RDOS Regular Board Meeting Agenda Item 6.1 ADMINISTRATIVE REPORT TO: FROM: Board of Directors B. Newell, Chief Administrative Officer DATE: May 16, 2013 RE: Gallagher Lake Water and Sanitary Sewer Service Areas Administrative Recommendation: THAT the Letter of Intent with the Osoyoos Indian Band and 3556514 Canada Ltd. - Norterra Inc. for water and sanitary servicing in the Gallagher Lake area be signed by the Chief Administrative Officer and the RDOS Chair. Reference: RDOS Board meeting June 16, 2011 Resolution B303/11A History: The RDOS received a subdivision referral for the bare land strata development known as Deer Park on July 21, 2011. The subdivision proposes construction of the final strata phase comprised of 27 bare land strata lots. The applicant 3556514 Canada Ltd. - Norterra Inc. (Norterra) requested as part of the subdivision to connect to community water and sanitary sewer systems. The Osoyoos Indian Band (OIB) has recently completed a community water and sewer systems in the Gallagher Lake area and OIB has interest in allowing non-band properties to connect to the systems. In December 2010, OIB signed an agreement with the property owner of the Gallagher Lake Village Modular Home Park, which is directly adjacent to OIB land, to supply water and sanitary services. Norterra proposes to connect to the OIB utility, Senkulmen Utilities Ltd (Senkulmen), but does not want to operate any service infrastructure outside of OIB land. To initiate the process the OIB requires a Letter of Intent (LoI) outlining conditions in which the services requested operate. The three parties involved (OIB, Norterra and RDOS) have drafted a LoI for consideration before the RDOS Board and the OIB Council. Once the LoI is accepted, a utility servicing agreement will be drafted detailing the water and sanitary services between the RDOS and OIB. Alternatives: THAT the Letter of Intent with the Osoyoos Indian Band and 3556514 Canada Ltd. - Norterra Inc. not be endorsed. Analysis: The proposed subdivision by Norterra and the existing Deer Park bare land strata represent 100 Page 1 of 9
water and sanitary connections to community infrastructure systems. To connect to the Senkulmen system approximately 675 metres of piping will be needed between Deer park and OIB lands and RDOS will be operators for that service. The Senkulmen will supply potable water to the RDOS for distribution to Deer Park and the surrounding Gallagher Lake area in the future. The RDOS will also operate a sanitary system collection system to transmit the sanitary effluent to the OIB lands and the Senkulmen sanitary treatment plant. As part of the agreement to construct and operate the water and sanitary infrastructure, the RDOS has agreed to contribute $200,000.00 towards the sewer collection system which will run between Deer Park and OIB land. There has been $200,000.00 set aside in the Rural Area C Projects budget to assist with construction of Gallagher Lake sewer projects. This funding was approved by the RDOS Board at the June 16, 2011 meeting as part of the Community Work Gas Tax Fund; with RDOS Bylaw 2559, 2011. The RDOS contribution to this project will be given at the time of assuming control over the infrastructure. At their April 30th, 2013 meeting the OIB Council met and agreed to accept the concept of entering into a binding servicing agreement with Deer Park (RDOS). The next steps in the process would be to sign the LoI and negotiate the terms of the Utility Servicing Agreement. Respectfully submitted: S. Juch, Subdivision Supervisor Attachments: Schedule A Context Maps Schedule B Draft Engineered Drawing Deer Park Schedule C Draft Letter of Intent Page 2 of 9
Attachment No. 1 Context Maps Deer Park Gallagher Lake OIB Lands Location of the OIB (Senkulmen) sewer treatment plant (indicative only) N Deer Park Proposed 30 lots bare land strata subdivision (Final Phase) OIB Lands Page 3 of 9
Attachment No. 2 Draft Engineered Drawing Deer Park Page 4 of 9
Date: Attachment No. 3 Draft Letter of Intent SENKULMEN UTILITIES LTD. REGIONAL DISTRICT OF OKANAGAN SIMILKAMEEN 3556514 CANADA LTD. Dear Sirs: Re: Letter of Intent between 3556514 Canada Ltd. (the Developer ), Gallagher Lake Water Works Ltd. ( Gallagher ), Regional District of Okanagan-Similkameen ( RDOS ) and Senkulmen Utilities Ltd ( Senkulmen ) with respect to the provision, construction and transfer of water and sewage utility infrastructure This Letter of Intent is to confirm our mutual understanding of the arrangements that we have made regarding the referenced matter. For the purposes of this Letter of Intent, the following shall have the meanings ascribed thereto: A. Osoyoos Indian Band (OIB) Lands shall mean those lands located on Osoyoos Indian Reserve No. 1; B. Lands shall mean those lands legally described as Lot A, District Lot 28S, SDYD, Plan KAP50404, except Strata Plan KAS1394 (Phases 1, 2 and 3); C. Development shall mean the bare land strata development formed by Strata Plan KAS1394 (Phases 1, 2 and 3). D. Strata Lots shall mean the strata lots created by the deposit of Strata Plan KAS1394 (Phases 1, 2 and 3) ( Development ) and the proposed strata lots to be constructed on the Lands by the Developer as set out below. OVERVIEW OF AGREEMENT 1. The following is a general description of the transactions contemplated under this Letter of Intent: a) The Developer owns the Lands and intends to construct a bare land strata subdivision consisting of 30 bare land strata lots as a continuation of Development. b) Senkulmen has constructed a water reservoir and a sewage treatment facility (the OIB Facility ) on the OIB Lands with sufficient capacity to provide water and sewage services to the Strata Lots; Page 5 of 9
c) Gallagher presently provides and has capacity to provide water and sewage treatment services to the Development through a facility it owns and controls (the Gallagher Facility ). Gallagher holds a Certificate of Public Convenience and Necessity (the CPCN ) through which is provides water; d) Gallagher wishes to construct, or to arrange for the construction and pay for, the necessary sewage and water infrastructure (the Infrastructure ) from the OIB Facility to the Lands in order to provide the services to the Strata Lots; e) Senkulmen shall construct, on behalf of and at the cost of Gallagher, the Infrastructure on OIB Lands to connect to the OIB Facility on the terms and conditions set out in this Letter of Intent. The specifications of the Infrastructure on the OIB Lands shall be as agreed by Gallagher, RDOS and Senkulmen; f) Gallagher intends to construct Infrastructure from OIB Lands to the Lands as a condition of subdivision of the Lands; and g) Gallagher intends to transfer to RDOS the Infrastructure (other than as constructed on the OIB Lands) and the CPCN upon completion of the Infrastructure, connection to the OIB Facility, subdivision of the Lands. INFRASTRUCTURE AND GALLAGHER FACILITY 2. Gallagher and RDOS agree as follows: a) Gallagher will, at its own cost and expense, construct, or arrange for the construction of, the Infrastructure to the OIB Facility. Gallagher will own, maintain and repair the Infrastructure from the Lands to the OIB Lands boundary until such time a transfer is completed to the RDOS and Senkulmen shall own, maintain and repair any of the Infrastructure constructed on the OIB Lands. b) RDOS shall contribute $200,000.00 to the cost of the construction of the Infrastructure at the time of transfer of the Infrastructure (other than the Infrastructure on the OIB Lands) to the RDOS. c) Gallagher will, at its own cost and expense, make such applications for tenures, permits, and licences as may be required to permit construction of the Infrastructure (other than the Infrastructure on the OIB Lands). d) Upon the completion of construction of the Infrastructure, Gallagher will transfer, and RDOS will acquire, all right, title and interest in and to the Infrastructure (other than the Infrastructure on the OIB Lands) and the CPCN. e) Gallagher and RDOS shall do such other things and acts, and sign such further and other documents as may be required, including the transfer of tenures, permits or licences and agreements relating to the Infrastructure and the CPCN to RDOS. F) Senkulmen shall take any and all steps, and obtain any and all permits and approvals for the construction and ownership of the Infrastructure on the OIB Lands. Page 6 of 9
OIB FACILITY 3. Senkulmen, the Developer and Gallagher agree as follows: a) Senkulmen will, at its own cost and expense, construct or upgrade, if required, the OIB Facility to permit the servicing of water and sewer to the Strata Lots. b) Upon the Infrastructure being connected to the OIB Facility, Gallagher, the Developer and Senkulmen will enter into a Water and Sewer Agreement setting out the right and obligations of the parties with respect to the provision of water and sewage treatment services. Senkulmen acknowledges that upon transfer of the Infrastructure (other than the Infrastructure on the OIB Lands) to RDOS, Gallagher will assign the Water and Sewer Agreement to RDOS and Senkulmen will consent to such transfer acknowledges that upon transfer of the Infrastructure (other than the Infrastructure on the OIB Lands) to RDOS, Gallagher will assign the Water and Sewer Agreement to RDOS and Senkulmen will consent to such transfer. c) The Water and Sewer Agreement shall be entered into by the Developer and Senkulmen and shall contain the following provisions: (i) (ii) As contained in the Water and Sewer Agreement, Senkulmen shall receive an annual user fee for the sewage services provided under the agreement, which sum shall be equal to the number of strata lots located within the Development that are ready for occupancy as of the payment date, multiplied by the annual user sewage rate established by the Town of Oliver pursuant to its sewage rates bylaw As contained in the Water and Sewer Agreement, Senkulmen shall receive an annual user fee for the sewage services provided under the agreement, which sum shall be equal to the number of strata lots located within the Development that are ready for occupancy as of the payment date, multiplied by the annual user sewage rate established by the Town of Oliver pursuant to its sewage rates bylaw. As contained in the Water and Sewer Agreement, Senkulmen shall receive semiannual fees for water services provided under the agreement, as follows: (a) (b) for every strata lot within the Development that is ready for occupancy, an amount equal to the flat rate established by the Town of Oliver pursuant to its water rates bylaw, as amended from time to time; and the volume of water supplied by Senkulmen to the Development during the relevant period multiplied by the rate per cubic meter established by the Town of Oliver pursuant to its water rates bylaw, as amended from time to time. Page 7 of 9
4 Connection Agreement 4 The Developer and Senkulmen shall enter into a Connection Agreement that shall contain the following provisions: (i) The Developer will pay to Senkulmen, within 3 business days after execution of the Water and Sewer Agreement and connection of the Development to the Infrastructure, a fee of $440,000.00. (ii) (iii) (iv) The Developer will pay to Senkulmen the sum of $7,000.00, per strata lot to be created by the Developer pursuant to section 1(a) of this Letter of Intent (the Future Payments ). The Developer agrees that it will pay to Senkulmen the sum of $7,000.00 from proceeds received upon the sale of a strata lot created pursuant to section 1(a) of this Letter of Intent. The Developer agrees to secure the Future Payments by granting a mortgage on the Lands to Senkulmen to secure such payments set out in section 3(c)(ii), which mortgage shall be registered against title to the Lands. Senkulmen agrees that it will provide a fully executed, registrable discharge of the mortgage for each strata lot created pursuant to section 1(a), which discharges shall be held by the solicitors for the Developer on the trust condition that a discharge of the mortgage for a strata lot may only be used upon the payment of $7,000.00 to Senkulmen. If the costs set out in section 3(c)(ii) are not paid within 3 years of the date of deposit of the strata plan creating the strata lots to be created pursuant to section 1(a) of this Letter of Intent, then the Developer shall compensate Senkulmen as set out below, in the discretion of Senkulmen: (a) (b) the Developer makes a cash payment of the amount then outstanding at the end of the 3 year term; the Developer issues a Promissory Note to Senkulmen on terms as agreed between the parties; or (c) the Developer transfers a strata lot or strata lots to Senkulmen having the same fair market value as the amount then outstanding at the end of the 3 year term. 4. Letter of Intent This is a non-binding Letter of Intent outlining the terms of the proposed transactions among the Developer, Senkulmen, RDOS and Gallagher. No binding agreement will exist until a formal agreement has been executed by the Developer, Senkulmen, RDOS and Gallagher. Any obligations that arise from this Letter of Intent shall terminate on September 30, 2013, unless otherwise agreed by the parties. Page 8 of 9
Please confirm acceptance of the terms herein by signing and returning the enclosed duplicate original of this Letter of Intent. Yours truly, Gallagher Lake Water Works Ltd. Per: Agreed and accepted: 3556514 Canada Ltd. Per: Senkulmen Utilities Ltd. Per: Regional District of Okanagan-Similkameen Per: Page 9 of 9