CITY COMMISSION AGENDA MEMO October 18, Dale L. Houdeshell, P.E., Director of Public Works

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1 CITY COMMISSION AGENDA MEMO October 18, 2013 FROM: Dale L. Houdeshell, P.E., Director of Public Works MEETING: November 5, 2013 SUBJECT: PRESENTER: Approve Interlocal and Interim Agreements with Pottawatomie County Rural Water District #1 for Extension of Water Service to the Blue Township Area and Authorize Negotiation of a Contract for Professional Services for the Blue Township Water Extension Project (WA1307) Dale L. Houdeshell, P.E., Director of Public Works BACKGROUND The 2003 update of the Manhattan Urban Area Comprehensive Plan identifies the US 24 Corridor/South Blue Township area as a potential urban growth corridor if municipal level water and wastewater services are provided. The Plan identifies the need for significant capital improvements for water and wastewater infrastructure, including a new trunk water main and storage tank facility. The Plan projected a population growth from 1,100 in 2003 to 5,609 in the year According to information received from the Pottawatomie County Office of Planning and Development, population growth in the 10 years following the 2003 update has been very close to the projection with the current population at approximately 3,500. In 2007, due to the expected growth in the Blue Township area and inadequate treatment capabilities at the existing Pottawatomie County system, the City entered into an Interlocal Agreement with Pottawatomie County for the Blue Township Sewer District (BTSD), providing for the connection of the BTSD s system to the City s system for collection and treatment of the BTSD s wastewater stream. Construction of the required infrastructure occurred from 2010 to The City s system began receiving BTSD s entire wastewater stream in April Since 2012, Pottawattamie County has seen a significant increase in building permits issued for new dwelling units within the Blue Township area. Pottawatomie County growth projections for the next 20 years estimate the population to increase by another 3,000 to 5,000.

2 Along with the population growth, the US 24 Corridor/Blue Township area is expecting to see a significant increase in commercial and industrial development and the likely redevelopment of some existing areas to higher density residential. In combination with these growth and development expectations, and the current limited water supply capabilities of the Pottawatomie County Rural Water District No. 1 (District), alternative water supply sources will be necessary to serve the area for both domestic water and fire protection services. DISCUSSION In April 2013, City Administration and District Officials began an extensive negotiation process to develop an Interlocal Agreement for the provision of water to the US 24 Corridor/Blue Township area. The proposed Interlocal Agreement establishes: the proposed service areas, initial and maximum amounts of water to be provided, connection fees for the initial service and for new customers, water rates, and divided ownership of infrastructure. Water usage by the District under the Interlocal Agreement would initially be limited to 0.5 million gallons per day (MGD). The District will have the an option to purchase additional 0.25 MGD blocks of water supply as needed for growth up to 2.0 MGD. The initial connection fees will be based on the initial 0.5 MGD quantity and are formulated on the District s percentage usage of the total capacity of the City s overall water system capacity. Additional 0.25 MGD blocks of water supply will require additional connection fees for the increased water availability. A connection fee for new customers of the District, served with City water, will also be paid to the City based on the terms listed in the agreement. The Interlocal Agreement will provide for City water service to an Incremental Service Area (Blue Township Growth Area) as shown (gray) in Exhibit A of the Interlocal Agreement. Within the US 24 Corridor (light red), the City will hold the first right of negotiation to supply water service for any new customer and the District will retain their right to supply water service for all existing customers of the District. The District will be responsible for paying the City for water provided at a rate of 125% of the rate(s) applicable to Inside City users, as set forth in the Code of Ordinances. This rate is consistent with the rate currently charged to Riley Rural Water District No. 1 and the Konza Water District also in Riley County. The infrastructure improvements necessary to provide this water service will begin with an extension of the City s existing 16-inch main along the north side of US 24, which currently ends just east of Heritage Square. The 16-inch main will be extended east to Excel Road and then north to a proposed water pumping station located near Elk Creek Road. From the water pumping station, the main will continue north along Excel Road to a new elevated storage tank, with an approximate 1,000,000 gallon capacity, to be located approximately 2.5 miles north of US 24.The City would own the main up to the pumping station. The District would own the pumping station, the tank, and the main in between.

3 The estimated design and construction costs are $4,850,000. The City would be initially responsible for all costs associated with the project design and construction and the City s portion of easement and right-of-way acquisition. When the project is completed and all final costs are known, the District will be required to pay its portion of the project, approximately $3,800,000. As Bartlett and West, Inc., has recently modeled the extension of water service to the Blue Township area and has performed professional services for the District in this area, the Interlocal Agreement provides for Bartlett and West, Inc., to be the project designer as they are uniquely qualified. Given this, City Administration is requesting approval to negotiate a contract for the design of the Blue Township Water Extension Project (WA1307). The negotiated agreement would then be brought back to the District and the Commission for consideration. As it will take several months to design and construct the required infrastructure, the City and the District have also developed an Interim Agreement to allow for the temporary connection of a small portion of the District s system to the City s system to provide City water to the interim service area as shown in Exhibit 1 of the Interim Agreement. The District would initially purchase water at 200% of the Inside City user rate. After the permanent connection is complete, the District would receive a credit for the water purchase, reducing the effective rate to 125% of the Inside City rates(s). FINANCING The entire project cost is estimated to be $4,850,000. The City s portion would be approximately $1,050,000. The District s initial connection fee would be approximately $281,000. Initial annual revenue is projected to be $92,000 under the Interim Agreement and $360,000 under the Interlocal Agreement. A bond resolution will be proposed at the time of construction with a later determination as to whether to remain with temporary notes or bond the City s estimated balance of $769,000. Funding for the debt service payments will come from the Water Fund. ALTERNATIVES It appears the Commission has the following alternatives concerning the issue at hand. The Commission may: 1. Approve an Interlocal Agreement and an Interim Agreement with Pottawatomie County Rural Water District #1 for the extension of water service to the Blue Township area and authorize the negotiation of a contract with Bartlett and West, Inc. for design of the Blue Township Water Extension Project (WA 1307). 2. Do not approve the Interlocal and Interim Agreements nor a contract with Bartlett and West, Inc. 3. Modify to meet the needs of the Commission. 4. Table the request.

4 RECOMMENDATION City Administration recommends approving an Interlocal Agreement and an Interim Agreement with Pottawatomie County Rural Water District #1 for the extension of water service to the Blue Township area and authorizing the negotiation of a contract with Bartlett and West, Inc., for design of the Blue Township Water Extension Project (WA1307). POSSIBLE MOTION Approve an Interlocal Agreement and an Interim Agreement with Pottawatomie County Rural Water District #1 for the extension of water service to the Blue Township area and authorize City Administration to negotiate a contract with Bartlett and West, Inc., of Manhattan, Kansas, for design of the Blue Township Water Extension Project (WA1307) DLH/ie Enclosures: 1. Interlocal Agreement 2. Interim Agreement

5 INTERLOCAL PUBLIC UTILITY AGREEMENT THIS INTERLOCAL PUBLIC UTILITY AGREEMENT (the Agreement ) is hereby entered into this 5 th day of November, 2013, by and between Rural Water District Number 1, Pottawatomie County, Kansas, hereinafter referred to as District; and the City of Manhattan, Kansas, a Municipal Corporation, hereinafter referred to as the City; and collectively referred to as the Parties. The Parties acknowledge that this Agreement shall require the approval of the Attorney General of the State of Kansas, pursuant to K.S.A Supp , et. seq. WHEREAS, the District has previously been created by the Board of County Commissioners of Pottawatomie County, Kansas, constituting a body politic and corporate under the Rural Water District Act, pursuant to K.S.A. 82a-612 et seq.; and WHEREAS, the Parties have determined it is in the best interests of the citizens and stakeholders within the service area, as defined herein by the Parties to construct a main Water Trunk Line-Tank Project which connects to the City s water system and extends the City s existing system to serve an area easterly along US Highway 24; and extending northerly along Excel Road and connecting to the to-be-built approximately 1,000,000 gallon water storage tank ( Tank ); all to be owned and maintained as set forth in greater detail in this Agreement by the Parties, and hereinafter referred to as the Water Trunk -Tank Project or Project in the approximate location as shown on Exhibit A, attached hereto and incorporated herein by reference. The part of the defined Project and all infrastructure constructed by the City which connects up to the Pump Station, including the master meter within the Pump Station, now or in the future, is hereinafter referred to as the City s System; and, WHEREAS, the Parties intend to specify the exact size and length of the Project and the location of the Pump Station and Tank by Plans and Bid Documents to be created as a part of this Agreement; and, WHEREAS, the District owns, and currently operates, infrastructure which provides water to properties within the District located in Pottawatomie County, and all of such infrastructure, as well as any such infrastructure which the District constructs in the future or constructed as a part of the Project, to accept water from the City, including the to-be-built Pump Station (excluding the master meter), Tank, and the water line between the Pump Station and Tank, is hereinafter referred to as the District s System; and,

6 WHEREAS, the Parties desire to cooperate in the design and construction of the Project in order to provide quality potable water to the District, and additionally easing the current and future demand for water on the District s System; and WHEREAS, the Parties hereto desire to enter into an agreement to set forth the rights and responsibilities of the Parties related to the matters set forth herein. NOW THEREFORE, in consideration of the mutual promises contained herein, the Parties hereto agree as follows: 1. PURPOSE. The purpose of this Agreement is to set forth the rights and responsibilities of the Parties hereto, related to the cooperation of the Parties in designing and constructing the Project and in providing water service to the area the District will initially serve with water purchased from the City ( Initial Service Area ) and in providing water service to the future incremental service area ( Incremental Service Area ) all as described and depicted in Exhibit A herein. 2. DURATION-TERMINATION. This Agreement shall commence upon its approval by the District, the City and by the Attorney General of the State of Kansas; and it shall continue for an indefinite period thereafter, unless terminated by the mutual agreement of the Parties, or by the terms hereof. Upon termination of this Agreement, the District s System shall remain the property of the District, and the City s System shall remain the property of the City, except as such ownership has been modified during the term hereof; and, any such termination, by agreement, shall address, among other matters, the relationship of the Parties as to any such modification of ownership that has occurred. Upon termination of this Agreement, the District shall disconnect the District s System from the City s system, and the District and the City shall share equally in the costs related to such disconnection. The costs of disconnection shall only include those costs minimally necessary to disconnect the District s System from the City s system, and shall not include any costs associated with the reconnection of the District s System to an alternate water system. Notwithstanding the fact that this Agreement is for an indefinite period, the Parties agree to review and renegotiate the terms hereof (the Extended Terms ), to be effective on each ten (10) year anniversary of the Effective Date. The Parties agree to commence such good faith review and renegotiation within two (2) years prior to each such anniversary. In the event the Parties cannot reach agreement during this two (2) year period, either party may proceed to terminate this Agreement as set forth herein. 3. MANNER OF FINANCING/BUDGET. The District and the City shall each be solely responsible for establishing, financing, and maintaining a budget for their responsibilities herein. All expenditures of each such entity shall be made according to their individual policies and practices, and pursuant to the terms of this Agreement. 4. NO SEPARATE ENTITY. The purposes of this Agreement can be most effectively fulfilled without the creation of any separate legal or administrative agency. The Parties hereto shall jointly administer this cooperative undertaking, as set forth herein. 5. MANNER OF ACQUIRING, HOLDING OR DISPOSING OF PROPERTY. Each party hereto shall be regarded as the owner of any and all property acquired by that party under the terms of this Agreement, except as specifically set forth herein.

7 6. ASSIGMENT. Neither this Agreement nor any rights or obligation hereunder shall be assigned or otherwise transferred by any party hereto, except as specifically allowed herein. 7. GOVERNING LAW. This Agreement shall be interpreted under and governed by the laws of the State of Kansas, without reference to its conflict of laws principles. 8. SUBMITTAL TO ATTORNEY GENERAL. It shall be a condition precedent to the effectiveness of this Agreement that it be submitted for review to the Attorney General of the State of Kansas in accordance with the terms of K.S.A Supp (g). 9. FILING OF AGREEMENT. This Agreement shall be filed with the Register of Deeds of Pottawatomie County, Kansas and with the Secretary of State of the State of Kansas, pursuant to K.S.A CAPTIONS. The captions used herein are for the sole purpose of ready identification and reference for the Parties hereto and shall not be considered or construed as a part of this Agreement or be utilized or considered in interpreting or construing the same. 11. WRITTEN NOTICE. All notices to be given with respect to this Agreement shall be in writing. Each notice shall be sent to the party to be notified at the address set forth herein or at such other address as either party may from time to time designate in writing. Every notice shall be deemed to have been given at the time it shall be deposited in the United States mail in the manner prescribed herein. 12. NOTIFICATION. Notices required herein shall be in writing and made by certified mail, return receipt requested to the following addresses: District: Rural Water District Number 1, Pottawatomie, Kansas P.O. Box N. Highway 99 Wamego, KS City: City Manager, City of Manhattan 1101 Poyntz Avenue Manhattan, KS The City agrees to hire a qualified consultant to design the Project and to prepare the necessary plans and bid documents pursuant to its applicable purchasing procedures for the Project that will enable its construction. Bartlett and West Engineers, Inc. appears to the Parties to be a uniquely qualified consultant, based on the firm s prior work with the City and District and its familiarity with both systems. The City will notify the District of the negotiated Design Costs upon receipt of the same from the consultant. Within five (5) calendar days after receipt from the City of the negotiated Design Costs, the District shall either contest in writing the amount of the negotiated Design Costs, or deliver to the City its written approval of such amount. The District s failure to respond within such five (5) calendar day s period shall be deemed to be approval of the same. If the

8 District contests the amount of the cost(s) within the five (5) day period, it shall notify the City, and set forth with specificity, its basis for contesting the Design Costs. The design and bid documents shall hereinafter collectively be referred to as the Plans and Bid Documents. The City shall initially be responsible for all costs (the Design Costs ) related to the preparation of the Plans and Bid Documents. The City further agrees to involve the District in the preparation of the Plans and Bid Documents. Such involvement by the District shall include, but not be limited to: pre-design meetings with the consultant; review of field check plans; review of the final plans; and, discussion of the connection point(s). The Plans and Bid Documents shall identify the location of the Project, including its connection(s) to the City s existing system. The Plans and Bid Documents shall identify the connection point(s) of the District s System (the Connection Points ) to the City s system and shall include the installation of master meter(s) at the Connection Points, one of which is likely to be approximately located at or within the to-be-built Water Pump Station (a.k.a., Booster Station). The City shall own the master meters and they shall be deemed to be a part of the City s System. Upon finalization of the Plans and Bid Documents, the City shall officially submit the same to the Kansas Department of Health and Environment ( KDHE ) for final approval. The Parties agree to make any required amendments or revisions required by KDHE and to the extent necessary to comply with any mandatory law, regulation, policy, or procedure required by KDHE. The Plans and Bid Documents shall be subject to the approval of the District, and such approval shall not be unreasonably withheld. Upon receipt of the construction cost estimate and Plans and Bid Documents, the District shall have fifteen (15) calendar days to notify the City, in writing, of any objections to the Plans and Bid Documents. If the District does not notify the City within such fifteen (15) day period, the District shall be deemed to have approved the Plans and Bid Documents and to have permanently waived any objection to the Plans and Bid Documents. The City shall not commence work on the project until the District has approved, or has been deemed to have approved, the Plans and Bid Documents. Once the District has approved the Plans and Bid Documents, the City shall notify the District of the Final Design Costs. Such notification shall be in the form of a sworn statement, setting forth a description of all costs incurred and shall have attached thereto, copies of invoices, which support the payment of such cost. The District may request additional evidence or verification of the stated cost. Within fifteen (15) calendar days after its receipt of the sworn statement, the District shall either contest in writing the amount set forth in the statement, or deliver to the City its written approval of such amount. The District s failure to respond within such fifteen (15) calendar day s period shall be deemed to be an approval. If the District contests the amount of the cost, it shall notify the City, with specificity (within 15 calendar days after receipt of such sworn statement), its basis for stating the amounts shown in the statement are not the appropriate cost. The City shall have the right to modify the statement or explain the statement to the District, and submit the same or a revised statement. The District shall approve or contest the resubmitted or revised statement within fifteen (15) days of its submission. The amount approved in accordance with the provisions of this paragraph shall be called the Approved Design Costs. 14. Following the District s approval of the Plans and Bid Documents, and following establishment of the Approved Design Costs, the Parties agree to cooperate in acquiring any easements or right-of-way necessary for the construction and/or location of the Project. The City

9 shall be primarily responsible for acquisition of easements or rights-of-way necessary for construction and/or location of the City s portion of the Project, and the District shall be primarily responsible for acquisition of easements or rights-of-way necessary for construction and/or location of the District s portion of the Project. The District agrees to assist the City in acquiring any and all easements and appurtenances, and shall make available for the City s use and dedication, easements and easement rights held by the District to complete the construction and/or location of the Water Trunk-Tank Project and related water lines and equipment, and cooperate and assist the City in any eminent domain and condemnation efforts or proceedings to acquire and condemn land, easements and interests necessary for the Project. The City agrees to be responsible for costs (the Acquisition Costs ) associated with the City s portion of acquisition, and the District agrees to be responsible of all Acquisition Costs associated with the District s portion of the acquisition. Once all necessary easements and rights of way have been acquired, the Parties shall notify each other of said acquisition completion and exchange an itemization of the Acquisition Costs. Such notification shall be in the same form and manner as set forth above. The amount approved in accordance with the provisions of this paragraph shall be called the Approved Acquisition Costs. 15. Upon the Parties acquisition of all necessary easements and rights of way, the City agrees to be responsible to select, and contract with, qualified contractors to construct the Water Trunk-Tank Project pursuant to the Plans and Bid Documents, and in conformance with the City s existing policies and procedures. The Parties agree that the qualified contractor for the water trunk line, Water Pump Station and the Water Tank will likely be different contractors or entities. The bid(s) shall be subject to the approval of the District, and such approval shall not be unreasonably withheld. The City will notify the District of the bid(s). Within five (5) calendar days after its receipt of the bid(s), the District shall either disapprove in writing the bid(s), or deliver to the City its written approval of such bid(s). The District s failure to respond within such five (5) calendar day s period shall be deemed to be an approval. If the District disapproves the bid(s), it shall notify the City, with specificity (within 7 calendar days after receipt of the bid(s)), its basis for disapproval of the bid(s). The City shall not commence work on the project until the District has approved, or has been deemed to have approved, the bid(s), and such approval shall not be unreasonably withheld. The City further agrees to be initially responsible for all costs (the Construction Costs ) to construct the Project, including the cost of any applicable permits. The City shall be responsible to cause its contractor(s) to complete construction of the Project pursuant to the Plans and Bid Documents. The determination of whether or not the construction of the Project is in compliance with the Plans and Bid Documents shall lie within the reasonable sole discretion of the City, except as provided herein. The Parties agree the District may inspect the Project construction, as the construction proceeds, in order to determine its compliance with the Plans and Bid Documents, and shall immediately notify the City s Director of Public Works of any non-compliance with the Plans and Bid Documents, and the City shall thereupon bring the construction into compliance with the Plans and Bid Documents or shall provide additional engineered drawings, documentation, or reports that reasonably justify variation during construction to the Plans and Bid Documents. In the event the District chooses not to inspect the Project construction, the District shall be deemed to waive any right to claim such construction does not comply with the Plans and Bid Documents. The Parties agree that each entity shall own and maintain their respective portions of the Project,

10 including the water trunk line, Water Pump Station, and the Water Tank, and all easements and rights-of-way associated therewith. The District shall allow the City, upon reasonable notice, to make inspection of the water trunk line, Water Pump Station, and the Water Tank and related construction. Once operable, the City shall be responsible for the operation, maintenance and repair of the Water Pump Station and the District shall be financially responsible to reimburse the City for the costs and expenses associated with such operation, maintenance and repair. The City shall provide the District invoices, receipts, and any other related documentation of such costs and expenses. The District shall reimburse the City through the normal billing and payment procedures established by the City. 16. Once construction of the Project is complete, and the Construction Costs are known, the City shall notify the District of the Construction Costs. Such notification shall be in the same form and manner as set forth above. The amount approved in accordance with the provisions of this paragraph shall be called the Approved Construction Costs. 17. The Total Cost of the project shall be the sum of the Approved Design Costs and the Approved Construction Costs. The District s share of the Total Cost of the Project shall consist of the Approved Design Costs and the Approved Constructions Costs attributable to the District s portion of the Project, i.e., the Pump Station, Tank and Water Trunk Line connecting the Pump Station to the Tank. The City s share of the Total Cost shall consist of the Approved Design Costs and Approved Construction Costs attributable to the City s portion of the Project, i.e., the Water Trunk Line connecting the City s system to the Pump Station. Each party shall be solely responsible for its individual Approved Acquisition Costs without contribution from the other Party to this Agreement. The Parties shall proceed with arranging the necessary financing as deemed expedient and in the best interest of each party to fund their respective portions of the project and with final approval of the elected bodies of the Parties. Either party may terminate this Agreement up to or including the date that the Approved Design Costs are either approved or deemed approved pursuant to provision 13 above, by giving written notice to the other party. The City will likely adopt a Resolution authorizing the issuance of temporary notes and/or general obligation bonds to finance the Total Cost of the project. The District shall make payment for all obligations under this provision to the City within thirty (30) days after the District has been advised by the City of the Total Cost of the Project. The District may elect to pay all or part of its portion of the Total Cost to the City at any point in advance of the time set forth in this provision in order to reduce the amount financed by the temporary notes and general obligation bonds. 18. Once the construction of the Project is substantially complete and the District has paid the Initial Connection Fee, the City agrees to make available to the District, at the Connection Point(s), water in an amount sufficient to serve the needs of the District, but not to exceed 0.5 million gallons per day ( MGD ). The District has the option to require the City to increase the amount of water it makes available, up to, but not to exceed 2.0 MGD, under the terms of this Agreement. Before the City is obligated to increase the amount of water it makes available to the District System, the District shall provide the City with written notice that it wishes to increase the amount of available water, and the District shall pay for such increase, in accordance with Paragraph 19, below. The

11 demand for the increase in water must be made pursuant to the increments set out for payment of the additional connection fee in Paragraph 19, below. The Agreement must be renegotiated by the Parties before the City has any obligation to provide water to the District in excess of 2.0 MGD. 19. In lieu of the connection fee required by Section of the Code of Ordinances of the City of Manhattan (hereinafter the Code of Ordinances ), the District agrees to pay to the City, and the City agrees to accept, a lump sum connection fee in the amount of Two Hundred Eighty One Thousand Ten Dollars ($281,010) ( Initial Connection Fee ). The Initial Connection Fee is based, in large part, upon the District s percentage usage of the total capacity of the City s System. The Initial Connection Fee shall be paid to the City prior to the introduction of water into the Water Trunk-Tank system for the District s use. The Initial Connection Fee shall be compensation to the City for its infrastructure used in making available to the District, water sufficient for the District s needs, but not exceeding 0.5 MGD. If the District requests that the City make available more than 0.5 MGD, the District must pay to the City, prior to the increased availability of the water an additional connection fee for the increased availability. If the District requests the full 2.0 MGD permitted by this Agreement, the additional connection fee shall total $ 843,030, and is based upon the increased usage of 1.5 MGD, or percent of the total capacity of the City s System. The District may request less than the full increase; however, any such request shall be in 0.25 MGD increments, and the District shall pay to the City $140,505 for each 0.25 MGD increase in the amount of water made available to the District. The District shall immediately purchase the next available increment from the City if either of the following events occurs: a. The daily water quantity made available to the District under the then daily allotment purchased by the District exceeds that daily allotment on five (5) different calendar days within any given one hundred and eighty (180) day calendar period; or b. The District s use is equivalent to an average of ninety percent (90%) or greater of the then current increment purchased by the District within a monthly billing cycle, and on any three (3) different calendar days within that monthly billing cycle, the District s use exceeds the daily allotment purchased by the District. In either event, the increment purchase by the District shall be made no later than the next billing cycle occurring after the City provides notice to the District that either exceeding water use event has occurred. The District may request, and the City shall provide, the related documentation of the exceeding water use calendar days. 20. All water provided by the City to the District shall be measured by the master meter(s) at the Connection Point(s), installed pursuant to the Plans and Bid Documents. The City shall calibrate such metering equipment annually to properly measure the quantity of water delivered to the District. A meter registering in accordance with the American Water Works Association standards shall be deemed to be accurate. The previous readings of any such meter disclosed by such calibration to be inaccurate, or in the event any meter fails to register for any period, shall be corrected for the period during which such readings were inaccurate or failure occurred, in

12 accordance with the percentage of inaccuracy or the amount of water determined to have been furnished during such period of meter failure, as determined and mutually agreed to by the City and the District based on facts and data to be made available to both Parties., Any corresponding charge or credit shall be made to the amount paid or payable by the District in accordance with such mutually agreed upon correction. The Parties shall have access to all meters for the purpose of verifying meter readings. The District shall pay the City, for water provided, and measured, under this Agreement, an amount determined by the Code of Ordinances. In the event the Code of Ordinances does not specifically identify an amount applicable to this Agreement, such amount shall be calculated as follows: a. If the Code of Ordinances continues to use a decreasing block rate schedule, similar to the schedule existing at the date of this agreement, or a flat rate schedule the District shall pay One Hundred Twenty-Five Percent (125%) of the rate(s) applicable to inside the city users, as set forth in Section of the Code of Ordinances, as it may be amended from time to time, with the rate(s) decreasing as the level of usage increases, pursuant to the schedule. b. If the City adopts an increasing block rate schedule, the Parties agree to negotiate in good faith a rate structure using a methodology consistent with those contained herein with the District s rate(s) being One Hundred Twenty-Five Percent (125%) of the rate(s) applicable to inside the city users and consistent with subpart c below. c. In no event shall the District rate exceed One Hundred Twenty-Five percent (125%) of the rate applicable to inside the city customers. In the event the Code of Ordinances is amended to create more than one category of customers (e.g., residential, commercial, industrial, irrigation), the District shall provide the City information concerning the approximate annual quantity and percentage of use by the District s customers attributable to each category of use. The rate(s) charged by the City to the District under such an ordinance shall be applied to the proportionate share of water used by the District s customers for each category of use, with such uses defined by or substantially similar to those determined by the City s Code of Ordinances; however, the District s rate shall not exceed One Hundred Twenty-Five Percent (125%) of the rate(s) applicable to similar inside the city Customer categories. The District s payments, pursuant to this section shall be made pursuant to, and in compliance with, the Code of Ordinances. 21. If the District does not pay its monthly water bill within thirty (30) days of issuance, the City shall assess a late charge, equal to one and one half percent of the balance due. The late charge shall be assessed and due on the thirtieth (30) day after the monthly bill is issued. If the District has an outstanding balance due to the City, under the terms of this Agreement, in excess of six (6) months in arrears, the City may discontinue service to the District until the outstanding balance is paid in full. If the District has an outstanding balance due to the City, under the terms of this Agreement, in

13 excess of twelve (12) months in arrears, the City may deem such action on the part of the District as a request to terminate service permanently. In such event, the City shall notify the District that it is permanently terminating service to the District, unless the District pays the outstanding balance due, plus the amounts that will accrue, in full, within sixty (60) days of such notice. If the District fails to pay the outstanding balance due, plus the amounts accrued, in full, within such period, the City shall be entitled to terminate service to the District permanently. If the City must pursue legal action to collect any outstanding payments, the District shall pay all costs and expenses incurred by the city associated with such legal action, including, but not limited to, attorney s fees. In the event of a billing dispute between the District and the City regarding one or more of the monthly billings, the Parties agree to be bound to the following procedure: a. The District shall notify the City s Department of Public Works of a challenge to the water billing within fifteen (15) days of receipt of said billing and provide any supporting information relied upon by the District in support of the challenge. The Director of Public Works, or designee, shall investigate the alleged dispute and provide a written response with any supporting information to the District s representative within thirty (30) days of receipt of the challenge to said water billing(s). In the event either Party is dissatisfied with the outcome of either the challenge and/or response, the Party may proceed to request review of the respective Parties administration within ten (10) days after receipt of the response. b. The administration of the respective Parties shall be represented by the City Manager, or designee, and the District s Manager, or designee. The Managers, or designees thereof, shall review the challenge, the response, and the supporting information and confer in order to resolve the water billing(s) dispute. The Managers or designees shall have the authority to bind the Parties in any resolution of the dispute, with any such resolution agreement to be placed in writing and signed by each. Such resolution, if any, shall be concluded within fifteen (15) days of the conference by the Managers or designees, unless additional time is agreed upon by the Managers or designees. If the Managers or their respective designees fail to resolve the dispute, either party may pursue a claim to resolve the matter in the Riley County District Court. c. The District agrees to pay the water billings by the due date stated in the billing during the above dispute process. In the event either party is entitled to any credit(s) or payment(s) after the final determination of the dispute, any such credit/payment shall be applied or made by the next monthly billing after said final determination. 22. The District shall own the District s System and shall be responsible for all maintenance and repair of such System. The City shall own the City s System and shall be responsible for all maintenance and repair of such System. The District shall own all water supplied by the City. The District shall supply the water to its customers receiving water from the City s System and the District shall not charge water rates to those customers that are less than the City s water rates for retail inside the city users. The District shall obtain the written consent of the City before the

14 District provides water or enters into an agreement to provide water to a party that will resell the water. In the event the City discovers a problem or irregularity in the City System that will impact the District s System, the City agrees to notify the District as soon as reasonably feasible. The City agrees to use its best efforts to provide water to the District, at a pressure substantially equal to, or greater than, the pressure available to the District s System presently. The City agrees the water delivered to the District at the Connection Point(s) shall meet applicable quality standards set by the Kansas Department of Health and Environment (KDHE). From and after its passage through the Connection Point(s), all water delivered to the District System shall be the responsibility of the District, and any damage or injury incurred shall be the responsibility of the District solely. In the event the District discovers a problem or irregularity in the District System that will impact the City s System, the District agrees to notify the City as soon as reasonably feasible. The District shall be responsible for any additional water treatment that may be required after delivery from the City. The District shall not introduce any water, other than water supplied by the City pursuant to the terms of this Agreement, into the portion of the District s System supplied by City water, except with the City s written consent, which consent will not be unreasonably withheld, and only if the City is unable to provide water to the District s System and the District takes all reasonable steps to insure that no cross contamination will occur as a result of the introduction of such water. 23. The District agrees to adopt and maintain in force water rules and regulations that are parallel with, and substantially similar in all material respects to, the water related ordinances of the Code of Ordinances of the City of Manhattan, as they now exist or as they may be enacted or amended, concerning the consumption, use, safety, care and conservation of water. Such rules and regulations shall be adopted by the District within 120 days of the execution of this Agreement and at a minimum, shall apply to all of the District customers that receive water from the City s System. The District will enforce its rules and regulations to ensure the integrity of this provision. In the event a Water Watch, Water Warning or Water Emergency is declared by the City, the District will join the City in such declaration, without unreasonable delay. The District agrees to adopt, observe and enforce such conservation measures declared by the City, or as otherwise required by the State of Kansas or federal agency. The District shall ensure commonality of those remedial measures taken under the conditions then existing. The Parties agree the City now has the capacity of producing treated water in a quantity sufficient to meet the normal demands of its users, including the District. The City agrees to make every reasonable effort to provide an adequate supply of water at all times pursuant to the terms of this Agreement, but both Parties understand the City s water supply might, by reason of unforeseen emergency, catastrophe, extended drought, disaster or other Acts of God, become inadequate to meet the needs of the inhabitants of the City, and all other customers. Should such an emergency occur, the City shall not incur any liability to the District because of any need to curtail or interrupt the provisions of water to the District. In the event that the total supply of water available through the City s facilities is not adequate to meet the needs of the District and the City by reason of unforeseen emergency, catastrophe, extended drought, disaster, or other acts of God, the City may reduce the supply available to the District in accordance with the City s Water Conservation Code, Article II of Chapter 32 of the Code of Ordinances.

15 24. It is understood between the Parties that the City is subject to regulation by the Kansas Department of Agriculture, Division of Water Resources, Kansas River Water District Number 1, as well as by other state and federal agencies. Should the City be required by any of such regulatory agencies to limit, or stop, serving the District, the City shall incur no liability whatsoever, and shall not be in breach of this Agreement by compliance with such orders. If because of such an order the City is obligated to terminate service to the District, the District shall be released from all obligations hereunder, as of the date of such termination. Should the City receive such an order from any state or federal agency, the City shall use its best efforts to determine whether the order is lawful and whether the City is required to comply with the order; and shall further use its best efforts to oppose and/or overturn such order, if the City, in its sole discretion, determines there is a reasonable probability that it can be successful in such efforts. 25. The Parties agree that the City is hereby granted the Right of First Negotiation to offer service to properties within the US-24 Service Corridor defined and depicted in Exhibit A, and generally described as the US Highway 24 corridor from the Blue River east to Lake Elbow Road. Said right of First Negotiation shall require new water customers, whether residential, commercial or otherwise, to first negotiate water services from the City, in good faith with the City. In the event the City determines not to provide services to any new water user(s) in the defined area or the water user(s) decline City Service, the City may determine not to exercise its Right of First Negotiation, and shall allow the District to provide water services to the new user(s). The Parties agree to inform one another of any request for water service in the US-24 Service Corridor. 26. The City hereby consents and agrees to allow any property within the US-24 Service Corridor, as shown in Exhibit A herein, currently connected to the District s System ( Existing Customer ) as of the date of this Agreement, to remain a customer of the District, provided the nature of that customer s water usage does not substantially change. However, if such an Existing Customer desires to change or changes the nature of its water usage requiring a meter larger than 1 inch, such Existing Customer shall be treated as a New Customer as set forth hereinafter, except that such New Customer shall not be required to pay the additional connection fee as set forth in paragraph 27. For the purpose of this Agreement, the term New Customer shall mean a property, located within the Initial Service Area that is not physically connected to the District s System as of the date of this Agreement or a property, located within the Incremental Service Area outside the Initial Service Area and begins receiving water from the City subsequent to the initial service to the District. The District shall be responsible to pay over to the City all connection fees owed to the City. The City and District agree any property within the US-24 Service Corridor that desires to become a New Customer shall be required to: a. Enter into and complete first negotiations for service with the City; and, b. Obtain written consent from the City prior to becoming a New Customer of the District. 27. The Parties agree the City may charge a connection fee for all New Customers of the District in the amounts set forth in this Agreement. In addition, the Parties agree that the City may charge a connection fee for all properties connecting directly to the City s System, in addition

16 to those connection fees generally required of all users under the Code of Ordinances, in the amounts set forth herein. Nothing contained herein shall prohibit the District from charging its own connection fee to its New Customers. 1)Residential use, all kinds including multifamily and mobile homes as follows: a) Single-Family uses, including mobile homes: $472.50/Lot b) Duplexes: $945.00/Lot c) Multifamily uses: $393.75/Unit 2)All other Uses: a) Retail commercial/office Warehouse uses: $ /acre (retail commercial/office warehouse uses shall include all non-residential uses located in residential zoning districts.) b) High water Use Commercial/Industrial (Over 2000 gal/day/acre): $ /acre 28. The Parties affirmatively state the additional connection fees set forth in provision 28 have been calculated by the use of a formula that has been developed, and agreed to, by all Parties in order to ensure both that the subject property connecting pays a similar cost for the extension of City water service as do properties within the City, and so such additional connection fee will not discourage development within the Incremental Service Area as defined herein. These connection fees will remain in the dollar amounts listed in this section throughout the term of this agreement. The formula is set forth on Exhibit 3 attached hereto. 29. In order to facilitate efficient communication and operation of the Project, including both the City s System and the District s System, the District and the City agree that the City may install or cause to be installed, antennas, data collection units, communication equipment and supporting equipment and appurtenances on the Tank and Pump Station, and defined site area. Additionally, the District and City agree that the City or other public entities, with equipment installation oversight by the City, may install or caused to be installed, antennas, communication equipment and supporting equipment, for public communication purposes as approved by the District. Entities other than the City or other public entities, with equipment installation oversight by the City, may install or cause to be installed antennas, communication equipment and supporting equipment on the Tank and Pump Station, and defined site area, according to the terms of any contract or lease as the District and such entity (s) may agree. 30. This Agreement shall remain in full force and affect as long as the City provides water service to the Water Trunk -Tank Project. No party to this Agreement shall transfer, convey or assign any ownership interest in the Project, without the written advance consent of all other parties to this Agreement. Provided, however, neither this Agreement, nor the restriction on transfer, conveyance or assignment shall apply to any portion of the Project, which exists within an area,