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Home My WebLink About03/29/1990 B A K E R S F I E L D Kevin McDermott, Chair Patricia DeMond Ken Peterson Staff: John Stinson A G E N D A BUDGET AND FINANCE COMMITTEE Thursday, March 29, 1990 12:45 p.m. City Manager's Conference Room 1. Wastewater Treatment Plant No. 3 Disposal Site CITY OF BAKERSFIELD BUDGET AND FINANCE COMMITTEE REPORT NO. 5-90 April 4, 1990 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL SUBJECT: CONSENT TO ASSIGNMENT OF AGREEMENT NO. 85-142, AS AMENDED (DISPOSAL SITE FOR WASTEWATER TREATMENT PLANT NO. 3). At its March 7th meeting, the City Council referred a letter from Mel Jans of Tenneco West to this Committee. That letter expressed Tenneco West's interest in transferring the wastewater disposal site west of Interstate 5 to the City and terminating Agreement No. 85-142, as amended, which governs the relations between the City and Tenneco West as to that disposal site. A few days before the Council meeting on March 7, Valley Communities, Inc.,.exercised an option to purchase the disposal site and assume Tenneco West's obligations and rights under Agreement No. 85-142. Under the terms of that Agreement, the City's written consent to any assignment is required, but the City may not'"unreasonably withhold consent." The City is specifically authorized to consider such factors as the skill, experience, performance record and financial capacity of the proposed assignee. The Committee has met with representatives of Valley Communities, Inc., including Mr. Joe Garone, Mr. Gary Garone, Mr. Eldon Hugie and Kenneth Payne. Staff has reviewed materials submitted by Valley Communities in support of the requested assignment, and has recommended that consent be given to the proposed assignment with the following conditions: 1. That the City's consent to assignment of the agreement to Valley Communities is subject to the condition that Tenneco West, Inc., shall BUDGET AND FINANCE COMMITTEE REPORT NO. 5-90 April 4, 1990 Page -2- have assigned its reclamation permit from the State Regional Water Quality Control Board for the disposal site to Valley Communities. 2. That funds payable pursuant to Paragraph 3 of the Agreement shall be withheld by the City in accordance with the following: a. .The City may withhold sufficient funds each year to pay all real property taxes and assessments against the disposal site property (the 4,700 plus acres subject to the Agreement), such funds to be released to Valley Communities upon receipt by the City of written evidence that all such taxes and assessments, including any special district taxes and assessments, have been paid; and b. The City may.withhold the sum of $100,000 each year for five years, to reimburse the City any costs it may incur should Valley Communities performance or non-performance re the disposal site lead to threatened regulatory agency action which might jeopardize the City's legal ability to discharge treated' effluent to that site or to issue building or sewer connection permits for any structure that would be served by the City Wastewater Treatment Plant No. 3 should the City enter upon and operate the disposal site and makes necessary improvements. Such funds shall be deposited by the City in an interest bearing account, and shall be paid over to Valley Communities, with accrued interest, five years after the first $100,000 is deposited into such account. c. In lieu of the procedure specified in Paragraph b, Valley Communities may elect to post with the City a performance bond or irrevocable letter of credit in the amount of $500,000, payable upon demand to the City, from BUDGET AND FINANCE COMMITTEE REPORT NO. 5-90 April 4, 1990 Page -3- an admitted California corporate surety or financial institution approved by the City. 3. That Valley Communities provide written notice to the Director of Public Works of the City within three business days of receipt of any written communication from any state or local regulatory agency of an deficiency in operations of the disposal site, including a copy of such communication, and that should Val.ley Communities fail to do so, the agreed liquidated damages shall be $500.00 per calendar day. The Committee has considered staff's recommendation and supporting materials and concurs. Therefore, this Committee recommends the approval of the Agreement Conditionally Consenting to Assignment of City Agreement No. 85-142, as Amended, and that the Council authorize the Mayor to execute Agreement. We request that the Council accept this report and implement its recommendations. Respectfully submitted, Councilmember Kevin McDermott, Chair Councilmember Patricia DeMond Councilmember Ken Peterson .alb Il ,I DRAFT City of Bakersfield BUDGET AND FINANCE COMMITTEE Report No. __-90 March 21, 1990 To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Subject: ASSIGNMENT OF AGREEMENT NO. 85-142, AS AMENDED, FROM TENNECO WEST, INC., TO VALLEY COMMUNITIES, INC. At its March 7th meeting, the City Council referred a letter from Mel Jans of Tenneco West to this Committee. That letter expressed Tenneco West's interest in transferring the wastewater disposal site west of Interstate 5 to the City and terminating Agreement No. 85-142, as amended, which governs the relations between the City and Tenneco West as to that disposal site. A few days before the Council meeting on March 7, Valley Communities, Inc., exercised an option to purchase the disposal site and assume Tenneco West's obligations and rights under Agreement No. 85-142. Under the terms of that Agreement, the City's written consent to'any assignment is required, but the City may not."unreasonably withhold consent." The City is specifically authorized to consider such factors as the~skill, experience, performance record and financial capacity of the proposed assignee. Budget & Finance Committee Report -90 Re Assignment of Agreement No. 85-142 March 21, 1990 Page 2 Staff has reviewed materials submitted by Valley Communities in support of the requested assignment, and has recommended that consent be given to the proposed assignment. The Committee has considered staff's recommendation and Supporting materials and concurs. The Committee recommends that the Council consent to the assignment and authorize the City Manager to provide written notice of such consent. Respectfully submitted, Councilmember Kevin McDermott, Chair Councilmember Patricia DeMond Councilmember Ken Peterson AJS/meg COM-RPTS\ B&F.RPT VALLEY COMMUNITIES, INC. 5329 Office Center Court, Suite #130 Bakersfield, California 93309 March 9, i990 Arthur J. Saalfield, Esq. .City Attorney 1501 Truxtun Avenue Bakersfield, California 93301 RE: Request for Approval of Assignment of city Agreement No. 85-142 to Valley Communities, Inc. Water Disposal at Interstate. 5 South of Taft Hi~hwa~ Dear Mr. Saalfield: Thank you for your letter of March 7, 1990 and the request for information relevant .to the Consent to Assignment (to Valley Communities, Inc. from Tenneco West, Inc.) by the City of Bakersfield. The following information is submitted pursuant to your request: 1. VALLEY COMMUNITIES, INC. is a California corporation formed on January 2, 1990 for the purpose'of acquiring the approximately 4710 acres of land which includes the water disposal site under Agreement 85-142. Copies of the Articles of Incorporation and Bylaws of Valley Communities are enclosed. 2. The officers of the corporation are as follows: ELDON R. HUGIE President JOE D. GARONE Vice President and Secretary GARY GARONE Vice President KENNETH B. PAYNE, II Vice President 3. The principal shareholders of the corporation are GARY GARONE, JOE D. GARONE, ELDON R. HUGIE and KENNETH B. PAYNE, II. 4. The initial capitalization of the corporation was $510,000 cash plus commitments from the shareholders to contribute or provide an additional $2,500,000. 5. 'The skill, experience, performance record and financial capacity of the principals of the corporation include the following:' A. ELDON R. HUGIE is an Attorney and Certified Public Accountant who has practiced law in the Bakersfield area over the past 30 years, primarily in the business, real estate, probate, tax and estate planning fields. He has been a principal in substantial farming and cattle operations in the states of California, Oregon and Texas, which includes the Fat city Cattle Arthur J. Saalfield, Esq. March 9, 1990 Page 2 operations at Bakersfield (feedlot formerly located at Mt. Vernon and East Brundage); Salinas Valley (100,000 head feedlot); Muleshoe, Texas (20,000 head feedlot); and Gonzales, California (1600 acres of farmland). The operations in the Salinas Valley required intensive water management to avoid contamination of surrounding land and avoidance of run-off into the Salinas River, including construction of ponds and extensive pumping operations to spread water from the approximately 700 acre feedlot to surrounding farm land. At the present time Mr. Hugie and his son, David Hugie, operate a 2500 acre farming and cattle operation on the Rogue River in Southern Oregon which also involves substantial water management and drainage control to avoid contamination of the Rogue River. Although it is not anticipated that the corporation will require substantial additional capital after purchasing the land, Mr. Hugie has the personal financial capacity to assist in any manner required to enable the corporation to conduct its planned operations. B. JOE D. GARONE has farmed in Bakersfield and Kern County over the past 50 years and is experienced in all aspects of farming, irrigation and water management. In addition, Mr. Garone has been involved in the farming operation at the City Water Disposal site south of Freeway 58 immediately east of Mt. Vernon for a number of years. Mr. Garone is president of Garone Realty, Inc., which specializes in brOkerage services associated with the purchasing and selling of farm properties in Kern County. Mr. Garone was a co-founder of California Republic Bank (formerly Greenfield State Bank) and served on the ~xecutive Committee and Loan Committee of that bank for a period of 17 years. He was a co-founder and charter president of Greenfield Water District. He was also a co-founder and charter president of the Upper Kern Island Water Association and is a past Trustee of the Greenfield School Board. Mr. Garone also has the financial capacity, as a shareholder, to provide whatever financial assistance the corporation may require in carrying on its proposed operations. C. GARY GARONE has been a successful farmer in Bakersfield and Kern County over the past 25 years. Currently, and over the past several years, he has been the owner and principal 'manager of Garone Farming operations which include farming of the properties owned by the City of Bakersfield south of Freeway 58 and east of Mt. Vernon (adjacent to Treatment Plant No. 2 and receiving water from that facility). He also worked with Production Credit Association from 1969-1974, is currently on the Kern County Board of Realtors, serves as a Director of the Kern County Hay Growers Association and is on the California Wheat Commission. Gary Garone also has the financial capacity, as a Arthur J. Saalfield, Esq. March 9, 1990 Page 3 shareholder, to provide additional financial stability to the corporation if needed to fulfill its obligations. D. KENNETH B. PAYNE, II has operated a general contracting business in California over the past 20 years. In recent years Mr. Payne has developed and built several shopping centers in the Bakersfield and Santa Clarita areas, including the Northridge Center at Fairfax and Auburn (completed in 1988), the Valley Springs Center at Wible Road and Wilson Road (completed in 1987), and the Golden Oak Center on Soledad Canyon Road in Santa Clarita, California (completed in 1989). Mr. Payne is also a well-known designer-builder of custom homes in the Bakersfield area. 6. GARY GARONE will be the resident manager of the farming and water managemetnt operations on the property. He will be working directly with City staff in working out any problems or special circumstances relating to the above agreement. He has prepared a business plan for the operations on the property, ~hich includes substantial improvements in the farming operation and distribution of water on the property. A copy of his preliminary forecasts of costs and income from farming are enclosed. Also enclosed is an overall forecast for the property, including projected servicing of the bond assessments and other financial matters. 7. All of the above principals are either natives or~ long-term residents of Bakersfield and Kern County who have a good working knowledge of the area and a keen interest in its future growth and welfare. It is requested that the City of Bakersfield consent to the assignment of the above referenced contract and that the matter, after review by staff, be included on the agenda of the Bakersfield City Council at their March 21, 1990 meeting for such consent. Please advise if there are any questions in regard to the above or if we can be of further assistance in providing additional information. Your personal courtesy and assistance in this matter is sincerely appreciated. Very truly yours, VALLEY COMMUNITIES, INC. ELDON R. HUGIE, ~ President ERH: vr Enclosures \BVLP\C ! TYI. TR. DOC BUENA VISTA PROPERTIES FORECAST OF CASH FLOW YEAR: 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Contract Receipts 163,701 183,362 203,033 222,693 242,413 262,025 281,695 301,356 321,027 340,687 360,358 380,019 399,689 419,350 439,021 458,681 478,352 Water Value Allocation 30,000 76,401 84,597 92,789 101,006 109,177 117,373 125,565 133,761 141,953 150,149 158,341 166,537 174,729 182,925 191,117 199,313 Farming / Operations 55,000 284,372 405,146 423,406 423,406 441,667 441,667 459,928 459,928 478,188 478,188 478,188 478,188 478,188 478,188 478,188 478,188 Miscellaneous 20,000 22,000 24,200 26,620 29,282 32,210 35,431 38,974 42,872 47,159 51,875 57,062 62,769 69,045 75,950 83,545 91,899 TOTAL 268,701 566,135 716,975 765,509 796,107 845,079 876,166 925,823 957,587 1,007,988 1,040,570 1,073,610 1,107,183 1,141,313 1,176,084 1,211,532 1,247,753 Bond Payments 320,000 311,000 302,000 318,000 332,000 319,000 331,000 216,000 208,000 225,000 215,475 230,850 219,300 232,750 219,875 230,800 215,400 NET CASH FLOW (51,299) 255,135 414,975 447,509 464,107 526,079 545,166 709,823 749,587 782,988 825,095 842,760 887,883 908,563 956,209 980,732 1,032,353 Buena-Vista Properties Forecast of Farming Ope'rations 1991 through 2006 Forecast of Income from Farming Cotton Alfa fa Alfalfa Wheat Overhead Total New Old Acre > 260.10 67.75 418.50 73.20 Year 1991 130,050.00 20 325 O0 125,550.00 80 520.00 72,072.90) 284 372 10 1992 156,060.00 20 325.00 251,100 O0 51 240.00 73,579.50) 405 145 50 1993 182 070.00 20 325 O0 251,100 O0 43 920.00 74,008.80) 423 406 20 1994 182 070.00 20 325.00 251,100 O0 43 920.00 74,008.80) 423 406 20 1995 208 080.00 20 325 O0 251,100 O0 36 600.00 74,438.10) 441 666 90 1996 208 080 O0 20 325.00 251,100 O0 36 600.00 74,438.10) 441 666 90 1997 234 090 O0 20 325 O0 251,100 O0 29 280.00 74,867.40) 459 927 60 1998 234 090 O0 20 325.00 251 100 O0 29 280.00 74,867.40) 459 927 60 1999 560 100 O0 20 325 O0 251 100 O0 21 960.00 75,296.70) 478 188 30 2000 260 100 O0 20 325.00 251 100 O0 21 960.00 75,296,70) 478 188 30 2001 260~100 O0 20 325 O0 251 100 O0 2-1 960.00 75,296.70) 478 188 30 2002 260.100 O0 20 325.00 251 100 O0 21 960.00 75,296.70) 478 188 30 2003 260 100 O0 20 325.00 251 100 O0 21 960.00 75,296.70) 478 188 30 260 100 O0 20 325.00 251 100 O0 21 960.00 75,296.70) 478 188 30 oo oo o.oo 2006 260 100 O0 20 325.00 251 100 O0 21 960.00 75,296.70) 478 188 30 3,615,390.00 325,200.00 3,892,050.00 527,040.00 (1,194,654.60)'Z,165,025.40 Forecast of Costs and ~ncome from Farming Cotton Alfalfa Alfalfa Wheat Costs New 0 d Preparation 49 50 135.00 13.50 31.50 13 50 49.50 0.00 15.30 7 20 9.00 0.00 7.20 Applic 36 O0 0.00 0 O0 54.00 Applic 20 70 0.00 18 O0 18.00 Applic 27 O0 22.50 22 50 0.00 63.00 90.00 90 O0 58.50 16.20 22.50 22 50 13.50 13.50 0.00 0 O0 0.00 28.80 0.00 0 O0 0.00 Preharvest 275.40 328.50 166.50 198.00 94.50 135.00 180.00 28.80 369.90 463.50 346.50 226.80 Acre /acre 900 6.25 9 2.5 ton/lb 0.70 85,00 85.00 120.00 630.00 531.25 765.00 300.00 .'.'~i 260.10 67.75 418.50 73.20 Costs .~ .................... Total Irrigation Rea Estate TOTAL Acre 11.10 13.91 10.40 6.80 Interest Dist Assess Insurance T xes OVERHEAD Year 1991 5,548 50 4 171.50 3~118.50 7,484.40 20 322.90 13,200.00 15,000.00 23 550.00 72,072.90 1992 6,658 20 4 171.50 6 237.00 4,762 80 21.829.50 13,200,00 15,000.00 23 550.00 73,579.50 1993 7,767 ~0 4 171 50 6 237 O0 4,082 40 2~ ?58.80 13,200 O0 15 000.00 23.550 O0 74,008.80 1994 7,767 90 4 171.50 6 237.00 4,082 40 22 258.o0 13,200.00 15,000 O0 23 550 O0 74 008.80 1995 8,877 60 4 171.50 6 237.00 3,402 O0 :~2 688.10 13 200.00 15,000.00 23 550.00 74,438.10 1996 8,877 60 4 171.50 6 237 O0 3,402 O0 22 688.10 13 200.00 15,000.00 23.550.00 74,438,10 1997 9,987.30 4 171.50 6 237 O0 2,721 60 23 117.40 13 200.00 15 000.00 23 550.00 74,867.40 1998 9,987.30 4 171.50 6 237 O0 2,721 60 23 117.40 13 200 O0 15 000.00 23 550.00 74 867.40 1999 11,097.00 4 171.50 6 237 O0 2,041 20 23 546.70 13 200 O0 15 000 O0 23 550.00 75 296.70 2000 11,097.00 4 171.50 6 237 O0 2,041 20 23 546.70 13 200 O0 15 000 O0 23 550.00 75 296.70 2001 11,097.00 4 171.50 6 237 O0 2,041 20 23 546.70 13 200 O0 15 000 O0 23 550.00 75.296.70 2002 11,097.00 4 171.50 6 237 O0 2,041 20 23 546.70 13 200 O0 15 000 O0 23 550.00 75 296.70 2003 11,097.00 4 171.50 6 237 O0 2,041.20 23 546.70 13 200 O0 15 000 O0 23 550.00 75.296.70 2004 11,097.00 4 171.50 6 '237 O0 2,041.20 23 546.70 13 200 O0 15 000 O0 23 550.00 75.296'70 2005 11,097.00 4 171.50 6 237 O0 2,041.20 23 546.70 13 200 O0 15 000 O0 23 550.00 75 296.70 2006 11,097.00 4,.171.50 6 237 O0 2,041.20 23 546.70 13 200 O0 15 DO0 O0 23 550.00 75 296.70 OFFICE OF THE SECRETARY OF STATE CORPORATION DIVISION I, MAt~CH FONG EU, Secretary of State of the State of California, hereby certify: " That the annexed transcript has been compared with the corporate record on file in this office, of which it purports to be a copy, and that same is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this J/~N 3 1990 1655629 '~ ENDORSED · FILED ~ Re office o! the Secre~ of S~te ARTICLES OF INCORPORATION of OF r3 N 2 1990 VALLEY COMMUNITIES, INC. M~CRFONG~,Secr~wolS~te ARTICLE ONE: Name. The name of this corporation is VALLEY COMMUNITIES, INC. ARTICLE TWO: PurDose. The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code. ARTICLE THREE: Aqent for Service. The name and address in the State of California of the corporation's initial agent for service of process is: KENNETH B. PAYNE, JR. 5329 office Center Court, Suite 130 Bakersfield, California 93309 ARTICLE FOUR: Authorized Shares. The total number of Shares which this corporation is authorized to issue is Fifty Thousand (50,000) shares all of the same class designated "Common Stock." ARTICLE FIVE: Limitation on Directors' Liability. In any action for breach of directors' duties pursuant to Corporations Code Section 309, the liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. ARTICLE SIX: Indemnification' of Aqents. Corporate agents, as that term is defined in Corporations Code SectiOn 317, may be indemnified for breach of duty to the corporation and its stockholders by bylaw, agreement, or otherwise in excess of the indemnification permitted by Corporations Code Section 317. However, there shall be no indemnification, of any agent in circumstances expressly prohibited by Corporations Code Section 317, or for any acts, omissions, or transactions from which a director may not be relieved of liability. K~NNETH B. PAY~ GR., Incorporator The undersigned declares that he is the incorporator who has executed these Articles of Incorporation and hereby declares that this instrument is the act and deed of the undersigned. KENNETH B. PAYN~, GR. -2- MEMORANDUM March 2, 1990 ~TO: Ed Schulz, Public Works Manager Greg Klimko, Finance Director FROM: Arthur J. Saalfield', City Attorne~-~~ / / SUBJECT: TENNECO ASSIGNMENTOF AGREEMENT NO. ~142, AS AMENDED Paragraph.'9 of Agreement No. 85-142 reads as follows: "9. Assignment. None of the obligations or benefits pursuant to this Agreement, nor the Agreement itself, shall be assignable by .Tenneco without the prior written consent of the City. The City shall not unreasonably withhold such consent. However, the City may consider factors such as, but not limited to, skill, experience, performance record, and financial capacity in deciding whether to consent to assignment to a proposed assignee." The City thus has the opportunity to determine whether the skill, experience, performance record, or financial capacity of the assignee or any other factor reasonably requires our withholding approval of the assignment. We need sufficient information to make informed decisions as to these and perhaps other factors, e.g., to decide as to the "financial capacity" of the assignee, we will need full details of the proposed transaction, essentially a business plan for the assignee's enterprise. It may be difficult to complete such analysis by the 21st of March, the last Council meeting before the deal must consummate. I suggest that Mel Jans and the assignee be contacted early next week and requested (orally, confirmed by letter to follow) to provide you with all the details of the transaction and of the assignee's proposed operation of the 4600+ acres. AJS/meg P-WORKS\ TENNECO.MEM cc: J. Dale Hawley, City Manager OFFICE of THE CITY ATTORNEY ARTHUR J. SAALFIELO CITY ATTORNEY MUNICIPAL LAW: 1501 TRUXTUN AVENUE LITIGATION: ALAN DALE DANIEL BAKERSFIELD, CALIFORNIA 93301 DON McGILLIVRA Y Assistant City Attorney (805) 326-3721 Assistant City Attorney LOUISE T. CLOSS ROBERT M. SHERFY Assistant City Attorney Assistant City Attorney LAURA C. MARINO MEDELYIAN R. GRADY Deputy City Attorney Assistant City Attorney INVESTIGATIONS: WILLIAM H. SLOCUMB KRIS BORTON March 7, 1990 Assistant City Attorney City Attorney Investigator Eldon R. Hugie Hugie and Hugie Attorneys at Law 5329 Office Center Court Bakersfield, CA 93309 Re: Purchase of City Disposal Site West of Interstate 5 from Tenneco West Dear Mr. Hugie: I understand that you and Joe Garone are principals in a corporation which has exercised an option to purchase the above-referenced approximately 4600 acre disposal site from Tenneco West, and that the corporation would assume Tenneco's responSibilities under the agreement governing that disposal site (City Agreement No. 85-142) in purchasing that site. Paragraph 9 of that Agreement requires that the City consent in writing to any assignment of that Agreement, with the proviso that such consent shall not unreasonably be withheld. It further provides that the City may consider such factors as skill, experience, performance record and financial capacity in deciding whether to consent to assignment. The City Council meets March 21st, then not again until April 4th. If the City Council is to act on the proposed assignment at-the March 21st meeting, the matter must be placed on the agenda by March 13th. For staff to make a recommendation to the City Council as to whether consent should be given to the assignment, we need all available relevant inf6rmation by the end of this week. Please provide us with information as to the .incorporation of the corporation (its articles and by-laws, its officers, principal shareholders and capitalization), its skill, experience and performance record, and its financial capacity. We would be specifically interested in the qualifications of the resident manager and the business plan for this operation. For example, having purchased the property, what funds will the corporation have to operate the disposal site in full compliance Letter to Eldon R. Hugie Re: Purchase of City Disposal Site March 7, 1990 Page 2 with regulatory requirements. What assumptions re income from sale of crops are being made? Any other information you may be able to provide will be appreciated. The City will not unreasonably withhold consent to assignment, but needs to be reasonably sure that the assignee is fully capable of performing the obligations of Agreement No. 85- 142 over the lengthy remaining term of that Agreement. Thank you for your cooperation. AJS/meg TENNECO.LTR cc: J. Dale Hawley Ed Schulz Greg Klimko David Stanton AGREEMENT NO. CONDITIONAL CONSENT TO ASSIGNMENT OF CITY AGREEMENT NO. 85-142t AS AMENDED THIS AGREEMENT made and entered into this day of April, 1990, by and between the CITY OF BAKERSFIELD, a municipal corporation, referred to herein as the ("City"), and VALLEY COMMUNITIES, INC, a California corporation, herein after' referred to as ("VC"). W.I TNE S SETH WHEREAS, VC has entered into an escrow agreement pursuant to which VC will purchase from Tenneco West, Inc. K property used as a disposal site for treated wastewater effluent from the City's Wastewater Treatment Plant No. 3, pursuant to City Agreement No. 85-142,j(hereinafter, the "Agreement") WHEREAS, Tenneco West, Inc. is willing to assign to VC its rights and obligations pursuant to the Agreement, and VC is willing to accept assignment from Tenneco West, Inc. of said rights and obligations; and WHEREAS, pursuant to the terms of the Agreement, the City's consent to its. assignment is required, may not be unreasonably withheld, but the City is expressly authorized to consider factors such as financial capacity ~a possible assignee in determining whether to give consent to assignment; and WHEREAS, representatives of the City and VC have met and discussed the assignment and the City has reviewed information submitted by VC as to VC's ability to perform its obligations under the Agreement; and WHEREAS, in consenting to such assignment, the City would be releasing from all obligation under the Agreement a party (Tenneco West, Inc.) whose financial capacity to perform the Agreement is unquestionable, and would be accepting, in its place, a newly formed corporation' with significantly lesser financial capacity; and ? W~EREAS, representatives of the City and VC have discussed the foregoing and have agreed that the consent to assignment'may appropriately be subject to the conditions set forth herein below. THEREFORE, in consideration of the respective and mutual covenants hereinafter contained and made, and subject to all the terms and conditions set forth below, THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. That the City's consent to assignment of the~f~/ agreement to VC is subject to the condition precedent that Tennec~' West, Inc., shall have assigned its reclamation permit ~r"~'the State Regional Water Quality Control Board for the disposal site to VC. 2. That funds payable pursuant to Paragraph 3 of the Agreement shall be withheld by the City in accordance with the following: a. The City may withhold sufficient funds each year to pay all real property taxes and assessments against the disposal site property (the 4,700 plus acres subject to the Agreement), such fundsto be released to VC upon receipt by the City of written evidence that all such taxes and assessments, including any special district taxes and assessments, have been paid; and b. The City may withhold the sum of $100,000 each year for five years, to reimburse the City any costs it may incur pUrsuant to Paragraph 4, below. Such funds shall be deposited by the City in an interest bearing account and, except to the extent drawn against by the City pursuant to Paragraph 4, below, shall be paid over to VC, with accrued interest, five years after the first $100,000 is deposited into such account. c. In lieu of the procedure specified, in Paragraph b, VC may elect to post with the City a performance bond or irrevocable letter of credit in the amount of $500,000, payable upon demand to the City, from an admitted California corporate suretyor financial institution approved by the City. 3. That VC provide written notice to the Director of Public Works of the City within three days of receipt of any written communication from any state or local regulatory agency of an deficiency in operations of the disposal site, including a copy of such communication. - 2 - 4. That the City ~s-?-t~ enter upon and operate the disposal site and make necessary improvements, all at VC's expense, should VC's performance or non-performance re the disposal site lead to threatened regulatory agency action which, might jeopardize the City's legal ability to discharge treated effluentto that site or to issue building or sewer connection permits.' for anfstructure that would be served by the City Wastewater Treatment Pl'ant No. 3~ provided, however, that the City shall have first given written notice to VC of the threatened action of the regulatory agency and shall have give~VC th~ opportunity to take actio~ address such matters to the satisfaction of the regulatory agency; provided, further, that the City may immediately enter and take all necessary corrective action if such action has not been completed by VC within 30 day~,~ny deadline set by an such agency. 5. Subject to and in consideration of the foregoing, the City consents to assignment of the Agreement from Tenneco West, Inc., to VC. o0o - 3 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, the day and year first-above written. CITY OF BAKERSFIELD By CLARENCE E. MEDDERS Mayor APPROVED AS TO FORM: ARTHUR J. SAALFIELD City Attorney By APPROVED: By ED SCHULZ Public Works Director COUNTERSIGNED: By GREGORY KLIMKO Finance Director ~/~S VALLEY COMMUNI~%X~I~N~, INC. By Title By AJS/pam Title AGREEMENT\VC-TENNECO.K 3/29/90 CIT ' of BAKERSFIELD Finance Department Treasury Division P.O. Box 2057 Bakersfield, California 93303 (805) 326-3757' March 13, 1990 Mr. Gary Garone CERTIFIED MAIL Gary Garone Farms 1001Hosk'ins Road Bakersfield, CA 93307 Dear Mr. Garone: After receiving my letter of October 18, 1989, you questioned the applicabil- ity of government program revenue in calculating additional amounts due. We t~ave obtained payment records from the Agriculture Stabilization and Conservation Service and verified that payments were made in 1986, 1987, and 1988 to Brian Garone, Jim Garone, and you. These annual payments were in the amount of $50,000.00 to each individual or $150,000.00 per year. The records for 1989 were not final at the time we obtained them but progress payments indicate that each of the three would receive $50,0'00.00 for 1989. These pay- ments were based upon your farming operations on City owned property as described in the agreement. In setting the criteria for calculation of the annual rental amount, Agreement 85'-226 clearly makes reference to the inclusion of government supported crop payments in the annual gross income. I am enclosing a copy of Agreement 85-226'for your convenience. I call your attention to the highlighted por- tions of Section II, paragraph B, and Section IV. Furthermore, government payments are included in each of the annual crop plans you submitted. There is absolutely no doubt that all government program revenue generated by the farm was to be included in annual gross income and this is the $150,000.00 figure reflected in the schedule enclosed with my October 18 letter. The schedule has been updated to reflect your December 31,1989 payment of $~00,000.00. The schedule was also changed, as .you requested, relative to the 1989 double crop information. The updated schedule is enclosed. The balance due for 1989 is $77,790.00 and the balance due from prior years of $94,373.00 remains unchanged. Mr. Gary Garone March 13, 1990 Page Two The combined balance due immediately is $172,163.00. We demand payment in full within 30 days. If payment is not made within such time, we shall pursue our legal remedies. Sincerely, William C. Descary Treasurer WDC/krc BD031390.2 cc: City Manager Public Works Director City Attorney Finance Director Internal Auditor Wastewater Superintendent Enclosures / Gary Garone Farms Crop Revenue Summary 19861198711988/1989 E:_stimated YieMs )~eres Ave/age Gross ~5% el Less "~' Baiance Per Act ~ _?l.a_.n_t?_..d ...... p..r_!~e ........ _!r.Lc__o_r!!e- ...... G_r?_S ....... Payments i :'i ':i: DUe ' 1.986 ................. "-:':'~ ............. Cotton 800 ids. 1397 0.585 653,796 ': ':.'..' ':' Wheat 2.19 Tons 1031 92.000 207,726 .... ": ^lfalfa 7 Tons 906 68.500 434,427 :... ~ . :.:/.: .'. 'Government program revenue 150,000 "; i '..'/:' ': 1,445,949 216 892 (200,000 ..................................... ) /: ....... .'$16,892 1987 .............................. 77 Cotton 800 tbs. 1430 0.670 766,4B0 '. :" Wheat 2.19 Tons 995 85.000 185,219 . : · · Al!alta 7 Tons 750 65.000 34 ?, 250 'Government program~evenue 150,000 .~..... 1,442,949 216,442 (200,000)::: /;':; $16,442 1988 .................................................. '5-':-:~--'... -- ....... Collon 800 lbs. 1670 0.650 868,400 '.':;;. · . ' V~eat 2.19 Tons 700 94.170 144,363 :::i.;;- /::..:'. Altalfa 7 Tons 1000 82.500 577,500 ..:..':.i~'.:.:.::?; :: · Govemment prograrn revenue ~50.000 :'::i::i::':! ::'::::.'::' ...... ] ,_7_40.:.2_6_.3_____2_6_1_~,.Q_3 .9___( 2___0_0 ,_.0. 0_ .0. ) :....~: :!:.':: s61,039 :::: ..!~:~';51. 'rOI'AL DUE FROM PRIOR YEARS- ':,'~:,?::::~;':,: $94,373 f989 ' Cotton 800 lbs. 1398 0.667 745,637 :.i::. ::;:: ::: ::i:;: .... Wheat 2.19 Tons 813 116.670 207,727 '-/ Alfalla 7 Tons 1140 85.830 684,923 '? · Governmen! program revenue 150,000 :::::::?::::::7/:::::::::: 1,788,288 268,243 · ,. ::~:..;.: ;~;.:::-~ ..:.. · ::~ .i.:::::!~..:;:::¥ .::- :: · · Corn 15 tons 187 17.000 47,685 4,769 .!:i '.;:i-:'...:'. "'Wheat 2.19 tons 187 116.67 47,780 4,778 i:i/i:':W:..:i:':;!'::.?: 277, 790 (200, OOO} .' 'fO-I'AL DUE-1989 i!:'?,'7':: $77,790 · Paid on cotton and wheat · * Double cropped @ 10% of gross yield AGREEMENT NO. CONDITIONAL CONSENT TO ASSIGNMENT' OF CITY AGREEMENT NO. 85-142, AS AMENDED THIS AGREEMENT made and entered into this day of April, 1990, by and between the CITY OF BAKERSFIELD, a municipal corporation, referred to herein as the ("City"), and VALLEY COMMUNITIES, INC, a California corporation, herein after referred to as ("VC"). W I TN E S SETH WHEREAS, VC has entered into an escrow agreement pursuant to which VC will purchase from Tenneco West, Inc. property used as a disposal site for treated wastewater effluent from the City's Wastewater Treatment Plant No. 3, pursuant to City Agreement No. 85-142 as amended (hereinafter, the "Agreement") WHEREAS, Tenneco West, Inc. is willing to assign to VC its rights and obligations pursuant to the Agreement, and VC is willing to accept assignment from Tenneco West, Inc. of said rights and obligations; and WHEREAS, pursuant to the terms of the Agreement, the City's consent to its assignment is required, may not be unreasonably withheld, but the City is expressly authorized to consider factors such as financial capacity of a possible assignee in determining whether to give consent to assignment; and WHEREAS, representatives of the City and VC have met and discussed the assignment and the City has reviewed information submitted by VC as to VC's ability to perform its obligations under the Agreement; and WHEREAS,.in consenting to such assignment, the City would be releasing from all obligation under the Agreement a party (Tenneco West,. Inc.) whose financial capacity to perform the Agreement is unquestionable, and would be accepting, in its place, a newly formed corporation with significantly lesser financial capacity; and W~EREAS, representatives of the City and VC have discussed the foregoing and have agreed that the consent to assignment may appropriately be subject to the conditions set forth herein below. T~EREFORE, in consideration of the respective and mutual covenants hereinafter contained and made, and subject to all the terms and conditions set forth below, THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. That the City's consent to assignment of the agreement to VC is subject to the condition precedent that Tenneco West, Inc., shall have assigned its reclamation permit from. the State Regional Water Quality Control Board for the disposal site to VC. 2. That funds payable pursuant to Paragraph 3 of the Agreement shall be withheld by the City in accordance with the following: a. The City shall withhold sufficient funds each year to pay all real property taxes and assessments against the disposal site property (the 4,700 plus acres subject to the Agreement), such funds to be released to VC upon receipt by the City of written evidence that all such taxes and assessments, including any special district taxes and assessments, have been paid;~. and b. The City shall withhold the sum of $100,000 each year for five years, to reimburse the City any costs it may incur pursuant to Paragraph 4, below. Such funds shall be deposited by the City in an interest bearing account and, except to the extent drawn against by the City pursuant to Paragraph 4, below, shall be paid over to VC, with accrued interest, five years after the first $100,000 is deposited into such account, at the rate of $100,000 per year, plus 20% of the accrued interest, over the following five years. c. In lieu of the withholding provided for in subparagraph b of Paragraph 2., above, VC may elect to post with the City a performance bond(s) or irrevocable letters of credit, payable upon demand by and to the City. Any such performance bond shall reference this agreement and shall specifically be to pay all capital and operating costs incurred by the City in meeting requirements of any and all regulating agencies, pursuant to Paragraph 4, below. Such bond or letters of credit shall be in the - 2 - amount of $100,000 the first year, increasing by $100,000 increments each year to $500,000 for the fifth year, and decreasing thereafter by $100,000 per year. Should VC not be able to obtain a replacement performance bond for any year after the first year, VC shall deposit with the City all sums that would be held by. the City cumulatively through that year, pursuant to subparagraph b of Paragraph 2. above, and the City may withhold any funds otherwise due VC .pursuant to Paragraph 3. of the Agreement up to such cumulative amount if such funds are not otherwise deposited with City by VC. Should VC fail to make all deposits required pursuant to this subparagraph within ten (10) days of notice from City to do so, such failure shall be deemed a material breach of this agreement. 3. That VC provide written notice to the Director of Public Works of the City within three business days of receipt of any written communication from any state or local regulatory agency of an deficiency in operations of the disposal site, including a copy of such communication. The parties agree that if such notice is not given as provided herein, it would be extremely difficult if not impossible to ascertain the actual damages sustained by the City, and liquidated damages in the amount of $500.00 per calendar day is a fair and reasonable estimate of such damages. That sum is not to be construed in any sense as a penalty. 4. That the City may enter upon and operate the disposal site and make necessary improvements, all at VC's expense, should VC's performance or non-performance re the disposal site lead 'to threatened regulatory agency action which might jeopardize the City's legal ability to discharge treated effluent to that site or to issue building or sewer connection permits for any structure that would be served by the City Wastewater Treatment Plant No. 3; provided, however, that the City shall have first given written notice to VC of the threatened action of the regulatory agency and shall have given VC the opportunity to take action to address such matters to the satisfaction of the regulatory agency; provided, further, that the City may immediately enter and take all necessary corrective action if such action has not been completed by VC within 30 days prior to any deadline set by an such~agency. 5. Subject to and in consideration of the foregoing, the City consents to assignment of the Agreement from Tenneco West, Inc., to VC. o0o - 3 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, the day and year first-above written. CITY OF BAKERSFIELD By CLARENCE E. MEDDERS Mayor APPROVED AS TO FORM: ARTHUR J. SAALFIELD City Attorney By APPROVED: By ED SCHULZ Public Works Director COUNTERSIGNED: By GREGORY KLIMKO Finance Director VALLEY COMMUNITIES, INC. By Title By AJS/pam Title AGREEMENT\VC-TENNECO.K 3/29/90 - 4 - ....... ' OFFICE of THE CITY ATTORNEY ARTHUR J. SAALFIELD CITY ATTORNEY MUNICIPAL LAW: 1501 TRUXTUN AVENUE LITIGATION: ALAN DALE DANIEL BAKERSFIELD, CALIFORNIA 93301 DON McGILLIVRA Y Assistant City Attorney - (805) 326-3721 Assistant City Attorney ROBERT M. SHERFY LOUISE T. CLOSS Assistant City Attorney Assistant City Attorney MEDEL YIAN R. GRADY LAURA C. MARINO Assistant City Attorney Deputy City Attorney March 30, 1990 WILLIAM H. SLOCUMB INVESTIGATIONS: Assistant City Attorney KRIS BORTON City Attorney Investigator Eldon R. Hugie, Esq. Hugie & Hugie Attorney at Law 5329 office Center Court Bakersfield, CA 93309 RE: Agreement Conditionally Consenting to Assignment of City Agreement No. 85-142 As Amended Dear Mr. Hugie: Since our meeting last Monday with the Council's Budget and Finance Committee, staff has discussed this matter and met again with 'the Committee. The result is the attached draft agreement. Please review and contact either me or Dale Hawley, before noon on Monday if possible, if you wish to discuss the agreement. ' Sincerely, Arthu[\ J. ~aal.field . _ \ . / __ / // ' City At~o~Qr ne~' AJS:lg Attachment: Draft Agreement cc: J. Dale Hawley, City Manager Greg Klimko, Finance Director AGREEMENT NO. CONDITIONAL CONSENT TO ASSIGNMENT OF CITY AGREEMRNT NO. 85-142, AS AMENDE~3 .THIS AGREEMENT made and entered into this day of April, 1990, by and between the CITY OF BAKERSFIELD, a municipal corporation, referred to herein as th~ ("City"), and VALLEY COMMUNITIES, INC, a California corporation, herein after referred to as ("VC"). WITNES SETH WHEREAS, VC has entered into an escrow agreement pursuant to which VC will purchase from Tenneco West, Inc. property used as a disposal site for treated wastewater effluent from the City's Wastewater Treatment Plant No. 3, pursuant to City Agreement No. 85-142 as amended (hereinafter, the "Agreement") WHEREAS, Tenneco West, Inc. is willing to assign to VC its rights and obligations pursuant to the Agreement, and VC is willing to accept assignment from Tenneco West, Inc. of said rights and obligations; and WHEREAS, pursuant to the terms of the Agreement, the City's consent to its assignment is required, may not be unreasonably withheld, but the City is expressly authorized to consider factors such as financial capacity of a possible assignee in determining whether to give consent to assignment; and WHEREAS, representatives of the City and VC have met and discussed the assignment and the City has reviewed information submitted by VC as to VC's ability to perform its obligations under the Agreement; and WHEREAS, in consenting to such assignment, the City would be releasing from all obligation under the Agreement a party (Tenneco West, Inc.) whose financial capacity to perform the Agreement is unquestionable, and would be accepting, in its place, a newly formed corporation with significantly lesser financial capacity; and WHEREAS, representatives of the City and VC have discussed the foregoing and have agreed that the consent to assignment may appropriately be subject to the conditions set forth herein below. THEREFORE, in consideration of the respective and mutual covenants hereinafter contained and made, and subject to all the terms and conditions set forth below, THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. That the City's consent to assignment of the agreement to VC is subject to the condition precedent that Tenneco West, Inc., shall have assigned its reclamation permit from the State Regional Water Quality Control Board for the disposal site to VC. 2. That funds payable pursuant to Paragraph 3 of the Agreement shall be withheld by the City in accordance with the .following: a. The City shall withhold sufficient funds each year to pay all real property taxes and assessments against the disposal site property (the 4,700 plus acres subject to the Agreement), such funds to be released to VC upon receipt by the City of written evidence that all such taxes and assessments, including any special district taxes and assessments, have been paid; and b. The City shall withhold the sum of $100,000 each year for five years, to reimburse the City any costs it may incur pursuant to Paragraph 4, below. Such funds shall be deposited by the City in an interest bearing account and, except to the extent drawn against by the City pursuant to Paragraph 4, below, shall be paid over to VC, with accrUed interest, commencing five years after the first $100,000 is deposited into such account, at the rate of $100,000 per year, plus 20% of the accrued interest, over the following five years.. (See attached Schedule, marked Exhibit "A".) c. In lieu of the withholding provided for in subparagraph b of Paragraph 2., above, VC may elect within thirty (30) days of the date of this agreement, to post and pOst with the City a performance bond(s) or irrevocable letters of credit, payable upon demand by and to the City. Any such performance bond shall reference this agreement and shall specifically be to pay all capital and operating costs incurred by the City in meeting requirements of any and all regulatory agencies, pursuant to Paragraph 4, below. Such bond or - 2 - amount of $100,000 the first year, increasing by $100,000 increments each year to $500,000 for the fifth year, and decreasing thereafter by $100,000 per year. Should VC not be able to obtain a replacement performance bond for any year after the first year, VC shall deposit with the City all sums that would be held by the City cumulatively through that year, including interest which would have been accrued, assuming an 8% investment rate, pursuant to subparagraph b of Paragraph 2. above, and the City may withhold any funds otherwise due VC pursuant to Paragraph 3. of the Agreement up to such ~cumulative amount if such funds are not otherwise deposited with City by VC. Should VC fail to make all deposits required pursuant to this subparagraph within ten (10) days of notice from City to do so, sUch failure shall be deemed a material breach of this agreement. 3. That VC provide written notice to the Director of Public Works of the City within three business days Of receipt of any written communication from any state or local regulatory agency of an deficiency in operations of the disposal site, including a copy of such communication. The parties agree that if such notice is not given as provided herein, it would be extremely difficult if not impossible to ascertain the actual damages sustained by the City, and liquidated damages in the amount of $500.00 per calendar day is a fair and reasonable estimate of such damages. That sum is not to be construed in any sense as a penalty. 4. That the City may enter upon and operate the disposal site and make necessary improvements, all at VC's-expense, ~should VC's performance or non-performance re the disposal site lead to threatened regulatory agency action which might jeopardize the City's legal ability to discharge treated effluent to that site or to issue building or sewer connection permits for any structure that would be served by the City Wastewater Treatment Plant No. 3; provided, however, that the City shall have first given written notice to VC of the threatened action of the regulatory agency and shall have given VC the opportunity to take action to address such matters to the satisfaction of the regulatory agency; provided, further, that the City may immediately enter and take all necessary corrective action if such action has not been completed by VC within 30 days prior to any deadline set by an such agency. 5. Subject to and in consideration of the foregoing, the C!tyconsents to assignment of the Agreement from Tenneco West, Inc., to'VC. o0o-- - 3 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, the day and year first-above written. CITY OF BAKERSFIELD By CLARENCE E. MEDDERS Mayor APPROVED AS TO FORM: ARTHUR J. SAALFIELD City Attorney By APPROVED: By ED SCHULZ Public Works Director COUNTERSIGNED: By GREGORY KLIMKO Finance Director VALLEY COMMUNITIES, INC. By Title By AJS/pam Title AGREEMENT\VC-TENNECO.K 3/30/90 ~ VALLEY COMMUNITIES, INC. PER PARAGRAPH 2C CONTRACT PER PERFORMANCE YEAR DURING PARAGRAPH 2B BOND OR NO. THE PERIOD CASH BOND LETTER OF CREDIT 1 4/4/90 - 4/3/91 $-14~t~,000 plus 100% $i0~,000 Accrued Interest $2~ ¢on~ 000 2 4/4/91 4/3/92 000 plus 100% Accrued Interest 3 4/4/92 - 4/3/93 $-~000 plus 100% Accrued Interest 4 4/4/93 - 4/3/94 000 plus 100% $4-g~,000 Accrued Inte?est 5 4/4/94 - 4/3/95 $500,000 plus 100%' $500,000 Accrued Interest 6 4/4/95 - 4/3/96 $400,000 plus 80% $400,000 Accrued Interest 7 4/4/96 - 4/3/97 $300,000 plus 60% Accrued Interest 8 4/4/97 - 4/3/98 $200,000 plus 40% ~000 Accrued Interest 9 . 4/4/98 - 4/3/99 $100,000 plus 20% $-1q~,000 Accrued Interest NOTE: Amounts are to be increased or decreased effective on the first business d~y of the period. EXHIBIT A AGREEMENT NO. CONDITIONAL CONSENT TOASSIGNMENTOF CITY AGREEMENT NO. 85-142~ AS AMENDED THIS AGREEMENT made and entered into this day of April, 1990, by and between the CITY OF BAKERSFIELD, a municipal corporation, referred to herein as the ("City"), and VALLEY COMMUNITIES, INC, a California corporation, herein after referred to as ("VC"). WITNESSETH WHEREAS, VC has entered into an escrow agreement pursuant to which VC will purchase from Tenneco West, Inc. approximately 4,700 acres of property subject to use as a disposal site for treated wastewater effluent from the City's Wastewater Treatment Plant No. 3, pursuant to City Agreement No. 85-142 as amended (hereinafter, the "Agreement", and hereinafter referred to as the "disposal site"); and WHEREAS, Tenneco West, Inc. is willing to assign to VC its rights and obligations pursuant to the Agreement, and VC is willing to accept assignment from Tenneco West, Inc. of said rights and obligations; and WHEREAS, pursuant to the terms ~of the Agreement, the City's consent to its assignment is required, may not be unreasonably' withheld, but the City is expressly authorized to consider factors such as financial capacity of a possible assignee in determining whether to give consent to assignment; and WHEREAS, representatives of the City and ¥C have met and discussed the assignment and the City has reviewed information submitted by VC as to VC's ability to perform its obligations under the Agreement; and WHEREAS, in consenting to such assignment, the City would be releasing from all obligation under the Agreement a party (Tenneco West, Inc.) whose financial, capacity to perform the Agreement is unquestionable, and would be accepting, in its place, a newly formed corporation with significantly lesser financial capacity;~ and WHEREAS, representatives of the City and VC have discussed the foregoing and have agreed that the consent to assignment may appropriately be subject to 'the conditions set forth herein below. THEREFORE, in consideration of the respective and mutual covenants hereinafter contained and made, and subject to all the terms and conditions set forth below, THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. That VC hereby covenants and agrees to perform all of the obligations under said Agreement effective as of the date of close of escrow between Tenneco and VC. 2. That the City's consent to assignment of the agreement to VC is subject to the condition precedent that Tenneco West, Inc., shall have assigned its reclamation permit from the State Regional Water Quality Control Board for the disposal site to VC. VC shall deliver timely written notice to the California Regional Water Quality Control Board (hereinafter referred to as "CRWQCB") of the assignment of the Agreement to VC from Tenneco, as required under existing policies and regulations of CRWQCB, and shall perform all requirements of the land owner pursuant to all present and all future policies and regulations of the Central Valley Region of CRWQCB, including but not limited to performance of the requirements set forth in Order No. 88-172 titled "California Regional Water Quality Control Board, Central Valley Region, Monitoring and Reporting Program No. 88-172 for Tenneco West, Inc., Land Application Site, Kern County". 3. That funds payable pursuant to Paragraph 3 of the Agreement shall be withheld by the City in accordance' with the following: a. Inasmuch as it is anticipated that theconstruction of additional storage facilities at the disposal site will be required within the next five years, and furthermore to provide a fund of cash for reimbursement to the City for any work done by the City pursuant to'Paragraph .5 of this agreement, VC agrees that the sums specified in Exhibit "A" shall be withheld, 25% from each quarterly payment, from funds otherwise payable to VC by the City pursuant to Paragraph 3 of Agreement 85-142. Said funds shall be deposited in a federally insured savings account or certificate of deposit in a financial institution at an office or branch within the City of Bakersfield. All interest on said funds shall accrue in the accounts in which the funds are deposited. VC shall have the right to name the institutions in which such accounts are carried and not more than $100,000, plus accrued interest, shall be carried in any one institution. The funds - 2 - in said accounts shall 'be used only for reimbursement of VC's costs in constructing wastewater storage facilities or tail-water return systems or to reimburse the City's costs incurred pursuant to Paragraph 5, below. VC's expenditures for such purposes shall only be reimbursable from such withheld funds and accrued interest if the improvements made by VC were pursuant to and in accordance with plans approved in advance in writing by the City. The City shall not unreasonably withhold its approval of any such plans. Within 30 days of the sixth.anniversary date of this agreement, and each such date thereafter until the balance of all accounts established pursuant hereto, including principal and interest, have been returned to VC, City shall make to VC payments as set forth in Exhibit "A". The foregoing notwithstanding, upon completion to City's reasonable satisfaction on the disposal site of a reservoir with a capacity of not less than 1,000 acre feet with an in~ermeable lining, any balance withheld by City in any such account shall be paid to VC or any bond or letter of credit returned to VC. b. In lieu of the withholding provided for in subparagraph b of Paragraph 2., above, VC may elect to post and post with the City a performance bond(s) or irrevocable letters of credit, payable upon demand by and to the City. Any such performance bond shall reference this agreement' and shall specifically be to pay all capita], and operating costs incurred by the City in meeting requirements of any and all regulatory agencies,~ pursuant to Paragraph 5, below. Such bond or bonds shall be in the annual amount, speCified in Exhibit "A". Should VC not be able to obtain a replacement performance bond for any year after the first year, VC shall deposit with the City all sums that would be held by the City cumulatively through that year, including interest which would have been accrued, assuming an 8% investment rate, pursuant to subparagraph b of Paragraph 2. above, and the City may withhold any funds'otherwise due VC pursuant to Paragraph 3. of the Agreement up to such cumulative -- 3 -- amount if such funds are not otherwise deposited with City by VC. Should VC fail to make all deposits required pursuant to this subparagraph within ten (10) days of notice from City to do so, such failure shall be deemed a material breach of this agreement. c. In the event sufficient monies are not provided to the City through the escrow for the sale of the disposal site to VC for the call of all outstanding bonds of Assessment District 86-30, then in addition to funds withheld pursuant to any other provision hereof, the City may withhold sufficient funds each year to pay all real property taxes and assessments against the disposal site, such funds to be released to'VC upon receipt by the City of written evidence that all such taxes and assessments, including any special district taxes and assessments, have been paid. 4. That VC shall provide written notice to the Director of Public Works of the City within three business days of receipt of any written communication from any state or local regulatory agency of any deficiency in operations of the disposal site, including a copy of such communication. The written notice may be received by the City from either VC or from the aforesaid state or local regulatory agency, but it shall be. the responsibility of VC to confirm that the City has in fact received said written notice within the aforesaid notification period. The parties agree that if such notice is not given as provided herein, it would be extremely difficult if not impossible to ascertain the actual damages sustained by the City, and liquidated damages in the amount of $500.00 per calendar day is a fair and reasonable estimate of such damages. That sum is not to be construed in any sense as a penalty. 5. That the City may enter upon and operate the disposal site and make necessary improvements, all at VC's expense, should VC's performance or non-performancein managing the disposal site lead to threatened regulatory agency action which might jeopardize the City's legal ability to discharge treated effluent to that site or to issue building or sewer connection permits for any structure that would be served by the City Wastewater Treatment Plant No. 3; provided, however, that the City shall have first given written notice to VC of the threatened action of the regulatory agency and shall have given VC the opportunity to .take action to address such matters to the satisfaction of the regulatory agency; provided, further, thatthe City may immediately - 4 - enter and take all necessary corrective action if such action has not been completed by VC within 30 days prior to any deadline set by an such agency, or upon such deadline if the deadline falls within 30 days of the date of City's notice to VC. The City shall give VC 3 days written notice of its intent to withdraw funds held pursuant to subparagraph a, above, to reimburse City its costs incurred under this subparagraph. 6. Subject to and in consideration of the foregoing, the City consents to assignment of the Agreement from Tenneco West, Inc., to VC. 7. NOTICES. All notices relative to this Agreement shall be given in writing and shall be sent by certified or registered mail and be effective upon depositing in the United States mail. The parties shall be addressed as follows, or at any other address designated by notice: CITY OF BAKERSFIELD City Hall 1501 Truxtun Avenue Bakersfield, California, 93301 VALLEY COMMUNITIES, INC. %Eldon R. Hugie, President 5329 Office Center Court, Suite 130 Bakersfield, CA 93309 8. ASSIGNMENT. This contract shall not be assignedby any party, or any party substituted, without prior written consent of all the parties. 9. INDEPENDENT CONTRACTOR. This Agreement shall not be construed as forming a partnership or any other association with VC other than that of an independent contractor. 10. MERGER AND MODIFICATION. This contract sets forth the entire Agreement between the parties and supersedes all other oral or written representations. .This contract may be modified only in a writing .approved by the City Council and signed by all the parties. TAX NUMBERS. VC'S Federal Tax ID N~mber . VC is a corporation? Yes X No . o0o -- 5 IN WITNESS WI{EREOF, the parties hereto have caused this Agreement to be executed, the day and year first-above written. CITY OF BAKERSFIELD By CLARENCE E~ MEDDERS Mayor APPROVED AS TO FORM: ARTHUR J. SAALFIELD City Attorney By APPROVED: By ED SCHULZ Public Works Director COUNTERSIGNED: By GREGORY KLIMKO Finance Director VALLEY COMMUNITIES, INC. By Title By AJS/pam Title AGREEMENTIVC-TENNECO.K 3/30/90. - 6 - VALLEY COMMUNITIES, INC. CUMULATIVE AMOUNT CUMULATIVE PER AMOUNT PARAGRAPH 3b CONTRACT PER PERFORMANCE YEAR DURING PARAGRAPH 3a BOND OR NO. THE PERIOD CASH BOND LETTER OF CREDIT I 4/4/90 - 4/3/91 $ 50,000 plus 100% $ 50,000 Accrued Interest 2 4/4/91 - 4/3/92 $100,000 plus 100% $100,000 Accrued Interest 3 4/4/92 - 4/3/93 $250,000 plus 100% $250,000 Accrued Interest 4 4/4/93 - 4/3/94 $400,000 plus 100% $400,000 Accrued Interest 5 4/4/94 - 4/3/95 $500,000 plus 100% $500,000 Accrued Interest 6 4/4/95 - 4/3/96 $400,000 plus 80% $400,000 Accrued Interest 7 4/4/96 - 4/3/97 $300,000 plus 60% $300,000 Accrued I.nterest 8 4/4/97 - 4/3/98 $200,000 plus 40% $200,000 Accrued Interest 9 4/4/98 - 4/3/99 $100,000 plus 20% $100,000 Accrued Interest NOTE: Amounts are to be increased or decreased effective on the first business day of the period. EXHIBIT A