31-Financial Management Payment for City's Water Rights
CITY COUNCIL AGENDA ITEM BRIEFING SHEET
Submittal Date: Originating Department: Presented By: Agenda Item No.:
10/l8/10
Council Date: Finance Gene Anderson 31.
10/25/10
RECOMMENDED MOTION:
Move to approve a Resolution authorizing a supplemental agreement with the U. S. Government regarding
payment for the City's water rights in Pat Mayse Reservoir and authorizing the City Manager to negotiate and
execute all necessary documents.
POLICY ISSUES):
Financial Management
In January 1965 the City of Paris entered into a contract with the U. S. Government for the use of 109,600 acre-
feet also expressed as 55 million gallons per day (55 MGD) of water supply storage in Pat Mayse Reservoir for
municipal purposes. Under the terms of the contract, the City would pay the associated construction costs of its
portion of the reservoir plus interest. The City would also pay 23.659% of actual operations and maintenance
expense of the reservoir. The City initially began making principal and interest payments on an 11 MGD space
while interest at 3.137% accrued on the remaining 44 MGD. In June 1978, the City began making principal and
interest payments on the second 1l MGD space. Interest continued to accrue on the remaining 33 MGD at
3.137%. In February 2005 the City proposed to prepay the remaining costs under this agreement and the related
1978 supplemental agreement. The savings under the proposal amounted to $1,750,935.12. The U. S. Congress
approved the prepayment proposal in November 2007 as part of the Water Resources Development Act (WRDA
2007). At that time the savings to the City had shrunk by $149,484.03 due to principal and interest payments
made by the City during the period between proposal and approval. However, the City also avoided O&M
expenses of $169,969.41 during this same waiting period. Actual payment of the $3,461,432 settlement amount
could not be made until a second supplemental agreement was drawn up by the U.S. Army Corps of Engineers.
This supplemental agreement was received and reviewed by staff in September. By executing this supplemental
agreement, the City of Paris will have paid in full its obligation regarding the water rights in Pat Mayse Reservoir.
The Corps of Engineers has also agreed to refund to the City of Paris the $149,484.03 in principal and interest
payments the City was required to make between the passage of the WRDA of 2007 and the City's acceptance of
the new supplemental agreement. The City has the funds needed to make its payment held in reserve for this
purpose and is prepared to make payment once the City Council has approved the supplemental agreement. The
City will continue to have to pay its share of actual O&M costs at the lake estimated to be $70,000 to $100,000
annually.
BOARD/COMMISSION RECOMMENDATION
EXHIBITS:
Resolution and Supplemental Agreement No. 2
ACTION: BUDGET INFO:
❑ Financial Report ❑ Minute Order Total Expense $3,461,432.00
❑ Department Report ® Resolution W&S Bds 2000 $1,635,529.57
❑ Presentation ❑ Ordinance Acct. Number 12-0916-82-98
❑ Public Hearing ❑ Other Pat Mayse Res $1,825,902.43
Acct. Number 10-0916-82-98
FISCAL NOTES:
None
REVIEWED AND APPROVED BY:
® Administration ® City Clerk ❑ Community Development ❑ EMS/IT ® Finance ❑ Fire
❑ Municipal Court ® Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities
City of Paris Revised 2/04/08
327
DRAFT
S:\RESWORK\CURRENT\Pat Mayse Reservoir - Water Rights Purchase - RES 2010.docx
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS,
AUTHORIZING THE CITY MANAGER TO EXECUTE A SUPPLEMENTAL
AGREEMENT WITH THE U.S. GOVERNMENT FOR WATER RIGHTS TO THE
PAT MAYSE RESERVOIR; MAKING OTHER FINDINGS AND PROVISIONS
RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Paris has entered into several water contracts with the U.S.
Corps of Engineers for water rights at the Pat Mayse Reservoir, Lamar County, Texas; and,
WHEREAS, on February 26, 2007, in Resolution No. 2007-030, the City Council
authorized the City Manager to propose a cash settlement to prepay the Pat Mayse
Reservoir Purchase Contract for Water Rights in the amount of $3,461,432.00; and,
WHEREAS, the U.S. Congress approved the prepayment proposal in November 2007
as part of the Water Resources Development Act ("WRDA"); and,
WHEREAS, a proposed Supplemental Agreement No. 2 was received by the City
from the U.S. Corps of Engineers, attached hereto as Exhibit A; and,
WHEREAS, by executing this Supplemental Agreement No. 2, the City of Paris will
have paid, in full, its obligation regarding the water rights in Pat Mayse Reservoir; and,
WHEREAS, the U.S. Corps of Engineers has also agreed to refund the City of Paris
$149,484.03 for the principal and interest payments the City was required to make
between the passage of the WRDA of 2007 and the City's acceptance of the new
supplemental agreement; and,
WHEREAS, the City has the funds needed to make said payment held in reserve for
this purpose and is prepared to make said payment upon approval of the Supplemental
Agreement No. 2 by the City Council; and,
WHEREAS, the City will be required to continue to pay its share of actual 0&M costs
at the Lake estimated to be $70,000 to $100,000 annually; and
WHEREAS, it would be in the best interest of the City of Paris and its citizens to
authorize the City Manager to make a cash settlement proposal to the U. S. Corps of
Engineers in the form of the Supplemental Agreement attached hereto and incorporated
herein as Exhibit A to fulfill the City's obligation under these water contracts;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PARIS, PARIS, TEXAS:
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Section 1. That the findings set out in the preamble to this resolution are hereby
in all things approved.
Section 2. That the terms and conditions of the Supplemental Agreement No. 2
attached hereto as Exhibit A is in the best interest of the City of Paris and its citizens and is
in all things approved, and the City Manager of the City of Paris is hereby authorized to
execute said Supplemental Agreement No. 2 on behalf of the City of Paris.
Section 3. That this resolution shall be effective immediately upon passage.
PASSED AND APPROVED this 11th day of October, 2010.
Will Biard, Mayor
ATTEST:
Janice Ellis, City Clerk
APPROVED AS TO FORM:
W. Kent McIlyar, City Attorney
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DA-34-066-CIVENG-65-1272
SUPPLEMENTAL AGREEMENT NO. 2
SUPPLEMENTAL AGREEMENT
BETWEEN THE UNITED STATES OF AMERICA
AND
CITY OF PARIS, PARIS, TEXAS
FOR
WATER STORAGE SPACE IN PAT MAYSE LAKE, TEXAS
THIS SUPPLMENTAL AGREEMENT, is entered into this
day of 20 , by and between THE UNITED STATES
OF AMERICA (hereinafter called the "Government")
represented by the District Engineer executing this
agreement, and the CITY OF PARIS, PARIS, TEXAS (hereinafter
called the "City") for storage space in Pat Mayse Lake,
Texas (hereinafter called the "Project");
WITNESSETH THAT:
WHEREAS, on the 15th day of February 1965, the
Government and the City of Paris, Texas, entered into
Contract No. DA-34-066-CIVENG-65-1272 for 21,900 acre-feet
of storage space in Pat Mayse Lake as a source of present
municipal and industrial water supply for the City; and,
WHEREAS, Contract No. DA-34-066-CIVENG-65-1272 also
recognized that the City desired to utilize an additional
87,700 acre-feet of storage space in Pat Mayse Lake as a
source of future municipal and industrial water supply;
and,
WHEREAS, on 15th day of June 1978, the Government and
the City of Paris, Texas, entered into Supplemental
Agreement No. 1 to contract No. DA-34-066-CIVENG-65-1272
for the 87,700 acre-feet of additional storage space in Pat
Mayse Lake; and,
WHEREAS, Supplemental Agreement No. 1 provided the
City with the right to utilize an additional 21,900 acre-
feet of storage space as a source of present use and 65,800
acre-feet as a source of future use water storage; and,
EXHIBIT
330
WHEREAS, the Water Resources Development Act of 2007,
Section 3152, Pat Mayse Lake Texas, directed the Secretary
of the Army to accept from the city of Paris, Texas,
$3,461,432 as payment in full of monies owed to the United
States for water supply storage space in Pat Mayse Lake,
Texas, under contract number DA-34-066-CIVENG-65-1272,
including accrued interest.
NOW, THEREFORE, said contract is hereby modified in the
following particulars but in no others:
ITEM 1: Article la, as amended by Supplemental Agreement
No. 1, and Articles l.e, l.f, and 10 are deleted in their
entirety and the following substituted therefore:
ARTICLE 1 - Water Storage Space.
a. Project Construction. The Government, subject to
the directions of Federal law and any limitations imposed
thereby, has designed and constructed the Project so as to
include therein space for the storage of water by the City.
b. Rights of City.
(1). The City shall have the right to utilize an
undivided 100 percent of the usable conservation storage
space in the Project between elevations 451.0 feet and
415.0 feet above National Geodetic Vertical Datum, which is
estimated to contain 109,600 acre-feet after adjustment for
sediment deposits. This storage space is to be used to
impound water for present demand or need for municipal and
industrial water supply.
(2). The City shall have the right to withdraw water
from the lake, or to request releases to be made by the
Government through the outlet works of the Project, subject
to the provisions of Article lc and to the extent the
aforesaid storage space will provide; and shall have the
right to construct all such works, plants, pipelines, and
appurtenances as may be necessary and convenient for the
purpose of diversion or withdrawals, subject to the
approval of the District Engineer as to design and
location. The grant of an easement for right-of-way,
across, in and upon land of the Government at the Project
shall be by a separate instrument in a form satisfactory to
the Secretary of the Army, in accordance with ER 405-1-12,
under the authority of and in accordance with the
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provisions of 10 U.S.C. 2669 and such other authorities as
may be necessary. Subject to the conditions of such
easement, the User shall have the right to use so much of
the Project land as may reasonably be required in the
exercise of the rights and privileges granted under this
agreement.
C. Rights Reserved. The Government reserves the
right to control and use all storage in the Project in
accordance with authorized Project purposes. The
Government further reserves the right to take such measures
as may be necessary in the operation of the Project to
preserve life and/or property, including the right not to
make downstream releases during such periods of time as are
deemed necessary, in its sole discretion, to inspect,
maintain, or repair the Project.
d. Quality or Availability of Water. The User
recognizes that this agreement provides storage space for
raw water only. The Government makes no representations
with respect to the quality or availability of water and
assumes no responsibility therefor, or for the treatment of
the water.
e. Sedimentation Surveys.
(1). Sedimentation surveys will be made by the
District Engineer during the term of this agreement at
intervals not to exceed fifteen (15) years unless the
District Engineer determines that such surveys are
unnecessary. When, in the opinion of the District
Engineer, the findings of such survey indicate any Project
purpose will be affected by unanticipated sedimentation
distribution, there shall be an equitable redistribution of
the sediment reserve storage space among the purposes
served by the Project including municipal and industrial
water supply. The total available remaining storage space
in the Project will then be divided among the various
Project features in the same ratio as was initially
utilized. Adjusted pool elevations will be rounded to the
nearest one-half foot. Such findings and the storage space
allocated to municipal and industrial water supply shall be
defined and described as an exhibit, which will be made a
part of this agreement and the water control manual will be
modified accordingly.
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(2). The Government assumes no responsibility for
deviations from estimated rates of sedimentation, or the
distribution thereof. Such deviations may cause unequal
distribution of sediment reserve storage greater than
estimated, and/or encroachment on the total storage at the
Project.
ITEM 2: Article 5, as amended by Supplemental Agreement No.
1, is deleted in its entirety and the following substituted
therefore:
"ARTICLE 5 - PAYMENTS. In consideration of the right to
utilize the aforesaid storage space in the Project for
municipal and industrial water supply purposes, the City
shall pay the following sums to the Government:
a. Project First Cost.
In accordance with Section 3152 of the Water Resources
Development Act of 2007 (WRDA 2007), the Secretary of the
Army is directed to accept payment from the City and the
City shall repay to the Government in a lump sum payment a
total of $3,461,432 which reflects payment in full of
monies owed to the United States for 100 percent of the
total storage space in the Project between elevations 451.0
and 415.0 above National Geodetic Vertical Datum, which
total storage space is estimated to contain 109,600 acre-
feet of water supply storage space in Pat Mayse Lake,
Texas, after adjustments for sediment deposits under water
storage contract DA-34-066-CIVENG-65-1272. The payment
shall be due and payable within 30 days after the City is
notified by the District Engineer of approval of this
Supplemental Agreement. A copy of Section 3152 of WRDA 07
is attached to and made a part of this supplemental
agreement as Exhibit E.
b. Repair, Rehabilitation, and Replacement (RR&R)
Costs. The City will be required to pay 10 . 526 percent of
the cost of joint-use RR&R of Project features. Payment of
these costs shall be made either incrementally during
construction or in lump sum (including interest during
construction at the rate as determined in Section 932 of
the Water Resources Development Act of 1986) upon
completion of construction.
C. Annual Operation and Maintenance (O&M) Expense.
The City will be required to pay 23.659 percent of the
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annual experienced joint-use O&M expense of the Project.
Payments for O&M expense are due and payable in advance on
the date for payment of Project first cost as set forth in
Article 5a(2) and shall be based on O&M expense for the
Project in the Government fiscal year most recently ended.
The amount of each annual payment will be the actual
experienced O&M expense (allocated joint-use) for the
preceding fiscal year or an estimate thereof when actual
expense information is not available.
d. Delinquent Payments. If the User shall fail to
make any of the payments when due, then the overdue
payments shall bear interest compounded annually until
paid. The interest rate to be used for overdue payments
due under the provisions of Articles 5a, 5b, and 5c above
shall be that determined by the Department of Treasury's
Treasury Fiscal Requirements Manual (1 TFRM 6-8000, "Cash
Management"). The amount charged on payments overdue for a
period of less than one year shall be figured on a monthly
basis. This provision shall not be construed as giving the
City a choice of either making payments when due or paying
interest, nor shall it be construed as waiving any other
rights of the Government, at law or in equity, which might
result from any default by the City.
ITEM 3: No Change to Article 11 in Supplemental Agreement
No. 1.
ITEM 4: No Change to Articles 15, 16, 17 or 18 in
Supplemental Agreement No. 1
ITEM 5: Exhibits A, B and C of the Supplemental Agreement
No. 1 are deleted in their entirety and substituted
therefore with: Exhibit A: Certification and Exhibit B is
substituted to reflect reservoir storage, allocation of
actual cost and the lump sum payment of the total 109,600
acre-feet of water supply storage, plus the total
percentage and amount of the variable annual joint-use O&M
costs associated with this storage as well as the total
percentage and amount of any associated RR&R costs.
ITEM 6: No Change to Article 7c in Supplemental Agreement
No. 1.
EXCEPT as herein modified, all the terms and
conditions of said agreement and Supplemental Agreement No.
1 shall remain unchanged and in full force and effect.
5
IT
IN WITNESS WHEREOF, the parties have executed this
Supplemental Agreement No. 2 as of the day and year first
above written.
THE UNITED STATES OF AMERICA CITY OF PARIS, TEXAS
Michael J. Teague KEVIN CARRUTH
Colonel, U.S. Army City Manager
District Commander
Date: Date:
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3353
EXHIBIT A
CERTIFICATION
I, Kent McIlyar, Attorney for the City of Paris, Texas,
have reviewed the foregoing agreement executed by Kevin
Carruth, City Manager, and as principal legal officer
of/for the City of Paris, Texas, certify that the City of
Paris, Texas, is legally and financially capable of
entering into the contractual obligations contained in the
foregoing agreement and that, upon acceptance by the United
State of America, it will be legally enforceable.
Given under my hand, this day of 2010.
KENT McILYAR
City Attorney
City of Paris, Texas
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EXHIBIT B
I - RESERVOIR STORAGE
Percent of
Usable Water Supply
Feature Elevation Storage(1) Storage
(ft NGVD) (ac-ft)
Flood Control 460.5-451.0 64,500
Water Supply 451.0-415.0 109,600 100.00
City of Paris 109,600 100.00
TOTAL 174,100
(1) Storage remaining after 100 years of sedimentation, beginning from
the date the Project became operational, 1 October 1967.
II - ALLOCATION OF ACTUAL COST (2)
Flood Control $1,562,775
Water Supply
Storage 3,093,407
Conduit 7,000
Recreation 4,601,906
Fish and Wildlife 82,328
TOTAL $9,347,416
(2) Excludes $105,000 non-reimbursable costs for relocation of roads
above replacement-in-kind standards. Includes $251,334 for the value of
Federally owned lands. Total cost of Project is $9,452,416.
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EXHIBIT B (Con't)
III - COST TO BE REPAID BY THE CITY FOR WATER SUPPLY
STORAGE SPACE
Total Cost of Storage
Space No. 1
Cost of 21,900 acre feet of water supply storage
(20.008 x $3,093,407) $ 618,681.00
Interest during construction
(20.008 x $116,127) 23,225.00
Investment Cost $ 641,906.00
Less credit for principal payments made under
Contract No. DA-34-066-CIVENG-65-1271 and the
Supplement Agreement No. 1 thru April 2005 -398,875.06
Principal payoff on Space No. 1 $ 243,030.94
Space No. 2
Cost of 21,900 acre-feet of water supply storage
(20.008 x $3,093,407) $ 618,681.00
Interest during construction
(20.008 x $116,127) 23,225.00
Investment Cost $ 641,906.00
Interest accrued from 30 Sep 1977 (end of
10-year interest free period) 10,068.00
Storage Space No. 2 cost $ 651,974.00
Less credit for principal payments made under
Contract No. DA-34-066-CIVENG-65-1271 and the
Supplement Agreement No. 1 thru April 2005 -255,619.31
Principal payoff on Space No. 2 $ 396,354.69
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33P,
EXHIBIT B (Copt)
FUTURE USE STORAGE
Cost OF 65,800 acre-feet of water supply storage
(60.00% x $3,093,407) $1,856,045.00
Interest during construction
(60.00% x $116,127) 69,677.00
Sub-Total Future Use Storage $1,925,722.00
Total Storage Cost
Space No. 1 $ 243,030.94
Space No. 2 396,354.69
Future Use $ 1,925,722.00
SUBTOTAL STORAGE COST $ 2,565,107.63
Simple interest at 3.137%
Thru 4-5-2005 1,588,276.95
TOTAL SPACE 1, 2 AND FUTURE
OWED THROUGH 4-5-2005 $ 4,153,384.58
Simple interest at 3.137%
Thru 4-1-2017 1,628,646.00
TOTAL AMOUNT OWED ON ALL STORAGE
SPACE THROUGH END OF CONTRACT AGREEMENT
DATE OF 4-1-2017 $ 5,782,030.58
Present Value of Storage assuming the average
Value of money over the next 12 years at 5%
And total amount owed by city of Paris, Texas
For all storage space in Pat Mayse Lake as
Provided for in Section 3152 of the Water
Resources Development Act of 2007 $ 3,461,432.00
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EXHIBIT B ( font )
IV - ANNUAL COSTS TO CITY FOR USE OF WATER SUPPLY
STORAGE SPACES NO. 1, 2 AND FUTURE
Operation and Maintenance (3)
Joint Use
23.6590 (4) x $362,044.22 (FY 09) _ $ 85,656.04
Repair, Rehabilitation, and Replacement (5)
Joint Use
10.526% (6) x $ 0 (FY 09) _ $ 0
TOTAL ESTIMATED ANNUAL COST $ 85,656.04
(3) Payments due and payable on the date specified in Article 5c
(4) Percent of Project joint-use operation and maintenance cost
allocated to water supply
(5) Repair, rehabilitation and replacement costs are payable
only when incurred as specified in Article 5b
(6) Percent of Project joint-use repair, rehabilitation and
replacement cost allocated to water supply
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EXHIBIT E
SECTION 3152. PAT MAYSE LAKE, TEXAS
The Secretary is directed to accept from the city of
Paris, Texas, $3,461,432 as payment in full of monies owed
to the United States for water supply storage space in Pat
Mayse Lake, Texas, under contract number DA-34-066-CIVENG-
65-1272, included accrued interest.
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