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Item N01 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: Wed., April 19, 2006 Division: BOCC Bulk Item: Yes No XX Department: Commissioner David Rice, District 4 Staff Contact Person: Tamara Lundstrom AGENDA ITEM WORDING: Discussion, possible direction concerning hook-ups to KWRU, and possible action regarding proposed contract between KWRU and users. ITEM BACKGROUND: Section 15.5-21, MCC, requires connection to central sewerage system within 30 days of written notice to owner of availability of system. A number of Code Enforcement cases are pending due to non-compliance, and BOCC has been informed by developers/redevelopers of multi-unit projects on Stock Island that they have been required to sign disparate agreements with KWRU County's wastewater legal consultant was previously requested to review the agreements about which complaints were received and draft a proposed agreement for consistency. PREVIOUS RELEVANT BOCC ACTION: See above. CONTRACT/AGREEMENT CHANGES: STAFF RECOMMENDATIONS: TOTAL COST: BUDGETED: Yes No COST TO COUNTY: SOURCE OF FUNDS: REVENUE PRODUCING: Yes No AMOUNT PER MONTH Year APPROVED BY: County Atty _ OMB/Purchasing _ Risk Management _ DIVISION DIRECTOR APPROVAL: 9)cwid [f. 9lice (David P. Rice, Commissioner) DOCUMENTA TION: Included XX Not Required_ DISPOSITION: AGENDA ITEM # Revised 2/05 The Board has expressed its concern that Developers and other potential wastewater customers have been placed in an unfair position regarding the terms under which they would receive service from KW Resort, at least in part, due to the County's mandatory wastewater connection ordinance. At the Board's direction, County Staff has investigated the issue and reviewed recent developer agreements and the standardized form of agreement which have been provided to Staff. This report provides Staff's analysis and makes several recommendations for changes to the standard KW Resort developer agreement. Background The Board of County Commissioners recently received complaints from attorneys representing developers and other interested parties that KW Resort Utilities ("KW Resort") was entering agreements with different parties that had different terms for the same service. KW Resort Utilities is a privately-owned utility which is regulated by the Florida Public Service Commission ("PSC"). The basic principle established by the PSC is that a private utility must treat similarly situated customers in a similar manner. For this reason, utilities are directed to file a form of standard developer agreement with the PSc. If the utility wishes to deviate from the standard form, the PSC possesses the discretion to review the deviations from the standard terms to determine whether they are reasonable. The PSC may then approve or reject any of the terms which deviate from the standard terms. The County's wastewater engineer and attorneys have solicited information from interested parties to determine whether customers or prospective customers of KW Resorts are being treated the same. Letters were sent by County Staff to fourteen individuals requesting that areas of concern be identified and that copies of documents demonstrating the cause for any concern be provided. Responses were received from three parties. In addition, County Staff has been communicating with attorneys who represent several clients which are or have been negotiating with KW Resort regarding connection to the KW Resort wastewater system. Copies of the most recent developer agreements entered by KW Resort recently have been provided. County Staff has reviewed the issues raised by Developers, their attorneys and others regarding past agreements and the negotiations of such agreements with KW Resort. Staff notes that the current KW Resort standard form of agreement appears to address several of the issues so identified. From the information provided and discussions that County Staff has held to date with representatives of KW Resort and its prospective wastewater customers, there appears to be some justification for the claim that prospective customers in similar factual situations are being treated differently by KW Resort. A representative of KW Resort has confirmed to County Staff that the utility believes that developers and other prospective customers must negotiate the terms of their agreements with the utility independently and irrespective of the terms that another developer or customer may have \ ~ . /0 (p u.J'''' received from KW Resort. Staff believes that this attitude is the crux of the problem previously presented to the Board of County Commissioners. Revised Standard Form of Agreement and Recently Signed Agreements Typically, KW Resort provides developers or other customers who either wish to connect to its system, or who are required to connect to its wastewater system, with a draft of what is commonly referred to as a developer agreement. While certain terms will differ among agreements, for instance, the number of equivalent residential units to be served and the total amount of connection charges to be paid, the majority of the terms in the agreement should be the same. County Staff has obtained KW Resort's standard form of agreement which is provided to applicants for new wastewater service. In reviewing the agreement, Staff realized that there were a few deleted sections or portions of sections in the agreement. Upon review of agreements recently signed between KW Resort and developers, where these sections have not been deleted, it appears that the deleted sections apply where a Developer owns existing wastewater infrastructure on its property, and the Developer potentially will retain ownership of the newly constructed facilities or a portion thereof, even after connecting to the KW Resort central wastewater system. The deletion of the section entitled "Existing Systems" from the standard form is reasonable where no existing facilities exist on the Developer's property. However, Staff is unclear at this time as to why an option of the Developer or associated potential customers to pay the Capacity Reservation Fee of$2,700 over a period of years (through a special assessment) is deleted from the form of standard agreement. Staffs initial recommendation is that the Board of County Commissioners instruct KW Resort to abide by the general principle that similarly situated customers must be treated similarly. There are a number of terms in developer agreements which can be standardized so as to be reasonable to both parties. To date, review of the agreements provided to County Staff confirm that there are instances where KW Resort has modified a term in one agreement, upon a showing by the Developer that the term is too one-sided in favor of KW Resort, yet retained the same one-sided term in a subsequent agreement with another Developer. The difficulty caused by this behavior is exacerbated when the same attorney represents both Developers and must repeatedly negotiate the same change to the utility-biased term in subsequent draft agreements. Recommended Revisions Staff recommends several modifications to the standard form of agreement which Staff believes will render the agreement more balanced: . Section 2: Delete in Section 2(a) the words "which Plans and Specifications shall be prepared by engineers reasonably acceptable to Service Company," and replace with "prepared by a Florida registered professional engineer,". . Section 6(e): Should be replaced by the following: "Developer shall pay [$ ] to Service Company for engineering review and administrative costs related to processing construction plans and documents submitted by Developer pursuant to this Agreement. Developer shall also pay Service Company [$ ] per hour for periodic inspections to be made by Service Company or its agents within thirty (30) days of submission by Service Company to Developer of invoices confirming time spent conducting such inspection services." · Section 7: The option to pay the Capacity Reservation Fee of $2,700 over time through a special assessment upon the signing of an appropriate consent and acknowledgment agreement should remain in section 7 of the standard form of agreement. · Section 13(C)(I): Add to end of sentence "provided that the Service Company has utilized its best efforts to maintain the Central Sewage System in good operating condition;" · Section 15: Replace the indemnification language In section 15 with the following: "Indemnification. Service Company and Developer agree (I) to indemnify and hold the other harmless from negligent acts or omissions of itself, its officers, or agents, and (2) to indemnify and hold the other harmless from third-party suits against a party which result from the breach of the Agreement by the other party." · Section 18: Add as the first sentence in Section 18, entitled Tariff: "This agreement shall be filed by Service Company with the Florida Public Service Commission within twenty (20) days after this Agreement is signed by both parties. " Also, amend the last sentence in section 18 to change the word ''Tariff' to "Agreement" to confirm that the "Agreement" will control in the event of a conflict with the Service Company's Tariff. There are other unique situations, such as where a customer is a condominium or hotel, or where on-site facilities exist which will be used by KW Resort as opposed to being retired from service, that may require additional terms in a specific agreement. However, it is impossible to address every situation in a standard form of agreement. The principle indicated earlier, that similarly situated customers must be treated in a similar manner must be the guiding principle in KW Resort's negotiation of such matters.