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R-07-09-13-11D3 - 9/13/2007 RESOLUTION NO. R-07-09-13-11D3 WHEREAS, the City of Round Rock ( "City" ) has previously entered into a Consent Agreement with Blake Magee Investments, L. P. , for Paloma Lake Municipal Utility District No. 1 ( "District" ) , and WHEREAS, in accordance with the Consent Agreement the City agreed to provide wholesale water and wastewater services to the District, and WHEREAS, the City now desires to enter into a Wholesale Water and Wastewater Agreement with Paloma Lake Municipal Utility District No. 1, to set forth the terms and conditions of such services, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City said Wholesale Water and Wastewater Agreement, a copy of same being attached hereto as Exhibit "A" and incorporated herein for all purposes . The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 13th day of September 0 NY L, Mayor City of Round Rock, Texas A S�T/• L . A. CHRISTINE R. MARTINEZ, City S11 retary 0:\Wdox\RESOLUTZ\R70913D3.WPD/Ymc/0140-4616 PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. 1 WHOLESALE WATER AND WASTEWATER AGREEMENT STATE OF TEXAS § § KNOW ALL MEN AT THESE PRESENTS: COUNTY OF WILLIAMSON §. This Wholesale Water and Wastewater Agreement(this"Agreement') is entered into as of the date last herein written between the CITY OF ROUND ROCK,TEXAS(the"C "),a home rule municipality located in Williamson County,Texas,and PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. 1 (the"District"),a conservation and reclamation district created under Article XVI, Section 59 of the Texas Constitution and operating under the provisions of Chapters 49 and 54 of the Texas Water Code. In this Agreement, the City and the District are sometimes referred to individually as "g-fart "and collectively as "the Parties". WITNESSETH: WHEREAS,the City owns and operates a water treatment and distribution system serving territory within the City's extraterritorial jurisdiction as well as within the boundaries of the City; and WHEREAS, the City owns wastewater collection facilities and capacity in regional wastewater treatment and disposal facilities serving territory within the City's extraterritorial jurisdiction as well as within the boundaries of the City; and WHEREAS,the District is located within the City's extraterritorial jurisdiction and has been created, with the consent of the City,to provide, among other services,retail water and wastewater services to the land within its boundaries; and WHEREAS, in accordance with the "Consent Agreement Between City of Round Rock, Texas and Blake Magee Investments, L.P. for Paloma Lake Municipal Utility District No. 1 and Paloma Lake Municipal Utility District No.2"dated effective September 22,2005,as amended(the "Consent Agreement"),the City has agreed to provide wholesale water and wastewater services to the District, and the District and the City now desire to enter into this Agreement to set forth the terms and conditions of such services; NOW, THEREFORE, for and in consideration of the premises and the mutual obligations and benefits herein contained,the Parties agree as follows: ARTICLE I. Definitions 1.01 In addition to the terms defined in the preceding paragraphs of this Agreement,the following terms, when used in this Agreement, have the following meanings: - 1 - EXHIBIT 295251-6 07/30/2007 En All a. "Board'or"Board of Directors"means the Board of Directors of the District. b. "Developer"means Paloma Lake Development, Inc. C. "Director"means the Director of the City's Water and Wastewater Utility. d. "Force Maieure" means acts of God, strikes, lockouts, or other industrial disturbances;acts of a public enemy;orders of the government of the United States or the State of Texas or any civil or military authority other than the Parties; insurrection, riots, epidemics, landslides, lightning, earthquake, fires, hurricanes, storms, floods, washouts, and droughts; restraint of government and people; civil disturbances;explosions,breakage or accidents to machinery,pipelines,or canals or other causes not reasonably within the control of the Party claiming the inability. e. "Impact Fees" means the amounts charged by the City to pay for a portion of the capital costs of the City's water supply and treatment system and wastewater collection,treatment and disposal system necessary to provide fresh water supply and wastewater collection,treatment, and disposal services to the District. f. "Living Unit Equivalent" or "LUE' means the amounts of water and wastewater service required to serve a service unit, as determined under City Ordinances. g. "McNutt Interceptor" means the City wastewater interceptor to be constructed as provided in the Consent Agreement which will transport wastewater generated by customers located within the McNutt drainage basin,including customers within the District, to the Brushy Creek Regional Wastewater Treatment Plant h. "Ordinances"means City ordinances, as amended from time to time. L "ProLt" means the water distribution facilities and the wastewater collection facilities to be constructed or acquired, and owned and operated, by the District. j. "Commission" means the Texas Commission on Environmental Quality, or its successor agency. ARTICLE H. Impact Fees 2.01 The District will collect the City's standard water and wastewater Impact Fees on behalf of the City at the time it collects its own tap and connection fees, and prior to initiation of service to any new water and/or wastewater connection within the District. The District will not provide service to any new connection until the City's Impact Fees have been paid by the customer requesting the connection. Impact Fees collected by the District during each month will be remitted to the City by the 15th day of the following month. The City will give written notice to the District of any change in the City's Impact Fees at least 30 days prior to the change becoming effective,in order to allow the District adequate time to amend its rate order and adjust the amounts which it is collecting on behalf of the City under this Section. -2 - 295251-6 07/30/2007 2.02 Upon the payment of each water or wastewater Impact Fee described in this Article 2.02,the District will have a guaranteed reservation and commitment of capacity in the City Systems for the amount of capacity(in LUES)for which a water and/or wastewater Impact Fee has been paid. 2.03 All other fees required by the City,including oversize fees,will be paid as required by City Ordinances and the Consent Agreement. ARTICLE M. Proiect Acquisition 3.01 Subject to the provisions of State law and the terms of the Consent Agreement,the District will finance and acquire the Project. 3.02 Plans and specifications for all District facilities will be subject to approval by the City. 3.03 The proceeds from the sale of the District bonds may be used to pay all costs and expenses permitted by State law and the rules of the Commission, including expenses and costs incurred in connection with engineering, inspecting, permitting, easement acquisition for, and constructing the Project,and all costs incurred in connection with the issuance,sale,and delivery of the bonds. 3.04 The District may enter into such contracts as are necessary to provide for purchase and construction of the Project,which contracts will be bid,approved and executed as required by State law and the rules of the Commission. 3.05 The City will have the right to inspect all portions of the Project located outside the District's boundaries which will be owned and operated by the City upon completion. The District will be responsible for reimbursing the City for the costs of such inspections. ARTICLE IV. Water Services 4.01 The City will sell and deliver water, which will be supplied from the City's water distribution system as extended pursuant to the Consent Agreement,to the boundaries of the District. The exact point or points of delivery of water to the District will be agreed upon by the Director and the District. The City presently has or will obtain an adequate water supply with which to provide water service to the District at the same level that water services are provided to customers within the City;however,the supply of water to the District may be reasonably limited by the City on the same basis and to the same extent as the supply of water to any other customers within the City. The City will provide potable water meeting the standards of the Commission for human consumption and other domestic uses at a minimum pressure of 35 psi at each customer meter and a minimum flow rate of 0.6 gallons per minute per LUE, and in compliance with all applicable requirements for wholesale contracts for purchased water systems,including Section 290.45(f),Texas Administrative Code, and any other applicable regulatory requirements. Service by the City to the District will be nondiscriminatory and consistent with the City's standard service policies and regulations, as established by the Round Rock City Council. The City will be the sole source of potable water to the -3 - 295251-6 07/30/2007 District and the District will not seek to develop its own potable wells or alternate supplies,except in the event that the City is no longer able to provide potable water service as contemplated hereby. 4.02 Retail water service within the District will be provided by the District. Water meters meeting City specifications for customers of the District will be provided by the District at the District's cost.The District will adopt a water conservation and drought management plan which is at least as stringent as the City's,as amended from time to time and will amend its plan from time to time to correspond with any amendments adopted by the City. The District will provide the City with a copy of said water conservation and drought management plan within forty-five (45) days after the effective date of this Agreement. In addition, the District will implement water rationing and water conservation measures under its water conservation and drought management plan when those measures are activated by the City. The City will give the District notice of any activation of water rationing and water conservation measures. The District may not sell or deliver water to any customer outside the boundaries of the District without the City's approval. 4.03 Water delivered to the District will be measured by a master meter or meters installed at all connections to the City water distribution system. Metering equipment and related facilities, including a meter vault and standard-type devices required for properly measuring the quantity of water delivered to the District,will be installed at each point of delivery at the District's cost. The City will approve the meter facilities prior to installation.The District,at its expense,will construct the vault and provide and install the meter.The City,at the expense of the District}will operate and maintain the metering equipment. The District will calibrate the master meters annually, or more frequently at the City's request. The District will provide the City with a copy of the calibration report within ten(10)days of District's receipt of same. If the City requests calibration of a master meter more frequently than once every 12 months and,upon calibration,the master meter in question proves to be accurate, then the cost of the calibration will be borne by the City. Any master meter registering within three percent(3%) accuracy will be deemed to be accurate. If any master meter tests to be inaccurate by more than three percent(3%),all testing and calibration costs will be borne by the District, the master meter will be recalibrated or replaced, and a billing adjustment will be made based on the degree of the meter's inaccuracy, as determined by the test. If the Parties can reasonably estimate the time at which the master meter became inaccurate, the City will make a billing adjustment based on that time period. If the Parties cannot reasonably estimate the time at which the master meter became inaccurate,then the City will make a billing adjustment to no more than the previous six months' billings. If a master meter is out of service or under repair so that the amount of water delivered cannot be ascertained or computed from the readings,the water delivered during the period the master meter was out of service or repair will be estimated and agreed upon by the Parties based on the best data available. The District will read all master meters on a daily basis, except on weekends and state and federal holiday and will keep accurate records of all measurements of water passing through the master meters. Such records will be open to the City for inspection or copying at all times during the District's regular business hours. Both the District and the City will be entitled to access the master meters at all times and the City will read the master meters once each City billing cycle, for billing purposes. 4.04 The initial rate to be charged by the City to the District for water supplied under this Agreement will be$2.51 per 1,000 gallons. The rates set by the City and charged to the District may be reviewed and/or amended annually based on a cost of service study performed by the City. The -4 - 295251-6 07/30/2007 City may include a reasonable rate of return in its rates.In the future,the wholesale rate may consist of two components, a demand charge and a volumetric charge. 4.05 The District agrees to pay the City in accordance with City Ordinances,to bill users of potable water within the District and to set and maintain tax rates and rates sufficient to pay the following: a. For water delivered by the City pursuant to this Agreement. b. For all District operation and maintenance expenses as they come due. C. For debt service on any bonds issued by the District in an amount deemed appropriate by the Board of Directors. 4.06 The District agrees to provide the City with a copy of each resolution or order adopted by the District setting water rates within seven days of adoption. The City agrees to give written notice to the District at least 30 days prior to approval of any wholesale rate change in order to allow the District to (i)review and comment upon the proposed change and(ii)adjust its own rates to its customers based on the increase in wholesale costs. ARTICLE V. Wastewater Collection,Treatment and Disposal Services 5.01 The City will collect and transport wastewater generated by customers within the District, not to exceed 1100 LUEs, from the boundaries of the District, through its system, to the City's wastewater treatment facilities. The exact point or points of delivery of wastewater to the City will be agreed upon by the Director and the District. The City presently has or will obtain adequate wastewater collection,treatment and disposal facilities with which to provide service to the District. Retail wastewater collection service within the District will be provided by the District. The District will adopt an order prohibiting industrial waste from entering its collection system. The City will be the sole source of wastewater treatment services for the District and the District will not seek to develop its own sanitary treatment capacity or an alternate source of service,except in the event that the City is no longer able to provide wastewater collection, treatment and disposal service as contemplated hereby. 5.02 The initial rate to be charged by the City to the District for wastewater services under this Agreement will be$3.52 per 1,000 gallons. Unless the District and the City agree otherwise,the City will bill the District for wastewater services based on 70%of the District's then-current monthly water usage, excluding water used for irrigation purposes and measured by irrigation-only water meters. The District agrees that the rates set by the City and charged to the District may be reviewed and/or amended annually based on a cost of service study performed by the City. The City will be entitled to include a reasonable rate of return for said rates. In the future, the wholesale rate may consist of two components, a demand charge and a volumetric charge. 5.03 The District agrees to pay the City in accordance with City Ordinances,to bill users of wastewater treatment services within the District and to set and maintain tax rates and rates sufficient to pay the following: - 5 - 295251-6 07/30/2007 a. For wastewater services provided by the City pursuant to this Agreement. b. For all District operation and maintenance expenses in an amount sufficient enough to meet such expenses as they come due. C. For debt service on any bonds issued by the District in an amount deemed appropriate by the Board of Directors. 5.04 The District agrees to supply the City with a copy of each resolution or order adopted by the District setting sewer rates within seven days of such adoption. The City agrees to give notice to the District at least 30 days prior to approval of any wholesale rate change in order to allow the District to (i) review and comment upon the proposed change and (ii) adjust its own rates to its customers based on the increase in wholesale costs. 5.05 In order to extend wastewater service to the District,the City and the Developer have agreed to cost participate in the construction of the McNutt Interceptor in accordance with the terms of the Consent Agreement. Upon completion,the McNutt Interceptor will be owned,operated and maintained by the City, subject to the reservation of 1100 LUES of capacity in the McNutt Interceptor for the provision of wastewater service to the District and the Developer's right to reimbursement from the District for the District's reserved capacity as provided in the Consent Agreement. 5.06 Anything to the contrary contained in this Agreement notwithstanding,the District and Paloma Lake Municipal Utility District No.2 will have the right to transfer LUEs of wastewater service between themselves as may be required for the ultimate development needs of both districts, provided that the maximum amount of wastewater service to both districts may not exceed a maximum of 2,000 LUEs, as provided in the Consent Agreement. The City's consent to any such transfer will not be required, but a copy of the transfer document, which must be in writing and signed by both the transferor district and the transferee district, must be delivered to the City. ARTICLE VI. Miscellaneous 6.01 If,by reason of Force Majeure,a Parry is rendered unable,wholly or in part,to carry out its obligations under this Agreement, such Party will give written notice and the full particulars of such Force Majeure to the other Parry within a reasonable time after occurrence of the event or cause relied upon, and the obligation of the Party giving such notice,to the extent it is affected by such Force Majeure,will be suspended during the continuance of the inability then claimed,but for no longer period, and any such Party will endeavor to remove or overcome such inability with all reasonable dispatch. 6.02 The City will not be liable to the District or any customer of the District for the failure of the City to provide water or wastewater treatment service where the failure results from Force Majeure. -6 - 295251-6 07/30/2007 6.03 This Agreement is subject to all valid rules,regulations and laws applicable thereto promulgated by the United States of America,the State of Texas,or any agency thereof or regulatory body having lawful jurisdiction. 6.04 This Agreement will be for the sole and exclusive benefit of the City and the District and will not be construed to confirm any benefit or right upon any other parties. 6.05 This Agreement may be amended by consent of both of the Parties. 6.06 The provisions of this Agreement are severable and, if any word, phrase, clause, sentence,paragraph,section or other part of this Agreement or the application thereof to any person or circumstance is ever held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement will be construed as if such invalid provision was not contained herein. 6.07 This Agreement will be in force and effect from the date of execution by both Parties and will continue in effect for 40 years thereafter. The foregoing notwithstanding, if all of the land within the District is annexed and the District is dissolved,this Agreement will terminate on the date of dissolution of the District. 6.08 This Agreement will be construed under and in accordance with Texas law. Venue for any action arising hereunder will be in Williamson County, Texas. 6.09 Any notice given under this Agreement must be in writing. Notice may be given: (i) by depositing the notice in the United States Mail,postage paid,certified,and addressed to the Party to be notified with return receipt requested; (ii)by delivering the notice to the Party, or an agent of the Party or(iii)by confirmed facsimile,provided that a copy of the notice is also given in one of the manners specified in(i)or(ii). Notice deposited in the mail in the manner specified will be effective three days after deposit. Notice given in any other manner will be effective only if and when received by the Parry to be notified. For the purposes of notice, the addresses of the parties will, until changed as provided below, be as follows: CITY: City of Round Rock 221 East Main Street Round Rock, Texas 78664 Attn: City Manager Facsimile: (512) 218-7097 DISTRICT: Paloma Lake Municipal Utility District No. 1 c/o Armbrust&Brown, L.L.P. 100 Congress Ave., Ste. 1300 Austin, Texas 78701 Attn: Sue Brooks Littlefield Facsimile: (512)435-2360 - 7- 295251-6 07/30/2007 The Parties may change their respective addresses for purposes of Notice by giving at least five days written notice of the new address to the other party. 6.10 If any date or any period provided in this Agreement ends on a Saturday, Sunday or legal holiday, the applicable period will be extended to the next business day. 6.11 Each party has been represented by legal counsel who have participated equally in the formulation,drafting,and approval of this Agreement. Therefore,in the event of any ambiguity,the provisions of this Agreement will not be construed for or against either party based on draftsmanship. Wherever appropriate,the masculine gender may include the feminine or neuter,and the singular may include the plural, and vice versa. IN WITNESS WHEREOF, the City and the District, acting under the authority of their respective governing bodies, have caused multiple counterparts of this Agreement to be duly executed, each of which will be of equal dignity, all as of the day of 2007. CITY OF ROUND ROCK, TEXAS By: NYLE MAXWELL, Mayor Date: ATTEST: CHRISTINE R. MARTINEZ City Secretary - 8- 295251-6 07/30/2007 PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. I By: Printed Name: Bob W. Roberts, Jr. Title: Vice President Date: August 15, 2007 ATTEST: SteThanie R Ncrvel� Secretary,Board of Directors -9- 295251-6 07/30/2007 DATE: September 6, 2007 SUBJECT: City Council Meeting - September 13, 2007 ITEM: 11D3. Consider a resolution authorizing the Mayor to execute a Wholesale Water and Wastewater Agreement with the Paloma Lake Municipal Utility District No. 1. Department: Water and Wastewater Utilities Staff Person: Michael D. Thane, Director of Utilities Justification: The City entered into the Paloma Lake Municipal Utility District (MUD) Nos. 1 and 2 Consent Agreement and agreed to provide wholesale water and wastewater services to the MUDs. The MUDs and the City now desire to enter into this wholesale agreement to establish the rates and rate methodology for these services. The initial rate for water will be $2.51 per 1,000 gallons as measured by master meters located at the MUDs boundaries. The initial rate for wastewater will be $3.52 per 1,000 gallons based on 70% of the MUDs then-current water usage, excluding water used for irrigation purposes and measured by irrigation-only water meters. These rates will be recalculated on a regular basis to reflect the City's cost to serve the MUD. In addition, the District will collect the City's standard water and wastewater Impact Fees on behalf of the City at the time it collects its own tap and connection fees. Funding• Cost: N/A Source of funds: N/A Outside Resources: Blake Magee Investments, L.P. Background Information: In September 2005, Blake Magee Investments, L.P. requested City consent to create two Municipal Utility Districts, Paloma Lake MUD Nos. 1 and 2 for approximately 2,000 living unit equivalents on 732 acres of land. The land will be served with water and wastewater by the City of Round Rock. A portion of the tract is within the Jonah Water Supply service area; however, the Jonah Board released the tract from their area so it can be served with water and wastewater by the City of Round Rock. Public Comment: N/A EXECUTED DOCUMENT FOLLOWS PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. 1 WHOLESALE WATER AND WASTEWATER AGREEMENT STATE OF TEXAS § § KNOW ALL MEN AT THESE PRESENTS: COUNTY OF WILLIAMSON § This Wholesale Water and Wastewater Agreement(this"Agreement') is entered into as of the date last herein written between the CITY OF ROUND ROCK,TEXAS(the"C "),a home rule municipality located in Williamson County,Texas,and PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. 1 (the"District"),a conservation and reclamation district created under Article XVI, Section 59 of the Texas Constitution and operating under the provisions of Chapters 49 and 54 of the Texas Water Code. In this Agreement, the City and the District are sometimes referred to individually as "a Par "and collectively as "the Parties". WITNESSETH: WHEREAS, the City owns and operates a water treatment and distribution system serving territory within the City's extraterritorial jurisdiction as well as within the boundaries of the City; and WHEREAS, the City owns wastewater collection facilities and capacity in regional wastewater treatment and disposal facilities serving territory within the City's extraterritorial jurisdiction as well as within the boundaries of the City; and WHEREAS,the District is located within the City's extraterritorial jurisdiction and has been created,with the consent of the City,to provide, among other services,retail water and wastewater services to the land within its boundaries; and WHEREAS, in accordance with the "Consent Agreement Between City of Round Rock, Texas and Blake Magee Investments, L.P. for Paloma Lake Municipal Utility District No. 1 and Paloma Lake Municipal Utility District No.2"dated effective September 22,2005,as amended(the "Consent Agreement'),the City has agreed to provide wholesale water and wastewater services to the District, and the District and the City now desire to enter into this Agreement to set forth the terms and conditions of such services; NOW, THEREFORE, for and in consideration of the premises and the mutual obligations and benefits herein contained,the Parties agree as follows: ARTICLE I. Definitions 1.01 In addition to the terms defined in the preceding paragraphs of this Agreement,the following terms, when used in this Agreement, have the following meanings: - 1 - 295251-6 07/30/2007 f�-07-Ck -13-/ID3 a. "Board"or"Board o Directors"means the Board of Directors of the District. b. "Developer"means Paloma Lake Development, Inc. C. "Director"means the Director of the City's Water and Wastewater Utility. d. "Force Maieure" means acts of God, strikes, lockouts, or other industrial disturbances;acts of a public enemy;orders of the government of the United States or the State of Texas or any civil or military authority other than the Parties; insurrection, riots, epidemics, landslides, lightning, earthquake, fires, hurricanes, storms, floods, washouts, and droughts; restraint of government and people; civil disturbances;explosions,breakage or accidents to machinery,pipelines,or canals or other causes not reasonably within the control of the Party claiming the inability. e. "Impact Fees" means the amounts charged by the City to pay for a portion of the capital costs of the City's water supply and treatment system and wastewater collection,treatment and disposal system necessary to provide fresh water supply and wastewater collection, treatment, and disposal services to the District. f. "Living Unit Equivalent" or "LUE' means the amounts of water and wastewater service required to serve a service unit, as determined under City Ordinances. g. "McNutt Interceptor" means the City wastewater interceptor to be constructed as provided in the Consent Agreement which will transport wastewater generated by customers located within the McNutt drainage basin,including customers within the District,to the Brushy Creek Regional Wastewater Treatment Plant h. "Ordinances"means City ordinances, as amended from time to time. i. "Proiect" means the water distribution facilities and the wastewater collection facilities to be constructed or acquired, and owned and operated,by the District. j. "Commission" means the Texas Commission on Environmental Quality, or its successor agency. ARTICLE H. Impact Fees 2.01 The District will collect the City's standard water and wastewater Impact Fees on behalf of the City at the time it collects its own tap and connection fees, and prior to initiation of service to any new water and/or wastewater connection within the District. The District will not provide service to any new connection until the City's Impact Fees have been paid by the customer requesting the connection. Impact Fees collected by the District during each month will be remitted to the City by the 15th day of the following month. The City will give written notice to the District of any change in the City's Impact Fees at least 30 days prior to the change becoming effective,in order to allow the District adequate time to amend its rate order and adjust the amounts which it is collecting on behalf of the City under this Section. -2 - 295251-6 07/30/2007 2.02 Upon the payment of each water or wastewater Impact Fee described in this Article 2.02,the District will have a guaranteed reservation and commitment of capacity in the City Systems for the amount of capacity(in LUES)for which a water and/or wastewater Impact Fee has been paid. 2.03 All other fees required by the City,including oversize fees,will be paid as required by City Ordinances and the Consent Agreement. ARTICLE M. Proiect Acquisition 3.01 Subject to the provisions of State law and the terms of the Consent Agreement,the District will finance and acquire the Project. 3.02 Plans and specifications for all District facilities will be subject to approval by the City. 3.03 The proceeds from the sale of the District bonds may be used to pay all costs and expenses permitted by State law and the rules of the Commission, including expenses and costs incurred in connection with engineering, inspecting, permitting, easement acquisition for, and constructing the Project,and all costs incurred in connection with the issuance,sale,and delivery of the bonds. 3.04 The District may enter into such contracts as are necessary to provide for purchase and construction of the Project,which contracts will be bid, approved and executed as required by State law and the rules of the Commission. 3.05 The City will have the right to inspect all portions of the Project located outside the District's boundaries which will be owned and operated by the City upon completion. The District will be responsible for reimbursing the City for the costs of such inspections. ARTICLE IV. Water Services 4.01 The City will sell and deliver water, which will be supplied from the City's water distribution system as extended pursuant to the Consent Agreement,to the boundaries of the District. The exact point or points of delivery of water to the District will be agreed upon by the Director and the District. The City presently has or will obtain an adequate water supply with which to provide water service to the District at the same level that water services are provided to customers within the City;however,the supply of water to the District may be reasonably limited by the City on the same basis and to the same extent as the supply of water to any other customers within the City. The City will provide potable water meeting the standards of the Commission for human consumption and other domestic uses at a minimum pressure of 35 psi at each customer meter and a minimum flow rate of 0.6 gallons per minute per LUE, and in compliance with all applicable requirements for wholesale contracts for purchased water systems,including Section 290.45(f),Texas Administrative Code, and any other applicable regulatory requirements. Service by the City to the District will be nondiscriminatory and consistent with the City's standard service policies and regulations, as established by the Round Rock City Council. The City will be the sole source of potable water to the - 3 - 295251-6 07/30/2007 District and the District will not seek to develop its own potable wells or alternate supplies,except in the event that the City is no longer able to provide potable water service as contemplated hereby. 4.02 Retail water service within the District will be provided by the District. Water meters meeting City specifications for customers of the District will be provided by the District at the District's cost.The District will adopt a water conservation and drought management plan which is at least as stringent as the City's,as amended from time to time and will amend its plan from time to time to correspond with any amendments adopted by the City. The District will provide the City with a copy of said water conservation and drought management plan within forty-five (45) days after the effective date of this Agreement. In addition,the District will implement water rationing and water conservation measures under its water conservation and drought management plan when those measures are activated by the City. The City will give the District notice of any activation of water rationing and water conservation measures. The District may not sell or deliver water to any customer outside the boundaries of the District without the City's approval. 4.03 Water delivered to the District will be measured by a master meter or meters installed at all connections to the City water distribution system. Metering equipment and related facilities, including a meter vault and standard-type devices required for properly measuring the quantity of water delivered to the District,will be installed at each point of delivery at the District's cost. The City will approve the meter facilities prior to installation.The District,at its expense,will construct the vault and provide and install the meter. The City,at the expense of the District will operate and maintain the metering equipment. The District will calibrate the master meters annually, or more frequently at the City's request. The District will provide the City with a copy of the calibration report within ten(10)days of District's receipt of same. If the City requests calibration of a master meter more frequently than once every 12 months and,upon calibration,the master meter in question proves to be accurate,then the cost of the calibration will be borne by the City. Any master meter registering within three percent(3%) accuracy will be deemed to be accurate. If any master meter tests to be inaccurate by more than three percent(3%),all testing and calibration costs will be borne by the District, the master meter will be recalibrated or replaced, and a billing adjustment will be made based on the degree of the meter's inaccuracy, as determined by the test. If the Parties can reasonably estimate the time at which the master meter became inaccurate, the City will make a billing adjustment based on that time period. If the Parties cannot reasonably estimate the time at which the master meter became inaccurate,then the City will make a billing adjustment to no more than the previous six months' billings. If a master meter is out of service or under repair so that the amount of water delivered cannot be ascertained or computed from the readings,the water delivered during the period the master meter was out of service or repair will be estimated and agreed upon by the Parties based on the best data available. The District will read all master meters on a daily basis, except on weekends and state and federal holiday and will keep accurate records of all measurements of water passing through the master meters. Such records will be open to the City for inspection or copying at all times during the District's regular business hours. Both the District and the City will be entitled to access the master meters at all times and the City will read the master meters once each City billing cycle, for billing purposes. 4.04 The initial rate to be charged by the City to the District for water supplied under this Agreement will be$2.51 per 1,000 gallons. The rates set by the City and charged to the District may be reviewed and/or amended annually based on a cost of service study performed by the City. The -4- 295251-6 07/30/2007 City may include a reasonable rate of return in its rates.In the future,the wholesale rate may consist of two components, a demand charge and a volumetric charge. 4.05 The District agrees to pay the City in accordance with City Ordinances,to bill users of potable water within the District and to set and maintain tax rates and rates sufficient to pay the following: a. For water delivered by the City pursuant to this Agreement. b. For all District operation and maintenance expenses as they come due. C. For debt service on any bonds issued by the District in an amount deemed appropriate by the Board of Directors. 4.06 The District agrees to provide the City with a copy of each resolution or order adopted by the District setting water rates within seven days of adoption. The City agrees to give written notice to the District at least 30 days prior to approval of any wholesale rate change in order to allow the District to(i)review and comment upon the proposed change and(ii)adjust its own rates to its customers based on the increase in wholesale costs. ARTICLE V. Wastewater Collection,Treatment and Disposal Services 5.01 The City will collect and transport wastewater generated by customers within the District, not to exceed 1100 LUEs, from the boundaries of the District, through its system, to the City's wastewater treatment facilities. The exact point or points of delivery of wastewater to the City will be agreed upon by the Director and the District. The City presently has or will obtain adequate wastewater collection,treatment and disposal facilities with which to provide service to the District. Retail wastewater collection service within the District will be provided by the District. The District will adopt an order prohibiting industrial waste from entering its collection system. The City will be the sole source of wastewater treatment services for the District and the District will not seek to develop its own sanitary treatment capacity or an alternate source of service,except in the event that the City is no longer able to provide wastewater collection, treatment and disposal service as contemplated hereby. 5.02 The initial rate to be charged by the City to the District for wastewater services under this Agreement will be$3.52 per 1,000 gallons. Unless the District and the City agree otherwise,the City will bill the District for wastewater services based on 70%of the District's then-current monthly water usage, excluding water used for irrigation purposes and measured by irrigation-only water meters. The District agrees that the rates set by the City and charged to the District may be reviewed and/or amended annually based on a cost of service study performed by the City. The City will be entitled to include a reasonable rate of return for said rates. In the future, the wholesale rate may consist of two components, a demand charge and a volumetric charge. 5.03 The District agrees to pay the City in accordance with City Ordinances,to bill users of wastewater treatment services within the District and to set and maintain tax rates and rates sufficient to pay the following: - 5 - 295251-6 07/30/2007 a. For wastewater services provided by the City pursuant to this Agreement. b. For all District operation and maintenance expenses in an amount sufficient enough to meet such expenses as they come due. C. For debt service on any bonds issued by the District in an amount deemed appropriate by the Board of Directors. 5.04 The District agrees to supply the City with a copy of each resolution or order adopted by the District setting sewer rates within seven days of such adoption. The City agrees to give notice to the District at least 30 days prior to approval of any wholesale rate change in order to allow the District to (i) review and comment upon the proposed change and (ii) adjust its own rates to its customers based on the increase in wholesale costs. 5.05 In order to extend wastewater service to the District,the City and the Developer have agreed to cost participate in the construction of the McNutt Interceptor in accordance with the terms of the Consent Agreement. Upon completion,the McNutt Interceptor will be owned,operated and maintained by the City, subject to the reservation of 1100 LUEs of capacity in the McNutt Interceptor for the provision of wastewater service to the District and the Developer's right to reimbursement from the District for the District's reserved capacity as provided in the Consent Agreement. 5.06 Anything to the contrary contained in this Agreement notwithstanding, the District and Paloma Lake Municipal Utility District No.2 will have the right to transfer LUES of wastewater service between themselves as may be required for the ultimate development needs of both districts, provided that the maximum amount of wastewater service to both districts may not exceed a maximum of 2,000 LUEs, as provided in the Consent Agreement. The City's consent to any such transfer will not be required, but a copy of the transfer document, which must be in writing and signed by both the transferor district and the transferee district,must be delivered to the City. ARTICLE VI. Miscellaneous 6.01 If,by reason of Force Majeure,a Party is rendered unable,wholly or in part,to carry out its obligations under this Agreement, such Party will give written notice and the full particulars of such Force Majeure to the other Parry within a reasonable time after occurrence of the event or cause relied upon, and the obligation of the Party giving such notice,to the extent it is affected by such Force Majeure,will be suspended during the continuance of the inability then claimed,but for no longer period, and any such Party will endeavor to remove or overcome such inability with all reasonable dispatch. 6.02 The City will not be liable to the District or any customer of the District for the failure of the City to provide water or wastewater treatment service where the failure results from Force Majeure. -6- 295251-6 07/30/2007 6.03 This Agreement is subject to all valid rules,regulations and laws applicable thereto promulgated by the United States of America,the State of Texas,or any agency thereof or regulatory body having lawful jurisdiction. 6.04 This Agreement will be for the sole and exclusive benefit of the City and the District and will not be construed to confirm any benefit or right upon any other parties. 6.05 This Agreement may be amended by consent of both of the Parties. 6.06 The provisions of this Agreement are severable and, if any word, phrase, clause, sentence,paragraph,section or other part of this Agreement or the application thereof to any person or circumstance is ever held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement will be construed as if such invalid provision was not contained herein. 6.07 This Agreement will be in force and effect from the date of execution by both Parties and will continue in effect for 40 years thereafter. The foregoing notwithstanding,if all of the land within the District is annexed and the District is dissolved,this Agreement will terminate on the date of dissolution of the District. 6.08 This Agreement will be construed under and in accordance with Texas law. Venue for any action arising hereunder will be in Williamson County, Texas. 6.09 Any notice given under this Agreement must be in writing. Notice may be given: (i) by depositing the notice in the United States Mail,postage paid,certified,and addressed to the Party to be notified with return receipt requested; (ii)by delivering the notice to the Party, or an agent of the Party or(iii)by confirmed facsimile,provided that a copy of the notice is also given in one of the manners specified in(i)or(ii). Notice deposited in the mail in the manner specified will be effective three days after deposit. Notice given in any other manner will be effective only if and when received by the Party to be notified. For the purposes of notice, the addresses of the parties will, until changed as provided below, be as follows: CITY: City of Round Rock 221 East Main Street Round Rock, Texas 78664 Attn: City Manager Facsimile: (512)218-7097 DISTRICT: Paloma Lake Municipal Utility District No. 1 c/o Armbrust& Brown, L.L.P. 100 Congress Ave., Ste. 1300 Austin, Texas 78701 Attn: Sue Brooks Littlefield Facsimile: (512)435-2360 - 7- 295251-6 07/30/2007 The Parties may change their respective addresses for purposes of Notice by giving at least five days written notice of the new address to the other party. 6.10 If any date or any period provided in this Agreement ends on a Saturday, Sunday or legal holiday,the applicable period will be extended to the next business day. 6.11 Each party has been represented by legal counsel who have participated equally in the formulation,drafting,and approval of this Agreement. Therefore,in the event of any ambiguity,the provisions of this Agreement will not be construed for or against either party based on draftsmanship. Wherever appropriate,the masculine gender may include the feminine or neuter,and the singular may include the plural, and vice versa. IN WITNESS WHEREOF, the City and the District, acting under the authority of their respective governing bodies, have caused multiple counterparts of this Agreement to be my executed, each of which will be of equal dignity, all as of the / day of Z ' i"' /211'1.11 2007. CITY OF ROUN ,TE S By- MAXWELL, Mayor Date: ATTEST: CHRISTINE R. MARTINEZ J City Secretary ` - 8 - 295251-6 07/30/2007 PALOMA LAKE MUNICIPAL UTILITY DISTRICT NO. 1 By: Printed Name: Bob W. Roberts, Jr. Title: Vice President Date: August 15, 2007 ATTEST: Stephanie R. Norvell Secretary, Board of Directors -9- 295251-6 07/30/2007