CC 2021-04-13_10b Continued Consideration of CCB Operating Agreement
MEMORANDUM
TO: CITY COUNCIL
FROM: WHITNEY MCDONALD, CITY MANAGER
BILL ROBESON, ASSISTANT CITY MANAGER/PUBLIC WORKS
DIRECTOR
SUBJECT: CONTINUED CONSIDERATION OF APPROVAL OF THE CENTRAL
COAST BLUE OPERATING AGREEMENT AND CONSIDERATION OF
APPROVAL OF LETTER OF SUPPORT TO BUREAU OF
RECLAMATION FOR PROJECT GRANT
DATE: APRIL 13, 2021
SUMMARY OF ACTION:
Receive an update regarding the outcome of discussions with the cities of Grover Beach
and Pismo Beach following Council’s conditional approval of the proposed Central Coast
Blue Operating Agreement (Operating Agreement) that occurred at the March 23, 2021
City Council meeting, continue consideration of approval of the proposed agreement, and
consider approval of a letter of support to the Bureau of Reclamation for the WaterSMART
Title XVI Water Reclamation and Reuse Grant Endorsement for Central Coast Blue.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There is no immediate fiscal impact from the actions described herein. However, there is
a significant financial impact for the overall cost of the Central Coast Blue project as
shared previously with the Council. There are five types of costs associated with the
Central Coast Blue project: pre-construction, property acquisition, construction,
operations and maintenance ongoing costs, and debt service costs. The Operating
Agreement also provides for reimbursement of funds paid to date by the City from other
agencies. Current estimated costs of the project, including Arroyo Grande’s share based
on the terms of the proposed Operating Agreement, are:
Item 10.b. - Page 1
CITY COUNCIL
CONTINUED CONSIDERATION OF APPROVAL OF THE CENTRAL COAST BLUE
OPERATING AGREEMENT AND CONSIDERATION OF APPROVAL OF LETTER OF
SUPPORT TO BUREAU OF RECLAMATION FOR PROJECT GRANT
APRIL 13, 2021
PAGE 2
RECOMMENDATION:
It is recommended the City Council receive an update regarding the outcome of
discussions with the cities of Grover Beach and Pismo Beach following Council’s
conditional approval of the Operating Agreement that occurred at the March 23, 2021 City
Council meeting, continue considering approval of the proposed agreement, and consider
approval of the letter of support to the Bureau of Reclamation for the WaterSMART Title
XVI Water Reclamation and Reuse Grant Endorsement for Central Coast Blue.
BACKGROUND:
The City of Pismo Beach is the lead agency for the Central Coast Blue project, a regional
recycled water project. The project has been a multi-agency effort between three of the
four Northern Cities Management Area agencies (the Cities of Arroyo Grande, Grover
Beach, and Pismo Beach) and the South San Luis Obispo County Sanitation District
(SSLOCSD) to construct a regional recycled water project that will enhance supply
reliability by injecting advanced purified water into the Santa Maria Groundwater Basin
(SMGB). The project will reduce vulnerability to drought and seawater intrusion by
creating a seawater intrusion barrier and supplementing the naturally occurring
groundwater.
An initial draft Framework was presented to all of the partner agencies in late 2019 and
early 2020 to outline a distribution of costs and benefits for the project. The Framework
was presented to the Arroyo Grande City Council on June 9, 2020, and was revised based
on the feedback received at that time and presented again to Council on August 11, 2020.
The parties then used the approved Framework to develop the proposed Central Coast
Blue Operating Agreement (Attachment 1), which was presented to the parties’ city
councils for approval along with the necessary California Environmental Quality Act
documentation for the project.
Pismo Beach was the first of the agencies to consider the Operating Agreement, which
occurred on March 16, 2021. On March 16, Pismo Beach approved the Central Coast
Blue Operating Agreement and adopted Statements of Overriding Considerations and a
Mitigation, Monitoring and Reporting Program for the Environmental Impact Report (EIR).
The Grover Beach City Council then approved the Operating Agreement, Statements of
Overriding Considerations and a Mitigation, Monitoring and Reporting Program at its
meeting on March 22, 2021.
On March 23, 2021, Council considered the proposed Central Coast Blue Operating
Agreement and its associated environmental determination. After receiving public
comment and conducting discussion and deliberation, Council approved the Operating
Agreement and adopted Statements of Overriding Considerations and a Mitigation,
Monitoring, and Reporting Program, subject to the condition that the cities of Pismo Beach
and Grover Beach separately agree to enter into a Community Workforce Agreement for
construction of the project.
Item 10.b. - Page 2
CITY COUNCIL
CONTINUED CONSIDERATION OF APPROVAL OF THE CENTRAL COAST BLUE
OPERATING AGREEMENT AND CONSIDERATION OF APPROVAL OF LETTER OF
SUPPORT TO BUREAU OF RECLAMATION FOR PROJECT GRANT
APRIL 13, 2021
PAGE 3
Lastly, on April 7, the City of Pismo Beach requested an updated letter of support for the
Title XVI grant application they are submitting to the Bureau of Reclamation for the Central
Coast Blue project. The grant application deadline is approaching quickly and the letter
was requested by April 16. A copy of the proposed letter is attached.
ANALYSIS:
Following Council’s action on March 23, 2021, City staff immediately began discussions
with management at the cities of Pismo Beach and Grover Beach regarding the
Community Workforce Agreement condition. Both cities have stated that they will not
agree to the condition.
During discussions with the cities of Grover Beach and Pismo Beach, certain questions
and concerns regarding the proposed Operating Agreement emerged. The questions and
concerns include whether the Operating Agreement should address the following:
Opportunities and requirements for public input and oversight regarding the
project;
Clear roles and responsibilities of the management committee, including
provisions addressing how disagreements among the committee members will be
resolved, such as through a defined voting structure;
Whether input from Grover Beach and Arroyo Grande should be required for the
construction procurement process, including input regarding local hire
requirements and a potential Community Workforce Agreement;
Concerns regarding the City’s percentage share of financial obligations for the
project and its ability to participate in decision making; and
The approval process for the project’s construction and operational budgets,
including whether each city should have the ability to disapprove the proposed
budgets without breaching the agreement.
A number of potential solutions to these questions and concerns were explored with
representatives of the cities of Grover Beach and Pismo Beach; however, both cities have
indicated that they are not interested in considering any alterations to the existing
proposed Operating Agreement at this time.
On March 24, 2021, the United States Bureau of Reclamation released its application for
Title XVI WIIN Water Reclamation and Reuse Projects. This grant opportunity has the
potential to provide significant funding for the Central Coast Blue project. The deadline
for submitting the grant application is April 23, 2021, one month earlier than previously
anticipated. The cities of Grover Beach and Pismo Beach have expressed hope that the
City will approve the current proposed Operating Agreement prior to that grant application
deadline.
Item 10.b. - Page 3
CITY COUNCIL
CONTINUED CONSIDERATION OF APPROVAL OF THE CENTRAL COAST BLUE
OPERATING AGREEMENT AND CONSIDERATION OF APPROVAL OF LETTER OF
SUPPORT TO BUREAU OF RECLAMATION FOR PROJECT GRANT
APRIL 13, 2021
PAGE 4
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
1. Eliminate the condition requiring an agreement by the cities of Grover Beach and
Pismo Beach to enter into a Community Workforce Agreement for project construction
and approve the Operating Agreement.
2. Take no further action, in which case the City’s approval of the Central Coast Blue
Operating Agreement will remain conditioned on the cities of Pismo Beach and Grover
Beach agreeing to enter into a Community Workforce Agreement for project
construction.
3. Rescind the City’s conditional approval and do not approve the Operating Agreement.
This will have the effect of removing the City from the project.
4. Rescind the City’s conditional approval of the Operating Agreement and direct staff to
prepare a letter identifying specific changes to the agreement that the City requires in
order to approve it. Under this alternative, Council may wish to approve the Operating
Agreement subject to the cities of Grover Beach and Pismo Beach agreeing to the
proposed amendment or addendum and include a deadline for the other parties’
approval. The action may be stated so that, if the deadline passes and the other
parties do not approve the proposed amendment or addendum, the City’s conditional
approval would become void.
5. Approve the letter of support to the Bureau of Reclamation.
6. Do no approve the letter of support to the Bureau of Reclamation.
7. Provide other direction to staff.
ADVANTAGES:
Receiving an update regarding the status of the Operating Agreement and the issues and
concerns discussed among the parties since March 23, 2021, ensures that Council and
the public have an opportunity to discuss and consider the impacts of approving or
disapproving the proposed agreement. Approval of the Operating Agreement will secure
an additional reliable water source for the City, while determining to not approve the
Operating Agreement will avoid the City incurring the costs of the project. Approval of the
letter of support to the Bureau of Reclamation will increase grant opportunities for the
project.
DISADVANTAGES:
Approving the proposed Operating Agreement will commit the City to paying
approximately 40% of the costs of the project while questions and concerns remain
regarding the agreement. While the proposed Operating Agreement includes provisions
allowing the City to exit the agreement before incurring its share of the costs of
construction, the City will be obligated to pay its share of pre-construction and property
acquisition costs upon approval of the agreement. It is estimated at this time that those
costs may reach approximately $3.1 million. Disapproving the proposed Operating
Item 10.b. - Page 4
CITY COUNCIL
CONTINUED CONSIDERATION OF APPROVAL OF THE CENTRAL COAST BLUE
OPERATING AGREEMENT AND CONSIDERATION OF APPROVAL OF LETTER OF
SUPPORT TO BUREAU OF RECLAMATION FOR PROJECT GRANT
APRIL 13, 2021
PAGE 5
Agreement, on the other hand, will remove the City from the project and thereby not
secure this water source for the City.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachments:
1. Central Coast Blue Operating Agreement
2. Draft Letter of Support to Bureau of Reclamation for WaterSMART Title XVI Water
Reclamation and Reuse Grant Endorsement, Central Coast Blue
Item 10.b. - Page 5
Page 1 of 20
OPERATING AGREEMENT FOR THE CENTRAL COAST BLUE WATER PROJECT
THIS OPERATING AGREEMENT FOR THE CENTRAL COAST BLUE WATER PROJECT (“Agreement’)
is made and entered into as of _______________, 2021 (“Effective Date”), by and among the
City of Pismo Beach, a California municipal corporation (“Pismo Beach”), the City of Grover
Beach, a California municipal corporation (“Grover Beach”), and the City of Arroyo Grande, a
California municipal corporation (“Arroyo Grande”), (collectively “Parties” and each individually
a “Party”).
RECITALS
A.The Parties have worked collaboratively to manage groundwater pumping in their
portion of the Santa Maria Groundwater Basin (SMGB) since development of a 1983
Gentlemen’s Agreement, which allocated the estimated available groundwater
among municipal and agricultural water purveyors and pumpers; and
B.The Gentlemen’s Agreement was further formalized in a 2002 Agreement Regarding
Management of the Arroyo Grande Groundwater Basin which was later
incorporated into a 2005 stipulation as part of the SMGB adjudication; and
C.In response to the detection of incipient seawater intrusion into the SMGB caused
by drought and unsustainable pumping, the Parties dramatically reduced their
groundwater pumping in the SGMB and began investigating supplemental supply
opportunities to improve water supply reliability and groundwater protection; and
D.It is the declared policy of the State of California, pursuant to Water Code Section
461, that the primary interest of the people of the State in the conservation of all
available water resources requires the maximum reuse of reclaimed water in the
satisfaction of requirements for beneficial uses of water; and
E.The California Legislature has found and declared, pursuant to Water Code Section
13511, that a substantial portion of California’s future water requirements may be
economically met by beneficial use of recycled water, and that the utilization of
recycled water by local communities for domestic, agricultural, industrial,
recreational, and fish and wildlife purposes will contribute to the peace, health,
safety and welfare of the people of the State; and
F.Treated effluent wastewater from the Pismo Beach and South San Luis Obispo
County Sanitation District (SSLOCSD) wastewater treatment plants was identified as
a significant water supply source that could be put to beneficial use; and
G.There continues to be legislative and regulatory pressure to limit ocean outfall
discharges that could impact the Pismo Beach and SSLOCSD wastewater disposal
operations; and
Attachment 1
Item 10.b. - Page 6
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H. Central Coast Blue is a regional multi‐phase groundwater protection project that will
allow beneficial use of water currently discharged to the ocean as a seawater
intrusion barrier; and
I. Phase 1 of the Central Coast Blue project will provide for the advanced treatment
and groundwater injection of wastewater flows from the Pismo Beach wastewater
treatment plant, and Phase 2 of the project is anticipated to add flows from the
SSLOCSD wastewater treatment plant for additional injection or delivery to
agricultural and other users; and
J. The Parties, by this Agreement, wish to set forth the Parties’ respective rights and
responsibilities in the planning, development, construction and operation of Central
Coast Blue.
AGREEMENT
NOW THEREFORE, in consideration of the matters recited and the mutual promises, covenants,
and conditions set forth in this Agreement, the Parties hereby agree as follows:
1. EFFECTIVE DATE
This Agreement shall be dated as of, and become effective on, the date of its execution by the
last of the Parties.
2. TERM
This Agreement shall terminate on ___________, 20__, and shall include the construction
periods (allowing for Facility construction and acceptance testing) as well as twenty (20) Years
of operation; provided, however, as set forth in Section 7(b) in no event shall this Agreement
terminate while any Certificates as defined below are outstanding. A Party may terminate this
Agreement as to that Party only upon giving one‐hundred (180) days’ advance written notice to
all other Parties. Notwithstanding any termination of this Agreement as to a Party, that Party
shall be obligated to pay such costs as are set forth in Exhibit “A” to this Agreement, which is
hereby incorporated by reference as if set forth fully herein.
3. DEFINITIONS
“Applicable Law” means any law, rule, code, standard, regulation, requirement, consent decree,
consent order, consent agreement, permit, guideline, action, determination or order of, or legal
entitlement issued or deemed to be issued by, any governmental body or court having
jurisdiction, applicable from time to time to any activities associated with the siting, design,
construction, equipping, financing, ownership, start‐up testing, acceptance, operation,
maintenance, repair and replacement of any part of the Project, and any other obligations of
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the Parties under this Agreement. Governmental bodies include local, county, state and federal
agencies and all successors thereto.
“Certificates” mean any bonds or certificates of participation used for Project construction that
are payable from the Net Revenues of a Party’s water or wastewater enterprise systems.
“Enterprise” means the Party’s water system, including all facilities, works, properties and
structures of the Party for the treatment, transmission and distribution of potable and non‐
potable water, including all contractual rights to water supplies, transmission capacity supply,
easements, rights‐of‐way and other works, property or structures necessary or convenient for
such facilities, together with all additions, betterments, extension and improvements to such
facilities or any part thereof hereafter acquired or constructed.
“Environmental Impact Report” or “EIR” means the Project’s final environmental impact report
dated ______, 2020, State Clearinghouse #2019120560.
“Environmental Law” means any federal, regional, state, or local law, statute, ordinance, rule,
regulations, code, order, decree, notice, directive or judgment relating to human health,
pollution, damage to or protection of wildlife, air, surface water, groundwater, soil, and/or the
environment, including but not limited to the following, as amended from time to time: (a) the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et
seq., (b) the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., (c) the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq., (d) the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq., (e) the Safe Drinking Water Act 42 U.S.C. § 300f et seq., (f) Clean Air Act 42
U.S.C. § 7401 et seq., (g) the Hazardous Materials Transportation Act, as amended 40 U.S.C.
§ 5101 et seq. (h) the California Air Resources Act, Cal. Health and Safety Code § 39000 et seq.,
(i) the Porter‐Cologne Water Quality Control Act, Cal. Water Code § 13300 et seq., and (j) any
regulations promulgated under the foregoing.
“Facility” means the advanced water treatment facility that will receive and further treat
wastewater influent from Pismo Beach’s and/or SSLOCSD’s wastewater treatment facilities,
which as of the date of this Agreement is proposed to be constructed on Assessor’s Parcel
Number 060‐543‐016 in the City of Grover Beach, including the facility’s equalization basin,
storage tanks, pump station and associated piping and equipment from the Pismo Beach and
SSLOCSD wastewater treatment facilities.
“Gross Revenues” means all gross income and revenue received or receivable by the Party from
the ownership and operation of its Enterprise, calculated in accordance with Generally
Accepted Accounting Principles, including all rates, fees and charges (including fees for
connecting to the Enterprise and any water stand‐by or water availability charges or
assessments) received by the Party for water service made available or provided by the
Enterprise and all other income and revenue howsoever derived by the Party from the
Enterprise or arising from the Enterprise; provided, however, that (i) any specific charges levied
for the express purpose of reimbursing others for all or a portion of the cost of the acquisition
Item 10.b. - Page 8
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or construction of specific facilities, or (ii) customers’ deposits or any other deposits subject to
refund until such deposits have become the property of the Party, are not Gross Revenues and
are not subject to the lien of the Agreement.
“Hazardous materials” means any substance defined as hazardous substances, hazardous
materials, or toxic substances in the Comprehensive Environmental Response, Compensation,
and Liability Act, as amended 42 U.S.C. § 9601 et seq.; the Hazardous Materials Transportation
Act, as amended 40 U.S.C. § 5101 et seq.; the Resource Conservation and Recovery Act, as
amended 42 U.S.C. § 6901 et seq.; and any substance defined as hazardous waste in Cal. Health
and Safety Code § 25117 or as hazardous substance in Cal. Health and Safety Code § 25316,
and/or in any regulations adopted and publications promulgated under these laws.
“Maintenance and Operation Costs” of the Enterprise means the reasonable and necessary costs
and expenses paid by the Party for maintaining and operating the Enterprise, as determined in
accordance with Generally Accepted Accounting Principles, including but not limited to (a) the
reasonable expenses of management and repair and other costs and expenses necessary to
maintain and preserve the Enterprise in good repair and working order, including the cost of
water, and (b) administrative costs of the Party attributable to the Enterprise and the financing
thereof; but excluding (x) depreciation, replacement and obsolescence charges or reserves
therefor, (y) capital expenditures other than as set forth in subsection (a) above, and
(z) amortization of intangibles or other bookkeeping entries or a similar nature.
“Municipal Pumping Entitlement” means a Party’s annual allocation of groundwater to a Party
under the adjudication of the water rights in the Santa Maria River Valley Groundwater Basin.
As of the date of this agreement, the Parties’ annual entitlement is as follows:
Party Municipal
Pumping
Entitlement (Acre‐
Feet/Year)
Arroyo Grande 1,323
Grover Beach 1,407
Pismo Beach 700
“Net Revenues” means, for any period, all of the Gross Revenues during such period less all of
the Maintenance and Operation Costs during such period.
“Order” means all of the following: (a) the National Pollutant Discharge Elimination System
(NPDES) permit, or successor permit, establishing requirements for the Project’s discharge of
treated wastewater, (b) and, if separate, the Water Reclamation Permit, or successor permit,
establishing requirements for reuse of Recycled Water, as may be issued, modified or reissued
by the Regional Water Quality Control Board or successor governmental entity.
Item 10.b. - Page 9
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“Pismo Beach Environmental Site Assessments” means the (1) Phase I Environmental Site
Assessment of Approximately 1.5 Acre Parcel, Huber Street Grover Beach, California prepared
for City of Pismo Beach, Public Works Department by Rincon Consultants, Inc. (Project 19‐
07931) dated June 21, 2019, including any attachments, exhibits and appendices thereto and
(2) the Phase II Environmental Site Assessment of Approximately 1.5 Acre Parcel, Huber Street
Grover Beach, California prepared for City of Pismo Beach, Public Works Department by Rincon
Consultants, Inc. (Project 19‐07931) dated July 22, 2019 including any attachments, exhibits and
appendices thereto.
“Project” means the Central Coast Blue groundwater protection project, and each phase of the
Project.
“Project Yield” means 100 % of the total annual amount of Recycled Water injected into
injection wells pursuant to this Agreement.
“Recycled Water” means water which, as a result of treatment of wastewater influent to Pismo
Beach’s and/or SSLOCSD’s wastewater treatment facilities, is suitable for the direct beneficial
uses allowable for Recycled Municipal Wastewater as defined by Title 22, Division 4, Chapter 3
of the California Code of Regulations.
“Regional Board” or "RWQCB" means the California Regional Water Quality Control Board,
Central Coast Region.
“Replacement Water Rate” means the acre‐foot unit cost for Project Recycled Water, which
shall be calculated by adding all the Project’s capital costs, financing charges, variable costs of
treatment, delivery and injection, and operations and maintenance costs for a given calendar
year, divided by the Project Yield for that year.
“Senior Obligations” means all bonds, notes, loan agreements, installment sale agreements,
leases or other obligations of the Party outstanding as of the date of the Agreement or incurred
by a Party after the date of the Agreement, payable from and secured by a pledge of and lien
upon any of the Net Revenues.
“User” means a Party, or other person or entity using Recycled Water provided by the Project
pursuant to this Agreement.
4. PROJECT FUNDING (PHASE 1)
The costs incurred in the Facility site acquisition, permitting, design and construction of the
Project shall be allocated according to the cost sharing provisions in Exhibit “A”.
5. PROJECT OPERATION (PHASE 1)
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a. Operation
During Phase 1, the Facility will receive and treat secondary treated effluent flows from the
Pismo Beach wastewater treatment plant. Grover Beach by its entry into this Agreement,
consents to the location of the Facility within the corporate boundaries of Grover Beach and
subject to the terms of this agreement will consider acceptance of title of the Property located
at APN 060‐543‐016. During Phase 1, the Facility is expected to accept an initial influent and
treatment capacity of up to 1.3 million gallons per day (MGD). During Phase 1, Pismo Beach
shall operate the Facility, furnishing such employees, operators, electricians, mechanics, and
administrative staff as are necessary to operate the Facility, including but not limited to
operation and maintenance of the injection, monitoring, and production wells, well inspections,
monitoring of pressures, cleaning out well casings, removing microbial build‐up, and
backflushing.
Pismo Beach shall, in accordance with its own ordinances, resolutions and policies and
procedures, recruit, hire, train and if necessary, discipline and terminate employees it assigns to
operate the Facility. Pismo Beach shall be responsible for the payment of all salaries, benefits,
insurance and retirement contributions for its own employees.
Pismo Beach shall, on a semi‐annual basis, invoice each other Party for its pro rata percentage
of the expenses incurred by Pismo Beach during such preceding period for operation of the
Facility, as established in the annual operating budget. The pro rata percentage for each party
shall be equal to the Party’s Water Purveyor Contribution percentage. As used herein, the
Water Purveyor Contribution percentages shall be as follows:
PROJECT Contributing
Water Purveyors
Cost Share
Percentage
Arroyo Grande 39%
Grover Beach 36%
Pismo Beach 20%
Unsubscribed 5%
Total 100%
Until a contributing water purveyor is identified for the unsubscribed portion noted above, the
Water Purveyor Contribution percentages shall be as follows:
PROJECT Contributing
Water Purveyors
Cost Share
Percentage
Arroyo Grande 40.7%
Grover Beach 37.7%
Pismo Beach 21.7%
Total 100%
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Such expenses shall include salaries, health and retirement benefits, and workers’
compensation insurance of the water and wastewater operators assigned to the Facility, utility
and supply costs for Facility operations, and an additional administrative charge equal to two
percent (2 %) of the respective shares of Arroyo Grande and Grover Beach to reimburse Pismo
Beach for its administrative costs in tracking and invoicing expenses for operation of the
Facility. Invoiced expenses shall be identified in the annual operating budget approved by the
Management Committee as described in subsection (b) below. Should Grover Beach accept title
to the Property, and to the extent any tax or assessment of any kind is imposed upon the City of
Grover Beach's ownership of the Property located at APN 060‐543‐016 or the operation of the
Facility by Pismo Beach, said taxes or assessments of any kind by any governmental agency shall
be considered expenses and allocated to the respective Parties consistent with Section 5 of this
Agreement. It is agreed by Pismo Beach that since they are a public entity, California Revenue
and Taxation Code Section 107.6 has no application to this Agreement. Payment shall be made
within thirty (30) days of receipt of each invoice as to all non‐disputed charges. If a Party
disputes any of the charges, it shall give written notice to Pismo Beach within thirty (30) days of
receipt of an invoice of any disputed charges set forth on the invoice. In the event that
payment is not made within thirty (30) days of receipt of each invoice as to all non‐disputed
charges, late penalties and interest may apply at the maximum rate allowed by law.
Pismo Beach shall keep and maintain full, complete, and appropriate books, records, and
accounts related to the operation of the Facility, including all such records necessary or prudent
to evidence and substantiate in full detail Pismo Beach’s calculation of each Party’s pro rata
share of such expenses. These records, including source documents, receipts, and any other
documents shall be available to each other Party upon that Party’s request for purposes of
review or auditing.
At least ninety (90) days prior to the end of each fiscal year, Pismo Beach shall prepare an
annual operating budget and provide it to the Management Committee, if one exists. If no
Management Committee exists, it shall be provided to the city managers of all Parties for
review and approval.
b. Management Committee
If deemed necessary by any of the city managers of the Parties, a Management Committee
consisting of nine members shall be formed, with three members appointed by each Party’s city
manager. The members shall serve indefinite terms at the discretion of their appointing
authority. The committee will be assisted in clerical functions by each of the Parties on annually
rotating basis to be established by the committee. The committee shall meet on a regular
basis, not less than semi‐annually, at such times and places as may be established by the
committee.
The Management Committee shall (1) review, suggest any modifications to, and approve the
annual operating budget prepared by Pismo Beach as described in subsection (a) above, (2)
assist the Parties in developing and administering policy recommendations to be presented to
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the city councils of the Parties on all major operational and funding aspects of the Project
including facility oversight and management, and (3) develop such non‐policy level operational
and funding protocols as will best ensure the continued operational and fiscal viability of the
Project.
c. Direct injection of Recycled Water
During Phase 1, Pismo Beach will deliver the Recycled Water from the Facility to one or more
groundwater injection wells, each of which will be capable of injecting approximately 800 acre‐
feet per year of Recycled Water into the groundwater basin. Pismo Beach shall consult with the
other Parties to determine the allocation of Recycled Water among the various injection wells
to best ensure the Project’s goals are effectively accomplished.
All Recycled Water injected into groundwater injection wells pursuant to this Agreement shall
be measured by Pismo Beach using such facilities and equipment as Pismo Beach may
determine in its sole discretion. Pismo Beach shall own, inspect, operate, maintain, repair and
replace the measuring equipment. Upon request by a Party, the accuracy of a measurement
shall be investigated by Pismo Beach and any error appearing therein shall be adjusted. A Party
may inspect such measuring equipment for the purpose of determining the accuracy thereof.
The quality of the Recycled Water injected into the groundwater injection wells shall
substantially comply with the quality criteria established by the Order and Applicable Laws,
although the Recycled Water’s quality may vary within those criteria. Pismo Beach shall test the
Recycled Water as required under the Order and Applicable Laws to ensure that it substantially
complies with the quality criteria set forth in the Order and Applicable Laws. The results of this
testing program shall be provided to the Management Committee, if one exists. If no
Management Committee exists, the results shall be provided to the city managers of all Parties.
The results of said tests shall be maintained at Pismo Beach’s wastewater treatment plant. An
annual report of the test values shall be sent by mail and e‐mail to each Party. All facilities used
for direct injection of Recycled Water are subject to inspection by any Party or the Regional
Board to ensure the protection of the public.
d. Extraction of Project Yield by Parties
Beginning at such time as permitted by the Order and Applicable Laws, each Party shall be
entitled to extract from the groundwater basin its pro rata allocation of the Project Yield. As
used herein, the pro rata allocations of the Project Yield shall be the same as the Water
Purveyor Contribution percentages set forth in Section 5(a) above.
In the event a Party extracts from the groundwater basin in any calendar year more than the
sum of (i) fifty percent (50%) of its Municipal Pumping Entitlement plus (ii) its pro rata
allocation of the Project Yield, the Party shall either (1) reduce its Municipal Pumping
Entitlement in the following year by an amount equivalent to the overage in the preceding year,
or (2) pay to the other Parties an amount equal to one hundred ten percent (110%) of the
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quantity of overage multiplied by the Replacement Water Rate. This payment shall be allocated
between the other Parties on a pro‐rata basis according to their Water Purveyor Contribution
percentages set forth in Section 5(a), with the over‐pumping Party’s Water Purveyor
Contribution percentage being allocated between the other Parties on the same basis.
e. Extraction of Project Yield by non‐parties
In the event an entity that is not a Party to this Agreement subscribes to all or a portion of the
unsubscribed Project Yield set forth in Section 5(a) as an Additional Project Participant, at such
time as permitted by the Order and Applicable Laws, that entity shall be entitled to extract from
the groundwater basin its pro rata allocation of the Project Yield.
In the event such entity extracts from the groundwater basin in any calendar year more than
the sum of (i) fifty percent (50%) of its pro rata allocation of the Project Yield plus any other
legal entitlement it may have to extract from the groundwater basin, the entity shall, at the
option of the other Parties, do one of the following (1) reduce its legal entitlement under the
final judgment in the Santa Maria Groundwater Basin litigation to pump from the groundwater
basin in the following year by an amount equivalent to the overage in the preceding year, (2)
convey an equivalent amount of water from other sources available to such entity to the
Parties entitled to receive such water entitlement or (3) pay to the Parties an amount equal to
one hundred twenty‐five percent (125%) of the quantity of overage multiplied by the
Replacement Water Rate. This payment shall be allocated between the Parties according to the
Water Purveyor Contribution percentages set forth in Section 5(a) above.
6. PROJECT OPERATION (PHASE 2)
In that the precise details of Phase 2 of the Project’s financing, construction and operation
remain to be determined among the Parties, the Parties agree to cooperate reasonably to
consider appropriate amendments to this Agreement to allocate responsibility for the
governance, financing, construction and operation of Phase 2 of the Project.
7. SUSPENSION AND TERMINATION
a. Notice of Default
Should any Party default in the performance of this Agreement or materially breach any of its
provisions, except as the result of an uncontrollable circumstance, the Party claiming such
default shall provide the Party a notice of default (“Notice”) to the Party claimed to have
defaulted. In such Notice, the Party claiming such default, shall provide a description of the
specific incidents giving rise to such default or breach and identify the requested cure. Upon
receipt of notice, the Party claimed to be in default shall notify the Party claiming such default
as to the status of its performance. Within thirty (30) days of receipt of the Notice, the Parties
shall meet and confer in good faith and exchange information in an attempt to remedy such
incidents.
Item 10.b. - Page 14
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b. Resolution When Project Financing Certificate(s) Outstanding
While any Certificates for the Project financing are outstanding, the only remedy for default
shall be specific performance and there shall be no suspension or termination of the
Agreement. If the Parties cannot agree on such remedies and the claimed default or breach
occurs while any Certificates issued for the financing of the Facility are outstanding, the matter
shall be submitted to binding arbitration using an independent arbitrator. If any Party wishes
to select an arbitrator, each Party shall prepare a separate list of five (5) independent
arbitrators having experience, as applicable in the development of, or operation of similar
public works facilities, in numerical order with the first preference at the top, and exchange and
compare lists. The independent arbitrator ranking highest on the three (3) lists by having the
lowest total rank order position on the three (3) lists shall be the Independent Arbitrator. In
case of a tie in scores, the Independent Arbitrator having the smallest difference between the
rankings of the three (3) Parties shall be selected; other ties shall be determined by a coin toss.
If no independent arbitrator appears on all lists, this procedure shall be repeated. If selection is
not completed after the exchange of three (3) lists or thirty (30) Days, whichever comes first,
then each Party shall select one independent arbitrator having experience described above and
the three (3) arbitrators so selected shall together select an Independent Arbitrator. The
Independent Arbitrator shall make its determination based on the submissions of the Parties,
the provisions hereof, and other factual determinations the Independent Arbitrator may make
regarding the matter in dispute, but in any case such determination must not adversely impact
the Parties’ ability to comply with the terms of the Certificates. The determination of the
Independent Arbitrator shall be binding. The Parties shall share the costs of the Independent
Arbitrator equally for the first three dispute resolutions brought in any twelve (12) month
period commencing on July 1, and thereafter shall be borne by the non‐prevailing party, as
determined by the Independent Arbitrator.
c. Resolution When Facility Financing Certificate (s) Not Outstanding
If the Parties cannot agree on such remedies and the claimed default or breach does not occur
during the period when any Certificates issued for the financing of the Facility are outstanding,
the Parties may exercise any legal rights they have under the Agreement and under Applicable
Law, including to secure specific performance.
8. ENVIRONMENTAL CONDITION AND INDEMNIFICATION
a. Each Party hereto agrees to protect, indemnify, defend and hold harmless each of the other
Parties and their officers, employees, agents, successors and assigns from and against any
and all actual or potential claims, liabilities, damages, losses, fines, penalties, judgments,
awards, costs and expenses (including without limitation reasonable attorneys’ fees and
costs and all foreseeable, unforeseeable and consequential damages) asserted against,
resulting to, imposed upon or incurred by said other Party by reason of the first Party’s
Item 10.b. - Page 15
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breach of any provisions of this Agreement, the Order or Applicable Laws. This
indemnification shall survive the termination of this Agreement.
b. Notwithstanding the above indemnity provision and to the extent this subsection (b) shall
be inconsistent with subsection (a), this subsection (b) shall govern the obligations of the
Parties for purposes of indemnification. Pismo Beach shall protect, defend, indemnify, and
hold harmless Grover Beach and Arroyo Grande, and their respective officials, employees,
attorneys and agents (“Indemnified Parties”) from and against any and all claims,
liabilities, damages, costs, expenses (including reasonable attorney fees and expert witness
fees), judgments, settlements, mediation, and/or arbitration awards, whether for personal
or bodily injury, property damage, or economic injury, violations of California statutory or
constitutional law filed against Grover Beach and/or Arroyo Grande related to the
preparation, approval or certification of the Environmental Impact Report or any other
document related to certification under the California Environmental Quality Act used by
Pismo Beach for the approval of this project.
c. Environmental Condition of Property and Indemnity. In accordance with Exhibit "A", and
subject to the conditions contained therein, the City of Grover Beach may agree to the
transfer of title of the Property located in the City of Grover Beach at APN 060‐543‐016
(hereinafter referred to as "the Property") which is part of the Central Coast Blue ground‐
water protection project defined in Section 3, "Definitions", as "Facility" and is used for
placement of the advanced water treatment facility. If Grover Beach agrees to accept the
transfer of the Property it will be subject to the terms and conditions of this Agreement, not
inconsistent with this subsection (c), no earlier than _____________________, 2021. To the
extent subsections (b), (c), (d) and (e) are inconsistent with any other provision(s) of this
Agreement, including subsection (a) of this Section 8, the provisions of subsections (c) (d)
and (e) of this Section 8 shall prevail and govern the responsibilities and obligations of the
Parties.
d. Environmental Audit. In the event of a transfer of title to the Property to Grover Beach,
Pismo Beach warrants and represents that the Property is not and, as of the close of escrow
and transfer of title of the Property at APN 060‐543‐016 to the City of Grover Beach, will not
be in violation of any Environmental Law. Pismo Beach further warrants and represents
that, during the time in which Pismo Beach owned the Property, other than as disclosed in
the Pismo Beach Environmental Site Assessments, neither Pismo Beach nor, to the best of
Pismo Beach’s actual knowledge, any third party has used, generated, manufactured,
produced, stored, or disposed of on, under, or about the Property or transported to or from
the Property any hazardous materials, including without limitation flammable materials,
explosives, asbestos, radioactive materials, hazardous wastes, toxic substances, or related
injurious materials, whether injurious by themselves or in combination with other materials.
Pismo Beach further represents and warrants that there is no proceeding or inquiry by any
governmental authority (including without limitation the Environmental Protection Agency,
the California State Department of Health Services, or the Department of Toxic Substances
Item 10.b. - Page 16
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Control) with respect to the presence of such hazardous materials on the Property or their
migration from or to other property.
e. Pismo Beach shall indemnify, protect, hold harmless, and defend City of Grover Beach, its
directors, officers, employees, attorneys, and agents, and any successors to the City of
Grover Beach's interest in the chain of title to the Property, their directors, officers,
employees, and agents (“Environmental Indemnitees”), from and against any and all liability
caused by or arising from the use, generation, storage, or disposal of Hazardous Materials
by Pismo Beach or any prior owner, occupant, or operator of the Property, including but not
limited to the cost of any legally required or necessary repair, cleanup, or detoxification
under any Environmental Laws and the preparation of any closure or other required plans,
whether such action is required or necessary before or after the close of escrow or transfer
of title to City of Grover Beach, to the full extent that such liability is attributable, directly or
indirectly, to the presence or use, generation, storage, release, threatened release, or
disposal of hazardous materials by any person on the Property including Pismo Beach.
Notwithstanding the generality of the foregoing, Pismo Beach shall not be obligated to
indemnify, hold harmless, and defend the Environmental Indemnitees from and against any
liability, claims, suits, actions, losses, expenses and costs (including reasonable attorneys’
fees and court costs) whether actual, alleged, threatened, or incurred that are caused by or
arising from or related in any manner to the presence or use, generation, storage, release,
threatened release, or disposal of hazardous materials by the Environmental Indemnitees
after the close of escrow or transfer of title of the Property to the City of Grover Beach.
9. REPRESENTATIONS AND WARRANTIES
Each Party warrants and represents to the others that:
a. it has all requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby;
b. the execution, delivery, and performance of this Agreement have been duly authorized
by its governing body, or are in accordance with its organizational documents, and this
Agreement has been duly executed and delivered for it by the signatories so authorized,
and constitutes its legal, valid, and binding obligation;
c. the execution, delivery, and performance of this Agreement will not breach or violate,
or constitute a default under, its organizational documents or any Agreement, lease or
instrument to which it is a party or by which it or its properties may be bound or
affected; and
d. it has not received any notice, nor to the best of its knowledge is there pending or
threatened any notice, of any violation of any Applicable Laws, awards or permits which
would materially and adversely affect its ability to perform hereunder.
Item 10.b. - Page 17
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10. NOTICE
Any notice required or permitted hereunder will be deemed sufficient if given in writing and
delivered personally or sent by registered or certified mail, return receipt requested, postage
prepaid, or delivered to a nationally recognized express mail service, charges prepaid, receipt
obtained, to the address shown below or to such other persons or addresses as are specified by
similar notice.
TO CITY OF PISMO BEACH: City of Pismo Beach
760 Mattie Road
Pismo Beach, CA 93443
Attention: Director of Public Works/City Engineer
TO CITY OF GROVER BEACH: City of Grover Beach
154 S 8th Street
Grover Beach, CA 93433
Attention: City Manager
TO CITY OF ARROYO GRANDE: City of Arroyo Grande
300 E Branch Street
Arroyo Grande, CA 93420
Attention: City Manager
11. CONSTRUCTION OF AGREEMENT
This Agreement is the result of arms‐length negotiations among sophisticated parties and
ambiguities or uncertainties in it will not be construed for or against any Party, but will be
construed in a manner that most accurately reflects the intent of the Parties as of the
Agreement Effective Date. Each of the Parties acknowledges and agrees that no other Party has
provided any Party with any legal, accounting, regulatory, financial, or tax advice with respect
to any of the transactions contemplated hereby, and each Party has consulted its own legal,
accounting, regulatory, financial and tax advisors to the extent it has deemed appropriate.
12. JURISDICTION, VENUE AND GOVERNING LAW
The Parties will bring any lawsuits arising out of this Agreement on in courts of the State of
California, which will have exclusive jurisdiction over the lawsuits. Venue is made and will be
performed in courts sitting in the County of San Luis Obispo or Federal Court. The Parties will
conduct any other hearing or action (such as mediation or arbitration), of whatever nature or
kind regarding this Agreement, in the County of San Luis Obispo. The Parties will accept service
of process at the address where they receive Notices. This Agreement is governed by, and
construed and enforced under, the laws of the State of California, without giving effect to the
State's principles of conflicts of laws.
Item 10.b. - Page 18
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13. BINDING EFFECT, ASSIGNMENT
Except as otherwise provided herein, the terms and provisions of this Agreement will apply to,
be binding upon, and inure to the benefit of the Parties hereto and their respective heirs, legal
representatives, successors, and permitted assigns. No Party shall assign its rights nor delegate
or otherwise transfer its obligations under this Agreement to any other person or entity
without the prior written consent of the other Parties to this Agreement. Any such assignment
made without the consent of the other Parties shall be void and the attempted Assignment
shall constitute a material breach of this Agreement.
14. NO THIRD PARTY BENEFICIARIES
Other than as expressly set forth in this Agreement with respect to the Regional Board, nothing
in this Agreement is intended to create any third party beneficiaries to the Agreement, and no
person or entity other than the Parties and the permitted successors, transferees and assignees
of either of them shall be authorized to enforce the provisions of this Agreement.
15. RELATIONSHIP OF THE PARTIES
The relationship of the Parties to this Agreement shall be that of independent contractors. Each
Party shall be solely responsible for any workers compensation, withholding taxes,
unemployment insurance, and any other employer obligations associated with the described
work or obligations assigned to them under this Agreement.
16. NO WAIVER
The failure of any of the Parties to insist upon the strict performance of this Agreement will not
constitute or be construed as a waiver or relinquishment of any Party’s right to thereafter
enforce the same in accordance with this Agreement in the event of a continuing or subsequent
default on the part of any of the other Parties.
17. SEVERABILITY
If any clause or provision of this Agreement or any part thereof becomes or is declared by a
court of competent jurisdiction invalid, illegal, void, or unenforceable, this Agreement will
continue in full force and effect without said provisions; provided that no such severability will
be effective if it materially changes the benefits or obligations of any Party hereunder.
18. HEADINGS
Headings and subtitles used throughout this Agreement are for the purpose of convenience
only, and no heading or subtitle will modify or be used to interpret the text of any section.
Item 10.b. - Page 19
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19. COUNTERPARTS; INTEGRATION
This Agreement may be executed in counterparts (and by different Parties hereto in different
counterparts), each of which will constitute an original, but all of which when taken together
will constitute a single Agreement. This Agreement constitutes the entire Agreement among
the Parties relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter hereof. This
Agreement cannot be amended, modified, or terminated except by a written instrument,
executed by all Parties hereto. Delivery of an executed counterpart of a signature page of this
Agreement by email will be effective as delivery of a manually executed counterpart of this
Agreement. The Parties agree to execute, acknowledge and deliver any and all additional
papers, documents and other assurances, and shall perform any and all acts and things
reasonably necessary in connection with the performance of the obligations hereunder and to
carry out the intent of the Parties. Should any Party request an amendment or modification of
any of the provisions of this Agreement, the Management Committee shall determine: (a)
whether the requested amendment or modification is minor when considered in light of the
Project as a whole; and (b) whether the requested amendment or modification substantially
conforms with the material terms of this Agreement and the Applicable Law. If the
Management Committee finds that the requested amendment or modification is both minor
and substantially conforms to the material terms of this Agreement and the Applicable Law, the
amendment or modification shall be determined to be a "Minor Amendment," and the Parties
may execute the Minor Amendment without the requirement of approval by the Parties’
governing bodies.
IN WITNESS WHEREOF, the Parties hereto, pursuant to resolutions duly and regularly adopted
by their respective governing boards, have caused their names to be affixed by their respective
officers as of the day and year first above‐written.
[signatures begin on following page]
Item 10.b. - Page 20
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CITY OF PISMO BEACH
___________________________________
James R. Lewis
City Manager
APPROVED AS TO FORM:
___________________________________
David M. Fleishman
City Attorney
CITY OF ARROYO GRANDE
___________________________________
Whitney McDonald
City Manager
APPROVED AS TO FORM:
___________________________________
Timothy Carmel
City Attorney
CITY OF GROVER BEACH
___________________________________
Matthew Bronson
City Manager
APPROVED AS TO FORM:
___________________________________
David Hale
City Attorney
Item 10.b. - Page 21
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Exhibit “A”
1. Project Pre‐Construction Costs are those Project costs paid by each Party, starting
with the 2017 Regional Groundwater Sustainability Program Contract through award
of the first construction contract for the full‐scale Project implementation. Pismo
Beach will contract for professional services required to obtain and perfect any
necessary permits, leases, licenses or other permissions for Phase 1 of the Project
pursuant to its own contracting policies. The Parties shall pay their pro rata share of
any professional service expenses incurred by Pismo Beach in connection with the
obtaining of such permits. Pismo Beach will enter into cost share agreements with
Arroyo Grande and Grover Beach for reimbursement of their portions of the Pre‐
Construction Costs. Included in the cost share agreements shall be cost estimates for
each phase of the Project. If Project costs do not exceed the estimated amount for
each phase, approval of the respective city councils of each Party is not required. The
cost estimates for each Project phase shall include a twenty percent (20%)
Contingency to allow for additional flexibility for contract management. Change
orders and/or amendments that exceed twenty percent (20%) of the original
contract value and that total more than $100,000 shall require approval by the
respective city councils of each Party.
2. Every contractor submitting a bid to the City of Pismo Beach for a Central Coast Blue
Project public works contract shall agree to make a good faith effort to hire qualified
individuals who are local residents. A “good faith effort” means a contractor will take
the following or similar actions to recruit and maintain local residents as part of the
construction workforce:
• Contact local recruitment sources to identify qualified individuals who are
local residents;
• Advertise for qualified individuals who are local residents in trade papers
and newspapers of general circulations within San Luis Obispo and Santa
Barbara Counties; and
• With respect to any portion of a public works contract to be performed by a
subcontractor, identify subcontractors whose workforce includes qualified
individuals who are local residents.
3. Pismo Beach has previously purchased the site for the Facility for <PRICE>. The costs
of the purchase of the Facility site for the Project shall be included as a construction
cost of the Project. The Parties acknowledge that pursuant to Article XIII, Section
11(a) of the California Constitution, the Facility site may be considered taxable real
property. As such, the Parties shall cooperate to minimize the property tax
implications of Pismo Beach’s current ownership of the Facility site by either
allocating such property tax costs among the Parties according to the Water Purveyor
Contribution percentages, by transferring title of the Facility site to Grover Beach, or
by such other action upon which the Parties may agree. If the Parties unanimously
Item 10.b. - Page 22
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agree the Property should be transferred to the City of Grover Beach, Grover Beach
shall accept the transfer of the Property subject to the following conditions
precedent:
Grover Beach shall engage an environmental professional to conduct a
Phase I Environmental Site Assessment on the Property prior to Grover
Beach’s acquisition of the Property, which shall be done consistent with
AAI (All Appropriate Inquiry) Standards (40 CFR §312.21/§312.31).
If the results or conclusions of the Phase I report conclude there are
some constituents or hazardous waste located on the Property or for any
other reason Grover Beach determines is appropriate, it will be in the
sole discretion of Grover Beach to hire an environmental professional to
perform a Phase II environmental site assessment.
The determination of whether to perform a Phase II environmental site
assessment or the extent and nature of the assessment shall be at the
sole discretion of Grover Beach. The determination of whether Grover
Beach will accept title to the Property will be subject to the analysis and
conclusions of the Phase I or Phase II reports and will be a determination
made at the sole discretion of Grover Beach.
Grover Beach may at its sole discretion determine to hire an
environmental professional to periodically monitor and inspect the
ongoing operations of Pismo Beach conducted within the jurisdiction of
Grover Beach. The extent and frequency of Grover Beach's monitoring
and inspection shall be defined by Grover Beach and implemented at its
sole discretion, subject to reasonable notice to Pismo Beach prior to any
on‐site inspection or monitoring. Reasonable notice for purposes of this
Section shall not be less than 24 hours prior to the inspection.
To the extent Grover Beach accepts title to the Property, the
representations, warranties and indemnity enumerated in Section 8 shall
apply during the term of this Agreement, shall survive and be binding
after the termination of this Agreement and any breach of the
requirements of Section 8 by Pismo Beach shall be considered a material
breach of this Agreement.
Any costs or expense related to any of the enumerated conditions in this
Section 3 of Exhibit "A", shall be considered an operational cost and
expense of the Project as defined in Section 5 of the Agreement and shall
be billed by Grover Beach to each of the Parties of this Agreement in the
pro rata percentages as defined in that Section and in the same manner
as other expenses are billed by Pismo Beach. All Parties agree to this
expense and will pay Grover Beach's invoices within thirty (30) days of
the date of the invoice.
Further as a condition precedent to Grover Beach taking title to the
Property, Pismo Beach and Grover Beach shall enter into an agreement
Item 10.b. - Page 23
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that defines the rights, duties and obligations of the parties related to
Grover Beach's ownership of the Property and Pismo Beach's operation,
maintenance and use of the Property. The structure of that agreement is
unknown at this time but Pismo Beach and Grover Beach shall use good
faith and reasonable due diligence in negotiating that agreement. The
agreement shall be approved by Grover Beach prior to taking title to the
Property. Such approval shall not be unreasonably withheld.
4. Cost share percentages for the Pre‐Construction Costs noted in Section 1 of this
Exhibit may be adjusted (e.g. Arroyo Grande 50%, Grover Beach 50%, and Pismo
Beach 0%) to help reconcile remaining pre‐construction cost contributions for each
of the Parties, if funding is available, until the cumulative contributions by each Party
approximately match the Water Purveyor Contribution percentages set forth in
Section 5(a) of the Agreement. Once pre‐construction cost contributions
approximate the Water Purveyor Contribution percentages, the remaining pre‐
construction costs will be split according to the Water Purveyor Contribution
percentages. In the event that the costs funded by Pismo Beach, Arroyo Grande, and
Grover Beach do not match the cumulative contributions in the Water Purveyor
Contribution percentages set forth in Section 5(a) prior to construction, the Parties
shall structure the construction financing to achieve the contributions in the Water
Purveyor Contribution percentages.
5. The costs of the construction of the Project (i.e. costs that start with the first
construction contract for the Project through determination of construction
Substantial Completion) shall be allocated according to the Water Purveyor
Contribution percentages set forth in Section 5(a). In the event a non‐Party to this
Agreement wishes to participate in the Project after Project construction, such non‐
Party shall be responsible for paying a cost equivalent to that paid by the Parties to
participate in the Project, including pre‐construction and construction costs. The
actual costs shall be negotiated between the Parties and the non‐Party seeking to
participate in the Project. In the event a non‐Party to this Agreement contributes any
amounts to the construction of the Project, the Parties’ obligations for construction
costs shall be reduced according to the Water Purveyor Contribution percentages set
forth in Section 5(a).
6. The respective obligation of each Party to make payments herein with respect to the
costs of the Project or in furtherance of the objective and purpose of this Operating
Agreement (“the Project Payments”) is a special, limited obligation payable solely
from Net Revenues and does not constitute a debt or pledge of the faith and credit of
each Party or of the State of California or of any political subdivision thereof within
the meaning of any constitutional or statutory debt limitation or restriction. The
Project payments are payable from Net Revenues on a subordinate basis by each
Party to its respective Senior Obligations. Any Costs Sharing Agreements entered
Item 10.b. - Page 24
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into by the subject Parties to this Agreement shall be governed by this same language
and limited obligations as stated in this section.
7. The respective obligation of each Party to make payments hereunder or in
furtherance of the objective and purpose of this Operating Agreement is further
subject to the Parties establishing sufficient Net Revenues to fund the obligations of
this Agreement which includes but is not limited to approval by the Party’s legislative
bodies for an increase in water user fees sufficient to meet the above obligations of
this Agreement, the successful implementation of a Proposition 218 protest hearing
wherein the Parties are authorized to proceed with approval of a fee increase and
the obtainment of Prop 1 Groundwater Grant Program Grant Funding by State Water
Resources Control Board.
8. Any grant funding obtained for pre‐construction permitting or construction costs will
be applied to reduce the total cost of the Project. The Parties’ obligations for such
costs shall be reduced according to the Water Purveyor Contribution percentages set
forth in Section 5(a).
9. The Parties shall allocate any outside legal costs incurred related to the design,
construction and operation of the Project according to the Water Purveyor
Contribution percentages set forth in Section 5(a). Outside legal costs shall not
include legal expenses attributable to a Party’s city attorney or his/her associates,
even if that city attorney is not an employee of the Party.
10. Except as set forth in this Agreement, each Party shall be responsible for the internal
staffing, legal and administrative costs it incurs in the performance of this
Agreement. To the extent this Agreement calls for one Party to make payment of any
sums to another Party, each Party agrees to submit payment within 30 calendar days
of receipt of an invoice for such payment from the other Party.
11. If a Party opts to terminate this Agreement as to that Party prior to award of the
construction contract for the first construction work for the Project, that Party shall
be responsible for its Water Purveyor Contribution percentage of all pre‐construction
costs as of the date the Party opts to terminate this Agreement as to that Party. Such
pre‐construction costs include the expense of the 2017 Regional Groundwater
Sustainability Program Contract and any outstanding contracts as of the date the
Party opts out of this Agreement.
12. If a Party terminates this Agreement as to that Party after the award of the
construction contract for the first construction work for the Project, that Party shall
be responsible for its Water Purveyor Contribution percentage of all construction
costs for the Project, whether incurred prior to or after the date of termination as to
that Party.
Item 10.b. - Page 25
Letterhead
April _, 2021
Grayford Payne
Deputy Commissioner
Policy, Administration and Budget
Bureau of Reclamation
1849 C Street NW
Washington DC 20240‐0001
SUBJECT: WaterSMART Title XVI Water Reclamation and Reuse Grant Endorsement,
Central Coast Blue
Dear Deputy Commissioner Payne:
The City of Arroyo Grande supports the City of Pismo Beach’s application for Federal funds that
would support the permitting, design, and construction of Central Coast Blue. Central Coast Blue
will provide communities in southern San Luis Obispo County with a new, locally‐controlled and
drought‐proof water supply.
Central Coast Blue will inject highly purified recycled water into the Northern Cities Management
Area (NCMA) of the Santa Maria Groundwater Basin (SMGB) to prevent groundwater
contamination caused by seawater intrusion. The SMGB is a source of drinking water for more
than 200,000 local residents and millions of visitors annually, supports 57,000 acres of irrigated
agriculture and is identified as a High Priority Basin as designated by the California Department
of Water Resources in accordance with the Sustainable Groundwater Management Act.
Central Coast Blue leverages significant local funding with State funding, and includes new and
innovative technology, including injection of highly purified recycled water from the City of Pismo
Beach Wastewater Treatment Plant (WWTP) in Phase 1, and from the South San Luis Obispo
County Sanitary District WWTP in Phase 2 if deemed feasible and necessary, into the
groundwater basin, to form a seawater intrusion barrier. Once implemented, Central Coast Blue
will significantly increase water supply reliability for the municipal, rural, residential, and
agricultural pumpers that rely upon groundwater from the SMGB.
Central Coast Blue is a critical project for the region and will provide the following benefits:
Enhances local water supply reliability for the users that rely upon groundwater from the
Santa Maria Groundwater Basin
Protects a critical groundwater supply by preventing seawater intrusion and improves
groundwater water quality through injection of high quality water
Increases groundwater recharge and improves sustainability for the SMGB, a High Priority
Basin, which supplies drinking water for more than 200,000 people and 57,000 acres of
irrigated agriculture
Attachment 2
Item 10.b. - Page 26
Letterhead
Utilizes new and innovative technology to produce advanced purified water
Leverages local and State funding sources
Benefits disadvantaged communities by improving water supply resiliency
The funding request included in the City’s application to the U.S. Bureau of Reclamation’s
WaterSMART initiative “Title XVI Water Reclamation and Reuse Projects under the WIIN Act” is
critical for the project’s success. Combined with the participating agency contributions and state
funding, the federal funding provided through the grant will allow the City and the project
partners to take the next critical steps for Central Coast Blue.
The City of Arroyo Grande supports the efforts being undertaken by the City of Pismo Beach, the
South San Luis Obispo County Sanitation District and other stakeholder agencies to improve
water quality and supply for the region.
Sincerely,
Whitney McDonald
City Manager
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