HomeMy WebLinkAbout16 - Acquisition of Rule 20A Credits from the City of LynwoodPORT CITY OF
O �
_ i NEWPORT BEACH
City Council Staff Report
<i FO RN
April 9, 2019
Agenda Item No. 16
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David A. Webb, Public Works Director - 949-644-3311,
dawebb@newportbeachca.gov
PREPARED BY: Michael J. Sinacori, Acting City Engineer,
msinacori@newportbeachca.gov
PHONE: 949-644-3342
TITLE: Acquisition of Rule 20A Credits from the City of Lynwood
ABSTRACT:
California Public Utilities Commission (CPUC) Rule 20A establishes program funding for
the undergrounding of overhead utilities by municipalities. The City of Lynwood
(Lynwood) has unallocated Rule 20A credits and is offering to sell them to the City of
Newport Beach for $1,578,885. This action will result in a $2,722,215 credit to the City's
Southern California Edison (SCE) Rule 20A account.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Approve Budget Amendment No. 19BA-040 transferring $1,428,885 from the
FY 2017/18 General Fund surplus to the Neighborhood Enhancement Fund and
appropriates this amount for the purchase of SCE Rule 20A Credits;
c) Authorize the City Manager to execute the Memorandum of Understanding (MOU)
between the City of Newport Beach and City of Lynwood documenting details of the
transaction for the Rule 20A credit acquisition; and
d) Authorize staff to process the Rule 20A credit transfer between the City of Newport
Beach and City of Lynwood with SCE.
FUNDING REQUIREMENTS:
If the attached Budget Amendment is approved, the total purchase of the SCE 20A
Credits will be funded by a transfer of $1,428,885 from FY 2017/18 General Fund surplus
to the Neighborhood Enhancement Fund and the existing $150,000 in the FY 2018/19
CIP for purchase of rule 20A credits.
16-1
Acquisition of Rule 20A Credits from the City of Lynwood
April 9, 2019
Page 2
DISCUSSION:
CPUC sets Rule 20 policies and procedures for the conversion of overhead utility facilities
to underground. Under Rule 20, underground utility projects may be financed by utility
rate money, combined rate funds and local tax proceeds, depending on whether the
project is classified under the Rule 20A, Rule 20B, or Rule 20C provisions.
Rule 20A projects are paid for by the utility's ratepayers. To qualify for funding through
these proceeds, projects must produce a benefit to the general public, not just customers
in the affected area. This may be satisfied by one or more of the following criteria:
• The location has an unusually heavy concentration of overhead facilities;
• The location is heavily traveled;
• The location is an arterial or major collector road in a city's general plan; and/or
• The overhead equipment must be located within or pass through a civic,
recreational, or scenic area.
The City receives an annual 20A allocation of approximately $200,000 that has been
earmarked for the November 2013 Council Approved Balboa Boulevard Underground
Utility District No. 22. SCE has indicated our City 20A fund balance is approximately
$3,000,000 as of November 2018. Initially the Balboa Boulevard project cost was
anticipated to be $4,100,000. However, cost increases since 2013 have occurred based
on the final design efforts. Though SCE and the City have worked to re -design the Balboa
Boulevard project, as directed by Council on June 12, 2018 to get closer to the 2013
budget, there still is a funding shortfall to complete the project. In accordance with
Council's desire to underground overhead utilities along major public roadways and
scenic areas, and as has done in several times in previous years, staff is recommending
to purchase additional unused 20A credits from the City of Lynwood to make up the
anticipated funding shortfall to complete the currently approved Balboa Boulevard Utility
Undergrounding project.
Lynwood currently has $2,722,215 in unallocated Rule 20A fund balance at the end of
calendar year 2018. The City has been given the opportunity to purchase these credits
at a rate of 58 cents per dollar credit for a total purchase price of $1,578,885. This
purchase price is slightly higher than our past Rule 20A transactions within the Orange
County region where we have paid between $0.45 and $0.55 per 20A dollar credit. Staff
recommends agreeing to this slightly higher purchase price as the market is currently
fairly tight and the City currently has and approved an active 20A undergrounding project
that will need additional funding. Furthermore, Assessment District 111 project that was
approved by Council in January 2016 is adjacent to and dependent upon the City and
SCE completing the Balboa Boulevard 20A effort. Without the 20A funding being
available, the Assessment District 111 area could not move forward and further delay
could jeopardize the completion of that district with the funds the property owners have
approved. The City Council may need to contemplate cancelling the Assessment
District 111, with expenses to date approximating $228,603.
16-2
Acquisition of Rule 20A Credits from the City of Lynwood
April 9, 2019
Page 3
As mentioned above, the final area of Balboa Boulevard 20A project is currently in the
final re -design stages and will be ready for bidding this summer. Upon approval of this
action, SCE will transfer Lynwood's available credit to Newport Beach's account upon
execution of the attached Memorandum of Understanding with the City of Lynwood.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A —Memorandum of Understanding between the Cities of Lynwood and
Newport Beach
Attachment B — Budget Amendment
16-3
ATTACHMENT A
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is entered into as of , 2019, by
and between the City of Newport Beach, a California municipal corporation and charter
city with its principal place of business at 100 Civic Center Drive, Newport Beach,
California 92660 ("Newport Beach"), and the City of Lynwood, a California municipal
corporation and general law city with its principal place of business at 11330 Bullis Road,
Lynwood, California 90262 ("Lynwood"). Newport Beach and Lynwood are sometimes
individually referred to herein as "Party" and collectively as "Parties".
RECITALS
A. Electric utility companies collect and annually allocate funds to communities
to convert overhead electric facilities to underground electric facilities ("Rule 20A Funds").
B. Newport Beach is actively planning one or more projects to underground
overhead electric facilities that qualify for the application of California Public Utilities
Commission ("CPUC") Rule 20A Funds ("Projects"). Newport Beach desires to obtain
additional Rule 20A Funds to finance such Projects.
C. Southern California Edison ("SCE") currently has designated and dedicated
a balance of $2,722,215 in Rule 20A Funds for the benefit of Lynwood ("Lynwood
Allocation"), and Lynwood currently has no active Projects that can make use of the
Lynwood Allocation.
D. Newport Beach desires to acquire, for consideration, the Lynwood
Allocation to use in connection with the Newport Beach Projects, and Lynwood desires to
transfer the Lynwood Allocation to Newport Beach to enable the Rule 20A Funds, which
have been allocated to Lynwood, to be used for their intended purpose of undergrounding
electric facilities and to derive economic benefit from the Lynwood Allocation.
AGREEMENT
NOW, THEREFORE, the Parties hereto agree as follows:
1. Lynwood agrees to assign, for use by Newport Beach, its rights and
interests in the Lynwood Allocation to Newport Beach, and Newport Beach agrees to
acquire, for consideration, the Lynwood Allocation in accordance with the terms of this
MOU. This MOU shall be subject to the approval of each the City Council of Newport
Beach and the City Council of Lynwood and shall become effective on the date when both
such approvals have been obtained ("Effective Date"). Notwithstanding the foregoing, if
this MOU has not become effective as of July 1, 2020, then either Party may terminate
this MOU on five (5) business days' written notice to the other Party without incurring any
liability, costs or further obligations to the other party or any third party.
2. Within fifteen (15) business days of the Effective Date, Newport Beach shall
make a payment to Lynwood in the amount of One Million Five Hundred Seventy Eight
Thousand Eight Hundred Eighty Five Dollars ($1,578,885) ("Acquisition Price"). The
Acquisition Price shall be paid in immediately available funds via check or wire transfer
to an account designated by Lynwood. The Acquisition Price shall constitute full
consideration for the transfer and assignment of the Lynwood Allocation.
16-4
3. Lynwood agrees to sell the Lynwood Allocation to Newport Beach at a
purchase rate of Fifty -Eight Cents ($0.58) for every One Dollar ($1.00) of Rule 20A Funds.
Within ten (10) business days of Lynwood's receipt of the Acquisition Price funds,
Lynwood shall deliver a written request to SCE, with a copy to Newport Beach, making a
formal request to transfer and assign Two Million Seven Hundred Twenty Two Thousand
Two Hundred Fifteen Dollars ($2,722,215) of Rule 20A Funds contained in the Lynwood
Allocation to and for the benefit of Newport Beach. Lynwood shall cooperate in good faith
with Newport Beach to provide any additional documentation or information that is
reasonably requested by SCE to complete the transfer. In the event that SCE is unable
to complete the transfer, or only complete a partial transfer, Lynwood shall return the
unused Acquisition Price funds to Newport Beach within ten (10) business days of
Newport Beach's notification to Lynwood.
4. Newport Beach acknowledges and agrees that it has conducted its own
investigation as to the applicability and transferability of the Lynwood Allocation for use in
the Projects and that Lynwood has not made any representation or warranty to Newport
Beach with respect to same. The actual use of the Lynwood's Allocation by Newport
Beach shall be subject to the rules and procedures adopted by SCE, CPUC, and such
other conditions or requirements set forth in the Public Utilities Code.
5. Newport Beach shall indemnify, defend, and hold harmless Lynwood, its
elected officials, officers, employees, and agents, from any claim, damage or liability
arising in connection with the use of Rule 20A Funds from the Lynwood Allocation in
connection with the construction of the Projects, including legal challenges of all types or
natures, including but not limited to administrative, judicial, or legislative actions.
6. In the event that either Party is in breach of its obligations as set forth in this
MOU, then the non -defaulting Party shall have the right to terminate this Agreement on
ten (10) business days' written notice to the defaulting Party unless the default is cured,
or cure has commenced, within the notice period. Upon termination for breach, the non -
defaulting Party may exercise any right or remedy which it may have under applicable
law. Within ten (10) business days of termination pursuant to this Section 6, Lynwood
shall return to Newport Beach that portion of the Acquisition Price applicable to that
portion of the Lynwood Allocation not yet transferred by SCE to Newport Beach.
7. All notices to be given pursuant to this MOU shall be delivered in person or
by commercial overnight delivery to the address of the Party set forth above, and
addressed to the City Manager of such Party and shall be effective upon receipt.
8. This MOU shall be governed and construed in accordance with the laws of
the State of California, and any action brought relating to this MOU shall be adjudicated
in a court of competent jurisdiction in the County of Orange.
9. Each Party shall at its own cost and expense comply with all statutes,
ordinances, regulations and requirements of all governmental entities, including federal,
state, county or municipal, whether now in force or hereinafter enacted.
Memorandum of Understanding — Page 2
16-5
10. A waiver by either Party of any breach, of any term, covenant or condition
of this MOU contained herein shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition contained herein, whether
of the same or a different character.
11. The terms of this MOU shall be construed in accordance with the meaning
of the language used and shall not be construed for or against either Party by reason of
the authorship of the MOU or any other rule of construction which might otherwise apply.
12. If any term or portion of this MOU is held to be invalid, illegal, or otherwise
unenforceable by a court of competent jurisdiction, the remaining provisions of this MOU
shall continue in full force and effect.
13. In the event of any dispute or legal action arising under this MOU, the
prevailing Party shall not be entitled to attorney's fees.
14. This MOU may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and the same
instrument.
15. Each Party signing this MOU explicitly affirms and provides they have the
power and authority to bind their respective Party.
[SIGNATURES ON FOLLOWING PAGE]
Memorandum of Understanding — Page 3
16-6
IN WITNESS WHEREOF, the Parties hereto have executed this MOU as of the
dates indicated below.
CITY OF LYNWOOD,
A California municipal corporation
Date:
Jose Ometeotl
City Manager
ATTEST:
Date:
Maria Quinonez
City Clerk
APPROVED AS TO FORM:
Date:
Noel Tapia
City Attorney
CITY OF NEWPORT BEACH,
A California municipal corporation
Date:
Grace K. Leung
City Manager
ATTEST:
Date:
Leilani I. Brown
City Clerk
APPROVED AS TO FORM:
Date:
S� ar C. Harp
City ttorney
[END OF SIGNATURES]
Memorandum of Understanding — Page 4
16-7
City of Newport Beach
BUDGET AMENDMENT
2018-19
EFFECT ON BUDGETARY FUND BALANCE:
Increase Revenue Estimates
X Increase Expenditure Appropriations
Transfer Budget Appropriations
SOURCE:
from existing budget appropriations
from additional estimated revenues
X from unappropriated fund balance
EXPLANATION:
ATTACHMENT B
NO. BA- 19BA-040
AMOUNT: 1 $1,428,885.00
This budget amendment is requested to provide for the following:
This budget amendment authorizes the transfer of a portion of the 2017/18 General Fund surplus to the Neighborhood Enhancement I
Fund where these funds will be appropriated for the acquisition of SCE Rule 20A Credits from the City of Lynwood.
ACCOUNTING ENTRY:
BUDGETARY FUND BALANCE
Fund Obiect
010 300000
REVENUE ESTIMATES
Amount
Description Debit
General Fund - Fund Balance $1,428,885.00
Org Object Project Description
53699 691010 Transfer in from General Fund $1,428,885.00
EXPENDITURE APPROPRIATIONS
O0cr Object Proiect Description
01099 991536 Transfer Out to Neighborhood Enhancement Fund
53601 980000 19M03 CIP - SCE Rule 20A Credit Purchase
Signed
Signed
al Approval: Finance Director
City Council Approval: City Clerk
" Automatic
Credit
$1,428,885.00
$1,428,885.00
Date
Date
16-8
Increase in Budgetary Fund Balance
ANDX
Decrease in Budgetary Fund Balance
No effect on Budgetary Fund Balance
ONE-TIME?
P
Yes
No
This budget amendment is requested to provide for the following:
This budget amendment authorizes the transfer of a portion of the 2017/18 General Fund surplus to the Neighborhood Enhancement I
Fund where these funds will be appropriated for the acquisition of SCE Rule 20A Credits from the City of Lynwood.
ACCOUNTING ENTRY:
BUDGETARY FUND BALANCE
Fund Obiect
010 300000
REVENUE ESTIMATES
Amount
Description Debit
General Fund - Fund Balance $1,428,885.00
Org Object Project Description
53699 691010 Transfer in from General Fund $1,428,885.00
EXPENDITURE APPROPRIATIONS
O0cr Object Proiect Description
01099 991536 Transfer Out to Neighborhood Enhancement Fund
53601 980000 19M03 CIP - SCE Rule 20A Credit Purchase
Signed
Signed
al Approval: Finance Director
City Council Approval: City Clerk
" Automatic
Credit
$1,428,885.00
$1,428,885.00
Date
Date
16-8