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HomeMy WebLinkAboutC-2186 - Storage Capacity Agreement for San Joaquin ReservoirCITY OF NEWPORT BEACH Office of CITY ATTORNEY June 9, 1990 To: The Honorable Mayor and Members of City Council From: Assistant City Attorney Subject: Storage Capacity Agreement with The Irvine Company re San Joaquin Reservoir Background In 1962 The Irvine Company (TIC), the Irvine Ranch Water District (IRWD), and other public entities agreed to construct the San Joaquin Reservoir. TIC agreed to donate the land upon which the reservoir was to be built and in return TIC received the right to store 100 acre feet of water in the reservoir. The right of TIC to store water in the reservoir was to be free of any charge or expense. By virtue of subsequent agreements, TIC agreed that should it transfer any of its right to store water that it would require the transferee to agree to pay its proportionate share of the cost and expense of reservoir main- tenance and operation. TIC further agreed that the transferee would execute an agreement to that effect. In 1965, and because of TIC development, TIC granted to the City of Newport Beach the right to store four acre feet of water in the reservoir. Due to the large number of entities that had an interest in the reservoir and the large number of agreements that those parties had entered into, this transfer of four acre feet took a long time to finalize. In 1967 the City determined that the cost of new water facili- ties, required because of increasing development of land within the City, should be financed by the developer. To implement this policy the City Council in 1967 adopted an ordinance establishing a water capital improvement charge (NBMC Section 14.33.010 et seq.) and adopted a series of drawings outlining the required master plan water facilities. This master plan 0 4 June 9, 1980 Page Two Storage Capacity Agreement with The Irvine Company re San Joaquin Reservoir provided that TIC would deed to the City water storage capacity in the San Joaquin Reservoir to serve lands devel- oped by TIC that could not be served by gravity flow from the Big Canyon Reservoir. Because of the time and trouble involved in the initial transfer of water rights, the parties agreed that TIC would make a single transfer of water storage capacity rights that would satisfy the require- ment for all TIC land, developed and undeveloped, presently within the corporate limits of Newport Beach. Joe Devlin, the Utilities Director, and The Irvine Company have completed negotiations with respect to the amount of water storage capa- city to be transferred and have determined that 32 acre feet of water storage rights in the San Joaquin Reservoir will satisfy all of TIC's obligations. Some Councilmembers may be aware that there is presently litigation pending between IRWD, Huntington Beach, Coastal Water District, and other entities that have interest in the reservoir, but the City of Newport Beach is not a party to that litigation. All parties that have an interest in the reservoir, including the City, have been participating.in negotiations to develop a comprehensive agreement which would govern all phases of reservoir operations. This grant of water rights from TIC to the City is already reflected in the draft of the Trust Agreement. It is anticipated that this Council will be asked to approve this Trust Agreement in June and we will prepare a comprehensive memorandum prior to Council's consideration of that agreement. Discussion Three documents are presented to the Council for consideration. The first document, the Grant Deed, actually transfers the storage capacity rights from TIC to the City. This document will be recorded with the County Recorder. The Storage Capacity Agreement simply provides that the City agrees to accept the 32 acre feet of water storage capacity as complete satisfaction of TIC's obligation. The City also agrees to indemnify TIC if, for instance, the City failed to pay its pro -rata share of reservoir expenses, a failure which would require TIC to do so. The Addendum Agreement is a contract required by contracts between the initial reservoir owners. These owners wanted a 0 di June 9, 1980 Page Three Storage Capacity Agreement with The Irvine Company re San Joaquin Reservoir separate agreement whereby an entity to whom water storage capacity rights were transferred would agree to pay its pro - rata share of reservoir expenses and charges. This agreement is required if TIC is to retain the remainder of its water rights in the reservoir free of expenses and other charges for reservoir maintenance and operation. All parties agree that the transfer of water rights as provided by these documents should precede any proposed approval by Council of the Trust Agreement that we have referred to above. This procedure is recommended because the Trust Agreement con- tains specific procedures whereby water storage rights can be transferred between reservoir owners and because the Trust Agreement already reflects the ownership of the City of 36 acre feet. / Robert H. Burnham STORAGE CAPACITY AGREEMENT • COP TIiIS AGREEMENT, made this day of 1980, by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city, hereinafter "City," and, THE IRVINE COMPANY, a Michigan corporation, hereinafter "TIC," is made with reference to the following facts. The parties hereto stipulate and agree that these facts exist and are material to this Agreement: A. TIC owns storage capacity rights in the San Joaquin Reservoir, the legal description of the Reservoir being contained in a grant deed recorded November 14, 1962, in Book 6322, Page 709, of Official Records in the Office of the County Recorder, County of Orange, State of California (hereinafter the .'Reser- voir "). B. The storage capacity rights owned by TIC derive from a series of agreements, some of which are appended hereto as Exhibit "A," and it is the desire of both parties that TIC's rights under these agreements are protected and that TIC suffers no loss or injury as a result of the grant of storage capacity. C. In 1967 City adopted Ordinance No. 1209, the ordinance presently contained within Chapter 14.33 of the Municipal Code of City, in an effort to establish a procedure for financing the expansion and development of the City water system in then- undeveloped areas of City. r 0 D. At the time City adopted Ordinance No. 1209 it also considered.enacting an ordinance to require TIC, in recognition of its plan of massive development within the confines of City, to formally dedicate storage capacity in Reservoir on a periodic or development -by- development basis. E. In lieu of adopting such an ordinance, City and TIC informally agreed that TIC would, in the future and not neces- sarily on a development -by- development basis, dedicate to City a portion of TIC's storage capacity rights in Reservoir to sat-, isfy the needs of areas then developed and other areas that TIC proposed to develop. F. City and TIC have agreed on the extent of storage capacity in Reservoir now to be conveyed by•TIC to City in accord with this informal agreement, and the storage capacity described in this Agreement is sufficient to satisfy the needs of City vis -a -vis past, present and future developments of TIC within the corporate limits of City as presently constituted, and will serve to extinguish all obligations owed by TIC to City with respect to such developments. NOW, THEREFORE, in consideration of the foregoing and the mutual promises contained herein, the parties agree as follows: 1. DEDICATION. TIC hereby agrees to convey and dedicate to City the right to store 32 acre -feet of watef in Reservoir, n these storage capacity rights derived from capacity in Reservoir now owned by TIC. This conveyance shall be accomplished by the -2- 0 6 execution of the grant of storage capacity, attached as Exhibit "II; "'and made a part of this Agreement, and all agreements between City and TIC that relate to.the conveyance of storage capacity shall be executed at the same time. 2. DUTIES OF CITY. City agrees to accept the TIC grant of 32 acre -feet of storage capacity in Reservoir as full and complete satisfaction of any obligation owed by TIC to City to convey storage capacity by TIC by reason of its development of lands within the corporate limits of City as presently.consti - tuted. City also agrees to do the following acts: a. City agrees to execute the document entitled "Addendum Agreement," a copy of which is attached hereto as Exhibit "C," and to deliver the executed Addendum Agreement to each of the parties to that agreement, and to utilize -its best efforts to obtain the signatures of each of the parties to that agreement, and then to deliver the fully executed Adden- dum Agreement to TIC. b. City agrees to perform each of its obligations pursuant to the terms of the Addendum Agreement, and City fur- ther agrees to and hereby does indemnify TIC with respect to any liability, claim, damage or cause, including attorneys' fees, incurred by TIC by reason of a failure of City to perform any duty or obligation required of it pursuant to the Addendum Agree- ment. This agreement to indemnify also includes the obligation -3- on the part of City to defend, or provide a defense for, TIC in the event of litigation that results from City's failure to perform duties or obligations pursuant to the Addendum Agree- ment. This agreement of City to indemnify TIC shall survive the delivery of the grant of storage capacity. 3. BREACH. Failure of City to perform any of the acts required of it pursuant to this Agreement shall not invalidate the grant of storage capacity but shall subject City to any other legal remedy or remedies TIC may wish to pursue. 4. ENTIRE AGREEMENT. This Agreement.constitutes the entire agreement between the parties with respect to storage capacity within Reservoir and supersedes all prior written or oral agreements, formal or informal, between the parties with respect to Reservoir, and this Agreement shall inure to, and be binding upon, the successors and assigns of the parties to this Agreement. - -4- IN WITNESS WHEREOF, the parties hereto subscribe their names as of the day and year first above written. Dated: (i1�, �� C J D CITY OF NEWPORT BEACH A Municipal Corporation BY Mayor Pro Tem ATTEST:` 'Q"' City Clerk APPROVED AS TO FORM: City Attorney THE IRVINE COMPANY A Michigan Corporation L0 0 -5- I RESOLUTION NO. 9796 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE A STORAGE CAPACITY AGREE- MENT AND ADDENDUM AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND THE IRVINE COMPANY IN CONNEC- TION WITH THE SAN JOAQUIN RESERVOIR WHEREAS, there has been presented to the City Council of the City of Newport Beach a certain Storage Capacity Agree- ment and Addendum Agreement between the City of Newport Beach and The Irvine Company in connection with the San Joaquin Reservoir; and WHEREAS, the City Council has reviewed the terms and conditions of said Storage Capacity Agreement and Addendum Agree- ment and finds them to be satisfactory and that it would be in the best interest of the City to execute said Storage Capacity Agreement and Addendum Agreement, NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Newport Beach that the Storage Capacity Agreement and Addendum Agreement above described are approved, and the Mayor and City Clerk are hereby authorized and directed to execute the same on behalf of the City of Newport Beach. ADOPTED this 9th day of June ATTEST: City Clerk Mayor Pro Tan 1980. kv 6/4/80