Memorandum To: President and Board of Directors From: Neal Shearer, Community Operations Officer Date: May 22, 2014 Re: Proposed EPCOR License Agreement for Opportunity Way Park CC: Jenna Kollings, Community Executive Officer Recommendation It is recommended that the Board approve the proposed License Agreement (Agreement) with EPCOR Water Arizona Inc., to allow the Anthem Community Council (ACC) to utilize the surface of the EPCOR water recharge facility for the construction, maintenance and operation of Opportunity Way Park (OWP). Background The ACC initiated a Facilities Master Plan process in 2012/13 to identify and prioritize capital projects to enhance Anthem’s quality of life over the next 5-10 years. In 2013, the Board approved Opportunity Way Park as the top priority project because of the recognized need for additional sports fields and park amenities on the west side of Anthem. Opportunity Way Park is planned for an eight acre site located north of Opportunity Way and west of 46th Lane that is owned by three separate entities— the ACC, Parkside HOA and EPCOR (an aerial photo of the existing site and concept plan for the proposed park are attached). EPCOR’s three acre water recharge facility that is located in the middle of the proposed park site is a critical part of the water and wastewater system that serves Anthem. The recharge facility replenishes groundwater by pumping approximately 400,000 gallons per day of treated effluent into the underground aquifer. It is important to clarify that the recharge facility reintroduces effluent into the water table to be further purified by nature; it does not directly supply drinking water. The recharge facility includes a pump station, electrical panels, valves and sounding tubes and several underground recharge pipes. It is currently fenced to prevent public access. EPCOR and ACC staff and legal counsel have jointly developed the proposed Agreement which is intended to allow the ACC to design, build and operate Opportunity Way Park while protecting EPCOR’s above and below ground equipment and their capacity to operate and maintain the recharge facility in accordance with permit and regulatory requirements. EPCOR representatives will be present at the May 28 Board meeting when this issue is considered. Agreement Summary At the Board meeting on April 23, 2014, staff provided a comprehensive update on Opportunity Way Park and outlined key provisions of the proposed Agreement for the Board and public to consider. This presentation was also posted on the ACC’s website to allow for additional public review and comment. The complete Agreement is attached and key provisions are summarized below: ACC may use EPCOR’s 3 acre water recharge parcel for park use for 30 years for a total license fee of $10 (initial term), with an annual renewal fee of $10 each. ACC pays for all park improvements and related repairs, maintenance and utilities for the park. EPCOR will provide effluent for park irrigation at the low tariff rates (77 cents/1,000 gallons), if permitted to do so. EPCOR must review and approve all plans for park improvements before construction begins. EPCOR retains ownership of the recharge facility and their rights to maintain and operate the facility take precedence over ACC’s use in all situations. ACC assumes liability for damages to the recharge facility from park operations, maintenance and use and indemnifies EPCOR from claims arising from park related activities. ACC shall maintain stipulated insurance coverage and name EPCOR as “additional insured.” ACC may terminate the Agreement at any time with notice to EPCOR. EPCOR may terminate the Agreement upon 6 months notice (or such lesser notice as may reasonably be required by the circumstances) if ACC’s operation or maintenance is “materially adversely affecting” EPCOR’s operation, maintenance or replacement of the recharge facility. ACC will receive advance notice of “intent to terminate” and a reasonable cure period to address the cause for the termination notice. ACC shall enforce use restrictions pertaining to the park that may be required by EPCOR, including not allowing users to bring alcohol, illegal drugs or firearms on EPCOR’s property or to remain on the premises before dawn or after dusk (note: this is consistent with ACC policies). EPCOR is regulated by the Arizona Corporation Commission and may seek their approval of the agreement within 30 days of effective date. The Agreement is binding upon ACC and EPCOR and their successors and assigns. To protect water quality at the recharge facility, ACC agrees to apply pesticides and fertilizers in accordance with manufacturer’s directions and applicable laws (note: ACC does not use pesticides on sports fields). If water quality samples detect any pesticides, or nitrates in a concentration equal to or greater than 70% (7 mg/L) of EPCOR’s permit limits, ACC will cease such product use until EPCOR determines, using all available data, that use can resume. Due Diligence and Water Quality The provision in the Agreement (noted above) regarding nitrate limits in water samples reflects the serious commitment of both entities to protect water quality at the recharge facility. Toward that end, the ACC enlisted the services of a water quality expert to analyze the impacts of applying nitrogen fertilizer on the two planned sports fields at Opportunity Way Park (one field is on EPCOR’s property and one is on Parkside HOA property). Dr. Janick Artiola (Associate Professor, Extension Specialist for Water Quality, Director of the Water Quality Laboratory and Instructor in Soil, Water and Environmental Science at the University of Arizona) conducted this analysis as an independent consultant and concluded that all proposed design scenarios for grass at OWP were forecasted to result in nitrate levels below the allowable limit in the Agreement and far below EPCOR’s permit limits. Assessing the Risks and Benefits As with any agreement, it is important to consider the potential risks and anticipated benefits. The main benefits of the proposed Agreement are that it allows for the future development of an integrated eight acre park with sports fields and other recreational amenities that address neighborhood and community needs, and it beautifies several acres of land that is currently surrounded by chain link fence in a residential neighborhood. The main risks are that in exchange for using EPCOR’s three acre water recharge parcel for about 33 cents a year, the ACC absorbs the liability associated with the park use and potential damage to EPCOR’s facilities; and EPCOR could disrupt park use (e.g., excavate the surface) or terminate the Agreement after the ACC has invested Enhancement Funds to build park amenities on the water recharge parcel (see the attached Agreement, Exhibit B, for a list of planned improvements to the portion of the park that is owned by EPCOR). While the risks associated with this agreement cannot be completely eliminated due to the unique nature and primary purpose of the water recharge facility, they can be reasonably mitigated through prudent park design considerations and responsible park management and oversight, and by maintaining a constructive partnership with EPCOR. Staff can speak to these issues in more detail at the meeting, as needed. Preliminary Project Cost Estimates In the next month, staff will develop an updated Enhancement Fund cash flow analysis for Opportunity Way Park. The ACC’s Enhancement Fund is the designated funding source for all expenditures relating to the park design, plan reviews, permits, construction and equipment required for the park. The preliminary estimate for OWP design/build related costs is $1.8 million. The ACC’s annual operating budget is the designated funding source to operate and maintain the park when it is completed in 2016 (current estimate). The preliminary estimate for OWP annual operating costs is $180,000. It is important to keep in mind that these are preliminary cost estimates that will change based on the final park design and other factors such as inflation and the bidding climate at the time of construction. Next Steps If the proposed Agreement is approved, the detailed design and plan review process for Opportunity Way Park will proceed as outlined in the design services agreement with EPG, which was authorized by the Board for an amount not to exceed $115,000 ($8,125 or 7% spent to date). This extensive design and plan review process will involve further community outreach meetings, periodic review sessions with the Community Planning & Development Committee and project partners (EPCOR, Parkside HOA Board and ACC Board), and the development of detailed plans and construction documents that meet all plan review and regulatory requirements through EPCOR and the City of Phoenix. The overall design and plan review process could take up to a year to complete, depending on variables such as special regulatory requirements, plan review turnaround times and the number of plan revisions. Attachments: Aerial view of proposed site for Opportunity Way Park Concept plan of proposed Opportunity Way Park Proposed License Agreement Aerial View of Proposed Park Site LICENSE AGREEMENT THIS LICENSE AGREEMENT (this “Agreement”) is made and entered into as of this ___ day of __________, 2014 (the “Effective Date”) by and between EPCOR Water Arizona Inc., an Arizona corporation (“EWAZ”), and Anthem Community Council, Inc., an Arizona nonprofit corporation (“Council”). RECITALS: A. EWAZ is the owner of the real property described on Exhibit “A” attached to this Agreement (the “Property”). B. EWAZ owns and operates a wastewater recharge facility beneath the surface of the Property, with certain appurtenant facilities at or above grade on the Property (the “Recharge Facilities”). C. Council requested the right to utilize the surface of the Property for the construction, maintenance and operation of a park with recreational amenities to be open to Council’s residents and guests (the “Park Facility”). D. EWAZ and Council recognize that this project is made possible through Council and EWAZ working together cooperatively and in good faith to improve and enhance the immediate and surrounding community. E. EWAZ is willing to grant that right to Council, subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the terms and mutual promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EWAZ and Council agree as follows: 1. Use. EWAZ hereby grants Council permission to utilize the surface of the Property, on a non-exclusive basis (subject only to EWAZ’s retained rights as the fee title owner of the Property and the owner and operator of the Recharge Facilities), for construction, maintenance and operation of the Park Facility; provided, however, that Council may not offer the Park Facility to its residents and guests unless and until all of the Council’s Improvements (as that term is defined in Section 4, below) are designed and constructed at Council’s cost and expense and approved by EWAZ. Without limiting the generality of the foregoing, Council acknowledges and agrees that while it has not been necessary since the inception of the Property, an unforeseen circumstance may make it necessary for EWAZ to excavate all or portions of the Property in connection with its operation, repair and replacement of the Recharge Facility and its component parts. In all respects and at all times, EWAZ’s ownership, operation, maintenance and replacement of the Recharge Facility will take precedence over Council’s construction, ownership, operation and maintenance of the Park Facility. If EWAZ excavates upon the Property to maintain or replace all or a portion of the Recharge Facility, EWAZ will restore the 1 surface grade of the Property, but EWAZ will not otherwise be required to replace or repair the Park Facility or any of its components. EPCOR will take measures reasonable under the circumstances to mitigate any damage to the Park Facility, including its irrigation system, during any such excavation on the Property and will reasonably coordinate restoration of the Property with Council to enable Council to undertake any necessary repair of the Park Facility in conjunction with EWAZ’s restoration of the Property. 2. Use Limitations. Council understands, acknowledges and agrees that: (i) EWAZ is retaining, at all times, its use and ownership rights with respect to the Property, as generally described in Section 1, above; (ii) EWAZ and its employees and representatives shall have full and unrestricted access to the Property at all times; (iii) Neither Council nor any invitees of Council are permitted at any time to drive any motor vehicle, including a golf cart, onto any portion of the Property except those portions specifically intended for ingress, egress and vehicular parking; provided, however, that the foregoing will not preclude Council or Council’s contractors from utilizing turf and facility construction and maintenance carts and equipment on the Property as reasonably necessary for the operation and maintenance of the Park Facility so long as such equipment does not damage the Recharge Facilities, nor will it preclude access onto the Property by emergency services vehicles and personnel; (iv) Council acknowledges that it is necessary for EWAZ to maintain water quality in the Recharge Facility that meets or exceeds all regulatory requirements. Accordingly, Council shall strictly adhere to all manufacturer’s directions and instructions for application of pesticides and fertilizer on the Property. Council shall not use any pesticide, fertilizer or other product on the Property in violation of any applicable federal or state law, rule or regulation, or use subsurface application for any pesticide or fertilizer. If any EWAZ water sample result at the EWAZ Point of Compliance for the Property indicates the presence of a pesticide, or total nitrogen or nitrate in a concentration of 70% of the EWAZ permit limits in the water, EWAZ will notify Council of the results and Council will immediately cease the use of all pesticides and fertilizer on the Property. The Council shall immediately consult with EWAZ and EWAZ will determine if the use of pesticides and fertilizer will be curtailed or suspended using all available data and the parties will meet and confer at least monthly to determine when the use of pesticides and fertilizer can resume. (v) Council shall not construct upon the Property any permanent or temporary structures except as approved by EWAZ; 2 (vi) Council shall be responsible for the cost of repairing any damage to the Recharge Facility resulting from the construction of the Council’s Improvements or the maintenance or operation of the Park Facility or caused by any person present upon the Property as a participant in or spectator at any activity or event conducted at the Park Facility; (vii) This Agreement does not grant permission or any other rights to Council or any of its invitees or any third parties to make use of, occupy or be present upon any portion of the Property other than for purposes reasonably related to the construction of the Council’s Improvements or the use or maintenance of the Park Facility; and (viii) In no event, (including, without limitation, EWAZ’s or its employees’ or representatives’ negligence), will EWAZ be responsible for any losses suffered by Council or any of its invitees arising out of or relating to their respective inability to access or make use of the Park Facility or for any injury to any of them or any damage to any of their personal property located anywhere on the Property. 3. Security Matters. Council understands and acknowledges that: (i) the Property comprises a portion of a public utility wastewater system; (ii) the United States federal government has declared public wastewater systems, including the Recharge Facility, to be critical infrastructure essential to the continued operation of the government and the nation; and (iii) EWAZ’s operations are governed by numerous federal and state statutes and regulations, and are subject to regulation by numerous federal and state agencies. Consequently, Council shall, and shall cause its invitees on the Property to, obey any and all use restrictions pertaining to the Property, including the Park Facility, that EWAZ may from time to time put into effect. Without limiting the generality of the foregoing, Council shall not permit any of its invitees to: 4. (i) bring upon the Property any consumable alcohol products, illegal drugs or firearms; or (ii) be or remain on the Property after dusk or before dawn. Council’s Improvements. (a). Council’s Plans and Specifications. Before Council may utilize the Property for the operation of the Park Facility under this Agreement, Council shall cause to be constructed upon the Property, at Council’s sole cost and expense, all of the improvements described on Exhibit “B” attached to this Agreement (the “Council’s Improvements”). Council shall submit plans and specifications for the Council’s Improvements to EWAZ and EWAZ will review such 3 plans within 30 days of receipt, and such plans and specifications shall be subject to EWAZ’s approval, which approval will not unreasonably be withheld. Council shall not undertake any construction of the Council’s Improvements on the Property unless and until EWAZ approves the construction of the Council Improvements, and will then undertake such construction only in accordance with the plans and specifications approved by EWAZ. (b). Council’s Acknowledgements and Agreements. Council acknowledges and agrees that: (i) its design of the Park Facility is required to accommodate the above grade features of the Recharge Facility, (ii) EWAZ intends to continue to utilize the Property for its operation of the Recharge Facilities, (iii) in connection with its construction of the Council’s Improvements and the operation and maintenance of the Park Facility, Council and its invitees are not permitted to damage any of the Recharge Facility, and (iv) the plans and specifications for the Council’s Improvements shall include the design and erection of appropriate signage informing users of the Park Facility that EWAZ made the Property available to Council for the Park Facility. (c). Deadline for Commencement of Construction. If Council does not commence construction of the Council’s Improvements within one year following EWAZ’s approval of Council’s plans and specifications, EWAZ’s approval of such plans and specifications will automatically be withdrawn. If Council thereafter elects to proceed with construction of the Council’s Improvements, Council will be required to once again obtain EWAZ’s approval of Council’s plans and specifications as a condition to commencing that construction. (d). Title to Council’s Improvements. Title to the Council’s Improvements shall at all times be with Council; provided, however, that title to any of Council’s Improvements or any other components of the Park Facility that remain on the Property after the expiration of the term of this Agreement or after the termination of this Agreement shall automatically be conveyed to EWAZ for no additional consideration and without the need for any further documentation of such conveyance. At EWAZ’s request, Council shall promptly execute and deliver any documents of conveyance requested by EWAZ to evidence any such conveyance. The provisions of this subsection 4(d) shall survive the expiration or any termination of this Agreement. (e). Maintenance of Council’s Improvements and the Park Facility. Following the construction of the Council’s Improvements, Council will reasonably maintain the Council’s Improvements and the Park Facility at Council’s sole cost and expense for the remainder of the term of this Agreement, including any Renewal Terms as defined in subsection 5(b), below. 5. Term. (a). Initial Term. The initial term of this Agreement (the “Initial Term”) shall be for a period of thirty (30) years, commencing on the Effective Date. (b). Renewal Terms. Unless EWAZ provides not less than six (6) months’ prior notice to Council, the term of this Agreement shall automatically renew for successive renewal 4 periods (“Renewal Terms”) of one (1) year each at the expiration of the Initial Term or any subsequent Renewal Term. (c). EWAZ Termination Right. EWAZ may terminate this Agreement, without penalty or other liability, upon six (6) months’ prior notice to Council (or such lesser notice as may reasonably be required by the circumstances) if EWAZ determines, in the reasonable exercise of its sole discretion, that Council’s operation and/or maintenance of the Park Facility is materially adversely affecting EWAZ’s, operation, maintenance and/or replacement of the Recharge Facility. Without limiting the generality of the foregoing, non-exclusive, illustrative examples of circumstances that could serve as the basis for EWAZ to terminate this Agreement are ground subsidence on the Property, collapse or other damage to the underground components of the Recharge Facility, degradation of the water quality in the Recharge Facility and damage to the above ground components of the Recharge Facility. (d). Notification of Intent to Terminate. Prior to issuing any notice of termination as contemplated in subsection 5(c), above, and to the extent circumstances reasonably permit, EWAZ will consult with Council regarding the issues with Council’s ownership, operation and/or maintenance of the Park Facility that are leading EWAZ to consider issuing such notice of termination and will afford Council an opportunity reasonable under the circumstances to address EWAZ’s concerns. (e). Cure Period. If EWAZ notifies the Council of its intent to terminate this Agreement, the Council will be provided an opportunity to cure the cause for the termination notice. Any corrective measure taken by the Council must be approved by EWAZ, which approval will not unreasonably be withheld, prior to any actions of the Council and must be completed prior to the effectiveness of the termination of this Agreement as specified in the EWAZ notice of termination unless EWAZ in its sole discretion defers the termination and provides additional time to complete the corrective measures. (f). Council Termination Right. Council may terminate this Agreement and abandon the Park Facility, without penalty or other liability, at any time upon notice to EWAZ. 6. License Fee. Council shall pay to EWAZ as a license fee the sum of Ten Dollars ($10.00) for the Initial Term and the sum of Ten Dollars ($10.00) for each Renewal Term. Such license fee shall be due and payable within sixty (60) days after Council’s receipt of EWAZ’s invoice for the applicable license fee. 7. Utilities. Council will be solely responsible for and promptly pay all charges for water, electricity and any other utilities provided to the Park Facility. Council shall install and maintain, at Council’s expense, separate utility services to the Park Facility in Council’s name. If EWAZ can legally do so, it will provide to Council reuse water for Council’s use to irrigate the Park Facility, such recycled water to be provided at EWAZ’s then effective reuse rate tariff, subject to other then applicable laws, regulations and tariffs. 8. Indemnification. Council acknowledges that, as of the Effective Date, EWAZ has little or no liability to the public for damages occurring on the Property because the Property is not 5 open to the public. Council agrees to indemnify, defend and hold harmless EWAZ and its affiliates and their respective directors, officers, employees and representatives (collectively, the “EPCOR Organization”) from any and all claims, including reasonable attorney’s fees, of bodily injury or damage arising from or out of the construction of the Council’s Improvements, the operation or maintenance of the Park Facility or events at the Park Facility, except to the extent such claims arise from or out of the gross negligence of EWAZ or its employees or contractors. Council’s obligations under this Section 8 shall survive the expiration or any termination of this Agreement and shall apply regardless of the existence of any insurance coverage. 9. Liability Insurance. During the Initial Term and all Renewal Terms, Council shall maintain, at its own expense, insurance covering claims for public liability, personal injury, death and property damage under a policy of general liability insurance, with limits of not less than two million dollars ($2,000,000.00) per person and two million dollars ($2,000,000.00) per occurrence and property damage insurance of not less than two million dollars ($2,000,000.00). Such insurance coverage shall designate the EPCOR Organization as Additional Insured and its limits shall be subject to increase from time to time following the fifth anniversary of this Agreement as reasonably determined by EWAZ. All such insurance shall be primary and noncontributory, and is required to respond and pay prior to any other insurance or self-insurance available to the EPCOR Organization. In addition to the liability limits available, such insurance will pay on behalf of or will indemnify the EPCOR Organization for defense costs. Any other coverage available to the EPCOR Organization applies on a contingent and excess basis. Council’s insurance shall include appropriate clauses pursuant to which the insurance companies shall waive their rights of subrogation against the EPCOR Organization. Council must provide certificates of insurance to EWAZ consistent with the foregoing prior to Council’s commencement of construction of the Council’s Improvements, and must maintain current certificates on deposit with EWAZ so long as this Agreement remains in effect. Council must require its insurance carrier to notify EWAZ in writing, at least thirty (30) calendar days prior to cancellation or any material change in any policy. 10. Notices. All notices or demands by or from EWAZ to Council, or by or from Council to EWAZ, shall be in writing. Such notices or demands shall be mailed to the other party at the following address and shall be effective upon delivery or receipt: EWAZ: EPCOR Water Arizona Inc. 2355 W Pinnacle Peak Road; Suite 300 Phoenix, AZ 85027 ATTN: Senior Manager, Eastern Operations Council: Anthem Community Council, Inc. 3701 W. Anthem Way; Suite 201 Anthem, AZ 85086 ATTN: Community Executive Officer 11. Assignment. Council may not assign this Agreement without the prior written consent of EWAZ. Any approved assignee must agree in writing to comply with the terms and conditions 6 of this Agreement and must be proven to the reasonable satisfaction of EWAZ to be financially capable to assume and fulfill Council’s obligations under this Agreement. 12. Miscellaneous. (a). Entire Agreement. This Agreement constitutes the entire agreement and understanding of EWAZ and Council with respect to its subject matter, and supersedes all offers, negotiations and other agreements. There are no representations or understandings of any kind not expressly set forth in this Agreement. Any amendments to this Agreement must be in writing and executed by EWAZ and Council. (b). Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona, without giving effect to its conflicts of laws provisions. (c). No Third Party Beneficiaries. There are no third party beneficiaries under this Agreement. For the avoidance of doubt, none of Council’s invitees have any rights or remedies arising under or out of this Agreement. (d). Invalidity. If any term of this Agreement is found to be void, invalid or unenforceable, such term shall be disregarded and shall not affect the remaining terms of this Agreement, which shall continue in full force and effect. (e). Counterparts; Electronic Delivery. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties, it being understood that both parties need not sign the same counterpart. This Agreement may be delivered electronically, and any such electronically delivered copy of this Agreement shall be considered an original. (f). Commission Oversight. Council understands that EWAZ is subject to the regulatory oversight of the Arizona Corporation Commission (the “Commission”). Accordingly, EWAZ may request approval of this Agreement by the Commission; provided, however, that if it is does, it will do so within thirty days after the Effective Date. If EWAZ requests such approval and if the Commission does not approve this Agreement on terms and conditions acceptable to EWAZ in its sole discretion, EWAZ may unilaterally terminate this Agreement without any liability to Council. (g). Press Releases. Neither party to this Agreement may issue any press release with public media regarding this Agreement or the transactions between EWAZ and Council contemplated by this Agreement without, in each instance, the prior approval of such release or communication by the other party. (h). This Agreement shall be binding upon and inure to the benefit of Council and EWAZ and their successors and assigns. 7 IN WITNESS WHEREOF, EWAZ and Council have executed this Agreement as of the Effective Date. Dated: EPCOR WATER ARIZONA INC. By: Its: Dated: ANTHEM COMMUNITY COUNCIL, INC. By: Its: 8 EXHIBIT A Description of the Property Tract T, as shown in the Final Plat for “Anthem West Unit One” recorded in Maricopa County Recorders office in Book 622, Page 14. 9 EXHIBIT B Description of the Council’s Improvements A more definitive description of Council’s improvements to the Property (Exhibit A) will be provided upon completion of the detailed Park Facility design and the plan review process. Below is an initial description of possible improvements to the Property: A multi-use sports field with natural grass surface and athletic goals for practices and games (approximately 280’ x 195’), plus additional grass buffer areas. Playground equipment and shade canopies with a weight of less than 750 lbs, structural support posts with 18” diameters or less and footings with depths of 48” or less. Surface material below the playground equipment that meets fall height safety standards (e.g., sand or engineered wood fiber). Turf and drip irrigation systems and related equipment above and below grade. A pathway composed of compacted granite, concrete or another acceptable surface that meets accessibility standards. Pathway lighting, benches and picnic tables. Enclosures that protect EWAZ’s above ground water recharge equipment and allow access for maintenance. A parking lot composed of asphalt with concrete curbing or another acceptable surface that meets accessibility and dust control standards (far west side of Property). Landscaping acceptable to EWAZ. A fence, wall or other barrier (approximately 4’ in height) to discourage unauthorized access to the Property. A drop-off lane along 46th Lane (far east side of Property). Security cameras. 10
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