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F4. Evergreen Sewer District AgreementcrTYOF # -�. City of Kalispell Post Office Box 1997 - Kalispell, Montana. 59903 WITelephone: (406) 758-7701 Fax: (406) 758-7758 MONTANA MEMORANDUM To: Mayor Johnson and City Council From: Doug Russell, City Manager Re: Proposed Evergreen Sanitary Sewer Treatment Agreement Meeting Date: July 20, 2015 BACKGROUND: In 1990, The City of Kalispell entered into an agreement with the Evergreen Sewer District to convey sewage to the Kalispell Wastewater Treatment Plant. This agreement expires in July of 2015. Staff has been working with representatives from the Evergreen district to develop a new agreement based on the impacts to the WWTP and the comparison to the residential rates for treatment for households in Kalispell. At the work session this past Monday, the agreement was reviewed and discussed. It was requested that a limit be placed on the amount of conveyance allocated to Evergreen, similar to the previous agreement. The attached agreement has this modification to the language, placing the capacity at 0.782 million gallons a day. The previous agreement identified a limit of 0.682 gallons. The increase accounts for new service boundaries, a portion of which includes areas that received council approval for service outside of the previous district boundaries. As the current agreement expires on July 25, an extension is also provided, in case the proposed agreement is tabled or rejected. ALTERNATIVE RECOMMENDATION: Should council table or reject the proposed agreement, it is recommended that council approve the attached extension to the current agreement. FINANCIAL IMPACTS: The new agreement provides for a formula where a residence in Evergreen will be paying the same amount for sewer treatment as would a resident in Kalispell. In total, it is estimated that the City of Kalispell would receive $530,000 in annual revenue under this agreement. RECOMMENDED ACTION: It is recommended that the City Council approve the attached agreement between the City of Kalispell and the Flathead County Water and Sewer District No. 1- Evergreen. ATTACHMENTS: Sanitary Sewer Treatment Agreement Extension of Term of Interlocal Agreement SANITARY SEWER TREATMENT AGREEMENT between CITY OF KALISPELL and FLATHEAD COUNTY WATER AND SEWER DISTRICT NO. 1 EVERGREEN This Agreement entered into this 1st day of July, 2015, by and between the City of Kalispell [hereinafter "Kalispell"] and Flathead County Water and Sewer District No. 1 — Evergreen [hereinafter "Evergreen"], as evidenced by their signatures hereon agree as follows: Section l: Recitals WHEREAS, Kalispell is a municipality of the State of Montana located within Flathead County and organized pursuant to Title 7 Chapter 3 Part 43. Kalispell owns, maintains and provides certain utility services, including wastewater treatment, to its city residents with oversight from the Montana State Department of Environmental Quality. Kalispell may legally provide its utilities to serve areas outside of Kalispell for consideration and if it is deemed to be in the best interests of Kalispell and its residents; and WHEREAS, Evergreen is a duly formed County Water and Sewer District created under the authority of the Montana state law. Evergreen currently possesses the statutory authority to provide water supply and distribution, wastewater collection, treatment and conveyance to properties in the proximity of its facilities with oversight from the Montana State Department of Environmental Quality; and WHEREAS, Evergreen entered into an Interlocal Agreement with Kalispell dated the 25th day of July, 1990, hereinafter referred to as the "1990 Interlocal Agreement", in which Evergreen conveys the sewage it collects to Kalispell WWTP. The 1990 Interlocal Agreement expires July 25, 2015; and WHEREAS, Evergreen entered into an Interlocal Agreement with Kalispell dated the 30th day of November, 2007, hereinafter referred to as the "2007 Interlocal Agreement", which delineated the provision of services and responsibilities of Kalispell and Evergreen with respect to municipal wastewater services that may be provided to properties located outside of RSID 132 but within such proximity to Evergreen's collection and conveyance system. The 2007 Interlocal Agreement remains in effect until modified or repealed by all necessary parties; and WHEREAS, Kalispell is required to implement and enforce a pretreatment program to control discharges from all industrial users of its wastewater treatment system pursuant to requirements set forth in 40 CFR Part 403. Evergreen is required to authorize Kalispell to implement and enforce Kalispell's sewer use ordinance and 40 CFR 403 within Evergreen's service area. Page 1 of 7 WHEREAS, it is in the best interests of all of the citizens of Flathead County that water quality continue to be protected by providing municipal sewage treatment services to all properties presently served by Evergreen, together with other properties located within such proximity to the Evergreen sewage collection and conveyance facilities that they may be served by Evergreen for collection and conveyance of sewage to the Kalispell WWTP. NOW THEREFORE, IT IS AGREED by and between Kalispell and Evergreen that it is to their mutual advantage to adopt this Agreement as follows: Section 2: Purpose It is the purpose of this Agreement to delineate the provision of services and responsibilities of Kalispell and Evergreen with respect to municipal waste water services that may be provided to properties connecting to Evergreen's collection and conveyance facilities that such property may be served by Evergreen. Section 3: Administration of Municipal Sewer Services 3.01 No separate legal entity is established by this Agreement. 3.02 Agreement: Evergreen agrees that it shall abide by all current Code, Rules, Regulations, Resolutions, and Ordinances, including but not limited to prohibited wastes, discharge limits, surcharges above base strengths, treatment plant impact fee, and pretreatment rules of the City of Kalispell, State Department of Environmental Quality, and the Environmental Protection Agency relating to sewage treatment. Evergreen agrees that it shall inform its users of the requirements they are subject to and the penalties to which such users are subject, for violation of the discharge requirements and prohibitions. 3.03 Service Area: It is understood between the parties hereto that this Agreement obligates Kalispell to accept normal municipal sewage from Evergreen for that area comprising the Service Area as show in Exhibit A. The volume rate will not exceed 0.782 million gallon average daily flow for the area within the Evergreen boundary as shown in Exhibit A. Volume rate outside of the Evergreen boundary is not applied against the 0.782 million gallons per day. For the purpose of this volume rate, the number of days of flow measurement will be 75 days. If the volume rate is fully utilized Evergreen may request an approval of a volume rate increase from the Kalispell City Council. 3.04 Consent Required by Kalispell: In the event owners of property outside of that portion of the Service Area as shown in Exhibit A attached hereto, operated by Evergreen, said property owner(s) must, prior to connection, apply for and obtain a written consent by the Kalispell City Council, or designee. Kalispell may decline the application for any reason. If Kalispell accepts the application, the property owner(s) or users shall provide a written execution of a waiver to protest annexation, consent to withdraw from the rural fire district, Page 2 of 7 enter into a development and or pretreatment agreement with Kalispell, meet pretreatment regulations, and pay the treatment plant impact fee. Evergreen is authorized hereunder to connect any property to its collection and conveyance system within that portion of the Evergreen District Boundary as shown in Exhibit A attached hereto, unless and until, Evergreen is notified by Kalispell that there is not sufficient treatment capacity at the Kalispell WWTP to treat any additional sewage from Evergreen. Property located inside the Evergreen District Boundary, prior to allowing connection by Evergreen, is required to obtain written consent of Kalispell's City Manager, or designee, after satisfying the requirement of paying the treatment plant impact fee. Annually Evergreen shall provide Kalispell an updated map highlighting properties that are connected to the Evergreen Sewer System and shall provide average and maximum daily flows from Evergreen to the Kalispell WWTP. This will assist Kalispell in making informed decisions on plant capacity and future plant upgrades. 3.05 Ownership of Kalispell WWTP: Kalispell shall remain the sole owner of Kalispell WWTP. 3.06 Ownership of Sewage Conveyance Lines and Facilities: Evergreen shall remain the sole owner of its collection and conveyance system. 3.07 Quality of Sewage to be treated: It is understood between the parties it is Evergreen's responsibility to manage the quality of sewage discharged to the Kalispell Treatment Plant. The effluent sewage from Evergreen will meet the sewage quality limits as outlined in City Code, Ordinance, Resolutions, and Regulations. Evergreen shall not discharge to the Kalispell Wastewater Treatment Facility Prohibited Wastes as outlined in City Code, Ordinance, Resolution and Regulations that will injure or interfere with any sewage treatment process, cause Kalispell a permit discharge violation, constitute a hazard to humans or animals, create a public nuisance, may contaminate sewage sludge, create any hazard in, or have an adverse effect on the water receiving discharge from the treatment facility. If Evergreen's discharge is not within the specified limits required by City Code, Ordinance, Resolutions, and Regulation, Evergreen shall be notified and thereafter shall immediately begin an investigation for sources of contamination of the sewage and take action necessary to eliminate the contamination. Kalispell shall assess Evergreen the cost of all sampling, treatment plant operation damages, and discharge permit penalties Kalispell has been assessed from contamination from Evergreen's discharge to the treatment facility. When Evergreen's average daily flows increase greater than 20% in a 15-day period, Evergreen shall begin an investigation for sources of excess ground and surface water flows and keep Kalispell informed of the findings and actions being taken to alleviate the excess flows. 3.08 Odor Abatement: In order to reduce the odors at the Treatment Plant where the effluent arrives at the end of Evergreen's force main, Evergreen shall construct and maintain odor Page 3 of 7 treatment facilities within two years of this signed agreement that will reduce the amount of hydrogen sulfide gas and odor released at the end point of the force main at the Kalispell Treatment Plant. 3.09 Sewage Treatment Rate: Evergreen agrees to pay to Kalispell the sewer treatment volume rate, base rate and surcharge rate for the sewage received from Evergreen at the Kalispell Wastewater Treatment Plant. The rate charged to Evergreen will not exceed the sewer treatment rate charge for a property located within the Kalispell City Limits based solely upon the service properties being located outside of the Kalispell City Limits. The rate excludes the following: I. any portion of the Kalispell Treatment Rate which is for the cost/expense of collection/conveyance of sewage from properties within Kalispell to the Kalispell Wastewater Treatment Plant, 2. treatment cost related to Kalispell's inflow and infiltration (I&I), and finally 3. any billing expenses for the owner of the properties within the City of Kalispell. Each year's rate(s) calculation will be based on Evergreen's and Kalispell's actuals for flows and the prior fiscal year ending June 30th. Included in the rate calculation will be a contribution to the replacement fund for either $450,000 or 50% of depreciation whichever is lower per fiscal year. Evergreen shall provide Kalispell the number of customers and flow volume for each year. Likewise, Kalispell shall provide Evergreen with the number of customers, volume billed and flow volume. The rate(s) formula is in Exhibit B attached hereto and incorporated fully herein by this reference. The entire volume of sewage from Evergreen will be measured by Evergreen's meter tied into Kalispell's telemetry -monitoring system, tested, and calibrated yearly. The metering system will be verified for compliance at least yearly through coordination between Evergreen and Kalispell. Kalispell shall bill Evergreen for sewage treatment on the tenth of each month. Payments are due in full no later than ten (10) days after mailing of the Kalispell bill. 3.10 Rate Study: A treatment rate study, performed by a financial consultant, may be performed during the term of this agreement. Any rate study conducted will establish individual treatment rates (both volume and base) for both Kalispell and Evergreen and will supersede the rate method established in 3.08. Evergreen agrees to pay Kalispell the sewer treatment rates for the sewage received from Evergreen at the Kalispell Wastewater Treatment Plant as established in the rate study. Kalispell shall work cooperatively with Evergreen in the rate development process to ensure the rates established are not discriminatory or based on out - of -city designation. Rather, the rate is to be based on the cost of service to treat Evergreen's sewer discharge, the replacement fund contribution is maintained, and the rate takes into account the exclusions of items I through 3 in Section 3.08. Page 4 of 7 3.11 Pretreatment: Evergreen agrees to authorize Kalispell to implement and enforce Kalispell's sewer use ordinance and 40 CFR 403 within Evergreen's service area. Kalispell shall: (1) update the industrial waste survey; (2) issue permits to all industrial users required to obtain a permit; (3) conduct inspections, sampling, and analysis; (4) take all appropriate enforcement action as outlined in the Kalispell's sewer use ordinance; and (5) perform any other technical or administrative duties the Parties deem appropriate. In addition, Kalispell may, as agent of Evergreen, take emergency action to stop or prevent any discharge which presents or may present an imminent danger to the health or welfare of humans, which appears to threaten the environment, or which threatens to cause interference, pass through, or sludge contamination. If the authority of Kalispell to act as agent for Evergreen under this Agreement is questioned by an industrial user, court of law, or otherwise, Evergreen shall take whatever action is necessary to ensure the implementation and enforcement of its sewer use ordinance against its industrial users, including, but not limited to, implementing and enforcing its own sewer use ordinance on its behalf and/or amending this Agreement to clarify the Control Authority's authority. Evergreen shall reimburse Kalispell for costs incurred in implementing and enforcing a pretreatment program to control discharges from all industrial users of its wastewater treatment system pursuant to requirements set forth in 40 CFR Part 403. Kalispell shall provide Evergreen with a detailed accounting of all such costs. The Parties shall review and revise this Agreement to ensure compliance with the Federal Clean Water Act (42 U.S.C. 1251 et seq.) and rules and regulations (40 CFR Part 403) issued thereunder, as necessary, but at least once every 5 years on a date to be determined by the Parties. 3.12 Force Main: The parties agree that a flow of 200 gpm is reserved for Kalispell in Evergreen's force main from the intersection of Willow Glen Drive and Concord Lane to the Kalispell WWTP. Section 4: Applicable Law These parties agree that this Agreement will be governed in all respects by the laws of the State of Montana and the parties expressly agree that venue will be in Flathead County, Montana and no other venue. Section 5: Binding Affect This Agreement will be binding upon and will inure to the benefit of the legal representatives, successors, and assigns of the parties. Page 5 of 7 Section 6: No Third Party Beneficiary This Agreement is for the exclusive benefit of the parties and will not constitute a third party beneficiary agreement and will not be relied upon or enforced by a third party. Section 7: Dispute Resolution a. Any claim, controversy, or dispute between the parties, their agents, employees, or representatives will be resolved first by negotiation between senior -level personnel from each party duly authorized to execute settlement agreements. Upon mutual agreement of the parties, the parties may invite an independent, disinterested mediator to assist in the negotiated settlement discussions. b. If the parties are unable to resolve the dispute within forty-five (45) days from the date the dispute was first raised, then such dispute will be resolved in a court of competent jurisdiction in compliance with the Applicable Law provisions of this Agreement. In that event, the prevailing party shall be entitled to recover attorney fees and costs of the litigation. Section 8: Severability If any portion of this Agreement will be held to be void or unenforceable, the balance thereof will continue to be effective. Section 9: Ori ing al Agreements and Resolutions of Kalispell All terms of the 1990, 1996, and 2007 Interlocal Agreements and Addendum between the parties hereto and Resolution No. 5103 of Kalispell augmenting those agreements will remain in full force and effect until the effective date of this Agreement, at which time they will be superseded by the adoption of this Agreement. Section 10: Effective Date This Agreement will become effective with the fiscal year beginning July 1, 2015. The process to transfer Trumble Creek Crossing customers from Kalispell to Evergreen will commence upon execution of the agreement. Section 11: Term of Agreement The duration of this contract is 20 years. This agreement is negotiable at any time if both parties so consent in writing. If no notice to terminate or renegotiate is received at least three months prior to expiration of this Agreement, then this agreement will renew for an additional five-year term subject to the preceding clause. Page 6 of 7 IN WITNESS WHEREOF, the local governments have caused this instrument to be duly executed by their proper officers as follows: CITY OF KALISPELL APPROVED BY THE CITY MANAGER OF THE CITY OF KALISPELL on the day of 201 , as authorized by the City Council to execute this Agreement. ATTEST: By: By: Aimee Brunckhorst City Clerk (SEAL) Doug Russell City Manager FLATHEAD COUNTY WATER AND SEWER DISTRICT NO. 1 EVERGREEN APPROVED BY THE BOARD OF DIRECTORS OF THE FLATHEAD COUNTY WATER AND SEWER DISTRICT NO. 1 EVERGREEN on the day of , 201 ATTEST: Roberta Struck Secretary John T Fallon Board President Page 7 of 7 Exhibit B Evergreen Rate Calculation Worksheet Kalispell Current Sewer Utility Rate FY Actual Flows/1,000 gallons Kalispell Evergreen Total 816,779 159,355 976,134 Monthly Base Rate $/1,000 gallons $8.44 $4.78 WWTP Collection Billing Expense Sum FY14/15 FY14/15 FY14/15 A Total Personal Services (includes lab personal for WWTP) $ 673,603 $ 347,624 $ 96,642 B Total Maintenance & Operations (includes lab for WWTP) $ 890,625 $ 398,054 $ 80,729 C Capital Outlay from Operating Budget (rates) $ 119,000 $ 545,826 D Capital Outlay from Bond & Impact Fees $ 45,000 $ 1,005,640 E Capital Outlay/Maint from Replacement Funds $ 953,610 $ - F Debt Service from Rates $ 871,565 $ 2,189 G Replacement Funds $ 411,599 $ - H Depreciation Expense (non cash) $ 842,146 $ 793,775 Expenditure Total $ 4,807,148 $ 3,093,108 $ 177,371 Less Capital Outlay/Maint from Replacement Funds (E) $ (953,610) Capital Outlay from Bond & Impact Fees (D) $ (45,000) $ (1,005,640) Depreciation Expense/Non Cash (H) $ (842,146) $ (793,775) Total $ 2,966,392 $ 1,293,693 $ 177,371 Step 1: Calculate % split for cost per 1,000 gallon based on actual expenses Calculated Rate Treatment $ 3.04 65.7% percent of total Calculated Rate Collection $ 1.58 34.3% percent of total Total $ 4.62 100.0% Step 2: Actual per 1000 gal rate, minus % for I/I, minus billing cost, percent split from Step 1 calculation applied Total actual charged pre 1,000 gal $ 4.78 Kalispell Rate minus % of I/I $ 4.09 billed/1,000 gal % I/I Billing cost per 1,000 gal $ 0.22 699,625 14.3% Rate per/ gal minus billing cost $ 3.88 Treatment per 1,000 gallons $ Collection per 1,000 gallons $ Step 3: Base rate application with Step 1 calculated percent split Treatment Monthly Base Rate $ Step 4: Evergreen's Yearly Volume and Base Rates 2.55 65.7% of $ 3.88 1.33 34.3% of $ 3.88 5.55 65.7% of $ 8.44 Volume Rate $ 2.55 $/1,000 gallons Monthly Base Rate $ 5.55 per month per account Evergreen Accounts 1,884 Accounts provided by Evergreen Estimated Annual Cost $ 531,596.64 per year EXTENSION OF TERM OF INTERLOCAL AGREEMENT BETWEEN THE CITY OF KALISPELL AND FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 EVERGREEN The Parties, CITY OF KALISPELL, hereinafter "the City", and FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 EVERGREEN, hereinafter "the District", hereby enter into this agreement to extend the term of the existing Interlocal Agreement between them as described below. WHEREAS, the District entered into an Interlocal Agreement with the City dated the 25th day of June, 1990, hereinafter referred to as the "1990 Interlocal Agreement'', in which it conveys the sewage it collects to the City's Wastewater Treatment Plant; and WHEREAS, the term of the 1990 Interlocal Agreement is for 25 years and is due to expire on the 25th day of July, 2015; and WHEREAS, the parties have been in earnest discussions regarding a new Interlocal agreement that will succeed the 1990 Interlocal Agreement and desire to continue those discussions in an effort to reach such agreement, which the parties agree will require more time than remains in the current agreement. NOW THEREFORE, the parties agree that it is in the best interests of their respective constituencies to extend the 1990 Interlocal Agreement for a period of time that extends to the I8th day of September, 2015. All other terms of the 1990 Interlocal Agreement between the parties shall remain in full force and effect. IN WITNESS WHEREOF, the local governments have caused this instrument to be duly executed by their proper officers as follows: CITY OF KALISPELL APPROVED BY THE CITYMANAGER OF THE CITY OF KALISPELL on the day of June, 2015, as authorized the City Council to execute the Interlocal Agreement. ATTEST: Aimee Brunckhorst, CMC City Clerk (SEAL) Doug Russell City Manager FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 EVERGREEN APPROVED BY THE BOARD OF DIRECTORS OF THE FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 EVERGREEN on the day of June, 2015. Jack Fallon President ATTEST: Roberta Struck Secretary