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HomeMy WebLinkAboutItem 12h - Assignment and Assumption Agreement DATE: September 21, 2021 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director By: Jacquelyn Mercado, Senior Management Analyst SUBJECT: ASSIGNMENT AND ASSUMPTION AGREEMENT BETWEEN THE CITY OF ARCADIA, EAST PASADENA WATER COMPANY, AND CALIFORNIA-AMERICAN WATER COMPANY Recommendation: Approve SUMMARY The City of Arcadia and East Pasadena Water Company jointly constructed and maintain a metered water interconnection that is located within Naomi Avenue at the west City limits of Arcadia. The interconnection was established as an alternative water source for East Pasadena Water Company to use in times of emergency. A formal agreement was signed in 1982 and set terms for the delivery of water through the interconnection and use of fire hydrants in the specified area. The City was recently informed that California-American Water has entered into an agreement to acquire the assets of East Pasadena Water Company. Following the completion of the sale, California-American Water will become the new water provider to approximately 10,000 residents in Temple City, Arcadia, and the east Pasadena area. Due to the acquisition, East Pasadena Water Company is requesting to transfer the existing interconnection agreement, with no changes to the terms and conditions, to California-American Water Company for their future use. It is recommended that the City Council approve, and authorize and direct the City Manager to execute, the Assignment and Assumption Agreement between the City of Arcadia, East Pasadena Water Company, and California-American Water Company. BACKGROUND East Pasadena Water Company is a privately owned class B utility with a long history of serving their community from wells located in the Main San Gabriel Groundwater Basin. In 1982, the City of Arcadia and East Pasadena Water Company jointly established an interconnection between their respective water distribution systems. The purpose for Assignment and Assumption Agreement September 21, 2021 Page 2 of 3 establishing the interconnection was to aid East Pasadena Water Company by providing a secondary source of supply, should their wells become inoperable due to mechanical failure or natural disaster. In 2019, American Water Works Company, announced that its subsidiary, California- American Water had entered into an agreement to acquire the assets of East Pasadena Water Company. California-American Water, through its existing distribution network, serves nearly 690,000 people in California, including some areas of Duarte, San Marino, and Rosemead. The completion of the sale will ensure that East Pasadena Water Company’s existing customers will start receiving high-quality water services from California-American Water. DISCUSSION Due to the acquisition, the proposed Assignment and Assumption Agreement is to transfer the existing interconnection agreement, with no changes in the terms and conditions, with East Pasadena Water Company to California-American Water Company for their future use. The term of the Agreement is in perpetuity unless and until both agencies agree in writing to terminate it. In no event will the City of Arcadia become liable for failing to deliver the requested water if, in its sole discretion, the City determines it is unable to do so for any reason. In the event the City of Arcadia determines, in its sole discretion, that an emergency exists, the City may reduce flows through the interconnection. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT There is no fiscal impact as a result of the approval of the Assignment and Assumption Agreement between the City of Arcadia, East Pasadena Water Company, and California-American Water Company. RECOMMENDATION It is recommended that the City Council determine that this action does not constitute a project and is, therefore, exempt under the California Environmental Quality Act (“CEQA”); and approve, and authorize and direct the City Manager to execute, the Assignment and Assumption Agreement between the City of Arcadia, East Pasadena Water Company, and California-American Water Company. Assignment and Assumption Agreement September 21, 2021 Page 3 of 3 Attachment: Assignment and Assumption Agreement 96996624V.2 ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is entered into as of September __, 2021 (the “Effective Date”) by and among East Pasadena Water Co., a California corporation (“Seller”), California-American Water Company, a California corporation (“Buyer”), and the City of Arcadia, a municipal corporation (“Arcadia”). Recitals A. Buyer and Seller are parties to that certain Asset Purchase Agreement dated as of April 19, 2019 (the “Purchase Agreement”), pursuant to which Seller has agreed to sell, and Buyer has agreed to purchase, all or substantially all of the assets of Seller that are used or held for use in the operation of a water supply and distribution system that serves approximately 3,000 customers in Pasadena, California. B. Seller and Arcadia are parties to that certain Agreement for Sale of Water and Provision of Fire Hydrants dated October 15, 1982, a copy of which is attached hereto as Annex A (the “Interconnection Agreement”). C. Under the Purchase Agreement, Seller has agreed to assign to Buyer, and Buyer has agreed to assume, the Interconnection Agreement. D. Arcadia is willing to consent to the assignment and assumption of the Interconnection Agreement, on the terms set forth in this Agreement. Agreement ACCORDINGLY, based on the foregoing and the mutual covenants set forth below, the parties hereby agree as follows: 1. Assignment and Assumption. Seller does hereby sell, assign, transfer and convey to Buyer, and Buyer does hereby, from and after the Effective Date, accept from Seller, all of Seller’s right, title and interest in and to the Interconnection Agreement. Buyer does hereby, from and after the Effective Date, assume from Seller and Buyer does hereby agree to pay, perform and discharge, as and when due, all of Seller’s obligations under the Interconnection Agreement. 2. Consent to Assignment and Assumption. Arcadia hereby consents to the assignment and assumption of the Interconnection Agreement as provided in this Agreement, and agrees that the Interconnection Agreement between Arcadia and Buyer shall remain in full force and effect in accordance with its terms after the Effective Date, subject to the amendment described in Section 3 of this Agreement. 3. Amendment. Section 8 (Notices) of the Interconnection Agreement hereby is amended to replace the address for Seller with the following address for Buyer: California- American Water Company, 655 W. Broadway, Suite 1410, San Diego, California 92101, Attention: Vice President, Legal. 2 96996624v.2 4. Further Assurances. Each of the parties hereto covenants and agrees to execute and deliver, at the request of any other party, such further instruments of transfer and assignment and to take such other action as any other party may reasonably request to more effectively consummate the assignment and assumption contemplated by this Agreement. 5. Purchase Agreement. This Agreement is being delivered pursuant to the Purchase Agreement and shall be construed consistently therewith. As between Buyer and Seller, in the event of any conflict or ambiguity between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall control. This Agreement is not intended to, and does not in any manner, enlarge, diminish or modify the rights and obligations of the parties to the Purchase Agreement, including, without limitation, any representations, warranties or indemnification obligations contained therein. 6. Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon the parties hereto and their respective successors and permitted assigns, and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 7. Counterparts. This Agreement may be executed in any number of multiple counterparts, each of which shall be deemed to be an original copy and all of which shall constitute one agreement, binding on all parties hereto. A manual signature on this Agreement, an image of which shall have been transmitted electronically, will constitute an original signature for all purposes. The delivery of copies of this Agreement, including executed signature pages where required, by electronic transmission will constitute effective delivery of this Agreement for all purposes. 8. Governing Law. This Agreement is to be governed by and construed in accordance with the laws of the State of California without regard to its conflicts of law principles. [SIGNATURE PAGES FOLLOW] 3 96996624v.2 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be signed as of the Effective Date. EAST PASADENA WATER CO. By:___________________________________ Name:__________________________ Title:___________________________ By:___________________________________ Name:__________________________ Title:___________________________ CALIFORNIA-AMERICAN WATER COMPANY By:___________________________________ Name:__________________________ Title:___________________________ By:___________________________________ Name:__________________________ Title:___________________________ [SIGNATURES CONTINUED ON NEXT PAGE] 4 96996624v.2 CITY OF ARCADIA By:___________________________________ Name:__________________________ Title: Mayor, City of Arcadia ATTEST: By:___________________________________ Name:__________________________ Title:___________________________ APPROVED AS TO FORM: By:___________________________________ City Attorney, City of Arcadia 5 96996624v.2 ANNEX A Interconnection Agreement (Attached) "ANNEX A"