R2006-180 11-06-06
RESOLUTION NO. R2006-180
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS
DESIGNEE TO ENTER INTO AN INTERIM WATER SUPPLY
AGREEMENT AND ISSUANCE OF BOND BY GULF COAST WATER
AUTHORITY.
WHEREAS, the City of Pearland, Texas (the "City") was heretofore duly created
under the laws of the State of Texas, and is located in the Counties of Brazoria, Harris
and Fort Bend, Texas; and
WHEREAS, Gulf Coast Water Authority sells water at wholesale to municipal,
industrial and agricultural customers in Galveston, Brazoria and Fort Bend Counties,
Texas; and
WHEREAS, the Authority has entered into a Purchase and Sale Agreement (as
amended or extended from time to time, the "Purchase Agreement") dated as of June
13, 2006, with Chocolate Bayou Water Company ("Chocolate Bayou") whereby the
Authority has the right to purchase substantially all of the real and personal property
(including the water rights) (collectively, the "Assets") of Chocolate Bayou (the
"Acquisition"); and
WHEREAS, the City desires to reserve the right to purchase raw water from the
Authority for municipal use subsequent to the closing of the Acquisition and to enter into
an interim water supply contract (the "Interim Water Supply Contract") providing for the
terms and conditions of such purchase; and
WHEREAS, the Authority intends to issue a contract revenue bond or series of
bonds to finance payment of the purchase price of the Assets, costs of issuance of such
financing and the Authority's costs of the Acquisition (the "Bond"); and
RESOLUTION NO. R2006-180
WHEREAS, a portion of the principal and interest of the Bond (the "City's Pro
Rata Share") will be secured by the City's payment obligations under the Interim Water
Supply Contract; and;
WHEREAS, the City desires to reserve the right to purchase water from the
Authority and finds it in the best interest of City to support the Authority in the acquisition
of the Assets; and
WHEREAS, the City Council of the City has determined that it is in the best
interest of the City to enter into the Interim Water Supply Contract, and desires hereby
to authorize the execution and delivery of the Interim Water Supply Contract and other
matters in connection therewith.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS:
Section 1. That the City Council (the "Council") of the City of Pearland, Texas
(the "City") hereby approves the Interim Water Supply Contract which shall be
substantially in the form attached hereto as Exhibit A.
Section 2. That the Council hereby authorizes the City Manager and the City
Secretary of the City to execute and deliver such Interim Water Supply Contract, with
such additions, deletions and other changes to such documents as such City officials
shall approve, such approval to be conclusively evidenced by their execution and
delivery thereof.
Section 3. That the Council hereby authorizes the City Manager and the City
Secretary of the City to perform such other and further acts and to execute and deliver
such other and further documents, certificates and instruments as such City officials, the
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RESOLUTION NO. R2006-180
City Attorney and counsel to the City shall deem necessary and appropriate in
connection with the transactions authorized hereby.
PASSED, APPROVED and ADOPTED this the 6th day of November, A.D., 2006.
TO~~
MAYOR
ATTEST:
APPROVED AS TO FORM:
~~ ~- dd---
DARRIN M. COKER
CITY ATTORNEY
3
Exhibit "A"
Resolution No. R2006-180
INTERIM WATER SUPPLY AGREEMENT
This INTERIM WATER SUPPLY AGREEMENT (this "Agreement") is entered into
as of the -W- day of November, 2006, between the GULF COAST WATER AUTHORITY
(the "Authority") and the CITY OF PEARLAND, TEXAS ("Customer").
WIT N E SSE T H:
WHEREAS, the Authority has entered into a Purchase and Sale Agreement (as amended
or extended from time to time, the "Purchase Agreement") dated as of June 13, 2006, with
Chocolate Bayou Water Company ("Chocolate Bayou") whereby the Authority has the right to
purchase substantially all of the real and personal property (including the water rights)
(collectively, the "Assets") of Chocolate Bayou (the "Acquisition"); and
WHEREAS, the Authority sells water at wholesale to municipal, industrial and
agricultural customers in Galveston, Brazoria and Fort Bend Counties, Texas; and
WHEREAS, Customer desires to purchase raw water from the Authority for municipal
use subsequent to the closing of the Acquisition; and
WHEREAS, the Authority intends to issue the Bond (as defined below) in substantially
the form of Exhibit "A" attached hereto to finance payment of the purchase price of the Assets,
costs of issuance of the Bond, and the Authority's costs of the Acquisition described in Section 2
hereof;
WHEREAS, Customer desires to reserve the right to purchase water from the Authority
and finds it in the best interest of Customer to support the Authority in the acquisition of the
Assets; and
NOW THEREFOR, for valuable consideration including the premises, the Authority and
Customer agree as follows:
Section 1. Reservation of Right to Purchase Water; Security for Bond. In return for
the right to purchase on a take-or-pay basis up to [14,352,317] GPD of Brazos River run of the
river water (subject to applicable regulatory and/or legal conditions imposed on the Authority by
the TCEQ or other state or federal administrative agencies) measured and taken from the river
either at the Briscoe Pump Station on the Brazos River or, if the TCEQ fails to issue to the
Authority the required permit amendment, at the Julif Pump Station on the Brazos River under a
long-term water supply contract commensurable with bonds to be issued by the Authority as
described in Section 4 herein (the "Water Supply Contract"), Customer agrees to pay to the
Authority its Pro Rata Share (as hereinafter defined) of the principal and interest when due on the
Authority's contract revenue bond or series of bonds, issued in the approximate original principal
amount of [$27,850,000] (the "Bond"). The Customer's Pro Rata Share shall be equal to
[39.93]%.
The Authority intends to issue the Bond at least 10 days prior to the closing of the
Acquisition. Customer acknowledges that the Authority will pledge this Agreement and
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Customer's payment obligations hereunder to Bank of America, N.A. (along with any of its
successors and assigns, the "Purchaser") as security for the Bond.
Section 2. Costs to be Reimbursed. To the extent the Bond is issued by the
Authority, the costs described in Section 2 (a) through (e) below and incurred as of the date of
issuance of the Bond shall be financed as part of the Bond principal amount. If the Bond is not
issued for any reason or if any such costs are incurred by the Authority after the issuance of the
Bond (the "Unreimbursed Costs"), Customer agrees to reimburse the Authority for the
Customer's Pro Rata Share of the Unreimbursed Costs including reasonable engineering, legal
and other professional and administrative fees and expenses incurred by the Authority for the
following:
a. Negotiating and executing the Purchase Agreement and any amendments
or supplements thereto;
b. Conducting a due diligence review of the Assets, obtaining approvals from
the TCEQ, and either terminating the Purchase Agreement for any reason permitted
under the Purchase Agreement or consummating a closing of the sale of the Assets which
is scheduled to occur on or before December 15, 2006 (as such date may be extended
from time to time); and
c. Execution of (i) this Agreement between the Customer and the Authority
pursuant to which the Customer shall have the right to purchase from the Authority up to
[14,352,317] GPO of raw water from the Brazos River under the terms set forth in the
Water Supply Contract; and (ii) Interim Water Supply Agreements between the Authority
and other public entities (together with Customer, the "Interim Customers") which are
substantially the same as this Agreement and which will be pledged to secure payment of
the Bond;
d. The cost of title insurance, surveys, legal fees relating to the Acquisition,
legal fees relating to water permits and amendments thereto, engineering fees relating to a
water transfer conveyance system from the Chocolate Bayou Water Canal System to the
Authority's Canal B System, and engineering water availability studies;
e. The fees of the Authority's financial advisor, bond counsel fees,
underwriting and bank fees, fees of bank counsel, fees of counsel to the respective
Interim Customers, paying agency fees, Texas Attorney General filing fees, printing
costs, and other costs of issuance of the Bond;
provided, however, that all such fees shall be reasonable. The fees and expenses for items (a),
(b) and (d) above shall not exceed $363,000. The fees and expenses for items (c) and (e) above
shall not exceed $120,000.
In addition to the costs and expenses described above in this Section 2, Customer agrees to
reimburse the Authority for the reasonable legal and other professional and administrative fees
and expenses incurred by the Authority for negotiation and execution of the Water Supply
Contract; Customer's Pro Rata Share of the design and construction of a water conveyance
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system between the Chocolate Bayou Water Canal System and the Authority Canal B System (if
such water conveyance system becomes necessary due to failure of the TCEQ to issue to the
Authority the required permit amendment by March I, 2007); and certain additional costs
described in Section 9 hereof.
Section 3. Billing. To the extent that any monies are then due under this Agreement,
the Authority shall bill Customer for its Pro Rata Share of the principal and interest due on the
Bond (and any refinancing or extension of such Bond), until Customer has fulfilled all of its
payment obligations under this Agreement and under the terms of its Water Supply Agreement.
The Authority shall also bill Customer for any other payments due by the Customer pursuant to
Section 2 which are not financed with proceeds of the Bond, and such bills shall contain an
itemized summary of the fees and expenses included therein. Customer shall pay such monthly
invoices within 30 days of receipt of such invoice. Any amounts not paid when due shall bear
interest at the lesser of 10% per annum or the highest nonusurious rate of interest applicable
under Chapter 2251.025, Texas Government Code, as amended, or other applicable State law.
The Bond issue shall be structured in such a manner that it is expected that capitalized
interest will be sufficient to pay the interest due on the Bond for two years. If such capitalized
interest is not adequate to pay the actual interest on the Bond when due, Customer shall pay its
Pro Rata Share of such unpaid interest when due. If any of the Customer's Pro Rata Share of
capitalized interest remains unspent at the time of the Customer's early payment of the Bond, the
unspent portion shall be credited to the Customer.
Section 4. Refinancing of Bond. The Authority intends to issue a series of contract
revenue bonds (the "Contract Revenue Bonds") to refinance all or a portion of the Bond prior to
the maturity thereof. Customer may prepay its obligations with respect to the outstanding
principal amount of the Bond and interest accrued thereon at any time permitted by the terms of
the Bond upon 45 days prior written notice to the Authority. If Customer pays all or part of its
obligations hereunder in cash, Customer shall not pay the debt service on the Authority's
Contract Revenue Bonds issued to refinance the Bond. In such event, the Customer shall only
pay a portion of the maintenance and operating expenses of the Authority's facilities used to
serve the Customer as more particularly set forth in the Water Supply Contract.
Section 5. Default and Remedies. It shall be an Event of Default hereunder if
Customer shall fail to timely pay any amount due hereunder. The Authority may refinance any
amount not paid when due and Customer shall continue to pay the principal, premium, if any,
and interest on the debt issued by the Authority to refinance the amount of Customer's failure to
pay hereunder.
Section 6. Surplus Water. (a) Prior to the execution of the Water Supply Contract,
the Authority shall use its best efforts to remarket up to [4,352,317] GPD of the water to other
Qualified Customers. In such case, the Qualified Customers shall assume the responsibility for
the capitalized interest and other costs attributable to the Customer as of such date and Customer
shall have no further rights or liabilities with respect to such water.
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Houston 291 7296v.20
(b) If the Customer determines during the term of the Water Supply Contract that it does
not require the use of all of the water which it purchases under the Water Supply Contract on a
take-or-pay basis, Customer may sell, or the Authority will, upon request of the Customer, use
reasonable efforts to market and re-sell such surplus water but only to Qualified Customers (as
hereinafter defined).
(c) If Customer pays cash (from the proceeds of an issue of Customer's bonds or
otherwise) to pay its Pro Rata Share of the principal and interest due on the Bond, and no debt
service is payable under Customer's Water Supply Contract, Customer may require that the
assignee Qualified Customer of all or a portion of the quantity of water it is purchasing under the
Water Supply Contract pay Customer an amount satisfactory to Customer as compensation for
assignee's purchase ofthe water; subject to subsection (e) below.
(d) If the proceeds of the Authority's Contract Revenue Bonds are used to refinance
the Bond and Customer pays a debt service component under the Water Supply Contract, then
Customer and the assignee Qualified Customer of all or a portion of the quantity of water it is
purchasing under the Water Supply Contract may agree that the assignee shall pay Customer
such additional compensation as Customer and its assignee agree is reasonable for assignee's
purchase of the water; subject to subsection (e) below.
(e) In the case of any agreements between Customer and its assignee Qualified
Customer for compensation pursuant to subsections (c) or (d) above, (i) the Authority shall not
be required to participate in any such agreements; and (ii) any such agreements must not be
prohibited by the TCEQ or any other applicable laws of the State.
"Qualified Customers" means any municipality or political subdivision of the state of
Texas or other entity which:
(i) assumes or enters into a water supply contract with the Authority on
substantially the same terms as Customer;
(ii) in the opinion of nationally recognized bond counsel would not cause the
interest on the Bond or any Contract Revenue Bonds issued to refinance the Bond or any
refinancing thereof to become taxable in the hands of the owner thereof;
(iii) would not cause the credit rating on the Contract Revenue Bonds to be
lowered as a result thereof; and
(iv) would not require the Authority to construct additional facilities to deliver
water to such successor Customer unless adequate provision is made for such successor
Customer to pay the capital and operating and maintenance costs thereof.
(f) If the purchaser of surplus water is not a governmental entity, clauses (i) through
(iv) above shall apply and such purchaser shall either pay all amounts necessary to redeem the
portion of the Bond proportionate to the amount of water purchased by such purchaser or agree
to pay the debt service on a series of taxable bonds issued by the Authority to refinance a
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Houston 2917296v.20
proportionate amount of the Bond or take such other action as IS deemed necessary by the
Authority's bond counsel.
Section 7. Obligations Absolute. Customer agrees to pay the amounts due hereunder
and acknowledges that the Authority shall pledge the amounts payable by Customer for principal
and interest on the Bond to payment of the Bond. This Agreement is entered into under the
Texas Interlocal Cooperation Act. All payments required to be made by the Customer to the
Authority under this Agreement shall be payable from legally available funds received by the
Customer from the ownership and operation of its water system (or its water system as a portion
of its combined utility system) (the "Water System"). Payments made to the Authority shall be
treated as an operating expense of Customer's Water System. Nothing in this Section, however,
shall be construed as preventing Customer, in its sole discretion, from making any payment due
the Authority from sources other than revenues and income of Customer's Water System.
Pursuant to the Texas Interlocal Cooperation Act, all payments made hereunder shall be made
from current revenues available to the paying party, and the parties agree that payments made
hereunder are in amounts that fairly compensate the performing party for services or functions
performed under this Agreement. This Agreement was approved by resolution of a majority vote
of the governing body of each of the parties at a duly called meeting. The payment obligations
of Customer hereunder are absolute and unconditional without any right of set-off.
Section 8. Term of Agreement. This Agreement shall terminate upon execution of
the Water Supply Contract and the later of payment by or on behalf of the Customer of (i) its Pro
Rata Share of the principal and interest on the Bond and its obligations under Section 2
hereunder; and (ii) its payment obligations as to any debt issued by the Authority pursuant to
Section 5 hereof to refinance the Bond upon an Event of Default by Customer.
Section 9. Water Supply Contract. The Water Supply Contract shall specifically
provide the terms and conditions for the sale of water to the Customer. Such terms shall include,
among other terms, provision for payment by the Customer to the Authority of (i) Customer's
Pro Rata Share of the Bond (or bonds issued to refinance the Bond, if applicable), (ii)
Customer's Pro Rata Share of the design and construction of a water conveyance system between
the Chocolate Bayou Water Canal system and the Authority Canal B System (if such water
conveyance system becomes necessary due to failure of the TCEQ to issue to the Authority the
required permit amendment by March 1, 2007), (iii) any costs associated with Authority
infrastructure improvement studies, engineering, construction and improvements to Authority
facilities required to convey Customer's water from the Brazos River to a mutually agreed
Customer delivery point, (iv) reasonable legal, professional, and other administrative costs
incurred by the Authority for negotiation and execution of the Customer's long term Water
Supply Contract, and (v) Customer's applicable portion of ongoing maintenance and operating
expenses (which shall include capital projects to maintain the Authority's system). In addition,
the Water Supply Contract shall contain language to the effect that upon the expiration of the
term of the Water Supply Contract the Authority agrees to continue to provide water to the
Customer (to the extent then permitted by law and reasonably feasible) so long as the Customer
wants to receive water from the same source as described in the Water Supply Contract and so
long as the Customer pays its share of the operating and maintenance expenses of the Authority's
facilities. The parties agree to negotiate in good faith the terms of the Water Supply Contract and
any renewal thereof. Any such agreement shall recognize the Customers' contribution to the
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Houston 2917296v.20
financing of the Acquisition of the Assets and the right to continue to receive water from such
source so long as the Customer pays its share of the operating and maintenance expenses of the
Authority's facilities.
Section 10. Unwind. Either party shall have the right to terminate this Agreement if
the Bond is not issued before the Purchase Agreement is terminated and the Customer has paid
all of its obligations under Section 2. If the Bond is issued by the Authority and the closing of
the Acquisition does not occur on or before April 1, 2007, (i) the Authority shall provide written
notice of such event to the Customer, and (ii) the Bond shall be redeemed on the earliest possible
date thereafter that will permit prepayment of such Bond without premium or penalty.
Section 11. Payments Obligation to Pay Debt Service Charges Unconditional. lt is
understood and acknowledged by Customer that the Bond and any bonds issued to refinance
such Bond pursuant to the terms hereof will be sold to the purchaser( s) thereof and the Authority
will purchase the Assets in reliance upon the commitment of the Customer to make payments as
provided herein. Accordingly, any other provision of this Agreement notwithstanding,
Customer's obligation to pay its obligations hereunder shall be absolute and unconditional under
any and all circumstances. So long as the Bond or any bond(s) issued to refinance the Bond
permitted hereunder remain outstanding, Customer (i) will not suspend or discontinue any
payments provided herein, and (ii) will not terminate this Agreement or otherwise seek to avoid
or to reduce the payment of such obligations for any reason.
Section 12. Ownership of Water. The Authority shall own all of the water and water
rights acquired from Chocolate Bayou until it passes the delivery point to Customer as shall be
set forth in the Water Supply Contract. The Customer shall have the right to purchase raw water
from the Authority under the terms hereof and shall have such further right to sell, convey, or
assign its right to purchase water under this Agreement as provided herein to Qualified
Customers after the execution of the Water Supply Contract.
[EXECUTION PAGE FOLLOWS]
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AGREED TO BY:
GULF COAST WATER AUTHORITY
IN
President
ATTESTED BY:
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[Execution Page to Interim Water Supply Agreement}
Houston 2917296v.20
-7-
EXHIBIT A
BOND NO.: R-l
UNITED STATES OF AMERICA
STATE OF TEXAS
COUNTY OF GALVESTON
GULF COAST WATER AUTHORITY
CONTRACT REVENUE BOND
SERIES 2006
DATED DATE:
ISSUANCE MATURITY INTEREST PRINCIP AL
DATE: DATE: RATE: AMOUNT:
December , December Variable, $
-
2006 2016 as described
below
December I, 2006
GULF COAST WATER AUTHORITY (the "Authority") hereby acknowledges itself
indebted to and promises to pay to Bank of America or its successors and assigns (the "Payee")
on the Maturity Date, solely from Pledged Revenues of the Authority, an amount equal to the
Principal Amount of this Bond plus accrued interest at the [Applicable Rate] (as defined in the
Resolution). Accrued interest shall be computed on the basis of a 365-day year (or 366-day year
in a leap year) based on the actual number of days elapsed, and shall accrue from the Issuance
Date shown above. The Principal Amount of this Bond and the interest accrued thereon shall be
payable in any coin or currency which, on the date of payment of such principal and interest, is
legal tender for the payment of debts due the United States of America, without exchange or
collection charges, by wire transfer of immediately available funds, upon presentation and
surrender of this Bond at the office of ; Attention:
THIS BOND is issued for the purpose of paying the purchase price for the assets of
Chocolate Bayou Water Company and costs incurred by the Authority in connection with
negotiating and closing the sale of such assets, capitalized interest on this Bond and costs of
issuance of this Bond, pursuant to and in compliance with the Act and pursuant to the Resolution
of the Authority adopted on November , 2006 authorizing the issuance of this Bond (the
"Resolution"), under and in strict conformity with the Constitution and laws of the State of
Texas. Capitalized terms used herein and not otherwise defined shall have the meaning assigned
in the Resolution.
THE AMOUNT DUE, payable, and owing on this Bond shall never exceed the Principal
Amount of this Bond plus accrued interest thereon.
THIS BOND may be prepaid in whole or in part prior to maturity, without penalty or
prepayment charge, on the last day of any [Interest Period] at a price equal to the outstanding
principal amount (or portion thereof being prepaid), plus any unpaid accrued interest thereon, by
Exhibit A-I
Houston 2917296v.20
wire transfer of immediately available funds to the place of payment, in accordance with the
terms and conditions of the Resolution.
THIS BOND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
BY ACCEPTANCE HEREOF the Payee accepts and agrees to all of the terms and
conditions of the Resolution, which terms and conditions are incorporated herein by reference for
all purposes. The Authority may treat the Payee as the absolute owner of this Bond for all
purposes, and the Authority shall not be bound by any notice to the contrary.
IN THE RESOLUTION the Authority has pledged the Pledged Revenues as security for
the payment of the principal of and interest on this Bond.
IT IS HEREBY CERTIFIED, RECITED AND COVENANTED that this Bond has been
duly and validly authorized, issued and delivered; that all acts, conditions and things required or
proper to be performed, exist and be done precedent to or in the issuance and delivery of this
Bond have been performed, existed and have been done in accordance with law; that this Bond
does not exceed any Constitutional or statutory limitation; and that due provision has been made
for the payment of the interest on and principal of this Bond, as such interest comes due and such
principal matures, by an irrevocable pledge of the Pledged Revenues described in the Resolution.
IT IS FURTHER CERTIFIED that (i) this Bond is issued pursuant to and in compliance
with the Act and pursuant to the Resolution duly adopted by said Board of Directors and (ii) this
Bond is a valid and binding special obligation of the Authority, enforceable against the Authority
in accordance with its terms.
IN WITNESS WHEREOF, this Bond has been executed by the manual or facsimile
signatures of the President or Vice President of said Board and attested by the Secretary of said
Board, and the official seal of the Authority has been duly affixed by being impressed, or placed
in facsimile, on this Bond.
President, Board of Directors
Gulf Coast Water Authority
Attest:
Secretary, Board of Directors
Gulf Coast Water Authority
(SEAL)
Exhibit A-2
Houston 2917296v.20