HomeMy WebLinkAboutA039 - April 28, 2026, Regular Meeting of the Ames City CouncilITEM #:43
DATE:04-28-26
DEPT:W&PC
SUBJECT:CONTRACT WITH XENIA RURAL WATER DISTRICT FOR SALE OF
POTABLE WATER - AMENDMENT NUMBER TWO
COUNCIL ACTION FORM
BACKGROUND:
On October 22, 1996, the City Council entered into a wholesale agreement with Xenia Rural
Water District to supply potable water from Ames to Xenia through a water metering facility
installed by Xenia near the intersection of Bloomington Road and G. W. Carver Avenue in
northern Ames. Appendix A to the original agreement allowed for the sale of up to 500,000
gallons per day. At Xenia's request, Appendix A was modified eight months later to reduce the
maximum daily sale to 250,000 gallons per day.
Since that time, Xenia has purchased a varying amount of water from Ames, based on their
operating needs and the capacity of their installed infrastructure. Currently, Xenia is able to
take only around 120,000 gallons per day from that existing metered connection.
KEY AMENDMENTS:
Staff from Ames and Xenia have been in conversations over the past two years about a
potential increase to the maximum quantity allowed under the agreement. The parties
have reached terms that both staffs are able to support and recommend to their
decision making bodies. Key terms of the agreement are described below, with the full text
of the amendment attached.
Xenia will be permitted to construct a new pump station on City-owned land at the
Mortensen and County Line (MAC) tower site. This specific element of the agreement
is the subject of the required public hearing.
The maximum day water capacity will be increased from 250,000 gallons per day
to 500,000 gallons per day, on a monthly average basis. Xenia may be permitted to
purchase water in excess of this amount with the City's concurrence and at the City's
sole discretion. There is no contractual requirement or obligation for Ames to make water
in excess of 500,000 gallons per day available.
In the 1996 agreement (as amended in 1997), Xenia made a one-time capacity
reimbursement for the 250,000 gallons per day covered by the agreement. In this new
amendment, Xenia will make an additional one-time payment to the City of
$1,464,500 as a reimbursement to the City for the incremental 250,000 gallons per
day capacity increase. That payment does not constitute ownership by Xenia of any
portion of Ames' infrastructure; it is simply to reimburse Ames' customers for prior
expenses.
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New volumetric rates will be adopted
During the first five years of the agreement, Xenia will purchase water at Ames'
"Non-peaking Industrial Rate" that appears in Chapter 28 Division II of
t h e Municipal Code. Xenia intends to immediately maximize the quantity they are
able to take from Ames (approximately 120,000 gallons per day) through their
existing north connection. However, Xenia initially will not be able to take the full
500,000 gallons per day. They will be installing new infrastructure to the south and
west of Ames, including the pump station, and that infrastructure is needed before
they can take the full contract quantity.
After five years, Xenia will be required to qualify annually for the "Non-peaking
Industrial Rate." To qualify, they must demonstrate that their summer peak
demands are no greater than 120% of their winter average demand. It is Xenia's
ultimate intent to consistently draw 500,000 gallons per day from Ames, allowing
them to meet that requirement. They would use their other water sources to make
up any daily or seasonal fluctuation in their demand. If Xenia does not meet the
requirements for the Non-Peaking Industrial Rate, they would then be billed under
the City's adopted Non-Residential Rate.
After the initial five years, there is also a "minimum take" clause, whereby Xenia
will be billed for a minimum of 200,000 gallons per day, even if their demand falls
below that level. This clause ensures that Ames continues to receive at least some
measure of financial benefit from the capacity that is being reserved for Xenia's
use.
Because the agreement references the City's adopted rates, the amount charged
to Xenia will automatically adjust in tandem with any future rate increases adopted
by the Ames City Council for customers within Ames.
A key consideration that was important to the City and agreed to by Xenia was to
lower the water service territory buyout terms for the developments known as
Auburn Trails and Hayden's Preserve. This new agreement would supersede
existing agreements that set the buyout costs at approximately $2,800 per
dwelling unit, and set a new buyout price of $3,000 per acre. It is anticipated that
this change will improve the financial viability of these residential developments
moving forward.
While not a specific element of the agreement, it is anticipated by both Ames and
Xenia that the increased quantities will help facilitate development in the western
and southwestern fringes of Ames. It will enable Xenia to provide a water
distribution system that can meet urban demands including fire flows, likely
eliminating water supply as an impediment to future annexations to the west.
The agreement will have a 40-year term. After that, either party may terminate for any
reason with 48-months advance notice.
All other terms of the 1996 agreement would remain in place.
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UTILITY AND SOURCE WATER IMPACTS:
The Ames Water Plant currently has an average day demand of 6.5 million gallons per day,
and a peak day demand of 9.5 million gallons per day. The treatment plant has a rated
capacity of 15 million gallons per day, and staff is implementing a "split treatment"
improvement that will increase the capacity by an additional 0.75 million gallons per day. The
City's developed source water supply is estimated to have a sustainable drought yield of 16 to
18 million gallons per day. This unused capacity is currently not generating any revenue for
the utility.
Xenia is currently purchasing very little water under the existing agreement. With this
amended agreement, Ames' existing customers will benefit by being able to spread the utility's
fixed costs over additional gallons while utilizing surplus treatment capacity. Initially, Xenia's
estimated 120,000 gallons per day usage will generate $170,000 per year (FY 2026
adopted rates) in additional revenue to the utility. Once their infrastructure
improvements are in place and they can take the full 500,000 gallons per day, this
agreement will generate an additional $703,000 in additional revenue per year. When
including the one-time up-front payment and accounting for increased variable
operating costs (such as electricity, chemicals, and lime sludge disposal), this
agreement would improve the Water Fund balance by $5.42 million over the next ten
years.
Iowa Code requires a public hearing before "disposing of an interest in real property," including
long-term leases. At its April 14 meeting, the City Council set April 28 as the date of the public
hearing for the terms of the amendment that would permit Xenia to construct a booster pump
station and water lines on the City's property at 900 S 500th Avenue; the site of the Mortensen
and County Line ("MAC") water tower. Immediately following the hearing, Council may take
action to approve the proposed amendment with Xenia.
At its April 23 meeting, the Xenia Rural Water District's Board of Directors approved the
amended agreement. The agreement will become effective immediately upon approval
from the Ames City Council.
ALTERNATIVES:
1. Take action on Amendment Number Two to the agreement with Xenia Rural Water
District:
a. Hold a Public Hearing on the terms and conditions to allow Xenia to construct a
pump station, water lines, and associated appurtenances on City-owned property
located at 900 S 500th Avenue (Mortensen and County Line Water Tower site)
b. Adopt a resolution approving the contract amendment with Xenia as proposed
2. Hold the Public Hearing, then direct staff to negotiate different terms to the proposed
amendment
3. Hold the Public Hearing, and then take no subsequent action on the agreement
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CITY MANAGER'S RECOMMENDED ACTION:
The City of Ames and Xenia Rural Water District have an established 30-year-old agreement
that allows Xenia to purchase potable water from the City of Ames for Xenia's subsequent
resale to their direct customers. Strengthening Xenia's ability to provide urban 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 agreement will eventually
generate revenue to Ames estimated to be in excess of $700,000 annually. An immediate
effect of the agreement is that it will help facilitate two key residential developments in Ames,
Auburn Trails and Hayden's Preserve, by significantly lowering the cost to transfer the water
service territory from Xenia to Ames. The agreement ties the volumetric water rate that
Xenia would pay to the Non-Peaking Industrial Rate being charged to industrial
customers within the Ames city limits, ensuring that Ames' customers are not
subsidizing Xenia's customers. In addition, it will also provide a one-time payment to the
Water Fund of $1,464,500. Therefore, it is the recommendation of the City Manager that the
City Council adopt Alternative No. 1, as described above.
ATTACHMENT(S):
FINAL DRAFT Xenia Agreement.pdf
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DO NOT WRITE IN SPACE ABOVE THIS LINE, RESERVED FOR RECORDER
Prepared by: Mark O. Lambert, City Attorney, 515 Clark Avenue, Ames, Iowa 50010 (Phone: 515-239-5146)
Legal Description: See Page 2
Return to Ames City Attorney, 515 Clark Ave, Ames, IA 50010
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
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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:
Parcel ‘A’: Part of the Northwest Fractional Quarter of the Southwest
Fractional Quarter of Section 7, Township 83 North, Range 24 West of
the 5th P.M., Story County, Iowa more particularly described as
follows: Commencing at the West Quarter Corner of said Section 7;
thence N89° 35’53”E, 110.00 along the north line of the Southwest
Fractional Quarter of said Section 7 to a point on the easterly right of
way line of 500th Street; thence following said line S0°44’36”E, 100.30
feet to the point of beginning; thence continuing S00°44’36”E, 204.97
feet to a point on the northerly right of way line of the U.S. Highway
#30; thence S67°46’53”E, 238.31 feet along said line; thence
N00°03’46”E, 296.64 feet; thence S89°35’53”W, 223.60 feet to the point
of beginning, containing 1.28 acres.
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 third 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 meters 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.
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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 reimbursement 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.
b. After the expiration of the INITIAL 5-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
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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 supersedes 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 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:
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XENIA RURAL WATER DISTRICT
Attest: By:
Peter Jensen, Secretary Dan Lovett, Chairperson
STATE OF IOWA, COUNTY OF STORY, SS.:
This instrument was acknowledged before me on by Peter
Jensen and Dan Lovett, as Secretary and Chairperson, respectively, of Xenia Rural
Water District.
__________________________________________
Notary Public
My commission expires:______________________
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CITY OF AMES, IOWA
Passed and approved on by Resolution No. ,
adopted by the City Council of Ames, Iowa.
Attest: By:
Renee Hall, City Clerk John A. Haila, Mayor
STATE OF IOWA, COUNTY OF STORY, SS.:
This instrument was acknowledged before me on by Renee
Hall and John A. Haila, as City Clerk and Mayor, respectively, of the City of Ames,
Iowa.
__________________________________________
Notary Public
My commission expires:______________________
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