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HomeMy WebLinkAbout2015-09-22 - AGENDA REPORTS - VALENCIA WATER FRANCHISE (2)E: 10 Agenda Item: 10 CITY OF SANTA CLARITA 4i AGENDA REPORT CONSENT CALENDAR CITY MANAGER APPROVAL: )G1 DATE: September 22, 2015 SUBJECT: VALENCIA WATER COMPANY'S REQUEST FOR NEW WATER FRANCHISE AND CONSIDERATION FOR ADOPTION OF RESOLUTION OF INTENTION TO GRANT A FRANCHISE AT A PUBLIC HEARING ON OCTOBER 13, 2015 DEPARTMENT: Administrative Services PRESENTER: Darren Hernandez RECOMMENDED ACTION City Council accept Valencia Water Company's request for a franchise, and adopt a Resolution of Intention to set a Public Hearing for October 13, 2015, on the potential grant of a water franchise to the Valencia Water Company. BACKGROUND Valencia Water Company (VWC) has a total of 31,000 service connections serving approximately 118,224 people in the Santa Clarita Valley, including Valencia, Stevenson Ranch and portions of Newhall, Saugus, and Castaic. The customer base is approximately 87% residential with the remaining customers commercial and industrial. Within the City of Santa Clarita (City), VWC has 18,229 service connections serving approximately 78,000 people. The capital stock of VWC was acquired by Castaic Lake Water Agency (CLWA) on December 129 2012 through an eminent domain proceeding; however, VWC remains a private water company and continues to exist as a separate legal entity with sole ownership of its assets. This is in contrast to Santa Clarita Water Company whose stock and assets were acquired by CLWA and therefore became a division within CLWA. VWC has an existing franchise with the City for water distribution and related activities in the City's right-of-way that is set to expire December 17, 2015. The franchise was initially granted by the City in 1991. The term of the current franchise is for 25 years, which is the longest term permitted under the City's municipal code on Franchises at Title 4. The franchise provided for an initial 10 -year term with a 15 -year extension if notice was provided by VWC for the extension. In 2001, notice was provided to the City, and the franchise was extended to Page 1 ' az , 4 Packet Pg. fit IL t jb . 15 -CQ December 17, 2015. By letter, dated August 7, 2015, VWC requested that the City grant them a new franchise (see application letter attached). City's Franchise Authority and Process to Grant Water Franchise The granting of franchises by cities is regulated pursuant to the California Public Utilities Code Sections 6201 et seq., also referred to as the Franchise Act of 1937 (Act). The Act sets forth the rates that can be collected, as well as the process for granting a new franchise, among other provisions. Under the Act, rates are set at 2% of the franchisee's gross annual receipts arising from the use, operation, or possession of the franchise, except that the payment cannot be less than I% of the franchisee's gross annual receipts. This is the formula in the current franchise, and it is the amount that is being proposed for the new franchise. As required by the Act, in order to receive a franchise, an application requesting the franchise must be submitted to the City. Next, the City must adopt a Resolution of Intention, which sets the public hearing date to discuss the proposed franchise. At the public hearing, the Council shall hear any comments or objections to the grant of the franchise. The Council may then make its decision regarding the franchise. If the Council desires to grant the franchise, such approval must be by adoption of an ordinance. Therefore, at the conclusion of the public hearing, the Council may introduce the ordinance, and the adoption of the franchise would occur at the following meeting. Proposed Terms for New Franchise with VWC The City and VWC are negotiating the specific terms of the franchise ordinance. City staff does not have any concerns relating to the franchise, and the proposed franchise will be similar to the current one. The parties are working on some modifications to the indemnification and insurance language, as well as remedies available to the City for default -and negotiations relating to the term of the franchise. The franchise rate will remain the same as dictated by state law. ALTERNATIVE ACTION Other action as determined by the City Council. FISCAL IMPACT There is no fiscal impact based on the adoption of the Resolution of Intention. The Resolution only sets forth the notice of public hearing for the potential grant of the franchise. Most recently in Fiscal Year 2014/15, the City received annual franchise fees in the amount of $162,337.25. However, this amount can change depending on the actual receipts of Valencia Water Company and its other activities. A similar annual franchise fee should be expected under a new proposed franchise. The City will also be paid a one-time franchise grant fee of $10,000. In addition, there may be other fees that are charged in the event work is done in the right-of-way or amendments are considered. It is anticipated these fees would continue under any new franchise. ATTACHMENTS VWC City of Santa Clarita Franchise Application Letter VWC City of Santa Clarita Resolution of Intention E: 10 Page 2 Packet Pg. 63 70.a Valencia 'Water Company 24631 Avenue Rockefeller • Valencia, CA 91355-3907 Telephone (661) 294-0828 * Fax (661) 294-3806 www.valenciawater.com August 7, 2015 The Honorable City Council City of Santa Clarita C/o Administrative Services Department 23920 Valencia Boulevard Santa Clarita, CA 91355 Re: Valencia Water Company Pipeline Franchise Dear Councilmembers: On February 26, 1991, the Santa Clarita City Council ("City Council") passed Ordinance 91-5, granting the Valencia Water Company ("VWC") a franchise with an initial 10 -year term effective December 17, 1990. On May 8, 2001, pursuant to the terms of the franchise agreement, the City Council accepted a renewal notice acknowledging the granting of a 15 -year extension to the VWC franchise. The franchise expires on December 17, 2015. On behalf of the VWC Board of Directors, I respectfully request the City Council grant VWC a new franchise for a 25 -year term. VWC will pay the City of Santa Clarita two percent (2%) of our gross annual receipts arising from the use, operation, or possession of the franchise, except that this payment shall be not less than one percent (1%) of the gross annual receipts from the sale of water within the limits of Santa Clarita. Such percentage will -be paid annually during the life of the franchise. Thank you for consideration of our request for a new water franchise and we look forward to continuing to serve the City of Santa Clarity and our customers. If you have questions or need further assistance, please contact Kathleen Hill, Planning Director for Alston &Bird LLP, at (213) 576-1056 or me at (661) 294-0828. Sincerely, Keith Abercrombie General Manager Packet Pg. 64 E110.b, RESOLUTION NO: 15- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA DECLARING ITS INTENTION TO GRANT A WATER FRANCHISE AS APPLIED FOR BY THE VALENCIA WATER COMPANY AND SETTING A PUBLIC HEARING ON THE MATTER FOR OCTOBER 13, 2015 WHEREAS, 'in 1991 the City granted to the Valencia Water Company (VWC) a franchise effective December 17, 1990, to lay and use pipes and appurtenances for the transmitting and distribution of water within the City (Ordinance 91-5); and WHEREAS, the franchise had a term of 25 years and is set to expire on December 17, 2015; and WHEREAS, by letter dated August 7, 2015, and consistent with the Franchise Act of 1937 (Act) found in the California Public Utilities Code, VWC requested that the City grant them a new 25 year franchise; and WHEREAS, under the proposed franchise, VWC will pay to the City the greater of 2% of the gross annual receipts received by VWC from the use, operation, or possession of the franchise or I% of the gross annual receipts VWC derives from sales of water within the City; and WHEREAS, the City Council finds that it is in the best interests of the City to consider granting the requested franchise to the VWC; and WHEREAS, as required by the Act, the City must adopt a Resolution of Intention to set a public hearing for the consideration of granting the franchise; and NOW, THEREFORE, the City Council of the City of Santa Clarita does hereby resolve: SECTION 1. Recitals. The above recitals are true and correct and incorporated herein. SECTION 2. Request for Franchise. The City Council accepts the application of VWC requesting a water franchise. SECTION 3. Intention to Grant Water Franchise. The City Council intends to consider granting to VWC a franchise at a public hearing and will take any testimony and hear any objections to the grant. The public hearing will be held at the time and place specified in the form of the notice set forth in Section 4, which the City Clerk is hereby directed to publish at least once within 15 days after the passage of this Resolution in the Signal, a newspaper of general circulation with the City. E Packet Pg. 65 SECTION 4. Notice of Intention to Grant Franchise: Notice is hereby given that the Valencia Water Company has filed its application with the Santa Clarita City Council requesting that the City Council grant to it a franchise for a 25 year term under the City's Municipal Code and the Franchise Act of 1937, to lay, construct, reconstruct, maintain, operate, repair, renew, change the size of, remove or abandon in place pipes and pipelines for the transportation of water, waste water, mud, steam and other liquid substances excluding hazardous substances in under, among or across those portions of the City's streets roads and highways. If the City grants a franchise to the Valencia Water Company and its approved successors and assigns, hereinafter "Grantee", Grantee must, during the life of the franchise, pay to the City 2% of the Grantee's gross annual receipts arising from the use, operation, or possession of the franchise; provided, however, that such payment will, in no event, be less than 1 % of the Grantee's gross annual receipts from the sale of water within the City limits. Grantee must pay the appropriate percentage annually from the date of the granting of the franchise, and in the event such payment is not made the franchise will be forfeited. Notice is hereby further given that any and all persons having any objections to the granting of the franchise may appear before the Santa Clarita City Council at the Council Chambers, City Hall, 23920 Valencia Blvd, Santa Clarita, California, at the hour of 6:00 p.m. or as soon thereafter as the matter may be heard on October 13, 2015. At any time not later than the hour so set for hearing objections, any person interested may make written protest stating objections against the granting of the franchise, which protests must be signed by the protestant and delivered to the City Clerk of the City of Santa Clarita, City Hall 23920 Valencia Blvd #120, Santa Clarita, CA 91355. The City Council will, at the time set for hearing any objections, proceed to hear and make its determination on all protests so made. SECTION 5. Effective Date. This resolution will take effect immediately upon adoption. SECTION 6. Certification. The City Clerk is directed to certify the passage of this Resolution. PASSED AND ADOPTED this 22nd day of September 2015. MAYOR ATTEST: CITY CLERK E10.b Packet Pg. 66 STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) I, Kevin Tonoian, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a regular meeting held on the 22nd day of September 2015, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: CITY CLERK 10.b Packet Pg. 67