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3. Interlocal Agreement - Evergreen Sewer and WaterCity of Kalispell Charles A. Harball office of City Attorney City Attorney 312 First Avenue East P.C. Box 1997 Kalispell, MT 59903-1997 MEMORANDUM TO: Mayor Pamela B. Kennedy and Kalispell City Council FROM: Charles Harball, City Attorney James H. Patrick, City Manager Tel 406.758.7708 Fax 406.758.7771. charbalI @kalispelLcam SUBJECT: Interlocal Agreement between. the City and Evergreen Sewer and Water MEETING DATE: Monday, November 1.9, 2007 -- Regular Meeting BACKGROUND: The City Manager has been negotiating with Evergreen Sewer and Water regarding the sewer services to be provided to Trumbull Creek Crossing, Phase I Subdivision and other properties seeking to be served outside of the City but along the boundaries of the Evergreen RSID. Drafts of an agreement were exchanged between the parties and the Evergreen Board, on November 14, 2007 approved the attached agreement with the Schedule A rate schedule. Evergreen staff, with the assistance of Ronald Foltz, a consulting CPA, was tasked with preparing the sewer rate structure, attached to the agreement as Schedule A. City staff, Amy Robertson, Rick Wills and Jim Hansz analyzed the schedule and agrees with the methodology. Of issues that are critical to Council, the District is in agreement with the City that the homes and businesses in these areas shall be customers of the City and further that the lines shall be owned and maintained by the District until such time as the City chooses to divert the sewage to its treatment plant by conveyance other than Evergreen. Evergreen shall bill the City for its usage of Evergreen lines, pursuant to a rate structure attached as Schedule A. RECOMMENDATION: That the City Council make a motion to authorize the City Manager to sign the interlocal agreement. Evergreen Interlacai Agreement November 14, 2007 Page - 2 FISCAL EFFECTS: The fiscal effect of this action is complicated because while it increases the obligations of the City to provide wastewater treatment, it should be, in most cases the most cast efficient method of conveying the sewage to the City's treatment plant. Respectfully submitted, Charles Ha all, City Attorney Ja es H. Patrick, City Manager Office of City Attorney City of Kalispell INTERLOCAL AGREEMENT CITY OF KALISPELL And FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 EVERGREEN Section 1: Recitals WHEREAS, Title 7, Chapter 11., Part 1, M.C.A., known as the `Interlocal Cooperation Act," permits governmental units to make the most efficient use of their powers by enabling them to cooperate with other local governmental units on a basis of mutual advantage and thereby to provide services and facilities in a manner and pursuant to forms of governmental organization that will accord best with geographic, economic, population, and other factors influencing the needs and development of local communities; and WHEREAS, said Act provides that an interlocal agreement may be authorized and approved by the governing body of each party to said contract; and WHEREAS, the City of Kalispell [hereinafter "City"] is a municipality of the State of Montana located within Flathead County and organized pursuant to Title 7 Chapter 3 Part 43. The City owns, maintains and provides certain utility services, including waste water treatment, to its city residents with oversight from the Montana State Department of Environmental Quality. The City may legally provide its utilities to serve areas outside of the City for consideration, if it is deemed to be in the best interests of the City and its residents. WHEREAS, Flathead County Water and Sewer District No. 1, Evergreen [hereinafter "District"] is a duly formed County utility created under the authority of the Montana state law. The District currently possesses the statutory authority to provide water and sewer utility services, inclusive of a wastewater collection system to properties in the proximity of its facilities with oversight from the Montana State Department of Environmental Quality. WHEREAS, the District entered into an Interlocal Agreement with the City dated the 25t' day of June, 1990, hereinafter referred to as the "1990 Interlocal Agreement's, in which it conveys the sewage it collects to the City's Wastewater Treatment Plant. The 1990 Interlocal. Agreement provides that "In the event property owner(s) or users outside the exterior boundaries of RS ID 132 desire to connect mains or services to the collection system operated by the District, said property owner(s) must, prior to connection, obtain a written consent executed by the chief INTERLOCAL AGREEMENT Page - 1 of 6 executive officer of the City which may include a written execution of a waiver to protest annexation and consent to withdraw from the rural fire district and any other such documents the City may require"; and WHEREAS, it is in the best interests of all of the citizens of Flathead County that water quality of the shared aquifer be protected by providing municipal sewer services to those properties seeking urban density development and located within such proximity to the District's collection system that they may be served by the District for collection and conveyance of sewage to the City's Wastewater Treatment Plant. NOW THEREFORE, IT IS AGREED by and between the City of Kalispell and the Flathead County Water and Sewer District No. 1, Evergreen, each a local government agency of the State of Montana, and pursuant to MCA 7-11-104, that it is to their mutual benefit to adopt this Interlocal Agreement as follows: Section 2: Purpose ����� 1 Fl 11�II II -I -I III -III II IIII II IIIII IIIIIIIIII.1 I.�I�I� It is the purpose of this Agreement to delineate the provision of services and responsibilities of the City and the District with respect to municipal wastewater services that may be provided to properties located outside of RSID 132 but within such proximity to the District's collection system that such property may be served by the District. Section 3: Administration of Municipal Sewer Services 3.01. No separate legal entity is established by this Interlocal Agreement. 3.02. The City and the District agree to work cooperatively to provide a reasonable opportunity for those properties seeking urban density development and located within such proximity to the District's collection system to be served by the City's wastewater treatment plant. In the event that both the City and the District consent to serve such properties, the sewage flows from these properties will not be attributable to the District's capacity as defined in the 1990 Interlocal Agreement. 3.03. Consent Required - The City. In the event property owner(s) or users outside the boundaries of RS ID 132 desire to connect mains or services to the collection system operated by the District, said property owner(s) must, prior to connection, apply for and obtain a written consent of the City Manager as authorized by the City Council. The City may decline the application if the preliminary engineering studies determine that the sewage is better conveyed to the City" s Wastewater Treatment Plant through a different conveyance system or if State or Federal regulations develop constraints to the capacity of the Treatment Plant that limits its capabilities to treat further sewage. If the City accepts the application, the property owner(s) or users shall provide a written execution of a waiver to protest annexation and consent to withdraw from the rural fire district. The City may also require the applicant property owner(s) or users to enter into any other INTERLOCAL AGREEMENT page - 2 of 6 development agreement with the City and pay such impact fees as may be required to manage the new demands upon City services as the development may create. 3.04. Consent Required - The District. In the event property owner(s) or users outside the boundaries of RSID 132 desire to connect mains or services to the collection system operated by the District, said property owner(s) after receiving the consent from the City, under paragraph 3.03 hereof, together with written notification of this approval from the City to the District, must prior to connection, apply for and obtain a written consent executed by the General Manager as authorized by the District's Board of Directors. The District may decline the application if the preliminary engineering studies determine that the sewage is better conveyed to the City's Waste Water Treatment Plant through a different conveyance system or if there are constraints in the capacity of the District's collection system that limits its capabilities to convey further sewage. If the District accepts the application, the property owner(s) or users may be required to enter into separate agreements With the District and to pay development costs or impact fees to the District. 3.05. Ownership of .Sewage Conveyance Lines and Facilities. The ownership, as well as the maintenance and operation obligation of the specific sewage collection system constructed on property outside of RSID 132 and that become connected to mains or services of the collection system operated by the District, pursuant to this Agreement, shall belong to the District until such time as any other sewage conveyance line, owned and maintained by the City, is constructed and diverts such sewage from the District's collection system. At that time and in that event, the ownership, as well as the maintenance and operation obligation of that sewage collection system, constructed upon such developed property outside RSID 132 shall be conveyed by the District to the City and this Agreement will have no further force and effect as to that specific developed property outside RSID 132. 3.06 City CustomerslBilling of Services. All customers outside RSID 132 that are utilizing the District's collection system and the City's Wastewater Treatment Plant shall be customers of the City and pay to the City whatever fees/charges the City shall assess them as City sewer customers. The District shall provide the City with the necessary water meter data for the City to determine customer sewer usage. 3.07 Fee Charged City by the District. The District shall charge the City a monthly fee for the sewage collected and conveyed from properties outside RSID 132 via the District's collection system to the City's Wastewater Treatment Plant. The District shall provide the City a monthly statement. The agreed upon fee payable for the collection and conveyance of sewage through the District's collection system to the City's Wastewater Treatment Plant is set forth on Appendix A attached hereto and by this reference incorporated herein. INTERLOCAL AGREEMENT Page - 3 of 6 3.08 Sewage Treatment Alternative. In the event the District elects to convey the sewage from specific sewage collection systems constructed on property outside of RS ID 132 to a treatment facility other than the C ity's Wastewater Treatment Plant, the City consents and agrees that the users within the specific sewage collection systems on property outside of RS ID 132 will then become customers of the District and this Agreement will have no further force and effect as to that specific developed property outside of RS ID 132. Section 4: Modification This Agreement may be changed with additions and/or deletions upon mutual written consent of the parties hereto. Section 5: Effective Date This Agreement shall become effective from signature date by both parties and shall remain in effect thereafter until modified or repealed by all necessary parties. Section G: Severabilit If any portion of this Agreement shall be held to be void or unenforceable, the balance thereof shall continue to be effective. Section 7: Applicable Law The parties agree that this Agreement shall be governed in all respects by the laws of the State of Montana and the parties expressly agree that venue shall be in Flathead County, Montana, and no other venue. Section S: Bindin Effect This Agreement shall be binding upon and shall inure to the benefit of the heirs, legal representatives, successors, and assigns of the parties. Section 9: No Third Party Beneficiary I IIIIIIIq�14 UIII IIrIr - IIMII/IMMr.11r�p141141111111.1r�� This Agreement is for the exclusive benefit of the parties and shall not constitute a third party beneficiary agreement and shall not be relied upon or enforced by a third party. Section 10-P Arbitration The parties hereto agree that all unresolved claims, demands, disputes, controversies and differences that may arise between the parties hereto explicitly concerning the content of this Agreement shall first be submitted to arbitration as herein set forth. The Arbitrator shall be selected, the arbitration conducted, and the arbitration ruling shall be INTERLOCAL AGREEMENT Page - 4 of 6 pursuant to the provisions and rules of the Montana Arbitrator's Association. The ruling of the Arbitrator shall be binding upon the parties hereto, provided that either party shall have the right to file an action in a court of law concerning the ruling of the Arbitrator and such ruling of the Arbitrator shall not be binding on the court of law. The court shall be authorized to award the prevailing party reasonable attorney fees and costs. Provided further, that, in the event the party that prevailed at arbitration also prevails at the court of law, the court of law shall also have the authority, under the terms of this Agreement, to award that prevailing party reasonable attorney fees and costs expended for the arbitration, in addition to the those reasonable attorney's fees and costs expended as a result of the action filed in the court of law. Section 11: Counterparts This Agreement may be executed in counterparts, which together shall constitute one instrument. Section 12: Ori inai Agreement -�--i��-w��i�i-iii-.rrirriii-11111-IIIIIIIIIIIIIIIIIIIIIYIYI r Sri 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 K.ALISPELL APPROVED BY THE CITY MANAGER OF THE CITY OF KALISPELL on the day of November, 2007, as authorized the City Council to execute the Interlocal Agreement. ATTEST: Theresa white City Clerk (SEAL) James H. Patrick City Manager INTERLOCAL AGREEMENT Page - 5 of 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 November 2007. am President ATTEST: Roberta Struck Secretary INTERLOCAL AGREEMENT Page - 6 of 6 Appendix A FLATHEAD COUNTY WATER & SEWER DISTRICT NO. 1 - EVERGREEN Basis of charges to the City of Kalispell November 1, 2007 The District will charge City of Kalispell, for City's sewer customers, an equitable share of the costs of collecting and transporting sewage for such customers to the City's treatment plant. The City has no explicit or implicit claims to collection system ownership, rights of administration, management, or supervision, or the expenditure of capitalization or replacement fund monies. Annual review of costs, sewage flows and sewage usage will be based on and occur after each fiscal year, for determining charges to the City. The Billing Formula will consist of and be the sum of two parts — rate and depreciation. First Part - The rate is the sum of District Operating costs divided by Total District Sewage collected and transported to the treatment plant. The rate is in dollars per thousand gallons, adjusted annually. The rate is multiplied by individual City customer sewage usage, billed to the city and paid monthly. Second Part - The depreciation will consist of Depreciation Costs times reserved percentage (1001000l(100,000 + 682,000) = 12.79%), adjusted annually, billed to the City and paid monthly. DEFINITIONS: Sewage Usage -Based on gallons of water used by sewer customers (rounded to the nearest 100 gallons). Cost of sewage usage by City customers to be billed to the City monthly. Monthly billings will show usage by each City customer. Total District Sewage collected and transported is based on actual District wastewater flows to the treatment plant. Operating costs - All costs incurred by the District to operate and maintain the sewer lines within the District excluding costs directly reimbursed by customers or others (e.g., hook-up fees) and depreciation expense (sometimes called capital asset replacement costs). Operating costs include all direct, indirect, and ancillary cost such as costs to supervise, administer, manage, insure, and oversee the sewer system as well as interest expense of debt and similar costs. Depreciation costs -- To be billed separate, from Operating costs, to the city based on the capacity (100,000 gallons a day) allocated to the city. Depreciation expense is based on the depreciation lives used by the District for financial reporting purposes, which includes an estimated 100 year life for sewer transmission lines, computed on the straight line method. Total capacity is based on the maximum usage allowed under the original 1990 Interlocal Agreement with the city for the sewage treatment at.the Kalispell Wastewater Treatment Plant (682,000 gallons per day). Sewer Expenses for the Fiscal Year ended June 30, 2007 are shown in Appendix A-1. This Appendix is referenced in and is an integral part of the 2007 Interlocal Agreement between the City of Kalispell and Flathead county Water & Sewer District No. 1 — Evergreen. EVERGREEN WATER AND SEWER DISTRICT SEWER EXPENSES FOR THE YEAR ENDED JUNE 30, 2007 TOTAL ELIMINATE FROM AND ADJUSTED EXPENSES AUDIT NOTE ADJUST EXPENSES Directors Fees Insurance New Service Connections Office Supplies Payroll and Benefits Postage and Delivery Professional Fees Repairs and Maintenance Tools and Supplies Treatment Costs Replacement to City-22% Utilities Miscellaneous and Other Depreciation $31125 $3,125 15,209 151209 2,085 A ($2, 085) 4,620 4,620 161,774 161,774 3,725 31725 53,323 53,323 98:806 98,806 230259 231259 242,279 B (242,279) 109,207 C (109,207) 38,484 38,484 51049 5,049 156 �0 156,6 Total Expenses 917,60 $353 571 $5C4 034 Adjustments - net 353 571 Anua[ Adjusted Sewer Costs 564, 034 Depreciation (156,1660) D Total Adjusted Sewer Expenses $407,374 Divide Adjusted Sewer Expenses by No. of Gallons (in Thousands) 171 552 Adjusted Sewer Costs (per 1,ODO Gallons) $2.37 Sewer Flow Capacity (in Thousands of Gallons) E Present Capacity for Evergreen - 682,000 per day = 248,930 Annually 87.21 % Additional Capacity for the City - 100,000 per day = 36,500 Annually 12.79% Total Annual Capacity (in Thousands of Gallons) 2851430 Annual reserve contribution per 1,00o gallons ($156,6601285,430) $0.549 City's annual share of depreciation expenses - 36,500 x $0.549 = $201033 NOTES: A New service connection costs eliminated because customers pay the cost. E Cost of wastewater treatment not charged to Kalispell customers by Evergreen. C Replacement costs not charged to Kalispell customers by Evergreen_ D Depreciation expense using a 100 year life for sewer lines . E Maximum capacity for Evergreen in based on the maximum allowed by the treatment plant agreement. Maximum capacity for the City is based on the amount specified in the City's resolutions. Appendix A-1