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HomeMy WebLinkAboutA010 - Resolution setting April 28, 2026, as date of Public Hearing on a long-term lease with Xenia Rural Water District for portions of 900 S 500th Avenue (Mortensen and County Line Water Tower parcel)ITEM #:15 DATE:04-14-26 DEPT:WPC SUBJECT:PROPOSED AMENDMENT TO WHOLESALE WATER AGREEMENT WITH XENIA RURAL WATER DISTRICT COUNCIL ACTION FORM BACKGROUND: Staff from Ames and Xenia Rural Water District have been in conversations over the past two years about a potential increase in the quantity of water sold by Ames to Xenia. The parties are nearing a final agreement, and the proposed contract amendment is planned to be on the City Council agenda on April 28. Among other elements, the proposed amendment would permit Xenia to construct a booster pump station on City-owned land at 900 S 500th Avenue, including associated water lines and other supporting infrastructure. That parcel is the site of the Mortensen and County Line (MAC) water tower. The initial term of the agreement would be for 40 years. Iowa Code requires a two-step process before the City can "dispose of an interest in real property." The City must first adopt a resolution describing the proposed disposition of the property and specifying the date, time, and place for a public hearing on the disposition. Then after the public hearing has been held, the City Council may proceed with action to approve or reject the disposal by a second resolution. Because the amended agreement grants to Xenia is a long-term right to use the City-owned land, the City Attorney advises that the City Council follow that two-step process. Key concepts in the contract amendment that staff is finalizing include: An upfront payment by Xenia of $1,464,500 as reimbursement to Ames customers for the infrastructure capacity Xenia will use An increase in the daily maximum water quantity sold to Xenia from 250,000 gallons per day to 500,000 gallons per day Unit pricing that matches the Ames "non-peaking industrial" rates A substantial reduction in the cost for developers to "buy-out" Xenia territory for the Auburn Trails and Hayden's Preserve developments A 40-year term for the agreement The attachment is a draft copy of the agreement. It is not the final version and is still subject to change, and is provided for context only. Council is not being asked to take action on the amended agreement with Xenia at this time. The Xenia Board of Directors is expected to approve the agreement on April 23. Action by the Ames City Council on the agreement could occur after the hearing on April 28. 1 ALTERNATIVES: 1. Adopt a resolution setting April 28th as the date of public hearing for the disposal of interest in real property (in the form of a long-term lease) in order to permit Xenia Rural Water District to construct a booster pump station on City-owned land located at 900 S 500th Avenue. 2. Do not take action to permit the construction of a booster pump station at this time. CITY MANAGER'S RECOMMENDED ACTION: The City of Ames and Xenia Rural Water District have a thirty-year-old wholesale water agreement. Strengthening Xenia's ability to provide urban-level water service in its territory outside Ames would benefit both parties by enabling growth to the west and southwest of Ames' current city limits. The first step in amending the existing agreement is to establish a date for a public hearing on action that would permit Xenia to construct a booster pump station on City-owned property in southwest Ames. Therefore, it is the recommendation of the City Manager that the City Council adopt Alternative 1 as described above. ATTACHMENT(S): DRAFT Xenia agreement amendment.docx 2 DRAFT AMENDMENT TO OCTOBER 22, 1996 AGREEMENT BETWEEN THE CITY OF AMES, IOWA AND XENIA RURAL WATER DISTRICT AND LEASE AGREEMENT. WHEREAS, the parties to this agreement are the City of Ames, Iowa (“City”), a municipal corporation, and Xenia Rural Water District (“Xenia”); and, WHEREAS, the City, through its Water & Pollution Control Department, and Xenia have had a wholesale agreement in place since October 1996 as amended by the First Amended Appendix A on June 24, 1997 (“1996 Agreement”); and, WHEREAS, the City and Xenia are mutually interested in supporting growth in and adjacent to Ames; and, WHEREAS, the City has a developed source water, treatment, and pumping capacity capable of supporting Xenia’s requested quantity of water; and, WHEREAS, the parties now wish to amend the 1996 Agreement; and WHEREAS, the City and Xenia have mutually agreed to terms and conditions that will appropriately compensate existing Ames customers for their prior investments and that is likewise financially viable for Xenia; THEREFORE, the parties hereby agree as follows: 1. The City grants Xenia permission to construct facilities on City property at the MAC Tower site on 500th Avenue, Ames, Iowa. The City and Xenia agree that Xenia will construct and install a pump station and underground discharge water lines at said City property. Xenia will retain ownership of the pump station and discharge water lines. The City will specify the route that Xenia will use to access the pump station. Xenia is responsible for repairing any damage to City property caused by Xenia in the construction and/or operation of its facilities, and if such damage occurs, Xenia will restore City land or property to its original condition at Xenia’s expense. 2. Xenia will construct its pump station and underground discharge water lines at locations specified in advance by the City, but generally within the following area, which the City as lessor hereby leases to lesee Xenia: [INSERT LEGAL DESCRIPTION] 3 3. Xenia will be responsible for all of the operations and maintenance (O&M) costs of the pump station. Xenia will provide property/casualty insurance for the structures, as the Xenia structures will not be insured by the City. Xenia acknowledges that it assumes the risk for all of its facilities, and that the City is not liable for any damage to Xenia facilities caused by Xenia, its staff, agents or contractors, or any t hird party unaffiliated with the City. 4. The exact placement and the connection to the City water distribution system shall be approved in advance by the City. 5. Structures built on City property will be subject to all standard City building requirements, inspections, and permits. 6. Paragraph 3 of the 1996 Agreement is amended to provide that m eters shall be provided by City. Installation of said meters will be by Xenia. Ownership and perpetual maintenance will be the same as the 1996 Agreement. 7. Meter setting shall be reviewed and approved in advance by the City. 8. Remote radio read will be performed by the City. 9. Appendix A, Paragraph 1 is amended as follows: The Water Capacity Reserved is increased to “up to 500,000 gallons per day,” a 250,000 gallon-per-day increase from the current 250,000 gallon-per-day agreement. 10. The concept of the “Extra-Use Ratio” contained in Appendix A Paragraph 3 of the original agreement is hereby stricken. In its place, the parties agree that, if and only if Ames has available water capacity and wishes to provide that available capacity to Xenia, and Xenia wishes to purchase quantities in excess of the Water Capacity Reserved, the rate charged will be at the rates discussed below. There will be no surcharge or penalty for exceeding the Capacity Reserved. It is understood that Ames is under no obligation to provide quantities in excess of the Capacity Reserved. Xenia agrees to immediately (within 24 hours) limit its usage to the Capacity Reserved upon notification by the City of Ames. If it fails to do so, Ames may take measures to limit the volume available, such as throttling a valve. 11. Appendix A Paragraph 2. A new payment for capacity purchase as reimbur sement of existing capacity in the water utility for the incremental 250,000 gpd increase shall be $1,464,500. 12. MINIMUM PURCHASE: a. During the INITIAL 5 YEARS OF THE AGREEMENT, there shall be no minimum purchase quantity. 4 b. After the expiration of the INITIAL FIVE-YEAR PERIOD, there will be a minimum purchase quantity. Thereafter, Xenia agrees to purchase a minimum of 200,000 gallons per day, calculated on a calendar month average. Xenia will be billed by Ames for a minimum of 200,000 gallons per day, even if the actual demand is less than that amount. When the actual demand exceeds 200,000 gallons per day, Xenia will be billed by Ames for the actual quantity used. 13. VOLUMETRIC PRICING: Paragraph 5 of the 1996 Agreement and details of volumetric pricing in Appendix A Paragraph 3 are replaced by the following: a. An underlying premise in the agreement on rates is Xenia’s intent to ultimately maximize their withdrawal from Ames, such that the flow rate is consistent on a year - round basis. b. During the INITIAL 5 YEAR PERIOD, Xenia will be billed at the rate established in the Ames Municipal Code at Section 28.201(3) “Non-Peaking Industrial Rate.” c. AFTER THE EXPIRATION OF THE INITIAL 5 YEAR PERIOD, Xenia’s demand pattern will be evaluated by the City on an annual basis for continued eligibility for the “Non-Peaking Industrial Rate.” The eligibility calculation shall be the average of the preceding “winter months” compared against the highest monthly average “summer month” during the preceding calendar year. d. Also AFTER THE EXPIRATION OF THE INITIAL 5 YEAR PERIOD, should Xenia not meet the requirements in the Ames Municipal Code for the “Non-Peaking Industrial Rate,” they would be billed for all water purchased at the unit rate contained in the Ames Municipal Code Chapter 28, Section 28.201(2) “Non-residential (Commercial) Rates.” This includes the summer/winter rate structure. e. It is understood that the rates contained in Chapter 28 may be amended from time to time by the Ames City Council. The intent of this agreement is that the rates charged to Xenia would move identically to rates charged to other non -residential accounts in Ames. 14. AUBURN TRAIL AND HAYDEN’S PRESERVE SERVICE TERRITORY: This agreement replaces and supercedes the service territory buy-out cost from previous agreements regarding the Auburn Trail and Hayden’s Preserve developments. The new buyout terms shall be $3,000 per gross acre. All other provisions related to the service territory buyout remain unaltered. 15. TERM OF AGREEMENT: This agreement will become effective as of the date of approval by the Ames City Council and will remain effective for 40 years from the effective date. After the end of the 40-year period, the agreement will continue in effect until terminated by either party. Either party may terminate for any reason with 48- months advance notice. At such time as the agreement terminates, Xenia agrees to 5 promptly remove all of its infrastructure, including the proper abandonment of its connection to the Ames system at Xenia’s expense within six months, although extensions of that time may be granted by the City. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed and sealed by their duly authorized representatives: XENIA RURAL WATER DISTRICT By:_____________________________ Date:________________________ Dan Lovett, Chairperson ATTEST:________________________ Date:________________________ Peter Jensen, Secretary CITY OF AMES, IOWA By: _________________________ Date: ________________________ John A. Haila, Mayor ATTEST:___________________ Date: ________________________ Renee Hall, City Clerk 6