's
Transmission System at a rate which exceeds the City's share of the
Pumping Capacity of the Southeast Plant multiplied by the City's
then current share of Pumping Allocation Factor.
In the event that the Southeast Plant is not being operated at its
Production Capacity or its Pumping Capacity, the City may, with the
agreement of the Authori ty Director and the Houston Director, use a
portion or all the unused Production Capaci ty or Pumping Capaci ty of
the Southeast Plant during a billing period.
When such additional
Production Capacity or Pumping Capacity is used, the City shall pay
the Excess production Fee or the Excess Pumpage Fee, or both, as the
case may be, as are established in Section 4.05 of the Houston Contract,
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'attached hereto as Exhibit nAn, and billed by Houston to the Authority.
Nothing herein. shall be construed to limit or frustrate the right
of City, the Authority or any other Participant to enter into agreements
for the alteration of any Participant's share of the Demand Allocation
Factor or Pumping Allocation Factor.
NOTICE: In addition, the Authority reserves the right to limit the
amount of Water actually received bv the City (by the use of flow regu-
lators, throttling devices or other restrictive metering devices) to the
amount of reserved production or Dumping caoacity of the City, and at an
instantaneous rate equal to said production capacity or pumping capacity.
Section 4.03 In consideration of and subject to the other terms
and cond i t ions of this Contract, the Au thori ty shall make, and the Ci ty
shall take, delivery of Water at the points of delivery specified in
Exhibi t tiC" annexed hereto and hereby made a part of th is Contract. In
the event that the City desires Water to be delivered at a substitute
or additional point of delivery, the City shall give the Authority
written notice and the full particulars with respect thereto and such
substi tute or add i t ional point of del i very will be es tabl ished by the
mutual agreement of the parties; provided, however, any cost or additional
cost associated with any such substitute or additional point of delivery
shall be borne by the City and the Authority shall have no obligation
to effect the delivery of Water at any such delivery point until all
such costs have been paid or reasonably provided for in the opinion of
the Board. Title to, possession and control of and responsibility for
all Water deliverable to the City hereunder shall remain in the Authority
up to the discharge side of the Authority's meter at each of the points
of delivery specified herein or pursuant to other provisions hereof
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whereupon title to, possession and control of, and responsibility for
all such Water shall immediately pass to and vest in the Ci ty. Each
party hereto shall save and hold the other harmless from all claims,
demands and causes of action which may arise while said Water is under
its ownership and control.
Section 4.04
It is recognized and understood by both parties to
this Contract that the Ci ty now owns and operates a system of wells
producing Water and that the City may elect to attempt to acquire and
operate addi tional wells, subject to the approval of all regula tory
authorities. While nothing in this Contract shall obligate the City to
continue the operation of its own Water wells, the Ci ty nevertheless
agrees that the \oJater supplied hereunder will be its principal source
of Water, and if it continues the operation of its own Water wells,
the City will coordinate the production therefrom in such manner a~ t6
minimize large daily fluctuations in the quantity of Water taken under
this Contract.
ARTICLE V
Metering Equipment
Section 5.01 The Authority shall install, operate and maintain at
its expense the necessary measuring equipment of standard type for
measuring properly the quantity of Water delivered under this Agreement.
Such measuring equipment shall be located on Authority's supply main at
each point of delivery. Such meter or meters and other equipment so
installed shall remain the property of Authority. Each of the partici-
pants shall have access to such measuring equipment at all reasonable
times, to inspect and to employ an independent laboratory to check
measuring equipment, but the reading, calibration and adjustment thereof
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shall be done only by the employees or agents of Authority.
For the
purpose of this Contract, the original record or reading of the main
meter shall be the journal or other record book of Authori ty in its
off ice in which the records of the employees or agents of Authori ty
who take the reading are or may be transcribed. Upon written request
of any of the Participants, the Authority will provide a copy of such
journal or record book, or permi t them to have access to the same in
the office'of Authority during reasonable business hours.
Section 5.02 Calibration of Meters Once each Fiscal Year, on a
date as near the end of such Fiscal Year as practicable, the Authority
shall calibrate its meters at each point of delivery (and if requested
in writing by the receiving Participant, in the presence of a represen-
tative of such receiving Participant), and the parties shall jointly
'.
observe any adjustments which are made to the meter in case any adjust-
ments shall be necessary, and if the check meter hereinafter provided
for has been installed, the same shall also be calibrated by the re-
ceiving Participant in the presence of a representative of Authority
and the parties shall jointly observe any adjustment in case any
adjustment is necessary.
If the City shall in 'writing request the
Authority to calibrate its meter and the .l\uthority shall give to the
City forty-eight (48) hours written notice of the time when any such
calibration is to be made and a representative of the City is not
present at the time set, the Authority may proceed with calibration
and adjustment in the absence of any representative of City.
Section' 5.03 Testing of Meters. If the City or the Authority at
any time observes a variation between a main delivery meter and the
'check meter, if any such check meter shall be installed, such party
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will promptly notify the other party, and the parties shall then cooperate
to procure an immediate calibration test and joint observation of any
adjustment and the malfunctioning meter shall then be adjusted to
accuracy. Each party shall give the other party forty-eight (48)
hours' notice of the time of any test or meter so that the other party
may conveniently have a representative present.
In addition, any
Participant may request the Authority to provide a periodic calibration
test of the measuring equipment, for any reason.
If the calibration
test shows that the Authority's meter is accurate within the below-
described tolerances, then such Participant shall pay for the test
performed. I f the calibration test shows that the Authori ty' s meter
is not accurate within the below described tolerances, then the Authority
shall pay for said meter cali~ration test.
Section 5.04 Adjust..-nents. to Meters
If, upon any test, the
percentage of inaccuracy of metering equipment is found to be in excess
of three percent (3%), registration thereof shall be corrected for a
period extending back to the time when such inaccuracy began, if such
time is ascertainable, and if such time is not ascertainable, then for
a period extending back one-half (l/2) of the time elapsed since the
last date of calibration, but in no event further back than a period of
six (6) months. If, for any reason, the main meter is out of service
or out of repair so that the amount of Water delivered cannot be
ascertained or computed from the reading thereof, the Water delivered,
through the period such meter is out of service or out of repair, shall
be estimated and agreed upon by the parties thereto upon the basis of
the best data available.
For such purpose, the best data available
shall be deemed to be the registration of any check meter if the same
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has been installed and is accurately registering. Otherwise, the best
data available sha~l be deemed any other meters in the transmission
line or treatment plant which can be related to the main delivery meter.
If no other meters in the system are operational which will allow
determination of delivered quantity, then the Authority shall determine
the amount of Water delivered during such period which may be estimated
(i) by correcting the error if the percentage of error is ascertainable
by calibration test or mathematical calculation, or (ii) by estimating
the quant i ty of del i very by del i veries during the preced ing periods
under similar conditions when the meter was registering accurately.
ARTICLE, VI
Rates and Charges
Section 6.01 The Ci ty and the Authori ty recognize the statutory
and contractual duty of the Authority to fix and from time to time to
alter and revise the rates and charges for Water delivery services to
be furnished and made available to the Participants so that the revenues
received by the Authority therefrom will at all times be not less than
an amount sufficient to:
(a) Payor provide for the payment of all expenses (including but
not 1 imi ted to Operation and ~1aintenance Expenses) incurred
by the Authori ty and billed to the Authori ty by Houston in
producing, treating, and pumping the Water actually delivered
to the City~
(b) Pay all expenses of the Authority incurred in connection with
the Transmission System and Distribution System, including
but not limited to operation and maintenance expenses connected
wi th the Transmission System and Distribution System~ and
(c) Payor provide for the payment of:
( i)
all of the premium, if any, and interest
principal of, all Bonds when and as the
become due and payable~ and
on, and the
same shall
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(ii) any sinking fund, and all reserve, contingency and
other fund payments to be made in respect of any Bonds
when, and as the same shall become due and payable~ and
(iii) fulfill the terms of any .agreements or covenants with the
owners of any Bonds and/or wi th any person on their behalf.
The City recognizes that the Authority must fix and from time to
time alter and revise its rates and charges for Water delivery services
f rom the Southeast Plant through the Author i ty' s Transmiss ion System
and Distribution System so that the gross revenues and the net revenues
actually received by the Authority from the Participants will produce
revenues suf f ic ierit as aforesaid on the bas is of actual cash requ irernents,
wi th full allowance being made for delinquencies and costs of collections.
Section 6.02 The parties further recognize that the rates and
charges payable hereunder and under the other Water sales contracts
will be the only source of funds (other than bond proceeds) available
to the Authority with which to discharge its obligations hereunder, and
further, that the Authority is not organized for profit and that its
rates and charges should be at all times the lowest rates and charges
which are consistent with the aims and objectives of this Contract, the
e f f ic ient and economical prov is ion of \'iater del i very serv ices to all
Participants now or hereafter served by the Authority and good business
management on the part of the Authority.
Section 6.03 For the services rendered and to be rendered by the
Authority under this Contract, the City agrees to pay to the Authority,
a t the time and in the manner hereinafter set forth, so long as this
Contract is in force and effect, the rates and charges established as set
forth in this Contract.
Section 6.04 Notwithstanding any term or provision herein to the
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contrary, the City shall make payment of all rates and charges payable
hereunder to the Authority without regard to whether the Authority has
completed the acquisition, construction, improvement, enlargement, ex-
tension, or. repair of its share of the Southeast Plant, or of the
Transmission System or the DistrIbution System, without regard to whether
the Southeast Plant, the Transmission System, or the Distribution
System is operating, or is operable, or its output is suspended, inter-
rupted, reduced or curtailed or has been terminated or abandoned,
entirely or in part, and without regard to any other condition or cause.
Section 6.05 On or before May 1 of each year, the City (and each
of the other Participants) shall submit its best estimate of the volume
of \~ater it will purchase from the Authority during the Fiscal Year
commencing on the following October 1. On or before June 1 of each
year, the .a.uthor i ty shall then prepare and submi t to the City (and.
each of the other Participants) the Authority's best estim3te of the
costs and expenses which will be incurred by the City to purchase Water
from the Authority, including all rates and charges specified above,
during the Fiscal Year commencing on such October 1. The total of all
such estimated costs and expenses, after deducting any surplus funds
wh ich may be on hand or after a::3d ing such amount as may be deemed
reasonable to restore during the year an~ deficiency of funds on hand,
shall then be divided by the estimated total volume of Water which will
be delivered to all of the Participants during said year. The quotient
(expressed in dollars per thousand gallons, the "Budgeted Unit Expense")
shall be used, subject to the remaining provisions of this Article VI,
for billing purposes during said Fiscal Year.
Section 6.06 In the event the Authority experiences any material
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variation in the costs and expenses of operating and maintaining the
Project or in the volume of Water delivered thereby, it may adjust the
Budgeted Unit Expense by whatever amount is necessary, in the Board's
opinion, provided (a) written notice with respect thereto, specifying
the material facts involved, is given to the City and each of the other
Participants and (b) the adjustment shall not be effective until the
first day of the second month following the receipt of such notice, ex-
cept any adjustment resulting from action taken in any emergency and any
decrease in the Budgeted Unit Expense may be made effective with the
next monthly statement submitted to the City (and the other Participants).
Section 6.07 The Authority is empowered to establish and fund such
reserve funds as it deems necessary and prudent for the operation of
the Authority's share of the Southeast Plant, the Transmission System,
and the Distribution System."' .~ounts" necessary to fund su'ch "reserve
funds shall be chargeable to the Ci ty (and the other Part i c ipan ts) as
a portion of the Budgeted Unit Expense. Said reserve funds may include
(but not necessarily be limited to) a reserve fund for the payment of
principal and interest on the bonds, an operating reserve fund, a con-
tingency reserve fund, and a capital repair reserve fund. Said reserve
funds may only be established by resolution or order adopted by the
Board. Further, said reserve funds may be funded, in whole or in part,
by proceeds from the sale of the Bonds, or by proceeds obtained by the
Authority from authorized Operating Cnarges (or capacity charges, as
the case may be) collected from all Participants.
ARTICLE VII
Billing and Payment
Section 7.01 On or before the tenth (10th) day of each
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calendar month commencing
10, 19 , and continuing
thereafter throughout the term of this Contract, the Authority shall
submit to the City (and to each of the other Participants) a statement
invoicing the Authority's charges for the previous billing period.
Each such statement shall specify (a) the volume of the Water delivered
to the City during such month multiplied by the Budgeted Unit Expense
(as adjusted, if such be the case)~ (b) the Production and Pumping
Operation and Maintenance Expenses due by the City in respect of such
month (calculated on the basis of the actual volume of Water delivered
to the City)~ (c) the City's share of Operation and Maintenance Expenses~
(d) the City's monthly minimum charge due by the City pursuant to the
prov is ions of th is Contract ~ and (e) the total of all such charges.
The City shall pay each such statement promptly upon its receipt thereof,
and any amount not. pa id wi thin forty' (40) days of the date of sa id
statement shall bear interest at the rate of ten percent (10%) per
annum until paid and, if any part of the amount past due and unpaid
(including interest) is collected by the Authority through the services
of an attorney, there shall be added thereto the amount of a reasonable
attorney's fee.
Notwithstanding the above, and regardless of whether the City actu-
ally takes Water from the Authority, the City shall pay, as the same
becomes due and payable, a monthly minimum charge which represents the
Ci ty' s share of princ ipal and premi tun (if any) plus interest charges
on all Bonds issued pursuant to this Contract (together with all funding
requirements for all reserve and other funds established under any Bond
Resolution). Said monthly minimum charge shall be calculated as follows:
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{;:N:H:)+6N:M:]+~~R:EE)+a x +(;2 X H}(-~ X H)
A - The total of all principal and mandatory sinking fund payments
of, and premium on, all outstanding Bonds due within the next
twelve (12) months, the net proceeds of which have been or
are to be used for' produc'tion Capaci ty and Pumping Capac i ty.
B - Percentage of City's share of the Authority's Initial Demand.
and Pumping Allocation Factor in Section 2.01 of Houston
Contract. In this instance, the Authority's share is 100% and
the share of each Participant is as follows:
La Porte - 83.30%
Morgan's Point - 4.29%
Shoreacres - 4.74%
Bayshore Municipal Utility District - 7.67%
C - Total interest due on all outstanding Bonds due wi thin the
next six (6) months, the net proceeds of which have been or
are to be used for production Capacity and Pumping Capacity.
D - The total of all principal and mandatory sinking fund payments
of, and premium on, all outstanding Bonds due within the next
twelve (12) months, the net proceeds of wh i ch have been or
are to be used for the Transmission System.
E - Percentage of the City's share of the total cost to construct
Transmission System, as established in Section 2.03 of this
Contract.
F - Total interest due within the next six (6) months on all out-
standing bonds, the net proceeds of which have been or ar~ to
be used for the Transmission System.
G - The total of all principal and mandatory sinking fund payments
of, and premium on, all outstanding Bonds within the next
twelve (12) months, the net proceeds of which have been or
are to be used for the Distribution System.
H - Percentage of the City's share of the total cost to construct
the Distribution System, as established in Section 2.03 of
this Contract.
I - Total interest due within the next six (6) months on all out-
standing bonds, the net proceeds of which have been or are to
be used for the Distribution System.
The proceeds of the Bonds used for a particular purpose shall
include: (i) the Authority's costs of issuing such Bonds~ (ii) any
amounts deposi ted to a fund or funds pursuant to the Bond Resolution
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authorizing such Bonds~ and (iii) the proceeds of any Bonds issued to
refund such Bonds. If Bonds are issued for more than one of the purposes
listed above, or. for any other purpose, the Authority shall allocate
such Bond proceeds pro rata in accordance with such uses.
Section 7.02 In the event the City fails to pay any statement
when it is due and payable, the Authori ty may give not ice of such
del inquency to the Ci ty and if all statements then due and unpaid,
including interest thereon, are not paid within thirty (30) days after
the delivery of such notice, then the City agrees that (a) the Aut~ority
shall be authorized, at its option, to file suit for the collection
thereof and to collect any amounts due and unpaid, together with interest
thereon at the maximum legal rate and reasonable attorney's fees, and
(b) the Authority may, at its option and in addition to all other available
remedies, terminate the delivery of Water to the City under this. Contract
until all amounts due and unpaid are paid in full as herein specified.
Section 7.03 In order to assure obtaining the lowest possible
interest cost wi th respect to the Authori ty' s Bonds, the City ar;rees
that it is in its best interest to establish a reliable record .:>f
payment of the Au thor i ty' s rates and charges. .';ccord in; ly, the City
further agrees that it shall tle unconditionally obligated to pay all
sums payable to the Authority hereunder and it shall pay the saT'lle
without set-off, counterclaim, abatement, suspension, or diminution
except as otherwise expressly provided herein, and this Contract shall
not terminate, nor shall the Ci ty have any right to terminate this
Contract, nor be entitled to the abatement of any payment or any reduc-
tion thereof, nor shall the obligations hereunder of the City be other-
wise affected for any reason that might be considered failure of consi-
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deratlon, eVlctlonwr cons ruc lve eVlc lon, WS ructlon or amage to
the Authority's share of the Southeast Plant, the Transmission System,
or the Distribution System, failure of the Authority to perform or ob-
serve any agreement, whether expressed or implied, or any duty, liabi-
1 i ty or obl iga tion aris ing out of or connected with the Contract, it
being the intention'of the parties that all sums required to be.paid by
the City to the Authority hereunder shall continue to be payable in all
events and the obligations of the City hereunder shall continue unaffec-
ted, unless the requirement to pay the same shall be reduced or terrnin-
ated pursuant to an express provision of this Contract.
If the City
disputes any amount to be paid to the Authority, the City shall none the-
less promptly make payments as billed by the Authority, and if it is
subsequently determined by agreement, arbitration, regulatory decision
or court decision that such disputed payment should have ~een less, the
. . '
Authority will then make proper adjustments to all Participants so that
the Participant will receive credit for its overpayments. Nothing con-
tained in this Section 7.03 shall ~e construed to release the Authority
from performance of any of the agreements on its part in this Contract.
.l\RTICLE VIII
Depository: Budaet and Audits
Section 8.01 Pursuant to the provisions-of Section 16(a) of
the Act, the Board shall select such depository or depositories as it
deems prudent for the funds of the Authority.
Section 8.02 On or before June 1 of each year the Board shall
cause to be prepared a tentative budget for the ensuing Fiscal Year.
Said tentative budget shall be delivered by the Authority to the City
and the other Participants, which shall have an opportunity to prepare
and submit to the Board its comments thereon. Said comments shall be
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delivered by the Board to the Authori ty and the other Participants
within 30 days of the receipt of the tentative budget. Thereafter, the
Board shall review the comments from the City and all other Participants
and shall prepare its budget on or before August 1 for the ensuing Fis-
cal Year. Said Budget, when prepared, shall be delivered to the City.
Section 8.03 Pursuant to the provisions of Section 16(b) of
the Act, the Board shall cause an audit of its affairs to be prepared
by an independant Certified Public Accountant or an independant firm
of Certified Public Accountants. A written report of the audit shall
be delivered to each member of the Board not later than 90 days after
the close of each Fiscal Year. Copies of the audit shall be delivered
to the office of the Authority, one of which shall be kept on file and
shall constitute a public record open to inspection by any interested
person or persons during normal office hours of the Authority. One
copy of the audit shall be delivered to each Participant. The cost of
the audit shall be paid by the Authority, and shall be an Operation
and Maintenance Expense.
.~RTICLE IX
Covenants of the Authority
Section 9.01 The Authority represents and covenants that (a)
it is duly authorized and empowered to enter into this Contract and (~)
it has and will have, throughout the term of this Contract, good right
and lawful power to execute, deliver and perform its obligations here-
under.
Section 9.02 The Authority covenants and agrees that it will
exercise its best efforts (a) to operate, maintain and manage the
Authority's share of the Southeast Plant, the Transmission System, and the
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Distribution System or cause the same to be operated, maintained and
managed in an efficient and economical manner in accordance with stan-
dards normally used by u,tilities owning like properties and in accordance
with the standards established in Exhibit "An and (b) to make or cause
to be made all needed replacements, additions, betterments and improve-
ments thereto in such manner that the efficiency of the Authority's
share of the Southeast Plant, the Transmission System, and the Distri-
bution System shall be fully maintained; provided, however, the Autho-
rity may temporarily interrupt or reduce deliveries of Water to the
Ci ty if the Authori ty determines that such interruption or reduction
is necessary in case of emergencies or to install equipment, make
repairs, replacements or inspections, or perform any other maintenance
work on the Authority's share of the Southeast Plant, the Transmission
System, the Distr'ibution System or. any part thereof.
The Authority
shall inform the Ci ty of any such planned inte~rupt ion or reduct ion,
giving the reason therefor, and will attempt to schedule the same at a
time which wi 11 cause the least in terference wi th the opera t ions of
the Participants.
The foregoing is subject to the provisions of the
Houston Contract.
Section 9.03 The Authority covenants and agrees that it will
comply with all terms, covenants and provisions. of the Houston Contract,
and will exercise its best efforts to enforce compliance by Houston of
its obligations thereunder in accordance with the respective terms
thereof.
Section 9.04 The Authority covenants and agrees to use its
best efforts to collect all charges due for Water supplied by it pursu-
ant to the' Water Sales Contracts as the same shall become due, and shall
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at all times maintain and promptly and vigorously enforce its rights
against any Participant which does not pay such charges when due.
Sect ion 9. OS , The Au thori ty covenants and agrees to enforce
diligently the provisions of the Water Sales Contracts and shall duly
perform its covenants and agreements thereunder. The Authori ty shall
not consent or agree to, or permit any rescission of or amendment to,
any \vater Sales Contract which will materially impair or adversely
affect the rights of the Authority thereunder or the rights or security
of the owners of any Bones. Any action by the Authority in violation
of the foregoing covenant and agreement shall be null and void as to
the Authority and any other party to any Water Sales Contract.
Section 9.06 In any and all dealings between the Participants,
the Authority covenants to act in a matter comporting with accepted
standards of good fait~ and fair dealing.
Section 9.07 The Authority covenants and agrees to abide by
the terms of the conservation plan as adopted by the Authority, attached
hereto as Exhibit D, and to monitor and require compliance by all
P3rticipants of said conservation plan.
ARTICLE X
Covenants of the City
Section 10.01 The City represents and covenants that (a) it
is duly authorized and empowered to enter into this Contract and (b) it
has and will have, as long as any Bonds are outstanding, good right and
lawful power to execute, deliver and perform its obligations under
this Contract and to fix and collect rates and charges for the service
provided by the Ci ty System suff icient to satisfy such obligations.
Section 10.02 Notwi thstanding any term or provision hereof
or in the Houston Contract to the contrary, the obligation of the City
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to make the payments under Section 7.01 hereof shall be payable solely
from the revenues and rece ipts of the City System.
Such obligation
may be characterized as an obligation to pay on a "take or pay" basis
whether or not:
(a) The Southeast Plant, the Transmission System, and the
Distribution System or any part thereof is completed, is
operating or operable or its output is suspended, inter-
rupted, curtailed or terminated in whole or in part~ or
(b) Any \vater is delivered or provided under this Contrac.t.
Said obligations shall not be deemed to constitute a debt of
the City or a pledge of its faith and credit~ provided, however, nothing
herein contained shall be construed as preventing the Ci ty, in its
sole discretion, from making any such payment from sources other than
said revenues and receipts.
Such obligation to make payments from
the revenues and rece ipts of the Ci ty System shall be absol ute and
uncond i t ional and sha 11 const i tu te an operat ing expense of the City
System for all purposes.
Sect ion 10.03 The City covenants and ag rees to establ ish,
maintain and collect rates and charges for the serv ice prov ided by
the City System which shall produce revenues and receipts at least
sur f ic ient to enable the Ci ty to pay the .b..uthori ty, when due, all
amounts payable by the City under this Contract and to pay any and all
such other amounts payable from, or which might constitute a charge and
alien upon, the revenues and rece ipts derived from the operation of
the City System, including all operation and maintenance expenses and the
principal of, premium, if any, and interest on all revenue bonds and
other obligations related to the City System.
Section 10.04 The Ci ty covenants and agrees that it shall
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(a) at all times operate the properties in the Ci ty System and the
business in connection therewith in an efficient manner and at a
reasonable cost, (b) at all times maintain the City System in good
repair, working order and condition, and (c) from time to time make all
necessary and proper
repairs, renewals, replacements. additions,
betterments and improvements with respect to the City System so that
at all times the business carried on in connection therewith shall be
properly and advantageously conducted; provided, howeve~, this covenant
shall not be construed as requiring the City to ex?end any funds which
are derived fr:>m sources other than the operation of the Ci ty System
and provided further that nothing herein shall be construed as preventing
the City from doing so.
Section 10.05 The City covenants and agrees that during the
term of this Contrac t (and any ex tens ion thereof) it w ill not sell or
otherwise dispose of or encumber all or substantially all of the Ci ty
System~ provided, however, that the City may, in the ordinary course of
~usiness, abandon, sell or otherwise dispose of any property or equipment
included in the City System if the City determines in good faith that
such property or equipment is surplus, obsolete or other_ise not required
for the efficient operation and maintenance of the City System.
Sect ion 10.06 The Ci ty covenan ts and agrees that it shall take
no action the effect of which would be to prevent, hinder or delay the
Authority from the timely fulfillment of its obligations under this
Contract.
Section 10.07 The City convenants and agrees that it shall
not (a) issue any bonds, notes or other evidences of indebtedness, (b)
incur lease obligations which, under generally accepted accounting
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principles, would appear as a liability on its balance sheet. or (c)
enter into an agree~ent with any party other than the Authority to take
or pay for Water, which bonds, notes, evidences of indebtedness, lease
or agreement is payable from the revenues derived from the City System
on a parity with, or superior in right of payment to, the operating
expenses of the City System. The City represents, covenants, and agrees
that the payments due to the Authority under this Contract are operating
expenses of the City System.
Section 10.08 (A) The City covenants and agrees with the
Authority for the benefit of the Authority, the other Participants, the
holders of the Bonds, and any other person interested in the exclusion
from gross income for federal income tax purposes of the interest on
(and original issue discount, if any, with respect to) the Bonds as
f ollo'ws:
(a) No action will be taken by the City, and there will be
no omission of any action by the City, which act or omission will
adversely affect any exclusion from gross income for federal income
tax purposes of interest on the Bonds,and, in particular, shall
comply with those provisions of Section 103 a:ld Sections 141 through
150 of the Internal Revenue Code of 1986, as amended (the "Code"),
that affect the exclusion from gross income for federal income tax
purposes of the interest on the Bonds.
(b) The City will not enter into any contract (or other
arrangemen t) for the sale of Wa ter acqu ired f rom the .ll,u thor i ty
pursuant to this Contract that will adversely affect the exclusion
from gross income for federal income tax purposes of the interest
on the Bonds.
(c) The City shall not take, or omit to take, any action if
such action or omission would cause the Bonds to be federally
guaranteed, within the meaning of Section 149(b) of the Code.
(B) The City represents and warrants that it is not now a
party to any contract whereby a person agrees to take or pay for Water
delivered by the City System. The City further covenants and agrees
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that, prior to entering into any contract whereby a person agrees to
take, or to take or pay for Water provided to the City under this
contract or otherwise agrees to purchase any Water provided to the
Ci ty under this Contract, the City shall notify the Authority of its
intent to enter into such contract.
As soon as practicable after
receipt of such notice, the Authority shall advise the City as to
whether, in the opinion of counsel of recognized standing in the field
of law relating to municipal bonds selected by the Authority, the
entering into of such contract would result in a violation of the
foregoing covenant.
The Ci ty agrees not to enter into such contract
if the Authority advises the City that such violation will or might
result therefrom.
Section 10.09 Nothing in this Article X shall preclude the
City from issuing bonds, notes or other evidences of indebtedness for
the purpose of financing necessary and. proper repairs, renewals,
replacements, additions, extensions and improvements of the City System
provided that such bonds, notes and other ev idences of indebtedness
shall be payable solely and exclusively from the net revenues of the
Ci ty System (after the payment of the operating expenses of the Ci ty
System) or from revenues derived from ad valorem taxes or both.
Article lO .10 The Ci ty, covenants to abide by the terms and
conditions of the drought contingency plan adopted by the City, attached
hereto as Exhibit E, as well as the terms and conditions of the conser-
vation plan adopted by the Authority, attached hereto as Exhibit D.
ARTICLE XI
CHANGES IN ALLOCATION FACTORS
Section 11.01 The City (together with the other Pariticipants)
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understand that -the allocation factors specified in Section 2.01 hereof
are based upon representations made by the City (and the other Partici-
pants) as to the requisite Demand .~llocation Factor and the Pumping
Allocation Factor needed for participation in the Southeast Plant. The
City also understands that the Authority is the equitable owner of the
Demand Allocation Factor and the Pumping Allocation Factor of the South-
east Plant (as specified in Section 2.01) of the Southeast Plant and
is a customer of the Southeast Plant. Neither the Authority, the City,
or the other Participants are entitled to an expansion of the Authority's
share in the Southeast Plant, or an expansion of the City's share of the
Authority's Demand Allocation Factor and the Pumping Allocation Factor
in the Southeast Plant.
The Authority covenants with the City that if the City desires to
obtain an expansion of its share of the Demand 'Allocation Factor or
Pumping Allocation Factor (or both), that upon written request to the
Authority ~y the City of such an expansion, the Authority will proceed
to request that Houston expand the Authority's Pumping Allocation
Factor or Demand Allocation Factor in the Southeast Plant. The Author-
i ty 'makes no warrant ies or covenan ts other than tha tit will use its
best efforts to obtain the requested expansion, and does not guarantee
an expansion in the City's share of the Demand Allocation Factor or
Pumping Allocation Factor if, as, or when needed. The City understands
that in the event it requests an increase in its share of the Demand
Allocation Factor or Pumping Allocation Factor (or both), that it will
be liable to pay for its increased capacity in the plant, together
with any and all necessary improvements in the Transmission System or
the Distribution System.
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Section 11.02 Pursuant to Section 3.03 of the Houston Contract,
in the event that. Houston undertakes an expansion of the Southeast
Plant, the Authori ty shall have the option of increasing its Demand
Allocation Factor, its Pumping Allocation Factor, or both, by paying to
Houston a sum or sums of money representing an additional capital con-
tribution to the cost of such future expansion of the Southeast Plant
(as defined in the Houston Contract) to increase its Production Capacity
and its Pumpi ng Capac i ty. Houston shall give one hundred f if ty (150)
days advance wri tten notice to the Authori ty of any proposed future
enlargement or expansion of the Southeast Plant. Immediately upon re-
ceipt of same from Houston, the Authority shall give written notice to
the City and the other Participants of such proposed future enlargement
or expansion of the Southeast Plant. At any time during the one hundred
fifty (150) days notice period, the _~uthority shall be authorized to
give notice of intent to enter into such agreement. The Authority will
not give notice to enter into such agreement, unless it receives writ-
ten not ice from the Ci ty, or any other Part ic ipant, of its respect i ve
desire to increase its share of the Demand Allocation Factor or Pumping
Allocation Factor.
The .b,uthority and the City agree, in giving or
responding to any such notice, to act timely and in good faith in order
to permit an orderly enlargement or expansion of the Southeast Plant
for the lowest cost reasona~ly obtainable without causing undue delay.
The Authority and the City understand that the option rights
provided to the Authority in the Houston Contract in this Section shall
be limited to an allocation of capacity in the expanded Southeast Plant
equal to or less than the then current demand allocations.
Section 11.03 If, in order to continue to supply the Authori ty
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(and therefore the City) Water at its Demand Allocation Factor, and
directly related and necessary to the operation and maintenance of the
Southeast Plant, it becomes necessary to perform a major replacement
to the Southeast Plant, plans and specifications for such repairs
shall be made and rev iewed by the Houston Dire.ctor and the Authori ty
Director. The Authority will, pay its pro rata share of the cost of any
such work, and will pass its costs through to the City in direct propor-
tion to the Ci ty' s share of same.
Upon inspect ion and rev iew of the
work, the Authority shall pay its pro rata share of any such repair or
replacement of the Southeast Plant within ninety (90) days after acce~-
tance of the completed repa i r or replacement by the Au thori ty, and
shall invoice the City for its share of same.
The Authori ty shall
never be required to pay for ~ortions or replacements, additions or
transmission facilities that solely relate to the Pa=ticipants or
their customers, nor shall the City ever ~e required to pay for portions
or replacements, additions or transmission facilities that solely
relate to other Participants of the Authori ty, or customers of the
Southeast Plant other than the Authority.
ARTICLE XII
Easements and Vesting of Title
Section l2.0l DurinJ the term of this Contract, the Author-
ity shall have the right to use the streets, alleys and public ways
and places of the City for the purpose of constructing, operating
and maintaining any Water transmission lines, distribution lines,
and related facilities which constitute a part of the Authority's
share of the Southeast Plant, the Transmission System, and the Distri-
bution System.
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In accordance with the provisions of Article
Section 12.02
1109j, V.A.T.C.S., at such time as the Bonds and all other indebtedness
incurred by the Authority in the acquisition, construction, improvement
or extension of the Authority's share of the Southeast Plant, the
Transmission System and the Distribution System is paid in full, an
undivided interest in the Authority's share of the Southeast Plant, the
Transmission System and the Distribution System equal to a fraction the
numerator of which is the aggregate amount of all production Capacity
and Pumping Capacity of the City and the denominator of which is the
total amount of all production Capacity and Pumping Capacity of all
of the Participants, shall automatically and irrevocably vest in the
City without the necessity of the execution and delivery of any convey-
ance by the Authority. If requested in writing by the City, the Author-
ity will execute, acknowledge and deliver to the City an appropriate
instrument acknowledging that such vesting of title has occured,
but such instrument shall not be necessary to effect the automatic
vesting of title which shall occur as set forth above.
ARTICLE XIII
I n'surance
Section 13.01 The .n.uthority agrees to carry fire, casualty, public
liability and other insurance in amounts and against risks which are
consistent with accepted insurance practices of companies owning 'and
operating similar facilities in Harris County, Texas~ provided, how-
ever, the Authority shall not be required to carry liability insurance
except to insure itself against risk of loss due to claims for which
it can, in the opinion of the Authority's legal counsel, be liable
under the Texas Tort Claims Act or any similar applicable law or
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judicial decision. All such insurance shall be written by responsible
insurance carriers .selected by the Authority in amounts sufficient
to avoid the ap~lication of any co-insurance clauses contained in
the policies effecting such insurance (and in any event for less
than 80% of full insurable value).
If the Southeast Plant should be materially damaged or destroyed
by fire or other casualty, the Authority shall, as expeditiously as
possible, diligently prosecute, or cause to be prosecuted, the recon-
struction or replacement thereof as nearly as possible to the condition
thereof immediately prior to such damage or destruction and shall apply
the proceeds from any insurance to the payment of the cost of such re-
construction or replacement. The insurance proceeds, if any, remaining
after the appl ication thereof to such reconstruction or replacement
shall be deposited in the Authority's interest and sinking fund (and
the capacity charges to be ~aid thereafter by the Participants
shall be reduced pro tanto). If the damage or destruction materially
reduces the .~uthority's ability to deliver Water hereunder and the
insurance proceeds are not sufficient to pay for the entire cost of
reconstruction or replacement, the _~uthority is authorized to draw
upon any cont ingency reserve fund and, if it is exhausted, then the
Participants shall make up any deficiency pro rata in accordance
~ith their reserved capacity in the Southeast Plant.
ARTICLE XIV
Arbitration
Section 14. 01 _~ny dispute which is specifically stated to be
subject to arbitration under the provisions of this Contract shall be
promptly submitted to an arbitrator mutually agreed to by the Authority
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and City.
Such arbitrator shall promptly proceed to resolve the
disputes submitted .'to him pursuant to the terms of this section, if
Authority and City can agree on a single arbitrator.
Section 14. 02 .~ny dispute or disagreement which is expressly made
subject to arbitration by the terms of this Contract (and if the
Authority and City cannot agree on a single arbitrator as provided in
the preceding paragraph) shall ~e su~mitted to ar~itration in Houston,
Texas, by a board of three (3) arbitrators upon the written notice of
either the Authority or the City, which notice shall name one arbitra-
tor. The party receiving such writte.n notice shall within ten (10) days
by written notice to the other, name a second ar~itrator.
The two
(2) art>it'rators so appointed shall name a third, within ten (10)
days after appointment of the second arbitrator, failin~ which a third
arbitrat:>r shall be appointed ~y a District Court in Harris County,
Texas, as ?rovided in the Texas Arbitration Act.
Section 14.03 The arbitrators so appointed shall promptly hear
and dete~ine the question or questions submi tted pursuant to the
procejures established by the Texas General Arbitration .~ct, shall
render ~heir decision with all reasonable speed and dispat=h, but in
no event later than thirty (30) days after the conclusion of evidence.
If within said period a decision is not rendered by the arbitrators,
or a majority thereof, new arbi trators may be named and shall act
hereunder at the election of the Authority or the City in like manner
as if none had been previously named.
Section 14.04 The decision of the arbitrator or of the majority
of the ar~itrators shall be final and binding upon the parties hereto
as to the question or questions submi tted, and a judgment upon an
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award rendered in such arbitration proceedings may be entered in any
court of competent jurisdiction.
The expense of arbitration shall
be borne one-half by the Authority, and one-half by the City, except
that each party shall bear. the compensation and expenses of its
counsel and witnesses.
Any cost of such arbi tration (including cost of counsel and
witnesses) paid by the Authority shall be considered an Operation and
Maintenance Expense.
ARTICLE XV
Miscellaneous
Section 15.01
This Contract shall be effective upon the day and
year first above written and shall continue in force and effect until
, 2027 and thereafter shall continue in force until all
Bonds and refunding Bonds, and all other obligations (including the
Houston Contract), if any, of the Authority, shall have been paid.
Section 15.02 ~o change or modification of this Contract shall
be made which will affect adversely the prompt payment when due of
all.moneys required to be paid by each Participant under the terms
of this Contract and no such change shall be effective which would
cause a violation of any provisions of any resolution of the Authority
authorizing the issuance of the Bonds or any Bonds issued to refund
any of the Bonds.
Section 15.03 Unless otherwise provided herein, any notice,
communication, request, reply or advice (herein severally and collec-
tively, for convenience, called "notice") herein prov ided or per-
mi t ted to be given, made or accepted by any party to any other
party, must be in writing and may be given or be served by depositing
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the same in the United States mail, postpaid, or by del i vering the
same to an officer of such party, or by prepaid telegram when appro-
priate, addressed to the party to be notified~ provided however,
that any notice of breach of this Contract, forfeit or Force Majeure
shall be.sent by Certified Mail with return' receipt requested. Notice
deposited in the mail in the manner hereinabove described shall be
conclusively deemed to be effective, unless otherwise stated herein,
from and after the expiration of ten days after it is so deposited.
Notice given in any other manner shall be effective only if and when
received by the party to be notified.
For the purposes of not ice,
the addresses of the parties shall, until changed as hereinafter
provided, be as follows:
If to the Authority, to:
La Porte Area t~ater Authority, Post Office Box 1115, La Porte
Texas 77571 Attn: General Manager
If to the City as follows:
The parties hereto shall have the right from time to time and at any
time to change their respective addresses and each shall have the
right to specify as its address any other address by at least fifteen
(15) days written notice to the other parties hereto.
Section 15.04
This Contract shall be governed by the applicable
laws of the State of Texas and the United States of America and any
applicable federal, state, or county permits, rules, orders, and
regulations of any state or federal governmental authori ty hav ing
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jurisdiction, but nothing contained herein shall be construed as a
waiver of any right to question or contest any such law, order, rule
or regulation in any forum having jurisdiction.
Section 15.05 The parties hereto agree that if any of the
provisions of this Contract should be or be held to be invalid or to
contravene the laws of the State of Texas, or the Uni ted States of
America, such fact shall not invalidate the whole agreement, but it
shall be construed as though not containing that particular provision,
and the rights and obligations of the parties hereto shall be construed
and remain in force accordingly.
Section 15.06 The parties hereto agree that upon the expiration
of this Contract the Citi shall have the right to continued service
for an additional period of forty (40) years or for such other time as
may be agreed, upon execution of an appropriate agreement between
City and the Authority.
Section 15.07 It is not intended hereby to specify (and this
Contract shall not be considered as specifying) an exclusive remedy
for any default, but all such other remedies (othe~ than termination)
existing at law or in equity may be availed of by the City or other
Participants and shall be cumulative. Recognizing however. that the
Authority's undertaking to provide and maintain a supply of Water
hereunder is an Obligation, failure in the performance of which
cannot be adequately compensated in money damages alone, the Authority
agrees, in the event of any default on its part, that the City shall
have available to it the equitable remedy of mandamus and spec if ic
performance in addition to any other legal or equitable remedies
(other than termination) which may also be available.
Recognizing
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that failure in the performance of the Ci ty' s obligations hereunder
could not be adequately compensated in money damages alone, the
City agrees in the event of any default on its part that the Authority
shall have available to it the equitable remedy of mandamus and
specif ic performance in addi tion to any other legal or equitable
remedies (other than termination) which may also be available to the
Authority. Notwithstanding anything to the contrary contained in
this Contract, any right or remedy or any default hereunder, (except
the right of the Authority to receive any payments which shall never
be determined to be waived), shall be waived unless asserted by a
proper proceeding at law or in equity within two (2) years plus
one (1) day after the occurrence of such default.
section 15.08 All amounts due under this. Contract, including,
but not 1 imi ted to, payments due under this Contract or damages for
the breach of this Contract, shall be paid and be due, in Harris
County, Texas, which is the County in which the Authority's principal
administrative offices are located. It is specifically agreed
among the parties to this Contract that Harris County, Texas is the
place of performance of this Contract~ and in the event that any
legal proceeding is brought to enforce this Contract or any pro-
vision hereof, the same shall be brought in Harris County, Texas.
Section 15.09 If by reason of Force Majeure any party hereto
shall be rendered unable wholly or in part to carry out its obliga-
tions under this Contract (other than the obligation of each Partici-
pant to make the payments required under Section 7.01 of this Contract)
then if such party shall give notice and full particulars of such
force majeure in writing to the other parties wi thin a reasonable
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time after occurrence of the event or cause relied on, the obligation
of the party giving such notice, so far as it is affected by such
force majeure, shall be suspended during the continuance of the
inability then claimed, but for no longer period, and any such party
shall endeavor to remove or overcome such inability with all .reasonable
dispatch. The term "Force Majeure" as employed herein shall mean
acts of God, str i kes, lockouts, or other industr ial disturbances,
acts of public enemy, orders of any kind of the Government of the
United States or the State of Texas, or any civil or military authority,
insurrection, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, storms, floods, washouts, droughts, arrests, re-
straint of government and people, civil disturbances, expl.:>sions,
breakage or accidents to machinery, pipelines or canals, partial or
entire failure of water supply, and inability on the part of the
A~thor i ty to del i ver Wa ter hereunder for any reason, or on account
of any other causes not reasonably wi thin the control of the party
claiming such inability, except for the payments from the Participants
to the Authority.
. Section 15.10 This Agreement and any addenda hereinafter set
forth constitute all the understandings between the parties hereto,
and there are no oral representa t ions, st ipulat,ions, war ran ties or
understandings with respect to the subject matter of this agreement
which are not fully expressed herein. Neither this Agreement nor its
execution has been induced by any representations, stipulations, war-
ranties or understand ings of any kind other than those here in expressed.
No amendment, addition to, alteration, modification or waiver of
all or any part of this Agreement shall be of any force or effect
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unless in writing and signed by the Authority, the City and any other
Participant affected by such change. If the terms and conditions of
this Agreement and the terms and conditions of any purchase order or
order acknowledgment wri tten in connection wi th this Agreement con-
flict, then the terms and conditions of this Agreement shall govern.
Section 15.11 No waiver by any party hereto of one or more
defaults by any other party hereto in the performance of any of the
pr~visions of this Agreement shall operate or be construed as a waiver
of any other or further defaul t or defaul ts, whether of alike or
different character.
Section 15.12 This Agreement shall bind and benefit the parties
hereto and their respective successors and assigns, and shall not be
assignable by any party without Nritten consent of the other parties.
Section 15.13 Th i s contract is to be construed accord i ng to
the laws of the State of Texas.
Section 15.14 The topical headings used herein have been inserted
for convenience only and shall not be construed as having any sub-
stantive significance or meanin~ whatsoever or as indicating that
all of the provisons of this Agreement relating to any particular
topic are to be found in any particular Article.
IN \'lITNESS WHEREOF, the parties hereto, act ing under au thor i ty
of their respective governing bodies, have caused this Contract to be
executed in several counterparts, each of which shall be an original,
but all collectively constituting one and the same instrument, all
as of the day and year first written.
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"
LA PORTE AREA WATER AUTHORITY
BY:~~~~'
~ President
ATTEST:
By: ~//. ~
Secretary
CITY OF LA PORTE, TEXAS
ATTEST:
By:
(l~~
, City Secretary
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