HomeMy WebLinkAboutR-1997-107 Terrace Heights Sewer District•
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RESOLUTION NO. R-97 107
A RESOLUTION authorizing the execution of a Settlement Agreement with the
City of Union Gap and the Terrace Heights Sewer District
regarding wholesale sewer charges.
WHEREAS, for several years there has been a dispute between the City of
Yakima and the City of Union Gap and Terrace Heights Sewer District regarding
the computation and payment of wholesale sewer service charges to the City of
Yakima; and
WHEREAS, the parties have conducted a mediation as to these matters and
also have received a ruling from Yakima County Superior Court Judge Michael
Leavitt regarding the ability of the City of Yakima to charge utility taxes; and
WHEREAS, the parties have negotiated a settlement to all of these matters
which has been incorporated into the attached Settlement Agreement; and
WHEREAS, the City Council, City of Yakima, deems it in the best interests of
the City of Yakima to enter into the attached Agreement; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
The City Manager and the City Clerk of the City Yakima are hereby
authorized and directed to execute the attached Settlement Agreement with the
City of Union Gap and the Terrace Heights Sewer District and to take all necessary
and prudent actions to implement the terms of said Agreement.
ADOPTED BY THE CITY COUNCIL this I T/Clay of August, 1997.
ATTEST: Lynn
City Clerk
res/(ke)TH-UGAgrmt
chanan, ayor
SETTLEMENT AGREEMENT
By and Between
The City of Yakima,
The City of Union Gap,
and
The Terrace Heights Sewer District
TABLE OF CONTENTS
Page
1. RECITALS 1
2. DEFINITIONS 1
2.1 Biochemical Oxygen Demand (BOD) 2
2.2 Capital Costs and Expenses 2
2.3 Comprehensive Plans 2
2.4 Current Method 2
2.5 Revised Method 2
2.6 Treatment Plant 2
2.7 Wastewater Facilities 2
3. REVISED METHOD FOR BILLINGS 3
3.1 Future Calculation of Treatment O&M and Strong Waste Charges
Under the Agreement 3
3.2 Revised Method of Calculating Treatment O&M Charges 3
3.3 Phasing -in of Revised Method 3
3.4 Monthly Treatment O&M Charge 4
3.5 Monthly Pumping O&M Charge (Union Gap only) 4
3.6 Annual Adjustment 5
3.7 Union Gap Unmetered Flows 5
3.8 Acquisition or Operation by Other Entity 6
4. SAMPLING AND TESTING 6
4.1 Testing of Influent 6
4.2 Sampling 6
4.3 Split Sampling 6
4.4 Testing 7
4.5 Notification of Sampling Results 7
5. SYSTEM OWNERSHIP - CAPACITY - PAYMENT 7
5.1 Yakima Owns System.. 7
5.2 Capacity Allocation 7
5.3 Future Calculation of Capital Expenditure Charges .. 7
5.4 Future Capital Costs and Capital Reserve Funds 8
5.5 Capacity Allocation 8
5.6 Permanent Increase in Allocation 8
5.7 Temporary Increase 9
6. PAYMENT OF FUTURE DISPUTED AMOUNTS INTO ESCROW . 9
7. CHARGES FOR PAST SERVICE - RELEASE OF CLAIMS 9
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7.1 Yakima -Terrace Heights 9
7.2 Yakima -Union Gap 10
8. RESOLUTION OF ISSUES RELATING TO CAPITAL COSTS 10
8 1 Debt Service Reconciliation 10
8.2 Depreciation 10
8.3 Equitable Share of System Costs 10,
9. UTILITY TAXES 10
9.1 Utility Tax Settlement 10
9.2 Order of Dismissal 10
10. REPRESENTATIONS AND WARRANTIES 10
10.1 Warranty of Capacity to Execute Agreement 10
10.2 Performance 11
11. MISCELLANEOUS 11
11.1 Payment for Benefit of Facility Only 11
11.2 Binding Effect 11
11.3 Governing Law 11
11.4 No Third -Party Beneficiary 11
11.5 Litigation 11
11.6 Entire Agreement 11
11.7 Modification of Agreement 11
11.8 Authorization to Enter Dismissal 11
11.9 Multiple Counterparts 12
11.10 Effectiveness 12
11.11 Accounting 12
ii
SETTLEMENT AGREEMENT
This Settlement Agreement ("Settlement Agreement") is entered into on the day
of i*st; 1997, by and between the City of Yakima ("Yakima"), the Terrace Heights
Sewer District ("Terrace Heights"), and the City of Union Gap ("Union Gap"). For
purposes of this Settlement Agreement,Yakima, Terrace Heights, and Union Gap, are
the "Parties."
1. RECITALS
1.1 The Parties have executed an Agreement for Wastewater Treatment and Disposal
Service dated February 23, 1976 ("Agreement") for purposes including Yakima's
provision of wastewater treatment and disposal services ("wastewater treatment") to
Terrace Heights and Union Gap.
1.2 A dispute has arisen regarding the methods used to calculate the charges Yakima
assesses Terrace Heights and Union Gap under the Agreement.
1.3 This dispute has given rise to certain claims and counterclaims in City of Yakima
v. City of Union Gap and Terrace Heights Sewer District, Yakima County Superior Court
No. 96-2-01083-8 (the "Litigation").
1.4 The Parties agree that the Agreement shall remain in effect pursuant to its terms,
and this Settlement Agreement shall remain in effect so long as Terrace Heights or Union
Gap retain an interest in the capacity of the Yakima's Wastewater Facilities.
1.5 The Parties wish to confirm how the Agreement will be implemented in the
future.
1.6 Yakima, Terrace Heights, and Union Gap desire to enter into this Settlement
Agreement in order to provide for certain payments and actions in full settlement of all
claims that are or might have been asserted by Yakima against Terrace Heights and
Union Gap; and by Terrace Heights and Union Gap against Yakima, in the Litigation or
otherwise in connection with rates and charges under the Agreement. The claims subject
to this Settlement Agreement include charges related to: strong waste for services
rendered through June 30, 1996; Capital Costs and Expenses (including debt service,
depreciation, and equitable system cost share); unlisted and unmetered flows; year-end
adjustments; state excise tax credits; utility tax; all other past billing and credit issues;
and, interest on the foregoing.
2. DEFINITIONS
The following definitions shall apply to this Settlement Agreement, unless specifically
provided otherwise herein.
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2.1 Biochemical Oxygen Demand (BOD): BOD is defined as the rate of oxygen
uptake required by bacteria to degrade and stabilize decomposable organic materials in
a standard volume of water during a 5 -day period at 20°C.
2.2 Capital Costs and Expenses. "Capital Costs and Expenses" means costs for
capital facilities, which costs shall include but are not limited to loan repayment, debt
service, debt service coverage, and capital facility assessments.
2.3 Comprehensive Plans. "Comprehensive Plans" mean those comprehensive,
utility, or facility plans adopted by the Parties under state law.
2.4 Current Method. "Current Method" means the basis for charging wastewater
treatment operation and maintenance costs ("Treatment O&M costs") under the
Agreement. The Current Method has not been the method previously employed under
the Agreement. . The Current Method shall not include charges for Capital Costs and
Expenses or depreciation. Under the Current Method, the allocation of Treatment O&M
costs shall be in the following proportions:
Flow: 100% of Treatment O&M costs;
BOD: 40% of Treatment O&M costs; and
SS: 40% of Treatment O&M costs
Under the Current Method, charges shall be calculated as follows: Terrace Heights' or
Union Gap's total flow in million gallons is multiplied by 100% of Treatment O&M costs
divided by the total Treatment Plant influent flow in million gallons; plus Terrace
Heights' or Union Gap's total pounds of BOD (but only with respect to concentrations
greater than 300 parts per million) multiplied by 40% of Treatment O&M costs divided
by total Treatment Plant influent pounds of BOD; plus Terrace Heights' or Union Gap's
total pounds of SS (but only with respect to concentrations greater than 300 parts per
million) multiplied by 40% of Treatment O&M costs divided by total Treatment Plant
influent pounds of SS.
2.5 Revised Method. "Revised Method" means the basis for charging Treatment
O&M costs as provided in this Settlement Agreement. The Revised Method shall not
include charges for Capital Costs and Expenses.
2.6 Treatment Plant. "Treatment Plant" means the City of Yakima's wastewater
treatment plant at 2220 East Viola, currently providing wastewater treatment for Yakima,
Terrace Heights, and Union Gap, as such plant may be improved, expanded, or replaced
from time to time.
2.7 Wastewater Facilities. "Wastewater Facilities" means the Treatment Plant; the
Rudkin Road Lift Station at 1916 Rudkin Road; and to the extent agreed upon by the
Parties, any other facilities that may be constructed, in the future, for joint use by the
Parties.
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3. REVISED METHOD FOR BILLINGS
3.1 Future Calculation of Treatment O&M and Strong Waste. Charges Under the
Agreement. From and after January 1, 1999, Yakima shall no longer assess and bill a
strong waste surcharge to Terrace Heights and Union Gap under Section 3(f) of the
Agreement. Instead, Yakima shall bill Terrace Heights and Union Gap for treatment of
all wastewater, regardless of strength, under Section 3(c) of the Agreement based upon
the actual costs to Yakima to treat and dispose of the wastewater as provided in this
Settlement Agreement.
3.2 Revised Method of Calculating Treatment O&M Charges. Beginning January 1,
1997, Yakima shall calculate the Treatment O&M charges Terrace Heights and Union
Gap pay for wastewater treatment based upon their pro -rata shares of actual Treatment
O&M costs. For these new calculations, eligible Treatment O&M costs are those set
forth in Section 3 of the Agreement, except that they shall not include Capital Costs and
Expenses. All Treatment O&M costs shall be assigned to one of the following
categories: (1) flow measured in volume without considering biochemical oxygen demand
(BOD) and suspended solids (SS); (2) BOD measured in mass; and, (3) SS measured in
mass. For wastewater delivered from January 1, 1997 through December 31, 1998, the
Treatment O&M costs shall be allocated to these three categories in the following
proportions:
Flow: 20% of Treatment O&M costs shall be allocated to flow;
BOD: 40% of Treatment O&M costs shall be allocated to BOD; and
SS: 40% of Treatment O&M costs shall be allocated to SS
From and after January 1, 1999, Yakima shall continue to allocate its costs based on
these proportions, unless or until all Parties agree to revise these proportions. Any such
revision shall be based on: (1) a detailed accounting of distribution of Treatment O&M
costs by Yakima, or (2) a review of the function and classification of each component
of the Treatment Plant and Treatment O&M costs allocated to flow, BOD, and SS of
each component. Such review shall be initiated at the request of any Party by
notification to the other Parties no later than September 1 of the year prior to the year
the revision would be implemented. Such review shall be based upon Ecology- and
EPA -approved methods and documents and generally accepted engineering practices.
3.3 Phasing -in of Revised Method. From January 1, 1996 through December 31,
1998 the Revised Method shall be phased in as follows:
3.3.1 January 1, 1996 - June 30, 1996: Yakima shall calculate flow bills for
Terrace Heights and Union Gap using the Current Method. These bills shall be
recalculated after the end of the year using actual Treatment O&M costs and
actual flows. Strong waste charges shall not be billed or recalculated, since they
were included in this settlement.
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3.3.2 July 1, 1996 - December 31, 1996: Yakima shall calculate flow and
strong waste bills for Terrace Heights and Union Gap using the Current Method.
These bills shall be recalculated after the end of the year using actual Treatment
O&M costs and actual volumes of flow and mass of BOD and SS.
3.3.3 January 1, 1997 - December 31, 1997: Yakima shall calculate bills for
Terrace Heights and Union Gap using the Current Method and the Revised
Method as follows. The rates charged to Terrace Heights and Union Gap shall
equal the calculation under the Current Method plus 40% of the difference
between the amount calculated under the Revised Method and the amount
calculated under the Current Method. The formula is as follows: Rates =
Current Method + .40 x (Revised Method - Current Method).
3.3.4 January 1, 1998 - December 31, 1998: Yakima shall calculate bills for
Terrace Heights and Union Gap using the Current Method and the Revised
Method as follows. The rates charged to Terrace Heights and Union Gap shall
equal the calculation under the Current Method plus 70% of the difference
between the amount calculated under the Revised Method and the amount
calculated under the Current Method. The formula is as follows: Rates =
Current Method + .70 x (Revised Method - Current Method) .
3.4 Monthly Treatment O&M Charge. Subject to the phasing -in of the Revised
Method under Section 3.3, monthly Treatment O&M charges to Terrace Heights and
Union Gap shall be calculated as follows: One -twelfth of the estimated annual Treatment
O&M costs for the Treatment Plant (based on the allocations in Section 3.2) for flow,
BOD, and SS shall be multiplied by Terrace Heights' and Union Gap's percentage (as
applicable) of the total monthly influent flow and loadings of BOD and SS to the
Treatment Plant. The total monthly charge for wastewater treatment to Terrace Heights
and Union Gap, as applicable, equals the sum of the three amounts calculated in
accordance with this Section. Total monthly loadings of BOD and SS shall be
determined by using the average strength of Terrace Heights' or Union Gap's
wastewater, in a particular month, based on the results of the tests conducted in
accordance with Section 4, multiplied by that Party's actual flow for that month. Split
sample test results, for a given day, from Terrace Heights or Union Gap, as applicable
(from the tests conducted pursuant to Sections 4.3 and 4.4), shall be averaged, using the
geometric mean, with Yakima's test results for that day's sample before being included
in the calculation for the monthly average of test results.
3.5 Monthly Pumping O&M Charge (Union Gap only). Monthly charges for O&M
costs for pumping wastewater at the Rudkin Road Lift Station ("Pumping O&M costs")
shall be determined by multiplying the unit cost by the monthly flow contributed by
Union Gap. The unit cost shall be determined by dividing the estimated annual costs of
O&M (which costs are specified in Section 3 of the Agreement) for the Rudkin Road Lift
Station by the estimated annual flow to be pumped by the Rudkin Road Lift Station.
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3.6 Annual Adjustment. Monthly Treatment and Pumping O&M charges to Terrace
Heights and Union Gap, as applicable, shall be recalculated after the end of each year
in accordance with Sections 3.4 and 3.5 except that each recalculation shall use actual
costs of operations and maintenance ("O&M") and the total of each Party's actual
monthly flows and plant loadings of BOD and SS, as applicable, for the previous year
(i.e., the year for which charges are being recalculated). The difference between the
amount billed in the previous year and the actual amount owed as determined urider this
Section ("adjustment") shall be billed or credited to Terrace Heights and/or Union Gap,
as applicable. This adjustment shall be detet ined and billed or credited to Terrace
Heights and Union Gap prior to September 30 (with respect to an adjustment for the
previous year). Beginning with the adjustment for 1997, interest shall be included at the
rate of 6% per annum on; A) any amount owed to Yakima by Terrace Heights or Union
Gap not paid within 60 days of the billing; or B) any amount owed to Terrace Heights
or Union Gap by Yakima not paid or credited within 60 days of the date of billing or
September 30, whichever comes first.
3.7 Union Gap Unmetered Flows.
3.7.1 Definitions: Under the Sewer Service Agreement, City of Yakima -City
of Union Gap dated January 10, 1979, and amendments, Union Gap discharges
wastewater from certain areas in Union Gap into Yakima's wastewater collection
system without measuring the quantity of wastewater using a wastewater flow
meter. For purposes of this Settlement Agreement, such flow is "Union Gap
Unmetered Flow."
3.7.2 Charges: The charge for the Union Gap Unmetered Flow shall be
payable in addition to charges established under Sections 3.1 through 3.6 of this
Settlement Agreement. Such charges for Union Gap Unmetered Flow shall be
calculated as follows: the quantity of such flow shall be multiplied by 0.5 times
the sum of the Treatment Plant unit cost and the Rudkin Road unit cost. The
Treatment Plant unit cost shall be determined by dividing 100% of the annual
Treatment O&M costs by the annual volume of wastewater flow into the
Treatment Plant. The Rudkin Road unit cost shall be determined by dividing
100% of the annual Pumping O&M costs by the annual volume of wastewater
pumped at the Rudkin Road Lift Station. On a monthly basis, Union Gap shall
provide Yakima with the flow information for all accounts which contribute to
Union Gap Unmetered Flow.
3.7.3 Wastewater Flow Meter: At such time that Union Gap installs a
wastewater flow meter at the point of discharge of any unmetered flow into the
Yakima system, this charge for Union Gap Unmetered Flow for the flow at that
location shall be discontinued.
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3.8 Acquisition or Operation by Other Entity.
3.8.1 Public Entity. In the event the Treatment Plant is acquired or operated
by a state, county, or other governmental entity ("agency") such agency may
establish rates and charges or costs for services for wastewater treatment
notwithstanding the provisions of Section 3 of this Settlement Agreement;
provided, however, that Terrace Heights, Union Gap, and Yakima shall all be
subject to the same rate structure for wastewater treatment services.
3.8.2 Private Entity. In the event the Treatment Plant is acquired or operated
by a non-governmental entity, the Parties acknowledge that payments under
Section 3 of this Settlement Agreement may include reasonable profit as may be
authorized by the contract between Yakima and the non-governmental entity;
provided, however, that Terrace Heights, Union Gap, and Yakima shall all be
subject to the same rate structure for wastewater treatment services. Rates
charged to Terrace Heights and Union Gap shall not include amounts for utility
or other taxes imposed by Yakima related to the provision of wastewater
treatment service.
4. SAMPLING AND TESTING
4.1 Testing of Influent. To determine the amounts of BOD and SS in Terrace
Heights' and Union Gap's influent to Yakima's system, the Parties agree to the following
protocol.
4.2 Sampling. Yakima shall take samples of wastewater at locations approved by
representatives of Yakima, Terrace Heights, and Union Gap. Samples shall be as
representative as possible of the overall wastewater stream, and shall be no less than
continuous, uninterrupted 24-hour composite samples, or by such other procedures as are
mutually agreed among Yakima and Terrace Heights and/or Union Gap. On or before
September 30, 1998, the Parties shall install and use flow -paced sampling procedures
using refrigerated ISCO, or mutually agreed-upon equivalent, sampling stations. Yakima
shall take samples a minimum of five (5) times per month. Yakima may take additional
samples at its option; however, Yakima may not charge for more than 10 samples per
month without prior permission from the affected Party. At their option, Union Gap
and/or Terrace Heights may request that Yakima take additional samples during a
particular month. Also, at their option, representatives of Terrace Heights and/or Union
Gap may attend the sampling. Yakima shall give reasonable notice of the date and time
of sampling.
4.3 Split Sampling. Yakima shall prepare split samples when it takes samples
pursuant to Section 4.2, and shall give a split sample to the representative of Terrace
Heights and/or Union Gap who attends the sampling. If no representative attends the
sampling, Yakima shall keep the split sample at the Treatment Plant until noon the
following day.
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4.4 Testing. Analysis of the split samples shall be done by laboratories accredited by
the Washington State Department of Ecology ("Ecology"). Each Party shall make its
Quality Assurance/Quality Control ("QA/QC") results available to any other Party upon
that other Party's request, and any Party may observe any other Party's testing
procedures. Terrace Heights and Union Gap shall continue to reimburse Yakima for
Yakima's actual costs of this sampling and analysis.
4.5 Notification of Sampling Results. Each Party shall promptly notify the other
Parties of its test results.
5. SYSTEM OWNERSHIP - CAPACITY - PAYMENT
5.1 Yakima Owns System. Yakima owns the Wastewater Facilities.
5.2 Capacity Allocation. Union Gap and Terrace Heights have an interest in and right
to capacity ("Treatment Capacity Allocation") of the Treatment Plant. In addition, Union
Gap has an interest in and right to capacity ("Pumping Capacity Allocation") of the
Rudkin Road Lift Station and its related force main. Treatment Capacity Allocation and
Pumping Capacity Allocation are referred to collectively as "Capacity Allocation. " The
Capacity Allocations under Sections 5.5 and 5.6 shall remain in effect as set forth in
Section 5.5.3.
5.3 Future Calculation of Capital Expenditure Charges. From and after January 1,
1996, Yakima shall bill Terrace Heights and Union Gap for their shares of debt service
(including repayment of Public Works Trust Fund (PWTF) loans and excluding any
charges for depreciation) on the following basis:
5.3.1 Schedule of Payments. Charges for debt service shall be determined on
a pro -rata basis by multiplying each Party's Capacity Allocation by the official
schedule for payment for each issuance of bonds. Yakima shall not include any
debt service charges for reserves other than those provided for under Sections
5.3.3, 5.3.4, and 5.4. Yakima shall have the sole responsibility to satisfy bond
reserve requirements and shall own all amounts accumulated as reserves, and
interest thereon. By September 30 of each year, Yakima shall, by invoice or
notice, provide to Terrace Heights and Union Gap a schedule for debt service
payments for the following year. Terrace Heights and Union Gap's payments are
due three working days before the due date listed on the debt service payment
schedule. If any payment is late, interest shall accrue at the rate of 6% on the
outstanding amount as of the due date listed on the debt service payment
schedule.
5.3.2 PWTF. Charges for PWTF loans shall be determined on a pro -rata basis
by multiplying each Party's Capacity Allocation by the amounts due under actual
PWTF invoices. The Parties acknowledge that Yakima may not be able to
provide 30 days notice of the actual amounts due. Yakima shall send Terrace
Heights and Union Gap copies of the invoice as soon after it is received as
practicable. Terrace Heights and Union Gap shall make payment within 30 days
40248159.03
of receiving the invoice.
5.3.3 Debt Service Coverage. Yakima shall include pro -rata charges for debt
service coverage only on debt obtained under covenants that require such
coverage in calculating debt service charges under the Agreement.
5.3.4 Wastewater Facilities Capital Reserve Fund. Pursuant to the
Agreement, the Parties together shall annually deposit into the Wastewater
Facilities Capital Reserve Fund (currently called the 472 Fund) the sum of
$150,000 or other such amount as may be agreed upon by the Parties. Each
Party's pro -rata share of such annual deposit shall be based upon its Treatment
Capacity Allocation. All money Terrace Heights and Union Gap pay into this
fund shall be used exclusively for the benefit of the Treatment Plant.
5.4 Future Capital Costs and Capital Reserve Funds. The Parties understand that, in
the future, Yakima may incur additional debt for capital costs and accumulate capital
reserve funds beyond those required to satisfy debt service requirements. Union Gap and
Terrace Heights shall be obligated to pay, or provide for payment of, their pro rata share
of such capital costs and reserve funds based upon current or future Capacity Allocation.
5.5 Capacity Allocation.
5.5.1 Terrace Heights. Upon execution of this Settlement Agreement, Terrace
Heights shall have obtained treatment capacity in the existing Treatment Plant in
an amount equal to its Treatment Capacity Allocation share (4.0%).
5.5.2 Union Gap. Upon payment of the amount set forth on Exhibit B and the
execution of this Settlement Agreement, Union Gap shall have obtained treatment
capacity in the existing Treatment Plant in an amount equal to its Treatment
Capacity Allocation share (8.1%). In addition, Union Gap shall have obtained
pumping capacity in the existing Rudkin Road Lift Station and its related force
main in an amount equal to its Pumping Capacity Allocation share (57.7%).
5.5.3 Capacity Allocation Term. The Treatment Capacity Allocation under
Section 5.5 and any change under Section 5.6 shall remain in effect for as long
as the Treatment Plant is in operation. The Pumping Capacity Allocation under
Section 5.5 and any change under Section 5.6 shall remain in effect for as long
as the Rudkin Road Lift Station is in operation. For purposes of this section,
operation includes any period of non -operation for repair, renovation,
construction or improvement. Further, the Treatment Capacity Allocation and
Union Gap's Pumping Capacity Allocation shall be binding on any successor or
assign, including but not limited to a contract operator or regional agency,
owning or operating the Wastewater Facilities.
5.6 Permanent Increase in Allocation. Yakima shall expand its Wastewater Facilities
based upon service needs set forth in Comprehensive Plans of all the Parties and
regulatory requirements. Terrace Heights and/or Union Gap may wish to obtain a
40248159.03 8
permanent increase of their Capacity Allocation. Terrace Heights and Union Gap will
provide Yakima with copies of their respective wastewater planning documents (and
amendments) indicating the jurisdiction's respective wastewater treatment needs. Yakima
shall include Union Gap's and Terrace Heights' wastewater treatment needs in its own
planning documents and shall plan for expansion of the Wastewater Facilities based on
the total capacity needs of all the Parties. When Yakima commences planning for
Wastewater Facilities improvement or expansion, Yakima shall notify Union Gap and
Terrace Heights of this activity, and upon reasonable notice by Terrace Heights and/or
Union Gap, Yakima shall include in any comprehensive or system plans, and in facility
design, the additional Capacity Allocation requested by Terrace Heights and/or Union
Gap. Terrace Heights and/or Union Gap, as applicable, shall bear all Capital Costs and
Expenses associated with any increase Terrace Heights or Union Gap requests, including
both expansion costs and costs reflecting any increase in the share of existing wastewater
facilities used to provide service to the Party increasing its Capacity Allocation. Each
Party shall give prior written notice to the other Parties of Comprehensive Plan
processes, drafts, submittals to regulatory agencies and public hearings.
5.7 Temporary Increase. Terrace Heights and/or Union Gap may wish to seek a
temporary increase in its Capacity Allocation in the event that it expects to require more
capacity than its current Capacity Allocation. Yakima shall consider a request for
temporary additional capacity, if at the time of the request, allocating more capacity to
Terrace Heights and/or Union Gap would not adversely affect Yakima's ability to serve
as authorized by state law. Additionally, Terrace Heights and Union Gap may allocate
between each other by separate agreement the capacity recognized in Section 5.5, "or as
later authorized by the Parties.
6. PAYMENT OF FUTURE DISPUTED AMOUNTS INTO ESCROW
In the event that Terrace Heights or Union Gap disputes any charges imposed under the
Agreement or this Settlement Agreement, the Party disputing the charges shall pay all
disputed charges into an interest-bearing escrow account. Disbursements from such
account shall be made on the joint instruction of Yakima and the Party raising the dispute
upon joint resolution of the disputepursuant to Section 9 of the Agreement, through
mediation, or otherwise.
7. CHARGES FOR PAST SERVICE - RELEASE OF CLAIMS
7.1 Yakima -Terrace Heights. Upon execution of this Settlement Agreement and
payment of the amount set forth on Exhibit A, Terrace Heights and Yakima agree to
release their claims against each other, as set forth in paragraph 1.6 above. A chart of
the amounts at issue under this Settlement Agreement and the reconciliation thereof is
attached as Exhibit A, which is incorporated herein by this reference. Yakima shall pay
Terrace Heights the total amount set forth on Exhibit A within 30 days of the effective
date of the Settlement Agreement.
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7.2 Yakima -Union Gap. Upon execution of this Settlement Agreement and payment
of the amount set forth in Exhibit B, Union Gap and Yakima agree to release their claims
against each other as set forth in paragraph 1.6 above. A chart of the amounts at issue
under this Settlement Agreement and the reconciliation thereof is attached as Exhibit B,
which is incorporated herein by this reference. Union Gap shall pay Yakima the total
amount set forth on Exhibit B within 30 days of the effective date of the Settlement
Agreement.
8. RESOLUTION OF ISSUES RELATING TO CAPITAL COSTS
8.1 Debt Service Reconciliation. Upon execution of this Settlement Agreement and
payment of the amounts set forth in Exhibit A and B, Yakima shall have acquired
Terrace Heights' and Union Gap's interests in accumulated reserves that have been
generated by their payment of debt service in the past.
8.2 Depreciation. Terrace Heights' and Union Gap's past depreciation payments have
been credited to and netted out of the equitable shares of the system cost set forth in
Exhibits A and B.
8.3 Equitable Share of System Costs. Upon execution of this Settlement Agreement
and payment of the amounts set forth in Exhibit A and B, Terrace Heights and Union
Gap shall be deemed to have paid an equitable share of the Capital Costs and Expenses
of Yakima's existing Wastewater Facilities, notwithstanding any outstanding share of
local cash.
9. UTILITY TAXES
9.1 Utility Tax Settlement. Yakima shall not include, in charges to Terrace Heights
or Union Gap under the Agreement or this Settlement Agreement, any amounts for its
own utility taxes or any taxes other than those that are both (1) imposed by third parties
and (2) related to the Wastewater Facilities and their operation.
9.2 Order of Dismissal. Upon the respective Parties' receipt of all payments required
under this Settlement Agreement (the reconciliation of which is set forth in Exhibits A
and B), the Parties shall enter into an Order of Dismissal, dismissing the Litigation with
prejudice.
10. REPRESENTATIONS AND WARRANTIES
10.1 Warranty of Capacity to Execute Agreement. Yakima, Terrace Heights, and
Union Gap represent and warrant that no other person or entity has or has had any
interest in the claims, demands, obligations, or causes of action referred to in this
Settlement Agreement except as otherwise set forth herein and that the Parties have the
right and authority to execute this Settlement Agreement and receive any sum specified
in it; and that they have not sold, assigned, transferred, conveyed or otherwise disposed
of any of the claims, demands, obligations, or causes of action referred to in this
Settlement Agreement.
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10.2 Performance. The Parties each agree to diligently perform any other acts and
execute and deliver any further documents which may be reasonable and necessary to
carry out the terms and provisions of this Settlement Agreement.
11. MISCELLANEOUS
11.1 Payment for Benefit of Facility Only. Any money Terrace Heights and Union
Gap pay under the Agreement or the Settlement Agreement shall be used exclusively for
the benefit of the Wastewater Facilities except as is allowed under Section 3.8.
11.2 Binding Effect. This Settlement Agreement, including but not limited to any
Capacity Allocation under Section 5, shall be binding upon and inure to the benefit of
the Parties hereto and their predecessors, successors, heirs and assigns.
11.3 Governing Law. This Settlement Agreement shall be construed and interpreted
in accordance with the laws of the State of Washington.
11.4 No Third -Party Beneficiary. This Settlement Agreement is entered into for the
exclusive benefit of the Parties hereto and shall not be construed to create any rights in
any third party.
11.5 Litigation. Each Party shall bear its own costs and expenses relating to the
mediation and the Litigation, and Yakima shall not include its mediation or the Litigation
costs and expenses in charges to Terrace Heights and Union Gap.
11.6 Entire Agreement. This Settlement Agreement and all exhibits hereto constitute
the entire agreement between the Parties relating to the settlement of the disputes relating
to the claims identified in Section 1.6. No statements, communications, letters or
agreements relating to this settlement shall have any force or effect unless embodied in
this Settlement Agreement or the Exhibits hereto. No representation, promise,
inducement or statement of intention has been made by any Party to any other Party
relating to the settlement which is not set forth in this Settlement Agreement and no Party
shall be bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth.
11.7 Modification of Agreement. No modification or waiver of this Settlement
Agreement or any part hereof shall be valid or effective unless in writing and signed by
all Parties to this Settlement Agreement; no waiver of any breach or condition of this
Settlement Agreement shall be deemed to bea waiver of any other subsequent breach or
condition, whether of like or different nature.
11.8 Authorization to Enter Dismissal. The Parties to this Settlement Agreement
hereby authorize and instruct their attorneys to, upon payment of the amounts set forth
in this Settlement Agreement, seek an order of dismissal of the Litigation with prejudice.
40248159.03
11
11.9 Multiple Counterparts. This Settlement Agreement, or any amendment thereto,
may be executed in multiple counterparts, each of which shall be deemed an original
agreement, and all of which shall constitute one agreement, by each of the Parties hereto
on the date respectively indicated in the acknowledgments of such Parties,
notwithstanding that all of the Parties are not signatories to the original or the same
counterpart, to be effective as of the day and year first above written.'
11.10 Effectiveness. This Settlement Agreement shall become effective upon execution
by all of the Parties and shall remain in effect for as long as Terrace Heights or Union
Gap have an interest in the capacity of the Wastewater Facilities. The Agreement shall
remain in effect pursuant to its terms.
11.11 Accounting. Annually, Yakima shall provide Terrace Heights and Union Gap
with an accounting:with respect to all charges under this Agreement and this Settlement
Agreement.
CITY OF YAKIMA
Roberts
City Clerk
NTRACT Na:
17-45.
RESOLUTION ND..
ATTEST:
i
Kathleen M. Holscher
Union Gap City Clerk
ATTEST:
21,4
R. A. Zais, Jr.
City Manager
Date: � 7 , 1997
CITY OF UNION GAP
,
o
Paul Burlingame
City Manager
Date:
9/et
, 1997
TERRACE HEIGHTS SEWER DISTRICT
Lucille McFarland
District Secretary
40248159.03
orman Alderson
District Manager
Date: Q ,�' , 1997
12
EXHIBIT A
Terrace Heights
Issue
Amounts
Credited
to Terrace Heights
Amounts
Credited
to Yakima
Strong Waste
through 6/30/96
$9,100
Equitable System
Cost Share
$19,000
Unlisted and
Unmetered Flows
$400
Return of Debt
Service. Reserve
Payments
$24,000
Year -End
Adjustments
$3,000
•
Year -End State
Excise Tax Credit
$1,500
Utility Tax
$30,900
Totals:
$59,400
$28,500
Grand Total due to Terrace Heights from Yakima under
Settlement Agreement:
40248159.3
30112M59:06pm
TOTAL
13
$59,400
($28,500)
$30,900
EXHIBIT B
Union Gap
Issue
Amounts Credited
to Union Gap
Amounts
Credited
to Yakima
Strong Waste
through 6/30/96
$135,000
Equitable System
Cost Share
$161,000
Unlisted and
Unmetered Flows
$38,000
Return of Debt
Service Reserve
Payments
$46,000
Year -End
Adjustment
$37,000
Year -End State
Excise Tax Credit
$2,000
Utility Tax
$72,100
Totals:
$157,100
$334,000
Grand Total due to Yakima from Union Gap under
Settlement Agreement:
40248159.3
402265 M:138pm
TOTAL
14
($157,100)
$334,000
$176,900
•
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. I 1
For Meeting Of 8/19/97
ITEM TITLE: Formal Ratification and Authorization to Execute Settlement Agreement
Between the City of Yakima, Union rGap and Terrace Heights Sewer
District for Various Issues Concerning Billing for Wholesale Wastewater
Services
SUBMITTED BY: Chris Waarvick, Wastewater Superintendent
Doug Mayo, Project Engineer
Glenn Rice, Assistant City Manager
Ray Paolella, City Attorney
CONTACT PERSON/TELEPHONE: Chris Waarvick/575-6078
SUMMARY EXPLANATION:
City Council is respectfully requested to ratify and authorize the execution of the attached
Settlement Agreement for various issues concerning billing for wholesale wastewater
services. The execution of this Settlement Agreement concludes years of
misunderstanding over the procedures, methods, and amounts of charges for wholesale
wastewater services to Union Gap and Terrace Heights Sewer District. In the urgency of
concluding the 4 -Party Agreement in the late 70's to ensure grant eligibility, carefully crafted
billing details, which at the time may have seemed unimportant, were left silent and
ultimately became major areas of disagreement.
Resolution X Ordinance _Contract Other (Specify) Settlement Agreement.
Memorandum from Liz Thomas, Preston Gates and Ellis
Funding Source Not Applicable
APPROVED FOR SUBMITTAL.:,---
City Manager
STAFF RECOMMENDATION:
Approve attached resolution ratifying and authorizing the City Manager to execute attached
Settlement Agreement with City of Union Gap and Terrace Heights Sewer District over
wholesale wastewater service billing disputes.
BOARD/COMMISSION RECOMMENDATION:
COUNCIL ACTION:
thlug/yakima sa
August 12, 1997 cw
Execution of this Settlement Agreement will release to the City of Yakima a net amount of
$146,000 -- resulting from credits for capital and past O&M charges and debits from utility
tax resolution (see Tables A and B of the Settlement Agreement). The City of Union Gap
and Terrace Heights continue to be valuable partners with the City of Yakima in providing
necessary wastewater services to the region. City staff believes the relationships between
the parties have ultimately been strengthened as a result of the resolution of this dispute via
the creation of clear billing procedures and responsibilities. The Terrace Heights Sewer
District has authorized their manager to sign the Settlement Agreement. The City of Union
Gap has not, as of this date, ratified this Settlement Agreement, but all indications are that
they are satisfied that all issues are fully and satisfactorily resolved. The Settlement •
Agreement will go before Union Gap's City Council for approval as soon as possible.
•
th/ug/yakima' sa
August 12, 1997 cw
•
PRESTON GATES & ELLIS LLP
ATTORNEYS
MEMORANDUM
To: The Honorable Mayor and Members of the City Council
From: Liz Thomas
Date: August 13, 1997
i
Subject: Summary of Settlement of Terrace Heights/Union Gap Litigation
This memorandum summarizes the history and key terms of the settlement
among the City of Yakima ("City") and Terrace Heights and Union Gap
("Customers") regarding their dispute over amounts due under the Four Party
Agreement and over utility taxes. A complete settlement has been reached and
the Settlement Agreement is ready for signature.
Amounts due to each of the parties on various elements of the dispute are
reflected on Exhibits A and B to the Settlement Agreement. In sum, the City will
be due $146,000 under the settlement. This figure represents the $249,000 due to
the City on non -tax issues (the mediated settlement that was reached last August),
reduced by the $103,000 utility tax settlement. The $146,00 figure also reflects
that after taking tax -related amounts into account, Union Gap owes the City
$176,900, but that is offset by $30,900 that the City owes to Terrace Heights.
Utility tax
In October 1997, Judge Leavitt ruled on summary judgment that the Four
Party Agreement did not permit the City to include its utility tax in rates charged
under that contract to these two customers. (The Judge's ruling did not disturb
application of the utility tax to other customers.) The ruling was based primarily
on the Judge's analysis of the factual context surrounding formation of the Four -
Party Agreement.
After the Customers prevailed on summary judgment, they asserted that the
City owed them a refund. They initially sought a tax refund in excess of
$509,000. After several months of negotiations, the Customers agreed to accept
$103,000 as a complete settlement of their claim to utility tax refunds.
A LIMITED LIABILITY PARTNERSHIP INCLUDING OTHER LIMITED LIABILITY ENTITIES
ANCHORAGE • COEUR D'ALENE • LOS ANGELES • PORTLAND • SEATTLE • SPOKANE • 140N0 LONG • WASHINGTON. D.C.
7111 FTTTH A VFNITF &ITTTF SW CFATTT F W Ac1J1Nf71Y114 ORIfld.7A7R 7(Y. A7Z.7SRf1 FX• VA. 671. 7027 www tmeiM08tPQ ram
Memorandum
August 13, 1997
Page 2
New strong waste billing methodology (Settlement Agreement
Sections 3 and 4)
Past disputes over what amount the Customers owed as a result of their
wastewater exceeding certain standards for biochemical oxygen demand (BOD)
and suspended solids (SS) were resolved through crediting Yakima approximately
$144,000 and instituting a new billing methodology, to be phased in over three
years. Related provisions of the settlement establish protocols for testing the
strength of the Customers' wastewater.
Customers' purchase of permanent capacity (Section 5)
The Customers had a strong interest in obtaining a permanent commitment
of capacity in the Wastewater Facility. The settlement amounts reflect their
guarantee of the following capacity allocations through payment for an equitable
share of the system cost: Terrace Heights - 4% of treatment capacity; Union Gap
- 8.1% of treatment capacity and 57.7% of Rudkin Road pumping capacity. The
capacity allocations will survive any possible termination of the Four Party
Agreement. The Settlement Agreement also contains procedures to be followed
in the event that the Customers wish to purchase additional capacity, and requires
the City to include the Customers' demand in the City's planning for wastewater
facilities. The Settlement Agreement also confirms that the City alone is the
owner of the facilities.
Capital expenditure payments (Section 5.3)
The parties agreed that the Customers could pay the portion of their
charges reflecting debt service on their allocated capacity pursuant to the City's
schedule for payment of debt service on bonds and principal and interest on
Public Works Trust Fund loans. The Customers will pay a pro rata share of
future capital expenditures.
Memorandum
August 13, 1997
Page 3
Conclusion
We recommend that the City approve the Settlement Agreement. The
mediated settlement has three desirable results:
•
•
•
payment of past -due amounts;
a new billing methodology that will be less susceptible to dispute; and
clarification of the City's ownership of the wastewater system and its
commitment to, continue to allocate capacity to the Customers:
cc: Richard A. Zais, Jr.
Chris Waarvick
John Hanson
RaycPaolella
J:\E112573400. 22\2F M37H.DOC
•