HomeMy WebLinkAboutReport & Draft Water Agreement O� FRJ0
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Prior Lake, MN 55372
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CITY COUNCIL WORK SESSION REPORT
MEETING DATE: February 24, 2014
PREPARED BY: Frank Boyles, City Manager
PRESENTED BY: Katy Gehler, Public Works & Natural Resource Director
Ric Rosow, City Attorney
ADENDA ITEM: DOMESTIC WATER BRIEFING
INTRODUCTION: The purpose of this report is to provide the city council with information
about the February 24, 2014 work session.
DISCUSSION: HISTORY:
As the city council is aware, the city will require additional quantities of
domestic water to serve our growing community. In the summer
months, for example, on a peak day, we will produce 6.2 million
gallons of water.
The capacity of our existing system is six million gallons a day. The
remaining 200,000 gallons are drawn from our water towers. Water
production and distribution equipment works twenty -two hours each
day during the peak season. In the event of a fire emergency or well
failure it is likely that we would be unable to meet community water
needs. Consequently, the Council has directed that we take additional
steps to assure that sufficient water is available at all times and in any
circumstance.
As a result, an engineering report was prepared some time ago
comparing the costs for development of Well #10 versus entering into
a cooperative water agreement with the SMSC. Since the results
suggested that the latter approach would be most cost effective, we
have pursued this alternative for some time now.
CURRENT CIRCUMSTANCES:
We originally anticipated that the city and SMSC would jointly build a
well and water treatment plant. Over time, it became clear that the
SMSC could not pursue joint operation of the facility with the city. So
we proceeded on the assumption that the facility would be owned only
by the SMSC.
Since this facility was to be a substitute for a well, we sought a 99 -year
agreement and multi - million dollar escrow which would cover city water
costs over multiple years in the event the SMSC either chose not to
provide the water the city needed, or could not provide such quantities.
Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com
We also discussed whether federal, state or tribal law would be
applicable to the agreement and in which court system issues would
be heard.
Without providing a blow -by -blow account of our extensive discussions
with SMSC representatives, the most difficult items to resolve were
term of contract, the amount of the escrow, and the legal venue in
which disagreements would be heard.
Over the course of our discussions we have altered our approach. The
agreement has become a water purchase agreement with a term of 25
years and a four -year termination clause. A rate per 1,000 gallons of
water would be established based upon mutually agreed upon costs
for inclusion. Each year the rate would increase our decrease based
upon the consumer price index. The SMSC would have to guarantee a
minimum amount of water to the city and the SMSC would operate the
plant, although the city would have inspection rights. A copy of the
draft agreement which has not been approved by the SMSC is
attached for review and discussion.
ISSUES:
At the work session, we would like to review the state of the city's
domestic water system with the city council. Based upon the water
needs of the city, we suggest that the following steps be taken:
1. Completion and execution of the water purchase agreement with the
SMSC.
2. Proceed with the development of Well #10.
3. Enter into a new agreement with the City of Savage for domestic
water purposes.
4. Maintenance and repair of existing wells to maximize productivity
and dependability (underway).
The staff will be prepared to review the state of our water system with the
city council. The city attorney will review the draft agreement with the city
council.
The SMSC has advised us that the well and water treatment plant will be
ready for use in April 2014.
WATER PURCHASE AGREEMENT BETWEEN
THE CITY OF PRIOR LAKE AND THE SHAKOPEE
MDEWAKANTON SIOUX COMMUNITY
THIS WATER PURCHASE AGREEMENT (the "Agreement ") is made and entered
into this day of , 2014, by and between the CITY OF PRIOR
LAKE, a Minnesota municipal corporation ( "City ") and the SHAKOPEE MDEWAKANTON
SIOUX COMMUNITY, a federally recognized Indian Tribe ( "SMSC ").
RECITALS
A. The SMSC is constructing an expansion ( "Expansion ") of the SMSC North Water
Treatment Facility (collectively the Expansion and the SMSC North Water Treatment Facility
are the "Facility "). The Facility will be capable of supplying water to the City as contemplated
by this Agreement.
B. The Parties desire to enter into this Agreement regarding the City's long term
purchase of water from the SMSC.
C. The City is authorized to enter into this Agreement pursuant to Minnesota Statutes
Chapter 412 and in particular § 412.221. The SMSC has been authorized by its General Council
in Resolution to enter into this Agreement.
D. For purposes of this Agreement "force majeure" means a condition beyond the
reasonable control of the SMSC and which it could not, by reasonable diligence, have avoided.
Such conditions include natural disaster, a lack of sufficient water in the required amount from
the aquifer used by the SMSC, fire, accidents, actions or decrees of governmental bodies, acts of
God, wars (declared and undeclared), acts of terrorism, riots, embargoes, civil insurrection, and
other events of force majeure, but shall not include a lack of funds or insufficiency of resources
caused by lack of funds.
E. Contemporaneous with the execution of this Agreement the City, the SMSC and
(Escrow Agent) have entered into that certain document entitled "Escrow
Agreement" dated _, 2014 ( "Escrow Agreement ").
NOW, THEREFORE, in consideration of their mutual covenants the Parties agree as
follows:
1. FACILITY. The SMSC will be solely responsible for the construction and maintenance
of the Facility and all related costs.
2. TERM. This Agreement shall have a term starting on April , 2014 and ending on
April , 2039, subject to early termination pursuant to paragraph 31 hereof.
3. WATER ALLOCATION. The City shall have the right to purchase from the Facility
1,000 gallons of water per minute for 24 hours a day for 365 days a year up to 1,440,000 gallons
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per day (hereinafter "peak demand ") for a period of 25 years. The SMSC's failure to provide the
water required by this Agreement shall be excused on account of an event of force majeure, the
City's default, or the City's draw on the escrow funds in accordance with the Escrow
Agreement. The SMSC shall immediately give notice to the City of a condition of force majeure
and shall resume timely performance as soon as such condition is terminated. If peak demand
lasts more than consecutive days the City's water purchases may be limited by the SMSC,
upon written notice to the City, to 1,300,000 gallons per day until the City's water purchases .
drop below . If the SMSC declares a force majeure on account of a lack of
water from the aquifer the City's purchases of water from the Facility may be limited to 65% of
the peak demand. The City's right to purchase up to the peak demand will be restored as soon as
reasonably possible after such condition is terminated.
4. PURCHASE PRICE. The initial purchase price shall be $ per thousand gallons
of water purchased (hereinafter referred to as the "Base Rate "). The Base Rate shall be in effect
from June _, 2014 until June , 2015. For purposes of this Agreement the cost of producing
water is the costs of operation, maintenance and repair of the Facility plus a profit of _ % to
cover capital repairs and replacements (hereinafter referred to as "Total Water Cost "). The Total
Water Cost shall be expressed on a unit basis with each unit being 1,000 gallons of water
(hereinafter referred to as the "Base Rate "). The Base Rate shall be in effect from June_ , 201r
throughout the term of this Agreement subject to adjustments based on the Consumer Price Index
as set forth below.
For the term of this Agreement the Base Rate shall be adjusted up or down on each subsequent
June by the percentage change in the Consumer Price Index (CPI) annual average from 2014
to the year preceding the adjustment, which adjusted rate shall constitute the Base Rate payable
until the subsequent adjustment. The CPI as used herein means the Consumer Price Index for
All Urban Consumers (CPI -U) for All Items in the Minneapolis -St. Paul, 1982 -84 =100, or the
successor of that Index, as published by the Bureau of Labor Statistics, U.S. Department of
Labor.
The SMSC shall invoice the City monthly for water provided to the City from the Facility. The
invoice shall detail the amount of water purchased by the City for the invoice month and for the
year to date. The City shall pay each invoice within 35 days of receipt of the invoice.
5. OPERATION AND MAINTENANCE. The SMSC shall operate and maintain the
Facility in a manner consistent with all applicable Tribal, Federal, State of Minnesota, and City
laws, rules and regulations. The SMSC shall operate and maintain the Facility in a manner that
ensures the City is supplied water from the Facility as set forth above. The SMSC shall also
ensure that the water delivered under this Agreement complies with the EPA's Safe Drinking
Water Act as may be amended.
6. ACCESS TO THE FACILITY. The City shall have the right to access the Facility in
order to inspect the Facility to ensure water quality and in order to maintain the City's property
including the City's SCADA system, the water main serving the City, and the fiber serving the
City. The City shall provide the SMSC with at least 24 hours' written notice prior to any such
access, provided, however that in an emergency the City shall not be required to provide 24
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hours' written notice but will provide as much notice as is reasonably possible. At a minimum,
in an emergency, the City shall call the two telephone numbers supplied by the SMSC to provide
notice of access.
7. DAMAGE, DESTRUCTION AND INSURANCE. The SMSC shall maintain
insurance coverage for the Facility in amounts deemed appropriate by the SMSC but in no event
less than the replacement cost of the Facility. If all or any part of the Facility is damaged or
destroyed by fire, casualty, the elements or any other cause the SMSC shall immediately notify the
City of such fact and the SMSC shall immediately commence and diligently pursue repair to return
the Facility to its condition prior to such damage or destruction.
S. SMSC DEFAULT AND CITY REMEDIES. If the SMSC fails to operate or maintain
the Facility, fails to provide the required water or maintain the required water quality, or in any
other way breaches the terms, conditions, representations or warranties contained in this
Agreement or the Escrow Agreement then the City shall have the right, as its sole and exclusive
remedy and right of recourse, to make a draw on the escrow funds as set forth in the Escrow
Agreement.
9. CITY DEFAULT AND SMSC REMEDIES. If the City fails to make the required
payments or in any other way breaches the terms or conditions contained in this Agreement, then
the SMSC's sole and exclusive remedy and right of recourse is to cease providing the required
water allocation to the City upon thirty days' written notice to City of failure to make said
payment(s). If, with -in twelve (12) months after the SMSC has ceased providing water to the
City, the City makes all required past due and current payments, the SMSC shall immediately
resume providing City with the allocated water.
10. GOVERNING LAW. This Agreement is governed by and must be construed in
accordance with the laws of the State of Minnesota without regard to Minnesota's conflict -of-
law provisions.
11. WAIVER OF TRIBAL COURT JURISDICTION AND EXHUASTION -OF-
TRIBAL REMEDIES DOCTRINE. The Tribal Court of the SMSC (the "Tribal Court") shall
not have jurisdiction over any dispute relating to the Escrow, the Escrow Agreement or the
City's draw on the Escrow. In connection with any matter pertaining to the Escrow, the Escrow
Agreement, or the City's draw on the Escrow, the SMSC expressly waives the right to have
disputes resolved in the Tribal Court and waives application of the doctrines of exhaustion of
tribal remedies, abstention, or comity that might otherwise require that a claim be heard first in
the Tribal Court. In addition to the above and not as a limitation thereof, if the SMSC desires to
contest any matter relating to the Escrow, the Escrow Agreement, or the City's draw on the
Escrow including but not limited to the Escrow Agent's actions under the Escrow Agreement
(hereinafter referred to as a "Claim "), the SMSC's sole and exclusive remedy and right of
recourse is to bring any action relating thereto in Minnesota State District Court, Scott County.
Each party shall bear its own costs and expenses, including attorney's fees, incurred in the
proceeding.
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12. AUTHORIZATION. This Agreement and all of its terms, including but not limited to
the governing law, disclaimer of Tribal Court jurisdiction and waiver of application of Tribal
Exhaustion doctrine also known as tribal exhaustion of remedies doctrine, have been authorized
and approved by the SMSC's Business Council by Resolution adopted the day of
2014, attached hereto as Exhibit A. This Agreement and of its terms, including but not limited to
the governing law, disclaimer of Tribal Court jurisdiction and waiver of application of Tribal
Exhaustion doctrine also known as tribal exhaustion of remedies doctrine, have been authorized
and approved by the City Council of the City of Prior Lake by Resolution adopted the _ day of
, 2013, attached hereto as Exhibit B.
13. NON - IMPAIRMENT. The SMSC may not enact any law, ordinance, rule or regulation
impairing the obligations of the SMSC under this Agreement or under the Escrow Agreement.
This provision shall not impair the right of the SMSC to terminate this Agreement under
paragraph 31 hereof.
14. REPRESENTATIONS AND WARRANTIES REGARDING IMPAIRMENT. The
SMSC represents and warrants that except for the right to terminate this Agreement under
paragraph 31 hereof, it, its General Council, its Membership, or its Business Council does not
have the ability or authority to impair this Agreement or the Escrow Agreement including the
ability or authority to rescind this Agreement, the Escrow Agreement or any waiver contained in
this Agreement or the Escrow Agreement. The SMSC further represents and warrants that the
SMSC's tribal constitution does not permit a referendum action that would allow the tribal
membership to rescind tribal council actions approving or entering into contracts including but
not limited to this Agreement and the Escrow Agreement.
15. TAXES, FEES AND PERMITS. No taxes or fees shall be imposed by the SMSC on
the City on account of this Agreement. The City is not required to obtain any permit from the
SMSC to purchase water under this Agreement.
16. EMPLOYEE STATUS. Any and all persons engaged in the work to be performed by
the SMSC related to this Agreement or the Facility shall not be considered employees of the City
for any purpose, including Worker's Compensation or any and all claims that may or might arise
out of said employment context on behalf of said employees while so engaged. Any and all
claims made by any third party as a consequence of any act or omission on the part of said
SMSC employees while so engaged on any of the work contemplated herein shall not be the
obligation or responsibility of the City. Any and all persons engaged in the work to be
performed by the City related to this Agreement shall not be considered employees of the SMSC
for any purpose, including Worker's Compensation or any and all claims that may or might arise
out of said employment context on behalf of said employees while so engaged. Any and all
claims made by any third party as a consequence of any act or omission on the part of said City
employees while so engaged on any of the work contemplated herein shall not be the obligation
or responsibility of the SMSC.
17. AUDITS. Any books, records, documents, and accounting procedures and practices of a
party related to this Agreement are subject to examination by the other party and either the
Legislative Auditor or the State Auditor, as appropriate. The parties agree to maintain these
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records for a period of six years from the date of performance of all services covered under this
Agreement.
18. INDEMNIFICATION. Each party is responsible for its own acts and omissions and the
results thereof to the extent authorized by law. The SMSC will indemnify the City and hold it
harmless from and against all judgments, claims, damages, costs and expenses, including a
reasonable amount as and for its attorney's fees paid, incurred, or for which it may be liable,
resulting from the negligent acts and omissions of the SMSC, its subcontractors, employees, or
agents. The City's liability is subject to the limits applicable to a municipality as set forth in
Minn. Stat. Ch. 466. The SMSC's tort liability is subject to the limits set forth in and subject to
the SMSC Tort Claims Ordinance.
19. DATA PRACTICES. All data created, collected, received, maintained or disseminated
for any purpose in the course of this Agreement is governed by the Minnesota Government Data
Practices Act, Minn. Stat. Ch. 13, any other applicable state statute, and any state rules adopted
to implement the act, as well as federal regulations on data privacy.
20. DISCRIMINATION. In performance of this Agreement, neither Party shall
discriminate on the grounds of or because of race, color, creed, religion, national origin, sex,
marital status, status with regards to public assistance, disability, sexual orientation, or age
against any employee, subcontractor, or any applicant for employment. Both Parties shall
include a similar provision in all contracts with subcontractors to this Agreement. Both Parties
further agree to comply with all aspects of the Minnesota Human Rights Act, Minn. Stat. Section
363.01, et seq., Title VI of the Civil Rights Act of 1964, and the Americans with Disabilities Act
of 1990. The parties understand and agree that pursuant to 42 USC Subchapter VI, the SMSC's
qualifying Indian preference laws, policies, and practices do not constitute discrimination.
21. CONFLICTS. No salaried officer or employee of City shall have a financial interest,
direct or indirect, in this Agreement. The violation of this provision renders the Agreement void.
22. LIMITATION OF REMEDIES. In the event of a breach of the Agreement neither
party shall be entitled to recover punitive, special or consequential damages or damages for loss
of business.
23. ASSIGNMENT. Neither party shall assign this Agreement, nor any interest arising
herein, without the prior written consent of the other party.
24. SEVERABILITY. The provisions of this Agreement are severable. If any portion
hereof is, for any reason, held by a court of competent jurisdiction to be contrary to law, such
decision shall not affect the remaining provisions of this Agreement.
25. WAIVER. No action nor failure to act by the City or the SMSC shall constitute a waiver
of any right or duty afforded any of them under the Agreement, nor shall any such action or
failure to act constitute an approval of or acquiescence in any breach thereunder, except as may
be specifically agreed in writing.
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26. DISPUTE RESOLUTION. The parties agree to use their best efforts to negotiate an
amicable resolution of any dispute arising from this Agreement. If the parties are unable to
negotiate an amicable resolution of a dispute within fourteen days from the date written notice of
the dispute is provided to the other party, or such other period as the parties agree to in writing,
the parties may enter into mediation. Upon service of a written notice requesting mediation, the
parties shall have ten days to select one person to act as a mediator. If the parties are unable to
agree upon a mediator, the Chief Judge of the Scott County District Court of Minnesota shall
select a mediator. The mediation shall be conducted pursuant to the procedures used by the
mediator. Each party shall bear its own cost of the mediation process. The parties shall share
equally the fees and expenses of the mediator. Mediation is a voluntary process. The mediator
does not have the authority to bind either party absent the party's consent.
27. NOTICES. Any notice required to be given to City or the SMSC pursuant to this
Agreement shall be in writing and shall be deemed duly given: (i) on the date of personal
delivery; (ii) on the date and time of confirmation if sent via facsimile (with verification of
receipt); (iii) one business day following dispatch by Federal Express or equivalent; or (iv) three
business days after mailing certified or registered mail, postage prepaid, return receipt requested,
to respective addresses of the parties set out below:
SMSC: With a copy to:
Shakopee Mdewakanton Sioux Community
Attn: William Rudnicki
2330 Sioux Trail SW
Prior Lake, MN 55372
FAX: FAX:
CITY OF PRIOR LAKE: With a copies to:
City of Prior Lake City of Prior Lake
Attn: Public Works Director Attn: City Manager
4646 Dakota Street SE 4646 Dakota Street SE
Prior Lake, Minnesota 55372 Prior Lake, Minnesota 55372
Fax: 952-447-4245 Fax: 952-447-4245
Gregerson, Rosow, Johnson & Nilan
Attn: Richard F. Rosow
650 Third Ave South, Suite 1600
Minneapolis, MN 55402
Fax: 612 - 349 -6718
28. SIGNING OF AGREEMENT. This Agreement may be signed in counterparts and on
different dates by each party without affecting the validity thereof.
29. INTEGRATION. The entire and integrated agreement of the parties contained in this
Agreement shall supersede all prior negotiations, representations, or agreements between the
parties regarding the subject matter hereof, whether written or oral.
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30. CROSS DEFAULT. A default by either party under this Agreement is a default under
the Escrow Agreement.
31. TERMINATION. This Agreement may be terminated by either party by four (4) years
prior written notice delivered to the other party at the address written above.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first
above written.
[Remainder of Page Intentionally Left Blank. Signature Pages Follow.]
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CITY OF PRIOR LAKE
BY:
Kenneth L. Hedberg, Mayor
BY:
Frank Boyles, City Manager
STATE OF MINNESOTA )
(ss.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this day of
, 2014, by Kenneth L. Hedberg and Frank Boyles, the Mayor and City Manager,
respectively, of the City of Prior Lake, a Minnesota municipal corporation, on behalf of the
corporation and pursuant to the authority granted by its City Council.
Notary Public
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SHAKOPEE MDEWAKANTON SIOUX COMMUNITY
By:
Its:
By:
Its:
STATE OF MINNESOTA )
(ss.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this day of
2014, by and , the
and , respectively, of the Shakopee Mdewakanton Sioux
Community, a federally recognized Indian Tribe, on behalf of the tribe and pursuant to the
authority granted by its
Notary Public
DRAFTED BY:
Gregerson, Rosow, Johnson & Nilan, ltd
650 Third Avenue South
Suite 1600
Minneapolis, MN 55402
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EXHIBIT A
SMSC RESOLUTION
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EXHIBIT B
CITY RESOLUTION
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