Memorandum

City of Lawrence

Utilities Department

TO:	David Corliss, City Manager Cynthia Wagner, Assistant City Manager Diane Stoddard, Assistant City Manager
FROM:	Mike Lawless, Deputy 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:	9/9/2013
RE:	Proposed Agreement with Douglas County Rural Water District No. 4 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 September 17, 2013 meeting:

Authorize the Mayor to execute the wholesale water agreement with Douglas County Rural Water District No. 4.

Background:

The current wholesale water agreement with Douglas County Rural Water District No. 4 (RWD No. 4) is 38-years old. It was entered into on August 19, 1975, and covers the treatment and transmission of water from the City to RWD No. 4.  City Staff and RWD No. 4 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 RWD No. 4.

The Board of Directors for RWD No. 4 approved the new agreement at their September 10, 2013 board meeting.

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 173,914,432 gallons per year. This is the allotment of water RWD No. 4 has through its agreement with the Kansas Water Office (KWO). In 2012, the City treated and transported 37,236,000 gallons of water for RWD No. 4.
Sale of Water	Every 5 years, the contract provides RWD No. 4 the option to increase the maximum contract quantity. The City agrees to sell water to RWD No. 4, over the term of the Agreement, to supplement the District’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 RWD No. 4 in the event that it does not renew its agreement with the KWO so long as the City has the capacity to do so.
Service Area Expansion	The District agrees to request and must receive approval from the City prior to extension of water lines outside its territorial boundaries that would enter into the City’s Urban Growth Area (UGA). The District and City mutually agree to work to address any emergency requests for water service outside the District territory and within the UGA of the City.
Cost of Raw Water	Currently, RWD No. 4 only purchases treatment and transmission of water from the City and purchases raw water from the KWO. As indicated above, RWD No. 4 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 RWD No. 4 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 RWD No. 4 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 2013 the rate for treatment and transmission is $2.91 per 1,000 gallons. Beginning in 2014, the District’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 RWD No. 4 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, 2053.

Request

Staff requests the City Commission authorize the Mayor to execute the wholesale water agreement with Douglas County Rural Water District No. 4.