04. Interlocal Agreement - Greenacres Water and Sewer DistrictTel 406.758.7709
Fax 406.758.7771
charbalI C kalispell.com
Mayor 'Tammi Fisher
and Kalispell City Council
Charles Ha.rball, City .attorney
Jane Howington, City Manager
Interlocal .agreement with Greenacres water and. Sewer District
November 1, 2010 -- Regular Council meeting
BACKGROUND:The neighborhood, known as Greenacres, located southeast of Kalispell, is
in the unincorporated area of Flathead. County, but otherwise wholly surrounded by the City. A
portion. of Greenacres is served by a community water system. The residents, so served, desire
to make improvements to this water system and have therefore formed a county water and sewer
district. By virtue of this new entity they are now able to obtain the necessary financing through
the sale of revenue bonds.
Bond counsel for Greenacres has indicated that he is not able to provide an unqualified
opinion about the bonds, which would affect the bonds negatively, unless the District is able to
enter into an interlocal agreement with the City of Kalispell regarding the pledged revenues
securing the bonds. This is due to the fact that Greenacres, being wholly surrounded, is subject
to the possibility of a forced annexation by the City of Kalispell should the City make that
determination. In that event the City could determine to subsume the Greenacres water system
into its existing municipal water system which could result in compromising that portion of
revenues pledged to the bonds.
The proposed interlocal agreement addresses this issue. By approving and entering into
this agreement the City is agreeing that, in the event that it annexes this portion of Greenacres,
it will segregate that portion of the water revenues pledged to the bond and make such payments
on the bond when they are due. The consideration that the City is receiving for this agreement is
the improved water infrastructure that it would receive upon any annexation.
RECO ATION: That City Council gives consideration to the proposed interlocal
agreement and pass a motion to approve the agreement and give the authority to the City
Manager to execute it on behalf of the City.
Greenacres Interlocal Agreement Memorandum
October 26, 2010
Page - 2
FISCAL IMPACTS: In the event that the City should determine to annex this portion of
Greenacres, it will benefit from the improved grater infrastructure that has been paid for by the
residents of that community.
Respectfully submitted,
Charl arball, City Attorney
1 ane Howington, City Mann r
Office of City Attorney
City of Kalispell
BETWEENINTERLOCAL AGREEMENT
,: SEWER DISTRIC
AND
THE CITY OF KALISPELL
WITH RESPECT TO CERTAIN FINANCED WATER IMPROVEMENT]
WHEREAS, the Greenacres County water and Sever District (the "District") is a
county water or sewer district, validly organized pursuant to Title 7, Chapter 13, Parts 21 and 22.
The District was incorporated on .August 9, 2006, is located within the boundaries of Flathead
County, Montana, and the boundaries of the District are more particularly described on the
attached Exhibit A.; and
WHEREAS, the District owns and operates a water system that serves persons and
improvements in and about the District (the `District System"); and
WHEREAS, A.S, the District has determined that it is in the best interests of the District to
improve the District System by installing water meters, meter pits, rehabilitating a pumphouse,
replacing main valves and blow -off valves, and related improvements (the "Project"); and
WHEREAS, the District conducted an election on April 27, 2010 to issue water system
revenue bonds in the total aggregate amount of up to $377,000 to pay a portion of the costs of the
Project, and the voters in the District authorized the issuance of the bonds in the amount of up to
$377,000; and
WHEREAS, bonds are now contemplated to be issued in two series, one a Series .A
.Bond in the maximum principal amount of $208,000 (the "Series A. Bond") and the other a
Series B Bond in the maximum principal amount of $208,000 (the "Series B Bond"); and
WHEREAS, the costs of the Project will be paid by a combination of grant funds, funds
of the District, and proceeds derived from the sale of the Series A Bond and the Series B Bond
(together, the "Bonds"), each having a 20-year terra, to the Department of Natural Resources and
Conservation of the State of Montana (the "DNRC") to evidence loans from. the DNRC to the
District in an amount of up to $416,000; and
WHEREAS, provided that the District complies with certain conditions for principal
forgiveness, the District's obligation to repay the Series A Bond will be forgiven; and
WHEREAS, the District is situated adjacent to the City of Kalispell, Montana (the
"City"); and
WHEREAS, the City has informally identified the District as a potential area for
annexation, but has no present intention to annex. the District; and
WHEREAS, so that the District System may be improved with proceeds of the Bonds,
the District and the City desire to enter into this Agreement to memorialize the rights and
obligations of the parties with regard to the District System and the Bonds in the event the
District is annexed into the City and the District System is connected to the municipal water
system owned and operated by the City (the "City System"), recognizing that the City has no
present intention to annex the District into the City.
Now THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the City and the District agree that it is to their mutual advantage to enter
into this Interlocal Agreement (this ",Agreement"') as follows:
Section 1: Purpose
It is the purpose of this Agreement to delineate the responsibilities between the District
and City with respect to the District Systems and the Bonds. The primary purpose of this
Agreement is to ensure the continued security and source of funds for the repayment of principal
of and interest on the Bonds as and when due.
Section. 2: Administration
2.01. No separate legal entity is established by this Agreement.
2.02. The District will administer the funding established for the Project and the City
shall have no responsibility therefor.
Section 3: ownership, operation, and Maintenance of Project
The District owns the District System and will own the Project and the District System as
improved by the Project. The District is responsible for and will pay the cost of operating and
maintaining the District System, as unproved by the Project. The parties agree that in the event
the District should be annexed into the City and the District System connected to the City
System, then (i) the District shall continue to own the District System until such time as all the
indebtedness of the District payable from the revenue of the District System, including the
Bonds, is paid in full, and (ii) the District and the City will agree as to the operation and
maintenance of the District System.
Section 4: The District and the Bonds
4.01. The District is a validly existing water and sewer district under the laws of the
State of Montana. The District agrees that it shall continue in existence as a valid water and
sewer district under the lags of Montana until all indebtedness of the District, including the
Bonds, are paid in full. The City acknowledges the existence and continuation of the District and
the District's responsibility to repay the Bonds over the life of the Bonds.
4.02. The security for the repayment of the Bonds is primarily rates and charges imposed
by the District for the use and availability of the District System. The resolution of the District
authorizing the issuance of the Bonds (the "Bond Resolution") requires that such rates and
charges of the District System will be sufficient to produce Net Revenues (as defined in the Bond
Resolution) in an amount equal to at least 120% of maximum fiscal year debt service on the
Bonds (the "District water Pates"'). Because the Series B Bond was authorized by an election,
the District has the authority and obligation to cause a deficiency tax levy to be levied by
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Flathead County, Montana in the event Net Revenues of the District System are insufficient to
repay the Series B Bond (the "Deficiency Tax Levy").
Section 5: Annexation
If the District is annexed into the City and the City System is connected to the District
System: (i) the District shall continue to remain in existence as a valid county water and sewer
district within the State of Montana until the Bonds and any other indebtedness of the District are
paid in full in accordance with their terms; (ii) the District shall continue charging and collecting,
or cause to be charged and collected, that portion of the District water Rates to and from persons
and entities who are within the boundaries of the District and/or who are or were served by the
District System, in an amount sufficient to produce Net Revenues of the District System at least
equal to 120% of the fiscal year debt service requirements of the Bonds (the "Bond Repayment
Charge'), from which the District shall remit to the holder of the Bonds an amount sufficient to
pay the principal of and interest on the Bonds as and when due, as provided below; and (iii) the
dollar amount of the Bond Repayment Charge charged to persons or entities in the District or
who are or were served by the District System that is set aside for and applied to the repayment
of the Bonds shall be a direct offset against and reduce in the amount of such Bond Repayment
Charge any water billing that the City charges to such persons or entities for the use or
availability of the City System. To implement the foregoing sentence, in the event the District is
annexed into the City and the City System is connected to the District System, the District shall
present to the City a list of the addresses and owners of the persons or entities who are charged
the Bond Repayment Charge and a schedule showing the amount of the Bond Repayment Charge
that is to be set aside for and applied to the repayment of the Bonds, as such list may be updated
from time to time to show the current owners. The City shall then bill the persons or entities
who are subject to the Bond Repayment Charge an amount equal to the amount all users of the
City System are customarily charged, in accordance with the rate schedules of the City for all
City water customers as then in effect. From collections of such City water billings, the City
shall segregate an amount equal to the Bond Repayment Charge and deposit monthly the
cumulative amount of the Bond Repayment Charge into a subaccount in the City's water system
funds denominated the Greenacres Subaccount and remit monthly all amounts in the Greenacres
Subaccount to a designated official of the District. The District shall deposit amounts
representing the Bond Repayment Charge upon receipt from the City in the Revenue Bond
Account of the District and apply all such amounts to the payment of the Bonds as and when
due.
The District shall cause the Deficiency Tax Levy to be levied if at any time during the
term of the Series B Bonds the District water Rates are or the Bond Repayment Charge is
insufficient to pay the debt service of the Series B Bonds. In addition, the City shall timely
enforce all remedies available to the City against any person or entity whose water bill includes
the Bond Repayment Charge for failure to pay the City bill for water service, including shutting
off water service.
No provision in this Agreement shall prohibit the City from acquiring, with the prior
agreement of the District, the District System and in connection therewith repaying and
discharging in full all amounts owing on the Bonds or the City otherwise paying and redeeming
in full the Bonds.
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The parties acknowledge that the primary purpose of this Agreement is to provide for the
ongoing security for the repayment of the Bonds in the event the District is annexed into the City
and the City System is connected to the District System.. This Agreement shall not be used or
referenced to show, or construed to have a bearing on, whether the District may be annexed into
the City or to enhance or diminish any legal rights or obligations of the parties with respect to
annexation itself.
Section 6: Miscellaneous
6.01. This .Agreement and any right or obligation hereunder shall not be assigned or
amended except in writing and only following the express written consent of the parties.
6.02. This Agreement is entered into voluntarily, with each party, through its governing
body, having read and approved by resolution the same upon an independent consideration of its
terms and conditions. The District and the City have full right, power, and authority to execute,
deliver, and perform their respective obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.03. This Agreement shall be binding upon each of the parties and their respective
successors and assigns and the terms hereof shall be effective on the date last set forth below (or
if there are two different dates, the later of such dates).
6.04. If any term or provision of this Agreement shall to any extent be invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby, and each term or
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
6.05. This Agreement may be executed in any number of counterparts, which when
taken together, shall constitute one and the same agreement.
Section 7: Interlocal Agreement
This Agreement is an interlocal agreement under Section 7- l l - 104, M.C.A. To that end,
this Agreement shall remain in effect until all the obligations of each party are fully discharged;
the District is a valid and existing water and sewer district and the City is a valid and existing
municipal corporation; the financial obligations of each party hereunder shall be satisfied from
amounts each party has on hand and available therefor; no joint board or budget shall result from
the undertakings set forth in this Agreement; no retirement or other employee obligations are
shared between. the District and the City as a result of this Agreement; and no partnership or joint
venture exists or shall be deemed to exist between the parties.
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IN WITNESS WHEREOF, the City of Kalispell and the District have caused this instrument to
be duly executed by their proper officers on the day of November, 20 10.
The District:
The City:
GREENACRES COUNTY WATER AND
SEWER DISTRICT
President of the Board
Authorized by Board Resolution, dated
,200.
CITY OF KALISPELL
ob
City Manager
Authorized by Motion of the City Council,
dated November I , 20 10.