20030707Comments.pdf

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i.,JOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5470
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF CDS STONERIDGE UTILITIES, LLC FOR
APPROVAL OF AN AMENDMENT TO ITS
CERTIFICATE OF PUBLIC CONVIENCE AND
NECESSITY TO INTERCONNECT WITH AND
ACQUIRE THE SERVICE TERRITORY OF
HAPPY VALLEY RANCHOS, INc. AND TO IMPLEMENT A SURCHARGE.
CASE NO. SWS-O3-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, John Hammond, Deputy Attorney General, and in response to the Notice of
Application, Notice of Public Workshop, Notice of Modified Procedure, and Notice of Written
Comment Deadlines, issued on June 5 , 2003 , submits the following comments. Order No. 29254.
BACKGROUND
On March 17 , 2003 , CDS Stoneridge Utilities LLC (Stoneridge; Company; SU) filed an
Application seeking Commission authorization to acquire the service territory of Happy Valley
Ranchos, Inc. (HVR), a Homeowners Association Water System, to complete an interconnection
between the existing Stoneridge water system and the neighboring HVR system, to amend its
Certificate of Public Convenience and Necessity to include the HVR customers within the
Stoneridge service territory and to implement a surcharge on the rates for connecting HVR
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customers to service the debt that will be incurred for the interconnection proj ect. Attached to the
Application are eight exhibits.
The Commission by Order No. 29254 suspended the Company s Application and
determined that Stoneridge shall continue charging only the current Stoneridge customers existing
Commission-approved rates and charges until such time as the Commission issues an Order
accepting, rejecting or modifying the Company s Application and the HVR customers are actually
being provided water service by Stoneridge. Order No. 29254 at 1.
STAFF EVALUATION
Company Proposal
Stoneridge Utilities requests approval to interconnect the SU water system and the
neighboring Happy Valley Ranchos Inc. water system. HVR initiated discussions with SU
regarding possible interconnection between the two systems in order to obtain better quality water.
The HVR system supply is of limited quantity and has experienced water quality problems in the
form of high iron concentration that requires fairly expensive filtration. The Stoneridge system in
comparison has two wells of good quality and quantity (600 and 800 gallons per minute), an
existing chlorination system and a substantial amount of storage. After comprehensive negotiations
between the two companies, SU agreed to interconnect subject to Commission approval and receipt
ofIdaho Department of Environmental Quality (DEQ) financing.
Stoneridge Utilities is working with the DEQ for approval of the interconnection. It has also
requested a loan from the State Drinking Water Revolving Fund to finance the engineering and
construction of the interconnection. The Company has obtained the services of James A. Sewell
and Associates consulting engineers to assist them with project engineering and agency review.
The Company s engineering consultant filed a report with the Commission and DEQ entitled "CDS
Stoneridge Utilities LLC. & Happy Valley Ranchos Water System Connection 2003 Engineering
Report" on May 15 2003. The engineering report provides the detailed engineering calculations for
the design of the interconnection project and some minor HVR system upgrades. It also includes a
detailed cost estimate for the proj ect as well as a recommended recovery method for the
construction costs.
The report estimates the total project cost to be $213 500. Stoneridge Utilities has requested
an equivalent loan amount from the State Drinking Water Revolving Fund that is administered by
DEQ to pay for all of the interconnection costs. The Company proposes to recover the financing
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costs by implementing a surcharge of$12.65 per month from each customer benefiting from the
interconnection. Presently that includes only the existing Happy Valley Ranchos water customers.
However, the Company also proposed to apply the surcharge to any new customers connecting to
the system downstream of the booster pump station serving the Happy Valley Ranchos system. The
surcharge is intended to recover only the debt service costs (principal and interest) to amortize the
State Revolving Fund loan over 20-years.
Once the interconnection is complete, the Company proposes to merge the operations of the
Happy Valley Ranchos system with the Stoneridge Utilities system. Stoneridge will cancel the
existing HVR rates and charges and begin charging the HVR customers all existing Stoneridge
Utilities approved rates and charges plus the surcharge. The Company is not proposing any changes
in rates at this time to the existing Stoneridge Utilities customers. The following is a comparison of
the existing HVR and SU rate schedules together with the surcharge proposed to collect the debt
service costs:
Existing Happy Valley RanchosBase Charge $ 5.Base Charge $ 24.
2.50
$ 5.
$ 8.
Existing loan sm-charge
including the fust
per 1000 gal for the next
per 1000 gal for the next
per 1000 gal for over
Monthly
000
000
000
000
gallons
gallons
gallons
gallons
Existing Stoneridge RatesBase Charge $ 14.00 Monthly
Commodity Charge $ 0.30 per 1000 gal
Proposed Happy Valley Ranchos RatesBase Charge $ 14.00 Monthly
Commodity Charge $ 0.30 per 1000 gal
Proposed 8m-charge $ 12.65 Monthly
The Interconnection Project
Commission Staff has reviewed the Engineering Report, performed an onsite investigation
of the physical system, had lengthy discussions with DEQ, the Company, its engineer, and held a
public workshop at the Stoneridge Event Center in Blanchard, Idaho on June 23 2003. The
interconnection project is composed of approximately 3500 lineal feet of 8-inch transmission main
a fire hydrant, associated valves and fittings. Because the HVR system is higher in elevation, a
duplex 150 gallon-per-minute 125 psi booster pump station is required between the two systems.
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The booster station is scheduled adjacent to the existing Stoneridge 315 000-gallon reservoir. The
project also includes some minor system improvements to the Happy Valley Ranchos system. The
HVR system s existing 32 000-gallon storage tanks are to be cleaned and additional system flushing
blow-offs are to be installed.
The project is scheduled to begin construction once the DEQ loan is finalized and the project
receives agency approval. The initial project construction schedule anticipated completion by fall
of 2003 but because of likely weather concerns a more realistic schedule will be final proj ect
completion in spring of2004. Once the interconnection project is completed and water can begin
flowing, the existing HVR well will be disconnected from the system and properly abandoned.
Given the amount of iron residue and iron bacteria in the HVR system, additional tank cleaning and
improved flushing ability provided by the interconnection will be needed to achieve water quality
approaching that of the Stoneridge system. It may take as much as a year or more of working with
the HVR system before the majority of the iron will be completely removed. Therefore, the two
systems will remain isolated to avoid cross contamination.
The existing Stoneridge supply and storage appears to be adequate to serve both systems.
The Stoneridge system is designed for a much larger customer base yet development has not
occurred at the rate initially anticipated. Therefore, there remains excess storage and pumping
capacity available to serve additional customers. If at some point in the future water production
becomes a problem, the Stoneridge system is located over the Rathdrum Prairie Aquifer. This
Aquifer is known to contain huge reserves of high quality water. However, it is evident that the
HVR system is not located over the same aquifer. HVR has attempted four times to find higher
quality water and has been unsuccessful. Therefore, the proposed interconnection and merger of the
Stoneridge and Happy Valley Ranchos systems appears to be the most practical and technically
feasible method of providing a satisfactory water supply to the HVR homeowners.
The engineering report was professionally completed and the engineer has answered all of
Staff's questions regarding service supply and design. The proposed interconnection design appears
capable of adequately serving the HVR system without detrimentally affecting service to the
existing Stoneridge customers. DEQ has reviewed the proposed project and found it sufficiently
favorable to recommend an interest rate reduction for the requested loan. DEQ is proposing an
interest rate reduction to 2% from the traditional 3.75% revolving fund loan rate because the project
consolidates two systems and it believes will provide significant public benefit. At the public
workshop, customers in attendance spoke in favor of the merger and were generally in agreement
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with the surcharge rates proposed. Based on the foregoing, Staff believes the project solves
problems for the HVR customers without harming customers of Stoneridge.
The Surcharge
The Company is proposing that all the project-financing costs be recovered through a
dedicated surcharge. Based on the engineer s estimate of$213 500 and a loan rate of2% for 20
years the Company estimates the surcharge to be $12.65 per month for each of the 86 existing HVR
customers.
Staff and the Company agree that the surcharge should neither harm nor benefit the
Company. Thus it should only be authorized to recover the project financing costs. Staff
recommends that the actual surcharge be implemented only after construction is completed, the loan
is closed, all costs are known and service is rendered through the interconnection. Even though
Staff believes that all interconnection construction and financing costs should be included in the
surcharge calculation, Staff cautions the Company and its engineer to make every attempt to control
construction costs. The proposed surcharge is the third surcharge estimate provided to the HVR
customers and the costs have increased with each estimate. One customer at the public workshop
expressed concern about the increasing costs but still supported the interconnection because of the
significant benefits that resulted from the project even though the surcharge had increased. Staff
recommends that the Company provide Staff with the results of the project construction bids and
resulting surcharge estimate. The additional information should provide Staff with an additional
degree of certainty for final construction costs. If costs have increased significantly from those
proposed, additional review might be warranted before construction costs are expended. Staff
recommends that the Commission keep the case open and reserve final approval of the surcharge
amount until construction is completed, the interconnection is operational and all financing costs are
known and measurable.
Staff and the Company agreed that the surcharge should be charged to all customers taking
service downstream of the interconnection between the Stoneridge and the Happy Valley Ranchos
system.l Any new customers that connect to the Happy Valley Ranchos side of the system would
also pay the surcharge. Staff recommends that these additional proceeds be used to prepay principal
on the loan. Principal prepayment would help shorten the life of the loan and the surcharge.
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Attempting to adjust surcharge rates with each new customer connection would be overly
burdensome for the Company and would not provide sufficient benefit for the level of effort.
Staff will continue to work with the Company to establish proper accounting procedures for
recording surcharge funds and expenditures. Staff will further assist the Company to properly
record the improvements and revenues in the Company s annual reports.
Customer Rates
The Commission in Case No. GNR-98-, Order No 28206 approved the existing SU rates
of$14 per month plus $.30 per 1000 gallons. These rates were based on 23 residential customers, 2
commercial customers, the condominium association and the golf course. The number of customers
has grown slowly since the rate case. Currently there are 36 residential and 13 commercial
customers and by interconnecting the HVR system, SU will add the 86 HVR residential customers.
Water companies generally experience economies of scale with increases in number of customers
and Staff believes that Stoneridge will likely experience unit cost savings as a result of the
acquisition of these 86 customers. Therefore, Staff recommends that the Stoneridge rates be
reviewed in two years from the time of the interconnection to ensure that the Company is not over
earning from the addition of the HVR customers.
Staff has also reviewed the effect of the surcharge together with the existing Stoneridge rates
on Happy Valley Ranchos customers. The existing SU rates are significantly below the existing
HVR rates. Even with the proposed surcharge the cost to HVR customers may be less than their
existing rates depending on customer usage. The greatest rate increase for HVR customers would
be at a usage of 20 000 gallons per month. The increase at 20 000 gallons is less than $4.00 per
month for a much improved water supply. HVR customers using more than approximately 22 000
gallons per month would see a rate decrease, and those using from 7 800 to 21 700 would see an
increase ofless than $4.00 per month. Attachment A is a comparison of the existing rates for both
systems and the proposed rates for the HVR customers after the interconnection at various levels of
consumption.
CONSUMER ISSUES
The Commission sent individual notice of the proposed merger to each customer of both
Stoneridge and HVR. A public workshop attended by 11 customers, representatives of the
Commission Staff, both water companies and DEQ was held June 23, 2003 in Blanchard.
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By June 30, 2003 nine customers of the Happy Valley Ranchos Water System had filed written
comments. Those comments are now part of the official case record. As an indication of support
by the parties for the merger and interconnection project, Staff includes as Attachment B, a signed
Water System Transfer and Acceptance Agreement signed by Happy Valley Ranchos board of
directors and Stoneridge Utilities.
If the merger is approved, residents of Happy Valley Ranchos Water System will become
customers of Stone ridge Water Company. Stoneridge Utilities is in compliance with the rules and
regulations of the Idaho Public Utilities Commission, including the Utility Customer Relations
Rules, (IDAPA 31.21.01000), Utility Customer Information Rules, (IDAPA 31.21.02000) and
Small Water Company Policies, (IDAPA 31.36.01000). The portion of the existing HVR
homeowners association by-laws applicable to the water system will be superceded by Stoneridge
Utilities tariffs. Stoneridge has prepared a rules summary, which will be sent to all customers
following approval of the merger. IPUC rules can be reviewed at the local office of Stoneridge
Water Company, or on line at http://www.puc.state.id.us/Rules.htm.
Rates charged for water are determined by the IPUC and can be found in approved tariffs.
Rates cannot change without notice to customers, Application to and approval by the IPUc.
Stoneridge s current tariffs can be found on the Commission s website. However, the current tariffs
will not include the surcharge for Happy Valley Ranchos Water customers until the Commission
has determined the appropriate surcharge. Staff will work with Stoneridge to prepare a new tariff
showing the surcharge for Happy Valley Ranchos Water System customers at the completion of this
case.
OTHER ISSUES
The Stoneridge Development is operated and controlled under a number of different
organizations. The parent company has added a strictly utility-limited liability company since the
initial certificate was issued and has operated the utility solely through this company since its
inception. Staff believes that this organization will facilitate the review of utility finances and
potentially avoid the commingling of funds between the development company, golf course, or any
other of the operations and the water utility.
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STAFF RECOMMENDATION
Based on the foregoing, Staff recommends the following:
1. The Commission approve the acquisition of Happy Valley Ranchos Water System by
Stoneridge Utilities.
2. The Commission approve the interconnection project and authorize debt financing from the
State Drinking Water Revolving Fund when approved by the Department of Environmental
Quality.
3. The Commission keep the case open and reserve approval of the surcharge amount until all
financing costs are known and measurable.
4. The Commission require Stoneridge to file the construction bid costs and revised surcharge
calculation once bids are received.
5. The Commission authorize the use of existing Stoneridge Utilities rates for all former Happy
Valley Ranchos customers and apply a surcharge only to those customers downstream of the
booster pump station adjacent to the existing Stoneridge storage reservoir once service is
provided to them.
6. The Commission require that all surcharge funds be used exclusively for the payment or
prepayment of the State Drinking Water Revolving Fund loan.
7. The Commission change the name on Certificate No. 395 from CDS Stoneridge Associates-
Land LLC. to CDS Stoneridge Utilities, LLC.
8. The Commission amend Certificate No. 395 to include the Happy Valley Ranchos service
territory within the certificated area.
Respectively submitted this -/1J day of July 2003.
Technical Staff: Bob Smith
Michael Fuss
Marge Maxwell
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WATER SYSTEM TRANSFER AND ACCEPTANCE AGREEMENT
THIS AGREEMENT is made and entered into this day of March, 2003, by and
between CDS STONERIDGE UTILITIES, LLC ("SU"
) ("
Transferee ) and HAPPy V ALLEY
RANCHOS WATER, INC.
, ("
HVR"
WHEREAS, HVR is the owner of that certain parcel of property and those certain
easements ("the Land") located in Bonner County, Idaho, property, assets and fixtures, commonly
known as the HVR Water System (the "Water System ) and more particularly described on
Exhibits A and B attached hereto; and
WHEREAS , HVR has reached an agreement with SU, as contained within a Letter of
Understanding dated February 6, 2003 (the "Letter ) regarding the transfer of the Water System
to SU; and
WHEREAS, SU and HVR wish to further set forth their understandings and agreement
regarding the terms and conditions of the transfer of the Water System;
NOW, THEREFORE, in consideration of the terms and conditions of this Agreement
and the mutual covenants herein contained, SU and HVR do hereby agree as follows:
HVR shall transfer and convey to SU, and SU shall accept from HVR, upon and subject
to the terms and conditions set forth in this Agreement, all ofHVR's property that is used and
useful in providing service from the Water System. The final acceptance by SU of the Water
System is subject to the satisfaction of certain conditions as set forth herein. Notwithstanding
any other provisions set forth herein, the election to accept transfer of the water system rests
solely with SUo If, in its sole discretion, SU determines that it will accept the Water System, the
parties shall mutually establish a date upon which the transfer is to occur (the "Closing Date ). It
is understood that after the "Closing Date" SU wiil provide water service and ongoing
maintenance to HVR users from SU s' current water supply subject to IPUC regulations.
SECTION 1. SALE OF ASSETS.
Attachment B
HVR agrees to transfer and SU agrees to accept all property and assets of HVR useful or
necessary for the operation and mainteI.1ance of the Water System. The Assets include, but are
not limited to, those items described on Exhibit A, attached hereto and made a part hereof (the
Assets
SECTION 2. TRANSFER OF LAND AND IMPROVEMENTS.
HVR agrees to transfer and SU agrees to accept certain real property owned by HVR that
is useful and necessary in operating and maintaining the Water System (the "Land"). The Land
includes the easements also described in Exhibit B , together with all the buildings, easements
appurtenances, rights,- privileges and improvements thereunto belonging or appurtenant to the
Land (the "Improvements ); all personal property owned by HVR and located on or used in
connection with the Land or the Improvements, including, but not limited to the personal
property listed on Exhibit A attached hereto and all fixtures, equipment and appliances useful or
necessary for normal operation of the Water System; all trees, shrubbery and plants now in or on
the Land; all rights, titles and interests ofHVR in and to all alleys and strips; all rights, titles and
interests of HVR in and to all leases, licenses or other agreements concerning o~cupancy of the
Landor the Improvements; all rights, titles and interests ofHVRin and to all rights-of-way,
rights of ingress or egress or other interests in, on, or to , any property, highway, street, road, or
avenue, open or proposed, in, on, or across, in front of, abutting or adjoining the Land; all rights
titles and interests of HVR, if any, in and to any unpaid awards for damage thereto, if any; all
insurance proceeds payable by reason of fire or other casualty occurring on or with respect to the
Water System, Improvements, or Land after the date of this Agreement; and all permits
certificates, approvals and licenses with respect to the Water System, Land and Improvements
including, but not limited to, certificates of occupancy and conditional use and other permits (aU
of the foregoing being hereinafter referred to collectively as the "Property"
SECTION 3. TERMINATION OF AGREEMENT.
. ._
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Attachment B
SU shall be entitled to perform any due diligence it deems necessary, in its sole and
absolute discretion, and shall be entitled to terminate this Agreement by written notice to HVR at
any time prior to closing.
Reasons for termination may include, but not be limited to, the following:
(a)Inability to complete all due diligence review in a manner or on a schedule
as identified by SU; or
(b)Identification that the Water System, or any portion of it, is in worse
condition than has been understood by SU; or
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(c)Failure to obtain unqualified approval for either the transfer of the Water
System by INR to SU, or the operation of the Water System after the transferby appropriate
State of Idaho and public health regulatory bodies; or
(d)The availability of funds from Idaho Department of Environrriental Quality ,
DEQ") in an amount sufficient to finance necessary repairs to the Water System at an interest
rate and under terms acceptable to SU;or
(e)The devel?pment of a plan acceptable to SU to provide adequate and
acceptable security to DEQ for the repayment oftheloan, which may include some form of
- \
special assessment which may involve a lien against a delinquent individual's property or
properties specially benefited by the improvements. ; or
(f)Failure to satisfy any other terms or conditions of the Letter, which terms
or conditions are incorporated l1erein as if fully set forth.
; )
SECTION4. HVR REPRESENTATIONS AND WARRANTIES.
HVR hereby makes the following representations and warranties, which representations
and warranties shall be deemed made by HVR to SU also as of the Closing Date and shall
survive the Closing Date.
(a)Disclosure of Material Facts. HVR represents that it has provided SU with
all information, including supporting documentation, and has not made any misstatements or
omissions material to the transfer contemplated by this Agreement. HVR further warrants that
should the existence of ad~itional documents that are or may be material become known to HVR
that it shall immediately notify SU and make the documents or materials available as quickly as
is practicably possible.
(b)Authentication of Documents . HVR represents that the documentation it
has provided to SU in conjunction with the transfer contemplated by this Agreement is authentic
and complete in all material respects.
(c)Parties in Possession. HVR is the owner ()'f all Assets and Property being
transferred herein and the Assets and Property are being transferred free of any lien, claim of lien
or encumbrance. There are no parties or trespassers in possession or which have a right to
possession of all or any portion of the Assets or Property and there are no leases or licenses
affecting the Assets or Property.
(d)Taxes. HVR shall pay all taxes, if applicable, incurred on the Assets
Property prior to the date of transfer by virtue of either its ownership thereof, or operation of the
Water System. HVR has paid all taxes attributable to any period of time prior to the Closing
Date, including but not limited to, real taxes, and any and all taxes that could become a charge on , I
the Assets as of the Closing Date.
(e)Water. System Claims . HVR warrants that there are no claims nor set of
facts giving rise to a claim which exists at the time of the Closing Date which claims arise out of
the operation of the Water System or its sale of water.
(f)Compliance. HVR has complied with all applicable state, local and
federal rules, laws, ordinances and regulations relating to the Property, Assets and Water Rights
as of the Closing Date.
(g)
Good Repair. HVR warrants that the equipment, Assets and
- Improvements being transferred are in reasonably good repair, considering reasonable wear and
tear, except for mutually agreed upon specific equipment and improvements to be repaired or
replaced at actual costs with the proceeds of any fmancing from DEQ.
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(h)Authority of HVR. HVR has the power and authority to enter into this
Agreement and be bound according to its terms, and the signatory hereto is duly authorized to
execute and deliver this Agreement and to perform ail of HVR's obligations hereunder.
(i)Condemnation or Assessment.HVR warrants that there is no pending
condemnation or similar proceeding or assessment affecting the Property or Assets, or any part
thereof, nor, to HVR's knowledge, is there any such proceeding or assessment contemplated by
any governmental authority.
Access. HVR warrants that the Land abuts upon and/or has access to and
from public streets. . There is no pending or threatened governmental proceeding which would
impair or curtail full and free access to the Land from public highways, streets or roads.
- (k)Construction Liens.HVR will provide an affidavit of title acceptable to
SU that no labor, material or services have been furnished in, on or about the Land or any part
thereof asa result of which any enforceable mechanics , laborer s or materialmen s liens or claims
might arise.
(1)Service Contracts. There exist no employment, union, service or
maintenance contracts or any other contracts, licenses and permits ("Contracts ) affecting the
Property. HVR shall indemnify, defend andhold SU harmless from any claim made or cause of
action brought under any such service contract, other than such a claim or cause of action arising
out of events occurring after the Closing Date with respect to any contract of HVR expressly
assumed by SUo Notwithstanding the foregoing, if such a contract exists, SU at its sole
discretion may continue said Contract although it is under no obligation to.
(m)Assumption of Liabilities. SU, by virtue of the acceptance of the Assets
and Property, will not be required to satisfy any obligation ofHVR arising prior to Closing other
than those to be expressly assumed by SU pursuant to this Agreement. HVR will pay and
discharge any and all liabilities of each and every kind arising out of or by virtue of the
possession, ownership or use of the Assets and Property prior to the Closing Date, and shall
indemnify, defend and hold SU harmless therefrom.
AttHr-hment
(n)Insurance. HVR certifies that policies of property and liability insurance
are presently in full force and effect with respect to the Property and Assets. HVR shall maintain
in force all policies, if any, of fire and other casualty and liability insurance maintained as of the
date hereof with respect to the Assets or the Property until the Closing Date.
(0)Defaults. To the best of HVR's knowledge, HVR is not in default and
there has occurred no uncured event which, with notice, the passage of time or both would be a
default, under any contract, transaction, agreement, lease, encumbrance, or instrument p~rtaining
to the Assets or Property.
(P)Litigation. There is no litigation or to the best of HVR's knowledge
threatened litigation which could now or in the future in any way (1) constitute a lien, claim, or
obligation of any kind on the Assets or Property; (2) affect the use, ownership or operation of the
- Assets or Property; or (3) otherwise adversely affect the Assets or Property. For purposes of this
clause, litigation includes lawsuits, actions, administrative proceedings, governmental
investigations and all other proceedings before any tribunal having jurisdiction over the Assets or
Property.
(q)
Hazardous Substances To the best ofHVR's knowledge, the Land is not
in violation of any law, ordinance, rule or regulation relating to the environmental conditions
thereon. Moreover, to the best of HVR's knowledge, there is no hazardous waste or other
substance, including but not limited to those that would be a hazardous substance or toxic
substance, as defined under the federal Comprehensive Environmental Response, Compensation
and. Liability Act of 1980, as amended, 42 D.C. Section 9601 et. seq ; the Hazardous Materials
Transportation Act, 49 U.C. Section 1802; and the Resource Conservation and Recovery Act
42 U.c. Section 6901 et. seq , and the regulations promulgated thereunder, Or under any
- ,
applicable local or state environmental ordinance, statute, law, rule or regulation, on or in the
vicinity of the Land, or on any parcels of property which abut the Land. Further, to the best of
HVR's knowledge, there are no substances or conditions in or on the Property or any other
- parcels of property which may affect the Property or use thereof which may support a claim or
Attachment B
u -
---
" -
cause of acticm under any federal, state or local environmental statute, regulation, ordinance or
other environmental regulatory requirements and to the best of HVR's knowledge, there is no
asbestos, PCBs or underground storage tanks located on the Property or which have been
removed therefrom. Except for underground water tanks to remain part of the operations.
(r)Option to Acquire Assets or Property. No person or entity has any right of
first refusal or option to acquire any interest in the Assets or Property or any part thereof, and
HVR has not sold or contracted to transfer the Assets or Property or any portion thereofor
interest therein other than as set forth herein.
(s)Violations. HVR has not received nor is HVR aware of any notification
from the Department of Building and Safety, Health Department, or such other city, county, state
or federal authority having jurisdiction, requiring any work to be done on the Property or
advising of any condition (including, without limitation, haZardous wastes) which would rerider
the Property or the Water System unusable or affect the usability of the Property or any part
thereof for the purposes of Su.
(t)Foreign Person.HVR is nota foreign person and is a "United States
Person" as such term is defined in Section 7701(a) (30) of the Internal Revenue Code of 1986, as
amended (the "Code ). HVR shall deliver to SU prior to the Closing Date an Affidavit prepared
by SU evidencing such fact and such other documents as may be required under the Code.
(u)Non-Contravention of Existing Documents. To the best ofHVR'
knowledge, neither the execution or delivery ofthis Agreement, nor consummation of the
transactions contemplated hereby, nor fulfillment of or compliance with the terms and conditions
hereof, contravenes any provision of any law, statute, rule or ordinance to which the HVR or the
Property is subject, or conflicts with or results in a breach of, or constitutes a default under, any
of the terms, conditions, or provisions of any agreement or instrument to which HVR is a party or
by which it is bound, or constitutes a default under any of the foregoing and there exists no
default in respect of any obligation pertaining to the Assets or Property.
(v)Agreements. HVR shall not enter into any leases, trust deeds, mortgages
restrictions, encumbrances, liens, licenses or other instruments or agreements affecting the
Property without the prior written consent of SU from and after the date of this Agreement.
SECTIONS. HOLD HARMLESS.
SU agrees to hold HVR harmless from any and all claims of whatever nature which arise
out of facts and circumstances associated with th~ Assets or Property which occur after the date
of Closing, to the extent permitted by law, except to the extent such claims arise from HVR'
negligent or wrongful acts or omissions.
HVR agrees to hold SU harmless from any and all claims of whatever nature whicll arise
out of facts and circumstances associated with the Assets or Property which occur prior to the
Closing Date.
SECTION6.COVENANTS OF HVR.
HVR covenants and agrees, from the date of this Agreement to the Closing Date, as
follows:
(a)HVR will perform all of its monetary and non-monetary obligations
(whether for borrowed money or otherwise) and the liens securing same pertaining to the Assets
or Property or any portion thereof, if any;
(b)HVR will not allow any lien to attach to the Property or Assets or any part
thereof except the lien for ad valorem taxes which are not due and- payable and any liens which
result from the activities of SU in connection with the Assets or the Property, nor will HVR
grant, create, or voluntarily allow the creating of, or amend, extend, modify or change, any
easement, right-of-way, encumbrance, restriction, covenant, lease, license, option or other right
affecting the Assets or Property, or any part thereof, nor shall HVR enter any agreement or
contract affecting the Water System without SU's written consent first having been obtained;
(c)HVR will notify SU of each material event of which HVR becomes aware
affecting the Assets or Property, or any part thereof, promptly upon learning of the occurrence of
such event; and
- !. ), \
, I
(d)HVR shall cooperate and assist SU in obtaining all governmental or
regulatory permits and approvals of transfer SU deems necessary to effectuate the transfer
contemplated herein. In the event any governmental or regulatory body requires actions by the
HVR after the Closing Date, HVR hereby covenants to take such reasonable actions as may be
required. The officers and directors ofHVR represent both individually and as representatives
of HVR, that they will execute necessary documents as may be requested.
If HVR defaults in the performance of its obligations under this section, SU (without any
obligation to do so) may, upon ten (10) days' prior written notice to HVR and HVR's failure to
cure said default prior to the expiration ,of said ten (10) day period, cure such default and may
seek reimbursement for the cost of said cure from HVR.
SECTION7. WARRANTIES BY SUo
(a)SU has legal authority to enter into this Agreement and be bound
according to its terms. If SU receives a claim covered by the HVR's hold harmless provision or
is making a claim itself for breach of HVR's warranties, it must promptly give HVR written
notice of the facts which it possesses which give rise to the claim; and
(b)Until such time that a determination is made as to the validity of the claim
by a court of competent jurisdiction, SU and! or HVR in all instances shall have the right to
defend all claims.
SECTIONS. CLOSING.
(a)Time and Place. Provided that all the contingencies set forth in this
Agreement have been fulfilled in a manner acceptable to SU (in its sole discretion), the Closing
Date shall take place no later than September 30 2003 , unless mutually extended in writing by
the parties or unless this Agreement is terminated by SU as provided in Section 4 herein.
(b)Documents to be Delivered to SUo For and in consideration of, and as-a
condition precedent to, the acceptance by SU of the Water System, HVR shall obtain and deliver
to SU at Closing the following documents (all of which shall be duly executed and acknowledged
where required and shall survive the Closing):
(i)Corporate Authority. All documents reasonably necessary to show
- -
- that HVR is properly organized and exIsting pursuant to the laws of the State of Idaho
and that the signatories are authorized to enter into this transaction. Such documents
shall include, but are not necessarily limited to, a Certificate of Good Standing issued by
the Secretary of State s Office, and a resolution duly adopted and executed by HVR'
Board of Directors.
(ii) WarrantY Deed. Statutory warranty deeds in recordable form and
otherwise in form and substance acceptable to SU containing the
legal description of the Land in such form as will convey to
good, marketable and indefeasible title to the Land, free and clear
of all liens, encumbrances , conditions, easements, assignments
and restrictions, except for general real estate taxes not yet due and
(iii)
payable and the exceptions permitted by SUo
No Water Rights. There are no water rights as part of this
- ,
agreement.
(iv)Title Documents; Such other documents, including, without
limitation, lien waivers, indemnity bonds, indemnification agreements, and certificates of
good standing as may be required (and reasonably approved by HVR) as a condition to its
insuring SU's good and marketable title to the Land free of any exceptions other than the
exceptions permitted by SU, if title insurance is acquired.
(v)Authority. Appropriate evidence as to authority of HVR to convey
the Land to SUo
(vi)Assignment of Leases. To the extent held by HVR, all original
leaSes of, and licenses with respect to all or any portion of the- Assets or the Property then
in effect and an assignment of same in form and content satisfactory to SU, and a notice
- to each of the lessees and licensees having rights thereunder to the effect that the Property
---......_...------------------
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has been transferred to SU and directing such lessees and licensees thereafter to remit all
rent, license fees and other payments required to be made thereunder directly to SUo
(vii)Assignment of Agreements with Customers of Water System and
Service Contracts . All original agreements with respect to service provided by the Water
System, including any set forth in Exhibit A hereto, and an assignment of same in form
I '
and content satisfactory to SU, and a notice to each of the customers having rights
thereunder to the effect that the service agreements are being transferred to SU and
directing such customers thereafter to remit all payments directly to SUo
(viii)Notice to Idaho Public Utilities Commission ("IPUC") of Transfer.
. )
To the extent required, HVR shall notify the IPUC of the conveyance of the Water
System.
(ix)Warranty Bill of Sale. All Assets shall be conveyed to SU by .
Warranty (as to title) Bill of Sale, Assignment of Warranties, Guaranties and Intangibles
in form and content satisfactory to SU and HVR which shall state that good and
marketable title to such property is transferred free and clear of all liens and
encumbrances.
(x)Surveys . - Such surveys, site plans, maps and plans and
specifications relating to the Property as are in the possession or control ofHVR. Water
meters, valves and blowoffs will be shown on such documents.
(xi)Notice to Department of Health of Transfer.HVR shall notify the
Panhandle Health District and IDEQ of the conveyance of the Water System.
(xii)UCC Filings Certificate. Any UCC filing certificates necessary to
effect the transfer.
(c)Payment of Costs. At Closing, HVR and SU shall pay their own
respective costs incurred with respect to the consummation of the transfer of the Assets and
, J Property. Any transfer tax on personal or real property incident to the conveyance of title to the
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Property to SU shall be paid by HVR. HVR shall pay the recording fees and any other fees
required to effectuate the transfer of the Water System to SUo
Cd)Prior to Closing. HVR shall agree to provide operator training to SUo
SECTION9. ATTORNEYS' FEES.
If either SU or HVR brings suit to enforce the provisions of this Agreement, the
prevailing party shall be entitled to an award of its reasonable attorneys' fees and costs in
connection with such lawsuit in an amount which the court deems just.
SECTIONIO. COMPLETE AGREEMENT.
This Agreement, along with the attachments hereto and the Letter, constitutes the entire
understanding and agreement of the parties with respect to its subject matter and any and all prior
agreements, understandings or representations with respe~t to its subject matter are hereby
canceled in their entirety and are of no further force or effect.
SECTION 11 CONTRACT MODIFICATIONS.
No amendment, change or modification of this Agreement shall be valid, unless in
writing and signed by all of the parties hereto.
SECTION 12.NOTICES.
Any notice required to be served in accordance with the terms of this Agreement shall be
- sent by registered mail, return receipt requested, addressed to the parties as follows:
To SU:Dean Allara
Managing Member;
CDS Stoneridge Utilities, LLC
60 East 3rd Avenue
Suite 112
San Mateo, CA 94401
To the HVR:Happy Valley Ranchos Water, Inc. -.
Attn: Steve Hites, President
PO Box 370
Blanchard, ID 83804
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SECTION 13.CASUALTY.
If any fire, windstorm or casualty occurs and materially affects all or any portion of the
, Assets or Property on or after the date of this Agreement and prior to the Closing, SU may elect
by written notice to HVR, to terminate this Agreement and be relieved of any obligation to accept
the Water System. IfSU makes such election, neither SU nor HVR has any further liability to
. the other and shall be relieved of all obligations hereunder.
SECTION 14.EVENT OF DEFAULT.
- - \
In the event of a default under this Agreement by HVR (including a breach of any
representation, warranty or covenant set forth herein), SU shall be entitled to seek specific
performance ofHVR's obligations hereullder and/or monetary damages against HVR. In the
event of a default under this Agreement by SU (including a breach of any representation
warranty or covenant set forth herein) HVR shall be entitled to seek specific performance of
SU's obligations hereunder and/or monetary damages against Su. The parties acknowledge that
su shall have no obligation to assume ownership of or responsibility for the operation of the
Water System until contingencies set forth herein are met to the satisfaction of SU.
, ', )
SECTION 15.APPLICABLE LAW.
This Agreement shall be governed by the laws of the State ofIdaho.
SECTION 16.RELATIONSHIP OF PARTIES.
Nothing contained in this Agreement shall be deemed or construed by the parties hereto
or by any third person to create the relationship of principal and agent or partnership or joint
venture or of any association between any of the parties hereto other than independent
; 1
-contracting parties.
SECTION 17.DOCUMENTS.
Each party to this Agreement shall perform any and all acts and execute and deliver any
and all documents as may be necessary and proper under the circumstances in order to
accomplish the intents and purposes of this Agreement and to CaIT)' out its provisions. The
closing statement will be derived from this agreement.
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SECTION 18.VALIDITY.
In case any tenn of this Agreement shall be invalid, illegal, or unenforceable, in whole or
in part, the validity of any of the other terms of this Agreement shall not in any way be affected
,- ,
~ereby.
SECTION 19.COUNTERPARTS.
- This Agreement may be signed in counterparts, anyone of which shall be deemed to be
an original.
SECTION 20.INDEPENDENT COUNSEL
The parties hereto acknowledge and agree that they have each been represented in the
negotiations and preparation of this Agreement by independent counse~ of their choice, or have
been advised to seek independent counsel to represent their individual interests, and that they
have read this Agreement, have had its contents fully explained to them by such counsel, if any,
and are fully aware of the contents hereof and of its legal effect.
SECTION 21.UNAVOIDABLE CIRCUMSTANCES.
Neither party hereto shall be deemed to be in breach or in violation of this Agreement if
either is prevented from performing any of its obligations hereunder for anY reason beyond its
reasonable control including and without limitation acts of God, riots, strikes, fires, storms
public disturbances, or any regulation of any federal, state or local government or any agency
thereof.
SECTION 22.EXHIBITS.
All exhibits attached hereto are incorporated by reference.- i
SECTION 23.HEADINGS.
The captions and paragraph headings used in this Agreement are inserted for convenience
of reference only and are not intended to define, limit or affect the interpretation or construction
of any term or provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written:
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\~ONEIUDGE ~JLITIES J.LC
By aJl
Its MANAGING MEMBER ~'t";-...IJ LA y/17"'1
HVR:
HAPPY VALLEY RANCHOS lNc.
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Its PRESIDENT or VICE PRE~IDENT
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STATE OF
County of 1;1') Y1 rI
) 55.
I certify that know or have satisfactory evidence that DEAN ALlAM is the personwho appeared before me, and said person acknowledbred that he signed this instrument
, 00 oathstated that he was authorized to execute the instrument and acknowledged it as the Managjng .
Member of CDS Stoneridge Utilitie~, LLC to be the !Tee and voluntary act of such party for theuses and purposes mentioned in the instrument.
Dated this a::..::::-day of
5T A TE OF IDAHO
County of (.jt0..~-
Notary
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residing at
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(printed Name)
My commission expires: 1- It ~/O
55.
certify that I know or have satisfactory evIdence that STEVE HITES is the person who -
appeared before me, and said person acknowledged that he signed this instrument, on oath Stated
that he was authorized to execute the instrument and acknowledged it a5 the President of Happy
Valley Ranchos Water, fnc. to be the free and voluntary act of such party for the uses and
purposes mentioned in theinstrument.
Dated this 3ft.d,dnyof '-1I\I 2003.
. No ~~ of/doho. residing
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ExhihillJ:Legal Ucst.:ripliol1 of LI111d
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* Exhiblt A:
Parts T.1.st froM Happy Valley Ranchos Water
Map - Happy Valley Rimchos WAter System I
. 2 , and .3 General Layout
***
ExbibH
Easel11en t 578523 LINDSTROM
Easemen t 582870 Harr.i.s
Ea~emen t 578522 Gus t in
Happy Valley Ranchos - Uni t 2 , Pages 1 and 2
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CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 7TH DAY OF JULY 2003
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. SWS-03-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
DEAN ALLARA, MGR. MEMBER
CDS STONERIDGE UTILITIES LLC
364 STONERIDGE RD
PO BOX 280
BLANCHARD, ID 83804
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