Memorandum

City of Lawrence

Utilities Department

TO:	David Corliss, City Manager Cynthia Wagner, Assistant City Manager Diane Stoddard, Assistant City Manager
FROM:	Mike Lawless, Assistant Director of Utilities
CC:	Dave Wagner, Director of Utilities Toni R. Wheeler, Director of the Legal Department Philip Ciesielski, Assistant Director of Utilities Beth Krishtalka, Assistant to Director
Date:	10/11/2012
RE:	Proposed Agreement with Baldwin City for the Treatment and Transmission of Water and the Sale of Water

Please include the following item on the City Commission Agenda for consideration at the October 16, 2012 meeting:

Authorize the Mayor to execute the wholesale water agreement with Baldwin City.

Background:

The current wholesale water agreement with Baldwin City is 35-years old. It was entered into on March 8, 1977, and covers the treatment and transmission of water from the City to Baldwin City.  City Staff and Baldwin City representatives have negotiated a new wholesale water agreement to extend our already well-established relationship. The new agreement also covers the treatment and transmission of water and adds a new provision that allows for the City to sell of water to Baldwin City.

Status

The significant terms of the proposed agreement include:

Issue	Description
Contract Quantity	The City agrees to treat and deliver a maximum quantity of water of 323,128,999 gallons per year. This is the allotment of water Baldwin City has through its agreement with the Kansas Water Office (KWO). In 2011, the City treated and transported 195,535,500 gallons of water for Baldwin City.
Sale of Water	Every 5 years, the contract provides Baldwin City the option to increase the maximum contract quantity. The City agrees to sell water to Baldwin City, over the term of the Agreement, to supplement Baldwin’s allotment through the KWO so long as the City has the capacity to do so. The agreement also provides provisions for the City to sell water to Baldwin City in the event that it does not renew its agreement with the KWO so long as the City has the capacity to do so.
Cost of Raw Water	Currently, Baldwin City only purchases treatment and transmission of water from the City and purchases raw water from the KWO. As indicated above, Baldwin City has the option to purchase water from the City above the KWO allotment and agrees to pay a raw water cost to the City. If Baldwin City maintains the agreement with the KWO, the basis of the raw water cost is the City’s cost for raw water from the Kansas River. If Baldwin City does not maintain its agreement with the KWO, the basis of the raw water cost is the City’s average cost for all raw water sources. The raw water cost would be in addition to the applicable billing rate for the treatment and transmission of water described below.
Billing Rate	The Agreement provides that for the remainder of 2012 and through 2013 the rate for treatment and transmission is $2.91 per 1,000 gallons. The $2.91 amount is the amount the City used in planning the 2012 Utilities budget and was previously provided to the City Commission as the 2013 wholesale rate.  Beginning in 2014, Baldwin City’s billing rate for all water purchased shall not increase at a rate greater than the average percentage increase for the City’s residential customers that use between 1,000 and 5,000 gallons per month
Conservation Measures During Water Emergencies	This provision requires Baldwin City to adopt, observe, and enforce conservation measures that achieve equivalent results of the water conservation measures imposed on Lawrence water customers during water emergencies. This is unchanged from the previous agreement.
Term	The Agreement expires on Dec. 31, 2052.

Request

Staff requests the City Commission authorize the Mayor to execute the wholesale water agreement with Baldwin City.