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03/19/2004 Audit 1 AUDIT REPORT OF MONROE COUNTY CONTRACTS WITH KW RESORT UTILITIES - CAPACITY RESERVATION AND INFRASTRUCTURE CONTRACT AND UTILITY AGREEMENT March 19, 2004 1 1 G ouNT y c � ler i" , ' 40 E COU NtY.� `• • t. " 1 1 Prepared by: Internal Audit Department Clerk of the Circuit Court Danny L. Kolhage, Clerk 1 Monroe County, Florida 1 1 y T,pUNTyc'. a \.; ,• : , •: „, : CLERK OF THE CIRCUIT COURT MONROE COUNTY BRANCH OFFICE BRANCH OFFICE PLANTATION KEY MARATHON SUB COURTHOUSE MONROE COUNTY COURTHOUSE GOVERNMENT CENTER 3117 OVERSEAS HIGHWAY 500 WHITEHEAD STREET, SUITE 101 88820 OVERSEAS HIGHWAY MARATHON, FLORIDA 33050 KEY WEST, FLORIDA 33040 PLANTATION KEY, FLORIDA 33070 TEL. (305) 289 -6027 TEL. (305) 292 -3550 TEL. (305) 852 -7145 FAX (305) 289 -1745 FAX (305) 295 -3663 FAX (305) 852 -7146 March 19, 2004 The Honorable Danny L. Kolhage Clerk of the Circuit Court 1 RE: Audit Report of Monroe County Contracts With KW Resort Utilities - Capacity Reservation and Infrastructure Contract and Utility Agreement Dear Mr. Kolhage: The Clerk's Internal Audit Department has completed the audit of the KW Resort Utilities - Capacity Reservation and Infrastructure Contract and the Utility Agreement with Key West Resort Utilities. The audit objectives were to assess compliance with state and local laws, 1 ordinances, and contracts, whether expenditures were appropriate and to review the extent of contract oversight provided. The audit did not include a review of which homeowners and businesses of South Stock Island have submitted fees and connected to the utility system. As more g overnments enter into contracts with private business organizations to administer public programs, the emphasis has changed to include strong financial and internal controls in the contract and equally important government management oversight. The Stock Island project is administered on a contractual basis and should have strong administrative and management oversight by the County. Responses from the County Administrator, the Clerk's Finance Department and KW Resort Utilities are included as an Exhibit at the end of the final report. 1 1 1 The accompanying audit report is provided for your information. Additional copies of the report will be provided upon your request. 1 Sincerely, Sandra L. Mathena, CPA, CFE, CIA Director of Internal Audit 1 Cc: Board of County Commissioners (5) 1 James Roberts, County Administrator Richard R. Collins, County Attorney Sandee Carlile, Clerk's Finance Director William L. Smith, Jr., KW Resort Utilities Corp. 1 1 1 1 1 1 1 1 1 1 1 AUDIT REPORT OF MONROE COUNTY CONTRACTS WITH KW RESORT UTILITIES - I CAPACITY RESERVATION AND INFRASTRUCTURE CONTRACT AND UTILITY AGREEMENT 1 TABLE OF CONTENTS 1 Page I. SCOPE AND OBJECTIVES 1 1 II. METHODOLOGY 1-2 1 III. BACKGROUND 3 -5 IV. AUDIT CONCLUSIONS 6 V. AUDIT FINDINGS: A. Utility Agreement 1. No escrow agreement or escrow agent 7 -8 2. Payment made from escrow funds also paid by the County as part of South Stock Island Project 9 -10 3. Utility Agreement ambiguous 11 -12 B. Capacity Reservation and Infrastructure Contract 1. Two Mobilization Costs 13 -14 2. Capacity reservation fees not remitted to Monroe County 15 3. URS Report - construction phase services 22% of construction costs 16 -19 1 C. Monitoring of Contracts 20 -21 1 VI. EXHIBITS A. Annual Report of KW Resort Utilities Corp - Parent/Affiliate Organization Chart B. Utili ty Agreement eement 1 C. Capacity Reservation and Infrastructure Contract D. E.T. MacKenzie's Comparison of Original Bid to Final Contract Price E. Affiliation of Officers and Directors 1 F. Letter from General Manager KW Resort Utilities Corp. G. Memorandum from KW Resort Utilities Monroe County Audit RE MCDC H. Steel Hector & Davis LLP Memorandum 1 I. Opinion KW Resort Utility Corp. Agreement J. Approvals of Applications for Payment K. Section 01505 Mobilization 1 L. Mobilization Letter from E.T. MacKenzie M. Mobilization Letter From Weiler Engineering N. Service Agreement KW Resort Utilities and Green Fairways, Inc. O. Retainer Agreement for Legal Services P. Check #2779 Q. Check #1014 R. Internal Audit Letter Requesting Additional Information 1 S. County Attorney's Memorandum of Guidance ® VII. AUDITEE RESPONSES - County Administrator and Clerk's Finance Department ■ VIII. AUDITEE RESPONSES - KW Resort Utilities 1 1 1 1 1 1 AUDIT REPORT OF MONROE COUNTY CONTRACTS WITH KW RESORT UTILITIES - CAPACITY RESERVATION AND INFRASTRUCTURE CONTRACT AND 1 UTILITY AGREEMENT I. OBJECTIVES AND SCOPE At the request of the Monroe County Clerk of the Circuit Court, the Internal Audit Department has completed an audit of the Capacity Reservation and Infrastructure Contract and the Utility Agreement with Key West Resort Utilities. The audit compliance objectives were to determine with state and local laws, ordinances, and P contracts, whether expenditures were appropriate and to review the extent of contract oversight provided. The audit did not include a review of which homeowners and businesses of South Stock Island have submitted fees and connected to the utility system. II. METHODOLOGY A. We interviewed the following personnel to obtain information about the contracts with KW Resort Utilities: 1 1. The County Administrator 2. The County Engineer 3. The County Attorney 4. Jeff Weiler, Weiler Engineering Corporation 5. The Clerk's Finance Department personnel 6. William L. Smith, Jr., President, Green Fairways Inc., President, KW Resort Utilities Corp., President, W.S. Utilities, Inc., Partner of Smith, Hemmisch & Burke 7. Doug Carter, Key West Golf Club 8. Gillian Siefert, Key West Golf Club 9. Harvey Davis, E.T. MacKenzie Company of Florida 1 B. Internal Audit Department examined the following documents: 1. Capacity Reservation and Infrastructure Contract 2. Utility Agreement 1 3. Service Agreement KW Resort Utilities and Green Fairways, Inc. 4. Retainer Agreement for Legal Services 5. Contractor Application for Payments 6. Checks issued to contractor 1 1 1 1 7. Monroe County Detention Center (MCDC) Escrow Account bank statements 8. South Stock Island Escrow Account bank statements 9. Agreement for KW Resort Utilities Corp. Wastewater Service 10. Original bids from all bidders 11. Change orders from subcontractors C. The Internal Audit Department reviewed the contracts to ensure that all terms and conditions were being complied with as documented within the agreement. D. Internal Audit reviewed the engineers Daily Report of Construction. E. Compared original bids from all bidders. F. Reviewed invoices from subcontractors. f 1 1 1 1 1 1 1 1 2 1 1 III. BACKGROUND INFORMATION I KW Resort Utilities Corp., was formed for the purpose of taking possession of a sewage treatment facility located on Stock Island, Florida from a trustee of the Court. Possession was taken on January 1, 1985. The stock of KW Resort Utility was sold to WS Utility, Inc., on I August 13, 1998. There is a direct relationship between WS Utility, Inc., Green Fairways, Smith, Hemmisch & Burke and KW Resort Utilities Corp. See Exhibit A - Annual Report of KW Resort Utilities Corp. - Parent/Affiliate Organization Chart. The Utility is privately 1 owned, but is subject to the Public Service Commission (PSC) with respect to tariffs. Utility Agreement I Monroe County entered into a Utility Agreement with KW Resort Utilities Corp. (Service Company), on August 16, 2001. See Exhibit B - Utility Agreement. KW Resort Utilities agreed to provide central sewage collection services to the Jail and Detention Center, Public 1 Service Building, Bayshore Manor and the Animal Shelter. The County conveyed to the Utility at no charge the lift station serving the Detention Facility Treatment Plant and the lift station serving the Public Buildings and the sewer main from the lift station to the Detention Facility Treatment Plant. The County was to construct and convey at no charge to the Utility a second lift station serving the Public Buildings located at the Animal Shelter and a sewer main from the second lift station to the existing sewer main serving the Detention Facility. The Service Company wanted to connect the Detention Facility in order to have use of additional gray water to use in irrigation of the golf course. 1 The Service Company was to construct a reuse ( "graywater ") line to the Detention Facility and agreed to make available a minimum of 32,000 gallons per day of graywater to the County, but I no more than 60,000 gallons per day. The Service Company was to design and construct at its sole expense offsite facilities to connect the county lift station at the Detention Facility to the Central Sewage System. Upon completion the County was to provide all of its Detention I Facility domestic - wastewater to the Service Company for treatment at the Service Company's applicable tariff. 1 The County agreed to pay a capacity reservation fee in the amount of $2,700 per equivalent residential connection (ERC). The initial reservation fee was $1,225,800. One third or $408,600 was paid upon completion of the connection, the second $408,600 was paid in April 1 2003. The last payment of $408,600 is scheduled for payment in April 2004. According to the Utility Agreement Section 7a - "When the Service Company begins I substantial physical construction to expand the capacity of its wastewater treatment plant or to extend its wastewater collection infrastructure to serve additional areas in South Stock Island I or other islands then the escrow agent will release the 6(c)(i) funds to the Service Company in the following manner: the payments will be made monthly equal amounts based on the expected completion date of the expansion as set forth in the Service Company's construction II documents. Release of said funds shall be made by escrow agent upon presentation of construction invoices (including costs of real estate acquisition, purchase or installation of 1 1 3 r 1 pipes and lift stations, and professional services; provided that such costs are exclusively attributable to such expansion of capacity or extension of collection infrastructure) to be paid I by Service Company along with a statement from Service Company describing the construction for which the invoices seek payment. If the Service Company has not commenced expansion of the wastewater treatment plant or collection infrastructure by the year 2006 or, if the FKAA has I not purchased the Service Company's assets then the escrow agent must release the 6(c)(i) funds to the Service Company." I Capacity Reservation and Infrastructure Contract The Capacity Reservation and Infrastructure Contract was entered into on July 31, 2002 between Monroe County and KW Resort Utilities Corp., for the purchase of wastewater 1 treatment plant capacity reservation to serve South Stock Island and the installation and expansion for the wastewater collection treatment system on South Stock Island. See Exhibit C - Capacity Reservation and Infrastructure Contract. This contract provided funds to KW 1 Resort Utility in an amount not to exceed $4,606,000 to construct the system expansion in exchange for which the Utility provided capacity at its wastewater treatment plant equal to 1,500 Equivalent Dwelling Units (EDU's). The construction costs of $4,606,000 were allocated as follows: I 1. Collection system infrastructure $3,500,000 2. Contingency amount 380,000 I 3. Engineering and engineering inspection 279,000 4. Construction administration and legal fees 347,000 5. Testing 100,000 1 E.T. MacKenzie Co. I The final contract for the collection system infrastructure for $3,499,229 was between E.T. MacKenzie Co., of Florida and KW Resort Utilities Corp. There were six original bids considered. The original E.T. MacKenzie bid was for $4,753,309. The final price with 1 MacKenzie was negotiated and lowered by $1,254,080. Most of the unit prices were reduced in the negotitation and several quantities were changed. Asphalt restoration was reduced by 13,000 square yards along with a unit price reduction from $43 per square yard to $28 per II square yard resulting in a savings of $634,000. Sod was eliminated in the final contract price which reduced the original bid by $18,000. Mobilization costs increased $20,464 from the original bid to the final negotiated contract amount. See attached Exhibit D - E.T. MacKenzie's 1 Comparison of Original Bid to Final Contract Price. I Contingency Amount The contract between Monroe County and KW Resort Utilities states a "not to exceed" amount of $4,606,000 which includes a contingency amount of $380,000. Contingencies are included E in contracts to cover unpredictable or unforeseen items of work or changes in the work subsequently required by the owner. A change order is necessary to use any of the contingency 1 1 4 1 funds. A change order is defined as "A document recommended by Engineer, which is signed by Contractor and Owner to authorize an addition, deletion, or revision in the Work, or an adjustment in the Contract Price or the Contract Times, issued on or after the Effective Date of the Construction Agreement." Weiler Engineering Corporation The contract between KW Resort Utilities and Weiler Engineering Corporation was for a lump sum of $379,000. The construction phase was for $279,000 and the geotechnical testing was for $100,000. The contract states on Exhibit C #3 "The Lump Sum includes compensation for Engineer's services and services of Engineers's Consultants, if any. Appropriate amounts have been incorporated in the Lump Sum to account for labor, overhead, profit and reimbursable Expenses." The engineer furnished a Resident Project Representative (RPR) to assist in observing the progress and quality of the Contractor's work. Daily Reports of Construction were completed by the on -site RPR. It was also the responsibility of the Engineer to determine the amounts that the Engineer recommends that the Contractor be paid on each application for payment. In the case of unit price work, Engineer's recommendation of payment will include final determinations of quantities and classifications of Contractor's work. Green Fairways Inc. The Agreement between KW Resort Utilities Corporation ( "Client ") and Green Fairways, Inc. ( "Administrator ") was entered into on August 15, 2002 for $300,000. It is part of the $347,000 listed in the above schedule as Construction Administration and Legal Fees. The Service Agreement in number 4 states "Client retains Administrator for the purpose of administering all aspects of the Project where Client has no internal structure enabling it to administer or supervise the project. Administrator agrees to represent Client with regard to said Project. 1 Administrator's services shall include the following: a. Comprehensive construction administration and supervision; b. Comprehensive supervision of payments; c. Testing supervision; d. Administration of Contracts. Green Fairways also has an $80,000 annual management contract with Key West Resort Utilities that is listed on the KW Utilities Corp.'s December 31, 2002 Annual Report as filed in accordance with the requirements of the Public Service Commission. See Exhibit E - Affiliation of Officers and Directors. 1 1 1 1 5 1 IV. Audit Conclusions: Al. KW Resort Utility does not have an escrow agent or escrow agreement for the capacity reservation fees paid by Monroe County for the Detention Center project of $1,225,800 as required by Section 7 of the Utility Agreement. A2. Withdrawals from the MCDC account include two payments that were also paid from funds payable under the Capacity Reservation and Infrastructure Contract. The first payment of $25,000 was withdrawn from the MCDC escrow account on September 23, 2002 and it was also billed and paid as part of Application #1 for Smith, Hemmesch, Burke & Brannigan to KW Resort Utilities as part of Check #2004005 dated November 5, 2002 for $250,530.84. The second amount for $236,000 was withdrawn from the MCDC escrow account on August 25, 2003. Monroe County paid KW Resort Utilities Application # 10 on checks 92811 and 92812 including the MacKenzie payment of $235,856.94 on November 12, 2003. A3. The Utility Agreement is ambiguous as to how the capacity reservation funds of $1,225,800 paid by Monroe County for the jail project were to be expended by KWRU. B 1. There were two mobilization costs of $199,804 associated with the Capacity Reservation and Infrastructure Contract. The project was developed to be executed in two phases, however, no separate construction phases occurred. The contractor stated that he included overhead for the project in the mobilization line and just split the total mobilization into two payments. During interviews with the County Engineer about the documentation received for mobilization, he stated the costs appear reasonable, are in line with other County projects and some of the other bids were larger for mobilization. B2. The capacity reservation fees collected for the South Stock Island project (Capacity Reservation and Infrastructure Contract) are not being remitted to Monroe County. 1 The balance in the South Stock Island escrow account as of November 30, 2003 is $135,553.56. The capacity reservation fees collected during the month are due by the fifth business day of the succeeding month. B3. URS in their report indicated that an audit of construction phase services may be warranted to confirm that fees expended are consistent with the services provided. Construction administration and legal fees total $347,000 and represents 9.9% of the construction value. There is a direct relationship between KW Resort Utility, Smith, Hemmisch & Burke and Green Fairways, Inc. the provider of construction administration and legal fees. Documentation was not provided that supports the expenditure of $347,000. C. Both contracts have unusual provisions that need to be monitored. 1 6 V. Audit Findings I A. Utility Agreement 1. No escrow agreement or escrow agent I Finding: Section 7 of the Utility Agreement states "The capacity reservation fee described in paragraph 6(c)(i), hereafter 6(c)(i) funds (minus the cost incurred by Service I Company to complete the Project including the graywater line), when due, must be deposited in an interest bearing escrow account with a federally insured financial institution that has an office in Key West, Florida. The mention of 6(c)(i) funds 1 include all accumulated interest. The terms of the escrow are as follows: a) When the Service Company begins substantial physical construction to expand the capacity of its wastewater treatment plant or to extend its wastewater collection infrastructure to serve additional areas in South Stock Island or other I islands then the escrow agent will release the 6(c)(i) funds to the Service Company in the following manner: the payments will be made monthly equal amounts based on the expected completion date of the expansion as set forth in di the Service Company's construction documents. Release of said funds shall be made by escrow agent upon presentation of construction invoices (including costs of real estate acquisition, purchase or installation of pipes and lift stations, I and professional services; provided that such costs are exclusively attributable to such expansion of capacity or extension of collection infrastructure) to be paid by Service Company along with a statement from Service Company 1 describing the construction for which the invoices seek payment." The Service Company does not have an escrow agreement or escrow agent. The I capacity reservation funds were withdrawn at the sole discretion of KW Resort Utilities Corp. See Exhibit F - Letter from General Manager KW Resort Utilities Corp. I Recommendation(s): 1. See recommendation A3. I County Administrator's Response: onse: P I 1. The Administration concurs that future contracts should be more clear in reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues I mentioned are not only included in contracts but followed through by the entities doing business with the County. The Administrator will request of the Board of County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on provisions of all contacts. 1 7 KW Resort Utilities Response: 2. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 1 8 1 2. Payments made from escrow funds also paid by the County as part of the South Stock Island Project I Finding: Internal Audit requested an accounting of the funds withdrawn from the MCDC escrow account. Funds of $687,696.06 were withdrawn from the MCDC account. I Invoices totaling $344,062.98 were provided for the jail project and Internal Audit requested information on the additional $343,633.08. 1 Withdrawals from the escrow account included two payments that were also paid from funds payable under the Capacity Reservation and Infrastructure Contract. The first payment of $25,000 was made to Smith Hemmesch Burke & Brannigan on I October 1, 2002 by KW Resort Utilities for vacuum sewer contract negotiations. The $25,000 was withdrawn from the MCDC escrow account by KW Resort Utilities on I September 23, 2002. KW Resort Utilities also billed Monroe County on Application #1 $25,000 for Smith Hemmesch Burke & Brannigan. The County paid the $25,000 for Smith Hemmesch Burke & Brannigan to KW Resort Utilities as part of check #2004005 dated November 5, 2002 for $250,530.84. The second amount for $236,000 was withdrawn from the MCDC escrow account on NI August 25, 2003. KW Resort Utilities paid MacKenzie $235,856.94 on August 25, 2003 with check number 1458. Monroe County paid KW Resort Utilities Application number 10 on checks 92811 and 92812 including the MacKenzie amount 1 of $235,856.94 on November 12, 2003. KW Resort Utilities stated that the funds for the legal bill and the payment made to 1 Mackenzie would be reimbursed to the escrow account upon receipt of funds due KW Resort Utilities by Monroe County on the SSI Infrastructure Contract. See Exhibit G - Memorandum from KW Resort Utilities Monroe County Audit Re 1 MCDC. The disbursements from the MCDC escrow account have not been made in 1 accordance with the provisions of the Utility Contract. There was no escrow agent approving the invoices before withdrawal of the funds. 1 Recommendation(s): 1. See recommendation A3. I County Administrator's Response: 1. The Administration concurs that future contracts should be more clear in I reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues mentioned are not only included in contracts but followed through by the entities 1 doing business with the County. The Administrator will request of the Board of I 9 County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on provisions of all contacts. KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 1 1 1 1 1 10 3. Utility Agreement ambiguous Finding: The Utility Agreement in paragraph 6(b) established a capacity reservation fee of $1,225,800 for 454 ERC's based on a flowage of 83,000 gallons per day from the law enforcement facilities on Stock Island. The Agreement states "County shall pay to Service Company a reservation fee ( "Capacity Reservation Fee "), in the amount of Two Thousand Seven Hundred ($2,700) dollars per E.R.C. connections to be reserved by County to serve the Property (individually, a "Connection ", collectively, the "Connections "). It further states all customers will pay the applicable fees, rates and charges as set forth in the Tariff. However, as previously stated in Finding Al Section 7 of the Utility Agreement "The capacity reservation fee described in paragraph 6(c)(i), hereafter 6(c)(i) funds (minus the cost incurred by Service Company to complete the Project including the graywater line), when due, must be deposited in an interest bearing escrow account with a federally insured financial institution that has an office in Key West, Florida. 1 The mention of 6(c)(i) funds includes all accumulated interest. The Agreement is ambiguous as to how the capacity reservation funds were intended to be expended However, KWRU has spent $344,062.98 of the MCDC escrow funds on the jail project and $163,094.03 on the expansion and upgrades of wastewater collection infrastructure to serve additional SSI customers. See Exhibit G - Memorandum from KW Resort Utilities Monroe County Audit Re MCDC. The Monroe County Board of County Commissioners hired Steel Hector & Davis LLP an independent attorney with utility experience to offer questions and suggestions on the proposed Utility Agreement. A letter addressed to the Assistant County Attorney from Steel Hector & Davis LLP, dated July 12, 2001 listed suggestions and questions which it appears the County did not respond to. For example, Section 7 - Escrow states "In (a), is there any schedule or deadline for 1 KWUC to begin or complete substantial physical construction (which appears to be in addition to the Project)? Will disbursements from escrow be made to the vendors submitting invoices to KWUC or instead to KWUC, and if the latter, how will the County assure that the vendors are paid? All this can be spelled out in the escrow agreement." An escrow agreement was never executed. See Exhibit H - Steel Hector & Davis LLP Memorandum. The Internal Audit Department requested an opinion from the County Attorney's Office to determine whether the funds could be used to offset the amount due on the Capacity Reservation and Infrastructure Contract. The County Attorney's Office stated that "Given the above, it is the opinion of this Office that $1,225,800 may not be used to offset any final payment that may be due KWRU under the July 2002 contract because the funds are already owed KWRU under the August 2001 1 11 1 contract." See Exhibit I - Opinion KW Resort Utility Corp Agreement. The contract language in the Utility Agreement concerning the Escrow funds, the actual use of the funds by Key West Resort Utilities and comments made by the Utility and County staff during the audit make it unclear as to what the actual disposition of the escrow funds should be, or was intended to be by either the County or Key West Resort Utilities. However, based upon an opinion by the County Attorney, and with the exception of our initial analysis of the financial activity of the escrow account, this audit does not include disbursements from the escrow account. Recommendation(s): 1 1. For all future contracts the Monroe County Board of County Commissioners should ensure that the specific contract language implements their intentions. 1 County Administrator's Response: 1. The Administration concurs that future contracts should be more clear in reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues mentioned are not only included in contracts but followed through by the entities doing business with the County. The Administrator will request of the Board of County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on provisions of all contacts. KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 1 1 1 12 1 B. Capacity Reservation and Infrastructure Contract 1. Two Mobilization Costs 1 Fin g din The contract between KW Resort Utilities and E.T. MacKenzie (subcontractor) is a unit price contract. According to the General Conditions Section 00700 Unit Price Work 11.02, initially the Contract Price will be deemed to include for all Unit Price Work an amount equal to the sum of the unit price for each separately identified item of Unit Price Work times the estimated quantity of each item in the Agreement. The estimated quantities of items of Unit Price Work are not guaranteed and are solely for the purposes of comparison of bids and determining an initial contract price. Each unit price will be deemed to include an amount considered by Contractor to be adequate to cover contractor's overhead and profit for each separately identified item. Determination of the actual quantities used will be made as an adjustment in the final 1 payment. Originally the contract was bid as two separate projects, one for Phase 1 and one for Phases 2 & 3. The project was developed to be executed in two phases, however, no separate construction phases occurred. E.T. Mackenzie was the contractor used for the entire project which would seem to indicate only one unit of mobilization was necessary. Based on review of the payment applications submitted by KW Resort Utilities to Monroe County, there were two approved mobilization charges associated with Pay Application Number 1 ($199,804) and Number 5 ($199,804) dated September 25, 2002 and January 27, 2003 respectively. Approval of Application for Payment number 1 by Weiler Engineering indicates work completed includes 100% mobilization. The Approval of Application for Payment number 5 does not include mobilization in the work completed. See Exhibit J - Approvals of Application for Payment. According to Section 01505 Mobilization - Mobilization shall include the obtaining of all permits; moving onto the site of all equipment; temporary buildings, and other 1 construction facilities; and implementing security requirements; all as required for the proper performance and completion of the work. See Exhibit K - Section 01505 Mobilization. URS Corporation questioned Weiler Engineering about the two mobilizations in their iP q g request for information letter dated 10/07/03. URS's question and Wieler's response is as follows: Please indicate what specific Contractor costs were associated with each of these Mobilization charges submitted for payment. A section of the specifications specifically delineates what the mobilization charges are for. There are two separate submittals, because we bid it as two 1 13 • 1 1 projects. One for Phase I and one for Phases 2 & 3. We just happen to have the same contractor for both contracts. After bidding, we decided to negotiate with one contractor and during negotiations, agreed to pay him for both mobilizations. The original bid amount for the Phase I mobilization was $189,572 and for Phases 2 and 3 it was $189,572. The negotiated amount for mobilization in total was $20,464 higher than the original bid amount. The Internal Audit Department requested documentation of the mobilization charges from E.T. MacKenzie and KW Resort Utilities. KW Resort Utilities stated they do 1 not have any documentation for mobilization. E.T. MacKenzie at first declined to present the information. See Exhibit L - Mobilization Letter from E.T. MacKenzie. Weiler Engineering sent a letter indicating that in December 2002 E.T. Mackenzie of Florida, Inc., made a decision to begin working two crews rather than one in order to finish the Stock Island Sewer Project ahead of schedule. See Exhibit M - 1 Mobilization Letter from Weiler Engineering. After numerous discussions, E.T. MacKenzie did provide a listing of the mobilization expenditures which included such items as overhead, crew housing, transportation of equipment in and out of Monroe County, bonds, field office costs, and travel. He stated he included overhead for the project in mobilization and just split the mobilization into two parts. During interviews with the County Engineer about the documentation received for the mobilization costs he stated the costs appear reasonable, are in line with other County projects and some of the other bids were larger on the mobilization line. Recommendation(s): 1. Construction Management should ensure that the right to audit clause also extends to all subcontractors and is clearly stated in the contract as a responsibility of the contractor. County Administrator's Response: 1 1. The Administration concurs with the recommendation and will work with the County Attorney to be sure that such provisions are included in future contracts. 1 KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 14 1 2. Capacity reservation fees not remitted to Monroe County I Finding: The capacity reservation fees collected for the South Stock Island project are not being remitted to Monroe County. In the Agreement the Utility agrees to repay the funds advanced by the County for the construction of the South Stock Island wastewater collection infrastructure project. The capacity reservation fee is $2,700 per EDU (equivalent dwelling unit). The Utility is allowed to retain a fixed fee of $600 per capacity reservation fee (EDU) from the project to cover the incremental cost of conversion and initial Advanced Waste Water Treatment (5- 5 -3 -1) operation. The net amount due to the County from the collection of new capacity reservation fees is $2,100 (capacity reservation fee $2,700 per EDU less discount for AWT conversion $600). The balance in the South Stock Island escrow account from capacity reservation fees 1 as of November 30, 2003 is $135,553.56. According to the Capacity Reservation and Infrastructure Contract Section 4 - "Utility shall account for the collection of new customer capacity reservation fees on a monthly basis. Utility shall pay to the County the total sum of the new capacity reservation fees collected during any month by the fifth business day of the succeeding month. Recommendation(s): 1. County Management should ensure that procedures are established to monitor the collection of the monthly reservation fee payment. 2. County Management should ensure that procedures that ensure the $600 fee 1 retained per ERC is used for AWT as required by the contract. County Administrator's Response: 1. The Administration concurs with the recommendations of the Audit and, in fact, has already proceeded to establish monitoring procedures for the future payment of capacity reservation fees. This is being done in conjunction with providing the property owners who hook into the new collection system the opportunity to pay their capacity reservation fees over a period of years. There will be appropriate accounting and follow -up mechanisms established. KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 1 15 1 1 3. URS Report - construction phase services 22% of construction costs I Finding: In URS's Report, South Stock Island New Wastewater Collection System Review of Design Process and As -Built Facilities on page 22 it is stated "Total costs for II construction phase services are 22.0 percent of the negotiated construction costs. An audit of the construction phase services may be warranted to confirm that fees expended are consistent with the services provided." Table 4 - Summary of Design and Construction Phase Service Costs per URS Report III Percent of Construction Value Item Component Cost (5) ($3,500,000) 1 Construction Administration & Certification (1) 46,300 1.3 2 Engineering Support and Inspection (2) 279,000 7.9 3 Construction Administration and Legal Fees (2) 347,000 9.9 4 Material Testing (2) 100,000 2.9 Total , 772,300 22.0 , I Notes: These services were provided through the December 31, 2001 Reimbursement Contract with Utility. These services were provided through the Capacity Reservation and Infrastructure Contract with Utility. 4 I Construction Administration and Legal Fees Table 4 summarizes the fees for construction phase services as a percent of the final negotiated construction cost of $3,500,000. Item number 3 Construction I Administration and Legal Fees totals $347,000 and represents 9.9% of the construction value. There is a direct relationship between WS Utility, Inc., Green Fairways Inc., Smith, Hemmisch & Burke, and KW Resort Utilities Corp. See I Exhibit A - Annual Report of KW Resort Utitilities Corp. - Parent/Affiliate Organization Chart. The Utility is privately owned, but is subject to the Public Service Commission (PSC) with respect to tariffs. I The Service Agreement between KW Resort Utilities Corporation ( "Client ") and Green Fairways, Inc. ( "Administrator ") states Administrator agrees to provide 1 services to Client, for comprehensive construction administration, supervision of payments, supervision of testing, and general administration of contracts relating to the installation and expansion of wastewater collection treatment system on South I Stock Island." The fee is a flat fee of $300,000 to administer and supervise the Project as defined in this Agreement. The fee was to be paid in monthly installments 1 of $25,000 per month commencing on September 30, 2002. See Exhibit N - Service Agreement KW Resort Utilities and Green Fairways, Inc. The Agreement with Weiler Engineering Exhibit B - Owner's Responsibilities I Section L. states "If Owner designates a construction manager or an individual or 1 1 16 1 entity other than or in addition to, Engineer to represent Owner at the site, define and set forth as an attachment to this Exhibit B the duties, responsibilities, and limitations of authority of such other party and the relation thereof to the duties, responsibilities, and authority of Engineer. There was no attachment mentioning Green Fairways, Inc. There is also a Retainer Agreement for Legal Services for $25,000 between KW Resort Utilities Corporation and Smith, Hemmesch, Burke and Brannigan to negotiate, draft and revise the contracts for the South Stock Island project. It does not appear that any of the attorneys in the firm of Smith, Hemmesch, Burke and Brannigan are currently permitted to practice law in the State of Florida. See Exhibit 0 - Retainer Agreement for Legal Services. The Internal Audit Department requested the following records from Green Fairways, Inc., on the $347,000 construction administration and legal fees: 1. Work Completion log for Green Fairways, Inc. P g Y 2. Individuals completing the work for Green Fairways, Inc., job descriptions, and their qualifications. 3. Accounting records, payroll records, bank statements and canceled checks for Green Fairways, Inc. 4. Documentation of work performed by Doug Carter and Gillian Seiffert for the $40,000 payment from Green Fairways, Inc., to the Key West Golf Club. 1 The documentation provided from KW Resort Utilities to support the payment owed of $347,000 included the following records: Check #2779 dated November 18, 2003 for $40,000 from Green Fairways, Inc., to the Key West Golf Club. The documentation states Doug and Gillian's work on South Stock Island Sewer Project. There was no supporting documentation provided on work completed, hours worked or personnel qualifications. See Exhibit P - Check #2779. Check #1014 dated October 1, 2002 for $25,000 to Smith, Hemmesch, Burke and Brannigan for contract negotiations. See Exhibit Q - Check #1014. There 1 were no detailed billing records or time records to substantiate and document time and expenses spent on contract negotiations. The President of Green Fairways, Inc., stated he had the Engineer's Daily Reports of Construction faxed to him and he reviewed it on a daily basis. 1 KW Resort Utilities responses are included in a letter from the Internal Audit Department requesting additional information. See Exhibit R - Internal Audit Letter Requesting Additional Information. The response from Green Fairways, Inc., personnel was that this was their first public project and did not realize the paperwork 1 17 1 1 that was necessary. • The County Attorney's Office issued an opinion stating "The figure agreed to for the "initial funding" is an amount not to exceed " -- or a "maximum amount" of -- $4,606,000.00. It is clear from the language used that this amount was neither a guaranteed amount, nor a fixed amount, but would be a sum dependent upon actual expenditures on the project by the Utility. Thus, the actual cost to the County would be a figure derived from legitimate project costs incurred by the Utility. To substantiate the project costs, the Utility, under the terms of the Contract, is required to provide adequate documentation for review and approval by the County Engineer and County Clerk ". It further states, "With the above in mind, I believe you are within your rights - and probably duty -bound to withhold sums from current and future payment requests for which no adequate documentation has been provided." See Exhibit S - County Attorney's Memorandum of Guidance. Recommendation(s): 3. The Clerk's Finance Department should withhold the $308,483 from the remaining application for payments. County Administrator's Response: 1. A response from the Administration is not necessary. Clerk's Finance Department Response: 1. In response to a concurring opinion from the County Attorney, the Finance Department did subtract $308,483 from payment application #11 which totaled $445,521.36 on the Capacity Reservation Infrastructure Contract. Check number 96959 in the amount of $137,038.36 was sent to Key West Resort Utilities on February 26, 2004. KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section 1 VIII. Auditee Responses. Auditor's Comment(s): 1 1. With regard to KW Resort Utilities' response which states "Referring to a URS report, the draft Audit Report suggests the construction administration fees for this project were too high." The audit finding did not make reference to the reasonableness of construction administration fees. The audit report quoted from URS's Report that, "An audit of the construction phase services may be warranted to confirm that fees expended are consistent with the services provided." 2. With regard to KW Resort Utilities' response which states "the Clerk's office previously approved and paid numerous invoices containing line items for construction administration after determining that there were no omissions from such invoices." The Clerk's office did not require documentation of construction f 1 18 administration and legal fees when paid because the amount paid was based on a percentage of completion basis, according to Section B of the contract. The Capacity Reservation and Infrastructure Contract states "The Utility agrees that the County will make monthly partial payments of the construction costs of $4,606,000 to the Utility in amounts equal to the percentage of South Stock Island Infrastructure work satisfactorily completed during the previous month." The amount paid for construction administration and legal was based on the amount of work completed by E.T. Mackenzie during the previous month. 3. KW Resort Utilities' response states "In addition, the draft Audit Report finds that the construction administration fees for this project were not documented, though the contract contains no documentation requirements for such services." However, Section D of the contract which relates to auditing does require documentation. It states "the Utility agrees to keep its financial records pertaining to this contract according to Generally Accepted Accounting Principles." 4. Related party disclosures are also a requirement of Generally Accepted Accounting Principles. The term "related parties" refers to the company entity and any other party with which the company may deal where one party has the ability to influence the other to the extent that one party to the transaction may not pursue its own separate interests. 1 1 1 1 1 1 1 1 1 1 19 C. Monitoring of Contracts Finding: Both contracts have unusual provisions that need to be monitored in addition to the construction activities. An individual or department has not been assigned the responsibility to ensure that all contract provisions have been satisfactorily completed which could result in a loss to Monroe County. For example, the capacity reservation fee is $2,700 per EDU (equivalent dwelling unit). The Utility is allowed to retain a fixed fee of $600 per capacity reservation fee (EDU) from the project to cover the incremental cost of conversion and initial 1 Advanced Waste Water Treatment (5- 5 -3 -1) operation. Monitoring needs to be completed to ensure the Advanced Wastewater Treatment operation is completed and the $600 per EDU is expended appropriately. The monthly payment of the reservation fees has not been completed by KWRU, YPa Ym P Y however, there was no monitoring of this clause. The escrow agreement between KW Resort Utilities and the bank was never prepared and there was no monitoring of this clause. In the Capacity Reservation and Infrastructure Contract the Utility agrees not to add construction cost funded by the County to its cost basis utilized by the Public Service Commission to calculate a reasonable return on invested capital. Utility further agrees not to use the advances in calculating any impact fees, connection charges or any like charges imposed on Utility's customers, i.e. that the advances will be applied as a credit against such fees otherwise charged. Monitoring of this clause is necessary to ensure that costs are not passed to residents. County Management did bring to our attention during the audit that not all of the insurance coverage was as required in the contract. Partnerships with the private sector requires strong governmental control. P P q gg 1 Recommendation(s): 1. County Management should ensure that procedures are established to monitor the ongoing clauses of the contracts. County Administrator's Response: 1. The Administration concurs with the recommendation. As discussed in a previous response to a finding, the Administration will ask the County Commission to create a position of contract monitor so that appropriate procedures and 1 compliance with contract provisions can be assured. 1 1 20 1 KW Resort Utilities Response: 1. KW Resort Utilities responses and comments to the audit are located in Section VIII. Auditee Responses. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 21 1 1 1 1 1 VI. Exhibits 1 1 1 Exhibit A 1 Annual Report of KW Resort Utilities Corp - Parent/ Affiliate Organization Chart 1 t I YEAR OF REPORT UTILITY NAME: KW Resort Utilities Corporation December 31, 2002, PARENT / AFFILIATE ORGANIZATION CHART Current as of 12/31/02 Complete below an organizational chart that shows all parents and subsidiaries of the utility. The chart must also show the relationship between the utility and the affiliates listed on E -7, E -10(a) and E- 10(b). 1 William L. Smith, Jr. WS Utility, Inc. Green Fairways Smith, Hemmisch & Burke 1 KW Resort Utilities Corp. 1 1 1 1 E -5 1 1 1 1 1 Exhibit B 1 Utility Agreement 1 E 1 UTILITY AGREEMENT THIS UTILITY AGREEMENT ( "Agreement "), dated as of the 16thday of August, 2001, by 1 and between KW Resort Utilities Corp., a Florida corporation, having Its office(s) at 6450 Junior I College Road, Key West, Florida, 33040 ("Service Company "), and The County of Monroe, Florida, a Florida County having Its office(s) at 5100 College Road, Key West, FL 33040, ( "County"). 1 RECITALS A. County is the owner of certain real property more particularly described on Exhibit "A ", attached hereto and made a part hereof (the "Property "). 1 B. County currently operates a jail and detention center on the Property ( "Detention Facility"), which requires sanitary sewer service. 1 C. County currently operates public facilities at the Public Service Building, Bayshore Manor, and the Animal Shelter, all along College Road ( "Public Buildings "), which i requires sanitary sewer service. D. County requests that Service Company provide central sewage collection services In and upon the Property. . E. Service Company owns, operates, manages and controls a central sewage system and is willing to provide sanitary sewer services pursuant to this Agreement. 4 NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and the mutual covenants and agreements hereinafter set forth, and Intending to be legally bound thereby, it Is agreed as 1 follows: i. On - Site Facilities I The County owns and operates the following facilities, which it agrees to convey at no charge to the Service Company: 1 A. Lift station serving the Detention Facility Treatment Plant. B. Lift station serving Public f ng the P I c Bu (dings and sewer main from the lift station to the Detention Facility Treatment Plant. I The County shall construct the following facilities, which it agrees to convey at no charge to the service corhpany at the time of connection to the Service 1 Company's system: A. A second lift station serving the Public Buildings located at the Animal • Shelter. B. A sewer main from the second lift station to the existing sewer main serving the Detention Facility. 1 The three County lift stations and appurtenant facility to be conveyed to Service Company are hereinafter referred to as "On -Site Facilities ". All On- I Site Facilities, laterals and Property Installations shall be in good working order upon connection to Service Company's system. Prior to commencing construction on the second lift station serving the Public Buildings, County shall provide Service Company with construction plans for approval by I (Util- KeyWest- Monroe County) 1 (4 -1 -2001) II Service Company, which approval shall not be unreasonably withheld. If the Service Company discontinues service to the County property for whatever reason (other than nonpayment or default by County) then the on -site facilities will be reconveyed by the Service Company to the County at no 1 charge. Service Company shall construct a reuse ( "graywater ") line to Detention Facility, and agrees to make available a minimum of 32,000 gallons per day ( "gpd ") of graywater to County, but no more then 60,000 gallons per day. Graywater shall meet all reuse water quality standards required by law. 1 2. Definitions "Business Day" - shall mean any day of the year in which commercial banks 1 are not required or authorized to close In New York, New York. "Central Sewage System" - shall mean the central sewage system owned and operated by the Service Company. "Customer" - shall mean the County. "Equivalent Residential Connections" - (ERC), shall be defined as one individual residential connection or, for commercial and other uses, the estimated flow based on the use and Chapter 64E -6 F.A.C., divided by the most recently approved "Capacity Analysis" rate per residential connection (currently 205 gallons per day per residential connection). 1 "Point of Delivery" - shall mean the point at which the county lines enter the three -lift station conveyed to the Service Company. "property Installations" - shall mean any service lines located on individual lots or parcels of the Property, on the County side of the Point of Delivery. "Service Company's Affiliates" - shall mean any disclosed or undisclosed officer, director, employee, trustee shareholder, partner, principal, parent, subsidiary or other affiliate of Service Company. "System" - shall mean all pipes, lines, manholes, lift or pump stations, reservoirs or Impoundments constructed or installed on the Property In public rights-of-way or easements dedicated to Service Company, or on lands conveyed to Service Company by deed in fee simple, including, 1 without limitation, Central Connection Lines. "Tariff" - shall mean Service Company's existing and future schedules of rates and charges for sewer service. 3 . System Construction Service Company shall design and construct at its sole expense offsite facilities to connect the county lift station at the Detention Facility to the Central Sewage System (the "Project "). Said Project shall commence 30 days after execution hereof and be completed 180 days after commencement. County upon completion shall immediately provide all of Its domestic wastewater to Service Company for treatment at Service 1 Company's applicable tariff. The Service Company's current tariff is $605.52 (utli-KeyWest. Monroe County) (4 -1 2001) 2 . • for a 4" meter base facility charge per month and $2.92 per 1000 gallons I measured off of water consumption. Additional wastewater services at the Public Service Building, Bay Shore Manor, the Animal Shelter and other shall pay the applicable tariffs. For instance if the Detention Center uses a 4" I meter and the Public Service Building has a 2" meter then the County's rate shall be $605.62 + $196.35 plus $2.92 per thousand gallons per month. Notwithstanding Utility's Tariff, Utility agrees to treat all of County's re -use water, including air conditioning re -use water. County agrees to pay Utility I for treating re-use water based upon a four -inch meter and Utility's current tariff, the re -use meter shall be read daily. The County represents that no re -use water is disposed via shallow injection well. 1 4. System Decommissionary I County currently operates a .105 MGD wastewater treatment plant on the property. After commencement of service by Service Company, County at its sole expense may at Its option decommission and remove said plant. I Notwithstanding the foregoing, Service Company agrees to assist County in said decommissionary by contributing to the cost of the engineering, permitting, and removing the existing plant the lesser of $10,000 or the sum of said costs. 1 5. Property Riahts ' 4 Prior to Service Company's c of the Project, County shall convey a) A non - exclusive easement; in the form attached hereto as Exhibit "B" I in and to any and all portions of the On -Site Facilities not located in public rights -of -way, of sufficient size to enable Service Company Ingress and egress and to operate, maintain and replace such portions of the On -Site Facilities not located within public rights -of- way for Service Company, other uses of Service Company's system and It's successor and assigns. If the Service Company discontinues service to the County . property for whatever reason, then the 1 easements granted to . this section will lapse and expire and the County property so encumbered will be free and clear of such easements. Language similar to the foregoing must appear in the easements filed for record. The Service Company agrees to provide and execute the documents necessary to extinguish such easements. b) Service Company at its sole discretion shall be permitted to pump II other customer's wastewater through said Ilft station and force main and County shall provide easements for said connections at request of Service Company without any additional charge. 1 . c) A bill of sale conveying title to On -Site Facilities free and clear of all liens and encumbrances. 1 6. Rates, Fees, Charges a) All Customers will pay the applicable fees, rates and charges as set I forth In the Tariff. Nothing contained in this Agreement shall serve to prohibit Service Company's right to bill or collect its rates and charges from . Customers, nor to require compliance with any provision of Its Tariff. . I (Util- KeyWest- Monroe County) (4 -1 -2001) 3 1 1 b) County shall pay to Service Company a reservation fee ( "Capacity Reservation Fee "), In the amount of Two Thousand Seven Hundred ($2,700.00) dollars per E.R.C. connections to be reserved by County I to serve the Property (individually, a "Connection ", collectively, the "Connections "). The Initial reservation shall be for 454 ERC's based upon an average I flow of 83,000 gallons per day from the county jail and an estimated flow from the addition to the juvenile detention center of 10,045 gallons per day. Cost for said hook -ups is $1,225,800. Any I additional flows of wastewater from the Detention Facility, Public Buildings, or expansions thereof, animal shelter or in excess of the estimated flow shall require additional capacity fee, which shall be 1 based upon Florida Code Statute 64E -6. c) The Capacity Reservation Fee for each connection shall be payable by County to Service Company as follows: (1) 1/3, upon completion of the connection (estimated at ■ this time to be $408,600). I (11) 1/3, one year after connection completion. (111) 1/3, two years after connection completion. 4 d) Service Company hereby agrees to reserve such capacity for the benefit for County subject to the provisions of this Section 5, provided, however, that such reservations shall not be effective until Service Company has received the Initial Installment of the Capacity I Reservation Fee in accordance with Section 6 © (I) hereof, and provided, further, that Service Company shall have the right to cancel such reservations in the event of County's failure to comply II with the terms of this Agreement e) In addition to the above charges, upon delivery hereof, County shall 1 also pay Service Company $.40 per thousand gallons for "graywater" provided to County pursuant to Paragraph 1 herein. I f) In the event of default by County In the payment of Capacity Reservation Fee hereunder, which default is not cured as provided in paragraph 12, hereof, Service Company may cancel this agreement by giving thirty (30) days written notice of default and retain all 1 payments hereunder as liquidated damages. 7. The capacity reservation fee described in paragraph 6(c)(i), hereafter I 6(c)(i) funds (minus the cost incurred by Service Company to complete the Project including the graywater line), when due, must be deposited in an interest bearing escrow account with a federally Insured financial Institution that has an office in Key West, Florida. The mention of 6(c)(I) funds I Includes all accumulated Interest. The terms of the escrow are as follows: a) When the Service Company begins substantial physical construction to expand the capacity of its wastewater treatment plant or to extend I its wastewater collection infrastructure to serve additional areas In South Stock Island or other islands then the escrow agent will release the 6(c)(I) funds to the Service Company In the following I manner: the payments will be made monthly equal amounts based (Util- KeyWest- Monroe County) (4-1 -2001) 4 1 1 on the expected completion date of the expansion as set forth in the I Service Company's construction documents. Release of said funds shall be made by escrow agent upon presentation of construction Invoices (including costs , of real estate acquisition, purchase or I installation of pipes and lift stations, and professional services; provided that such costs are exclusively attributable to such expansion of capacity or extension of collection infrastructure) to be paid by Service Company along with a statement from Service I Company describing the construction for which the invoices seek payment. County hereby agrees to enforce, through Code Enforcement proceedings, its ordinance requiring all property owners located within Service Company's service area to connect to Service Company's System and to pay the tariff applicable to such connection. In the event of breach hereof by County which breach I continues after notice and reasonable opportunity to cure as provided in Paragraph 12, below, all escrowed funds shall be released to Service Company. I b) However, if the Service Company agrees to sell its wastewater treatment plant and collection Infrastructure to the FKAA before the Service company completes the construction Just described, then the 6(c)(I) funds (or the balance then remaining undisbursed) must be transferred to the FKAA upon the completion of the actions needed to consummate the sale of the wastewater treatment plant and 4 collection Infrastructure to the FKAA. For the purposes of this paragraph 7, sale means the sale of physical assets, an equity purchase (and /or debt assumption or purchase) resulting In the FKAA acquiring a controlling. Interest in the Service Company, a Tong -term I lease of the physical assets, or any other transaction that results in the FKAA assuming the obligation to operate the Service Company's wastewater treatment plant and current collection Infrastructure. I c) If the Service company has not commenced expansion of the wastewater treatment plant or collection infrastructure by the year 2006 or, if the FKAA has not purchased the Service Company's assets 1 as described above by the year 2006, then the escrow agent must release the 6(c)(I) funds to the Service Company. 8. Absolute Conveyance 1 . as provided elsewhere in this contract regarding the reconveance of property and the extinguishment of easements If service Is discontinued, I County understands, agrees and acknowledges that County's conveyance of the On -Site Facilities and any and all easements, real property or personal property, or payment of any funds hereunder (including, without I limitation, the Capacity ' Reservation Fee), shall, upon acceptance by Service Company, be absolute, complete and unqualified, and that neither County nor any party claiming by or through County shall have any right to such easements, real or personal property, or funds, or any benefit which I Service Company may derive from such conveyance or payments in any form or manner. 1 9. Delivery of Serviceq Malntenancq a) Upon connection as . provided in section 1, Service Company shall provide service the Point of Delivery in accordance with the terms I (Util- KeyWest- Monroe County) 5 (4-1-2001) 1 of this Agreement and all applicable laws and regulations and shall operate and maintain the System In accordance with the terms and provisions of this Agreement. Service Company shall use its best efforts to provide service prior to February 15, 2002 In the event that Service Company is unable to provide service on February 15, 2002 thru no fault of Service Company, then all cost of alternative sewage disposal shall be County's until service is provided. Service means that the Service Company will process, treat and dispose of wastewater and will operate its system: in compliance with the quality and process standards required by DEP and the Service Company; In accordance with Industry standards as they develop and any FKAA, County, or City of Key West requirements; and, in a manner that does not pose or cause health or environmental risk or damage (provided, that should any violation of health or environmental rule or law occur, service company shall be in compliance herewith if service company promptly undertakes and completes any necessary remedial action). Service also means the furnishing of graywater, described in section 1, meeting Industry standards. b) County shall, at its sole cost and expense, own, operate and maintain all Property Installations, which have not been conveyed to Service Company pursuant to the terms and conditions of this Agreement. c) In the event County desires additional services over and above that reserved herein and provided Service Company has additional uncommitted capac(ty, Service Company shall provide said additional capacity provided County pays the additional connection fees required under Chapter 64E -6 F.A.C. d) County shall pay for any extra expense of operating the Detention Center lift station resulting from prisoner or staff disposal of debris into the system or failure to maintain its grease trap. Service Company shall have the .right to inspect the grease traps in order to • insure their continued maintenance by County. e) County shall only provide domestic waste water for treatment by Service Company. No water from air conditioning systems or swimming pools shall flow into the wastewater disposal system. f) The Service Company agrees to keep its system in good repair, In full operating condition In compliance with applicable law and to promptly remedy all breakdowns, spills, contaminations and other acts of environmental damage or pollution. • 10. Repair of Svstern In the event of any material damage to or destruction of any of the lift stations located on County property operated or maintained by Service Company due to any acts or omissions by County, or Its agents, representatives, employees, invitees, licensees, detainees or Inmates, Service Company shall repair or replace such damaged or destroyed portion of the System at the sole cost and expense of County. County shall pay all costs and expenses associated with such repair or replacement within thirty 1 (Util- KeyWest- Monroe County) 6 (4 -1 -2001) 1 • • 1 (30) days after receipt of any invoice from Service Company setting forth any such costs and expenses. 11. Term This Agreement shall become effective as of the 12__ day of At , 2001, and shall continue for 99 years so long as Service 1 Company, Its successor or assignees, provides sewer service to the County, and the County's successors and assigns. 12. Default 1 In the event of a default by either party of its duties and obligations hereunder, the non - defaulting party shall provide written notice to the defaulting party specifying the nature of the default and the defaulting party shall have fifteen 15 days to cure any default of a monetary nature and thirty (30) days for any other default. If the default has not been cured within the applicable period (time being of the essence), the non- defaulting party shall be entitled to exercise all remedies available at law or in equity, Including but not limited to, the right to damages, injunctive relief and specific performance. Service Company may, at Its sole option, discontinue and suspend the delivery of service to the System in accordance with all requirements of applicable law and the Tariff, if County fails to timely pay all fees, rates and charges pursuant to the terms of this Agreement. The County, however, may withhold payment, without default, if the Service Company through no fault of the County: fails to provide consistent minimum wastewater and graywater services as required by section 9; causes or permits unexcused delays or Interruptions in service or commencing service; cause or permits repeated or chronic failures to maintain quality standards; causes or permits damage to County property; causes or permits adverse health effects to the public or system users; causes or permits environmental damage; or, exposes the County or its officials and employees to sults or liability attributable to the Service Company's conduct. 13. Excuse from Performance a) Force Maieura If Service Company is prevented from or delayed in performing any act required to be performed by Service Company hereunder, and such prevention or delay Is cased by strikes, labor disputes, inability to obtain labor, materials or equipment, storms, earthquakes, electric power failures, land subsidence, acts of God, acts of public enemy, wars, blockades, riots, acts of armed forces, delays by carriers, inability to obtain rights -of -way, acts of public authority, regulatory agencies, or courts, or any other cause, whether the same kind Is enumerated herein, not within the control of . Service Company ( "Force Majeure'), the performance of such act shall be excused for a period equal to the period of prevention or delay. If the Service Company Intends to claim force majeure as an excuse for nonperformance, then it must so notify the County in writing within ten business days of the force majeure event. The Service Company must also undertake all reasonable measures, at its expense, to restore full service at the earliest practical date. The (Ut11- KeyWest- Monroe County) 7 (4 -1 -2001) County Is not obligated to pay any Service Company tariff, charge or fee until service Is restored. b) Governmental Acts If for any reason during the term of this Agreement, other than for due conduct of the Service.Company and its agents and representatives, and except for the lawful actions and decisions of the County In the exercise of its governmental powers, any federal, state or local authorities or agencies fail to Issue necessary permits, grant necessary approvals or require any change In the operation of the Central Sewage System or the System ( "Governmental Acts "), then, to the extent that such Governmental Acts shall affect the ability of any party to perform any of the terms of this Agreement in whole or in part, the affected party shall be excused from the performance thereof and a new agreement shall be negotiated, If possible, by the parties hereto In conformity which such permits, approvals or requirements. Notwithstanding the foregoing, neither County nor Service Company shall be obligated to accept any new agreement if it substantially adds to its burdens and obligations hereunder. 1 c) Emeraencv Situations Service Company shall not be held liable for damages to County and County hereby agrees not to hold Service Company liable for damages for failure to deliver service to the Property upon the occurrence of any of the following events provided that service is . restored within 24 hours: 1 . A lack of service due to loss of flow or process or distribution failure; 2. Equipment or material failure in the Central Sewage System or the System, including storage, pumping and piping provided the Service Company has utilized its best efforts to maintain the 1 Central Sewage System In good operating condition; and 3. Force Majeure,unforeseeable failure or breakdown of pumping, transmission or other facilities, any and all governmental requirements, acts or action of any government, public or governmental .authority, commission or board, agency, agent, official or officer, the enactment of any statute, ordinance, resolution, regulation, rule or ruling, order, decree or judgment, restraining order or injunction of any court, including, without limitation,. Governmental Acts. 1 14. Successors and Assigns This Agreement and the easements granted hereby, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 1 15 Indemnification a) To the Extent authorized by Section 768.28, FS, the County agrees to Indemnify and hold harmless the Service Company for claims, demands, 1 (Util- KeyWest- Monroe County) (4-1-2001) 8 1 causes of action, losses, damages, and liabilities that arise out of the negligent act(s) or omissions) of any County officer, employee, contractors (Including subcontractors employed by a County contractor) and agents, in connection with the use of the system, the operation of the system, or the 1 occupancy of the Property. b) The Service Company agrees to indemnify and hold harmless the County for claims, demands, causes of action, losses, damages and liabilities that arise out of the negligent act(s) or omissions) of any Service Company officer, employee, contractors (including subcontractors employed by a Service Company contractor) and agents in connection with the maintenance, expansion and operation of the system, Including those acts or omissions that result in environmental damage or pollution. 1 16 Notices All notices, demands, requests or other communications by either party under this Agreement shall be in writing and sent by (a) flrst class U.S. certified or registered mall, return receipt requested, with postage prepaid, or (b) overnight delivery service or courier, or (c) telefacsimile or similar facsimile transmission with . receipt confirmed as follows: 1 If to Service Company: KW Resort Utilities Corp. 6450 Junior College Road Key West, Florida 33040 Fax (305)294 -1212 With a copy to: W. Smith 1 11 E. Adams, Suite 1400 Chicago, Illinois 60603 Fax (312)939 -7765 If to County: County Administrator Public Service Building 1 5100 College Road Key West, FL 33040 With a copy to: County Attorney PO Box 1026 Key West, FL 33041 18. Tariff 1 This Agreement is subject to all of the terms and provision of the Tariff. In the event of any conflict between the Tariff and the terms of this Agreement, the Tariff shall govern and control. 1 19. Miscellaneous Provisions a) This Agreement shall not be altered, amended, changed, waived, terminated or otherwise modified in any respect or particular, and no consent or approval required pursuant to 1 this Agreement shall be effective, unless the same shall be In writing and signed by or on behalf of the party to be charged. (Util- KeyWest- Monroe County) 9 (41.2001) 1 b) All prior statements, understandings, representations and agreements between the parties, oral or written, are superseded by and merged in this Agreement, which alone fully and completely expresses the agreement between them in connection with this transaction and which is entered into after full investigation, neither party relying upon any statement, understanding, representation or agreement made by the other not embodied in this Agreement. This Agreement shall be given a fair and reasonable construction in accordance with the intentions of the parties hereto, and without regard to or aid of canons requiring construction against Service Company or the party drafting this Agreement. c) No failure or delay of either party In the exercise of any right or remedy given to such party hereunder or the waiver by any party of any condition hereunder for its benefit (unless the time specified herein for exercise of such right or remedy has expired) shall constitute a waiver of any other or further right or remedy nor shall any single or partial exercise of any right or remedy preclude other or further exercise thereof or any other right or rernedy. No waiver by either party of any breach hereunder or failure or refusal by the other party to comply with its obligations shall be deemed a waiver of any other or subsequent breach, failure or refusal to so comply. d) This Agreement may be executed In one or more counterparts, each of which so executed and delivered shall be deemed an original, but all of which taken together shall constitute butone and the same instrument. It shall not be necessary for the same counterpart of this Agreement to be 1 executed by all of the parties hereto. e) Each of the exhibits and schedules referred to herein and attached hereto is incorporated herein by this reference. f) The caption . . headings in this Agreement are for convenience only and are not Intended to be a part of this Agreement and shall not be construed to modify, explain or alter any of the terms, covenants or conditions herein contained. g) This Agreement shall be interpreted and enforced in accordance with the laws of the state in which the Property is located without reference to principles of conflicts of laws. In the event that the Florida Public Service commission loses or relinquishes its authority to regulate Service Company, then all references to such regulatory authority will relate to the agency of government or political subdivision imposing said regulations. If no such regulation exists, then this Agreement shall be governed by applicable principles of law. h) Each of the parties to this Agreement agrees that at any time after the execution hereof, it will, on request of the other 1 party, execute and deliver such other documents and further (Util- KeyWest- Monroe County) 10 (4 -1 -2001) • • assurances as may reasonably be required by such other party in order to carry out the intent of this Agreement. I) If any provision of this Agreement shall be unenforceable or Invalid, the same shall not affect the remaining provisions of this Agreement and to this end the provisions of this Agreement are Intended to be and shall be severed. Notwithstanding the foregoing sentence, if (I) any provision of this Agreement is finally determined by a court of competent jurisdiction to . be unenforceable or invalid In whole or in part, (0) the opportunity for all appeals of such determination have expired, and (111) such unenforceability or invalidity alters the substance of this Agreement (taken as a whole) so as to deny either party, in a material way, the realization of the Intended benefit of Its bargain, such party may terminate this Agreement within thirty (30) days after the final determination by notice to the other. If such party so elects to terminate this Agreement, then this Agreement shall be terminated and neither party shall have any further rights, obligations or liabilities hereunder, except for any rights, obligations or liabilities which by this specific terms of this Agreement survive the termination of this Agreement. j) The parties • hereto do hereby knowingly, voluntarily, intentionally, unconditionally and irrevocably waive any right any party may, have to a jury trial In every jurisdiction in any action, proceeairlg or counterclaim brought by either of the parties hereto against the other or their respective successors or assigns In . respect of any matter arising out of or in connection with. this agreement or any other document executed and delivered by either party in connection therewith (including, without limitation, any action to rescind or cancel this agreement, and any claim or defense asserting that this agreement was fraudulently induced or is otherwise void or voidable). This waiver is a material Inducement for the parties hereto to enterinto,this agreement. k) In the event of any litigation arising out of or connected in any manner with this Agreement, the non - prevailing party shall pay the costs of the prevailing party, including its reasonable counsel and paralegal fees incurred in connection therewith through and inciu.ding all other legal expenses and the costs of any appeals and.. appellate costs relating thereto. Wherever In this Agreement ' it Is stated that one party shall be responsible for the attorneys' fees and expenses of another party, the same shall automatically be deemed to include the fees and expenses In connection with all appeals and appellate 1 proceedings relating or incidental thereto. This subsection (k) shall survive the termination of this Agreement. I) This Agreement shall not be deemed to confer in favor of any third parties any rights whatsoever as third party beneficiaries, the parties hereto intending by the provisions hereof to confer no such benefits or status. Ce West- Monroe County) 1 1 (4-1-2001) 1 IN WITNESS WHEREOF, Service Company and Developer have executed this Agreement as of the day and year first above written. Y •, 1 KW RESORT UTILITIES CORP. mo • I � °,� 4 11(10.146 L S'v�6 ,w By: it iii,. • ;Q� .. ` Title r -` \ `'' r '7! .:g% ,,.,, sn . tom. + 4 4 n i f ! BOARD OF COUNTY COMMISSIONERS : � - =5- L. KOLHAGE, Clerk OF MON COUNTY, FLOR DA B By Deputy Ierk Mayor/ airman APPRovfo STATE OF / LL/ NO/S) -��, /� ' ) COUNTY OF C 0 0 IC ) SS. DATE BERT N. ;* :'� v , The foregoing Instrument s acknowledged befor- e this 33 day of 2 �..e 001, b •. . _ 4 _ • as �' s 1TS aitta - _'_ CO _ j : Florida corporation, on behalf of said I corpo tion. 11e /sh Js personally known to 2 or who has produced ✓) ✓.P e' $ � ( .d�P,as Identification. i 1 My Commission Expires: OFFICIAL SEAL. • H ANNON , , , . , OP 4.ONQI ES>e• 200a I STATE OF FLORIDA ) ) ss: 1 COUNTY OF MONROE ) The foregoing Instrument was acknowledged before me this day of July, 2001, by , as Mayor of Monroe County, a political subdivision of the State of Florida. He is personally known to me. c My Commission Expires: µ 1 . 3:4,* c„7, r _. W CZI r: JdconKWUtillties2 C) n ' ' s - o - v -3 1 'c_ ry r rn -n C] I"- 0 a rn W I (Util- KeyWest- Monroe County) 12 (4 -1 -2001) 1 Flub 28 01 11:19• M -oe County 3C 954321 p. .... , • 401:::3) 0.egi./., .. . w Ire . • . . .. . . 1 • _ . Addendum A • ...-0 A ,areal et Mall. tae•m.r1r aq,,.ry., N w ay or twigs, Treeless or the Isles.! �yw..at Trost Fad of Ube ile •r M Wall ow) Dud Number 19725. sad meld parcel was ;ramble 27. T•M►ashlr•67 Seeth Raa,,s 25 East and Is nears* C•yatr. Platt mid •said parcel' We described ay lutes aid bawds a• • rallatral t Met• • ilea f the cater Irma or the r1 ht or tray at U. 3, 1gbray N a ta sa the c lisp •t the Florlda Eaat �t Relined: and Ihe teeter Ilea of the right sr %Ng Cesa(ry► Club Read' (OCCA). alas lean es Jaaf•r GIIM P Read (41CR) s a l b s•• Imo asstsr Hata exist as or May Is 1990, mold Intersects* betag blows es Past •1 le nod bivia, c.erdlasta. •t H•06ga9.70' i 3 2512112.63* based es u. Mercator u.t. legal for East U r rr asd ram lbws N 20. 11' 57• W (.p Hari tuatara!** •r the OCCR tar a dist baud es Ube ance or 230.44 feet to Mercator t • e (*4 the Ems 1213.261; thence 11 52' 51' 57' b 2 01.07 208.96 i distaste of 330.00 feet 1. Mai •a Ibo east Use W s co 11 3 • a 30' 57' W idea, the costar Ilse or t �O War or a Ii E• i1 0 0.00 Weta N 10• •4 01- 07635.17' & !•2507507 Waco 3 %. aco N i ' 5r W r 500.00 feet 1. Pilot u. OCC N R for • diatoms if 265.00 fast to Nat .5 ( 57.11'132 ' i U. clear 2.9 or Weal 03. 33' 87• W nisei the seater Ilea et 5.07061.7264150522.9 distance o 2.00 rest u Plat 0 6 (N- 05015.42' i 1•250613.411; thaws M it 7 T 152.00 costar Ilse of the OCCR for a'distaste or 12236 rat a Pals • i *the E�50654.9n twee• N 50' 20' ST V for a d t 7 (5-00 f Point 1 i a•II 9.69' & 2 and w an Nar of et 200.00 rat to Past •. the said 041e6 116. 1905 veld 6 cs Her sr 03 6 s the leads sno M hi .. . Paled •0 04-89056.35' 1 E•2S095TA21 w p P lase• or 932.72 teed to •r lead Woo described berets mild Past st $ . s the Mresl thence 11 63• 32 06' V ter a distance K 40 • root b ee am'bN b M trim Mee . 1 -250772.3771 thence S 40' 23• t9,5' V � a •t t* Mist •10 (N•09150.3T i 4 •11 (N49076.04 4 E 25 070254•%9 Wets amens •r t r. net; eat 241.24 r,,t le P•lal •12 01.10941.93• 2 o5 .0 32' MI 1 16 s ,great distance •r Masa High Tide Liao of Florida Da i E•a80502A 17 w I 40 5916. • 111 11 tItITL fir a y (lfllTU; Waco S 27 OY Os L•250420.131: f lItTL s Itasca di 3 j Or p��w70 feet to Nat • 13 • eat -0170 f .O t L 137.17 net 1. 0411066423' see/ ales, the cell thes for a • 0292 W or 9 nun . a I E 52'tt theses s U1 NW sea w said distance et 101.25 fe i t. ' 02 - W E• Huec• s 51' sr or W is old N • ds b tNWa.4t• r 146.23 test to P•Igt .16 (N- 00495.40' i 0450167.331t * said tar a ar 57' of Me Nee the sold ruin tare dlstaae• or 19330 rat ttheses 7 Rr 57 M 1. 250013.99'1: thence 11 30' 27' 57' W w (N•0061s.2 a, 315.40 teat u Piglet •10 01.01111113.14' & 0449554.0n said ew ter a dlil• •r sad along the said 'I ITL far a distaste t 1 Weed M 44` 27' S7' r & E•249755.031: these N 01' d 200 toot 4 Pay! •f0 (N•t19147.04' 165.00 9755 t5 Peat h • 32' 0 E slug the said Ion for a Odom •t sad also, the said 1 or j� or 7742 ro ot to 1 N 16 7.22• & E 249702.451: theses M 10. 45 . 52' V w tars foamy.* .r 5735 rest to Pend •22 01.0 944141' & VO497 3.91'!4 thence N 14` 57' 57.5' W led al o 0 • geld MNTL tar a. dhsta•c• et 120.46 feet 1• Plat • • 165.00 0 �t y; Feint • � 3' 26 33• 2s r a distance r ( 09695.1 w the sad wee for • distance • r rsr n Nstaacs or 195.00 feat.!•• :Er24945;1.s2')s L .64 at` 8 04' s 6 aa moasmuat: thence 8 13' 16 ' W far a dicta. 54.2.7 39 sit 1 a ends I uacr •26 (N- 09563.59' & C4249952539 Sad a 0 hat'ts P•la E for • diat•sc• or 269.09 teat to counts 353 90 . p� u•nts sf 44' sr 02' c fo rela u•erow mate N 74' 46P' t'�7 01 A0352.5r 11, E- .250171. and e •20 (5.09303.96' & Emot M 7 OD' E far a disteace K 00.26 test to Feist 29• E for • 41.1..ce sr 453.59 0 r 7 e.1 16 Feist 0 29 t' theme 3 56' S0• I and a csacrsts msnumeat: thence N 40' 29 ( & 57. 51.11 Feist .30 0149239.2r a. E•250756.021 ea j c for • dlst*ac6 •r Ib7.23 toot to 32 tb • Westerly * et-3 16.00 fist V PO4 03 concrete u.swa•st: Masco 563• r end carved M t •r 11.. of l 01 - 09on C al gig Road sad a 1 comma a �asa,n•at. sold carve bill* vo to Um i 4b Southeast sad College load asd a 9•.01 rote; wilco aM/i t bs a•etbsaot Q.tSSCO et 66.04 root V P51at •12 said wr9N tided M *sd b�M a radius et ust u■ . e 65.0 N 63. 32' 06• W 2 i� 1. 33 E 1000.00' sew • 0 • er•g I a* a t O OF eEalN/IdNO. •*Id Parma s atsl�ia dishes. Y s13 3 it 6 r . ( 6 a� toot/. EXHIBIT A I THIS INSTRUMENT PREPARED BY: John R. Jenkins, Esquire Rose, Sandstrom & Bentley, LLP 2548 Blairstone Pines Drive Tallahassee, FL 32301 (850) 877-6555 GRANT OF EASEMENT THIS GRANT OF EASEMENT is made this ___day of , 200_, by (AGrantor @), whose address is to K. W. Resort Utilities Corp., (AGrantee @), whose address is 6450 Junior College Road, Key West, Florida 33040. WITNESSETH, that Grantor, its successors and assigns, for and in consideration of the sum of Ten and No /100 Dollars ($10.00) and other good and valuable consideration to it in hand paid by Grantee, the receipt and sufficiency of which is hereby acknowledged, grants and conveys a utility easement, in perpetuity, over, in, through and under the property described in Exhibit AA@ attached hereto and made a part hereof (Property@). Notwithstanding the foregoing, in the event Grantee discontinues service for any event other than non - payment or default by Grantor then the easement granted shall lapse and expire. 1. Grantor permanently grants, sets over, conveys and delivers to Grantee, it successors and assigns, the nonexclusive right, privilege and easement to construct, reconstruct, lay and install, operate, maintain, relocate, repair, reconnect, replace, improve, remove and inspect sewer transmission and collection facilities, reuse transmission and distribution facilities and all appurtenances thereto, and all appurtenant equipment in, under, upon, over and across the Property with full right to ingress and egress through the Property for the accomplishment of the foregoing rights. 2. This Grant of Easement is a reservation and condition running with the Property and shall be binding upon the successor and assigns of Grantor, all purchasers of the Property and all those persons or entities acquiring right, title or interest in the Property by, through or under Grantor. 3. The Grantor warrants that it is lawfully seized in fee simple of the land upon described easement is situated, and that it has good and lawful authority to convey said land o any part thereof or interest therein, and said land is free from all encumbrances and that Grantor will warrant and defend the title thereto against the lawful claims of all persons whomsoever. 4. All easements and grants herein shall be utilized in accordance with established generally accepted practices of the water and sewer industry and all rules, regulations, ordinances, and laws established by governmental authorities having jurisdiction over such matters. 5. Grantor retains, reserves and shall continue to enjoy the use of the surface of the above described property for any and all purposes, that do not interfere with Grantee =s use of the subject easement, including the right to grant easements for other public utility purposes. Grantor, its successors or assigns, may change the grade above Grantee =s installed facilities, or perform any construction on the surface of the above described property which is permitted hereunder; however, if the change in grade and/or construction requires the lowering relocation and/or protection of Grantee =s installed facilities (such protection to include but not limited to the construction of a vault to protect the pipes), such lowering, relocation and/or protection shall be performed at the sole cost and expense of Grantor, its successors or assigns. 6. If in the future any portion of any driveways, sodded areas, gardens or lantin s shall be P 8 destroyed, removed, damaged or disturbed in any way by Grantee as a result of Grantee installing, excavating, repairing, maintaining, replacing, reconnecting or attaching any underground sewer mains, lines or related facilities within the foregoing described. easement, Grantee =s sole obligation to restore the surface of the easement area shall be limited to the replacement of sod and /or pavement, and Grantee shall have no obligation, nor be responsible or liable for any expense incurred in the replacement of gardens, plantings or trees or any boundary wall, building or structure located in the said easement area which may have been destroyed, removed, damaged or disturbed, IN WITNESS WHEREOF, the undersigned has executed this instrument this day of _, 200 ed, and delivered in our presence. S: Print Name: Print Name: 1 • • STATE OF FLORIDA COUNTY OF MONROE 1 The foregoing instrument was acknowledged before me this day o Y f 200 ,by who is personally know to me or who has produced as identification. My Commission Expires: NOTARY PUBLIC 1 1 1 1 1 1 1 Exhibit C 1 Capacity Reservation and Infrastructure Contract 1 1 1 f 1 1 t t CAPACITY RESERVATION AND INFRASTRUCTURE CONTRACT 1 KW Resort Utilities Corporation THIS CONTRACT is entered into this 31st day of July, 2002, by and between Monroe County, a political subdivision of the State of Florida, whose address is Gato Building, 1100 Simonton Street, Key West, FL 33040 (County), and KW Resort Utilities Corp., a Florida corporation whose address Is 6450 College Road, Key West, FL 33040 (Utility), for the purchase of wastewater treatment plant capacity reservation to serve South Stock Island and the Installation and expansion for the wastewater collection treatment system on South Stock Island. Whereby the County agrees to provide Initial funding for the installation and expansion of the Utility wastewater treatment system and the Utility agrees to provide wastewater treatment services to the residences and businesses of South Stock Island. 1 IN CONSIDERATION of the mutual promises and benefits set forth below, the parties agree as follows: 1. A. The County agrees to purchase from the Utility, and the Utility agrees to sell, capacity at its wastewater treatment plant sufficient to treat 1500 e.d.u.'s. The Utility agrees that the capacity purchased Is to serve the South Stock Island area. As consideration for the purchase the County agrees to fund the Utility's construction of the wastewater collection system on South Stock Island , in an amount not to exceed $4,606,000, pursuant to the plans dated May 30, 2002 from Weller Engineering Corporation. The plans are attached to this contract as Exhibit A and made a part of it. The Utility's completion of the system must be done In 16 months from the commencement date of this contract unless delayed by acts of war, legal challenges, acts of God, or lack of funding from the government. B. The Utility agrees that the County will make monthly partial payments of the construction costs of $4,606,000 to the Utility in amounts equal to the percentage of South Stock Island infrastructure work satisfactorily completed during the previous month. The parties agree 1 that the construction costs of $4,606,000 Is allocated as follows: I. Collection system Infrastructure H. Contingency amount $3,500,000 ill. Engineering and engineering inspection 279,000 Iv. Construction administration and legal fees 279,000 v. Testing 347,000 Total 100.000 1 $4,606,000 The Utility agrees that the maximum amount due it from the County under this contract Is $4,606,000. If the construction of the South Stock Island Infrastructure expansion described in paragraph one costs in excess of $4,606,000, the excess costs are solely the responsibility of the Utility and do not operate In any way to relieve the Utility of Its obligation to complete the infrastructure so that it satisfactorily collects wastewater In South Stock Island and transports It to the Utility's plant for treatment. In order to Insure that the collection infrastructure is satisfactorily completed and that all contractors (in any tier) and materialmen are paid, the Utility agrees t purchase, or require its contractors to purchase, performance and payment bonds In a form and amount satisfactory to the County. No payment will be made by the County until the bonds are 1 purchased. The Utility must also supply the County with the names of all contractors before payment can be made. C. Payments to the Utility will be made as follows: 1 1 I 1. On the first business day of each month the Utility shall submit to the County Engineer an Invoice, In a form satisfactory to the County Clerk, for payment for the work completed, or materials delivered, during the prior month. The invoice must contain: 1 a) An engineer's certificate that the percentage of work requested for payment has been completed in a good workmanlike manner and the I amount requested represents the percentage of work completed, or materials delivered to the Utility for incorporation Into the work provided they are kept separate from other materials at the Utility's site(s) and are Identifiable as materials for incorporation in the work authorized by 1 this contract, together with any supporting documentation requested by the County Engineer. I b) Partial lien waivers for interim payments from the contractors, materialmen, and Utility. Final waivers are necessary for final payment. An engineer's certificate that the South Stock Island Infrastructure expansion is functioning satisfactorily and In accordance with the design and performance criteria of Ex. A is also required for final payment. 11. The County Engineer must review the invoice and within 5 business days, inspect the work completed and materials delivered, and Inform the Utility in writing of any error or omission in the invoice and what must be done to correct the deficiency. If the Invoice is satisfactory he shalt forward the invoice to the County Clerk for payment. The Clerk must then promptly review the 4 Invoice. If the Clerk determines there is an error or omission In the invoice, he must inform the Utility In writing. If the invoice Is not returned to the Utility by the Engineer or Clerk for correction, the Clerk must make the payment to the I Utility within 20 business days of the County Engineer's receipt of the Invoice. A corrected Invoice need only be returned to the officer who noted the deficiency, with a copy to the County Engineer and, if satisfactorily corrected, shall be paid by the Clerk within 20 days of the officer's receipt of a corrected invoice. 1 111. If there Is a dispute between the Utility and one of its contractors which disrupts, delays or stops the work, the County reserves the right to withhold 1 payment(s) until the dispute Is resolved. D. The Utility agrees to keep its financial records pertaining to this contract according to generally accepted accounting principles. The records must be kept three years after 1 the date of the County Clerk's, or County's Issuance of an audit for this contract. The Utility must make Its financial records pertaining to this contract available to an auditor I employed by the County or Clerk during regular business hours (Monday - Friday, 9 AM - 5 PM, holidays excepted). If the auditor determines that money paid by the County to the Utility was not spent as authorized by this contract, or that the $600 portion of the capacity reservation fees collected from property owners was not spent on AWT conversion and operating costs as required by I this contract, or that capacity reservation fees collected from property owners were not remitted to the County as required by this contract, then the Utility must repay to the County the amounts not spent or remitted as required by this contract, together with Interest calculated at the rate set forth In Sec. 55.03, Fla. Stat., from the date the auditor determines that the funds were improperly spent 1 or withheld. E. The parties agree that nothing In this contract may be construed to create 1 privity, or any other contractual or legal relationship however described, between the County and 2 1 I any contractors, subcontractors, design professionals and administrative personnel, and materialmen, of the Utility. Such persons may not seek payment from the County but only from the Utility or the Utility's sureties. I F. The South Stock Island wastewater collection infrastructure constructed pursuant to this contract is, and will remain, the sole property of the Utility. Nothing in this contract may be construed as creating any County obligation or liability to the Utility or any third parties to 1 construct, maintain, repair or operate the infrastructure. G. The payments due the Utility pursuant to this contract may be paid out of 1 County non -ad valorem revenue sources only. The Utility agrees that it may not seek to compel the County to pay any amount out of ad valorem funds that may be due the Utility under this contract. 3. Utility agrees to reimburse County, to the extent of its collection of capacity I reservation fees from all new customers connecting to the vacuum sewer system to be constructed pursuant to the plans of Ex. A. and funded by this contract. Utility shall account and pay to the County on a monthly basis all amounts due. The capacity reservation fee is $2,700 per EDU I (equivalent dwelling unit) as set forth in the Utility's tariff filed with the Public Service Commission, which fee shall remain at $2,700 until January 1, 2007. Notwithstanding, the foregoing Utility shall not be required to repay the County the advanced funds unless there are monies generated by connections to the South Stock Island wastewater collection infrastructure project and only to the extent of collections from that project. 1 4. Utility agrees to repay the funds advanced by County for Y tY the construction of the South Stock Island wastewater collection infrastructure project. Utility's obligation of repayment is limited 4 to the capacity reservation fees collected by the Utility from new customers connecting to the project. Utility shall account for the collection of new customer capacity reservation fees on a monthly basis. Utility shall pay to the County the total sum of the new customer capacity I reservation fees collected during any month by the fifth business day of the succeeding month. Utility has neither the authority nor the obligation to enforce the mandate of the State of Florida or to require the owners of residences and businesses of South Stock Island to abandon their current wastewater treatment system and connect to the wastewater collection Infrastructure project. I 5. Utility further agrees to convert its wastewater treatment system to Advanced Waste Water Treatment (5- 5 -3 -1), hereafter AWT, by January 1, 2007 provided that the County so requests and that Utility is allowed to recapture the costs of its conversion to AWT and increased I operating costs by a resolution of the County Commission. Such resolution requesting that the Utility convert to AWT and that allows Utility to recapture the costs of its conversion to AWT and increased operating costs must be adopted before January 1, 2003. Any repayment of funding by I the County to construct the project from the collection of new capacity reservation fees shall be proportionally discounted and reduced by the Utility's cost of conversion to AWT standards. Utility shall be allowed to retain a fixed fee of $600 per capacity reservation fee (EDU) from the project to cover the Incremental cost of conversion and initial AWT operation. The net amount due to the I County from the collection of any new capacity reservation fees would be equal to $2,100 (capacity reservation fee $2,700 per EDU less discount for AWT conversion $600). Any connection fees collected from users of the existing wastewater collection system who connected to that system prior to the effective date of this contract, and which fees were reserved for AWT, must be spent on AWT. I The Utility agrees to complete the AWT upgrade at its own expense If the fees collected for the upgrade under this paragraph do not cover the total cost of the upgrade. The Utility agrees to use its best efforts to require the property owners of South Stock Island to connect to the new collection Infrastructure. If the owner of a property required to connect to the new collection system refuses I to do so, the Utility shall refer the refusal to the County which may use any available legal or equitable remedy to compel connection. 1 6. Utility agrees not to add the construction cost funded by the County to Its cost basis utilized by the Public Service Commission to calculate a reasonable return on invested capital. Utility 1 3 1 I ' I further agrees not to use the advances in calculating any impact fees, connection charges or any like charges imposed on Utility's customers, Le„ that the advances will be applied as a credit against such fees otherwise charged. I 7. The Utility agrees to Indemnify and hold harmless the County, members of the County Commission, County officers and employees, and County contractors, from any acts or omission committed by the Utility's officers, employees, and contractors (of any tier) during the course of I performing the work required by this contract. This paragraph will survive the completion of the work. The purchase of the Insurance required by paragraph 8 does not vitiate this Indemnlflcation /hold harmless paragraph. I 8. During the term of this contract the Utility must keep in full force and effect the insurance set forth in Exhibit B. Exhibit B Is attached to this contract and made a part of It. 9. The Utility warrants that he /it has not employed, retained or otherwise had act on I his /its behalf any former County officer or employee subject to the prohibition of Section 2 of Ordinance No. 010 -1990 or any County officer or employee in violation of Section 3 of Ordinance No. 010 -1990. For breach or violation of this provision the County may, In its discretion, terminate this 1 contract without liability and may also, in its discretion, deduct from the contract or purchase price, or otherwise recover, the full amount of any fee, commission, percentage, gift, or consideration paid to the former County officer or employee. ■ 10. This contract is govemed by the laws of the State of Florida. Venue for any litigation arising under this contract must be In a court of competent jurisdiction In Monroe County, Florida. In the case of litigation, the prevailing party Is entitled to costs plus a reasonable fair market value 11 attomey's fees. 11. The parties agree that this written contract represents their final mutual understanding and replaces any prior communications or representations between the parties, whether written or oral. This contract may only be modifled in a writing agreed to, and executed by, both parties. I 12. County hereby agrees to grant perpetual R.O.W. easements to Utility for the wastewater collection Infrastructure contemplated by Exhibit A, as long as such easements are used for wastewater collection Infrastructure. The County agrees to provide the Utility access to existing • County Stock Island rights -of -way necessary for construction. The County also agrees to and hereby does permit this project without any additional permitting requirements. 13. Because County ill repave tY p e the following streets following project completion, after installation of the pipes and other subterranean Infrastructure under the streets and R.O.W. County I will only require that Utility or its contractors to backflll, compact and level street trenches for the following streets. STh I I Front FROM IQ Cross Street End 5 Street Utility US 1 12t' Avenue 5th Avenue End station) (radio station 1 Aven I 4 Avenue 5a' Avenue 4`t " h Avenue 3 Avenue End past Sunshine 3'd Avenue Maloney Ave. (excluding Maloney intersection) Sunshine (8) 4 Avenue 2nd Avenue 2 Avenue I 2nd Avenue 3'd Street (8) 3' Street (excluding 3" St. intersection) 2 Terrace 3 Avenue 2' Maloney Avenue 2 Street 3 Avenue 2 Avenue Peninsula Avenue End Peninsula Marine 1st Avenue Peninsula Avenue Maloney Ave. ( excluding Maloney Intersection) 1 Maloney Avenue End by Hickory House 4 1 1 . 14. This contract is binding on the heirs, successors, and assigns of the parties and shall bind such heirs, successors and assigns as if they were the original parties to this contract. 15. The Utility warrants and represents that: A. Its existing facilities, and facilities to be constructed, are, and will be, in compliance with all applicable environmental permits, laws, rules, and orders; B. the contract is Utility's legal and binding obligation, enforceable against it In I accordance with its terms; C. Utility has taken all necessary corporate actions to approve, enter into, become bound by, and perform the Contract; I D. Utility holds all necessary permits, certificates, licenses, and authorizations from the PSC and any environmental regulatory agency with jurisdiction over the Utility and the new South Stock Island infrastructure; and E. Utility's current rates, including its capacity reservation fees, have been duly I approved by the PSC. 16. The Utility shall be deemed in default under this Contract in the event that, and as soon as, any of the following occurs: 1 when due; A. Utility falls to perform any obligation to the County under this Contract as and B. Utility fails to reimburse or pay to the County, as and when due, any amount to I which the County is or becomes entitled under this Contract or otherwise; C. Utility breaches any representation or warranty to the County in this Contract or In any related agreement or Instrument; D. Utility falls to obtain any license, permit certificate, or order that It needs to 4 construct and operate, as planned, the expansion of its system contemplated by this Contract, or any such license, permit, certificate, or order Is rescinded, revoked, suspended, or nullified, or Is modified in a materially adverse respect; E. The Florida PSC declines or refuses to approve any rate, rate plan, or rate I change that Utility proposes, requests, or needs to construct and operate the Stock Island Infrastructure or to operate profitably; F. Utility becomes Insolvent, or ceases to pay its debts and obligations as and when due, or becomes the subject of a petition filed under the United States Bankruptcy Code; or G. a receiver or similar custodian Is appointed for Utility, its Stock Island facilities, or any substantial part of its business or properties. III 17. In the event that Utility Is in default under this Contract and falls to remove or cure such default within 30 business days after written notice thereof by the County, then the County may take any or all of the following actions, in any combination and order, all In the County's sole discretion and without limiting any other rights or remedies that the County may have under this I Contract or applicable law in the circumstances: A. terminate this Contract and the County's performance, duties, and obligations hereunder; I B. suspend or refuse to make any or all further payments to Utility that otherwise might or would be or become due or payable to Utility under this Contract; C. exercise Its rights under any performance, payment, or surety bond or similar agreement or policy that Utility or the County may have; I D. assume responsibility for and control over completion of construction of the Stock Island Infrastructure and facilities; E. require Utility to furnish collateral satisfactory In form and amount to the County; I F. file a complaint or initiate a proceeding with the Florida PSC; G. Initiate a suit for any and all available monetary damages and Injunctive and equitable relief and remedies In any court of competent jurisdiction; and of Utility's facilities a d propertl s, and recomm en a person or to serve in uchf me or all capacity. 5 1 1 1 18. This contract commences on the signature date of the last party to sign it. 1 19. All communication of the parties required by this contract shall be in writing and addressed to: Monroe County Administrator KW Resort Utilities Corp. 1 l'A' ;• : 1100 Simonton Street 6450 Colle Ac t c � - ,' �' ��! FL 33040 ge Road � .� „ ,, .e,-a; N Key West, FL 33040 ' WHEREOF, the parties hereto have set their hands and seals the day and year Vie ` `'" BOARD OF COUNTY COMMISSIONERS A "! ,_: - L. KOLHAGE, CLERK OF MONROE COUNTY, FLORIDA By St • &)iJ i .,, ,¢J By Deputy Clerk May airperson (SEAL) I ATTEST: KW RESORT UTILITIES CORP. : _ , A r. i _t /. 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N.41 III I •• • I ...4 a7 1 `■ • 1 .--:tb • i.: i -r.L -111 $ i I --' ' ' * - ........--- ..,40 4 "11; " J I V ..":.: 1 1.- "1- ." - - - --- , ! i 14 14,0F . ; I . 1 1 ' 1 •''' ' 'n' . ;:''' I 31 '7 \Y 4 - ,,,• te, / fl I % t .. • ■ ji a. rit 1 , • , 4 , ,..„ 4 _ . 1 ...`± • o . • li ....1C. 1 • \ 1 4 A Pt- # S.1 I r 1.., iel 7 -4... 7 i • if . - 1 91' # ■ ......, ....•. ) ... . _./ ..5...... / 111/07 7002 FAI 13:03 N e (TX/RX 110 60012] CO3 M I . COMPLETE SET OF EXHIBIT A PLANS ARE ON FILE IN THE CLERK'S OFFICE 1 1 JUL -19 -02 16:1T FROII-coith,huwucch,burs £ brannigan 912 039 7705 T -102 P.004/004 F -209 1 ____12E49/41! _in 1343 PAX 11141,78.161115 IfSIL>t ENCI ING CORP Own 1 ;14111 ( ,I 1 .� ._ _ > ! ;. �.r ...— Y 1 .. — .rr 1 I amomer"iman•ZelLii r 1 oft I l i 1 1711 N. li � ;' L ``141� 11AM ith ..".-4: , .„ 1119 a ...._ _ . �� 1110 �\.. ' m Nilif r 13*' '--' ; ,: • , : , pAI.e eJrr 8 Y ji B 1 ii �' r1 aaNRo 6 Co.01Tf , * .1 ' 40 1 • .4 ..; 1 . . Ai .„.. \ .. `\\ 1-`i 1 , _.„- r 'rr , . , . ♦ �. ..____ . o p. , .. 1 ..,..,,, „,, ,_4 i 1p : 4. - t i t ,I_- , ' 4_:,,,ti* ..i/t0 e # Ii�i i I +4 + :,, T « � u'„ i 1 i f_ : •1461 i III 1;: i 11 to 111 j r •1itnU ` I 1 1 1 1 1 1 1 1 1 Exhibit D 4 E.T. MacKenzie's Comparison of Original Bid to 1 Final Contract Price 1 1 1 1 1 1 1 I Bid Form Schedules Mackenzie Bids Revised per Addendum #3 Final Contract Price Original Bid 1 Unit Unit Qty Item No Description Qty Unit Price Amount Amount Difference Price 1 Mobilization 1 LS 199,804 199,804 189,672 10,232 189,572 2 Maintenance of Traffic 1 LS 40,452 40,452 40,462 0 I 3 Const. Stake Out & As-Bunts 1 LS 97,424 97,424 97,424 0 4 10" PVC, SDR21 Vacuum Sewer 8,300 LF 62 431,600 614,600 (83,000) 62 6 8" PVC, SDR21 Vacuum Sewer 3,200 LF 48 163,600 188,800 (35,200) 69 6 6" PVC, SDR21 Vacuum Sewer 1,600 LF 46 69,000 84,000 (16,000) 66 7 6" PVC, SDR 28 Gravity Sewer 1,000 LF 45 46,000 55,000 (10,000) 65 I 8 4" PVC, SDR21 Vacuum Sewer 500 LF 44 22,000 27,000 (5,000) 54 9 10" Division Valves 6 EA 1,386 8,316 10,116 (1,800) 1,686 10 8" Division Valves 2 EA 786 1,672 2,172 (600) 1,086 11 6" Division Valves 3 EA 666 1,998 2,898 (900) 966 I 12 4" Divislon Valves 2 EA 646 1,092 1,692 (600) 846 13 Vacuum Pit Type A Complete 13 EA 4,620 68,760 68,393 (9,633) 6,261 14 Vacuum Pit Type Al Complete 6 EA 4,620 22,600 26,305 (3,705) 5,261 16 Vacuum Pit Type B Complete 26 EA 4,880 122,000 140,525 (18,525) 5,621 16 Vacuum Pit Type C Complete 7 EA 11,091 77,637 86,477 (7,840) 12,211 I 17 Vacuum Station Construction & Site Work 1 EA 466,406 456,405 466,406 0 18 Vacuum Station Building (Inc. Foundation & Elec.) 1 EA 174,118 174,118 174,118 0 19 Asphalt Restoration 2,000 SY 28 66,000 430,000 (374,000) 43 10,000 20 Concrete Sidewalk Replacement 600 SY 30 16,000 17,000 (2,000) 34 21 Concrete Driveway Repair 600 SY 30 16,000 17,000 (2,000) 34 22 Shell Driveway &Parking Repair 4,000 SY 7 28,000 72,000 (44,000) 18 23 Sodding 0 SY 0 0 9,000 (9,000) 6 1,500 24 Conflict Manhole 2 EA 4,223 8,446 9,928 (1,482) 4,964 I 25 Service Cleanouts 100 EA 149 14,900 48,600 (33,700) 486 26 Concrete Encasement 600 LF 26 13,000 46,600 (32,500) 91 27 Vacuum Station Force Main 8" 140 LF 46 6,440 6,860 (420) 49 28 Manufacturer Field Representative 8 Week 8 23,628 23,528 0 I 29 Vacuum Testing Station 1 LS 17,820 17,820 17,820 0 30 Spare Parts & Special Tools 1 LS 19,320 19,320 19,320 0 Total Bid - Phase 1 (Airvac Equipment) 2,200,832 2,881,505 (680,673) I 1 Mobilization 1 LS 199,804 199,804 189,572 10,232 189,572 2 Maintenance of Traffic 1 LS 40,462 40,452 40,452 0 4 Const. Stake Out & As- Builts 1 LS 41,753 41,763 41,753 0 5 10" PVC, SDR21 Vacuum Sewer 4,800 LF 62 249,600 297,600 (48,000) 62 • 6 8" PVC, SDR21 Vacuum Sewer 1,500 LF 48 72,000 88,500 (16,500) 59 7 6" PVC, SDR21 Vacuum Sewer 3,500 LF 46 161,000 196,000 (35,000) 56 8 6" PVC, SDR 28 Gravity Sewer 600 LF 45 27,000 33,000 (6,000) 55 9 4" PVC, SDR21 Vacuum Sewer 100 LF 44 4,400 6,400 (1,000) 64 I 10 10" Division Valves 5 EA 1,386 6,930 8,430 (1,500) 1,686 11 8" Division Valves 1 EA 786 786 1,086 (300) 1086 12 6" Division Valves 6 EA 666 3,330 4,830 (1,600) 966 13 4" Division Valves 1 EA 646 646 846 (300) 846 14 Vacuum Pit A Complete 20 EA 4,520 90,400 105,220 (14,820) 6,261 15 Vacuum Pit Type Al Complete 6 EA 4,520 22,600 26,306 (3,705) 5,261 I 16 Vacuum Pit Type B Complete 10 EA 4,880 48,800 66,210 (7,410) 6,621 17 Vacuum Pit Type C Complete 12 EA 11,091 133,092 227,244 (94,152) 18,937 18 Asphalt Restoration 3,000 SY 28 84,000 344,000 (260,000) 43 8,000 19 Concrete Sidewalk Replacement 1,000 SY 30 30,000 34,000 (4,000) 34 I 20 Concrete Driveway Repair 600 SY 30 16,000 17,000 (2,000) 34 21 Shell Driveway & Parking Repair 2,000 SY 7 14,000 36,000 (22,000) 18 22 Sodding 0 SY 9,000 23 Conflict Manhole 2 EA 4,788 9,576 9,928 (9,000) 6 1,500 24 Service Cleanouts 100 EA (600) 4,964 120 12,000 48,600 (36,600) 486 1 25 Concrete Encasement 300 LF 26 7,800 27,300 (19,500) 91 26 Manufacturer Field Representative 8 Week 2,941 23,528 23,528 0 2,941 1,298,397 1,871,804 (673,407) Total Bid - Phases 1, 2, 3 3,499,229 4,753,309 (1,254,080) 1 1 1 1 i 1 1 1 Exhibit E Affiliation of Officers and Directors 1 1 1 1 1 1 1 1 UTILITY NAME: KW Resort Utilities Corporation I YEAR OF REPORT December 31, 2002 AFFILIATION OF OFFICERS AND DIRECTORS 1 For each of the officials listed on page E -6, list the principal occupation or business affiliation and all affiliations or connections with any other business or financial organizations, firms, or partnerships. For purposes of this part, an official will be considered to have an affiliation with any business or financial 1 organization, firm or partnership in which he is an officer, director, trustee, partner, or a person exercising similar functions. PRINCIPAL OCCUPATION AFFILIATION NAME AND ADDRESS OR BUSINESS OR OF AFFILIATION NAME AFFILIATION CONNECTION OR CONNECTION (a) (b) (c) (d) William L. Smith, Jr. President WS Utility, Inc. 11 East Adams Street Suite 1400 Chicago, IL 60603 President Green Fairways 11 East Adams Street Suite 1400 Chicago, IL 60603 Attomey Smith, Hemmisch & Burke 11 East Adams Street Suite 1400 Chicago, IL 60603 1 1 1 1 1 1 1 1 E -8 1 1 1 1 1 1 Exhibit F 1 Letter from General Manager KW Resort Utilities Corp. 1 1 1 1 1 1 KW RESORT UTILITIES P.O.Box2125 Key West, Florida 33045 Telephone (305) 294 -9578 Facsimile (305) 294 -1212 1 December 19, 2003 1 John R. Collins County Attorney County of Monroe PO Box 1026 Key West, Fl 33041 -1026 Re: Utility Agreement between Monroe County & KW Resort Utilities Corp. Thank you for your letter of December 9, 2003. The capacity reservation fee was placed in an interest bearing account at Republic Bank, ank, a federally insured financial institution in Key West, in accordance with paragraph 7(a). All payments from the escrow account have been made in accordance with the requirements and procedures set forth in paragraph 7(a). We have provided Sandra Methena, County Auditor, all documents supporting the disbursements from the escrow account. The contract did not identify an escrow agent nor did it attach an escrow agreement. If the County would like a particular form of escrow agreement or a specific escrow agent used for the balance of the capacity reservation fee, please provide us a proposed escrow agreement and the identity of a proposed escrow agent. Sincerely, KW RESORT UTILITIES CORP. Doug C er Cj General Manager 1 1 1 1 1 1 1 Exhibit G Memorandum from KW Resort Utilities Monroe 1 County Audit RE MCDC 1 1 1 1 1 1 1 KW RES IRT UTILITIES CORP 1 MEMORANDUM 12/17/03 1 T0: FROM: GILLIAN SEIFERT RE: MONROE COUNTY AUDIT RE MCDC - LETTER DATED 12/8/03 ITEM #2: 1 Total Disbursements from the MCDC Bank Account to date: $687,6 Already Provided invoices re: Jail Project totaling (344,062.98) To be reimbursed to MCDC account upon receipt of funds due KWRU by Monroe County on the SSI Infrastructure Contract (copy of check enclosed). Smith Hemmesch Burke & Brannigan -sewer contract negotiations. ( 25,000.00)* To be reimbursed to MCDC account upon receipt of funds due KWRU by. Monroe County on the SSI Infrastructure Contract (copy of check 1 enclosed). Mackenzie of Florida -SSI #10 Payment Request. (235,856.94)* Expansion and Upgrades of Wastewater collection infrastructure to serve additional SSI customers and Wastewater Treatment Plant: Construction Trailer - invoices attached totaling ( 61,182.86) Airvac Storage shed - invoices attached totaling ( 7,582.21) Keys Energy - Impact fees & Meter Cost ( 6,940.00) Filter Modifications at Plant - see attached invoices totaling ( 23,580.66) Generator for plant & freight ( 4,721.85) Lift Station Upgrades/Improvements - see attached ( 59,086.45) 1 *Paid out of MCDC Account ( 80,317.89) Note. Partial payment was made by Monroe County on SSI #10 Payment Request of $235,856.94. However, an additional payment to Mackenzie of Florida was made on 11/18/03 in the amount of $237,529.44 (see attached copy) 1 1 1 1 1 1 1 � Exhibit H 1 Steel Hector & Davis LLP Memorandum 1 1 1 1 1 1 i i 1'MteL 1 i , 10 • I S T E E L E . Stec) Hactor a Davis up I HECTOR • 215 south Monnte Strut islahauee, Honda 32301.1804 IDAV 1 S" LS0.2 0 I e5o.22211410 Fax www.steeihector.com • July ;12, 2001 . writ. tuna armrest anector.com 1 By Fax and Mail I Robert N. Wolfe, Es q. Office of the County Attorney County of Monroe Post Office Box 1026 1 Kay West, FL 33041 -1026 Re: Proposed Utility Agreement with KW Resort Utilities Corp, 1 Dear Mr. Wolfe: • 4 Enclosed with the 'bard' copy of this letter Is the original of the memo on the referenced subject, As discussed, I corrected some typographical errors so that the abbreviation used for KW Resort Utilities Corp. ( "KWUC') is consistent throughout I We appreciate the opportunity to assist you in this matter. Please let me know what further steps would be helpful. 1 Sincerely yours, e #411111111 1 4. . • . Enclosure • 1 r ) /1 A'z-1 e/4 .---=--:,- . 1 i a-A-z .. ; -, ' - % -* e.-40-07--ep.' I TA1_1991/3,365-1 , / ` , 1. 1 Po t -It'• brand lax transmittal memo 7671 [0 *IMP* ■ .10 Te m p.4 k1 te Marti Wart Palm Bach 7allahrssn a I Dept. Phone t D004100 Fax II ' Fax r 1 1 S T E E L r Sleet Metier 6 Davis w 218 South Monroe, Sufle 301 • HECTOR. Tallahassee, Ronde 92301-1804 1150.222.2300 D A 'V I S Steel erector & Davis LLP elh err Fax mama ksortli Mann nalgORAl! DIfid Privileged & Confidential / Attorney -- Client Communication 1 Hy Fa:(305 /292-3516) and Mail • To: Robert N. Wolfe, Esq. Office of the County Attorney, Monroe County, Florida From: Cary P. Timiu, Esq. 1 Date: July 12, 2001 Re: Proposed Utility Agreement with KW Resort Utilities Corp.. • M requested, this memo offers questions and suggestions about the proposed Utility Agreement ("Agreement') between the County of Monroe ("County') and KW Resort Utilities Corp. ("KWUC') for sewage collection services for spa cified.County facilities. As your office consulted us about this proposal only rec gamy, some points noted below may fail to reflect the course of the parties' negotiations or issues considered already decided. This memo is based on the draft of the Agreement sent to us on June 28, 2001. For convenience, the memo is divided into a section of general comments (Part I) t and another for comments about specific provisions of the draft Agreement (Part YT). Because many issues are intcsrclated, this division is somewhat arbitrary. In addition, we Taro preparing to sending separately from this memo a copy of the Agreement on which arc marked a number of 1 drafting points that should be self - explanatory and are not discussed here. Y. Genera/ Comments 1 A. JCVJUC, Although the County may already be familiar with KWtJC and its operations, conceptually the transaction presents several questions that you may want to explore, HAS KWUC furnished satisfactory evidence of its ability to meet County code and cootracting requirements and to perform initially and overthc longer term? This could include such elements as: (a) present and projected system capacity, (b) ability to rauitatake and complete construction of system additions as required in the'/tig eernent, plus any other projected expansions, (c) adequate level of service to =is' and future custorrrerrs,.(d) ability to process wastewater and to treat and deliver'graywater' for the intended uses, (c) financial and managerial resources to meet all commitments, (f) regulatory compliance; 'and (g) any significant pending litigation, disputes, or regulatory enforee anent proceedings. 1 Mama weer Palm asses TIM ueee Kay wit Lorton Caws use Pak Rlo es Janeiro Sam cosines 1 1 1 1 -- -- ••,••• •••••... ... .. .. ..u�aa "a.. u.. .. a. ,u JYI O�y LJ5 1V VAL.:t :1/ 1 • I B. Miff, The Agr+oemeat is "subject to all of the terms apd provisions of the Tariff," which controls in event of any conflict with the Agreement (§ 18). The Tariff is defined as KWUC's "existing and future schedules of rates and charges" (§ 2) and evidently Is filed with I the Public Service Commission (§ 19(g)). It would seem prudent to take ane ar more clam following steps: (a) review the Tariff for any effect on the Agttemot (b)• Novido that tits 5 ` „ 1 A g r e e r a t h e r , : . s . . , ' ■ controls in event of any co . i • • or c obtain a warren or ' �` I • vacant that nothing in the Tariff co i e 'ors with or , • - • - , . the Agreement. Some bulk s .c agreements must a wed and become partcia utility's tariff. ' I KWUC should be able to provide infomution and assurances an this point However, if the Agreement is consummated and remains subject to future .changes in the TarIff then conceivably KWUC could in effect modify the Agreement unilaterally by ernontling its Tariff. To protect against this risk, the County may want to add provisions entitling it (i) to 1 notice of any such proposed changes, so that the County could protest them if it so desires, and (ii) to terminate the Agreement, or to obtain price or service adjustments, if its terms are -materially adversely altered by changes in the Tariff, Issues bearing on terminating the 1 Agreement are discussed below. C. Fes. The Agreement impliei (§ 7) that the Florida Keys Aqueduct I Authority may at any time acquire KWUC or KWUC's facilities used to service the County properties. The only clear consequence of such an occurrence under the Agreement is that funds until then held in escrow to pay or reimburse KWUC's construction costs would Instead be . II "transferred to" PKAA (§ 7(b)), implying that they are released from escrow. Is this loss of .,;Q control over escrowed funds acceptable? Mare generally, should the Agreement have other � "' � provisions to accommodate this possible sale? For example; should the Agreement be subject t I P ar,. t? Sven absent a sale, does PKAA have some a tTiority over the , i if transaction, KWUC, or the County's sewer services that should be reflected lathe Agreement? • e. D. Changed Property Uses. Interpreting § 11; the Agreement would run for the ' It ; 1 lesser of 99 years or until KWUC or its SUCCASSOIS no longer "paovidea sewer services to the public." One risk this language creates is unexpected expiration of the Agreement if KWUC (or its then successor) goes out of business or ceases serving "the public, "' a term that must exclude I the County if the provision is meaningful. A separate, troubling issue is, so to speak, the encumbrance on the County's present use of its Property. The Agreement assumes that the cunt uses will continue forever. While presumably no change in we is now anticipated, the length of time involved opens the possibilities that the precept facilities may be significantly expanded, that the Property could be put to distindtly differcpt or additional uses, or conceivably • that the County may want to lease or convey the Property to :someone :else. Although it does not I expressly prohibit such changes or transactions, thee Agreement does not provide for them. At a azlaimum, it would scam that KWUC should be obligated to continue service if the County's „r„ uses continue basically the sense but increase in volume, and lithe system and service "�L� requirements are not drastically altered even if the County's :or a subsequent ldssee's or owner's 1 use changes. 1 2. . STEEL HECTOR Et DAVI ut • 1 1 .. • ...... . v . u ( '" L '. 1 4 V /tt E. water Processing 9�ty. The A requires KWUC to accept w astewater from the County at the Point of Delivery (§ 9(a)).' However, I see no express „p, II obligation to process, treat, or dispose of wastewater. The vaguo uadatnidng that to provide `� "service” in accordance with `Sall applicable laws and regulations" might be interpreted to mean . only "sewage collection services" per the recitals.: You may want to consider adding • ... • . . and warranties that KWUC will process, treat, and dispose. of wastewater and will . . '.. I system (a) in complier= with identified quality apd process 'standards or specific PSC cs in aocordan.c with industry standatds es develo they p and any special Cotirrry reaui�m g (o in a does not se or cause health or environmental risks or damn . Similarly, I Se single paragraph on graywater at end of ¢ 1 states rime , `t3raywatu 1 meet all reuse water quality standards regnlred by law." Here also it may be better to refer to specific state . 0A— requirements, as now and later in effect. In addition, the Agreement provides no penalty, 1 remedy, or price adjustment if KWUC fails to maintain quality or processing standards or fails to a deliver graywatcr as promised. Il F. County's Remedies. The draft greeme nt gives the .County.no specific remedy for a default by KWUC, touch less for circumstatteestbat could deprive the County of the benefits of the Agreement. Section 12 previdtis that, before cxereising en. remedy, a non - defaulting party must give written notice and alloarthe defaulting party 30 days to cure, after I which the former may "exercise all remedies available at law or in equity," This is a condition precedent to exercising rights outside the Agreement, note remedy. By contrast, KWUC is 4 . entitled to "discontinue and suspend" service in event of any. payment delinquency, and this may be independent of its obligation otherwise to gives days' notice ofpayment'default. Without meaning to suggest that the County would have a practice of disputing'o'delaying payments, or will have reason to do so, it would hardly be unusual for the occasional payment to be a few days late. To my mind, these provisions seam ono- sided. : Events and circumstances for which the County may want 'a contractual remedy include: (a) KWUC's banlauptcy or financial distress, (bj sale or change of control to anyone except FRAA, (c) failure to sustain consistent minimum wastewater and ywater services, (d) gr a / =excused delays or interruptions in service, in commencing service, or starting or completing , /, c (e) repeated or chronic failure to maintain quality standards; 0) t , ) damage to County i property, (g) injuries: including adverse health effects to cititiens or consumers, (h) environmental age and (1) third -party claims exposing'the Cbimty or its. oflicials;to shits or =isle or liability attributable to KWUC's conduct. Far from ail these cireMnstances are; "dthulta" in the usual sense. Agreeing on specific remedies, including but certainly not limited f o terminating the Agreement, seems especially important tf as prol#osed, thre County wit'! cpavey crucial wastewater facilities to KWUC. In practical effect,: the County might become* sort of captiv customer, and terminating the Agreement could be ,a last resort. % : Designing specific provisions to p'otect the County against:t eventualities I involves careful work and negotiation. Somo posatbilidcs are: (i) requiring KWLJC to submit O`' quality and inspection reports regularly, enabling the County to monitor p and spot problems; (ii) entitling the County to conduct inspections and teats, including some without al- notice, using consultants of its choosing; (iii) K .YUC consenting to entryof a specific 3. . STEEL HECTOR& DAVIS Ltr . 1 • _ _ _.. .. . ...... ....... .__ ......Iva �/� • v!'l a•. a. .J D U : , � / 11UJG:7L..{J lb t ML. . b/ I10 decr or mandatory injunction if It fps to • erfOzm �t, v) price re4uctiima•,.O�f.1�1..+{sAdated such L b 111ta Or failures; l .) entitling the County t0 o alternate sr as ( ' 1 • I I . r 1 • . .• , I;.% •. ♦ • • I -I • es• vi cati • : the Coun to re • • environmental clean • or remedia, ... .. eta if 1. • ; vii) entitling the Cotmty obtain court u • • iatment eta receiver for KWUC or the ' system m event or a or or sustained breath . if:Mr4n11 i OM rt► ' 1 b I becomes . + - , .c.r• , ►- - c . , -..... I the Amt, rcgviring KWUC to convey back to the C u tea fatuities that the County has previousTy,conveyed to KWUC. . I IX. Comments an Specific Provisions 1: Section 1 • County Facilities to be Conveyed. 1 • Should a sales price be attributed to thug lift stations and mains to be conveyed to P KWUC? 0 / ��" K• • It seems desirable for legal desaiptions or surveys of these facilities to be attached as 4 exhibits or agreed to be provided later.' • • ' 1 ` • • : - `: • • Should the agrocmcat or an exhibit specify dates for commend or completing ty-d construction and for conveying theftelliides? ' . O 1 • Are plans for the new lift station far emugh alongtbat subjecting them to KWTJC's approval does not risk a serious din ` ppro agreement? Perh�s ab�tncctloa althin a peff. cified time should be deemed irel. j 4 • In c a p n-to- aragraph, the am a requuiag that the On-Site Facilities be "in good wodcing ocdat" upon connection to'KWUC's system ilso refers to "laterals and Property Installations," terms that I do not sco used elsewhere in the Agreement. "Property Installation?' is defined in §.2 but in a a seetns . I er 417' should this covenant relate to time o e- --- cno or of conveyance? • Should the County's obligation to contract new facilities or the construction G schedule be tied to KWUC's performance of its construction obligations under 3? 1 • The final paragraph, concerning meter, would'bc better moved to § 3 or made a '¢� ` separate section. It scans misplaced in & 1. Have the l rQ�q'on and construction `"'� schedule' the line been a • _ gieed VIES wnsttuctiorr is� at. KWUC's cecpcase�� . i, :.. . i 1.4-7N. Section 2. Definitions. • ` 1 Fe • i • I :: • T he definitions of "Property Itstallations" and (Single Faiiiily nstaUati ons" ook to have been taken from an agreement fof eciden1i&I property and may b e superfluous or I should be modified. I did not notice that the deed term !Baisiness Day" is used -.. . anywhere. • The definition of "Customer" is undesateiadable, but what need is there to refer in this Agreement to any customer except the County? Odle only choices are residential and I commercial, I would have thought that County'is'the latter,`but other provisions are based on "domestic" use only. Sirailatly, § 6(a) fifers confitsingly to "Customers" 1 . • . 4 . 1 STEEL H ECTOR &DAVIS Llr 1 1 -- -- - ... nur..•.uw..ua. ..vurvai hat• uttt�.c lU:J10SaY'J-Y3bld 1'Hl:ta ti/ 10 0,-- • A ctga- /''-C 2 I generally. It cannot help the County to include a provision, which looks l l4e a O promise, that "all Customers" shall paY KWUC's fees per its Tariff. • The definition of "System" includes impiovementa Installed on the Property," but ( v/P'd I many of those remain the County's prgperty and ere not part of KWUC's system. This definition also rte to "Central Connection •Lines," another term not elsewhere I defined of used. C �� • "Equivalent Residential Connection" is the crucial definition far the County's costs. 1 AMMO that pricing in this manner was discussed and tentatively agreed and, without w/ t Y seeing an example, have not verified haw the computation will work. Note that the "Capacity Analysis" rate is subject to change. Section 3. JCWUC Construction and Servi I • Has the County reviewed and approved KWUC's constructionplans? Does KWUC need permits that it has not yet obtained? • Should there be it penalty if KWUC does not commence or complete construction on time or does not commence service as pt'eraned? • .' • Should KWUC be obligated to givethe County advance written notice ofthe data on which KWUC will be prepared to Nooept "all blithe County's1 donoestic wastewater" (3d sentence)? Also, that wording •soups too breed; consider using more precise phrasing such as: "all of the County's wistewa tet collected on or discharged from the Property". 4 • It seexna better to move the last 3 sentences, about pricing, to §, 6(a). Section 4. Existing S.vstem. II • The phrase "up to $ 10,000" (or whatever the agreed figure) should be clarified to avoid any implication that KWUC mayclect how much to pay. I gather the intent is, Q "Service Company shall reimburse the County's out -of- pocket costs for engineering, 1 permitting, and removing the recasting plant, but not in excess of 510,000" Section S, luny Rig1. 1 . • T he introductory phrase ("Prior to Service Co�xtpAny's constriction , , . ") appears to apply to subsection (a) only. I assume that you are reviewing the proposed easement (Exhibit "B')• .. _ . • • Subsection (b) leaves unclear which "1 }ft station and force main" are meant Is there e any practical COIN= that this accommodation in favor of cater custom � customers could / `"7 1 interfere with KWUC's services to th4 County? • D.//— • Should (e) refer to a depd instead of a bill of sale? — ✓_ 1 1 5• STEEL HECTOP. & DAVIS LIP • 1 1 , •� — ws WW... I COUNTY ATTY OFFICE ID:3052923516 PACE 7/10 1 Section 6. Ziwkg. • Per comments above, substitute the final .3 sentences of § 3, with any needed ' 4212441 1 revisions, for §6(a) of this draft . • I assume the pricing formulas in (b) were negotiated Has the average br typical flow K: been measured, so that the initial Capacity Reservation Pee is beIievedmtt'fieient for I the foreseeable future or at least a good A►hilo? The rcferet . C h. 64&6 should not be to a "Statute". Have those provisions been reviewed to neaten dun they yield a definite and acceptable price for "additional capacity"? I • Subsection (o) is either cut off in my copy or incomplete, as clauses (i) and (d) ca11 for 41 01� % payment of only 2/3 oft= total fee. • r • Subsection (d) should refer to Section 6. not "Section 5". More lmportantiy, KWUC ' I should not be entitled to "cancel" tat reservation based on any "failure" of the County "to comply with" the Agreement. Such a drastic result should not occur absent a serious, uncured breach, and the County should ba v entitled to restore its reserved 'k capacity by coming into compliance or paying a fee. Or one could simply delete this 1 provision, so that the County's capacity, if paid for, zctnains reserved so long as the Agreement is in effect. • Subsection (f) is a separate termination right in twos of KWUC and would be better I moved to § 12. A cure period is essential. The liquidated damages could be significant If KWUC terminates the Ag eement soon after the County pays the full . r reservation fee. How does S1,225,800npmparo with KWUC's projected out-of- 1‘ 4 pocket costs and opportunity costs ?. Q • 4' 7 Section 7. Escrow. • 1 • Is just 1/3 of the reservation fee to be escrowod? Why are KWUC's costs far the "Project" excluded from the escrow, and is tbatt amount to be paid directly to KWUC? • I n ( a ) , is t h e r e a n y s c h e d u l e • • ., ' . ' f o r K W U C • be:' • or complete "substantial 1 physical construction" 4 • hich appeaa :to be in addition to the Prof? Will disbursements from es' • •_: * T• I• - venders submitting Invoices to KWUC or instead to KWUC, and if the latter, how will the County assure that the vendors aro 1 paid? All this can be spciled out in the escrow agreement. • • The last two sentences of (a) go beynatthe escrow arrangement: Does the County be-40 really intend to require all property owners in'KWUC's stsvlce area to coon system and to pay its tariff, and can it flO so, lawfully and in practice urely the County cannot agree to cause other patties to pal 'KWUC even if the amounts arc owing. Or is this sentence actually meant to be !trotted to the County's Own use? The last sentence is confusing because I am unsure what "breach" Is meant or why any breach accept wrongfully withholdiageserowed funds should entitle KWUC to them. - • • Regarding (b), ace commarta in Part I egarding PKAA. This provision implies that there is no reason to bold funds in escrow if FKAA, instead of KWUC, will use them. 1 1 6 STEEL HECTOR & DAVIS ur 1 ---,.- -. .+.+•-.a ..[w',:I1UNKUt. LOUNTY ATTY OFFICE 10 PAGE 8/10 1 t: • I • Shauld (c) be limited to the cireumatauce that KWUC has not commenced expansion but is otherwise in compliance with the Agreement and is providing all required services (so that ao expansion will have :tuned out to be needed)? 1 Section $. Absolute Conveyances. • • ' I • This presumably accords with the parties' intent.' However, does the County want a right or option to buy back the "On-Si c.Faoilitier and relatedtasemeats if (a) it rightfully terminates the Agreement, (b) KWUC is acquired by new owners in whom I the County lacks confidence, (c) RWUC's performance is seriously deficient and not _ remedied, or (d) the County decides, perhaps after some minimum number of years, to resume self- servioc? An appraisal mechanism could used to set a price. 1 Section 9. Scrvic tu4Maintenance. A. K 1 • The first clause of (a) cannot be taken literally and iat61 be deleted or replace with I something Wee, "Upon connection as riaovided in Section 1 ". See earlier comments about processing and maintenance obligations.' What if KWUC muses the 10/31/01 deadline due to its " fault"? In the abst&aca of a penalty, the result seems the same as if I any delay is not KWUC's fault, i.e., the County has to bear the costs of disposal. You night consider a sharing formula that shifts an increasing portion of those costs to KWUC the later it becomes. 4 • Subsection (b) goes without saying but Should be paired with KWUC's obligations maintain and keep its system in good repair, full operating condition, and in ®i" compliance with applicable law and to:promptly remedy all breakdowns, spills, contaminations, and the like. Purther,the Co ' should have aright to inspect the I On -Site Facilities ... . . .i•. _�, . i'4•tareartt�rl:. . • Sub - ons (d) and (c) seem to have xi clear practical purpose but should allow some ` flexibility or describe a threshold, as strict compliance seams uancalisRc: . ID � � = = Section 10. Repairg. I 4 ( " • You tiny want ro limit this provision tp'"materiat" damage or destruction caused by _ acts or omissions " taken without legalyusdficatiou " and by '' eltrrminzitiag "nvitccs" and "licensees," at least the former of whir atoms to 'embrace th a public. The phrase "their respective" is wrong; " its" would do. The 'County should be'able to dispute invoices tbat it believes are not its responsibility:* The last sentessee appears either to . duplicate § 9(b) or to suggest that the County is responsible for parts of KWUC's s Sections 1 1 germ) & 12 CDefaultl — See: comments in Part I. • ■ 7 • STEEL HICTOR & DAVIS LLP . 1 1 1 -- - - .. • . r r<urh : MuNIUt COUNTY ATTY OFFICE I D :305292 35 1 6 PAGE 8/10 1 Section 13. Excuses from Performance. • While a force majeure clause like (a) is appropriate, you may want to require KWUC to notify the County whenever it is claiming the benefit of this clause and to take all reasonable measures, at its expanse, to.restore full service at the earliest practical opportunity. ® • In (b), the phrase "other than the fault of the Co' unty seems wrong, Consider ® whether it should it instead be, "other aura, due conduct of KWUC and its agents and representatives, and except fir lawful actions and decisions of the County in the exercise of its governmental powers.' • Under (c), should KWUC be excused even if these conditions are due to its own conduct or neglect? Is the 24 hour period practical? Does the County have back-up emergency services? • Subsection (d) is too broadly phrased. .Consider adding at the end, "so long as KWUC uses its beat efforts to restore full service, at the earliest practical opportunity and in fact restores service within a reasonable time in the circumstances." Section 1 Indemnification. • • I assume that your office has developed standard clauses that it uses in comparable contracts. Why should the County be responsible for the conduct of independent contractors and subcontractors? 4 • The provision as drafted is wholly one: sided. KWUC should be obligated to indemnify the County against costs, losses, daaacs, etc. to the cadent that they are attributable to any conduct or breach of KWUC or its agents or representatives, including without limitation any incurred as a result of third -party claims, damage to County property, personal injuries, pollution, and the like. Again, your office has doubtless developed similar clauses for use is other contracts. 1 Section 18. Imo$. -- See comments in Put I. • Section 19. Miscellaneous. 1 • Subsection a) is a waiver of jury trial.; This may or may not be acceptable to the County. I • Subsection (k) is a prevailing party attorneys' fee provision, which again may or may • not be acceptable. ' Some Other Provisions That Might Be A4dgd To The Agreement • Effect of ssible florae eminent domain ceedin Po Pr'o gs. • Representattona and warranties by KWUC that (a) nothing prevents it from entering 1 into and performing the Agreement, (b) the Agreement is its binding and lawthl obligation, (c) it is in full compliance with all utility and environmental permits, 8 STEEL HECTOR & DAVIS ur 1 orders, laws, and regulations, and (d) there are no pending or threatened suits, proceedings, claims, or demands that would have amaterial adverse effect on its ability to perform or to continue its business operations. • Alternative dispute resolution procedures if the County is so inclined. • Right of County to obtain or purcbase temporary 'site: native services in event of an emergency or prolonged service intern ption, with KWUC to bear at least some Costs. ‘.. 1 • 9 STEEL HECTOR & DAVIS LI 1 1 1 1 1 1 1 Exhibit I 4 Opinion KW Resort Utility Corp. Agreement 1 1 1 1 1 JAN -13 -04 09.55 FROM:MONROE C'r"JNTY ATTY OFFICE ID:3052923516 PAGE 1/1 MEMORANDUM 1 VIA FAX: DATE: January 7, 2004 TO: Danny Kolhage Clerk of the Courts FROM: Richard Coilinsi County Attorney RE: KW Resort Utility Corp. agreement if August 2001, your Memo of December 23, 2003 " „ „ eft 1 The contract in paragraph 6 established a capacity reservation fee of $1,225,800 for 454 ERC's based on a flowage of 83,000 gallons per day from the law enforcement facilities (jail Included) on Stock Island. Once the collection infrastructure was built and working (and it Is) that money became irretrievably due KWRU albeit payable in installments over a two I year plus period. Perhaps as an incentive to spur the sewering of South Stock Island, paragraph 7 provided an accelerated payment schedule for $1,225,800 if KWRU began construction of SSI expansion. However under the August 2001 agreement KWRU was under no obligation to do so. 1 Given the above, it is the opinion of this Office that $1,225,800 may not be used to offset any final payment that may be due KWRU under the July 2002 contract because the funds 1 are already owed KWRU under the August 2001 contract. Given this situation any audit of the use made by KWRU of the $1,225,800 in escrow is academic because KWRU was, in effect, expending their own funds. 1 R/.IRC /jeh 1 1 1 E 1 1 1 1 1 Exhibit J Approvals of Applications for Payment 1 1 1 1 1 1 1 1 1 The Weiler Engineering Corporation 20020 Veterans Blvd. Suite 7 -9 Port Charlotte, PL 33954 (941) 7644447 Stock Island Sewer Expansion Project OON611 1U C11 Q N � MA NAG EMENT Approval of Application for Payment OCT 15 2002 Submittal To: VAL K.W. Resort Utilities Contract No. 02013.001 MON Application for Payment No. 1 was submitted to the ENGINEER on September 26, 2002. The request is for an amount of S192,975.84 by E.T. MacKenzie of Florida, Inc. The work completed includes 100' /e Mobilization and 15% construction stake out and as- builts. I hereby certify that the work has been completed to the extent printed on the Application. Jo ay Johnson P.E. Project Engineer, Weiler Engineering 41,7 ; • 4- n4_.i 4 Christopher A. Johns° Project Coordinator, er Engineering 1 1 1 1 1 1 1 1 1 1 20020 Veterans Blvd. Suite 7 -9 • Port Charlotte, FL 33954 (941) 764 -6447 Stock Island Sewer Expansion Project Approval of Application for Payment 1 Submittal To: K.W. Resort Utilities Contract No. 02013.001 Application for Payment No. 5 was submitted to the ENGINEER on January 29, 2003. The request is for an amount of $703,452.41. The work completed includes 2349.5 linear feet of 10" vacuum main, 1539 linear feet of 8" vacuum main 1079 linear feet of 6" vacuum main, 166 linear feet of 4" vacuum main, and 703.5 linear feet of 6" gravity sewer. Additionally, 11 Al valve pits, 4 A pits, 7 B pits, 5 buffer tanks, 7 division valves, 444 linear feet of encasement, 1141.3 SY of asphalt restoration, and 640 SY parking/shoulder repair was completed. I hereby certify that the work has been completed to the extent printed on the Application. Jo Jay Jo P.E. Project Engineer, Weiler Engineering L �' . ,r��C` -� 2/ i/d 3 Chri opher A. Johnson Project Coordinator, Weiler Engineering 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Exhibit K Section 01505 Mobilization 1 1 1 1 1 1 1 1 SECTION 01505 - MOBILIZATION SECTION 01505 MOBTT.JZATION PART GENERAL 1 G NERAL 1.01 GENERAL A. Mobilization shall include the obtaining of all permits; moving onto the site of all equipment; temporary buildings, and other construction facilities; and implementing security requirements; all as required for the proper performance and completion of the WORK. Mobilization shall include the following principal items: 1. Moving on to the site of all CONTRACTOR's equipment required for first month operations. 2. Installing temporary construction power, wiring, and lighting facilities. 3. ru 4. Providing Developing field const office tra ction iler: gr.the water supply. CONTRACTOR, complete with all furnishings normal to : afield o ce and all utility services including telephones. 5. Providing all on -site' ctomtuunication facilities, including cellular phone for the Superintendent. 6. Providing on -site sari #airy facilities and potable water facilities. 7. Arranging for and er;Otpn of CONTRACTOR's work, site access, and storage. 8. Obtaining all required : permits. 9. Having all OSHA required notices and establishment of safety programs. 10. Having the CONTRACTOR' Superintendent at the job site full time. 11. Submitting initial submittals. 12. Audio -Visual pre - construction record as described in Section 01010. 13. Project identification and signs. PART 2 — EXECUTION 2.01 PAYMENT FOR MOBILIZATION A. The CONTRACTOR's attention is directed to the condition that no payment for mobilization, or any part thereof will be approved for payment under the Contract until all mobilization items listed in Paragraph 1.01.A above have been completed as specified. 1 END OF SECTION 01505 1 STOCK ISLAND SEWER EXPANSION SECTION 01505 - Page 1 of 1 1 1 E 1 1 1 Exhibit L 1 Mobilization Letter from E.T. MacKenzie 1 1 1 1 1 1 i E.T. MacKenzie of Florida, Inc. One of The MacKenzie Companies Contracting & Consulting December 9, 2003 Sandra L. Mathena, CIA, CFE, CPA Director of Internal Audit 500 Whitehead Street, Suite 101 Key West, Florida 33040 Re: Stock Island Sewer Expansion Ms. Mathena: Attached please find the items you requested relating to Air -Vac and subcontractor change orders. Regarding our mobilization items, as I explained to the Clerk of the Court in a public meeting, our mobilization for this project was bid at $379,144. After finalizing the contract, the amount was $399,608. This amount was divided between the two phases of the project for convenience of payment by K -W Resort Utility. Included in mobilization are certain items that we consider proprietary information not intended to be made public and available to our competition. We respectfully decline to present details at this time and remind you, as I did the Clerk of the Court, that the bid tabulation for this project shows our mobilization to be well within the price range of our competitors. Please see attached tabulation. Sincerely, '4A CU, La— Harvey W. Davis Division Manager 6212 33rd Street E. • Bradenton, FL 34203.941- 756 -6760 • Fax: 941 - 756 -6698 • EOE 1 1 .8888888888888888888888888 8 . `o °o 0a8I $8R.14 O -RR888 IlB�R 8 g l V W a N N N v(1 a o E 2t I z Q t� .888888p88888S8888888888888888 8 a O pO O 8 8 8 R c §§ O CD O O O O R y g N 8 O 8 t N Of IA N N N t0 !, OD a N 2 = 8888888888888888888888888 8 M N .- l'�1 -0E � ;W 88 t M Y N N �" V `Q Y V 10 N f:f. 8 N p 1 -$$$$$$$$$$$$$$$$$$$$$$$$$ 1 Wg74g4gw pISW:=4"1 t X888 1 o_ a p v> m H 00 g Y -- 00,6 N M N 8888888888888888888888888 8 d w azo�388 8680 ,_- °'- �R88�gN „.2 -„” 0 0W 8888 8 88888888888888888888 z a a§ §" "g § § §1 §§ egg( "k §g§ p p O M N -, e- IA 10 f0 m 0 m Z l� D N Z 1 Z cLui Oc? I. I z m 8888888888888s ' W-WeillIWWt 4i §§qFMNR 2_ Z i S tD cp M a M O- cp CD Y iN ��pp N g M r- p O g O N Y M ; N ( N N r p p p 0p p p � �p a pp p p w O O O M �.;- #. n v�l 8 o n fV 00 .$1 01 O �.51i . O m e YCl N k g s 2 rr Y�1 S 4 g ii f �l . z . '+ .V b w- S N M d ASS c:I' ..i °1 .a a V v < o c't H Z ej gg m I 1 p Q 'A Np ill t 1 1 l' 1 g 4?ipP61d 1 1 1 1 1 1 1 1 1 Exhibit M III Mobilization Letter from Weiler Engineering 1 1 1 1 1 1 1 1 1 1 . 15:41 From- 1XNR0E COUNTY ENGINERING +3052954321 T -419 P.002/002 F -446 "Excellence in Engineering" r' . 1; L ;11.4 _ N13 6630 Front Street, Stock Island C �" Q A T 0 Key West, Florida 33040 1 (305) 295 -3301 ph (305) 295 -0143 fax December 23, 2003 Dave Koppel, P.E. Monroe County Engineering 1100 Simonton Street 1 Key West, FL 33040 RE: MacKenzie mobilization Dave: Although Harvey Davis of B.T. MacKenzie of Florida, Inc. explained that the mobilization fees item +7rd in the contract with KW Resort Utilities Corp were justified and totaled less than a single mobilization cost for other contractors that bid the job, I think it is pertinent to point out that two mobilizations actually took place. The first crew arrived with equipment on Stock Island in September of 2002 and began working on Phase 1 construction. In December, 2002, E.T. MacKenzie of Florida, Inc. made a decision to begin worldng two crews rather than one in order to finish the Stock Island Sewer Project ahead of schedule. The plan was to have the original crew to continue laying vacuum main lines for Phase 1 and Phase 2 & 3. The second crew would begin installing vacuum pits, buffer tanks and gravity lines for Phase 1 and Phase 2 & 3 at the same time. A Caterpillar 340 track hoe, a Caterpillar front -end loader, two equipment operators and several laborers were mobilized at the end of the week of December 9, 2002. The new crew began working setting tanks on December 16, 2002, using dump trucks and drivers contracted from Toppino's. Both E.T. MacKenzie crews continued working simultaneously until the project neared completion in July of 2003. 1 I hope this information helps with your questions regarding the mobilization costs incurred during this project. Sincerely, Ed Castle, P.E. Project Manager 1 1 E 1 1 E Exhibit N 1 Service Agreement KW Resort Utilities and Green Fairways, Inc. 1 1 1 1 1 1 1 1 1 S ERVICE AGREE ,,.n., THIS AGREEMENT made this 15 day of August, 2 02 b I CORPORATION ( "Client") and.GRBEN FAIRWAYS, IN("Administrator"). �' and between KW RESORT UTILITIES WHEREAS, Administrator agrees to be the provide services to Client, for co 1 administration, supervision of payment, supervision of testis mprehensive construction to the installation and expansion of wastewater collection tment semi system o o n� n South S outh tock Island, Monroe of contracts relating 1 County, Florida ("Project "). For such matters, Administrator is authorized to authority to supervise and administer all aspects of the Project. For this work, the Client's s agent with the • Administrator a flat fee as described in paragraph 6 of this Agreement. Client agrees to pay THEREFORE, in consideration of mutual undertakings, it is agreed as follows: 1. DEFINITIONS. a. IJ'rurr�r: KW Resort Utilities Corp., a Florida Corporation. b. PRO _: The installation and expansion of wastewater collection treatment stem Florida, 3` on South Stock Island, Monroe County, da and related contracts. c. Contracts: • Contract by and between KW RESORT MACKENZIE of Florida, Inc.; UTILITIES CORPORATION and E.T. • Contract by and between KW RESORT UTILITIES CORPORATION and Weiler Engineering; and • Contract by and between KW RESORT UTILITIES CORPORATION and 1 • Monroe County. • Contract by and between E.T. MACKENZIE of Florida, Inc., and Airvac, Inc. 3. • 1 Client retains Administrator through the date of the Project's completion. 4. SERVICES. Client retains Administrator for the purposes of administering all aspects of the Project where Client has no internal structure enabling it to administer or supervise the Project. Administrator agrees to represent Client with regard to said Project. Administrator's services 1 shall include the following: a. Comprehensive p ehensive construction administration and supervision; b. Comprehensive supervision of payments; c. Testing supervision; d. Administration of Contracts. 1 1 5. CLIENT RESPONSIBILITES. 1 Client agrees to cooperate with Administrator in its efforts to supervise and administer various aspects of the Project. 6. ADMINISTRATOR COMPENSATION. a. FEES: The fee will be a flat fee of $300,000.00 to administer and supervise the Project as 1 defined in this Agreement. The fee is to be paid in monthly installments of $25,000.00 per month commencing on September 30, 2002. b. COST AND EXPENSES' The cost and necessary expenses have been calculated into and are included in Administrator's flat fee. c. BILLING: 1 Administrator shall bill Client in installments at Administrator' shall be due (30) days from receipt thereof. s option. Said invoices 7. EXTRAORDINARY ADMINISTRATOR SERVICES The fee schedule provided in paragraph 6 above does not apply to Administrator's services involved in defending itself against any action or actions relating to the Contracts or Project. Extraordinary costs and expenses incurred in administering or supervising the Project are optional and if directed by Client to be performed. Administrator shall be compensated for said services on a fee structure to be negotiated by the parties at the time such services requested by Client. rnces are 8. CONTINUATION OF SERVICES. Client acknowledges that this Agreement contemplates services with regard to the Wastewater Treatment System for the entire stated period, notwithstanding sale or other disposition thereof prior, said fee shall remain an obligation of Client. 9. ENTIRE AGREEMENT. This Agreement is the sole and entire Agreement of the parties and the parties hereby acknowledge that there are no other Agreements or understandings between them, either oral or written, relating to real estate tax reduction services for the real estate described herein. [Remainder of page intentionally left blank. Signature Page immediately follows.] 2 ACCEPTED AND AGREED TO: GREEN FAIRWAYS, INC. 1 BY: ADMINISTRATOR KW RESORT UTILITIES CORPORATION d BY: IL Ill i CUE ► 1 1 1 1 1 1 1 3 1 Exhibit 0 Retainer Agreement for Legal Services 1 1 1_ ;AO 1 L_ _ ►iii kit_ R . COOK 3434D 'r- t DC COOK 3 34 THIS AGREENlE p made this 1 st day of RESORT UTILITIES CORPORATION ( " Clint') and SMITH 2002 bY. and between KW it & �{ 1 g;A1 I.GAN (Attorney "), ' HEIVI11%I, BURKE WHEREAS, Attorney agrees to be the legal representatives of the the negotiation of a series of contracts relating to the sale of a wastewat Client, limned to capacity reservation and the installation expansion of wastewater collection treatment lation and a er treatmen plant system in South Stock Island. For such matters, Attorney is authorized to ex records, and documents, communicate with an amine any books, present any information necessary administrative body, party or court, and the Client agrees to pay Attorney a flat fee as describe in contracts Sr r h 6 of f t his Agre i is Agre this wo 1 ement. • THEREFORE, in consideration of mutual undertakings, it is agreed as follows: 1. IONS. a. UTILITY: KW Resort Utilities Corp., 1 a Florida Corporation b . WASTEWATER TREATMENT SYSTEM: South Stock Island Wastewater Treatment System 1 2 . CONTRACTS. 1 . The contracts which are the subject of this Agreement ( "Contrcts ") are 1 as follows: • Contract by and between KW RESORT UTILITIES CORPORATION and E.T. MACKENZIE of Florida, Inc.; • Contract by and between KW RESORT UTILITIES CORPORATION and Weiler Engineering; • Contract by and between KW RESORT UTILITIES CORPORATION and Monroe County; • Contract by and between E.T. MACKENZIE of Florida, Inc., and Airvac, Inc. 3 . TERM. n, : a BRANNIGAN Client retains Attorney for a period time to negotiate final Contracts. "DAMS ST. L.L. 10903 4. SERVICES. ( ) 030.0100 Client retains Attorney for the purposes of negotiating, drafting, and revising Contacts, and Attorney agrees to represent Client with regard to said Contracts. Attorney's services shall include the following: a. All aspects of negotiation, drafting, and revising 'Contracts; b. Where applicable, submitting documents, financi and economic data concenun �, technical, "'° g the subject Contracts; ` ° °"' U PAGE 12970 c. If requested by Client, preparing collateral agreements; d. Advising Client regarding egazduig Contracts. 5. RESPONSIBILITES. Client agrees to cooperate with Attorney in their efforts to prepare and negotiate final Contracts, to provide upon request such information regarding Contracts as Attorney may deem necessary including, but not limited to, technical information, compiled reports; operating statements; documentation of construction or repair costs; and other economic or physical information about the subject Contracts normally presented in negotiating multiple agreements. 6. ATTORNEY COMPENSATION. a The fee will be a fiat fee.of $25,000:00 to negotiate final Contracts b. COST AND EXPENSES: The cost and necessary expenses have been calculated into and are- ! included in Attorney's flat fee. c. BILLING: Attorney shall bill Client in installments at Attorney's option. Said invoices shall be due (30) days from receipt thereof. 7 . EXTRAORDINARY ATTORNEY SERVICES The fee schedule provided in paragraph 6 Attorney's services involved in prosecuting o defendinge does not apply ct to g g action relating to the Contracts, extraordinary ae or actions expenses incurred t procuring documentation, or other costs and s ervices beyond the scope of this Retainer Agreement. These services are optional and if directed by Client to be performed. Attorney shall be compensated for said services on the following ESCH, Fee Basis: MICAH f ADAMS ST. L. 10103 An hourly attorney's fee of $150.00 per hour. 939 -0100 8. EXCLUDED ATTORNEY SERVICES. This Agreement does not include Attorney's services for litigation or any services other than negotiating final Contracts. 2 • 9. CONTINUATION OF SERVICES. 1.00K 34349 PAGE 12970 Client acknowledges that this Agreement regard to the Wastewater Treatment System for the entire stated p with notwithstanding sale or other disposition thereof prior, said fee shall remain an obligation of Client. 10. ENTIRE AGREEMENT. This Agreement is the sole and entire Agreement of the parties and the 1 parties hereby acknowledge that there are no other Agreements or understandings between them, either or or written, relating to real estate tax reduction services for the real estate described herein. [Remainder of page intentionally left blank. Signature Page immediately dlatel follows.] ws.] 1 1 1 1 1 1 E NIBAN 'ADAMS ST. I L. 60903 939.0100 1 1 3 1 OOK 34349 PAGE 12970 ACCEPTED AND AGREED T0: SMITH, HEMMESCH, BURKE & BRANNIGAN 1 BY: A 4r/a • s-- KW RESORT UTILITIES CORPORATION BY: CLIENT LENT 1 1 1 1 MESON, NIGAN ' ADAMS 6T. I L. 60903 939 -0100 1 4 1 1 1 1 1 1 1 1 Exhibit P 1 Check #2779 1 1 1 1 1 1 1 'GREEN FAIRWAYS, INC. $r „,1:2MELIAM L. SMITH, JR. 277f Check #: .Vendor ID:KEY WEST CC Vendor Name: Key West Golf Club . r .. Invoice No. Date Invoice Amount Amount Paid Discounts Taken Credits Taken . Net Amount Work on KW Stock ..scAtNbj 11/18/03 40000.00 40000.00 0.00 0.00 40000.00 Siw4A kiecr Net Check Amt 40000.00 1 wvRK .60,4 .Sy 1)c+0 - 4- & /41 M 1 • GREEN FAIRWAYS, INC. 2 7 7 9 + THE PRIVATE BANK II C/O WILLIAM L. SMITH, JR. AND TRUST COMPANY 11 E. ADAMS ST., SUITE 1400 TEN NORTH DEARBORN - CHICAGO, ILLINOIS 60602 I CHICAGO, IL 60603 2- 848.710 • * * * * * * * * * * ** Forty Thousand &00/100 Dollars I D7tTC N10UI9T • 11 /18/03 * ** *40,000.00 . Key West Golf Club I ,rd„,:. 6450 College Road ir Key West, FL 33040 I 11 '00277 911' 11 EN FAIRWAYS, INC. 0 WILLIAM L. SMITH, JR. • 2779 1 , 1 • 1 6 1 R. ki ^9 ` vJf ‘ ` -1S • • QQ.co ricls Z • 1 DOE= EJU 16FORM$ 1 +800.716 .0304 www.dohu•fom..00, II 1 1 1 is ,t________L________.6"1. 4, , . i ,,_0,.. - - - s _ .._____ _ k_ . . nC . k (4 7 / / 1 II 1 1 ' � 6/ / / U 67 o�� p--)V ..----' ,r �� � 1 1 1 ; ,491 , 4 *-'' I i i i [ , 1 1 1 1 1 1 Exhibit Q 1 Check #1014 1 1 1 1 1 1 1 1 1014 KEY WEST, FL 83046 10 —U( —° Z DATE PAY:- _ j P �• 1 � 10f0.%El MED1f�111YE io t _ f.501- >04 te@ 7 ..3 vQ --15— ?2 rr� FOR eat) lio &leo 4111111011111111111111 too 2 COW 4 , 1 1 \ lots ,s Q M 'T Cow zo`c - v�o cz�z 1 S. I ____ 1\Q.s26),r) ----....9 . .- i*.C-IC 1 c-4 fi`t k_ . 1 QQ:, ,..N.),c, o rs.-2,- o s ok--- ‘.■k..S ct- se----Qc:=‘ " 1 , f__,_s . as 1 1 r @,:z e. d c X, , , ,, 77,4 4 ffit, 4 & 2 Pt a ,) , - ; , 4, , ,,, b I 1 1 BAST ADA2d$ • SUITE 1400.OHIOAOO, ILLINOIS e0 coo- 6004 (OM) 606 -0100 • FAX (312) 909 -7765 www.shbb-law.com MONROE COUNTY I WILLIAM L. SMITH, JB. CONSTRUCTION Doxern P. HsMrMBs0H, Ja. KBVIN P. Swum OCT 15 2002 THOMAS B. BBANNIGAN I SCOTT M. GIIBTZOW OHILISTOPHER B, KAOZYNSHI REM MS September 18, 2002 K W Resort Utilities I cfo Ms. Gillian Siefert 6450 Junior College Road Key West, Florida 33040 1 INVOICE: K39 -02216 4 - R e: Vacuum Sewer Contract Negotiations I The following is an invoice for the South Stock Island Sewer Expansion. Two legal services were rendered regarding contract negotiations. II The contract negotiations were with the following: 1) Monroe County Board of Commissioners I 2) McKenzie for the installation of a vacuum sewer system 3) Weiler Engineering 4) Airvac Sewer Products for the products and vacuum sewer system warranty 1 1 Total Fees for Service Rendered: $25` Please make check a abl p Y e to Smith, Hemmesch, Burke & Brannigan 1 1 1 1 1 1 1 1 Exhibit R Internal Audit Letter Requesting Additional Information 1 1 1 1 o` o . CLERK OF THE CIRCUIT COURT BRANCH OFFICE MONROE COUNTY BRANCH OFFICE MARATHON SUB COURTHOUSE MONROE COUNTY COURTHOUSE F KEY GOVERNNMENT 3117 OVERSEAS HIGHWAY 500 WHITEHEAD STREET SUITE 101 CENTER MARATHON, FLORIDA 33050 OVERSEAS HIGHWAY TEL. (305) 289 6027 KEY WES l; FLORIDA 33040 TEL. (305) 292 3550 PLANTATION KEY, FLORIDA 33070 TEL. (305) 852 -7145 FAX (305) 289 -1745 FAX (305) 295 -3663 FAX (305) 852 -7146 January 14, 2004 Key West Resort Utilities 6450 College Rd. Key West, FL. 33040 Dear Mr. Carter: Thank you for responding to our audit requests. We are in the process of finalizing our audit. The documentation provided for the $300,000 construction administration fee to Green Fairways, Inc. and the $47,000 for legal fees is not adequate. We previously requested the following items and received the following responses. 1 Request Work completion log for Green Fairways, Inc. KW Resort Utility Response Included in packet, labeled as "Daily report of construction," which were reviewed daily by Green Fairways. Auditors Comment These reports were completed by the the engineering firm and consisted of daily work reports of approximately one page per work day. Documentation is needed for Green Fairways, Inc. that details -the date, the hours spent working and on exactly what work was performed by whom and the amounts paid. Request Individuals completing the work for Green Fairways, Inc., job descriptions and their qualifications. KW Resort Utility Response William L. Smith Jr., President of Green Fairways Inc.; Doug Carter contract construction manager; Gillian Seifert contract accounting services. 1 C Auditors Comment Job descriptions and qualifications of these individuals were not provided. Request Accounting records, payroll records, bank statements and cancelled checks for Green Fairways, Inc. KW Resort Utility Response Included in packet, labeled "Green Fairways accounting records." Auditors Comments The only financial record provided was check number 2779 dated November 18, 2003 for $40,000 to the Key West Golf Club. The documentation says Doug and Gillian's work on South Stock Island Sewer project. The amount was charged to consulting fees other. Please provide documentation and time sheets on the use of the other $260,000. Second Request Documentation of work performed by Doug Carter and Gillian Seiffert for the $40,000 payment from Green Fairways Inc. to the Key West Golf Club. KW Resort Utility Response Doug and Gillian's responsibilities in the expansion of the KW Resort base were, but not limited to; daily oversight of contractors and engineers, financial record keeping including, accounts receivable and accounts payable, compiling data for customer agreements and coordinating inspections for new customer connections, and compliance with Florida Public Service Commission regulations, along with many other general managerial duties. Auditors Comments As stated above, we request work completion logs and time sheets that provide documentation of the $40,000 payment made in November 2003. Request List of required documents - Legal bills. KW Resort Utility Response Provided to Monroe County Auditors on November 5, 2003. Invoice K39 -02216 for $25,000 to KW Resort Utilities for Vacuum Sewer Contract Negotiations. 1 Auditors Comments Please provide invoices and checks for the remaining $22,000 in legal fees. 1 1 1 Based on the information that has been provided to us thus far on these matters we are unable to determine if these are appropriate expenditures. Sincerely, )&a"tini. rrizt Direstor of Internal Audit Sandra L. Mathena, CIA, CFE, CPA Director of Internal Audit 1 1 1 1 1 1 1 1 1 1 1 1 f 1 1 Exhibit S 1 County Attorney's Memorandum of Guidance 1 1 1 MEMORANDUM OF GUIDANCE 1 TO: Honorable Danny L. Kolhage, Clerk of Courts FROM: John R. Collins, County Attornj SUBJ: Payment Requests from KW Resort Utility 1 DATE: January 29, 2004 1 You have indicated to me that your intemal audit of the expenditures of KW Resort Utility pursuant to its Capacity Reservation And Infrastructure Contract with the County has initially revealed the payment of $347,000.00 for "Construction Administration and Legal Fees" for which the Utility can provide no backup documentation. Your question is, essentially, whether you can withhold that amount from monies due on current and future payment requests until such time as adequate documentation is provided to substantiate the amounts paid. As a preliminary matter, I note that your concern is based upon your legal obligation to properly account for the expenditure of public funds only for legal and permitted purposes. 1 A preliminary review of the contract indicates that the County's financial obligation to the Utility is to pay for (1) the purchase of wastewater treatment plant capacity reservation to serve South Stock Island, and (2) the installation and expansion for the wastewater collection treatment on South Stock Island. This obligation is to provide "initial funding" which the Utility agrees to repay to the County from fees collected from new Utility customers. The Contract "allocated" costs in the areas of (1) collection system infrastructure, 1 (2) contingency, (3) engineering and engineering inspection, and (4) construction administration and legal fees (listed at $347,000.00). The figure agreed to for the "initial funding" is an amount "not to exceed " -- or a "maximum amount" of -- $4,606,000.00. It is clear from the language used that this amount was neither a guaranteed amount nor a fixed amount, but would be a sum dependent upon actual expenditures on the project by the Utility. Thus, the actual cost to the County would be a figure derived from legitimate project costs incurred by the Utility. To substantiate the project costs, the Utility, under the terms of the Contract, is required to provide adequate documentation for review and approval by the County Engineer and County Clerk. 1 In this specific instance no documentation has been provided detailing or itemizing the basis upon which the $347,000.00 was spent. Thus, you cannot determine whether the amount expended was legally an obligation of the County under the Contract. With the above in mind, I believe you are within your rights – and robabl P Y duty- bound —to withhold sums from current and future payment requests for which no 1 adequate documentation has been provided. As a side note, I find it hard to believe that a Martindale- Hubbell listed law firm such as Smith, Hemmesch, Burke & Brannigan (the firm used by the Utility for legal services related to the Contract) does not provide its' clients with detailed billing records, or keep internal records to substantiate and document time and expenses spent on client matters. It may be that, in this regard, all the Utility need do is to ask its' law firm to provide it with such documentation. 1 1 1 1 1 1 1 1 1 c E 1 1 VII. Auditee Responses - 1 County Administrator and Clerk's Finance Department 1 1 �i E 1 1 1 } r r` �� BOARD OF COUNTY COMMISSIONERS _„_ f w , , � ,,- p vt1 — Mayor Murray E. Nelson, District 5 1 ._. u . ` leo I • Mayor Pro Tem David P. Rice, District 4 O U N TYM O N RO E ,- '' " Dixie M Spehar, District 1 ^ , 73 r . George Neugent, District 2 1 KEY WEST FLORIDA 33040 � �i � � t 294 -4641 4 a , , w I . 1.," ,, , • Charles "Sonny" McCoy, District 3 * ,lizi r- i cc -, I Monroe County Board of County Commissioners Office of the County Administrator m' • The Historic Gato Cigar Factory >_ ;. 1100 Simonton Street, Suite 205 ,+ Key West, FL 33040 '• (305) 292 -4441 — Phone (305) 292 -4544 - Fax I MEMORANDUM Date: March 15, 2004 1 To: Danny Kolhage Clerk of the Court lik From James L. Roberts A 2C--7 County Administrat I Subject: Response to Preliminary Audit Report of Monroe County Contracts with KW Resort Utilities — Capacity Reservation and Infrastructure Contract and Utility Agreement I Opening Response: I V. Audit Findings g A. Utility Agreement 1. No escrow agreement or escrow agent Finding: Section 7 of the Utility Agreement states "The capacity reservation fee described in paragraph 6(c)(i), I hereafter 6(c)(i) funds (minus the cost incurred by Service Company to complete the Project including the graywater line), when due, must be deposited in an interest bearing escrow account with a federally insured financial institution that has an office in Key West, Florida. The mention of 6(c)(i) funds include all accumulated interest. The terms of the escrow are as follows: a) When the Service Company begins substantial physical construction to expand the capacity of its 1 wastewater treatment plant or to extend its wastewater collection infrastructure to serve additional areas in South Stock Island or other islands then the escrow agent will release the 6(c)(i) funds to the Service Company in the following manner: the payments will be made monthly equal amounts based on the IE expected completion date of the expansion as set forth in the Service Company's construction documents. Release of said funds shall be made by escrow agent upon presentation of construction invoices E (including costs of real estate acquisition, purchase or installation of pipes and lift stations, and professional services; provided that such costs are exclusively attributable to such expansion of capacity or extension of collection infrastructure) to be paid by Service Company along with a statement from Service Company describing the construction for which the invoices seek payment." The Service Company does not have an escrow agreement or escrow agent. The capacity reservation funds were withdrawn at the sole discretion of KW Resort Utilities Corp. See Exhibit F - Letter from General Manager KW Resort Utilities Corp. Recommendation(s): 1 1. See recommendation A3. County Administrator's Response: 1. The Administration concurs that future contracts should be more clear in reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues mentioned are not only included in contracts but followed through by the entities doing business with the County. The Administrator will request of the Board of County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on provisions of all contracts. 2. Payments made from escrow funds also paid by the County as part of the South Stock Island Project Findine: Internal Audit requested an accounting of the funds withdrawn from the MCDC escrow account. Funds I of $687,696.06 were withdrawn from the MCDC account. Invoices totaling $344,062.98 were provided for the jail project and Internal Audit requested information on the additional $343,633.08. Withdrawals from the escrow account included two payments that were also paid from funds payable under the Capacity Reservation and Infrastructure Contract. The first payment of $25,000 was made to I Smith Hemmesch Burke & Brannigan on October 1, 2002 by KW Resort Utilities for vacuum sewer contract negotiations. The $25,000 was withdrawn from the MCDC escrow account by KW Resort Utilities on September 23, 2002. KW Resort Utilities also billed Monroe County on Application #1 $25,000 for Smith Hemmesch Burke & Brannigan. The County paid the $25,000 for Smith Hemmesch Burke & Brannigan to KW Resort Utilities as part of check #2004005 dated November 5, 2002 for $250,530.84. 1 The second amount for $236,000 was withdrawn from the MCDC escrow account on August 25, 2003. KW Resort Utilities paid MacKenzie $235,856.94 on August 25, 2003 with check number 1458. Monroe County paid KW Resort Utilities Application number 10 on checks 92811 and 92812 including the MacKenzie amount of $235,856.94 on November 12, 2003. KW Resort Utilities stated that the funds for the legal bill and the payment made to Mackenzie would be reimbursed to the escrow account upon receipt of funds due KW Resort Utilities by Monroe County on the SSI Infrastructure Contract. See Exhibit G - Memorandum from KW Resort Utilities Monroe 1 County Audit Re MCDC. 1 The disbursements from the MCDC escrow account have not been made in accordance with the • provisions of the Utility Contract. There was no escrow agent approving the invoices before withdrawal of the funds. Recommendation(s): 1. See recommendation A3. County Administrator's Resnonse: 1. The Administration concurs that future contracts should be more clear in reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues mentioned are not only included in contracts but followed through by the entities doing business with the County. The Administrator will request of the Board of County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on 1 provisions of all contracts. 1 3. Utility Agreement ambiguous Finding The Utility Agreement in paragraph 6(b) established a capacity reservation fee of $1,225,800 for 454 ERC's based on a flowage of 83,000 gallons per day from the law enforcement facilities on Stock Island. The Agreement states "County shall pay to Service Company a reservation fee ( "Capacity Reservation Fee "), in the amount of Two Thousand Seven Hundred ($2,700) dollars per E.R.C. connections to be reserved by County to serve the Property (individually, a "Connection ", collectively, the "Connections "). It further states all customers will pay the applicable fees, rates and charges as set forth in the Tariff However, as previously stated in Finding Al Section 7 of the Utility Agreement "The capacity reservation fee described in paragraph 6(c)(i), hereafter 6(c)(i) funds (minus the cost incurred by Service Company to complete the Project including the graywater line), when due, must be deposited in an interest bearing escrow account with a federally insured financial institution that has an office in Key West, Florida. The 1 mention of 6(c)(i) funds includes all accumulated interest. The Agreement is ambiguous as to how the capacity reservation funds were intended to be expended However, KWRU has spent $344,062.98 of the MCDC escrow funds on the jail project and $163,094.03 on the expansion and upgrades of wastewater collection infrastructure to serve additional SSI customers. See Exhibit G - Memorandum from KW Resort Utilities Monroe County Audit Re MCDC. The Monroe County Board of County Commissioners hired Steel Hector & Davis LLP an independent attorney with utility experience to offer questions and suggestions on the proposed Utility Agreement. A letter addressed to the Assistant County Attorney from Steel Hector & Davis LLP, dated July 12, 2001 listed suggestions and questions which it appears the County did not respond to. For example, Section 7 - Escrow states "In (a), is there any schedule or deadline for KWUC to begin or complete substantial physical construction (which appears to be in addition to the Project)? Will disbursements from escrow be made to the vendors submitting invoices to KWUC or instead to KWUC, and if the latter, how will the County assure that the vendors are paid? All this can be spelled out in the escrow agreement." An escrow agreement was never executed. See Exhibit H - Steel Hector & Davis LLP Memorandum. The Internal Audit Department requested an opinion from the County Attorney's Office to determine whether the funds could be used to offset the amount due on the Capacity Reservation and Infrastructure ' "Given the above, it is the opinion of this Office that Contract. The County Attorney's Office stated that Cave p $1,225,800 may not be used to offset any final payment that may be due KWRU under the July 2002 contract because the funds are already owed KWRU under the August 2001 contract." See Exhibit I - Opinion KW Resort Utility Corp Agreement. The contract language in the Utility Agreement concerning the Escrow funds, the actual use of the funds by Key West Resort Utilities and comments made by the Utility and County staff during the audit make it unclear as to what the actual disposition of the escrow funds should be, or was intended to be by either the County or Key West Resort Utilities. However, based upon an opinion by the County Attorney, and with the exception of our initial analysis of the financial activity of the escrow account, this audit does not include disbursements from the escrow account. Recommendation(s): 1. For all future contracts the Monroe County Board of County Commissioners should ensure that the specific contract language implements their intentions. County Administrator's Response: 1. The Administration concurs that future contracts should be more clear in reference to the intentions of the County Commission. Both the Administration and the County Attorney should work to be sure that provisions of the issues mentioned are not only included in contracts but followed through by the entities doing business with the County. The Administrator will request of the Board of County Commissioners in the forthcoming budget a contract monitoring position so that there can be closer tabs kept on provisions of all contracts. B. Capacity Reservation and Infrastructure Contract 1. Two Mobilization Costs Finding The contract between KW Resort Utilities and E.T. MacKenzie (subcontractor) is a unit price contract. According to the General Conditions Section 00700 Unit Price Work 11.02, initially the Contract Price will be deemed to include for all Unit Price Work an amount equal to the sum of the unit price for each separately identified item of Unit Price Work times the estimated quantity of each item in the Agreement. The estimated quantities of items of Unit Price Work are not guaranteed and are solely for the purposes of comparison of bids and determining an initial contract price. Each unit price will be deemed to include an amount considered by Contractor to be adequate to cover contractor's overhead and profit for each separately identified item. Determination of the actual quantities used will be made as an adjustment in the final payment. Originally the contract was bid as two separate projects, one for Phase 1 and one for Phases 2 & 3. The project was developed to be executed in two phases, however, no separate construction phases occurred. E.T. Mackenzie was the contractor used for the entire project which would seem to indicate only one unit of mobilization was necessary. Based on review of the payment applications submitted by KW Resort Utilities to Monroe County, there were two approved mobilization charges associated with Pay Application Number 1 ($199,804) and Number 5 ($199,804) dated September 25, 2002 and January 27, 2003 respectively. Approval of Application for Payment number 1 by Weiler Engineering indicates work completed includes 100% mobilization. The Approval of Application for Payment number 5 does not include mobilization in the work completed. See Exhibit J - Approvals of Application for Payment. According to Section 01505 Mobilization - Mobilization shall include the obtaining of all permits; moving onto the site of all equipment; temporary buildings, and other construction facilities; and implementing security requirements; all as required for the proper performance and completion of the work. See Exhibit K - Section 01505 Mobilization. URS Corporation questioned Weiler Engineering about the two mobilizations in their request for information letter dated 10/07/03. URS's question and Wieler's response is as follows: Please indicate what specific Contractor costs were associated with each of these Mobilization charges submitted for payment. A section of the specifications specifically delineates what the mobilization charges are for. There are two separate submittals, because we bid it as two projects. One for Phase I and one for Phases 2 & 3. We just happen to have the same contractor for both contracts. After bidding, we decided to negotiate with one contractor and during negotiations, agreed to pay him for both mobilizations. The original bid amount for the Phase I mobilization was $189,572 and for Phases 2 and 3 it was $189,572. The negotiated amount for mobilization in total was $20,464 higher than the original bid amount. documentation of the mobilization charges Internal Audit Department requested d es from E.T. g MacKenzie and KW Resort Utilities. KW Resort Utilities stated they do not have any documentation for mobilization. E.T. MacKenzie at first declined to present the information. See Exhibit L - Mobilization Letter from E.T. MacKenzie. 1 Weiler Engineering sent a letter indicating that in December 2002 E.T. Mackenzie of Florida, Inc., made a decision to begin working two crews rather than one in order to finish the Stock Island Sewer Project ahead of schedule. See Exhibit M - Mobilization Letter from Weiler Engineering. After numerous discussions, E. T. MacKenzie did provide a listing of the mobilization expenditures which included such items as overhead, crew housing, transportation of equipment in and out of Monroe County, bonds, field office costs, and travel. He stated he included overhead for the project in mobilization and just split the mobilization into two parts. During interviews with the County Engineer about the documentation received for the mobilization costs he stated the costs appear reasonable, are in line with other County projects and some of the other bids were larger on the mobilization line. Recommendation(s): 1. Construction Management should ensure that the right to audit clause also extends to all subcontractors and is clearly stated in the contract as a responsibility of the contractor. County Administrator's Resnonse: 1. The Administration concurs with the recommendation and will work with the County Attorney to be sure that such provisions are included in future contracts. 2. Capacity reservation fees not remitted to Monroe County Finding: The capacity reservation fees collected for the South Stock Island project are not being remitted to Monroe County. In the Agreement the Utility agrees to repay the funds advanced by the County for the c construction of the South Stock Island wastewater collection infrastructure project. The capacity reservation fee is $2,700 per EDU (equivalent dwelling unit). The Utility is allowed to retain a fixed fee of $600 per capacity reservation fee (EDU) from the project to cover the incremental cost of conversion and initial Advanced Waste Water Treatment (5- 5 -3 -1) operation. The net amount due to the County • from the collection of new capacity reservation fees is $2,100 (capacity reservation fee $2,700 per EDU less discount for AWT conversion $600). The balance in the South Stock Island escrow account from capacity reservation fees as of November 30, 2003 is $135,553.56. According to the Capacity Reservation and Infrastructure Contract Section 4 - I "Utility shall account for the collection of new customer capacity reservation fees on a monthly basis. Utility shall pay to the County the total sum of the new capacity reservation fees collected during any month by the fifth business day of the succeeding month. Recommendation(s): 1. County Management should ensure that procedures are established to monitor the collection of the monthly reservation fee payment. 2. County Management should ensure that procedures that ensure the $600 fee retained per ERC is used for AWT as required by the contract. County Administrator's Response: 1. The Administration concurs with the recommendations of the Audit and, in fact, has already proceeded to establish monitoring procedures for the future payment of capacity reservation fees. This is being done in conjunction with providing the property owners who hook into the new collection system the opportunity to pay their capacity reservation fees over a period of years. There will be appropriate accounting and follow -up mechanisms established. o 3. URS Report - construction phase services 22% of construction costs F indine: In URS's Report, South Stock Island New Wastewater Collection System Review of Design Process and As -Built Facilities on page 22 it is stated "Total costs for construction phase services are 22.0 percent of the negotiated construction costs. An audit of the construction phase services may be warranted to confirm that fees expended are consistent with the services provided. 1 Construction Administration and Legal Fees Table 4 summarizes the fees for construction phase services as a percent of the final negotiated construction cost of $3,500,000. Item number 3 Construction Administration and Legal Fees totals $347,000 and represents 9.9% of the construction value. There is a direct relationship between WS utility, Inc., Green Fairways Inc., Smith, Hemniisch & Burke, and KW Resort Utilities Corp. See Exhibit A - Annual Report of KW Resort Utitilities Corp. - Parent/Affiliate Organization Chart. The Utility is privately owned, but is subject to the Public Service Commission (PSC) with respect to tariffs. The Service Agreement between KW Resort Utilities Corporation ( "Client ") and Green Fairways, Inc. ( "Administrator ") states Administrator agrees to provide services to Client, for comprehensive construction administration, supervision of payments, supervision of testing, and general administration of contracts relating to the installation and expansion of wastewater collection treatment system on South Stock Island." The fee is a flat fee of $300,000 to administer and supervise the Project as defined in this 1 Agreement. The fee was to be paid in monthly installments of $25,000 per month commencing on gr P Y September 30, 2002. See Exhibit N - Service Agreement KW Resort Utilities and Green Fairways, Inc. The Agreement with Weiler Engineering Exhbit B - Owner's Responsibilities Section L. states "If Owner designates a construction manager or an individual or entity other than or in addition to, Engineer to represent Owner at the site, define and set forth as an attachment to this Exhibit B the duties, responsibilities, and limitations of authority of such other party and the relation thereof to the duties, responsibilities, and authority of Engineer. There was no attachment mentioning Green Fairways, Inc. There is also a Retainer Agreement for Legal Services for $25,000 between KW Resort Utilities Corporation and Smith, Hemmesch, Burke and Brannigan to negotiate, draft and revise the contracts for the South Stock Island project. It does not appear that any of the attorneys in the firm of Smith, Hemmesch, Burke and Brannigan are currently permitted to practice law in the State of Florida. See Exhibit 0 - Retainer Agreement for Legal Services. 1 The Internal Audit Department requested the following records from Green Fairways, Inc., on the $347,000 construction administration and legal fees: 1. Work Completion log for Green Fairways, Inc. 2. Individuals completing the work for Green Fairways, Inc., job descriptions, and their qualifications. 3. Accounting records, payroll records, bank statements and canceled checks for Green Fairways, Inc. 4. Documentation of work performed by Doug Carter and Gillian Seifert for the $40,000 payment from Green Fairways, Inc., to the Key West Golf Club. The documentation provided from KW Resort Utilities to support the payment owed of $347,000 included the following records: Check #2779 dated November 18, 2003 for $40,000 from Green Fairways, Inc. to the Key West Golf Y , eY Club. The documentation states Doug and Gillian's work on South Stock Island Sewer Project. There was no supporting documentation provided on work completed, hours worked or personnel qualifications. See Exhibit P - Check #2779. Check #1014 dated October 1, 2002 for $25,000 to Smith, Hemmesch, Burke and Brannigan for contract negotiations. See Exhibit Q - Check #1014. There were no detailed billing records or time records to 1 substantiate and document time and expenses spent on contract negotiations. The President of Green Fairways, Inc., stated he had the Engineer's Daily Reports of Construction faxed 1 to him and he reviewed it on a daily basis. KW Resort Utilities responses are included in a letter from the Internal Audit Department requesting 1 additional information. See Exhibit R - Internal Audit Letter Requesting Additional Information. The response from Green Fairways, Inc., personnel was that this was their first public project and did not realize the paperwork that was necessary. The County Attorney's Office issued an opinion stating "The figure agreed to for the "initial funding" is an amount not to exceed " -- or a "maximum amount" of -- $4,606,000.00. It is clear from the language used that this amount was neither a guaranteed amount, nor a fixed amount, but would be a sum dependent upon actual expenditures on the project by the Utility. Thus, the actual cost to the County would be a figure derived from legitimate project costs incurred by the Utility. To substantiate the project costs, the Utility, under the terms of the Contract, is required to provide adequate documentation for review and approval by the County Engineer and County Clerk ". It further states, "With the above in Pp Y Y g Y mind, I believe you are within your rights - and probably duty -bound to withhold sums from current and future payment requests for which no adequate documentation has been provided." See Exhibit S - County Attorney's Memorandum of Guidance. Recommendation(s): 1. The Clerk's Finance Department should withhold the $308,483 from the remaining application for payments. County Administrator's Response: 1. A response from the Administration is not necessary. 1 C. Monitoring of Contracts Findi Both contracts have unusual provisions that need to be monitored in addition to the construction activities. An individual or department has not been assigned the responsibility to ensure that all contract provisions have been satisfactorily completed which could result in a loss to Monroe County. For example, the capacity reservation fee is $2,700 per EDU (equivalent dwelling unit). The Utility is allowed to retain a fixed fee of $600 per capacity reservation fee (EDU) from the project to cover the incremental cost of conversion and initial Advanced Waste Water Treatment (5- 5 -3 -1) operation. Monitoring needs to be completed to ensure the Advanced Wastewater Treatment operation is completed and the $600 per EDU is expended appropriately. The monthly payment of the reservation fees has not been completed by KWRU, however, there was no Y p Ym mP Y monitoring of this clause. The escrow agreement between KW Resort Utilities and the bank was never prepared and there was no monitoring of this clause. In the Capacity Reservation and Infrastructure Contract the Utility agrees not to add construction cost funded by the County to its cost basis utilized by the Public Service Commission to calculate a a reasonable return on invested capital. Utility further agrees not to use the advances in calculating any impact fees, connection charges or any like charges imposed on Utility's customers, i.e. that the advances will be applied as a credit against such fees otherwise charged. Monitoring of this clause is necessary to ensure that costs are not passed to residents. County Management did bring to our attention during the audit that not all of the insurance coverage was as required in the contract. 1 Partnerships with the private sector requires strong governmental control. Recommendation(s): 1. County Management should ensure that procedures are established to monitor the ongoing clauses of the contracts. 1 1 n Administrator's County Response: u 1. The Administration concurs with the recommendation. As discussed in a previous response to a finding, the Administration will ask the County Commission to create a position of contract monitor so that appropriate procedures and compliance with contract provisions can be assured. 1 1 1 1 4 1 1 1 1 1 1 1 1 1 I . `c ,;;;; c • -. :' Ao t . V. '"r> i • O f C v p t y4. CLERK OF THE CIRCUIT COURT MONROE COUNTY BRANCH OFFICE BRANCH OFFICE PLANTATION KEY MARATHON SUB COURTHOUSE MONROE COUNTY COURTHOUSE GOVERNMENT CENTER 3117 OVERSEAS HIGHWAY 500 WHITEHEAD STREET, SUITE 101 88820 OVERSEAS HIGHWAY MARATHON, FLORIDA 33050 KEY WEST, FLORIDA 33040 PLANTATION KEY, FLORIDA 33070 TEL. (305) 289 -6027 TEL. (305) 292 -3550 TEL. (305) 852 -7145 • FAX (305) 289 -1745 FAX (305) 295 -3663 FAX (305) 852 -7146 March 16, 2004 1 Mr. Danny L. Kolhage Clerk of the Circuit Court Re: Finance Response to Monroe County's Internal Audit of Key West Resort Utilities Dear Mr. Kolhage: Below is the Finance Department's response to the audit finding regarding the Internal Audit of the Key West Resort Utilities: 1 Construction Administration and Legal Fees Recommendation: 1 The Clerk's Finance Department should withhold the $308,483 from the remaining applications for payment. 1 Finance Department Response: In response to a concurring opinion from the County Attorney, the Finance I Department did subtract $308,483 from payment application #11 which totaled $445,521.36 on the Capacity Reservation Infrastructure Contract. Check number 96959 in the amount of $137,038.36 was sent to Key West Resort Utilities on February 26, 2004. 1 Sincerely, . ' cZ I LV Sandra Carlile Finance Director 1 c 1 VIII Auditee . - KW Resort Utilities The following exhibits included in the KW Resort Utilities Response have "not" been included in the final audit report in order to limit the size of the report: Exhibit C - Copies of Invoice Nos. 1 -10, and corresponding payment records showing date of payment Exhibit D - Check in the amount of $237,529.44 from KWRU paid to E.T. MacKenzie Company of Florida, Inc. 1 Exhibit E -1 - Support for Application for Payment No. 5 Exhibit I - Invoice Nos. 1 -10 showing amounts billed as "Construction administration and legal fees" 1 Exhibit J - Payment records for invoice Nos. 1 -10 Exhibit L - Invoice No. 11 1 i L K W RESORT UTILITIES P.O. Boa 2125 Key West, FL 33045 305- 294 -9578 March 16, 2004 Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners Monroe County Monroe County Courthouse 500 Whitehead Street, Suite 101 Key West, Florida 33040 Response to Draft Audit udit Report of Monroe County Contracts with KW Resort Utilities dated March 1, 2004 Dear Mr. Kolhage: On March 1, 2004, at the request of KW Resort Utilities Corporation ("KWRU"), a meeting was held in the office of the County Administrator. Attending the meeting were William L. Smith, Jr., President of KWRU; Douglas M. Halsey of the law firm of White & Case LLP, counsel for KWRU; County Administrator, Jim Roberts; County Attomey, J. Richard Collins; Danny Kolhage, County Clerk; Sandra Mathena, of the Clerk's intemal audit department; and Nathan Eden, outside counsel for the Clerk's office in this matter. KWRU had requested the meeting to discuss the status of outstanding payments due KWRU under three separate contracts with the County. The contracts and the amounts then outstanding are identified below. (1) Reimbursement Contract, dated December 19, 2001 $ 46,800.00 (2) Utility Agreement, dated August 16, 2001 $ 408,000.00 (3) Capacity Reservation and Infrastructure Contract, $ 308,483.00 dated July 31, 2002 (the "Capacity Contract ") At the meeting, the County indicated there were no issues outstanding with respect to the payments due under Contracts 1 and 2. The County requested KWRU to resubmit the invoice for the outstanding balance on the Reimbursement Contract, and it has done so. Since the meeting, the County has paid KWRU the balance due under the Utility Agreement. No agreement was reached with respect to the outstanding balance due under the Capacity Contract. At the meeting KWRU was provided a copy of a draft Audit Report along with a covering letter, both dated March 1, 2004. The letter requested KWRU to respond to certain findings in the draft Audit Report, which responses would be included in the final Audit Report. 1 1 Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 2 Such comments were to be submitted to the Clerk's office by March 15, 2004. On March 10, 2004, the Clerk agreed to extend the deadline for KWRU to respond to the draft Audit Report until March 16, 2004. This letter first provides a project summary for the South Stock Island 1 Sewer Expansion Project, and thereafter responds to each section of the draft Audit Report and findings in the order in which they appear in the draft Audit Report. Relevant documents, not included in the appendix to the draft Audit Report, are included in the appendix to this letter. E PROJECT SUMMARY The South Stock Island Sewer Expansion Project has been a marked success. It was completed on time, under budget, and has provided cost savings for both the County and for sewer utility customers. Notably, this project was the second major sewer construction project in Monroe County. The first project, in Marathon, has had numerous delays and is significantly over budget. The original bid for the construction costs for the South Stock Island Sewer Expansion Project was for $4,753,309. On behalf of the County, KWRU was able to negotiate the construction costs down to approximately $3.5 million, resulting in a cost savings to the County of approximately $1.2 million. This is acknowledged in Exhibit D of the draft Audit Report. KWRU was given sixteen months to complete the project. It completed the project in less than ten months, and did so below contract cost estimates, resulting in additional savings for the County. Further, of the $4,606,000 contract price for the project, $3,150,000 will be returned to the County upon customers connecting to the new system. Finally, the project has resulted in significant cost savings for its customers, especially when compared with other similar projects. The cost of $4,100 per equivalent dwelling unit ( "EDU ") for this project is dramatically lower than other projects, such as North Key Largo Utility ($19,762 per EDU), Islamorada — Plantation Key Colony ($15,738 per EDU), Little Venice ($15,481 per EDU), Bay Point ($18,429 per EDU) and Conch Key ($13,156 per EDU). The KWRU monthly sewer rates of $36.21 are a fraction of other monthly sewer rates in the Florida Keys, such as Key Haven (approximately $80 per month) and Little Venice (projected at approximately $75 per month). The South Stock Island Sewer Expansion Project has been a remarkable success, and has delivered significant benefits to the County and the residents it will serve. RESPONSES TO AUDIT I. Objectives and Scope - The draft Audit Report does not identify the state and local laws and ordinances which were considered. II. Methodology - The County and the Clerk are authorized to audit the Capacity Contract as set forth in paragraph 1(D) of the Capacity Contract: The Utility must make its financial records pertaining to this contract available to an auditor employed by the County or Clerk during regular business hours (Monday- Friday, 9 AM — 5 PM, holidays excepted). If the auditor determines (1) that any money Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 3 I paid by the County to the Utility was not spent as authorized by this contract, or (2) that the $600 portion of the capacity reservation fees collected from property owners was not spent on AWT conversion and operating costs as required by this contract, or (3) that capacity reservation fees collected from the property owners were not remitted to the County as required by this contract, then the Utility must repay to the County the amounts not spent or remitted as required by this contract, together with interest calculated at the rate set forth in Sec. 55.03, Fla. Stat., from the date the auditor determines that the funds were improperly spent or withheld. i (emphasis and numbering supplied) The draft Audit Report does not determine: (1) that any money paid by the County to the Utility was not spent as authorized by the Capacity Contract, or (2) that the $600 portion of the capacity reservation fees collected from property owners was not spent on AWT conversion and operating 4 costs as required by the Capacity Contract. The draft Audit Report did find that capacity reservation fees collected from property owners were not remitted to the County as required by the Capacity Contract, but that matter has been rectified. The draft Audit Report selectively 1 addresses certain items in the Capacity Contract and fails to address others. It purports to be an independent review of the "extent of contract oversight provided." This is, at best, ironic because under the two audited contracts, the County Engineer and the County Clerk provided the payment oversight function and it is the Clerk who is now conducting the audit. The draft Audit Report makes no comment regarding the Clerk's review and approval of invoices which the Clerk's Office now has determined should not have been paid. III. Background Information — The draft Audit Report observes, "there is a direct relationship between WS Utility, Inc., Green Fairways, Smith, Hemmisch & Burke, and KW Resort Utilities Corp." It is not disputed that William L. Smith, Jr. has an interest in each of those entities. It is also irrelevant. This "direct relationship" comment is made several times throughout the draft Audit Report, but it supports no finding or conclusion, nor should it. There 1 is nothing illegal or improper about Mr. Smith's having an ownership interest in various entities involved with these contracts. This comment is nothing more than gratuitous innuendo and has no place in a document purporting to be an audit. Under the section entitled "Utility Agreement," there is reference to the County conveying to the Utility the lift station "at no charge" and the County's agreement to construct a I second lift station "at no charge to the Utility." These comments incorrectly suggest that there was some financial benefit to KWRU associated with the conveyance of the lift stations when, in fact, the opposite is true. The County sought to convey the lift stations to KWRU because of 1 their significant operating and maintenance costs. This sentence should be rewritten to state that the Utility agreed to take over and manage the operations of the lift stations and assume their E I Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 4 operating and maintenance expenses. The last sentence of paragraph 3 on page 3 is incorrect as written and should be rewritten as follows: "Upon completion, the County was to direct all of its untreated domestic wastewater, formerly treated at the Detention Facility Treatment Plant, to the Service Company for treatment at the Service Company's applicable tariff." The summary of the Capacity Contract on page 4 of the audit does not quote or even discuss paragraph 1(C)(ii) of the Capacity Contract although that section of the contract is the subject of draft Audit Report fording B(3). IV. Draft Audit Report Findings A.1. Utility Agreement — No Escrow Agreement or Escrow Agent. On December 9, 2003, the County Attorney wrote KWRU regarding the requirement for an Escrow Agreement and an Escrow Agent. By letter dated December 19, 2003, included in the appendix to the Audit at Exhibit F, KWRU responded by confirming that as required by the Utility Agreement ( "Agreement "), the capacity reservation fee described in paragraph 6(c)(1) had been placed in an interest bearing escrow account at Republic Bank in accordance with paragraph 7(a) of the of the Agreement (see letter from KWRU attached as Exhibit A). The letter further stated "The contract did not identify an Escrow Agent nor did it attach an Escrow Agreement. If the County would like a particular form of Escrow Agreement I or a specific Escrow Agent used for the balance of the capacity reservation fee, please provide us with a proposed escrow agreement and the identity of a proposed escrow agent." KWRU received no response to this letter. At the meeting held on March 1, 2004, the County Attorney indicated it was no longer necessary to have an Escrow Agreement or an Escrow Agent. KWRU remains willing to sign an escrow agreement prepared by the County and agree to an Escrow Agent identified by the County. All of KWRU's withdrawals of capacity reservation funds have been done for purposes allowed under the Agreement. The function of an Escrow Agent under the contract would have been purely perfunctory, as the documentation and conditions for the release of funds from the account have been satisfied by the documents provided in support of each withdrawal (see Exhibit B). The observation that funds were "withdrawn at the sole discretion of KW Resort Utilities Corp." improperly suggests that KWRU withdrew funds from the Escrow Account for purposes not allowed under the Agreement, which is not correct. A.2. Payments made from escrow funds also paid by the County as part of the South Stock Island Project. Draft Audit Report finding A.2. correctly notes the amount of funds which were withdrawn from the MCDC escrow account. These payments were for purposes allowed under the Agreement. This finding suggests that vendors were paid twice. This is incorrect. No vendor was paid twice for the same services. The County was invoiced for services under the Capacity Contract in accordance with the procedures set forth in that Contract. Frequently, the County failed to make timely payment of invoices submitted (see Exhibit C). Accordingly, funds were drawn from the Escrow Account to pay vendors due to the delays in payment by the I Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 1 Page 5 County. Nothing in the Capacity Contract prohibited the use of Escrow Account funds for this purpose. The draft Audit Report fails to note that the County was chronically delinquent in making payments of approved invoices in accordance with the Capacity Contract. On November I 18, 2003, KWRU paid McKenzie directly the additional sum of $237,529.44 (see Exhibit D), which sum KWRU was entitled to draw from the Escrow Account. In summary, the Escrow I Account served as a vehicle to buffer lags in payment from the County. No vendors were paid twice and no amounts were disbursed from the Escrow Account for purposes not permitted under the Agreement. 1 A.3. Utility Agreement ambiguous. The County Attorney has expressed his opinion, quoted on pages 9 and 10 of the draft Audit Report, that the funds in the Escrow Account "are already owed KWRU under the August 2001 contract." All disbursements from the Escrow Account have been made for the purposes allowed under the Utility Agreement. KWRU does not believe there is any ambiguity whatsoever regarding what was intended with respect to the disposition of escrow funds. The form of the Utility Agreement was determined by the County Attorney, and the absence of the ll designation of an Escrow Agent or proposed form of Escrow Agreement was also the responsibility of the County Attorney's office. B. Capacity Reservation and Infrastructure Contract 1. Two mobilization costs. The draft Audit Report indicates that there were "two approved mobilization charges associated with Pay Application Number 1 ($199,804) and Number 5 ($199,804)." The draft Audit Report also indicates an opinion that "only one unit of mobilization was necessary." Finally, the draft Audit Report indicates that the approval of Application for Payment number 1 includes 100% mobilization, and that the "Approval of Application for Payment number 5 does not include mobilization in the work completed." There thus appears to be a suggestion that the second request for payment for mobilization was improper and unsupported, a suggestion which is simply not true. 1 To protect the County and KWRU, payment for , p ym or the costs of mobilization was separated into two payments. The contractor agreed that KWRU could pay for the mobilization I via two separate payments, thus accounting for the two separate Applications for Payment for mobilization costs. Furthermore, the support for the mobilization costs appears in the supporting documents for Application for Payment number 5 (Exhibit E -1). The Application for Payment is a request for a specific amount, and the various elements making up this amount are described on the attached detail, specifically under the detail for Phases II and III. This is clearly a separate mobilization cost, not double - billing for the same cost, as appears to be suggested in the draft Audit Report. Furthermore, these mobilization costs are well within the norms for such a project. Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 1 Page 6 1 Moreover, this issue has been resolved by the County Engineer, who determined that the mobilization costs appear reasonable and are in line with other County projects (see 1 Exhibit E -2), and that some of the other bids for this project were larger on the mobilization line. 2. Capacity reservation fees not remitted to Monroe County. On September 10, 2003, the County Commission approved Amendment No. 1 to the Capacity Contract (Exhibit F). That modification specifically amended the section of the Contract dealing with the Utility's obligation to collect capacity reservation fees and transmit such fees to the County. The amendment modified the terms of payment and the County agreed in such resolution to provide to KWRU the form for the Consent and Acknowledgement Agreement. To date, the County has failed to provide KWRU the forms to effectuate the amendment. This is nowhere acknowledged in the audit. KWRU has received capacity reservation fees in the amount of $126,215.03 which it has held pending the effectuation of the contract modification. Despite repeated assurances, to date the County has not effectuated the amendment or provided the Consent and Acknowledgment form. Accordingly, KWRU is simultaneously transmitting to the County under separate cover a check in the amount of $126,215.03, representing the capacity reservation fees, for the County to dispose of as it deems fit (a copy of the check is attached as Exhibit G). A list of the customers who have provided such fees, along with the dollar amount provided by each is enclosed with the check (Exhibit H). KWRU intends to carry out the intent of the contract as amended by the County Commission in September 2003. Capacity Reservation Fees shall be accounted for and remitted to the County on a monthly basis as agreed, regardless of the County's implementation of the Amendment to the contract. In addition, for those customers who have elected to pay the entire $2,700 fee up front, the $600 fee retained per equivalent residential connection ( "ERC ") have been placed in a separate Advanced Wastewater Treatment ( "AWT") account. 3. URS Report — construction phase services 22% of construction costs. Referring to a URS report, the draft Audit Report suggests the construction administration fees for this project were too high. In addition, the draft Audit Report finds that the construction administration fees for this project were not documented, though the contract contains no documentation requirements for such services. Based on its determination that construction administration and legal fees are not sufficiently documented, the County has withheld payment of $308,483 from Invoice No. 11. There are several problems with this approach. First, the County has determined that there are no problems with Invoice No. 11, and does not dispute that KWRU has properly spent the amounts listed thereon. Second, the Clerk's office previously approved and paid numerous invoices containing line items for construction administration after determining that there were no omissions from such invoices. Finally, the County has the right to request repayment if it determines that the Clerk made an improper payment. It does not have the right to refuse to pay Invoice No. 11. This unilateral action on the part of the County violates the procedures set forth in the Capacity Contract. Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 7 The construction administration costs for this project, when compared with other projects, are very reasonable. A review of the construction administration costs associated with other projects such as the Key Largo Park Project and the Key Largo Trailer Village Project shows that the costs to design, engineer, and administer this sort of project fall within a range of $550,000 to $750,000, regardless of the overall cost of the project. For example, the Key Largo Park Project had a total cost of $2.254 million with a construction administration cost of approximately $556,000, resulting in a construction administration cost of 24.69% of the total cost. The Key Largo Trailer Village Project had a similar cost of construction administration of approximately $740,000, but the total cost for the project was approximately $8.9 million, resulting in a construction administration cost of 8.29% of total cost. It is thus apparent that construction administration costs, as a percentage of total project cost, is not a useful indicator of the reasonableness of such fees. The construction administration costs for this project are reasonable and in line with the actual dollar costs for other similar projects. The reasonableness of the construction administration costs may be evaluated based on the EDU cost when compared with other similar projects. For example, in the Little Venice Project, an 800 -EDU project, the monthly construction administration costs were approximately $36,000 per month, whereas for this project, a 1500 -EDU project, Green Fairways charged only $25,000 per month to administer the project. Moreover, the Key Largo Waste Water District Project, an 850 -EDU project, has total construction administration costs of approximately $2,330 per EDU, whereas this project, a 1500 -EDU project, had total construction administration costs of only $520 per EDU. The construction administration costs for this project are reasonable when compared with other sewer projects in Monroe County. The draft Audit Report recommends that "[t]he Clerk's Finance Department should withhold $308,483 from the remaining application for payments." The withholding of this amount clearly violates the payment and audit procedures established by the Capacity Contract. The Capacity Contract breaks out various categories of construction costs, totaling $4,606,000, including $347,000 in "Construction administration and legal fees." Over the course of the project, KWRU submitted ten (10) invoices, which invoices included amounts for services properly classified as "Construction administration and legal fees" in the amount of $308,483 (see Invoice Nos. 1 -10 containing amounts billed as "Construction administration and legal fees" attached as Exhibit I). Each of these first ten invoices was subject to the following review process set forth in the Capacity Contract: The County Engineer must review the invoice and within 5 business days, inspect the work completed and materials delivered, and inform the Utility in writing of any error or omission in the invoice and what must be done to correct the deficiency. If the invoice is satisfactory he shall forward the invoice to the County E E Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 8 Clerk for payment. The Clerk must then promptly review the invoice. If the Clerk determines that there is an error or omission in the invoice, he must inform the Utility in writing. If the invoice is not returned to the Utility by the Engineer or Clerk for correction, the Clerk must make the payment to the Utility within 20 business days of the County Engineer's receipt of the invoice. A corrected invoice need only be returned to the officer who noted the deficiency, with a copy to the County Engineer and, if satisfactorily corrected, shall be paid by the Clerk within 20 days of the officer's receipt of a corrected invoice. All KWRU invoices were properly submitted to the County Engineer and the County Clerk, both of whom had sufficient opportunity to review the invoices for substantive sufficiency and for documentary support, according to the procedures mandated by the Capacity Contract. The County then approved and paid each of these first ten invoices, including those amounts submitted as "Construction administration and legal fees" (see payment records attached as Exhibit J). Any time the County's representatives requested additional information or documentation relating to these ten invoices, KWRU provided the requested information and documentation. In fact, with respect to invoice #1, the County requested documentation regarding the General Administration and legal fees contained in that invoice (see KWRU's response attached as Exhibit K). At no point did the County deny any invoice, or any amount thereof, including amounts for "Construction administration and legal fees," on the grounds that KWRU omitted contractually required documentation from its request for payment. On January 20, 2004, KWRU submitted Invoice No. 11 in the amount of $445,521.36 (Exhibit L). Invoice No. 11 included amounts unrelated to the payment category of "Construction administration and legal fees." Invoice No. 11 was likewise subject to the review process mandated by the Capacity Contract, and the amount for which payment was requested was likewise approved (see Exhibit M). The County does not dispute any of the items in Invoice No. 11. Based on the results of the draft Audit Report, however, the County only paid $137,038.36 of the invoice, and deducted $308,483 related to the past payments for "Construction administration and legal fees" (see Exhibit N noting deduction of $308,483). The Clerk's office, assuming it complied with the Capacity Contract, already determined there were no omissions with respect to the invoices submitted for Construction Administration expenses, totaling $308,483 which invoices the Clerk's office approved and paid. Now, however, the Clerk has determined that these same invoices omitted sufficient documentation to support the amounts the Clerk's office has already paid. Based on this artifice, the County has omitted $308,483 from the payment for Invoice No. 11, which invoice does not include any amount for "Construction administration and legal fees." The County has refused to pay funds properly and legally due to KWRU under the Capacity Contract, in direct contravention of KWRU's right to receive payments under the Capacity Contract. L Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 9 The County is subject to various guidelines in its administration of the Capacity Contract. First, and most notably, the Capacity Contract itself describes in detail the procedures that are to be followed for the submission of requests for payment, the review of such requests, and the payment of those requests. Nowhere does the Capacity Contract provide that the County may deduct from a current payment past payments already made and approved on the basis of a current dispute with either those payments or the requests therefore. The County is also governed in its administration of the Capacity Contract by County Ordinance section 2 -9, which specifically provides that the Board of County Commissioners is to pay for services rendered "as determined by the sound discretion of the board of county commissioners and as specified in the contract." Thus, the County's action cannot be supported by either the language of the Capacity Contract or by the County's own Code (which specifically requires compliance with the terms of the Capacity Contract). The County unquestionably has the right to audit contracts and the Capacity Contract plainly acknowledges such rights. The Capacity Contract also provides that the Utility must repay amounts not spent or remitted as required by the Capacity Contract. Thus, if the County audits the Capacity Contract and finds that KWRU was improperly paid for services not rendered, the County may then seek repayment of those amounts. The County has not, however, made a finding that the $308,483 is related to "amounts not spent or remitted as required by this Contract." Nor has the County made a request for repayment according to the Capacity Contract. It would be lawful for the County to request KWRU to repay such amounts under Section 1.D of the contract if such a finding were made. Instead, the County has failed to follow the contractually mandated procedures, and has unilaterally withheld payment from an invoice over which there is no dispute. The County is thus in breach of the Capacity Contract by attempting to unilaterally recoup past payments in violation of the procedures set out in the Capacity Contract. C) Monitoring of Contracts In its finding, the draft Audit Report comments that the "contracts have unusual provisions that need to be monitored in addition to the construction activities," and that "partnerships with the private sector requires (sic) strong governmental control." These are not proper audit findings. Instead, they are gratuitous political commentary. These comments should be removed from the final Audit Report, unless the following is also inserted: "Private concems entering into contracts with Monroe County do so at their peril." 1 CONCLUSION The draft Audit Report addresses a number of issues surrounding the South Stock Island Sewer Expansion Project. The draft Audit Report includes a number of inaccurate statements that require correction, such as comments addressing payments from escrow funds, mobilization costs, and the payment of reservation fees to the County. There are also a number of conclusions that, in their current form, require clarification or additional explanation due to Ii L Mr. Danny L. Kolhage, Clerk of the Board of County Commissioners March 16, 2004 Page 10 their potential to mislead the reader, such as comments regarding KWRU's withdrawal of funds from an escrow account, the alleged ambiguity of the Utility Agreement, and the allegation that the construction administration costs as a percentage of the total project costs are too high. In addition, the draft Audit Report addresses the County's withholding of approximately $308,000 in construction administration fees, which, as explained herein, is a breach of the Capacity Contract. The amount due KWRU under Invoice No. 11 should be remitted promptly to KWRU. Finally, there are a number of gratuitous comments, including comments regarding certain ownership relationships, comments regarding the conveyance of a lift station to KWRU, and comments regarding the monitoring of contracts with private enterprises, all of which should either be significantly qualified or removed altogether as they have no place in a financial audit. Sincerely, I ` 1 1 \ CV William L. Smith, Jr. cc: Jim Roberts, County Administrator J. Richard Collins, County Attorney Sandra Mathena, Clerk's Internal Audit Department Nathan Eden Douglas M. Halsey 1 1 1 Index to Appendices for KWRU's Response to The Draft Audit Report of Monroe County 1 Exhibit A — Letter from KWRU to County Attorney John Collins regarding placement of the capacity reservation fee in a Republic Bank account Exhibit B — Reconciliation of MCDC Bank Account Exhibit C — Copies p of Invoice Nos. 1 -10, and corresponding payment records showing date of payment. Exhibit D — Check in the amount of $237,529.44 from KWRU paid to E.T. MacKenzie Company of Florida, Inc. Exhibit E -1 — Support for Application for Payment No. 5. Exhibit E -2 — Letter from Jeff Weiler to William L. Smith noting the reasonableness of the project costs. Exhibit F — Amendment Number One to the KW Resort Utilities Corporation Capacity Reservation and Infrastructure Contract Exhibit G — Check in the amount of $126,215.03 from KWRU to Monroe County Exhibit H — List of customers who have provided capacity reservation fees Exhibit I — Invoice Nos. 1 -10 showing amounts billed as "Construction administration trahon and legal fees" Exhibit J — Payment records for Invoice Nos. 1 -10 Exhibit K — KWRU's response to County's request for additional support for Invoice No. 1 Exhibit L — Invoice No. 11 Exhibit M — Engineer's approval of Invoice No. 11 Exhibit N — Letter from Clerk Danny Kolhage to William L. Smith regarding payment of Invoice No. 11 and the deduction of $308,483.00 relating to Construction administration and legal fees 1 1 1 t E EXHIBIT A e 1 1 i e s c c KW RESORT UTILITIES P.O. Box 2125 Key West, Florida 33045 Telephone (305) 294-9578 Facsimile (305) 294 -1212 December 19, 2003 John R. Collins County Attorney County of Monroe PO Box 1026 Key West, Fl 33041 -1026 Re: Utility Agreement between Monroe County & KW Resort Utilities Corp. Thank you for your letter of December 9, 2003. The capacity reservation fee was placed in an interest bearing account at Republic Bank, a federally insured financial institution in Key West, in accordance with paragraph 7(a). All payments from the escrow account have been made in accordance with the requirements and procedures set forth in paragraph 7(a). We have provided Sandra Methena, County Auditor, all documents supporting the disbursements from the escrow account. The contract did not identify an escrow agent nor did it attach an escrow agreement. If the County would like a particular form of escrow agreement or a specific 1 escrow agent used for the balance of the capacity reservation fee, please provide us a proposed escrow agreement and the identity of a proposed escrow agent. Sincerely, KW RESORT UTILITIES CORP. Doug 8 er General Manager 1 1 1 I EXHIBIT B 1 1 1 1 1 t E 1 KW RESORT UTILITY CORP RECONCILE MCDC BANK ACCOUNT SINCE INCEPTION TO 10/31/03 DEPOSITS: 4/2002 1st Payment - Capacity Reserve Fee (1/3) $408,600.00 4/2003 2nd Payment - Capacity Reserve Fee (2/3) $408,600.00 INTEREST EARNED: April 2002 - December 2002 $1,120.50 January 2003- October 31, 2003 $2,224.21 LESS: Transfers made to KWRU Operating Account 4/2002 - $301,898.08 9/2002 450,000.00 10/2002 - $50,000.00 7/2003 - $50,000.00 8/2003 - $236,000.00 - $887,698.06 I BALANCE AS AT 10/31/03 ^ $132,848.65 I Expenditures: 8/02 -3/03 Purchase of Construction Trailer and related expenses $52,515.00 1/02 -10/02 Jail Project $358,247.53 9/02 Smith Hemmesch Burke /SSI legal fees for drafting Contract etc. $25,000.00 12/02 -2/03 Paid to Beneway for improvements to effluent lines $123,699.00 4/03 Filter modifications at Plant $23,580.66 8/03 Payment made to Contractor, MacKenzie, for their SSI Payment request #10 (ck #1458) $235856.94 TOTAL EXPEDITURES $816,899.13 1 E E � EXHIBIT E-2 1 E L L E F t E E I 1 C [ • MAR -11 -2004 12 :38 The Law Offices of SHB&B 13129Z97?65 P.05 'Excellence In Engineering" THE WEILER ENGINEERING 20020 Versant Blvd, Suit. 7 -9 CORPORATION port Charlotte. FL 33954 (941) 764 -6447 ph (9a1) 764 -89tS 6: March 10, 2004 .. ..r. • Mr. William L. Smith, P.A. KW Resort Utilities 11 East Adams Street, Suite 1400 Chicago, 11 60603 • Re: Response to County Audit involving mobilization and fees • DearBE1: I received your PAX regarding the County's concern over payment of two mobilizations and total cost of construction phase services and offer the following: Mobiliptioo Mobilization for the first phase was deemed complete and approved in Pay Request number 1 in September, 2002. Par, our agreement with.the contractor, moMlizaaion for phases 2 and 3 was approved in December, 2002 after the contractor had moved a second crew and equipment to begin work on those phases. Although the project was awarded to a single contractor, mobilization remained as separate bid items for each part just u the other 25 bid items for phases 2 and 3 did. It was always the intent to pay the contractor the total of the two u the project still was divided into twoplats and costs associated with mobilization oontinued throughout all phases. The contractor was gracious enough to accept payment in this manner rather than all at once in the beginning. • Ercl • I am somewhat surprised at tbe.Countai'a conoeiprepriling the•fees during construction considering their Consultant's fees to prepare the, ncc td i layout only for the parks is nearly 7% of the estimated cost of eogs tetlon a Out fees tip,desipi,•survey, permit, bid, provide construction oversight and icene ,certify the project complete and including reimbursable expenses was approximately 13% of the negotiated cost of construction and less than 11% of the bid amount prior to negotiations. The feet for this project are far less than those for the Key Largo project and I can not even guess at what the professional and administrative fees for the Little Venice project are I have been told that Cardinal Contracting is currently receiving about 536,000 per month to administer the Little • , . • 1 MAR-11 -2004 12:38 The Law Offices of SWAB 1J1�+`J3y((o; r-.wo [ . V alid pr oject. The design and administrative fees per connection for the Stock Island project are a fraction of what they are for other projects throughout the County, Is than 1600 per II connection for the Stock Island project In fact, some projects have cost neatly as much to design and administer the projeet.per connection u the Stock Island project cost to build the system per connection. • ... .. .•, v. . i. is •...r . , ..• .. Additionally, it is mireoollection•`thar nail litilid not char any fees for administering the original design contract That said, the fee of'1347,000 for die entire project seems even more reasonable. Other projects in the County have accumulated more than 2rA of the cost for design to administer the design. M always, please feel free to contact me if yon wish to discuss this or any other matters further. Sincerely, • • . . ^I ' . 1.. . . 1 • ... !. . ' i • R t .. _1 :,•, :.i0,., .:. 1 . . •':....1•I'..i :c:,; . The Wale Eni ineaing Coipgra . ; , c ; / 4 CC: File 02013.001 1 . . • : 1 . .. 1 .... . .. . . • . . I 1 1 EXHIBIT F 1 1 1 1 MAR -04 14. 33 FROM . NONROE COUNTY ATTY OFF I I. . v • •.+ 1 • 1 AMENDMENT NUMBER ONE TO THE KIM RESORT UTILITIES CORPORATION 2 CAPACITY RESERVATION AND INFRASTRUCTURE CONTRACT 3 4 5 This is an amendment to the Capacity Reservation and Infrastructure Contract 6 between Monroe County, a politkal subdivision of the State of Florida, hereafter 7 County, and KW Resort Utilities Corporation, a Florida corporation, hereafter Utility. g RECITATIONS 9 A. On July 31, 2002, the parties entered a contract whereby the County 1 t0 purchased a reservation of wastewater treatment capacity from the Utility In an 11 amount deemed sufficient to trea /S� C tea generated on south Stock Island. /44 12 B In consideration for the County's purchase of the reserved wastewater 13 treatment capadty the Utility agreed to extend Its Collection system through out 14 south Stock Island and to collect $2700 per EDU (equivalent dwelling unit) from 14 • 15 each property owner required by County ordinance to connect to south Stock Island 16 wastewater collection system when the system is complete. 17 C. As provided for in the parties' July 31, 2002 contract, the $2700 is t8 intended to repay the County for the County's purchase of the wastewater 19 treatmen t capacity reservation and to pay for the upgrade of the Utility's Stock pa ity 20 Island wastewater treatment plant to AWT. 21 D. Pursuant to the parties' July 31, 2002 contract and the current 22 provision of the Monroe County Code, the $2700 is due In full from each property 23 owner upon notification of availability for connection of the south Stock Island 24 wastewater collection system. 25 E. In recognition of the flnancial hardship to some property owners that � 26 payment of the $2700 in full might cause the Board of County Commissioners has 1 . . i adopted an ordinance (Ordinance No. 027 -2003) that would allow a property 2 • owner r• a - • • • - • • e e - = • - - .: riod of u. to 20 years 3 with annual payments collected as non -ad valorem assessments under Sec. 4 197.3632, FS. 5 F. As a result of Ordinance No. 027 -2003, an amendment to the Capacity 6 Reservation and Infrastructure Contract . is necessary. 7 In consideration of the mutual promises and consideration set forth below, 8 the parties agree as follows: 9 1. The parties' July 31, 2002 contrail (the original contract) is attached 10 to this contract amendment as EMblt A and made a part of this amendment. The 11 parties adcnowledge that the County in Resolution No. 595 -2002 directed that the b iz Utility upgrade its Stock Island wastewater treatment plant to A WT by January 1, 4 13 2007 pursuant to paragraph 5 of the original contract. A copy of Resolution No. 14 595 -2002 Is attached to this contract amendment as exhibit 5 and made a part of 15 this amendment. 16 2. Subparagraph 4A Is hereby added to the original contract to read as 17 follows: is 'A. Notwithstanding paragraphs 3 and 4, as a result of the adoption 19 of Ordinance No. 017 -2003, the Utility shall: 20 (1) collect from a property owner so electing 5% of the total 21 capacity reservation that would otherwise be due and remit the 5% collected 22 to the County by the 10 day of the month following the month of collection; 23 and E j ,. 1 • 1 (2) obtain a written consent to payment of the capacity reservation fee 2 • through the non -ad valorem- collection --- method (on the fArm furnished by the '3 County) and deliver the written consent to the County. 4 The County must by June 1, 2005, determine whether the south Stock 5 Island capacity reservation fee revenue collected through the non -ad valorem 6 assessment method can legally be pledged for the repayment of bonds. If 7 the revenue Is pledged, then the $600 per EDU for AWT must be paid to the 8 Utility out of the bond proceeds within 30 days of the County's receipt of 9 such proceeds (except for the ;600. per EDU collected from property owners 1 10 who paid the $2700 In full). 1f the County chooses not to pledge the capacity 1 fi reservation fee revenue for the repayment of bonds, then the County agrees 12 in fiscal year 2005 -2006 to levy a non -ad valorem assessment on property 13 owners electing the non -ad valorem assessment option that is suffident to 14 generate ;600 per EDU In revenue. That ;600 per EDU will then be paid to 15 the Utility for the AWT upgrade. Alternatively, the County may pay the 16 Utility in Ascal year 2005 -2006 the $600 per EDU (except for property 17 owners who paid their capacity reservation fees In full), out of any lawfully 28 available revenue source.' 19 3. Except as provided in this amendment, In all other respects the P Pro P� 20 parties' original contract remains In foil force and effect. 21 4. This contract amendment will take effect on the signature date of the 22 last party to execute this amendment. 23 IN WITNESS WHEREOF, the parties hereto have set their hands and seals as 24 Indicated below. • 1 nAK -47 1 .* 179 4.1:49 FROn , nuWKYC a.vun a • 'a a x yr r a a.c. • 2 'IOW • • BOARD OF COUNTY COMMISSIONERS - 9 ` • : _ , - • • , : • COUNTY FLORIDA 6 ey Q G..�il�a� By • . 7 • • - :"Deputy Clerk Mayor a rman 8 Date 9 /D -0_3 4 10 11 (SEAL) 12 Attest: / KW RESORT UTILITIES CORPORATION !3 i 0 By . /// � / / / ~Pi�I By ��� 16 - rota • ' • ident is Date 1 l-/Y- Q3 1 19 ponrcwauK 22 ; MONROE COUNTY ATTORNEY a11s T O o�,;t,: 1p E COUNTY lCTTORI ''..f47 / t COLLINS III TO FORM: J R. COt11frYIO'er b. " JOHN R. COLLINS Oak M • a REVIEWED rrNiti s_H =• -es /EI [ . 1 1 . 1 1 1 1 „----, c EXHIBIT G 1 1 1 1 1 1 1 1 1 I II , i � i ' , , 1 . il I __ . / / / /� / / /// / ice ����� I ....: ' -. ; ✓• .-; �� / /_/ /� 'ice / 7/// �%iw!/.' tf 1 PAY ORDER OF M oa a resubrCkt I $ iLt.,24f• 03 1 4. _ r t(� . 03 i� �"w iii! / //��� ' ' i / . ms s 0 . 0..! � % i // • , -� / / / // / iii � �1ii����IO' I PAY TO ORDER O %QUA ihk sS NO flow Mc. I $ MO N -DI •-..-------- i :� E );,.,-.....,-,,,,I.0.,/,„ ..- ,,,,,,,_, -.. .....7:,-.-_-;..., -.4 .._ .1,... ....: .. „,... . .4„.... . �i %��� %i %f�% %iii % %i % «I % � % %��iii� /�� ... L ______ i i i E EXHIBIT H E 1 1 1 1 1 1 1 i 1 i 1 I 1 KW RESORT UTILITIES P.O. Box 2125 Key Wert, Florida 33045 Telephone (305) 294-9578 Facsimile (305) 294-1212 IE March 15 2004 Mr. Danny Kolhsge Clerk of the County Court Monroe County 500 Whitehead Street Key West, FL 33040 Dear Mr. Kolhage: Enc please find our check, drawn' oa the Sth ou Stook Island Era+ow A�000unt. in the smouat of 5126, losed 215 w hich r epr e sents C apa t y Rese r v ation Fees remitted to us end ca as follows: Fees P d��l PAC Tntalriid Dogma/ / Due KW Monroe Cty Hsing Audi 5th & Cross St $16,200.00 812,600.00 $ 3,600.00 Walter Price/Paradise Tattoo 5160 US 1 5,400.00 4,200.00 1,200.00 Fred Satinero 5570 3rd Ave 2,700.00 2,100.00 600.00 Multihull Tech/Consellation Y 600 Shrimp Rd 2,700.00 2,100.00 600.00 Rose & Ray Alvaro 5513 5th Ave 10,800.00 8,400.00 2,400.00 Key West Wilding 5650 lst Ave ' 3,420.04 2,660.03 760.01 Stewart Andrews 5517 5th Ave 2,700.00 2,100.00 600.00 Joe Padgett 8t Patricia Marrero 5510 lit Ave 2,700.00 2,100.00 600.00 1 Fees orm third Paci Hurricane Hole 5130 US1 34,245.00 34,245.00 Balance due Coral Hammock 5510 US 1 54,810.00 54,810.00 when entire Ira Goldstein 6440 Sunshine St 900.00 900.00 fee is reed 1 TOTAL DUE TO MONROE COUNTY $ 126,215.03 Yours sincerely, KW RESORT UTILITIES CORP. Imo, '� Smi c. 1 1 1 EXHIBIT K 1 1 1 1 1 B . . : ' . ' . i • . ,. • .. ....- 1 ......, . . . .•... E . KW RESORT uTiLnills P.O. Box 2125 i -------- - 7 • .---- --- • __ _______ .. . . . . Key WesFl t, orida 33045 C i Telephone (305) 294.9570 . . . Facsimile (305) 291-1212 • • . •. r • . •. : i • • • , November 4 2002 .. . I • I 1 • i • I • ! ...:;:t• Deafly KnihM30 ' . i • • . Clerk of the County Court [ . *tiros Carney • • . 1 • . : 500 Whitehead Street : : Kay Weskit 33040 ; . , Dear Mr. KARP i 1 . , Phea-SCalibikddililitiendga elncitY itaarvatica & hiffestrutt 14 Pkit1itninAlta t NLE048=1 . 7..11 reference to our telephone conversation on Friday regarding .the above, please find 1 triefosed tbe item you requests:I: • • ;:opies of the following Contraots/Agreements: E. T. MacFenzie of Florida inc. • Weiler :tem.kg Corporation • 1 . Smith Hermes& Burke it &minion Green Fairways Tnc. . • I - A :To =closed is a Hut of the Contractors and current Bub-Ccmtractore; Conditional waiver and Release of Lien Upon Payment and a letter from Mr, William Smith mtplalning • the Attorney Retainer Agreement and Seploe Agreement with Green 1 ' • Fairways. • • • - x1,0Tu3t that this will enable you to have a check in payment of the above invoice out for u$ this weak 1 . , . . .......r:I.,s sincerely, • [ • -, .. :- ••• --"... , .•• . ;)oug Carter I s1 Manager ' i i . . . 1 . . . : . • E • i . 1 • Joy Resort Utilities Cory. 6450 E. Junior College Road Xey West, Florida 33040 Phan: (305) 294-5232 November 1, 2002 Mr. Danny Kohledge Monroe County Clerk of the Courts 500 Whitehead Key West, Florida 33040 Re: KW RESORT UTILITIES CORP. Attorney Retainer Agreement & Service Agreement Dear Mr, Kohledge: Pursuant to your request regarding the South Stock Island wastewater project, enclosed please find two agreements. The first agreement is between KW Resort Utilities Corporation and Smith, Hemmesch, Burke and Brannigan. This agreement is a retainer for legal services for the negotiation of final contracts relating to the project. The second agreement is a service contract between KW Resort Utilities Corporation and Green Fairways, Inc. This agreement allows Green Fairways to provide comprehensive administration and supervision over various aspects of the project as detailed in the agreement. Please note that'both the aforementioned legal retainer and service contract are essential to the furtherance of the project because KW Resort Utilities Corp., has no employees and . contracts for aN services including legal and administrative functions required under the Capacity Reservation and Infrastructure Contract and said administration and legal fees are provided for in the contract between the Utility and the County. I note that our breakdown is $300,000.00 for administration and $47,000.00 for legal fees. We have spent $25,000.00 of the legal fees and have $22,000.00 remaining for any construction disputes. I hope that this will resolve any further issues regarding invoices from Smith, Hemmesch, Burke and Brannigan or Green Fairways, Inc. Please call me at your 1 1 c earliest opportunity if you need any additional information to process the payment of the outstanding Invoices. — - Very truly yours, Willie . S ith, Jr. WLS/smg Enclosure 1 1 1 1 1 1 1 � . EXHIBIT M 1 1 1 1 1 �� ui i c I I cuuy 07. or, .7ClOL,41. L1 L KtY wtb l WU- CLUB rAtat lib "Excellence in Engineering" - -- 1 „ • - _ - _ -- - -- -- St_e -_tees- Isisnd - - -- -- C R P' • A 0 Key Wost, Florida 33040 (305) 295.3301 ph (305) 295.0143 fax E . Stock Island Sewer Expansion Project Approval of Application of Payment Submitted to: KW Resort Utilities Corp. Contract No.: 02013.001 Application. for Payment No. 11 was submitted to the ENGINEER on November 10, 2003. The ENGINEER worked with ES. MacKenzie of Florida, Inc. to develop this request, including a balancing change order for the work performed by the CONTRACTOR through October 31, 2003. Substantial completion of the project occurred in July2003 and the system was placed into service with a Certificate of Completion submitted to and approved by the FDEP. The CONTRACTOR is therefor entitled to payment in the amount of 98% of the contract amount less 100% of the work yet to be completed. The format of the pay request has been modified to reflect these conditions and to include balancing changes in quantities and additional work. A Partial Waver and Release of Lien and Consent of Surety Company to Final Payment are attached. Please note that this is not a Request for Final Payment as 2% of the requested amount is being retained. The Request for Final Payment will be submitted after the two remaining items of work are completed At that time, all documents required by contract will be submitted along with the Request. Application for Payment No. 11 requests an amount of 5423,781.36. I certify that the work has been completed as indicated on the Application and Change Order No. 1. �- � _.. Edward R. Castle, P.E. Project Manager 1 1 1 • mitt, 1004 pb: 3b 3G.7L7gi L 1 CY 19CJ I t VL.UD r ry c o t E . E , < < , 11 ,,n. ..,, lam ' iii. -g �, aoi 1 II-1, " - I i iii 1 illi W 1 f ,$ 1 1 1 4, _ .G m i ( � y� �w 9 +a O O. O O e N O i 8 fi i O O 0 8 N .� . .. . §§ i i i .. .. ._ V V a a G 4 r $W i J i A i i A W 1 In II .1... O b O el o ig 8i p.•a w w S Q.w a VI+ l NI — N N lifisei �rr s 1 ggis8tiosstgsssg 0 tsgssgss .bl litho gIti § §gt4t1 o 88SSS s$$8$gg,g$SSg ,s$ss88$g$$ z I 1131 q J m � 1i1 �!► �Ni� N •+ N t V �+ 71 1 tg$$g$gsggs$88 g8ksgsgis$03 s s A . t y. «��' * h N « cna w or ro Fa z 8 $ 8 s$ k g s s$$ g g$ s S$$ g s s t g$ ks 8 S j 1 tl1/411 L1104 CM' 5b .i1 W 41'Ll'L KtY Wt51 UUUh HUH PHUt Uti 5 g ..i Itilliii ii C Z P 2 0 0.0 v ii cup 1 11[ 1111111161 4 iiiiiiii0W0111 1 1111 r1111i1111� lil 1111111111111111111 1 14 1 111111111111111 .fl III i 1 z 1 " g b t F i z 0 I • UV 2 // 20114 09:56 3@52941212 KEY Whbl WU ULUU .,, ..., 1 • [ ! lTir111111111111111"U41 ; t Al : . ll r • . „.•• ,. •2, _ I 1 I jili — . !iH7 'H•:fiffiffii I i 1/ il ill! 1 /1111 11114 till E35 1 i i I OM i 1 ---I i G“65'6“IGGrMV24 1 " i 1 1 - *9-999"9 A • 1 f .... I I _1 , ,galm0009eAe 01 2 • P l iii 8 __,i 0000 1 9 000 -. 8-. _ 1 1 1 ' 1 Mil I 1. 1 R fti I in Itiv 1 ii r Ili t gil I 1 144, 111161 tiilibkino Al 11 Wiiiikl 1 t iiiiiiif priiimpU 1 °I. Illikiti gsgsgg 1 , kgi isgss8 ssiilgt, 1 t t E 1 - g 11 1 , VILX N k A PI 1 1 ilillin MrettlijOt i i R II 4 n'It tt! 41 ! PM If 1 1M 1,, ig faltilliiillassilglailijil f 1 1 E E 61/27/2884 89:56 3052941212 KEY 441E5 (iU_h CLUB rm.= as KW RESORT UTILITIES - - -- P.O. Box 2125 _ - - - -- Key West, Florida 33045 Telephone (305) 294.9578 Facsimile (305) 294.1212 c CONDITIONAL WAIVER AND RELEASE OF LIEN UPON PAYMENT The undersigned, in consideration of the payment in the amount of $443,521.36 and conditioned upon payment issued to the undersigned in said amount, waives and releases its lien and right to claim a .lien for tabor, services or materials furnished to Monroe County Board of County Commissioners to the following described property: Stock Inland Sewer Expansion Project Pro 1 P ,� This waiver, together with all previous waivers, if any, does not cover any retainage amounts due to us for contract improvement provided. (":" - Signature poug Carter — C Wage Signed on 1- 3 0 - aoc3 STATE: fa-°1-`11 fi COUNTY: Mo*1 Qiorc Signed, sealed and delivered in the presence of. NOTARY PUBLIC • 4. , arCOMMON CO 23i234 My Commission Expires: %e • 1 �� EXHIBIT l� ` N� . .....,.... E ,. - -9. • ifr ''' t E . \.. pit . .• • ll CLERK OF THE CIRCUIT COURT MONROE COUNTY BRANCH OFFICE BRANCH OFFICE PLANTATION KEY MARATHON SUB COURTHOUSE MONROE COUNTY COURTHOUSE GOVERNMENT CENTER 3117 OVERSEAS HIGHWAY 500 WHREHEAD STREET SUITE 101 88820 OVERSEAS HIGHWAY MARATHON, FLORIDA 33050 KEY WEST FLORIDA 33040 PLANTATION KEY, FLORIDA 33070 TEL (705) 289 -6027 TEL (305) 852-7145 II FAX (305) 289 -1745 FAX (305) 295 -3663 FAX (305) 852 -7146 February 26, 2004 William Smith, President KW Resort Utilities Corp. ( ' 6450 College Road Key West, FL 33040 Dear Mr. Smith, Enclosed please find Monroe County Warrant #96959 in the amount of 5137,038.36. This IIII warrant represents payment of your pay application #11 on the Capacity Reservation Infrastructure Contract in the original amount of 5445,521.36 minus the sum of S3011,483.00. • The adjustment of $308,483.00 represents all of the payments made to your firm pursuant to the contract under the budget category Construction Administration and Legs]. As you.are aware, during the conduct pf the audit being performed by my office, no documentation has been presented to the auditors that would allow us to make a determination that the expenses in this category were made for purposes authorized by the contract. The County Attorney's office concurs with this action. Sincerely yours, . 2.=i' — 1 Danny age Clerk of Court and ex- officio Clerk to the 'board of County Commissioners i DLK:icd B.. cc: County Attorney Encl. E .. .• . __ .-------_____ ........... 1