Finance Committee
May 22, 2023

- 1 -
5/22/2023 4:00:00 PM
www.modestogov.com
AGENDA
City of Modesto

FINANCE COMMITTEE / COUNCIL WORKSHOP
Room 2001-40 Del Puerto Room
Tenth Street Place, 1010 10th Street
Modesto, California
Monday, May 22, 2023 at 4:00 PM
Roll Call: David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
Alternates: Eric Alvarez, Jeremiah Williams, Chris Ricci, Sue Zwahlen “Wordly” can translate into 25+ different languages! To access written translation during the meeting, please scan the QR Code or click this link https://attend.wordly.ai/join/RJDY-6364.
"Wordly" puede traducir a más de 25 idiomas diferentes! Para acceder a la traducción durante la reunión, por favor escanee el código QR o haga clic en el enlace https://attend.wordly.ai/join/RJDY-6364.

THIS MEETING WILL BE PHYSICALLY OPEN TO THE PUBLIC AND BY ZOOM

VIDEO CONFERENCING AND TELEPHONE
Effective March 1, 2023, if a technical issue arises with Zoom or the phone dial-in option, the Committee meeting will continue unless the meeting is being held pursuant to the provisions of Assembly Bill 2449. Alternative viewing options are listed below and the meeting is physically open to the public.

You may observe a livestream of the meeting at http://media.modestogov.com. You may also participate in the meeting as indicated below.
- 1 -
5/22/2023
- 2 -
5/22/2023 4:00:00 PM

PARTICIPATING IN CITY COUNCIL COMMITTEE MEETINGS
As a courtesy, the City of Modesto is providing alternatives to view Council Committee meetings and provide public comments. If you wish to make either a general public comment or to comment on a specific agenda item, you may use one of the following options:

SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the Committee Members and placed in the record, but will not be read aloud during the meeting. Written comments must be received two hours before the meeting.

VIRTUAL PARTICIPATION BY ZOOM VIDEO

CONFERENCING AND TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view and participate in Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
 Enter the following link into an Internet Browser
https://us02web.zoom.us/j/86945970570,
 Enter the following link into an Internet Browser https://zoom.us/ and using the Webinar ID 869 4597 0570
 Passcode 84326
To use Zoom, please visit: https://zoom.us/ and either sign-up for a free Zoom account or continue as a guest. Once you have downloaded the app onto your mobile device, joined from your web browser, or downloaded the Zoom software on your computer you will be ready for the upcoming Committee meeting.

Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can participate by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID 869 4597 0570 Passcode 84326
Providing Public Comment on Zoom and by Telephone
The Committee Chairman will request public comment during the Public Comment periods on the meeting agendas and during each Regular Calendar Item on the Committee Agenda. Once the Chairman has announced the public comment period, please do one of the following.

USING A COMPUTER OR SMART PHONE APP:
 Click on the “Raise Hand” feature in the webinar controls. This will notify City staff that you have raised your hand.
- 2 -
5/22/2023
- 3 -
5/22/2023 4:00:00 PM
 City staff will unmute your microphone when it is your turn to provide public comment.
 A prompt will appear to confirm you would like to be unmuted and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again.

USING A REGULAR PHONE (not using a computer or smart phone APP):
 Dial *9 (star 9), this will notify City staff that you have “raised your hand” for public comment.
 City staff will unmute your microphone when it is your turn to provide public comment.
 You will hear “you are unmuted” and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again.  If your phone is unmuted, and you are unable to be heard, the host may ask that you Dial *6 to toggle mute on/off in Zoom.

Additional Zoom resources/support
Please visit Zoom’s website support page on helpful tips to prepare for the meeting:
https://support.zoom.us/hc/en-us/categories/201146643
Council has not delegated directive or final approval authority to the Committees. Committee actions are recommendations to the full City Council, not final decisions on an issue.

PUBLIC COMMENTS
Please refer to special public comment instructions above.

Three-minute time limit per speaker.

Only interested persons in the audience may present these matters. Under State law, Committee Members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee Member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.

CONSENT ITEMS – ROLL CALL VOTE REQUIRED:

Information concerning the consent items listed below has been forwarded to each Committee Member prior to this meeting for study. Unless some member of the audience or Committee Member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item. - 3 -
5/22/2023
- 4 -
5/22/2023 4:00:00 PM
Any and all of the following agenda items are subject to action by the Modesto City Council.

This Agenda is on file in the City Clerk’s Office, Sixth Floor, 10th Street Place, Posting Board at entry of 10th Street Place, and is available on the City’s Web site at www.modestogov.com.

In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting.

CONSENT
An item may be removed from consent and discussed at the request of an audience member or Committee Member.

Consent

1. Consider approving the recommended budget adjustments to Fiscal Year 2022-23 Annual Operating and Capital Improvement Program Budgets; and forwarding to Council for approval. (Funding Source: Various Funds)
 Motion approving the recommended budget adjustments to Fiscal Year 2022-23 Annual Operating and Capital Improvement Program Budgets; and forwarding to Council for approval.

BUDGET; Steve Christensen, 209-577-5390, [email protected] Consent

2. Consider approving an Agreement with Hinderliter, de Llamas & Associates (HdL), Brea, CA for Cannabis Consulting Services for a total amount not to exceed $784,050 over three years and forwarding to Council for approval. (Funding Source: Cannabis Business Permit Fee and Various Funds)
 Motion approving an Agreement with Hinderliter, de Llamas & Associates, Brea, CA by utilizing the City of Hesperia Agreement for Cannabis Consulting Services for a two year Agreement with one one-year extension option, for an annual estimated amount of $261,350 and a total amount not to exceed $784,050 over three years; and forwarding to Council for approval.

FINANCE DEPARTMENT; Gina Brown, 209-577-5381, [email protected] Consent

3. Consider approving a change in the interest rate index for the Modesto Irrigation District (MID) Financing Authority Domestic Water Project Revenue Bonds, Series - 4 -
5/22/2023
- 5 -
5/22/2023 4:00:00 PM
2007F and the related interest rate swap; and authorizing the payment of costs, and forwarding to Council for approval. (Funding Source: Water Fund)  Motion approving a change in the interest rate index for the Modesto Irrigation District (MID) Financing Authority Domestic Water Project Revenue Bonds, Series 2007F and the related interest rate swap; authorizing the payment of costs, and forwarding to Council for approval.

FINANCE DEPARTMENT; DeAnna Christensen, 209-577-5387,
[email protected]
Consent

4. Consider authorizing the submittal of application(s) to the United States Department of Agriculture, for the Composting and Food Waste Grant Program related to SB1383 and forwarding to Council for approval. (Funding Source: Solid Waste Fund)  Motion authorizing the submittal of application(s) to the United States Department of Agriculture – Composting and Food Waste Grant Program, and authorizing the City Manager, or his designee, to sign Grant Applications and related forms, and forwarding to Council for approval.

PUBLIC WORKS; Rosene Salmo, 209-577-5453, [email protected] Consent

5. Consider approving Prequalified Engineering Consultant Lists for Water, Wastewater, and Storm Drain for various Capital Improvement Projects for a period of three years, with two one-year extensions options and forwarding to Council for approval. (Funding Source: Various Capital Improvement Program Projects)  Motion approving a Prequalified Consultant List for Water, Wastewater, and Storm Drain Engineering Services and forwarding to Council for approval.

UTILITIES; Cristian Ciotau, 209-577-5260, [email protected] Consent

6. Consider approving an Agreement with Envirogen Technologies, for a Dual MinX Regenerable Ion Exchange Treatment System for a total amount not to exceed $1,660,348 and forwarding to Council for approval. (Funding Source: Water Fund)  Motion approving an Agreement with Envirogen Technologies, Inc., Rancho Cucamonga, CA, for a Dual MinX Regenerable Ion Exchange Treatment System in the amount of $1,509,407, plus $150,941 in additional services and materials if needed, for a total amount not to exceed $1,660,348 and forwarding to Council for approval.
 Motion amending the Fiscal Year 2022-23 Capital Improvement Project MultiYear Budget in the amount of $1,785,348 to be transferred into the Project from Water Reserves Fund and forwarding to Council for approval.

UTILITIES; Jeff Daniels, 209-571-5869, [email protected] Consent

7. Consider approving the Second Amendment to the Purchasing Agreement for Lawn Maintenance Services for Water Wells and Tanks to All Season Lawn Landscaping for - 5 -
5/22/2023
- 6 -
5/22/2023 4:00:00 PM
a revised total amount of $402,671 and extending the term of the Agreement to December 31, 2023. (Funding Source: Water Fund)
 Motion approving the Second Amendment to the Purchasing Agreement with All Season Lawn Landscaping, Escalon, CA, for Lawn Maintenance Services for Water Wells and Tanks, increasing the total amount of $357,671 by $45,000 for a new total amount not to exceed $402,671, and extending the term of the Agreement from June 25, 2023 to December 31, 2023; and forwarding to Council for approval.

UTILITIES; Jeff Daniels, 209-342-4585, [email protected]

UNFINISHED BUSINESS

8. Consider approving the Solid Waste Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the Solid Waste Haulers, to become effective July 1, 2023, and rescinding Resolution No. 2022-276 for the July 1, 2022, annual rate adjustment, and forwarding to Council for approval. (Funding Source: Solid Waste Fund, Geer Road Landfill Fund, Green Waste Fund, Compost Facility Improvements Fund)
 Motion approving the Annual Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the Solid Waste Haulers, for an increase of $5.92 per month for residential services with weekly green/organics container collection, an increase of $1.53 per cubic yard for commercial services, and an increase of $23.22 per pull for industrial services, to become effective July 1, 2023, and rescinding Resolution No. 2022-276 for the July 1, 2022 annual rate adjustment, and forwarding to Council for approval.
 Motion approving a Fuel Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the haulers, for an adjustment of $0.29 per month for residential services, and an adjustment of $0.39 per cubic yard for commercial services, to become effective July 1, 2023, and forwarding to Council for approval.

PUBLIC WORKS; Rosene Salmo, 209-577-5453, [email protected]

NEW BUSINESS

9. Consider approving a new Utility Billing Discount Program for customers who enroll in Auto Pay and Paperless Billing for their City of Modesto Utility Bill and forwarding to Council for approval. (Funding Source: Water and Wastewater Funds)  Motion approving a new Utility Billing Discount Program for customers who enroll in Auto Pay and Paperless Billing for their City of Modesto Utility Bill and forwarding to Council for approval.

FINANCE DEPARTMENT; Jeni Martin, 209-571-5892, [email protected] - 6 -
5/22/2023
- 7 -
5/22/2023 4:00:00 PM

ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
- 7 -
5/22/2023

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: May 2, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
FROM: Joseph P. Lopez, City Manager
SUBJECT: Monthly Budget Adjustment Report – May 2023
CONTACT: Steve Christensen, Budget Manager, [email protected] 209-577-5390
DESCRIPTION:

Consider approving the recommended budget adjustments to Fiscal Year 2022-23 Annual Operating and Capital Improvement Program Budgets; and forwarding to Council for approval. (Funding Source: Various Funds)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus on Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

Each month staff presents a variety of budget adjustments requiring the approval of the City Council. These changes are submitted to the Finance Committee for review prior to submission to Council and include an explanation and justification for each transaction.

This report includes a number of adjustments that have been identified by monitoring department budgets. Due to the number of adjustments, they are included as an attachment to this report (Exhibit A). As in past reports, adjustments are segregated by fund and department as appropriate. The adjustments are reflected in a more summarized version and supporting documentation is available for review upon request.

Also included in this report as an attachment (Exhibit B) is a summary of the budget adjustments approved by the City Manager and/or Budget Manager consistent with the recent change in authority levels that was approved by Council with the passing of the Fiscal Year 2019-20 Operating Budget via Resolution No. 2019-305.
#1..
- 8 -
Finance Committee, May 22, 2023
Monthly Budget Adjustment Report – May 2023

DISCUSSION:

The monthly budget adjustments attached as Exhibit A in this item include adjustments across various departments. These adjustments are explained in further detail within Exhibit A.

FISCAL IMPACT:

The fiscal impact of each item is noted in the attachments to this report. The adjustments are for Fiscal Year 2022-23.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving the recommended budget adjustments to Fiscal Year 2022-23 Annual Operating and Capital Improvement Program Budgets; and forwarding to Council for approval.

Approved by:

Joseph P. Lopez, City Manager
Attachments:

1. Exhibit A – Budget Adjustments Requiring Council Approval

2. Exhibit B – Staff Approved Budget Adjustments
#1..
- 9 -
Finance Committee, May 22, 2023
Monthly Budget Adjustment Report

EXHIBIT A
FISCAL YEAR 2022-23

COMMUNITY AND ECONOMIC DEVELOPMENT
 A budget adjustment in the amount of $53,400 is needed to budget the transfer in and transfer out of Community Development Block Grant (CDBG) CARES Act Funding from project 101257 – CDBG CV CARES Act Funding to Fund 1342 for expenses related to the purchase of vehicles for the Community Health and Assistance Team (CHAT) program.

HUMAN RESOURCES
 A budget adjustment in the amount of $586,645 is needed in the Insurance Administration Fund (5310) to establish the budget for the cybersecurity response vendors. During the April 11, 2023 Council meeting, per resolution 2023-188 Council approved the agreements with response vendors up the amount of $586,645. All the invoices will be submitted to the City’s insurance company with the anticipation for reimbursement less the City’s $100,000 deductible. The item however, did not establish the budget and this item will establish the budget for those payments.

PUBLIC WORKS
 The following adjustments are being made from the various city Fleet Replacement subfunds to the Fleet Replacement Fund (5409). This action is being done to reimburse the Fleet Replacement Fund (5409) for vehicle purchases that had been made as required by fund accounting rules in FY 22-23 for the activity through March 2023. Below is a table showing the net effect in each sub-fund as a result of the various adjustments.

Fund Fund Name Net Impact
of
Adjustments
4899 Solid Waste Fleet Replacement Fund $514,131
5410 General Fund Fleet Replacement $70,363
Total Transfer Outs $584,494
5409 Transfer In – Fleet Management Fleet Replacement $584,194 Total Transfer Ins $584,194
A budget adjustment is necessary to establish a transfer in the amount of $514,131 from the Solid Waste Fleet Replacement Fund to Fleet Replacement Fund for purchase of (2)

62.0 3 axle packer trucks.

A budget adjustment is necessary to establish a transfer in the amount of $70,363 from the General Fund Fleet Replacement Fund to Fleet Replacement Fund for purchase of (1) ½ ton responder truck and (1) Mid-Sized SUV.
#1..
- 10 -
Finance Committee, May 22, 2023
Monthly Budget Adjustment Report

UTILITIES
 A budget adjustment in the amount of $492,000 is needed in the Water PCE Mitigation Fund for Project 101498 – PCE McHenry Trust Settlement. The City recently took on fiduciary oversight of funds to aid in the PCE cleanup specifically at McHenry Village and the revenue for these funds needs to be recognized and allocated to the projects discretionary expense budget.
 A budget adjustment in the amount of $9,700,000 is necessary in the Water Fund – CIP Projects Fund (4180) to reduce the discretionary expenditure budget in Project 101003 – SCADA Master Plan and re-allocate to Project 101292 – SCADA System Replacement.

Additionally, the transfer out from the Wastewater Fund (4210) needs to be reduced and transfer in to Project 101003 by $4,850,000 and re-established as a transfer out from Fund 4210 and transfer in to Project 101292. The SCADA Master Plan project is being closed and all expenses related to the SCADA system replacement will be tracked in project 101292.
#1..
- 11 -
Department Director/Budget Manager/City Manager Approved Budget Adjustments EXHIBIT B For FY2022/23
AT #
Approv
ed by
CM,
BM or
DD Fund Fund Name Cost Ctr/Project Name Account Name
Rev/E
xp/TI/
TO
Acco
unt Current Budget
Increase
(Decrease)
Revised
Budget Description
AT-143 BM 0100 General Fund 34130 - PRN Historical
Properties Transfer Out to Fund 3130 TO $ 18,700 (6,737) $ $ 11,963 AT-143 BM 0100 General Fund 34130 - PRN Historical
Properties Transfer Out to Fund 1380 TO $ - 6,737 $ $ 6,737 AT-145 BM 0100 General Fund AUD-City Auditor Budget Only - Salary Adjustment - Decrease Exp. $ (107,245) (7,000) $ $ (114,245)
AT-145 BM 0100 General Fund AUD-City Auditor Budget Only - Benefit Adjustment - Decrease Exp. $ (58,164) (3,000) $ $ (61,164) AT-145 BM 0100 General Fund CCM-City Council of Modesto Business Expenses Exp. $ 23,500 10,000 $ $ 33,500 AT-150 BM 0100 General Fund FIN-Administration Service Credits-Intrafund Rev $ 12,238 6,745 $ $ 18,983 AT-150 BM 0100 General Fund CED-Cannabis Administration Services City Forces-Intrafund Exp. $ 43,171 6,745 $ $ 49,916 AT-156 DD 0100 General Fund 14410 - CED Planning Budget Only - Salary Adjustment - Decrease Exp. $ (76,365) (9,310) $ $ (85,675)
AT-156 DD 0100 General Fund 14410 - CED Planning Budget Only - Benefit Adjustment - Decrease Exp. $ (32,728) (3,990) $ $ (36,718) AT-156 DD 0100 General Fund 14410 - CED Planning Professional Services Exp. $ 109,093 $ 13,300 $ 122,393 Total Changes for Fund 0100 $ (67,800) $ 13,490 $ (54,310) AT-146 BM 1170 HOME Partnership Grants 101493 - 7th Street Village Intergov - Federal Revenue Rev $ - 25,000 $ $ 25,000 AT-146 BM 1170 HOME Partnership Grants 101493 - 7th Street Village Svcs City Forces Exp. $ - 25,000 $ $ 25,000 Total Changes for Fund 1170 $ - $ 50,000 $ 50,000
AT-155 BM 1180 Emergency Shelter Grants
(ESG) 101258 - ESG CARES Act Task 1385 Appr Unit C Exp. $ 462,085 (80,057) $ $ 382,028 AT-155 BM 1180 Emergency Shelter Grants
(ESG) 101258 - ESG CARES Act Task 1387 RRH DTS AD Appr Unit C Exp. $ 47,640 (1,003) $ $ 46,637 AT-155 BM 1180 Emergency Shelter Grants
(ESG) 101258 - ESG CARES Act Task 1387 RRH DTS Appr Unit C Exp. $ 418,939 81,061 $ $ 500,000 Total Changes for Fund 1180 $ 928,664 $ 1 $ 928,665
AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Intergov - State - CA Recycle Exp. $ - 54,417 $ $ 54,417 AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Appr C - Beverage Container Collection Exp. $ - 16,400 $ $ 16,400 AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Appr C - Litter Clean Up Exp. $ - 500 $ $ 500 AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Appr C - Advertising Exp. $ - 8,759 $ $ 8,759 AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Appr C - Recycling Education Exp. $ - 8,758 $ $ 8,758 AT-158 CM 1341 Grants - Operation Grants
Reimbursed CCPP 22/23 Appr C - Svcs City Forces Exp. $ - 20,000 $ $ 20,000 Total Changes for Fund 1341 $ - $ 108,834 $ 108,834
A budget adjustment is necessary to reallocate $6,737, from Project 101346 to Project 101479. The General Fund originally transferred a total of $26,000 to Project 101346 for Mansion Ground Improvements. The project is now completed and being closed. There is $6,736.50 in budget remaining on the project that is available to allocate to project 101479 for additional Historical Property Improvements.

A budget adjustment of $10,000 is necessary to move salary savings from City Auditor to the City Council for underbudgeted conference expenses.

A budget adjustment in the amount of $25,000 is necessary for pre-award costs as approved on Resolution 2023-121 and 2023-122, establishing the budget for 7th Street Village Development. There is no impact to the General Fund.

A budget adjustment of $6,745 is necessary to create the budget for Direct Charge Agreement FIN-ADMIN-08. The Director of Finance completes the review of all annual financial audits, annual permit fees and attends the monthly cannabis updates. The labor cost associated with these service should be billed and reimbursed through the annual permit fee.

A budget adjustment is needed to release unspent funds in the amount of $81,061 and rebudget these funds in a different task in order to meet contractual obligations as approved on Reso 2022-058 and 2022-061. There is no impact to the General Fund and no change to the project budget.

A budget adjustment of $13,300 is necessary to move salary savings to Professional Services to cover underbudgeted consultant expenses.

The City of Modesto received grant funding in the amount of $54,417.00 from the City/County Payment Program through CalRecycle. These funds will be utilized to enhance the current recycling program and expand our efforts through education and outreach, advertising and collection programs. In addition, allocated funds will support a designated staff member.
#1..
- 12 -
Department Director/Budget Manager/City Manager Approved Budget Adjustments EXHIBIT B For FY2022/23
AT #
Approv
ed by
CM,
BM or
DD Fund Fund Name Cost Ctr/Project Name Account Name
Rev/E
xp/TI/
TO
Acco
unt Current Budget
Increase
(Decrease)
Revised
Budget Description
AT-144 BM 1342 Grants - Police 101359 - 2022 OTS STEP Grant Appr Unit A - Salaries & Wages Exp. $ 204,112 (6,778) $ $ 197,334 AT-144 BM 1342 Grants - Police 101359 - 2022 OTS STEP Grant Appr. Unit C - Tools & Field Supplies Exp. $ 46,028 6,778 $ $ 52,806
AT-148 BM 1342 Grants - Police 101422 - BSCC CalVIP Grant Appr. A PRN - Salaries and Wages Exp. $ 158,155 (67,272) $ $ 90,883
AT-148 BM 1342 Grants - Police 101422 - BSCC CalVIP Grant Appr. A PRN Match - Salaries and Wages Exp. $ 147,839 (23,577) $ $ 124,262
AT-148 BM 1342 Grants - Police 101422 - BSCC CalVIP Grant Appr. C PRN - Discretionary Expenses Exp. $ - 67,272 $ $ 67,272
AT-148 BM 1342 Grants - Police 101422 - BSCC CalVIP Grant Appr. C PRN Match - Discretionary Expenses Exp. $ - 23,577 $ $ 23,577
Total Changes for Fund 1342 $ 556,134 $ - $ 556,134
AT-141 BM 1380 Non-Capital Parks Fund (NonGrant)
100880-Fund
Development/Special Projects Miscellaneous Revenue Rev $ - 8,500 $ $ 8,500 AT-141 BM 1380 Non-Capital Parks Fund (NonGrant)
100880-Fund
Development/Special Projects Professional Services Exp. $ 8,000 8,500 $ $ 16,500 AT-143 BM 1380 Non-Capital Parks Fund (NonGrant)
101479 - Historical Property
Improvements
Appr. Unit C - Business
Expenses Exp. $ - 6,736 $ $ 6,736
AT-143 BM 1380 Non-Capital Parks Fund (NonGrant)
101479 - Historical Property
Improvements Transfer In from Fund 0100 TI $ 24,000 6,737 $ $ 30,737 Total Changes for Fund 1380 $ 32,000 $ 30,473 $ 62,473
AT-157 BM 1390 American Rescue Grants
(ARPA)
19206 - MPD-ARPA Outreach
Specialists
Budget Only - Salary Adjustment
- Decrease Exp. $ - (12,000) $ $ (12,000)
AT-157 BM 1390 American Rescue Grants
(ARPA)
19206 - MPD-ARPA Outreach
Specialists
Budget Only - Benefit
Adjustment - Decrease Exp. $ - (8,000) $ $ (8,000)
AT-157 BM 1390 American Rescue Grants
(ARPA)
19206 - MPD-ARPA Outreach
Specialists Vehicles >$5,000 Exp. $ 49,000 20,000 $ $ 69,000 Total Changes for Fund 1390 $ 49,000 $ - $ 49,000
AT-151 BM 1700 Surface Transportation Fund PW - Electrical Division Budget Only - Salary Adjustment - Decrease Exp. $ - (60,000) $ $ (60,000)
AT-151 BM 1700 Surface Transportation Fund PW - Electrical Division Budget Only - Benefit Adjustment - Decrease Exp. $ - (20,000) $ $ (20,000)
AT-151 BM 1700 Surface Transportation Fund PW - Traffic Operations Repair and Maintenance - Real Property Exp. $ 264,731 80,000 $ $ 344,731
Total Changes for Fund 1700 $ 264,731 $ - $ 264,731
AT-143 BM 3130 Parks Fund 101346 - Mansion Ground
Improvements
Appr. Unit C - Business
Expenses Exp. $ 26,000 (6,736) $ $ 19,264
AT-143 BM 3130 Parks Fund 101346 - Mansion Ground
Improvements Transfer In from Fund 0100 TI $ 26,000 (6,737) $ $ 19,263 A budget adjustment is necessary to recognize revenue in the project for Grogan Park. The funds will be used to pay for turf materials for Grogan.

A budget adjustment is necessary to reallocate $6,737, from Project 101346 to Project 101479. The General Fund originally transferred a total of $26,000 to Project 101346 for Mansion Ground Improvements. The project is now completed and being closed. There is $6,736.50 in budget remaining on the project that is available to allocate to project 101479 for additional Historical Property Improvements.

A budget adjustment is necessary to reallocate $6,737, from Project 101346 to Project 101479. The General Fund originally transferred a total of $26,000 to Project 101346 for Mansion Ground Improvements. The project is now completed and being closed. There is $6,736.50 in budget remaining on the project that is available to allocate to project 101479 for additional Historical Property Improvements.

A budget adjustment in the amount of $6,778 is needed to balance the grant monty spent on Project 101359. The project is in the process of being closed and the negative task needs to be cleaned up.

A budget adjustment is necessary to dedicate funds out of the MPD's CalVIP Grant award to host events and programs outlined in their grant application. The overall project budget is not being increased. The budget adjustment is only moving fund from the salaries and wages expenditure accounts to Appr Unit C. Discretionary tasks.

A budget adjustment is necessary to move salary savings in the PW-Electrical Division to the PW-Traffic Operations division to purchase additional material for thermoplastics. There are sufficient salary savings to move down due to vacancies and the overall Surface Transportation fund and Traffic Division budget is not changing.

A budget adjustment is necessary to reallocate funds in the ARPA Outreach Specialist cost center from Appropriation Unit A to C to account for additional expenses related to the CHAT vehicle purchase. There are sufficient salary savings to account for this change. No additional funding is being allocated. #1..
- 13 -
Department Director/Budget Manager/City Manager Approved Budget Adjustments EXHIBIT B For FY2022/23
AT #
Approv
ed by
CM,
BM or
DD Fund Fund Name Cost Ctr/Project Name Account Name
Rev/E
xp/TI/
TO
Acco
unt Current Budget
Increase
(Decrease)
Revised
Budget Description
AT-147 BM 3130 Parks Fund 101376 - Park Partners 2021 Gen. Parks CTGY Exp. $ 55,350 $ (2,000) $ 53,350 AT-147 BM 3130 Parks Fund 101376 - Park Partners 2021 Mancini Bowl CON Exp. $ - $ 2,000 $ 2,000 AT-153 BM 3130 Parks Fund 101376 - Park Partners 2021 Gen. Parks CTGY Exp. $ 53,350 (1,500) $ $ 51,850 AT-153 BM 3130 Parks Fund 101376 - Park Partners 2021 Mancini Bowl CON Exp. $ 2,000 1,500 $ $ 3,500 Total Changes for Fund 3130 $ 162,700 $ (13,473) $ 149,227 AT-142 BM 3140 Capital Grants - CIP Projects 101338- Transit Center Improvements CTGY- Contingency Exp. $ 38,861 (20,000) $ $ 18,861 AT-142 BM 3140 Capital Grants - CIP Projects 101338- Transit Center Improvements
EDA - Eng. Design
Administration Exp. $ 27,187 (20,000) $ $ 7,187
AT-142 BM 3140 Capital Grants - CIP Projects 101338- Transit Center Improvements CA - Construction Admin Exp. $ 2,029 40,000 $ $ 42,029 Total Changes for Fund 3140 $ 68,077 $ - $ 68,077
AT-152 DD 4895 Waste to Energy Dist Fund PW - Waste to Energy Administration Professional Services Exp. $ - 5,224 $ $ 5,224 A budget adjustment of $5224 is necessary to fund an agreement with R3 Consulting for compliance with state law. There are sufficient fund reserves for the increase in expense budget.

Total Changes for Fund 4895 $ - $ 5,224 $ 5,224
A budget adjustment is necessary to reallocate CTGY and EDA task budgets to the CA task for project 101338. The project's overall revenue and expense budget will not be impacted by this adjustment.

A budget adjustment is necessary to reallocate funds from the General Parks Partners contingency task to create a new Mancini Bowl construction task. No A budget adjustment is necessary to reallocate funds from the General Parks Partners contingency task to the Mancini Bowl Seating to pay for the handicap striping.
#1..
- 14 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: April 28, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Hinderliter, de Llamas & Associates (HdL) Agreement CONTACT: Gina Brown, Revenue & Collections Compliance Manager, [email protected], 209-577-5381
DESCRIPTION:

Consider approving an Agreement with Hinderliter, de Llamas & Associates (HdL), Brea, CA for Cannabis Consulting Services for a total amount not to exceed $784,050 over three (3) years and forwarding to Council for approval. (Funding Source: Cannabis Business Permit Fee and Various Funds)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

The passage of Proposition 64, The Adult Use of Marijuana Act, in November 2016 ended the prohibition on adult-use of cannabis in California and created a statewide regulatory structure for adult-use cannabis businesses. Proposition 64 gave local governments control of taxes and fees associated with cannabis businesses operating within their jurisdictions.

In November 2017, the City Council placed before the voters a ballot measure, “Measure T,” allowing the City Council to implement an excise tax on cannabis businesses within the City.

Modesto voters approved Measure T, with 82.5% voting in favor of it.

On January 16, 2018, the Modesto City Council adopted Ordinance No. 3684-C.S. which permitted certain commercial cannabis uses, subject to land use and zoning criteria.

Staff and Council recognized that expert consultant assistance would be necessary to review and evaluate cannabis business applications, and to assist City staff in establishing tax rates and an #2..
- 15 -
Finance Committee, May 22, 2023
Hinderliter, de Llamas & Associates (HdL) Agreement

annual permit fee. Therefore, a Request for Proposal (RFP) was issued. Three proposals were received as a result of the RFP process. HdL was selected due to their experience and expertise related to cannabis business permitting, financial, and regulatory processes.

On July 9, 2018, the City entered into a Professional Services Agreement (PSA) with HdL for consulting services not to exceed $49,750. The PSA scope of work authorized HdL to review, score, and rank cannabis dispensary applications, and to determine the Annual Permit Fee for permitted businesses’ on-going compliance inspections.

On December 4, 2018, by Resolution No. 2018-539, Council approved an increase and extension to the HdL’s Consulting agreement. The agreement was increased by $1,114,500, from $49,750, to $1,164,250 over a two-year period, with three one-year extensions for a total term of five years.

Currently, HdL performs annual compliance inspections and financial audits on the City of Modesto’s permitted cannabis businesses, as well as, cannabis consulting services for the City of Modesto. HdL conducts background checks of cannabis business employees and issues identification badges to cannabis employees. The background checks and badges are billed directly to the cannabis businesses.

DISCUSSION:

On March 10, 2022, the City of Hesperia, California issued an RFP for Cannabis Audit Services and received four proposals. Three City of Hesperia staff members evaluated and ranked the proposals based on qualifications, experience, and approach to the scope of work. Based on the cumulative scores from the panel; HdL was the top-rated consultant.

On July 1, 2022, the City of Hesperia entered into an Agreement with HdL for a three-year (3) Agreement with one (1) one-year extension option for a total of four (4) years. The initial term of the Agreement is effective July 1, 2022, through June 30, 2025.

The term of the current Agreement between the City of Modesto and HdL is due to expire on July 8, 2023. HdL has effectively met the City’s cannabis consulting needs by providing consistent and satisfactory service. To continue receiving the various services currently being provided by HdL, the City will ‘piggy-back’ off the City of Hesperia’s competitive bid process and “access the terms” of the Agreement between the City of Hesperia and HdL. HdL will continue to conduct Annual Cannabis Financial Audits, Annual Compliance Inspections, and provide subject matter expertise consulting at the rates listed on Exhibit B. Optional services such as Non-competitive Application Review Process and Competitive Application Review (Application and Interviews), will be billed at the consultant staff’s hourly rate listed on Exhibit B Page 2 and performed upon mutual agreement by both parties. Background checks and badges for cannabis owners, managers, and employees will continue to be provided by HdL and paid by the cannabis business.

Modesto Municipal Code (MMC) Section 8-3.203 generally requires all purchases, which meet or exceed $50,000 for material, equipment, or contractual services to be formally bid. However, exceptions to the formal bidding process are granted in MMC 8-3.204(d) “where the Purchasing Manager, in her discretion, determines that a process other than the formal bid procedure set forth in Section 8-3.203 will result in procurement for the City at the lowest possible cost commensurate with the desired quality.” In addition, MMC 8-3.202(d) encourages the Purchasing Manager to utilize the ‘piggybacking’ from a competitive bid process with City of Hesperia when the best cost savings interest of the City would be served. Here, this exemption is satisfied #2..
- 16 -
Finance Committee, May 22, 2023
Hinderliter, de Llamas & Associates (HdL) Agreement

because Hinderliter, de Llamas (HdL) Associates, has continually met the City’s cannabis consulting needs.

FISCAL IMPACT:

The charges related to the annual financial audits, the annual inspection to ensure compliance, and other consulting fees directly related to the permitted businesses are reimbursed by the annual permit fee charged and paid by the permitted cannabis businesses. Any other consulting provided by HdL not directly related to the permitted businesses would be funded by the General Fund.

Financial audit reviews are typically completed on businesses with twelve (12) months of tax reporting data. During the first four years of the contract, only six (6) of the fifteen (15) retail and non-retail businesses currently permitted had commenced business and had twelve (12) months of tax reporting data. The City anticipates a majority of the fifteen (15) currently permitted retail and non-retail businesses will be eligible for inspections and financial audits within the next three (3) years, thus increasing the cost of the annual agreement.

In addition, HdL has conducted an internal review of staff time and costs associated with cannabis audits and compliance services. Their findings indicate their initial estimates were understated and must be adjusted to ensure time and cost recovery for the services they provide. These new rates allow HdL to continue to provide high-quality audit and compliance services, including the any necessary consulting such as that provided for the cannabis equity program.

Below is a five (5) year history of the spending activity under the current Agreement.

Fiscal Year
(FY)
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
YTD*
Expenditures $80,275 $35,650 $49,525 $45,300 $48,579
*Through 1/31/22.

Below are the three (3) year estimate costs.

Year 1 Year 2 Year 3 Total
$211,600 $261,350 $311,100 $784,050
RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving an Agreement with Hinderliter, de Llamas & Associates, Brea, CA by utilizing the City of Hesperia Agreement for Cannabis Consulting Services for a two (2) year Agreement with one (1) one-year extension option, for an annual estimated amount of $261,350 and a total amount not to exceed $784,050 over three years; and forwarding to Council for approval.

Approved by:

DeAnna Christensen, Director of Finance
#2..
- 17 -
Finance Committee, May 22, 2023
Hinderliter, de Llamas & Associates (HdL) Agreement

Joseph P. Lopez, City Manager
Attachments:

1. Standard Agreement - HdL

2. City of Hesperia Agreement

3. Exhibit A – Scope of Work

4. Exhibit B – Pricing Schedule
#2..
- 18 -
1 STANDARD CONSULTANT AGREEMENT
THIS AGREEMENT, made and entered into in the City of Modesto, State of California, this day of , 2023, (“Effective Date”) by and between the CITY OF MODESTO, a municipal corporation of the State of California, hereinafter referred to as "City", and Hinderliter De Llamas & Associates, a California corporation, hereinafter referred to as "Consultant".

This Agreement is made with regard to the following recitals:

A. The City has determined that there is a continued need for the administration of cannabis business activities.

B. Consultant represents that it is qualified, willing and able to provide the services to prepare said document(s).

NOW, THEREFORE, in consideration of this agreement, and the mutual promises, covenants, and stipulations hereinafter contained, the parties agree as follows:

1. SCOPE OF SERVICES.

Consultant shall undertake and complete the scope of work as set forth and described in the documents attached hereto and referred to as Exhibit "A" or "Project". Any services in addition to those identified in Exhibit A and B may only be performed upon mutual agreement of both parties. #2..
- 19 -
2 2. TERM OF AGREEMENT.

The term of the Agreement shall be two (2) years with one (1) one-year extension option by mutual agreement, subject to Paragraph 9 below, for a total of up to three (3) years.

Year 1: July 1, 2023 through June 30, 2024
Year 2: July 1, 2024 through June 30, 2025
Year 3: July 1, 2025 through June 30, 2026
Pricing as set forth in Exhibit B shall remain firm for the first two (2) years of the AGREEMENT. Price increases for any subsequent AGREEMENT years following the second year, shall not exceed the percentage change in the Consumer Price Index (CPI) for the City of Modesto West Urban Area in any one AGREEMENT year, and shall be negotiated through the Purchasing Division. Requests for price increases shall be submitted by CONTRACTOR in writing, 90 days prior to the annual anniversary date of the AGREEMENT to be effective for the subsequent year. This Agreement is effective as of the dates listed above in Years 1 through Years 3 and will continue in effect until City's acceptance of and payment for all services authorized by City and performed by Consultant, unless terminated earlier in accordance with the provisions of the termination clause in this Agreement.

City hereby gives Consultant notice to proceed with the preparation of the Project, as of July 1, 2023. Consultant shall diligently proceed with the completition of the Project within the time period set forth in Exhibit "A".

3. COMPENSATION.

Consultant agrees to accept a sum not to exceed $784,050 for performing all services and furnishing all staffing and materials for Modesto in accordance with Exhibit "A" , except that additional services may be compensated as described below.

The Compensation shall be paid pursuant in the manner and at the times set forth below:

City shall pay Consultant on a time and materials basis for Consultant’s actual costs for all work called for in Exhibit “A” to this Agreement. All work to be performed under this Agreement shall be #2..
- 20 -
3 billed at the rates set forth in Exhibit “B” attached hereto. Consultant shall submit monthly invoices to City which include detailed tasks, hours worked, and billable rates for all work completed, and detailed receipts for any reimbursable expenses paid by Consultant and identified in Exhibit “B” or approvd by the City in writing.

City shall pay Consultant for work performed as authorized by the City. All consulting work shall be billed: 1) on the rate set forth in Exhibit “B”, attached hereto, After the two year term, any increase to the rates shown in Exhibit “B” shall be negotiated through the Purchasing Division by the Consultant in writing 90 days in advance of the term date and be approved by City.

Consultant shall submit monthly invoices to City which include a detailed description of completed tasks, hours worked, and billable rates.

4. OBLIGATIONS OF CONSULTANT.

Throughout the term of this Agreement, Consultant shall possess, or secure all licenses, permits, qualifications and approvals legally required to conduct business. Consultant warrants that it has all of the necessary professional capabilities and experience, as well as all tools, instrumentalities, facilities and other resources necessary to provide the City with the services contemplated by this Agreement. Consultant further warrants that it will follow the best current, generally accepted and professional practices to make findings, render opinions, prepare factual presentations, and provide professional advice and recommendations regarding this project.

5. PERFORMANCE BY KEY EMPLOYEE.

Consultant has represented to City that Ajay Kolluri will be the person primarily responsible for the performance of the services referred to in this Agreement. City has entered into this Agreement in reliance on that representation by Consultant.

6. OWNERSHIP OF DOCUMENTS/TITLE TO DATA.

Ownership of Documents
#2..
- 21 -
4 All reports, drawings, designs, graphics, working papers and other incidental work or materials furnished hereunder shall become and remain the property of the City, and may be used by City as it may require without any additional cost to City. No reports shall be used by the Consultant for purposes other than this contract without the express prior written consent of City.

Title to Data
If, as a part of the agreement, Consultant is required to produce data such as, but not limited to, drawings, plans, specifications, calculations, models, flow diagrams, visual aids and other related materials, the originals of all such data generated under this agreement will be delivered to City upon the completion or termination of services under the contract. It is understood and agreed that the documents and other materials, including but not limited to those described above, prepared pursuant to this Agreement are prepared specifically for the City and are not necessarily suitable for any future or other use.

All materials, documents, data or information obtained from the City data files or any City medium furnished to Consultant in the performance of this Agreement will at all times remain the property of the City. Such data or information may not be used or copied for direct or indirect use by Consultant after termination of this Agreement without written consent of the City.

7. NEWS AND INFORMATION RELEASE.

Consultant agrees that it will not issue any news releases in connection with either the award of this Agreement, or any subsequent amendment of or efforts under this Agreement, without first obtaining review and approval of said news releases from the City Manager.

8. CONFLICT OF INTERST.

Consultant warrants that it presently has no interest and shall not acquire any interest, direct or indirect, which would create a “conflict of interest”, as that term is defined in the Political Reform Act (Gov. Code § 81000 et seq), for the Consultant in the peformance of this Agreement. . Consultant warrants that, in performance of this Agreement, Consultant shall not employ any person having any such interest. Consultant understands that, if this Agreement is made in violation of Government Code § 1090 et seq., the entire Agreement is #2..
- 22 -
5 void and Consultant will not be entitled to any compensation for services performed. Consultant agrees to file a Statement of Economic Interests with the City Clerk at the start and end of this contract if so required at the option of City.

9. AMENDMENTS.

This Agreement, including the Exhibits attached hereto, may be amended only by a writing signed by both Parties.City will not be responsible to pay any charges Consultant may incur in performing services not identified in Exhibit ‘A’ unless first authorized by the City in writing

10. INDEPENDENT CONTRACTOR.

All acts of Consultant, its agents, officers, and employees and all others acting on behalf of Consultant relating to the performance of this Agreement, shall be performed as independent contractors and not as agents, officers, or employees of City. Except as City may specify in writing, Consultant has no authority to bind or incur any obligation on behalf of City. Consultant has no authority or responsibility to exercise any rights or power vested in the City. It is understood by both Consultant and City that this Agreement shall not under any circumstances be construed or considered to create an employer-employee relationship or a joint venture. Consultant, its agents, officers and employees are and, at all times during the terms of this Agreement, shall represent and conduct themselves as independent contractors and not as employees of City.

Consultant shall determine and control the method, details and means of performing the work and services to be provided by Consultant under this Agreement. Consultant shall be responsible to City only for the requirements and results specified in this Agreement, and, except as expressly provided in this Agreement, shall not be subjected to City's control with respect to the physical action or activities of the Consultant in fulfillment of this Agreement. Consultant is permitted to provide services to others during the same period service is provided to City under this Agreement. If necessary, Consultant has the responsibility for employing other persons or firms to assist Consultant in fulfilling the terms and obligations under this Agreement.
#2..
- 23 -
6 If in the performance of this Agreement any third persons are employed by Consultant, such persons shall be entirely and exclusively under the direction, supervision, and control of Consultant. All terms of employment including hours, wages, working conditions, discipline, hiring, and discharging or any other term of employment or requirement of law shall be determined by the Consultant.

It is understood and agreed that as an independent contractor and not an employee of City neither the Consultant or Consultant's assigned personnel shall have any entitlement as a City employee, right to act on behalf of the City in any capacity whatsoever as an agent, or to bind the City to any obligation whatsoever. It is further understood and agreed that Consultant must issue W-2 forms or other forms as required by law for income and employment tax purposes for all of Consultant's personnel.

11. ASSIGNMENT.

Neither this Agreement nor any portion thereof shall be subcontracted or assigned, other than noted in Exhibi ‘A’, without the express prior written consent of the City in each and every instance.

12. PATENT/COPYRIGHT MATERIALS.

Unless otherwise expressly provided in the contract, Consultant shall be solely responsible for obtaining the right to use any patented or copyrighted materials in the performance of this Agreement. Consultant shall furnish a warranty of such right to use to City at the request of City.

13. NOTICES.

Notice required by this Agreement shall be given in writing and shall be deemed given and effective upon delivery provided that such are delivered in accordance with the provisions of this Section.

Notices shall be delivered either by: (a) personal delivery; (b) overnight courier service which obtains confirmation of delivery; or (c) certified pail, return receipt requested, if delviery is confirmed by a return reciept; or (d) by electronic transmission subject to reasonable proof that the notice was both transmitted and received. Each such notice shall be sent to the parties at the address respectively set forth below or to such other address as a party may designate by written notice given in accordance with the provisions of this Section:
#2..
- 24 -
7 FOR CONSULTANT: Name: Hinderliter, de Llamas and Associates Address: 120 S State College Blvd, Suite #200, Brea, CA 92821 Attention: Andrew Nickerson
Phone: (714) 879-5000
FOR CITY: Name: City of Modesto
Address: P.O. Box 642
Modesto, CA 95353
Attention: Dianne Love
Phone: (209) 571-5164

14. INSURANCE REQUIREMENTS.

The Consultant shall provide at its own expense and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to the City as may be required by the Risk Manager of the City. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be given to the Risk Manager of the City by certified mail, return receipt requested, for all of the following stated insurance policies.

In the event the certificates of insurance required hereunder do not provide for notice of cancellation to the certificate holder and/or additional insureds, the Consultant shall provide, and shall require its subcontractors to provide, as an express condition precedent to payment hereunder, an endorsement from their insurers providing that the additional insureds identified herein shall be provided 30 days notice of the cancellation on the policies of insurance required hereunder (10 days notice if the policies are cancelled for nonpayment of premium). In addition, the named insured on all such policies shall provide to the additional insureds identified herein any notices of cancellation of said insurance policies within 5 business days of receipt of such notice. The Consultant shall, as a further express condition precedent to payment for work performed, affirm under penalty of perjury that the required insurance on the project remains in place and said insurance has not been cancelled.
#2..
- 25 -
8 (a) Worker's Compensation - in compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $1,000,000. (b) General Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. This insurance shall indicate on the certificate of insurance the following coverages and indicate the policy aggregate limit applying to: premises and operations; broad form contractual; independent consultants and subcontractors; products and completed operations as applicable.
(c) Automobile Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. This insurance shall cover any automobile for bodily injury and property damage.
(d) Professional Liability insurance with a minimum limit of $1,000,000 per claim and policy aggregate. If coverage is on a claims made basis it shall be maintained for at least three (3) years following completion of the work.

If at any time any of said policies shall be unsatisfactory to the City, as to form or substance, or if a company issuing such policy shall be unsatisfactory to the City, the Consultant shall promptly obtain a new policy, submit the same to the Risk Manager for approval and submit a certificate thereof as hereinabove provided. Upon failure of the Consultant to furnish, deliver or maintain such insurance and certificates as above provided, this Agreement, at the election of the City, may be forthwith declared suspended or terminated. Failure of the Consultant to obtain and/or maintain any required insurance shall not relieve the Consultant from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the Consultant concerning indemnification. The City, its agents, officers, employees, and volunteers shall be named as an additional insured on all insurance policies required herein, except Workers' Compensation and Professional Liability. The Workers' Compensation insurer #2..
- 26 -
9 shall agree to waive all rights of subrogation against the City, its agents, officers, employees, and volunteers for losses arising from work performed by Consultant for the City. The Consultant's insurance policy(ies) shall include a provision that the coverage is primary as respects the City; shall include no special limitations to coverage provided to additional insured; and, shall be placed with insurer(s) with acceptable Best's rating of A:VII or with approval of the Risk Manager. The Consultant must deliver certificates evidencing existence of the insurance listed above to the City prior to the time the contract is signed.

CONSULTANT shall provide CITY with separate endorsements evidencing proof of the CITY’s additional insured status as to both the general liability and automobile liability insurance policies. In addition, CONSULTANT shall provide CITY with a Workers Compensation subrogation waiver by way of a separate endorsement. All endorsements referenced above must include the applicable policy number.

For any claims related to this project, the CONSULTANT’S insurance coverage shall be primary insurance as respects the Entity, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the Entity, its officers, officials, employees, or volunteers shall be excess of the CONSULTANT’S insurance and shall not contribute with it.

15. TERMINATION OF AGREEMENT.

Termination for Default
In the event either party fails to perform under this AGREEMENT or breaches any condition contained herein, the other party shall notify in writing the breaching party of the non-performance.

Within 10 days after receipt of notification, the breaching party shall correct any non-performance to the reasonable satisfaction of the non-breaching party, or such other time as may be identified in the notice. Failure to correct any non-performance shall allow the non-breaching party to terminate this AGREEMENT for cause.

Termination for Convenience
#2..
- 27 -
10 City may cancel this Agreement at any time, with or without cause, upon written notification to Consultant. Consultant may cancel this Agreement at any time, with or without cause, upon 90 days written notification to City.

Post-Termination Procedure
Upon receipt of a written notice of termination, the Consultant shall:
a. Cease its work as directed in the notice of termination as of the termination date and see to it that its employees, subconsultants and agents are notified of such termination and act as specified in the notice of termination; b. Terminate all orders and Subcontractors except as necessary to complete any portion of the Work that is not terminated;
c. If directed in writing by the City to do so, assign all right, title and interest in subcontracts and materials in progress to City, in which case the City will have the right at its discretion to settle, or pay any or all claims arising out of the termination of such subconsultants, but in no event shall recovery by any Consultant or subconsultant include lost profits for portions of the Work not completed or undertaken, including materials not delivered; d. Deliver or otherwise make available to the City all data, drawings, specifications, reports, estimates, summaries and such other information and material as may have been accumulated by the Consultant in performing the Work whether completed or in process;
e. Settle outstanding liabilities and claims, subject to the approval of City; f. Complete performance of such part of the Project as has not been terminated; g. Take such other actions as may be necessary, or as may be directed by the City for the protection and preservation of the Project and/or property related to the Project;
#2..
- 28 -
11 h. If City so requests, and at City's cost, Consultant shall provide sufficient oral or written status reports to make City reasonably aware of the status of Consultant's work on the project.
i. The Consultant understands and agrees that City may, in City's sole discretion, refuse to pay Consultant for that portion of Consultant's services which were performed by Consultant on the project prior to the termination date and which remain unacceptable and/or not useful to City as of the termination date.

City will pay Consultant for work actually completed prior to the receipt of the termination notice or otherwise completed in accordance with the notice of termination. The final payment to the Consultant after termination for convenience shall be limited to amounts due and owing under the Agreement at time of termination, including the following:
a. The cost of settling and paying valid claims arising out of the termination of the Work such as subconsultant agreements or contracts for materials; b. The Agreement price allocable to the portion of the Work properly performed or goods supplied to the work site by the Consultant as of the date of termination, as determined in accordance with the notice of termination, reduced by any sums previously paid to the Consultant.

16. PREVAILING WAGES & DIR REGISTRATION.

If the Consultant is performing “public work” as defined in Labor Code Section 1720 et seq. (the “Prevailing Wage Laws”), Consutlant shall pay, and shall require its subconsultants and subcontractors to pay, not less than rhw prevailing rate of per diem wages for work of a similar character in the locality in which the Project is to be performed. The Consultant shall keep accurate payroll records in accordance with Labor Code Section 1776, and shall comply with all other applicable requirements of the Previaliang Wage Laws. Consultantshall require its subconsultants and subcontractors to comply with the Previaling Wage Laws as may be required by law. #2..
- 29 -
12 Consultant shall waive, indemnify, hold harmless, and defend City concerning any liability arising out of Consultant, or its subconsultants or subcontractors, failure to comply with the applicable Previlainge Wage Laws. If the Consultant is preforming “public work” as defined in the Prevailing Wage Laws, Consultant shall be currently registered with the Department of Industrial Relations and qualified to perform public work consistent with Labor Code section 1725.5, except in limited circumstances as set forth in Labor Code section 1771.1. Consultant agrees, in accordance with Section 1771.4 of the California Labor Code, that if the work under this Agreement qualifies as public work, it is subject to compliance monitoring and enforcement by the Department of Industrial Relations.

17. INDEMNITY.

The Consultant shall hold the City, its agents, officers, employees, and volunteers, harmless from and save, defend and indemnify them against any and all claims, losses, liabilities, judgments or damages from every cause, including but not limited to injury to person or property or wrongful death, including reasonable costs and expenses of defense of any judicial or administrative action, arising directly or indirectly out of any negligent or intentional act or omission of Consultant, or its agents, officers, employees, or volunteers relating to or during the performance of its obligations under this Agreement.

Consultant's obligation to defend, indemnify, and hold the City, its agents, officers, and employees harmless under the provisions of this paragraph is not limited to or restricted by any requirement in this Agreement for Consultant to procure and maintain a policy of insurance.

In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City.

18. DISPUTE RESOLUTION.
#2..
- 30 -
13 Venue for all claims, controversies, or disputes arising out of, or relating to the formation of this Agreement, or the breach, termination execution, enforcement, interpretation, or validity of this Agreement, including the determination of the scope or applicability of this contract provision shall be in the Superior Court of Stanislaus County or the United States District Court for the Eastern District of California.

19. ATTORNEYS’ FEES.

If a party to this AGREEMENT brings any action, including an action for declaratory relief, to enforce or interpret the provision of this AGREEMENT, the prevailing party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose.

20. ENTIRE AGREEMENT.

This Agreement and its exhibits contain the entire understanding between Consultant and City. All previous proposals, offers and communications relative to this Agreement, whether oral or written, are hereby superseded except to the extent that they have been incorporated into this Agreement. .

20. PARTIAL INVALIDITY.

If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

21. WAIVER.

The waiver by any party to this Agreement of a breach of any provision hereof shall be in writing and shall not operate or be construed as a waiver of any other or subsequent breach hereof unless specifically stated in writing.

22. AUDIT.

The City's duly authorized representative shall have access at all reasonable times to all reports, contract records, contract documents, contract files, and personnel necessary to audit and verify Consultant's charges to City under this Agreement.
#2..
- 31 -
14 Consultant agrees to retain reports, records, documents, and files related to charges under this Agreement for a period of four (4) years following the date of final payment for Consultant services. City's representative shall have the right to reproduce any of the aforesaid documents.

23. GOVERNING LAW.

This Agreement shall be governed according to the laws of the State of California.

24. HEADINGS NOT CONTROLLING.

Headings used in the Agreement are for reference purposes only and shall not be considered in construing this Agreement.

25. COMPLIANCE WITH LAWS.

Consultant shall insure compliance with all safety and hourly requirements for employees, in accordance with federal, state, and county safety and health regulations and laws. Consultant shall fully comply with all applicable federal, state, and local laws, ordinances, regulations and permits.

26. CITY BUSINESS LICENSE.

Consultant will have a City of Modesto business license. #2..
- 32 -
15 IN WITNESS WHEREOF, the City of Modesto, a municipal corporation, has authorized the execution of this Agreement in duplicate by its City Manager and attestation by its City Clerk under authority of Resolution No. 2023- , adopted by the Council of the City of Modesto on the day of , 2023, and (CONSULTANT) has caused this agreement to be duly executed in duplicate as of the Effective Date.
#2..
- 33 -
I
Professional Services Agreement 2022-23-03 I
City o~ 9Jropeitta
Incorporated. 1988
THIS AGREEMENT is made and entered into this I ST day of July 2022, by and between the City of Hesperia, hereinafter called "City", and Hinderliter, de Llamas & Associates, hereinafter called the "Consultant" .

RECITAL
I. PURPOSE: The purpose of this Agreement is to aJlow City to procure the service of an experienced professional firm to provide annual compliance and financial audits for the
commercial cannabis businesses that operate within the City.

TERMS AND CONDITJO S

2. MJSSION: City hereby retains Consultant in the capacity as Consultant for provision of the work or services described in Exhibit I. Consultant hereby accepts such responsibility as described herein. Consultant warrants that all work and services set forth in Exhibit I will be performed in a competent, professional and satisfactory manner.

3. TERMS: This Agreement shall commence as of the day and year first above shown and shall remain in full force and effect and ongoing until 06/30/2025 unless sooner terminated as provided herein. The Purchasing Supervisor or his or her designee is authorized to extend this Agreement for up to one year and approve line item adjustments to the Agreement's program budget as long as such amendments are upon the same terms and conditions as specified herein.

4. CONSULTANT RESPONSIBlUTIES: Upon the request of
the Purchasing Supervisor, or his or her designee, Consultant shall complete the work program described in Exhibit I.

Consultant shall obtain at its sole cost and expense such licenses, permits and approvals as may be required by law for the performance of the work or services required by this Agreement. Consultant commits the principal personnel listed below to perform the work or services specified herein, and to make all decisions in connection therewith.

Consultant: David McPherson

5. REPLACEMENT OF NAMED PERSONNEL: It has been
determined that the individual(s) named in this Agreement are necessary for the successful performance of this Agreement.

Replacement of these individual(s) shall not be made by Consultant without written consent of City, which shall not be unreasonably withheld. The consent of the City shall be given in writing within ten (10) days of the receipt of written notice from the Consultant of the intent to replace personnel. If City fails to respond to Consultant within ten (10) days of
notification by Consultant, said personnel replacement shall be deemed approved.

6. RELEASE OF NEWS rNl"ORMATION: No news release,
including photographs, public announcements or confinnation of same, of any part of the subject matter of this Agreement or any phase of any program hereunder shall be made without prior written approval of the City's Purchasing Supervisor or his or her designee.

REV. 8--{i-02-14

7. CONFIDENTIALITY OF REPORTS: Consultant shall keep
confidential all reports, information and data received, prepared or assembled pursuant to performance hereunder and that City designates as confidential. Such information shall not be made available to any person, firm, corporation or entity without the prior written consent of City.

8. COMPENSATION: During the term of this Agreement, City shall pay Consultant the fee described in Exhibit Il, the program budget. Said compensation shall be considered full and complete reimbursement for all of the Consultant's costs associated with the services provided hereunder. The
maximum compensation for services, including all
Consultants' costs, under the terms of this Agreement, shall not exceed the total amount of$532,000.

Consultant shall be paid in accordance with City's standard accounts payable system. lnvoices shall be approved by the City's Purchasing Supervisor or his or her designee prior to payment.

9. RIGHT TO AUDIT: City or any of its duly authorized
representatives shall have access to any books, documents, papers and records of Consultant and/or its subcontractors which are pertinent to the specific program hereunder for the purpose of making an audit, an examination, excerpts and transcriptions. All books, records and supporting detail shall be retained for a period of five (5) years after the expiration of the term of this Agreement, or any extension thereof, or for any longer period of time as required by law.

I 0. AUDIT EXCEPTIONS: Consultant agrees that in the event the program established hereunder is subjected to audit exceptions by appropriate audit agencies, it shall be responsible for complying with such exceptions and paying City the full amount of liability resulting from such audit exceptions.

11. CITY SUPPORT: City shall provide Consultant with any plans, publications, reports, statistics, records or other data or information pertinent to the services to be provided hereunder which are reasonably available to City.

12. INDEPENDENT CONTRACTOR: Consultant shall perform
the services as contained herein as an independent contractor and shall not be considered an employee, elected/appointed official or family member of any employee or
elected/appointed official of the City, or under City supervision or control. This Agreement is by and between Consultant and City, and is not intended, and shall not be construed, to create the relationship of agent, servant, employee, partnership, joint venture, or association, between City and Consultant.

Consultant shall not at any time or in any manner represent that it or any of its agents or employees are agents or employees of the City.

Page I of5
#2..
- 34 -
City o! ffiespe;tia

13. CONFLICT OF INTEREST: Consultant represents, warrants and agrees that it does not presently have, nor wi ll it acquire during the term of this Agreement, any interest direct or indirect, by contract, employment or otherwise, or as a partner, joint venture or shareholder ( other than as a shareholder holding a one percent [1 %] or less interest in publicly traded companies) or affiliate with any business or business entity that has entered into any contract, subcontract or arrangement with City. Upon execution of this Agreement and during its term, as appropriate, Consultant shall upon written request, disclose in writing to City, any other contractual or employment
arrangement from which it receives compensation.

Given that the services Consultant performs for City relate to economic development, Consultant agrees not to accept
employment during the term of this Agreement by any other person, business or corporation which employment is likely to directly develop a conflict of interest over a specific business attraction or retention effort. Consultant warrants that it has not paid or given and wilJ not pay or give any third party any money or other consideration for obtaining this Agreement.

14. SUCCESSOR AND ASSIGNMENT: The services as
contained herein are to be rendered by Consultant whose name is as appears first above written and said Consultant shall not (i) contract with any other person or entity to perform the work or services, nor (ii) assign or transfer any interest in this Agreement without the prior written consent of City.

15. INDEMNIFICATION: Consultant agrees to indemni fy,
defend (upon request by City) and save harmless City, its elected and appointed officials, officers, agents and employees from and against any liability, expense, including defense costs and legal fees, and claims fo r damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury or property damage arising from or connected with Consultant's operations, or its services, negligent acts and/or om1ss1ons hereunder, including any workers'
compensation suit, liability or expense, arising from or connected with the services perfom1ed by or on behalf of Consultant by any person pursuant to this Agreement.

16. INSURANCE: Without limiting Consultant's indemnification of City, Consultant shal l procure and maintain at all times during the life of this Agreement, a program of insurance against claims for injuries to persons or damages to property which may arise from or in connection with performance of the work hereunder by Consultant, its officers, representatives, agents or employees. Consultant acknowledges that Section 3700 of the Califo rnia Labor Code requires all employers to be insured against liability for workers' compensation or undertake self-insurance in accordance with the provisions of that Code Section. Consultant shall fo rmally acknowledge this requirement by sign ing the attached Worker's
Compensation Insurance Certificate prior to commencing
work hereunder. Consultant shall not commence work under this Agreement until it has obtained all insurance required hereunder from a company or companies acceptable to the City nor shall Consultant allow any subcontractor to commence work on its subcontract until all insurance required of the REV. 8 --{)-02- 14
Professional Services Agreement 2022-23-031
I ncorporatcd. 1988
subcontractor has been obtained. The Consultant shall take out and maintain all times during the life of this Agreement the fo llowing policies of insurance: For all operations of the Consultant or any subcontractor in performing the work
provided for herein, insurance with the fo llowing minimum limits and coverage.

A) Mininlum Scope of Insurance: Coverage shall be at least as broad as: (i) Insurance Services Office Commercial
General Liability coverage (Occurrence Form CG 0001).
(ii) Insurance Services Office Form Number CA 0001
(Ed. 1/87) covering Automobile Liability, Code I (any
auto). (i ii) Workers' Compensation insurance as required by the State of California and Employer's Liability
Insurance. (iv) Errors and Omissions liability insurance appropriate to Consultant's profession.

B) Minimum Limits on Insurance: Consultant shall
maintain limits of no less than: (i) General Liability: $ 1 million per occurrence for bodily injury, personal injury and property damage including products/completed
operations and any other activities undertaken by
Consultant pursuant to this Agreement. If Commercial
General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the project/location or the general aggregate limit shall be twice the required occurrence
limit. (ii) Automobile Liability: $ 1 million per accident fo r bodily injury, death and property damage insuring
against liability arising out of the use of any vehicle. (iii) Workers' Compensation insurance as required by the State of California (iv) Employer's Liability: $ 1 million per accident fo r bodily injury or disease. (v) Errors and
Omissions Liability: $1,000,000 per claim insuring
against any liability arising out of professional errors and/or omissions ("malpractice"). Modifications to the
above noted minimum insurance limits may only occur
upon concurrence of both parties to this Agreement,
confirmed in writing by Consultant and City's Risk
Management.

C) Deductibles and Self-Insured Retentions: Any deductibles or self-insured retentions must be declared to and
approved by City's Risk Management. At the option of
the City's Risk Management, either: (i) The insurer shal l reduce or elim.inate such deductibles or self-insured
retentions as respects the City, its elected and appointed officials, officers, agents and employees; or (ii) The
Consultant shall provide a financial guarantee satisfactory to the City's Risk Management guaranteeing payment of
losses and related investigations, claim administration and defense expenses.

D) Other Insurance Provisions - Commercial General and
Automobile Liability: The commercial general liability
policies are to contain, or be endorsed to contain, the following provisions: (i) The City, its elected and
appointed officials, officers, agents, employees and
volunteers are to be covered as additional insured with respect to liability arising out of work or operations
performed by or on behalf of the Consultant or
automobiles owned, leased, hired or borrowed by the
Consultant. (I) Each insurance policy required by this
Section 16 shall be endorsed to state that coverage shall

#2..
- 35 -
not be reduced or canceled by either party, except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City's Risk Management. (2) Consultant's insurance shall specify
that: (i) it applies separately to each insured against whom claim is made or suit is brought, except with
respect to the limits of the insurer's liability; (ii)
Coverage shall be primary insurance as respects to the
City, its officers, officials, employees, agents and
volunteers. Any insurance maintained by the City, its
officers, offi cials, employees, agents and volunteers shall be excess of the Consultant's insurance and shall not
contribute with it. (iii) any fai lure to comply with
reporting or other provisions of the required policy,
including breaches of warranty, shall not affect the
coverage required to be provided; (iv) all costs of
adjusting and/or defending any claim against any insured, including court costs and attorney's fees, shall be paid in addition to and shall not deplete any policy limits.

E) Other insurance Provisions - Workers' Compensation and Employer's Liability: The following provisions apply to Consultant's workers' compensation and employer's
liability insurance: (i) Such policies may be subject to deductible or retention in an amount acceptable to the
City's Risk Management. (ii) Consultants shall provide to the City an endorsement that the insurer waives the right of subrogation against the City it officers, officials, employees, agents and volunteers.

F) Acceptability of Insurers: Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A-VIl, unless the City's Risk Management approves, in
writing, insurers with a lower A.M. Best rating.

G) Verification of Coverage: Consultant shall furnish the City's Risk Management with original certificates and
amendatory endorsements e ffecting coverage required by this clause. The Endorsements should be on forms
provided by the City's Risk Management or on other than City's forms provided those endorsements conforn1 to the requirements of the City's Risk Management. All
certificates and endorsements are to be received and
approved by the City's Risk Management before work
commences. The City reserves the right to require
complete, certifi ed copies of all required insurance
policies, including endorsements affecting the coverage required by these specifications at any time.

Notwithstanding the above, if the life of this Agreement shall extend beyond one (I) year, Consultant shall
provide City with certificate, amended endorsements or
complete certified copies of required insurance policies evidencing renewal of the required policies of insurance prior to beginning of any subsequent year of services
pursuant to this Agreement.

H) Failure to Provide or Maintain Insurance: Failure on the part of Consultant to procure or maintain required
insurance shal l constitute a material breach of this
Agreement upon which City may immediately terminate
this Agreement.

REV. 8---<i-02- 14
Professional Services Agreement 2022-23-031
Incorporated. 1988

17. COMPLIANCE WITH LAWS: The parties agree to be bound by applicable federal, state and local laws, regulations and directives as they pertain to the performance of this Agreement.

18. NON-DISCRIMINATION: Consultant shall not discrin1inate, harass, or allow harassment on the basis of race, color, creed, re ligion, sex, marital status, national origin, ancestry, age, physical disability (incl uding HJV and AIDS), mental
disability, medical condition (including pregnancy and
cancer), family care leave, age, gender identification, political affiliation or sexual orientation, in the performance of its services and duties pursuant to this Agreement, and will comply with all laws, rules and regulations relating thereto.

Such nondiscrimination shall include but not be limited to the fo llowing: employment, promotion, demotion, transfers, recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection fo r training, including apprenticeship.

19. SEVERABILITY: In the event that any prov1s1on herein contained is held to be invalid, void or illegal by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect, impair or invalidate any other provision contained herein, unless the invalid provision is so material that its invalidity deprives either party of the basic benefit of their bargain or renders this Agreement meaningless. If any such provision shall be deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law.

20. INTERPRETATION: No provision of this Agreement is to be interpreted for or against either party because that party or that party's legal representative drafted such provision, but this Agreement is to be construed as if it were drafted by both parties hereto.
21 . AGREEME T: This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the retention of Consultant by City and contains all the covenants and agreements between the parties with respect to such retention of Consultant by City for the services described in Exhibit I and contains all the covenants.

22. W AIYER: No delay or omission in the exercise of any right or remedy by a non-defaulting party on any default shall impair such right or remedy or be construed as a waiver. o breach of any provision hereof can be waived unless in writing. Waiver of any one breach of any provision shall not be deemed to be a waiver of any other breach of the same or any other provision hereof.

23. CONTRACT EVALUATION AND REVIEW: The ongoing
assessment and monitoring of this Agreement is the
responsibility of City's Purchasing Supervisor or his or her designee.

#2..
- 36 -
City ~ <at~pe1tia

24. TERMINATION: This Agreement may be tenninated by
either party, with or without cause, by giving written notice at least thirty (30) days prior to the effective tennination date in the written notice. Upon receipt of the termination notice, Consultant shall immediately cease all work or services hereunder except as may be specifically authorized by City's Purchasing Supervisor. In the event of temiination by City, Consultant shall be entitled to compensation for all services rendered prior to the effectiveness of the tennination notice and for such additional services specifically authorized by the Purchasing Supervisor and City shall be entitled to
reimbursement for any compensation paid in excess of the services rendered.

25. TERMINATION OF CONTRACT: NON-AV AILABILlTY
OF FUNDS: If the term of this Agreement extends into fiscal years subsequent to that in which it is approved, such
continuation of the Agreement is subject to the appropriation of funds for such purpose by the City. If funds to effect such continued payment are not appropriated, Consultant agrees to tem1inate any services supplied to the City under this
Agreement. and relieve the City of any further obligation therefore.

26. NOTICE: Notices herein sliall be presented in person or by certified or registered U.S. mail, as follows: To Consultant:
120 S. State College Blvd. Suite 200, Brea, CA 92821 To City:
9700 Seventh Avenue, Hesperia, CA 92345, Attn: Purchasing Supervisor. Nothing in this paragraph shall be construed to prevent the giving ofnotice by personal service.

Professional Services Agreement 2022-23-031
!ncu, 1 nr 11, •. •IXX

27. NON-LIABILITY OF CITY OFFICERS AND
EMPLOYEES: No officer or employee of the City shall be
personally liable to the Consultant, or any successor in interest, in the event of any default or breach by the City or for any amount which may become due to the Consultant or to its successor, or for breach of any obligation of the terms of this Agreement.

28. ATTORNEY'S FEES: If either party to this Agreement is required to initiate or defend or made a party to any action or proceeding in any way connected with this Agreement, the prevailing party in such action or proceeding, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to reasonable attorney's fees, whether or not the matter proceeds to judgment.

29. CORPORATE AUTI-IORITY: The persons executing this
Agreement on behalf of the parties hereto warrant that (i) such party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said party, (iii) by so executing this Agreement, such party is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other Agreement to which said party is bound.

30. ENTIRE AGREEMENT
This Agreement with attachments constitutes the entire
understanding and agreement of the parties.

IN WITNESS WHEREOF, the patties hereto have caused this Agreement to be executed as of the day and year first above shown.
"CONSULTANT''
Hinderliter, de Llamas & Associates
(Check One: Individual Partnership []}Corporation)
(Corporations require two signatures; one from each of the following: A.

Chairman of Board, President, any Vice President; AND B. Secretary,.

Assistant Sec.itlll))l,~ etll'Urer, Assistant Treasurer, or Chief Financial Officer.

President
Richard Park CFO
Print Name Title
REV. 8-6-02-14
"CITY"
ATTEST
By: '.£b' '1"12-Zz_
City Date
-11·U..

Date
7-J2--2z_
Date
•City Manager's signature not required for contracts $25,000 and below

#2..
- 37 -
Professional Services Agreement 2022-23-031
City 0~ rn~peJdll
lnwrr< r<11<d I 'i8X

WORKERS COMPENSATION INSURANCE CERTIFICATE
The Consultant shall execute the following as required by the California Labor Code, Section 1860 and 1861:
"/ am aware of the provisions of Section 3700 of the Labor Code which requires every employer to be insured against liability for worker's compensation or to undertake seff-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this Contract." Hinderliter de Llamas and Associates
Andrew Nickerson, CEO
Title
Signatufu
Richard Park, CFO
Print Name
REV. 8--0--02•14
4'-
Date

#2..
- 38 -
City Ob 9Jespeitta
Exhibit I
Professional Service Agreement 2022-23-031
Incorporated I 988
Scope of Work
The City will contract with the Consultant for the following Financial Audit and Commercial Cannabis Compliance services:

Education, Subject Matter Expertise and Technical Support:

The Consultant will provide the City with ongoing technical support and subject matter expertise as needed throughout the term of the contract to ensure proper oversight and management of all commercial cannabis businesses, including regulatory compliance and financial record-keeping . The Consultant will provide "best practices" for the City and permittees they are following State and local law.

Conduct Compliance Inspections (1 per year):

The Consultant will provide the City with a draft regulatory compliance program that ensures permitted cannabis businesses comply with all applicable State and local laws, as well as providing a list of "best practices" for regulated businesses. The regulatory program will be informed by input gathered through the series of stakeholder meetings. The Consultant will provide ongoing recommendations to the City as needed to identify improvements to the City's regulatory program and/or to address changes in State law.

The Consultant will provide the City with recommendations as needed to improve or rework the permit packet and City processes to comply with changes to regulatory requirements and/or to better align with industry best practices. The Consultant will also provide recommendations as necessary to improve collection of cannabis business tax returns, cash handling procedures, and other financial information.

Conduct Financial Audits (1 per year):

The Consultant will conduct an annual financial audit to verify the accuracy of the revenue reported to the City during the review period and will recommend a tax/fee assessment should the audit reveal any unreported revenue. The Consultant will also use information gathered as a part of compliance inspections to assist with the financial audit.

The Consultant will provide a draft audit report to the commercial cannabis business. The business will be given the appropriate time to respond or appeal the report in accordance with the City ordinance. The Consultant will review any documentation provided by the business to dispute the findings and will adjust the tax/fee assessment as necessary prior to issuing the final report to the City.

The City will inform the Consultant when a cannabis business received permission to operate (i.e., through the issuance of a development agreement, conditional use permit, certificate of occupancy or other indication the business has opened). The Consultant will then work with the City to schedule periodic compliance inspections and financial audits. The Consultant will coordinate with the City as the time for each inspection and audit approaches.

Exhibit I Page 1 of 2
#2..
- 39 -
Exhibit II
Professional Service Agreement 2022-23-031
Incorporated. 1988
Fee Schedule
The Consultant's fees shown here do not include any follow-up re-inspection or review of any supplemental documents provided to address or contest any findings of non-compliance, nor do they include any assistance with the appeal of any enforcement action by the City. Any costs associated with such additional services would be billed at Consultant's hourly rate for the assigned staff person.

Scope of Service Objectives Cost
Education, Subject Matter Expertise and Technical Support 2 hours included at a reduced rate of 50% for each business subject to both audits and compliance inspections in each year of the contract. Any additional hours shall be billed at Consultant's standard houri rate for the assi ned staff erson 1.

Conduct Financial Audits
Estimated Total
Subject Matter Expertise
Compliance Inspections
Financial Audits
TARR o tional
See rate chart
$10,0
$2,50
$400
TBD
$24,000
$120,000
TBD
1 The total number of hours at this discounted rate shall not exceed 24 hours for any one year.

Exhibit II Page 1 of 2
#2..
- 40 -
City Ob ffiespe1tta
Hourly Rates for Consultant's Staff
Exhibit II
Professional Service Agreement 2022-23-031
I ncorporatcd I 988
The prices are based on the hourly rates for Consultant's staff as shown in the chart below. Any additional services requested by the City that are not specifically described in this proposal would be billed at the standard rate for the assigned staff person.

Compliance Director
uty Audit Director $250
$250
$250
$195
$195
$195
$195
$195
$195
eresa Schneider $195
$195
$195
$120
Conflicts of Interest and Non-Disclosure
Consultant will work solely with public agencies and no private-sector clients in the cannabis industry. All cannabis business information will be kept confidential by Consultant and will not be shared internally beyond those Consultant employees who are required to have access for purposes of conducting the work contemplated herein, or for administrative purposes as necessary.

Exhibit Il Page 2 of 2
#2..
- 41 -

1. SCOPE OF WORK
Education, Subject Matter Expertise and Technical Support:

HdL will provide general consulting in the form of technical assistance and subject matter expertise on an as-needed basis throughout the term of the agreement. Such assistance may be used best practices for the City and permittees to ensure proper oversight and compliance with all regulatory and financial reporting requirements. Such hours may also be used to provide education, monitoring of changes to State laws and regulations, participation in conference calls, responding to staff inquires via phone and email, reviewing staff reports to the City Council, assisting with responses to inquiries from the public, or other issues yet to be determined as requested by the City.

HdL shall initially provide 2 hours of such general consulting assistance as a part of this proposal, with additional assistance to be provided on an hourly basis as needed or requested by the City.

Conduct Compliance Inspections
HdL will conduct one (1) on-site compliance inspection annually, as requested by the City, for each permitted cannabis business to determine compliance with State and/or local laws. If HdL identifies any non-compliant activities, we will provide the City with a recommended appropriate action to address the deficiency and to ensure future compliance by the permittee.

The cost for these services includes all of the following:
 Notifying permittee of pending inspection
 On-site inspection to ensure that each business complies with all State and local laws and regulatory protocols for all of the following:
o Inventory management
o Cash handling procedures
o Access control
o Video surveillance
o Product safety
o Alarm system maintenance and safety
o Lock standards
o Packaging and labeling
o Waste management
o Transportation documentation
o Surveillance equipment maintenance
o Occupational badges
o Business records
o Other items as necessary to ensure compliance with laws  Preparation of a draft report detailing the findings of the inspection and providing recommendations for improvement where needed. If the inspection identifies any #2..
- 42 -
violations of law or other non-compliance issues, then HdL will prepare a notice to comply as an included part of the report.
 All travel costs associated with the inspection
 All phone, email and other communications involved in preparing for, scheduling and coordinating the inspections and providing the report.

The cost for this service does not include any follow-up re-inspection or review of any supplemental documents provided to address or contest any findings of non-compliance, nor does it include any assistance with the appeal of any enforcement action by the City. Any costs associated with such additional services would be billed at HdL’s hourly rate.

Conduct Financial Audits
HdL will conduct an annual revenue audit of each cannabis business to verify the accuracy of the revenue reported and remitted to the City during the review period and will recommend a tax assessment should the audit reveal any unreported revenue. As part of the audit process, HdL will conduct a risk-based review of each business using our proprietary Cannabis Analytical Testing System (CATS™). CATS was designed by HdL to address the unique challenges associated with auditing the cannabis industry. CATS allows audit staff to cross-analyze multiple business records to identify reporting variances, discrepancies and outliers to produce the most accurate measure of gross receipts on behalf of the City.

To initiate the process, the City shall provide HdL with a list of all licensed cannabis businesses subject to audit. HdL shall work with the City to determine the appropriate review period for each business and to develop a schedule for conducting all audits. As the time for each audit approaches, HdL will prepare a notification letter informing the licensee of the impending audit and providing a list of all records and documentation the business is required to provide, including remote access to the business’s point-of-sale (POS) system where applicable. HdL recommends that the notification letter be sent by the City to communicate HdL’s authority to conduct the audit and to encourage cooperation by the business.

The full annual audit shall include:
 Review Point-of-Sale (POS) system structure
 Review inventory system (subject to METRC data)
 Analyze and compare POS data with other available data sources, including:
o City cannabis tax returns
o State tax returns
o Federal tax returns
o METRC sales and inventory data
o CDTFA data
o Bank statements
o ATM merchant statements
o Sales receipts
o Other financial documents as available
#2..
- 43 -
 Identify any variances or over/under reporting
 Calculate any taxes or fees due to the City
 Prepare and issue report
Where cannabis cultivation is taxed on a square-footage basis, the audit shall include one annual site inspection to verify compliance with maximum permitted canopy area. Square footage audits may also consider documented findings from inspections by the City, CDFA or other agencies, where available. Where cannabis cultivation is taxed at a percentage tax of gross receipts, the audit shall include the applicable review listed under ‘The Full Annual Audit Shall Include’ section.

A business that holds multiple state cannabis licenses shall be considered a single business for audit purposes, provided that all licenses are held and operated under the same name, ownership, location, and a single tax ID number. Any variation may indicate separate business entities requiring separate audits. Any such determination shall be made on a case-by-case basis in consultation with the City.

HdL will provide a draft audit report to the commercial cannabis business. The business will be given an appropriate opportunity to respond or appeal the report in accordance with the City ordinance. HdL will review any documentation provided by the business to dispute the findings and will adjust the tax/fee assessment as necessary prior to issuing the final report to the City.

The cost for this service assumes a standard 12-month review period. This may be increased up to a maximum of 24 months, in accordance with the statute of limitations for tax audits. This cost also assumes reasonable cooperation from the licensee. Non-cooperation by the licensee may result in additional charges at HdL’s hourly rate, or in termination of the audit and potential enforcement action by the City. Any such action or additional charges would be determined in consultation with the City.

The cost does not include assistance with administrative appeals or enforcement of audit findings, cannabis tax policy questions or guidance, or other services not directly associated with preparing the revenue audit report. Any costs associated with such additional services would be billed at HdL’s hourly rate.

Tax Analytical Remittance Reports (TARR) Summary (Optional) HdL has developed a quarterly revenue monitoring system that provides a risk-based assessment of each cannabis business to identify outliers or possible errors that may warrant further investigation. Our proprietary Tax Analytical Remittance Report (TARR) uses specially designed algorithms to analyze confidential data from each cannabis business and make recommendations to the City to address tax/fee liability deficiencies or other financial compliance issues.

Our TARR process gathers operator data from a variety of sources and compares the revenue and volume of sales to the amounts reported to the City. Our analysis identifies any variances between amounts reported to the City and amounts reported elsewhere and provides a report to the City highlighting any high-risk businesses and making recommendations for performing a full revenue audit where indicated. #2..
- 44 -
HdL shall begin the process by collecting data from the following sources:
 METRC or other inventory track-and-trace program
 Business point-of-sale (POS) systems
 Questionnaire to be completed by each business
 Cannabis Business Tax Returns
 CDTFA1 excise and cultivation tax returns
 Other data sources or reports as requested or required by the City HdL’s TARR system will cross-analyze data from these various sources and identify any internal inconsistencies or errors. Our system also utilizes our proprietary CATSTM software to generate estimates for average wholesale price, projected harvest yield and value, and projected sales for each business for the time period reviewed. Our system identifies any outliers, where data provided by a business falls outside the normal range for similar businesses. Variances of greater than 10% (or as determined in consultation with the City) shall trigger further investigation.

Specific reports to be generated by our TARR program may include any or all of the following:

Sales Reported in METRC vs. Sales Reported to the City
 METRC vs. City Cannabis Business Tax Returns
 Over or Under-Reported Revenues
Projected Sales vs. Sales Reported in METRC
 Projected Sales vs. Actual Sales Reported in METRC
 Variance Between Projected Sales and Actual Sales
Sales Analysis
 Pounds Sold per METRC vs. Pounds Reported on CDTFA Tax Returns  Total Sales vs. Canopy Used (Cultivation)
Wholesale Price Analysis
 Average Sales Price by Operator by Quarter
Harvest Analysis (Cultivation)
 Projected vs. Actual Pounds Harvested
 Projected vs. Actual Pounds Harvested by Operator
 Variance Between Projected and Actual Pounds Harvested  Pounds Harvested per Square Foot by Operator
 Pounds Harvested per Square Foot by License Type
 Pounds Harvested per Harvest Cycle by Operator
 Pounds Harvested per Harvest Cycle by License Type
Canopy Usage Analysis (Cultivation)
 Canopy Used vs. Canopy Allowed per License
 Total Canopy Used vs. Total Pounds Harvested
1 California Department of Tax and Fee Administration
#2..
- 45 -
Destroyed/Waste Product Analysis
 Harvest Destroyed or Waste
Sales Trends
 Quarter Over Quarter Change
 Quarterly Sales by Operator
 Quarterly Sales by License Type
 Total Sales by Operator
HdL can also create additional reports upon request by the City. Reports can also be provided in a non-confidential format utilizing information gathered from cannabis businesses throughout the state, region and City to create regional or statewide comparisons. HdL will continue to modify and develop our TARR program as new data sources become available or to address changes in the cannabis industry. HdL will work with the City to determine the best suite of reports to be provided based on the number and type of cannabis businesses within the City.

Additional Optional Services
Any services in addition to those identified in this exhibit (Exhibit A) or Exhibit B may only be performed upon mutual agreement of both parties.
#2..
- 46 -

2. EXPERIENCE
Company Profile
Founded in 1983, HdL is a consortium of three companies established to maximize local government revenues by providing audit, compliance, economic development, consulting services and software products. Our audit and consulting services include sales, use and transaction taxes, property taxes, transient occupancy taxes, and a Cannabis Management Program. The firm also provides a variety of enterprise software processing tools for business licensing, code enforcement, animal control, building permits and tracking/billing of false alarms.

HdL’s systematic and coordinated approach to revenue management and economic data analysis is currently being utilized by over 600 agencies in six states. The firm currently serves 49 counties, 311 cities and 132 transactions tax districts in California.

HdL’s key staff has extensive experience serving local government and many have previously held positions in city management, finance, planning, economic development or revenue collection. HdL is a Corporate Partner of the League of California Cities and California State Association of Counties and works extensively with the County Auditor’s Association of California, California Society of Municipal Finance Officers (CSMFO) and California Municipal Revenue and Tax Association (CMRTA) on anticipation and planning of programs to strengthen local government revenues.

This close understanding of local government needs coupled with extensive databases and advanced methodology provides for the most relevant, productive and responsive revenue recovery; forecasting; and economic services available.

Our team of professionals has over 80 years of direct experience establishing and implementing cannabis regulatory and taxation programs, including establishing land-use regulations, permit processes, staffing plans, and cost recovery fees; structuring cannabis business tax fees; regulatory compliance; financial audits; and law enforcement training. Our team has conducted over 11,000 cannabis compliance inspections and investigations in California, Colorado and Nevada.

Key Personnel
Ajay Kolluri; Director of Cannabis Services
Ajay Kolluri is the Director of Cannabis Services for HdL. Ajay is responsible for overseeing the cannabis team and the daily operations of HdL’s Cannabis Division.

Ajay previously served as Manager for the Office of Cannabis Oversight (OCO) at City of Long Beach. Working within the City Manager’s Office, Ajay was responsible for the licensing, regulation and enforcement of all commercial cannabis activity in the City, encompassing one of the largest legal cannabis markets in the state. #2..
- 47 -
During his tenure with the OCO, Ajay oversaw the issuance over 200 cannabis business licenses, generating over $10 million in annual revenue for the City. Ajay has experience in all aspects of cannabis oversight, including public health and education, planning and zoning, building inspections, enforcement, fee development, economic analysis and revenue projections.

Prior to overseeing the OCO, Ajay worked in public finance, serving as Budget Analyst for the Department of Financial Management in the City of Long Beach. Ajay holds a Bachelor’s degree in business economics from the University of California, Santa Barbara, and a Master’s degree in public policy from the University of Michigan.

Matt Eaton; Deputy Compliance Director
Matt Eaton is the Deputy Compliance Director at HdL and plays a critical role in implementing the Cannabis Compliance Program for local agencies. Prior to joining the firm, he was a progressive law enforcement professional with 30 years’ experience conducting criminal/regulatory investigations, and corporate/individual background investigations.

While working as a Supervisory Investigator at the Colorado Department of Revenue in the Marijuana Enforcement Division (MED), Matt managed criminal investigators and civilian staff in the Denver Metro and Longmont field offices. During his six-year tenure at the MED, he conducted approximately 10,000 criminal investigations and compliance reviews, including regulatory and financial investigations. He is a subject matter expert on track and trace systems and understands the complexity of reviewing data to ensure businesses are in compliance with state and local regulations. Matt was responsible for planning, developing and implementing report and field inspection protocols for the agency. He also played an instrumental role in recommending changes to current regulations and identifying essential language for new legislation in Colorado. Matt is well known for his ability to maintain working relationships with cannabis industry leaders and external stakeholders in resolving issues.

Matt received his Bachelor of Science Degree from Biola University and maintained Police Officer Service Training (POST) certification for over 30 years in California and Colorado. He has also served as an adjunct instructor teaching law enforcement principle related to criminology, correctional processes, procedural law, interviews, interrogations and criminal evidence at AIMS Community College in Greeley, Colorado.

Mark Lovelace; Senior Policy Advisor
Mark Lovelace has 23 years of broad experience in public policy, community engagement and advocacy and is recognized as a leader in advancing the statewide discussion of medical and recreational cannabis as a legitimate policy issue in California. Mark served on the Humboldt County Board of Supervisors from 2009 through 2016 where he was instrumental in developing a comprehensive approach to regulating cannabis, including a voter-approved tax on commercial cultivation and an innovative track and trace pilot program. Mark established and co-chaired the Cannabis Working Group for the California State Association of Counties (CSAC) and helped draft CSAC’s cannabis legislative platform. #2..
- 48 -
Mark has worked extensively with public agencies and statewide organizations on cannabis issues and has led numerous presentations, workshops and panel discussions. Prior to his time on the Board, he worked for many years as a respected advocate on land use, planning, development, resource management and environmental issues. Mark received his Bachelor of Science degree in Industrial Design from San Jose State University.

David Ross; Senior Compliance Inspector
David Ross is a Certified Fraud Examiner with 7 years of experience conducting gaming and non-gaming audits and investigations of tribal gaming facilities. David’s experience includes conducting forensic accounting investigations into cash larceny, expense reimbursement fraud, check fraud, credit card fraud, payroll fraud, wire fraud, insider trading, construction fraud in addition to litigation support.

David previously worked as Surveillance Officer and Internal Auditor for the Shingle Springs Tribal Gaming Commission, where he was responsible for analyzing financial statements for a facility with revenues exceeding $20 million per month. David also analyzed internal controls and established policies and procedures to ensure compliance with federal, state and local regulations. In addition, David conducted surveillance reviews and investigations into criminal activity including check and credit card fraud, skimming, money laundering, drug activity and other violations.

David holds a Bachelor’s Degree in Business Administration from Vanguard University in Costa Mesa and a Master’s Degree in Finance from California State University San Bernardino. He is a member of the Association of Certified Fraud Examiners.

Michelle Shaw; Compliance Inspector
Michelle conducts onsite inspections, examinations and other actions to monitor compliance with established standards for local licensed cannabis businesses. Prior to joining HdL, she was a Compliance Specialist Officer at a large, multinational bank where she managed, validated and oversaw the effectiveness and accuracy of numerous compliance issues within the consumer retail space. Throughout her eight years of experience at the bank, she performed assessments of affiliate businesses to determine compliance/non-compliance of their processes and procedures pursuant to bank standards and state regulations.

A graduate of Cypress College, Michelle holds a Foundations of Banking Risk certificate from the Global Association of Risk Professionals and a paralegal certificate from the Southern California College of Business and Law.

Teresa Schneider; Compliance Inspector
Teresa Schneider served for 28 years with the Montclair Police Department, including 12 years in the Background Investigations Unit. In this capacity, Teresa was responsible for conducting background investigations of all City business license applicants, as well as all sworn and non-sworn positions within the police and fire departments and of civilians requesting access to police department records.
#2..
- 49 -
Theresa previously served 4 years in the U.S. Army’s nursing program at Fort Campbell, Kentucky. During this time she attended college at the University of Kentucky and Austin Peay State University. After receiving an Honorable Discharge in 1990, Teresa was hired by the Montclair Police Department. During her 28-year career, she worked numerous assignments, including patrol, K9, detective bureau, court liaison, volunteer coordinator, and red-light automated enforcement. Teresa received many awards throughout her career, including Officer of the Year.

Elizabeth Eumurian; Audit Manager
Elizabeth Eumurian is the Audit Manager for HdL. Her primary role is to oversee and review the audits conducted by team members to assure accuracy and consistency. She also conducts financial audits, evaluates cannabis applications and conducts background checks.

As part of the audit program, she will be conducting and preparing analytical information through the CATS™ program to prepare Tax Analytical Remittance Reports (TARR) summaries to evaluate under reporting or anomalies in the remittance of tax payments to local jurisdictions.

Elizabeth previously worked as a senior auditor in the entertainment industry. In this role, she executed testing procedures for targeted audit programs, analyzed findings and prepared audit and compliance reports. She also has experience working for a large financial institution analyzing data for reporting anomalies and performing internal audits. Elizabeth has recently done work for Blythe, California City, Coachella, Cotati, Desert Hot Springs, Long Beach, Mammoth Lakes, Moreno Valley, Perris, San Bernardino, and Vallejo.

Elizabeth earned her Bachelor of Arts degree in History from California State University and holds a certificate in CannaBusiness from Oaksterdam University.

Valerie Carter; Senior Auditor
Valerie Carter works as an Auditor for HdL’s Cannabis Management Team. Valerie has over 5 years of public sector work experience focusing on public policy, auditing and revenue tax implementation. She was a Tax Auditor II for the City of Oakland’s Revenue Management Bureau and an Assistant Management Analyst for the City of Berkeley’s Transportation division. Valerie earned a Bachelor’s Degree in Business Administration from Cal Poly Pomona, with an emphasis on Finance, Real Estate, and Law.

Pam Davis; Auditor
Pam Davis conducts revenue audits of licensed cannabis businesses as a member of HdL’s Cannabis Management Team. Prior to joining HdL, Pam served as the Director for the Richland County (South Carolina) Business Service Center for over 15 years, where she was responsible for auditing businesses to ensure accurate reporting and remittance of a variety of local taxes. Pam also conducted research and rate impact analyses and developed policies, procedures and user manuals to ensure business and governmental compliance. #2..
- 50 -
Pam received a Master’s of Public Administration degree from the University of Georgia and a Bachelor’s Degree in Political Science from Clemson University. She also holds a certificate in CannaBusiness from Oaksterdam University as well as numerous other certifications, Odette Mikhail; Auditor
Odette Mikhail conducts cannabis revenue audits at HdL. Odette previously worked as a senior auditor at public accounting firms. In this role, she executed testing procedures for audit and review engagements, identified accounting issues, reviewed internal controls, and prepared financial reports and statements. Odette earned her Bachelor of Science degree in Accounting and Business Administration from Ain Shams University in Cairo, Egypt.

Tao Lu; Auditor
Tao Lu works as an Auditor for HdL’s Cannabis Management Team. Tao has two and a half years’ experience as an accountant with an emphasis in information technology and food manufacturing industries. He also has public audit work experience at RSM China. Tao was born and raised in China. He earned a Bachelor’s Degree in Accounting and Finance from Syracuse University in New York before relocating to Southern California with his family.

Eric Magana; Auditor
Eric Magana works as an Auditor for HdL’s Cannabis Management Team, conducting revenue audits of licensed cannabis businesses to ensure they are accurately reporting their revenues and remitting the proper amount of fees or taxes. Prior to joining HdL, Eric worked as a Loan Specialist for the U.S. Small Business Administration, where he processed over 5,000 business loans and grant applications. Eric holds a Bachelor’s Degree in Economics and Administrative Studies from University of California at Riverside.

Tonson Chieng; Audit Analyst
Tonson Chieng is an Auditor for HdL’s Cannabis Management Team, conducting revenue audits of licensed cannabis businesses to ensure they are accurately reporting their revenues and remitting the proper amount of fees or taxes. Tonson previously worked as an accountant for Release Point, a business services company in Claremont, California, where he was responsible for generating and reviewing financial reports for in depth analysis along with other accounting and bookkeeping functions. Tonson also brings experience as a staff accountant for the CPA firm of MMB & Co.

Tonson received a Bachelor of Science degree in Accounting from California Polytechnic State University at Pomona in 2020.
#2..
- 51 -
Jennifer Erwin; Audit Analyst
Jennifer Erwin is an Audit Analyst for HdL’s Cannabis Management Team. Jennifer conducts revenue audits of licensed cannabis businesses to ensure they are reporting and remitting the proper amount of cannabis tax revenue to their host jurisdiction. Jennifer previously served as Finance Director for the City of Perris, California and as Assistant Controller for the Morongo Band of Mission Indians. Jennifer brings extensive experience with complex financial analyses, fee studies, cost accounting procedures and collections.

Jennifer is a Certified Public Accountant (CPA #108992) and received her Bachelor of Science degree in Business Administration from the University of Phoenix.

Dante Chegini; Audit Analyst
Dante Chegini conducts revenue audits as a member of HdL’s Cannabis Management Team to ensure that licensed cannabis businesses are reporting and remitting the proper amount of cannabis taxes to their host jurisdiction. Dante previously worked as a financial analyst at a public finance investment banking firm in Los Angeles, where he was lead analyst on over 30 deals with a total value exceeding $1 billion. Dante brings experience with organizing and analyzing large volumes of financial data to determine accurate revenues and debts.

Dante received a Bachelor of Science degree in Business Administration from the University of Southern California, Marshall School of Business in May of 2022 with a focus on financial and managerial accounting and business finance.

Kristi Lervold; Administrative Assistant
Kristi is the Administrative Assistant for HdL’s cannabis team. In this role she supports individual team members, coordinates internal processes, and assists with client requests, contracts, billing reconciliation and invoicing. Kristi’s 18-year career includes ten years as the administrative assistant to HdL’s CFO, handling various operational responsibilities and supporting financial functions, as well as experience in the occupational health industry, facilitating services for federal, state, and local government clients. Kristi holds a Bachelor’s of Science degree in Business Management with a minor in Business Administration. #2..
- 52 -
Exhibit B Page 1 of 2
Exhibit B - City of Modesto Fee Schedule
The Consultant's fees shown here do not include any follow-up re-inspection or review of any supplemental documents provided to address or contest any findings of non-compliance, nor do they include any assistance with the appeal of any enforcement action by the City. Any costs associated with such additional services would be billed at Consultant's hourly rate for the assigned staff person.

Scope of Services Cost
Education, Subject Matter Expertise, and Technical Support - 2 hours included at a reduced rate of 50% for each business subject to both audits and compliance inspections in each year of the contract. Any additional hours shall be billed at Consultant's standard hourly rate for the assigned staff person.1 See Rate Chart Conduct Compliance Inspections $2,000 per inspection
Conduct Financial Audits $10,000 per audit
Tax Analytical Remittance Reports (TARR) Summary (Optional) $2,500 per business per year Travel (if and as needed for meeting attendance) $400 per day Optional Additional Services: Billed at hourly rate*
*For hourly rate, see Hourly Rate for Consultant’s Staff chart below. 1 The total number of hours at this discounted rate shall not exceed 24 hours for any one year. #2..
- 53 -
Exhibit B Page 2 of 2
Hourly Rate for Consultant's Staff
The prices are based on the hourly rates for Consultant's staff as shown in the chart below. Any additional services requested by the City that are not specifically described in this proposal would be billed at the standard rate for the assigned staff person.

Staff Person Title
Hourly
Rate
Matt Eaton Deputy Compliance Director $250
Ajay Kolluri Director $250
Mark Lovelace Senior Policy Advisor $250
Elizabeth Eumurian Audit Manager $195
Odette Mikhail Auditor $195
Tao Lu Auditor $195
Valerie Carter Auditor $195
Pamela Davis Auditor $195
Eric Magana Auditor $195
Dante Chegini Audit Analyst $195
Tonson Chieng Audit Analyst $195
Jennifer Irwin Audit Analyst $195
Michelle Shaw Compliance Inspector $195
Teresa Schneider Compliance Inspector $195
Cheryl Lee Business Application Reviewer $195
Jeff Burris Business Application Reviewer $195
Kristi Lervold Administrative Assistant $120
All Cannabis business information will be kept confidential by Consultant and will not be shared internally beyond those Consultant employees who are required to have access for purposes of conducting the work contemplated herein, or for administrative purposes as necessary.
#2..
- 54 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: May 1, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice Chair
Nick Bavaro, Member

THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Modesto Irrigation District Financing Authority Domestic Water Project Revenue Bonds, Series 2007F Interest Rate Swap Amendment
CONTACT: DeAnna Christensen, Director of Finance, [email protected], 209-577-5387
DESCRIPTION:

Consider approving a change in the interest rate index for the Modesto Irrigation District (MID) Financing Authority Domestic Water Project Revenue Bonds, Series 2007F and the related interest rate swap; and authorizing the payment of costs, and forwarding to Council for approval. (Funding Source: Water Fund)
STRATEGIC PLAN ELEMENT:

These items support the City of Modesto 2020-2025 Strategic Plan Focus of Governance and Service Delivery under goal H: Achieve Financial Sustainability.

BACKGROUND:

On June 26, 2007, the Modesto Irrigation District Financing Authority (the “Authority”) issued its Domestic Water Project Revenue Bonds, Series 2007F (the “Bonds”) in order to assist the Modesto Irrigation District (the “MID”) in financing a Phase Two expansion to its domestic water treatment and delivery system (the “Treatment Facility”). This debt issuance was approved by the City Council on May 8, 2007 through Resolution 2007-275. Pursuant to an Amended and Restated Treatment and Delivery Agreement between the MID and the City, the City agreed to purchase the Treatment Facility output and pay all costs associated with the Treatment Facility, including financing costs.

DISCUSSION:

The Bonds bear interest at a rate equal to 67% of three-month London Interbank Offer Rate (LIBOR) plus a spread of 0.58% for the Bonds maturing on September 1, 2027, and plus 0.63% for the Bonds maturing on September 1, 2037. MID entered into a swap contract with JPMorgan #3..
- 55 -
Finance Committee, May 22, 2023
Modesto Irrigation District Financing Authority Domestic Water Project Revenue Bonds, Series 2007F Interest Rate Swap Amendment

Chase Bank, N.A., the swap counterparty, in order to eliminate the interest rate risk on the Bonds.

The swap contract requires the swap counterparty to pay floating rates of 67% of three-month LIBOR plus the applicable spread (corresponding with the variable rate payable on the Bonds), effectively matching the variable components of the bonds and the swap contract.

The LIBOR index will terminate (for financial instruments generally) after June 30, 2023, making it necessary for the City and MID to take action to address the Series 2007F Bonds, since they are currently tied to the LIBOR index. On March 15, 2022, President Biden signed federal legislation known as the Adjustable Interest Rate (LIBOR) Act 1(the “LIBOR Act”), which addresses agreements that include LIBOR as a benchmark and did not contemplate a replacement benchmark should LIBOR be discontinued. The LIBOR Act provides that for agreements containing no fallback benchmark provisions, the benchmark replacement will be the Secured Overnight Financing Rate (“SOFR”), including a specified spread adjustment. For agreements having no fallback provisions, this new benchmark rate will automatically replace LIBOR upon its cessation. The Series 2007F Bonds are subject to the LIBOR Act as the Bond documents do not include a fallback provision that specifies a replacement index in the event of the discontinuation of the LIBOR index. The Bonds will convert from the LIBOR index to the SOFR index by operation of the federal LIBOR Act. To maintain the perfect matching of the Bonds and related swap contract that has been in effect since the inception of the transaction, the contract will also need to be amended to the identical index.

This amendment was approved by the Modesto Irrigation District board on May 9, 2023. Since these bonds were issued by the Authority, they will be the authorized authority of the amendments to the swap contract. As noted above, the City pays all costs associated with the Treatment Facility, including financing costs. The swap contract costs are financing costs for that purpose.

FISCAL IMPACT:

City staff has worked with MID staff and consultants for the purpose of amending the 2007F swap documentation, to be effective on the first interest rate reset date after June 30, 2023, to incorporate a non-LIBOR interest rate regime for the 2007F Swap Contract, being the three-month term SOFR. The Council is requested to approve the amendments of the MID swap contract and the payment of the associated costs, which are estimated to include the fees of the MID’s bond counsel, municipal advisor, and swap advisor, the fees of the City’s bond counsel, financial advisor to the City. PFM Swap Advisors, the City’s and MID’s swap advisor, has estimated the fixed rate paid under the interest rate on the swap contract will need to be adjusted by approximately 5 basis points to cover the counterparty’s additional hedging costs associated with the change from LIBOR to SOFR. Staff and PFM have estimated the other third-party costs associated with the transaction at approximately $115,000 which will be funded through the Water Fund.

Party Estimated Fee
Orrick (Bond Counsel to MID) $30,000
Norton Rose Fulbright (Bond Counsel to City) 15,000
PFM Financial Advisors (Municipal Advisor to MID) 10,000 PFM Financial Advisors (Municipal Advisor to City) 20,000 PFM Swap Advisors (Swap Advisor) 40,000
Total $115,000
1 https://www.congress.gov/bill/117th-congress/house-bill/4616/text #3..
- 56 -
Finance Committee, May 22, 2023
Modesto Irrigation District Financing Authority Domestic Water Project Revenue Bonds, Series 2007F Interest Rate Swap Amendment

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving a change in the interest rate index for the Modesto Irrigation District (MID) Financing Authority Domestic Water Project Revenue Bonds, Series 2007F and the related interest rate swap; authorizing the payment of costs and forwarding to Council for approval.

Approved by:

DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
#3..
- 57 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: May 1, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Bill Sandhu, Public Works Director
SUBJECT: Authorize Staff to apply for the United States Department of Agriculture – Composting and Food Waste Grant Program
CONTACT: Rosene Salmo, Integrated Waste Program Manager, [email protected], 209-577-5453
DESCRIPTION:

Consider authorizing the submittal of application(s) to the United States Department of Agriculture, for the Composting and Food Waste Grant Program related to SB1383 and forwarding to Council for approval. (Funding Source: Solid Waste Fund) STRATEGIC PLAN ELEMENT:

The recommended action is consistent with the Council’s Strategic Plan Area of Focus (2020- 2025) - Quality of Life: “Engage partners across the community to ensure the safety, resilience, and attractiveness of Modesto;” Goal D: “Provide safe, efficient, and reliable infrastructure through proactive community investment, maintenance, and sustainability efforts.” BACKGROUND:

The U.S. Department of Agriculture (USDA) announced availability of up to $9.5 million for Compost and Food Waste Reduction (CFWR) pilot projects for fiscal year 2023. The cooperative agreements support projects that develop and test strategies for planning and implementing municipal compost plans and food waste reduction plans. Implementation activities will increase access to compost for agricultural producers, improve soil quality and encourage innovative, scalable waste management plans that reduce and divert food waste from landfills1. The matching requirement is 25% of the total awarded grant. Cost sharing may be achieved with contributions of cash, services, materials, equipment, or third-party in-kind contributions.
1 https://www.usda.gov/topics/urban/coop-agreements
#4..
- 58 -
Finance Committee, May 22, 2023
Authorize Staff to apply for the United States Department of Agriculture – Composting and Food Waste Grant Program

DISCUSSION:

Landfilling of organic waste is a major source of methane pollution in California, a greenhouse gas 20 times more potent than carbon dioxide. Organic waste includes edible food, which could be used to feed the 9.2 million Californians who were food insecure in 2020 if diverted from landfill. Under Senate Bill (SB) 1383, the Department of Resources Recycling and Recovery (CalRecycle) requires that local jurisdictions implement an excess food recovery program that connects producers with recovery organizations and monitor the recovered amount.

Staff recommends that the Solid Waste Division apply for the USDA grant to further develop relationships between the City and local food recovery agencies so that they are better prepared for the influx of edible food they will receive under SB 1383. These actions qualify as grant funded activity as they seek to expand existing infrastructure that will combat climate change and build a collaborative that represents the priorities of the City, local food recovery organizations, and local excess food producers.

The following major goals would be included in the grant application:
 Expanding the capacity of local food banks and donation sites for perishable food  Reducing emissions associated with transporting, collecting, and distributing food from producer to donation sites to consumers
 Bridging connections between producers and donation sites to ensure food is collected and recovered
 Providing education and resources for required donors  Expanding methods for large scale distribution of recovered food, through home drop offs or alternative pickup locations
 Increase access to compost for agricultural producers and regional customers FISCAL IMPACT:

Applying for this USDA grant does not commit the City to a financial obligation or to accept the grant, if awarded. This item is administrative in nature and has no fiscal impact.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion authorizing the submittal of application(s) to the United States Department of Agriculture – Composting and Food Waste Grant Program, and authorizing the City Manager, or his designee, to sign Grant Applications and related forms, and forwarding to Council for approval.

Approved by:

Bill Sandhu, Public Works Director
Joseph P. Lopez, City Manager
#4..
- 59 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
April 25, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: William Wong, Director of Utilities
SUBJECT: Prequalified Engineering Consultant Lists - Water, Wastewater and Storm Drain CONTACT: Cristian C. Ciotau, Sr. Civil Engineer, [email protected], 209-577-5260 DESCRIPTION:

Consider approving Prequalified Engineering Consultant Lists for Water, Wastewater, and Storm Drain for various Capital Improvement Projects for a period of three years, with two oneyear extensions options and forwarding to Council for approval. (Funding Source: Various Capital Improvement Program Projects)
STRATEGIC PLAN ELEMENT:

The recommended action supports the 2020-2025 City of Modesto Strategic Plan Initiatives, Goal D: Provide safe, efficient, and reliable infrastructure through proactive community investment, maintenance, and sustainability efforts.

BACKGROUND:

There are a number of Capital Improvement Program (CIP) projects that may require outside consultant services for efficient project delivery. Retaining a prequalified list of consultants allows the Utilities Department to have accelerated access to specific water, wastewater, and storm drain engineering services when necessary. This will eliminate the need to send out repetitive Requests for Qualifications (RFQ) for projects of similar scope, thereby saving staff time and project costs.

The current lists for prequalified water, wastewater and storm drain engineering services expire on April 28, 2023.

DISCUSSION:

In accordance with Modesto Municipal Code 8-3.204(a), “Exceptions to Formal Bidding Requirements,” agreements for professional services are exempt from the formal bidding process and requirements.
#5..
- 60 -
Finance Committee, May 22, 2023
Prequalified Engineering Consultant Lists - Water, Wastewater and Storm Drain

Furthermore, in accordance with Administrative Directive 3.1, Selection Procedures for Professional Consultants Who Provide Architectural & Engineering Services for Capital Projects, which is in compliance with State of California Government Code, Section 4526-4529, staff solicited and formally advertised an RFQ through Planet Bids for water, wastewater and storm drain engineering services.

On March 17, 2023, staff received ten Statements of Qualifications (SOQs) for water engineering services; two of which were considered local firms. After careful review of the SOQs by staff, the following firms were selected as the four most qualified:
 Carollo Engineers
 West Yost Associates, Inc.
 BKF
 Woodard and Curran
Staff received nine SOQs for wastewater and storm drain engineering services, one of which was considered a local firm. After careful review of the SOQs by staff, the following firms were selected as the four most qualified:
 Carollo Engineers
 West Yost Associates, Inc.
 BKF
 Woodard and Curran
These prequalified consultant lists would be used for CIP projects with a total budget of $2 million or more. Generally, the scope of work to be provided by engineering consultants would include preparation of basis of design reports, final design and potentially peer review for projects such as, but not limited to:
 Larger Sewer Trunk Lines
 Wastewater Pump Stations and Lift Stations
 Wastewater Treatment Plant Improvements
 Water Wells, Wellhead Treatment and Water Pump Stations When services are needed for water, wastewater, and storm drain engineering, a Request for Proposals (RFP) with a specific scope of work may be issued to these firms. Following an evaluation process, staff will then select the most qualified firm. An agreement for services will then be presented to Council for approval.

All of the selected firms have proposed the use of various local firms as subconsultants, with participation depending on the scope of the project.

The prequalified consultant lists will be active for three years from the date of Council approval, after which the lists may be extended via two one-year extension options at the written approval of the Director of Utilities. In the event the firms listed are deemed to lack experience or expertise for specific projects, the City retains the right to recruit other consultants for individual projects and not be restricted to only using the prequalified consultant lists. #5..
- 61 -
Finance Committee, May 22, 2023
Prequalified Engineering Consultant Lists - Water, Wastewater and Storm Drain

FISCAL IMPACT:

There are no fiscal impacts associated with the establishment of a prequalified consultant list.

Costs for water, wastewater and storm drain engineering consultants will be determined on a CIP project specific basis once a scope of work and an agreement has been negotiated with the selected firm.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving a Prequalified Consultant List for Water, Wastewater, and Storm Drain Engineering Services and forwarding to Council for approval.

Approved by:

William Wong, Director of Utilities
Joseph P. Lopez, City Manager
#5..
- 62 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: April 24, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: William Wong, Director of Utilities
SUBJECT: Award Agreement with Envirogen for Grayson Wells Treatment System CONTACT: Jeff Daniels, Water Division Manager, [email protected], 209-571-5869 DESCRIPTION:

Consider approving an Agreement with Envirogen Technologies, for a Dual MinX Regenerable Ion Exchange Treatment System for a total amount not to exceed $1,660,348 and forwarding to Council for approval. (Funding Source: Water Fund)
STRATEGIC PLAN ELEMENT:

The recommended action supports the 2020-2025 City of Modesto Strategic Plan Initiatives, Goal D: Provide safe, efficient, and reliable infrastructure through proactive community investment, maintenance, and sustainability efforts.

BACKGROUND:

The Grayson Community Water System has over 277 water service connections serving approximately 875 residents. The City of Modesto provides water service through Well #274 and Well #295 which both have high nitrate levels. In August 2002, the California Department of Public Health issued a Compliance Order directing the City to have a reliable treatment system in place by April 2003. Basin Water, Inc. was awarded a contract to install an ion exchange treatment process to reduce the nitrate levels. Basin Water, Inc. was later purchased by Envirogen Technologies, Inc. (Envirogen) for nitrate treatment services and they have been providing operational support and critical parts for the on-site existing ion exchange equipment for the last eighteen years.

On October 11, 2016, by Resolution 2016-412, Council authorized an Equipment Lease to Purchase Agreement with Envirogen for the equipment used at Well #274 and Well #295.

The two wells within the Grayson Community Water System continue to have high nitrate levels.

The equipment previously leased under the Envirogen Lease and now owned by the City of Modesto reduces nitrate levels by using an ion exchange treatment process. #6..
- 63 -
Finance Committee, May 22, 2023
Award Agreement with Envirogen for Grayson Wells Treatment System

DISCUSSION:

In April 2022, the State’s Division of Drinking Water informed City Staff that the existing nitrate removal system in place since 2003 is at the end of its useful life. The State’s review of the City’s past inspection reports, water quality monitoring data and system performance records, require the City to replace the existing system with a similar approved and tested treatment system. The Envirogen System has already been approved and vetted by the State as a treatment system that removes nitrates.

Due to the existing Envirogen Treatment System nearing the end of its useful life, a replacement is required for Grayson residents to continue having access to water that meets State water quality requirements. The proposed new system is an updated design that provides the same level of treatment at the existing site where the units are located. Additionally, this system utilizes Envirogen’s most current control system that will provide better support for integration and monitoring operations.

Envirogen has been providing technical support, replacement parts, and consumables since the inception of the Grayson Nitrate Treatment Facility to ensure proper and reliable operation.

Envirogen’s ion exchange treatment process is a patented technology and provides a support service team with over twenty years of experience on Envirogen equipment. In addition to service, Envirogen supplies critical spare parts for the equipment that was developed in 2009.

The design has been modified over time such that some parts of the older versions of the treatment equipment are no longer utilized in the current units being installed, thus another reason for replacing the current treatment system.

Keeping the system in place will not only enable the City of Modesto to maintain its current permit with the State, but also ensure compliance with the drinking water quality standards it has previously maintained. Due to the acute nature of nitrate contamination that is known to cause health issues, it is not recommended to utilize a new technology that may or may not be approved by the State. Due to these reasoning’s, Staff requests approving this sole source purchase with Envirogen for a new Dual MinX Regenerable Ion Exchange Treatment System.

Modesto Municipal Code, Section 8-3.203 generally requires all purchases, more than fifty thousand dollars to follow formal bidding procedures. However, MMC Section 8-3.204(b) provides that a purchase may be exempted from the City’s formal bidding requirement where the Purchasing Agency’s requirements can be met solely by a single article or process. Envirogen is the original equipment manufacturer and sole proprietor of the necessary support services to Well #274 and Well #295 with the Grayson Community water system. Therefore, this purchase qualifies for exemption from the formal bidding procedures.

FISCAL IMPACT:

The following capital project account has been created to track the expenses associated with this effort:

Project 101484 – Grayson Nitrate System Replacement
ANTICIPATED PROJECT EXPENDITURES:

Equipment and Consulting Services Agreement –
Envirogen Technologies, Inc.
$1,509,407
Additional Services As Needed - Envirogen (10%) $150,941 Engineering/Administration/Construction Force – City Staff $125,000 Total Project Costs Not To Exceed $1,785,348
#6..
- 64 -
Finance Committee, May 22, 2023
Award Agreement with Envirogen for Grayson Wells Treatment System

A budget adjustment amending the Fiscal Year 2022-23 Multi-Year Program budget in the amount of $1,785,348 will be necessary to fully fund this project. The funding for the project will come from Water Fund reserves.

RECOMMENDED COMMITTEE ACTION:

STAFF RECOMMENDATIONS:

Motion approving an Agreement with Envirogen Technologies, Inc., Rancho Cucamonga, CA, for a Dual MinX Regenerable Ion Exchange Treatment System in the amount of $1,509,407, plus $150,941 in additional services and materials if needed, for a total amount not to exceed $1,660,348 and forwarding to Council for approval.

Motion amending the Fiscal Year 2022-23 Capital Improvement Project Multi-Year Budget in the amount of $1,785,348 to be transferred into the Project from Water Reserves Fund and forwarding to Council for approval.

Approved by:

William Wong, Director of Utilities
Joseph P. Lopez, City Manager
Attachments:

1. Agreement

2. Envirogen Proposal #24304

3. Financial Interest Disclosure

4. Bid Waiver Approval Form

5. Envirogen Sole Source Letter Justification-Modesto
#6..
- 65 -
-1-

STANDARD AGREEMENT

FOR EQUIPMENT AND CONSULTANT SERVICES
THIS AGREEMENT made and entered into in the City of Modesto, State of California, this day of _________________ , 2023, (“Effective Date”) by and between the CITY OF MODESTO, a municipal corporation of the State of California, hereinafter referred to as "City", and Envirogen Technologies, Inc. , a Delaware corporation, hereinafter referred to as "Vendor." For purposes of this Agreement, the capitalized term “Parties” shall be a collective reference to both City and Vendor. The capitalized term “Party” may refer to either City or Vendor interchangeably as appropriate.

This Agreement is made with regard to the following recitals:

A. The City has determined that an Envirogen Dual MinX Treatment System for the Grayson Community, for which the City provides potable water service, should be prepared for the City to purchase, and continue to provide quality water service for the Grayson Community.

B. Vendor represents that it is qualified, willing, and able to provide the services to design, manufacture and supply a packaged ion exchange system with the Dual MinX Treatment System contained in a shipping container.

NOW, THEREFORE, in consideration of this agreement, and the mutual promises, covenants, and stipulations hereinafter contained, the parties agree as follows:

1. SCOPE OF EQUIPMENT AND SERVICES.

Vendor shall undertake and complete the preparation of the scope of work as set forth and described in the documents attached hereto entitled “ENVIROGEN DUAL MinX ION EXCHANGE NITRATE TREATMENT SYSTEM, Envirogen Proposal #24304 Rev #6..
- 66 -
-2-
4” and referred to as Exhibit "A" or "project". The Vendor shall perform the services as described in Exhibit "A" in a manner compatible with the standards of its profession and shall produce a fully complete project that is acceptable to City.

2. TERM OF AGREEMENT.

This Agreement is effective as of the date first written above and will continue in effect until City's acceptance of and payment for all equipment and services authorized by City and performed by Vendor, unless terminated earlier in accordance with the provisions of the termination clause in this Agreement.

Vendor shall undertake and complete the preparation of the scope of work as set forth and described in the documents commonly referred to as “project” attached hereto as Exhibit "A" and made a part hereof. City hereby gives Vendor notice to proceed with the preparation of the project in the manner described in Exhibit "A", as of the Effective Date of this agreement. Vendor shall diligently proceed with the preparation of the project and agrees to complete said preparation within the estimated time period set forth in Exhibit "A".

3. COMPENSATION.

Vendor agrees to accept a sum not to exceed ONE MILLION FIVE HUNDRED NINE THOUSAND FOUR HUNDRED SEVEN AND 00/100 DOLLARS ($1,509,407) (maximum compensation) as full remuneration for providing and performing all equipment and services for Modesto in accordance with Exhibit "A" attached hereto and for performance by Vendor of all of its duties and obligations under this Agreement, except those additional services may be compensated as described below.

The Compensation shall be paid in the manner and at the times set forth in Exhibit “A” attached hereto, upon the submission of an invoice by Vendor to City. #6..
- 67 -
-3-
Additional services may be authorized by the City Manager in an amount up to, but not to exceed ten percent (10%) of the agreed maximum compensation, or ONE HUNDRED FIFTY THOUSAND NINE HUNDRED FORTY-ONE AND 00/100 DOLLARS ($150,941). In the event that additional services are deemed necessary, the Consultant shall provide a written request to the City Manager indicating the reason for additional work, scope and cost of such work. The City Manager shall provide a written response to the request, either approving or denying the additional expenditure. If additional services are requested and approved, they will be billed at the hourly rates set forth in Exhibit “B” and may not exceed the amount requested and approved in writing by the City Manager. In that event, the new total compensation shall not exceed ONE MILLION SIX HUNDRED SIXTY THOUSAND THREE HUNDRED FORTY-EIGHT AND 00/100 DOLLARS ($1,660,348). If additional services in excess of this amount are deemed necessary by City Staff, an amendment to this Agreement will be required and must be approved by the City Council prior to commencing the work, as provided in Paragraph 9 of this agreement.

4. OBLIGATIONS OF VENDOR.

Throughout the term of this Agreement, Vendor shall possess, or secure all licenses, permits, qualifications and approvals legally required to conduct business. Vendor warrants that it has all of the necessary professional capabilities and experience, as well as all tools, instrumentalities, facilities, and other resources necessary to provide the City with the services contemplated by this Agreement.

6. OWNERSHIP OF DOCUMENTS/TITLE TO DATA.

Ownership of Documents
#6..
- 68 -
-4-
All reports, drawings, designs, graphics, working papers and other incidental work or materials furnished hereunder shall become and remain the property of the City, and may be used by City as it may require without any additional cost to City. No reports shall be used by the Vendor for purposes other than this contract without the express prior written consent of City.

Title to Data
If, as a part of the agreement Vendor is required to produce data such as, but not limited to, drawings, plans, specifications, calculations, models, flow diagrams, visual aids and other related materials, the originals of all such data generated under this agreement will be delivered to City upon the completion or termination of services under the contract.

All materials, documents, data, or information obtained from the City data files or any City medium furnished to Vendor in the performance of this Agreement will at all times remain the property of the City. Such data or information may not be used or copied for direct or indirect use by Vendor after termination of this Agreement without written consent of the City.

7. NEWS AND INFORMATION RELEASE.

Vendor agrees that it will not issue any news releases in connection with either the award of this Agreement, or any subsequent amendment of or efforts under this Agreement, without first obtaining review and approval of said news releases from City through the City Manager.

8. INTEREST OF CONTRACTOR.

Vendor warrants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of #6..
- 69 -
-5-
services required to be performed under this Agreement. Vendor warrants that, in performance of this Agreement, Vendor shall not employ any person having any such interest. Vendor agrees to file a Statement of Economic Interests with the City Clerk at the start and end of this contract if so required at the option of City.

9. AMENDMENTS.

Both parties to this Agreement understand that it may become desirable or necessary during the execution of this Agreement, for City or Vendor to modify the scope of services provided for under this Agreement. Any material extension or change in the scope of work shall be discussed with City and the change and cost shall be memorialized in a written amendment to the original contract prior to the performance of the additional work.

Until a change order is so executed, City will not be responsible to pay any charges Vendor may incur in performing such additional services, and Vendor shall not be required to perform any such additional services.

10. INDEPENDENT CONTRACTOR.

All acts of Vendor, its agents, officers, and employees and all others acting on behalf of Vendor relating to the performance of this Agreement, shall be performed as independent contractors and not as agents, officers, or employees of City. Vendor, by virtue of this Agreement, has no authority to bind or incur any obligation on behalf of City. Vendor has no authority or responsibility to exercise any rights or power vested in the City. No agent, officer, or employee of the City is to be considered an employee of Vendor. It is understood by both Vendor and City that this Agreement shall not under any circumstances be construed or considered to create an employer-employee relationship or a joint venture. #6..
- 70 -
-6-
Vendor, its agents, officers, and employees are and, at all times during the terms of this Agreement, shall represent and conduct themselves as independent contractors and not as employees of City.

Vendor shall determine the method, details, and means of performing the work and services to be provided by Vendor under this Agreement. Vendor shall be responsible to City only for the requirements and results specified in this Agreement, and, except as expressly provided in this Agreement, shall not be subjected to City's control with respect to the physical action or activities of the Vendor in fulfillment of this Agreement. Vendor has control over the manner and means of performing the services under this Agreement. Vendor is permitted to provide services to others during the same period service is provided to City under this Agreement. If necessary, Vendor has the responsibility for employing other persons or firms to assist Vendor in fulfilling the terms and obligations under this Agreement.

If in the performance of this Agreement any third persons are employed by Vendor, such persons shall be entirely and exclusively under the direction, supervision, and control of Vendor. All terms of employment including hours, wages, working conditions, discipline, hiring, and discharging or any other term of employment or requirement of law shall be determined by the Vendor.

It is understood and agreed that as an independent contractor and not an employee of City neither the Vendor or Vendor's assigned personnel shall have any entitlement as a City employee, right to act on behalf of the City in any capacity whatsoever as an agent, or to bind the City to any obligation whatsoever.
#6..
- 71 -
-7-
It is further understood and agreed that Vendor must issue W-2 forms or other forms as required by law for income and employment tax purposes for all of Vendor's personnel.

11. ASSIGNMENT.

Neither this Agreement nor any portion thereof shall be subcontracted or assigned without the express prior written consent of the City in each and every instance.

13. NOTICES.

Notice required by this Agreement shall be given in writing and shall be deemed given and effective upon receipt provided that such are delivered in accordance with the provisions of this Section. Notices shall be delivered either by: (a) personal delivery (including delivery by an overnight courier service which obtains confirmation of receipt); or (b) facsimile, provided that such transmission is followed by delivery by an overnight courier service which obtains confirmation of receipt; or (c) postage prepaid, return receipt requested, certified mail; or (d) by electronic transmission subject to reasonable proof that the notice was both transmitted and received. Each such notice shall be sent to the parties at the address respectively set forth below or to such other address as a party may designate by written notice given in accordance with the provisions of this Section:

FOR VENDOR: Name: Envirogen Technologies, Inc.

Address: 2627 Chestnut Ridge Road, Suite 200
Kingwood, TX 77339
Attention: Todd S. Webster, Ph D., P.E.

Phone: (877) 312-1385
Email: [email protected]
FOR CITY: Name: City of Modesto
Address: P.O. Box 642
Modesto, CA 95353
Attention: Jeff Daniels, Water Division Manager
#6..
- 72 -
-8-
Phone: (209) 342-4585
Email: [email protected]

14. INSURANCE REQUIREMENTS.

The Vendor shall provide at its own expense and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to the City as may be required by the Risk Manager of the City. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be given to the Risk Manager of the City by certified mail, return receipt requested, for all of the following stated insurance policies.

In the event the certificates of insurance required hereunder do not provide for notice of cancellation to the certificate holder and/or additional insureds, the Vendor shall provide, as an express condition precedent to payment hereunder, an endorsement from their insurers providing that the additional insureds identified herein shall be provided 30 days notice of the cancellation on the policies of insurance required hereunder (10 days notice if the policies are cancelled for non-payment of premium). In addition, the named insured on all such policies shall provide to the additional insureds identified herein any notices of cancellation of said insurance policies within 5 business days of receipt of such notice. The Vendor shall, as a further express condition precedent to payment for work performed, affirm under penalty of perjury that the required insurance on the project remains in place and said insurance has not been cancelled.
(a) Worker's Compensation - in compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $1,000,000. #6..
- 73 -
-9-
(b) General Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. This insurance shall indicate on the certificate of insurance the following coverages and indicate the policy aggregate limit applying to: premises and operations; broad form contractual; independent consultants and subcontractors; products and completed operations as applicable.
(c) Automobile Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. This insurance shall cover any automobile for bodily injury and property damage.
(d) Professional Liability insurance with a minimum limit of $1,000,000 per claim and policy aggregate. If coverage is on a claims made basis it shall be maintained for at least three (3) years following completion of the work.

If at any time any of said policies shall be unsatisfactory to the City, as to form or substance, or if a company issuing such policy shall be unsatisfactory to the City, the Vendor shall promptly obtain a new policy, submit the same to the Risk Manager for approval and submit a certificate thereof as hereinabove provided. Upon failure of the Vendor to furnish, deliver or maintain such insurance and certificates as above provided, this Agreement, at the election of the City, may be forthwith declared suspended or terminated. Failure of the Vendor to obtain and/or maintain any required insurance shall not relieve the Vendor from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the Vendor concerning indemnification. The City, its agents, #6..
- 74 -
-10-
officers, employees, and volunteers shall be named as an additional insured on all insurance policies required herein, except Workers' Compensation and Professional Liability. The Workers' Compensation insurer shall agree to waive all rights of subrogation against the City, its agents, officers, employees, and volunteers for losses arising from work performed by Vendor for the City. The Vendor's insurance policy(ies) shall include a provision that the coverage is primary as respects the City; shall include no special limitations to coverage provided to additional insured; and, shall be placed with insurer(s) with acceptable Best's rating of A:VII or with approval of the Risk Manager. The Vendor must deliver certificates evidencing existence of the insurance listed above to the City prior to the time the contract is signed.

VENDOR shall provide CITY with separate endorsements evidencing proof of the CITY’s additional insured status as to both the general liability and automobile liability insurance policies. In addition, VENDOR shall provide CITY with a Workers Compensation subrogation waiver by way of a separate endorsement. All endorsements referenced above must include the applicable policy number.

For any claims related to this project, the VENDOR’S insurance coverage shall be primary insurance as respects the Entity, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the Entity, its officers, officials, employees, or volunteers shall be excess of the VENDOR’S insurance and shall not contribute with it.

15. TERMINATION OF AGREEMENT.

Termination by City for Default of Vendor
Should Vendor default in the performance of this Agreement or materially breach any of its provisions, at its option, City may terminate this Agreement by giving written #6..
- 75 -
-11-
notification to Vendor. The termination date shall be the effective date of the notice. For the purposes of this section, material breach of this Agreement shall include, but not be limited to, any of the following: failure to perform required services or duties, willful destruction of City's property by Vendor, dishonesty, or theft.

Termination by City for Convenience
The City may also terminate the Vendor's performance under the Agreement, either in whole or in part, at its own discretion, or when conditions encountered during the Work make it impossible or impracticable to proceed, or when the City is prevented from proceeding with the Agreement by act of God, by law, or by official action of a public authority, or upon a determination by the City that such termination is in the best interest and convenience of the City, or whenever the City is prohibited from completing the Work for any reason. The City shall provide no less than ten (10) calendar days written notice of its intent to terminate the Agreement for convenience and shall endeavor to provide the Vendor with consultation with the City prior to termination.

Post-Termination Procedure
Upon receipt of a written notice of termination pursuant to either of the foregoing paragraphs, the Vendor shall:
a. Cease its work as directed in the notice of termination as of the termination date and see to it that its employees, subconsultants and agents are notified of such termination and act as specified in the notice of termination;
b. Terminate all orders and Subcontractors except as necessary to complete any portion of the Work that is not terminated; c. If directed in writing by the City to do so, assign all right, #6..
- 76 -
-12-
title and interest in subcontracts and materials in progress to City, in which case the City will have the right at its discretion to settle, or pay any or all claims arising out of the termination of such subconsultants, but in no event shall recovery by any Vendor or subconsultant include lost profits for portions of the Work not completed or undertaken, including materials not delivered; d. Deliver or otherwise make available to the City all data, drawings, specifications, reports, estimates, summaries and such other information and material as may have been accumulated by the Vendor in performing the Work whether completed or in process; e. Settle outstanding liabilities and claims, subject to the approval of City;
f. Complete performance of such part of the Work as has not been terminated;
g. Take such other actions as may be necessary, or as may be directed by the City for the protection and preservation of the Work and/or property related to the Work;
h. If City so requests, and at City's cost, Vendor shall provide sufficient oral or written status reports to make City reasonably aware of the status of Vendor's work on the project.

City will pay Vendor an amount based on the percentage of work completed in accordance with the notice of termination. The final payment to the Vendor after #6..
- 77 -
-13-
termination for convenience shall be limited to amounts due and owing under the Agreement at time of termination, including the following:
a. The cost of settling and paying valid claims arising out of the termination of the Work such as subconsultant agreements or contracts for materials;
b. The Agreement price allocable to the portion of the Work properly performed or goods supplied to the work site by the Vendor as of the date of termination, as determined in accordance with the notice of termination, reduced by any sums previously paid to the Vendor.
c. Upon such a termination for convenience, City shall pay Vendor (i) for all Products and services delivered prior to the date of termination, and (ii) any and all Costs incurred by Envirogen prior the date of Termination incurred by Vendor in the engineering, design, production, acquisition, transportation or otherwise for any Product or service as yet undelivered and (iii) all reasonable Costs associated with the demobilization of Vendor following the termination.

Authorization to Terminate Agreement
Termination of the Agreement may be invoked by the City Manager, or his/her designee, subject to the right of the Vendor to appeal the City Manager, or his/her designee’s, decision to the City Council. The Vendor shall appeal by notifying the City Clerk in writing within ten (10) calendar days of receipt of written notification from City of termination #6..
- 78 -
-14-
of the Agreement. In the event that termination of this Agreement is upheld by the City Council, any cessation of payment of delay claims, extended claims, Eichleay claims, or any other claims for delay shall be retroactive to the date of termination selected by the City Manager, or his/her designee.

17. INDEMNITY.
a. Each Party hereby agrees to defend, indemnify and hold the other Party and their respective partners, affiliates and subsidiaries, and their respective directors, officers, partners, members, employees and agents (collectively “Indemnified Parties”), harmless from and against any and all claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, Costs and expenses (including, without limitation, costs of defense, settlement and reasonable attorneys’ fees and expenses) (all of the foregoing herein collectively called “Liabilities”), arising out of (i) the Indemnifying Party’s negligence or willful misconduct; and, (ii) failure of the Indemnifying Party or any of its employees or agents to observe or comply with any of the Indemnifying Party’s duties or obligations under this Agreement, including, without limiting the generality of the foregoing, any failure to observe or comply with any applicable laws, ordinances, codes, orders, rules or regulations; violation or breach of any provision of this Agreement including, but not limited to, any warranty for which a remedy is not specified. The foregoing obligations of indemnity will include, but not be limited to, any and all Liabilities for or relating to (i) injury to or death of any person (including, without limitation, employees or agents of the Parties), (ii) damage to or loss or destruction of any property (including, without limitation, property of the Parties, or their respective employees or agents), and (iii) any spill, release or leak of any hazardous substance or waste or any contamination of, injury or damage to or adverse effect on the environment. The Indemnifying Party shall be liable, however, only for #6..
- 79 -
-15-
that percentage of total Liabilities that corresponds to the indemnifying Party’s percentage of total negligence or fault as compared to that of the indemnified Party. b. Neither Party shall have any liability to the other Party for any indirect, incidental, aggravated, exemplary, punitive, or consequential damages incurred by the other Party, whether brought on an action for breach of contract, breach of warranty, tort, strict liability, or otherwise and irrespective of whether caused or allegedly caused by either Party’s negligence or willful misconduct and none shall be awarded by any tribunal against a Party hereto in favor of a Party hereto; provided, however, that the limitations on liability contained in this Section 17 shall not apply to damages which are part of a third party claim for which a Party is claiming an indemnity obligation under this agreement from the other Party and the Party entitled to indemnity protection under this agreement is seeking an indemnity or other relief against the payment of such damages from the Party required to provide such indemnity or other relief. Anything in the Agreement notwithstanding, any liability of a Party shall not exceed $1,000,000.

18. DISPUTE RESOLUTION.

All claims, controversies, or disputes arising out of, or relating to the formation of this Agreement, or the breach, termination execution, enforcement, interpretation, or validity of this Agreement, including the determination of the scope or applicability of this contract provision shall be determined by binding arbitration in Modesto, California by one arbitrator, except as otherwise specified in this Agreement. The American Arbitration Association shall administer the arbitration under its Arbitration Rules then in effect, subject to the modifications of those rules contained in this paragraph. This agreement to arbitrate shall be specifically enforceable under the prevailing law of any court having jurisdiction, and the award #6..
- 80 -
-16-
rendered by the arbitrator may be entered in any court having jurisdiction. The appropriate venue for any arbitration or court proceeding relating to or arising out of this provision shall be in Stanislaus County, California.

This paragraph is not intended to and does not waive the claim filing requirements found in California Government Code section 900 et seq. In the event that a timely and legally sufficient, arbitrable claim is filed by Vendor with City, and the claim is rejected in whole or in part by City, this paragraph shall result in the conclusive, final, and binding resolution of all the issues presented in the claim by Vendor so long as any issues presented by the claim are arbitrable. Claims rejected by City or by operation of law, shall be submitted by Vendor to arbitration pursuant to the Arbitration Rules of the American Arbitration Association within ninety (90) days after mailing of the written rejection by City to Vendor. Otherwise, the claim or claims shall be deemed waived in their entirety.

The “fast track’ rules of the American Arbitration Association shall apply to any claim or counterclaim less than ONE HUNDRED FIFTY THOUSAND AND 00/100 ($150,000.00) DOLLARS. In arbitration not proceeding under the “fast track” rules, the arbitrator shall have the power to order those depositions be taken and other discovery be made.

Both City and Vendor shall have the right, upon written notice, to take no more than three (3) depositions of the other as a matter of right in an arbitration proceeding under the “fast track” rules.

Whether or not City and Vendor may be engaged in interstate commerce, any controversy or dispute mentioned above shall be determined by, and the parties shall be bound by, the substantive law of the State of California, and not the Federal Arbitration Act at 9 USC Section 1 et seq.
#6..
- 81 -
-17-
The arbitrator may grant any remedy or relief deemed by the arbitrator just and equitable under the circumstances, whether or not such relief could be awarded in a court of law. The arbitrator shall be empowered to award monetary sanctions against a party for failure of cooperation in the arbitration. The arbitrator shall, in written award, allocate all the costs of the arbitration, including the fees of the arbitrator and the reasonable attorney fees of the prevailing party, against the party who did not prevail. The prevailing party shall be the party in whose favor the majority of the central issues in the case are resolved.

Notwithstanding anything in this provision to the contrary, the arbitrator shall have no power to award punitive damages or other damages not measured by the party’s actual damages (excluding litigation costs and fees) against any party. This limitation of the arbitrator’s powers under this Agreement shall not operate as an exclusion of the issue of punitive damages from this Agreement to Arbitrate sufficient to vest jurisdiction in a court with respect to that issue.

The parties hereby waive any rights provided by Title 9.2 of the California Code of Civil Procedure, Section 1296. The arbitrator’s award shall be deemed final, conclusive, and binding to the fullest extent allowed by California law.

19. ENTIRE AGREEMENT.

This Agreement and its exhibits contain the entire understanding between Vendor and City. Additional or new terms contained in this Agreement which vary from Vendor's proposal are controlling and are deemed accepted by Vendor by shipment of any article or other commencement of performance hereunder. All previous proposals, offers and communications relative to this Agreement, whether oral or written, are hereby superseded except to the extent that they have been incorporated into this Agreement. No future waiver of #6..
- 82 -
-18-
or exception to any of the terms, conditions, and provisions of this Agreement shall be considered valid unless specifically agreed to in writing by all the parties.

20. PARTIAL INVALIDITY.

If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

21. WAIVER.

The waiver by any party to this Agreement of a breach of any provision hereof shall be in writing and shall not operate or be construed as a waiver of any other or subsequent breach hereof unless specifically stated in writing.

22. AUDIT.

Consultant agrees to retain reports, records, documents, and files related to charges under this Agreement for a period of four (4) years following the date of final payment for Consultant services. City's representative shall have the right to reproduce any of the aforesaid documents.

23. GOVERNING LAW.

This Agreement shall be governed according to the laws of the State of California.

24. HEADINGS NOT CONTROLLING.

Headings used in the Agreement are for reference purposes only and shall not be considered in construing this Agreement.

25. COMPLIANCE WITH LAWS.
#6..
- 83 -
-19-
Vendor shall insure compliance with all safety and hourly requirements for employees, in accordance with federal, state, and county safety and health regulations and laws. Vendor shall fully comply with all applicable federal, state, and local laws, ordinances, regulations and permits.

26. CITY BUSINESS LICENSE.

Vendor will have a City of Modesto business license.

27. SUPPLEMENTAL PROVISIONS.

The text of Sections 1-7 and 9 Confidential Information of Exhibit A, Appendix A are hereby incorporated by this reference into the agreement. #6..
- 84 -
-20-
IN WITNESS WHEREOF, the City of Modesto, a municipal corporation, has authorized the execution of this Agreement in duplicate by its City Manager and attestation by its City Clerk under authority of Resolution No. 2023- , adopted by the Council of the City of Modesto on the day of _________________ , 2023, and Envirogen Technologies, Inc. has caused this agreement to be duly executed in duplicate as of the Effective Date. #6..
- 85 -
Finlays Extracts and Ingredients, USA, Inc. Resin Adsorption and IPA Stripping and Recovery Equipment Wildfox III
A Lifecycle Performance Company
ENVIROGEN DUAL MinX ION EXCHANGE

NITRATE TREATMENT SYSTEM

PREPARED FOR CITY OF MODESTO

3/7/2023
Envirogen Proposal # 24304 Rev 5
877-312-8950
2627 Chestnut Ridge Rd, Suite 200
Kingwood, TX 77339
www.envirogen.com
#6..
- 86 -
Proposal 24304 City of Modesto
Envirogen Proposal i

PROPRIETARY & CONFIDENTIAL

LICENSING AND CONFIDENTIALITY STATEMENT
ALL INFORMATION CONTAINED IN THIS DOCUMENT IS THE PROPERTY OF ENVIROGEN TECHNOLOGIES, INC. ("ENVIROGEN") AND ITS AFFILIATES. THE DESIGN CONCEPTS AND INFORMATION CONTAINED HEREIN ARE THE PROPERTY OF ENVIROGEN AND ARE SUBMITTED IN CONFIDENCE. THEY ARE NOT TRANSFERABLE AND MUST BE USED ONLY FOR THE USE AND PROJECT FOR WHICH THE DOCUMENT IS EXPRESSLY SUBMITTED. THEY MUST NOT BE

DISCLOSED, REPRODUCED, LOANED, OR USED IN ANY OTHER MANNER WITHOUT THE EXPRESS WRITTEN CONSENT OF ENVIROGEN. ENVIROGEN ASSUMES NO RESPONSIBILITY OR LIABILITY FOR THE USE OF THIS DOCUMENT OR THE

DESIGN CONCEPTS AND INFORMATION CONTAINED HEREIN FOR ANOTHER PROJECT OR IN A MANNER THAT DOES NOT RELATE TO THE ORIGINALLY INTENDED USE OF THIS DOCUMENT. IN NO EVENT SHALL THIS DOCUMENT OR THE

DESIGN CONCEPTS AND INFORMATION CONTAINED HEREIN BE USED IN ANY MANNER DETRIMENTAL TO THE INTERESTS OF ENVIROGEN. THE RIGHTS AND OBLIGATIONS OF ENVIROGEN AND ITS CUSTOMER ARE FURTHER LIMITED IN THE AGREEMENT BETWEEN THEM FOR THIS PROJECT. ALL PATENT AND OTHER RIGHTS ARE RESERVED.

ACCEPTANCE OF THE DELIVERY OF THIS DOCUMENT CONSTITUTES AGREEMENT TO THESE TERMS AND CONDITIONS.

Revisions Log
Revision General Notes:

Proposal
Revision Date Notes/Comments Issued
by
Approved
by
1 7/7/2022 Final Issue TW KS
2 7/28/2022 Revised for SIR-100 Resin TW/MD KS
3 8/11/2022 Revised to Add Container/Resin Removal TW KS 4 1/12/2023 Updated Scope and Pricing TW KS
5 3/6/2023 Updated Scope and Pricing TW KS
#6..
- 87 -
Proposal 24304 City of Modesto
March 7, 2023 Page 1
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

TABLE OF CONTENTS

1.0 PROJECT SUMMARY AND APPROACH ...................................................................................... 2

1.1 INTRODUCTION..................................................................................................................... 2

1.2 PROPOSED APPROACH AND NEEDS...................................................................................... 2

2.0 TECHNICAL OVERVIEW.............................................................................................................. 3

2.1 PACKAGED ION EXCHANGE SYSTEM..................................................................................... 3

3.0 DESIGN, SCOPE AND MANAGEMENT ....................................................................................... 4

3.1 ION EXCHANGE SYSTEM EQUIPMENT................................................................................... 4

3.2 PROJECT ENGINEERING DELIVERABLES................................................................................. 6

3.3 QUALITY ASSURANCE ............................................................................................................ 6

3.4 OPERATING AND MAINTENANCE MANUAL.......................................................................... 6

3.5 EQUIPMENT NOTES & CLARIFICATION ................................................................................. 6

3.6 DISPOSAL OF CONTAINER AND RESIN................................................................................... 8

3.7 FIELD AND TECHNICAL SERVICES .......................................................................................... 8

3.8 CLIENT-FURNISHED ITEMS .................................................................................................... 9

4.0 PRICING................................................................................................................................... 10

4.1 ION EXCHANGE SYSTEM EQUIPMENT................................................................................. 10

4.2 COMMERCIAL CONSIDERATIONS........................................................................................ 10

4.3 ESCALATION CONCERNS & CLAUSE .................................................................................... 12

5.0 SCHEDULE ............................................................................................................................... 13 #6..
- 88 -
Proposal 24304 City of Modesto
March 7, 2023 Page 2
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

1.0 PROJECT SUMMARY AND APPROACH

1.1 INTRODUCTION
Envirogen Technologies, Inc. (Envirogen) has prepared this firm-fixed pricing proposal for the design and supply of a pair of MinX Ion Exchange system for the City of Modesto’s Grayson Wells (City, Wells 274 & 295). This proposal represents a modern-day replacement for the existing pair of Envirogen SimPACK™ Ion Exchange system currently used to treat the Grayson Wells.

1.2 PROPOSED APPROACH AND NEEDS
Limited feed water quality data was provided by City staff on February 1, 2022 for Wells 274 & 295. Currently, the City has two existing SimPACK treatment systems at the site. The systems were originally supplied by Envirogen in the 2004 timeframe and are nearing the end of their useful life.

The proposed new systems involve our current, updated design that provides the same level of treatment as the existing units. Additionally, these systems utilize our most current control system that will provide better support for integration and monitoring operations.

Envirogen has selected the proposed system based on the provided water quality parameters shown in Tables 1a and 1b.

Table 1a – Influent and Target Effluent Flow/Concentrations Per Train Analyte Units Influent Range Effluent Target
Flow Rate gpm 300 300
Nitrate (as N) mg/L ≤16 ≤8
Table 1b - Influent Water Modeling Assumptions1
Analyte Units Influent Range
Sulfate mg/L ≤300
Chloride mg/L ≤343
Bicarbonate (as HCO3) mg/L ≤268
Hardness (as CaCO3) mg/L ≤748
pH SU 7.8-8.0
1 A full-water evaluation with metal (i.e., chromium, arsenic, iron, manganese) and total dissolved solids (TDS) analysis is warranted.
#6..
- 89 -
Proposal 24304 City of Modesto
March 7, 2023 Page 3
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

2.0 TECHNICAL OVERVIEW

2.1 PACKAGED ION EXCHANGE SYSTEM
Envirogen’s MinX ion exchange system allows for continuous on-demand treatment with the use of regenerable ion exchange resins. Our automated system controls the flow of water for treatment, as well as regeneration and rinse cycles for exhausted bed vessels, to maintain a set number of beds for treatment of the target contaminant.

The major components of the system include:
• Pre-filtration
• Ion Exchange (IX) treatment vessels inside an engineered, equipment shelter container • Regeneration system controlled and monitored by a programmable logic controller (PLC) utilizing Envirogen MinX control logic.

The process begins with raw water being sent from the wellfield to the client provided backpressure and flow splitting assembly. Raw water then enters into the container and through a flow meter and modulating flow control valve that will maintain optimum treatment flow. Raw water then flows to the pre-filtration unit where suspended solids greater than 5 microns are removed using standard bag-type filters. The prefiltration unit removes any large amount of Total Suspended Solids (TSS) and eliminates the need to backwash the IX vessels.

After being filtered, the water is then sent to Envirogen’s MinX IX system where the nitrate is removed using proven IX technology. Envirogen uses a multi-bed design operated in a staggered mode process. The staggered bed is Envirogen’s N+1 method which means that while the active beds are providing treatment, one vessel is in standby or being regenerated. This design provides the system treatment redundancy that is required by regulators, while producing a consistent effluent water quality that meets the target water quality requirements. During the treatment process, nitrate levels are monitored using an on-line nitrate analyzer that can measure the systems effluent, and if desired alternate between the effluent and influent.

Treatment occurs as the nitrates in the raw water are exchanged for chlorides on the IX resin.

Once a vessel is exhausted, it is automatically removed from service and a regeneration of that vessel’s resin
bed is controlled by the MinX PLC controller. The
system’s resin beds are regenerated using brine reclaim and concentrated brine (NaCl) in a counter-current
flow process. Once the regeneration process is
complete, the vessel isrinsed using the treated effluent water. The rinse water is partially recovered and used
as make-up water for the brine tank and partially to the brine recovery tank. The remaining rinse water, along
with the brine waste, is sent to waste. All steps in the MinX regeneration process are designed to minimize waste generation. The actual daily volume of waste will be determined based on the final process set points and treatment system utilization. #6..
- 90 -
Proposal 24304 City of Modesto
March 7, 2023 Page 4
Envirogen Technologies Confidential – Trade Secret and Proprietary Information The MinX system is controlled and monitored using a PLC controller accessed via a human machine interface (HMI) panel located inside the system container. The PLC monitors all key performance criteria, including nitrate levels, and provides all system notifications and alarms.

In the event of a process issue or equipment failure, the PLC triggers an alarm, which can trigger a well(s) shutdown, ensuring that water quality is always maintained. The PLC is also capable of being remotely monitored and can be tied into the customer’s SCADA system if desired. This system allows for minimal operator interaction for general operational conditions.

3.0 DESIGN, SCOPE AND MANAGEMENT
Envirogen’s proposed scope of supply is outlined below.

3.1 ION EXCHANGE SYSTEM EQUIPMENT
Envirogen will design, manufacture, and supply a packaged Ion Exchange system with one MinX system in one shipping container. Table 2 below summarizes the major equipment included in Envirogen’s proposed scope of supply.
#6..
- 91 -
Proposal 24304 City of Modesto
March 7, 2023 Page 5
Envirogen Technologies Confidential – Trade Secret and Proprietary Information Table 2 - Major Equipment List
Description of Item Qty Description
(or equal)
Pre-Filter Skid Assembly
Flange Common Inlet/Outlet Manifold, 304 Stainless Steel Ten (10)- #2 bag filter housing, each with
304 Stainless Steel Construction
Swing Bolt Quick Release Covers with Vent port
Isolation and Drain Valves
Epoxy Coated Steel Skid Frame
1 Rosedale or
Equal
MinX Ion Exchange System
40’-0” Modified shipping container as Equipment Shelter Two (2) trains of MinX Ion Exchange Systems Each Consisting of o 4- ø48” X 72” FRP IX vessels
o Motor operated Valve for Flow, Regen and Rinse Control o Internal Piping & Manifolds – Sch80 PVC
o 240 ft3 of Nitrate Selective Resin (SIR 100) (Certified NSF-61) o Main System PLC based Control Panel
 NEMA 4 Wall Mount Enclosure
 10” Color Touch Screen HMI
 Battery UPS for PLC, HMI and Comms
 Ethernet connection for remote communications
Online Nitrate Sensor and Analyzer
Miscellaneous, Instruments and transmitters for process measurement and control.
1 Envirogen
Brine Recovery Tank Assembly
Nominal 1400 gallon
5’ 1” ø x 11’-9” HDXLPE Tank, SG 1.35
Natural Translucent Color
PVC Tank Fittings and Vent
Seismic restraint/Hold assembly
Level Transmitter
2 Envirogen,
Polyprocessing
Replacement Tank for Brine Storage
15 ton Briner Tank
Aprox 6’-0” ø x 12’-0” Side Wall HDPE Tank
Color Black
PVC Tank Fittings and Vent Connection

*Note: This is item shall be an in-kind replacement tank. No other ancillaries such as salt fill tube, dust bag, level sensor, etc. are included.
2 Brinemaker or
Equal
#6..
- 92 -
Proposal 24304 City of Modesto
March 7, 2023 Page 6
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

3.2 PROJECT ENGINEERING DELIVERABLES
The engineering deliverables for the system will include the documents:
• Process Flow Diagrams
• Piping and Instrumentation Diagrams
• Detailed Process Description
• General Arrangement Drawings
• General Process Piping Layouts
• Schematic Wiring Diagrams

3.3 QUALITY ASSURANCE
Envirogen will have oversight of various subcontracted services. Responsibilities will be to ensure the quality of the work and that the required schedules are maintained. The following subcontracted services will be managed:
• Receipt inspection of manufactured of components
• Shop assembly of system
• Equipment inspections (prior to delivery)

3.4 OPERATING AND MAINTENANCE MANUAL
Equipment manuals, as well as data and specifications, will be compiled into an O&M Manual.

One (1) electronic PDF copy of the final O&M Manual will be provided in no later than 120 working days after process startup. The O&M Manual will include the sections:
• Table of Contents
• Operating and Maintenance instructions
• Copies of Equipment Layout Drawings with record comments • Detailed process description
• Copy of the “Bill of Material”
• Copies of component equipment O&M manuals supplied by the manufacturer. • Recommended Operator Log Sheet

3.5 EQUIPMENT NOTES & CLARIFICATION

1. Due to market conditions and global supply chain issues, any noted component manufacture is subject to change based on availability and schedule. Should an alternate component be required, it will be presented to the Buyer before the change.

2. All material in contact with the water shall be food grade or NSF 61 compliant.

3. All commodity items (valves, motor-driven equipment, instruments, equipment skids, etc.) will be manufacturer’s standard or as stated in catalog cuts.

4. All equipment proposed is rated for use in non-hazardous areas.

5. All motors will have Total Enclosed Fan Cooled (TEFC) housing. #6..
- 93 -
Proposal 24304 City of Modesto
March 7, 2023 Page 7
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

6. All items located inside the MinX Equipment Shelter will be piped and wired together for ease of installation at site. Connections to external wiring or piping as well as any penetration into the enclosure, shall be done by installing contractors.

7. The Supplied Uninterruptable Power Supply (UPS) is design to provide power to just the PLC, HMI and network communication. It does not supply power to outputs external instruments or valves.

8. The Pad for the installation of the treatment unit should be flat and level. Shimming of the container may be required to ensure the container frame sits proper and square so doors opening and close properly.

9. Motor selection will be by the equipment manufacturer based on the performance requirements of the equipment. For pumps, motors will be sized for end of curve horsepower rating.

10. PLC, HMI and I/O modules will be Allen Bradley Compact Logix Series. Ethernet communication will be AB TCP/IP protocol.

11. Any radiological contaminants, metals, organics, and oxyanions that are removed by the IX unit and ultimately released into the brine waste are assumed to be disposable into the waste brine tanks and are the responsibility of others.

12. The proposed unit is a modern-day equivalent of the existing SimPACK. Although the physical configuration of the unit is different, the unit will have the same general process and functionality as the existing unit.

13. The proposed system will consist of two independent trains housed inside one equipment enclosure to provide the same redundancy the current system provides.

14. The scope includes only a replacement tank for the briners. Any existing ancillary equipment such as the salt fill tube, dust bag and duct, drain valves, level senor, anchors, or ladders shall be carefully removed for reuse on the new tanks by the installer. The installer is also responsible for any repair or modification, if needed, to mate the ancillaries to the new tank.

15. Replacement tanks are expected to be of the same size and shape as the existing tanks. No new seismic calculation or certification are included this scope.

16. No waste tanks are included in this scope. It is assumed the existing waste tanks are in good condition and can be reused with the new MinX System.

17. No Brine Pumps and Brine Filters are included in this scope. It is assumed the existing brine pump and filters are in good condition and can be reused with the new MinX System. #6..
- 94 -
Proposal 24304 City of Modesto
March 7, 2023 Page 8
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

3.6 DISPOSAL OF CONTAINER AND RESIN
Envirogen will coordinate the removal of the spent resin from the existing vessels for disposal, as well as the existing container and its contents from the site.

Disposal of the resin will consist of removal of the by an Envirogen technician at site. Prior to removal the resin will be tested to confirm it non-hazardous and suitable for disposal. Then, the resin will be removed and placed in dewatering supersacks. The super sacks will be pickedup at the site and moved to the disposal facility.

Disposal of the container will consist of haul away of the container from site and disposal.

Envirogen shall arrange for container for pickup by roll-off service and moved to a facility for disposal.

Clarification for Disposal Services:
• Resin removal is contingent that resin is non-hazardous, and the receiving facility accepts the material. The City must support and allow removal resin must within 10 days of testing. If process is delayed or material is deemed hazardous or unacceptable, a change order will be required.
• All electrical, plumbing, or mechanical connections to the existing container will be disconnected by the City of Modesto.
• The City of Modesto shall position the container to allow removal by roll-truck from site driveway. This shall include lifting or movement of the container on site or removal of fence/gate if required.
• Any permits required for the removal of the container will be the responsibility of the City of Modesto.
• All water inside the unit, used to sluice out resin, can be disposed of on site, to waste tank or drain. No hauling of water is included.

3.7 FIELD AND TECHNICAL SERVICES
This proposal includes the following for Technical Support for assistance during installation, review of installation, and start-up. All services to be provided during normal business hours Monday thru Friday between 7am and 3pm.

Envirogen has included time for One (1) Technician for up to:
• Two (2) trips up to Five (5) days each for a total of up to ten (10) days onsite.

The trips to involve the activities:
• Removal of existing Resin for disposal
• Mechanical installation check‐out
• Supervision of System disinfection (by others)
• Supervision of initial loading of media (by others)
• Start-up support assistance
#6..
- 95 -
Proposal 24304 City of Modesto
March 7, 2023 Page 9
Envirogen Technologies Confidential – Trade Secret and Proprietary Information • Operator training, 1 session 4 hours
Any additional services or time, if requested by the Owner or contractor, shall be invoiced based on Envirogen’s published or prevailing rates. Expenses associated with any additional Envirogen labor including travel, will be invoiced at Cost plus 15%.

3.8 CLIENT-FURNISHED ITEMS

1. Coordination of information that may impact Envirogen’s ability to fulfill its obligations as set forth in in this Proposal and attachments.

2. All required permits including any construction or environmental permits.

3. Access to site for visits and walk-downs, including, if required, any site-specific safety training, orientations, or escorts while on site.

4. Any Demolition, Decommissioning, or Refurbishment work required to ready the site for new equipment, unless specifically noted in this proposal.

5. Unloading of Envirogen-supplied Equipment. This shall include any blocking or cribbing for stored materials at the site before being set.

6. On-site space for storage and equipment staging.

7. Site security fencing, lighting, safety, and fire prevention equipment (eyewash, showers, fire extinguishers, etc.).

8. Appropriate office facilities, space to work and restroom facilities for Envirogen or subcontractors during on-site activities.

9. Design and construct a concrete foundation for the supplied equipment to meet API standards and tolerances.

10. Design, supply, and install all field piping, wiring, pipe supports, stairs, catwalks, containment areas, sumps, and drains for the equipment area.

11. Installation of the Envirogen supplied components or other free issued materials for field assembly. Including loading of media

12. Design, supply, and Installation of interconnecting piping and electrical to complete connections to and from the individual equipment limits.

13. Supply and connection of electrical power feed, single phase 230 volt and single phase 120- volt systems as required.

14. Designated area for equipment installation

15. Supply and addition of Salt to Briner or other chemicals for start-up and post start-up operations.

16. Piping insulation or freeze protection, or personnel protection where required.

17. All required lubricants, including the first fill of all equipment covered in this Proposal.

18. Supply and disposal of clean water for on-site hydro and functional testing.

19. Installation contractor to supply labor for electrical and mechanical punch list items discovered during dry &wet shakedown or performance testing.

20. Connection and integration to Plant SCADA or RTU system.

21. Performance testing equipment rental and any analytical services (onsite or Third Party).

22. Labor, chemical and service to disinfector per local requirements upon checkout of system and prior to loading of media

23. Prepare, submit and obtain necessary permitting of system prior to performance testing. #6..
- 96 -
Proposal 24304 City of Modesto
March 7, 2023 Page 10
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

24. Provide flow-to-waste capability and disposal of water, chemical and other waste produced during start-up, testing and demonstration of the treatment system.

25. Provide all necessary well pump controls for staging, sequencing, blending controls and interface with MinX unit.

26. Provide necessary piping, valves and equipment to limit feed pressure to less than 150 psi and to protect the MinX unit from damage as the result of over-pressurization, surge and water hammer.

27. Provide necessary equipment to maintain a minimum of 35 psi backpressure on the discharge side of the MinX unit.

28. Characterize waste profile of generated brine.

29. Provide influent feed water flow meter to the IX treatment unit.

30. Ongoing service agreement for cellular modem connection with client chosen provider.

31. Flood Abatement measures.

32. Anything not explicitly detailed in our offer.

4.0 PRICING

4.1 ION EXCHANGE SYSTEM EQUIPMENT
The pricing for the Scope of Work and Equipment provided in Section 3.0 is:

Dual MinX Ion Exchange System and Removal of Existing Resin/Container.... $1,509,407.00

4.2 COMMERCIAL CONSIDERATIONS
• This proposal is valid for 30 days from date of proposal. • Any associated sales taxes, fees, permits, etc., shall be the responsibility of the client. • Payment Milestones provided as shown in Table 3.
• Payments are NET 30 from the date of invoice issuance. • Shipping is Delivered-at-Place (DAP) Modesto, CA.
• Envirogen Standard Terms and Conditions (ETIGC #2121118, Appendix A) must be part of any issued purchase order.
• Due to volatility with supply chain all pricing and lead times are subject to change.

Once under contract, cost of equipment will be subject to general escalation clause requirements as noted in Section 4.3.
• This Proposal/Offer and its appendices must be attached to or incorporated by reference in any purchase order.
#6..
- 97 -
Proposal 24304 City of Modesto
March 7, 2023 Page 11
Envirogen Technologies Confidential – Trade Secret and Proprietary Information Table 3 – Payment Milestones
Milestone # Event
Percent of
Contract Value
1 Upon Execution of Purchase Order or Contract 15%
2 Upon Submittal of the Project-Specific Drawings
Submittals will occur in stages and will be invoiced as 1) Process Submittal – 10%
2) Mechanical Submittal – 10%
3) Electrical Submittal – 10%
One invoice will be submitted as each submittal occurs. 30%
3 Upon the Issuance of Major Equipment Purchase Orders
This milestone shall be invoiced upon presentation of unpriced copies of Envirogen’s Purchase orders for major Components (Container, Vessels, Controls Panels and Resin).

Multiple invoices potentially issued for this milestone. 30%
4 Upon the Notification to Ship Equipment
This milestone shall be invoiced Upon the earlier of (i) Shipment of the Equipment or (ii) 30 calendar days following the date buyer is notified the equipment is ready to ship.

This invoice may be prorated based on the equipment shipped or available to ship.
20%
5 Upon Commissioning of System1
This milestone shall be invoiced upon the earlier of (i) successful commissioning/start-up of the system, or (ii) 60 calendar days following the installation of the equipment, or (iii) 120 calendar days following the date that Envirogen provides notice that the major equipment was ready to ship. 5%
1 Successful commissioning of the MinX system is defined as full design flow through the system and attainment of full treatment as expected by the system. Full flow for the base system is 300 gpm/train (or whatever can be supplied from the site extraction process if less than 300 gpm/train is attainable), and full treatment is defined as reducing the treated water across the MinX system itself to the effluent contaminant concentration levels provided in Table 1a at the supplied flow rate. This level of treatment is contingent on the specific influent contaminant concentrations being less than or equal to the values shown in Tables 1a/b of this proposal. In the event the feed water provided to the treatment system is outside of these flow and contaminant specifications during the commissioning period, the start-up will be deemed successful, with the treatment considered satisfied. #6..
- 98 -
Proposal 24304 City of Modesto
March 7, 2023 Page 12
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

4.3 ESCALATION CONCERNS & CLAUSE
Due to the current market volatility, at any time before client release for fabrication, the price of materials significantly increases, through no fault of Envirogen, the price (for the Ion Exchange System) shall be equitably adjusted by an amount reasonable and necessary to cover such increase. As used herein, a significant price increase shall mean any increase in price equal to or exceeding 3% experienced by Envirogen from the date of this proposal.

Escalation of Envirogen's price shall apply in the event of an increase in prices of metals, metal products, PVC products and Fiberglass Reinforced products as measured by the following indices:

1. Index: PPI Commodity data for Metals and metal products-Hot rolled steel bars, plates, and structural shapes, not seasonally adjusted.

Issuer: Bureau of Labor Statistics / United States Department of Labor.

Series ID: WPU101704
http://data.bls.gov/timeseries/wpu101704

2. Index: PPI Commodity data for Plastics Material and Resins Manufacturing, not seasonally adjusted.

Issuer: Bureau of Labor Statistics / United States Department of Labor.

Series ID: PCU
https://data.bls.gov/timeseries/PCU325211325211
Envirogen’s price shall be adjusted upward, if there is an increase in price equal to or exceeding 3% and the increase shall be measured using the formula and indices from the base date of this proposal. The increase shall be calculated as:
((PO Value *.85*%Metals) * (Metals IndexPO-Metals IndexProp)/Metals IndexProp) + ((PO Value * .85* %Plastic) * (Plastics IndexPO-Plastics IndexProp)/Plastics IndexProp)))+ PO value Where:
• Metals Indexpo is the Metals index value for the month of release of purchase orders to suppliers.
• Metals IndexProp is the Metals index value for the month of this proposal. • % Metals is equal to 12%
• Plastics Indexpo is the Plastics index value for the month of release of purchase orders to suppliers.
• Plastics IndexProp is the Plastics index value for the month of this proposal. • % Plastic is equal to 17%
No upward adjustment shall apply to supplies or services that are required to be delivered or performed before the effective date of the adjustment, unless Envirogen’s failure to deliver or perform according to the delivery schedule results from causes beyond Envirogen’s control and without its fault or negligence, within the meaning of the Default clause. #6..
- 99 -
Proposal 24304 City of Modesto
March 7, 2023 Page 13
Envirogen Technologies Confidential – Trade Secret and Proprietary Information The aggregate of the increases to the contract price made under this clause shall not exceed 10 percent of the original price.

5.0 SCHEDULE
Envirogen will engineer and submit required drawings as shown in Table 4 below.

Table 4- Estimated Schedule
Task Milestone Estimated Dates
Submittal of Engineering Drawing 6 weeks After Receipt of Order Client Review Period 2 Weeks (10 days) After Submittal
Notice of “Ready” to Ship 24-40 Weeks after Submittal Approval Completion of Site Testing / Commissioning 1 Week
While drawings are issued for approval, they are intended for informational purposes only.

All drawings will remain the property of Envirogen and may not be used by others for fabrication.

Submittal documentation shall be provided electronically in PDF including the operations and maintenance documentation.

Any request by Client to either accelerate or delay a deliverable date described above for any reason other than an event of force majeure, shall require a mutually acceptable change order pursuant to Section 12.5 of Envirogen’s General Conditions attached as Appendix A. Such change order shall include the new schedule of deliverable due date(s) and any price adjustment occasioned by the change in schedule.
#6..
- 100 -
Proposal 24304 City of Modesto
March 7, 2023 Page 14
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

APPENDIX A

GENERAL CONDITIONS FOR THE SALE OF PRODUCTS AND SERVICES BY ENVIROGEN TECHNOLOGIES, INC. (ETIGC #221118)
#6..
- 101 -
Proposal 24304 City of Modesto
March 7, 2023 Page 15
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

GENERAL CONDITIONS FOR THE SALE
OF PRODUCTS AND SERVICES BY ENVIROGEN TECHNOLOGIES, INC.

ETIGC #221118
The following General Conditions are and shall be an integral part of any Order to which these terms and conditions are attached and/or referenced. In no event shall any term or condition attached to or made part of any purchase order or other contract document issued by Purchaser, or any shipping document or other document associated with the services or Products described in the Order to which these General Conditions apply have any controlling effect whatsoever unless specifically adopted in writing by an authorized representative of both Envirogen Technologies, Inc. (“Envirogen”) and Purchaser.

1. Definitions. Throughout these General Conditions or any Order or other document to which they apply, the following words and phrases, when printed with the initial letter capitalized (unless shown below without capitalization), shall have the meanings ascribed to them below, unless the context requires otherwise:
“Cost” shall mean all expenses incurred by Envirogen for materials, supplies, energy, regulatory permitting, labor, outside contractors and professionals, transportation, supervision, excise, sales and similar taxes. For all purchases of materials, supplies and services, “Costs” shall include an additional ten percent (10%) of the direct expense to reimburse Envirogen for purchasing and accounting activities. Labor charges for Envirogen’s personnel will be at rates shown in any Order or attachment, exhibit or schedule incorporated therein. In the absence of any such specification of rate(s), labor charges for Envirogen’s personnel will be at the individual’s hourly wage rate (or equivalent) plus forty percent (40%) for employee and group benefits and employee taxes. “Purchaser” shall mean the person or entity purchasing Products or services from Envirogen. “Day” or “day” shall mean a calendar day unless otherwise indicated. “Party” or “Parties” shall mean either Envirogen or Purchaser or both. “Products” shall mean products, equipment, parts, goods, media or materials meeting the description or specifications set forth in the Order.
“Order” shall mean any purchase order, work order, change order, letter agreement or similar contract document issued by Purchaser and accepted in writing by Envirogen or issued by Envirogen and accepted in writing by Purchaser which either references or attaches these General Conditions and/or all attachments, amendments or any ancillary documents to any such contract document.
“Owner” shall mean the ultimate end user of the Product or service where the end user if not the Purchaser. Normally this would occur where the Purchaser is a prime contractor and Envirogen is a subcontractor.
#6..
- 102 -
Proposal 24304 City of Modesto
March 7, 2023 Page 16
Envirogen Technologies Confidential – Trade Secret and Proprietary Information In addition to the definitions set forth above, embedded within these General Conditions or any Order, there may be additional defined terms which are designated as such in a parenthetical and highlighted with quotation marks.

2. Cooperation of Purchaser. To assist Envirogen in providing Products and/or performing services, Purchaser shall (i) provide Envirogen with all relevant material, data, and information in its possession pertaining to the specific project or activity, (ii) consult with Envirogen when requested, (iii) permit Envirogen reasonable access to relevant Purchaser or Owner controlled sites, (iv) ensure reasonable cooperation of Purchaser’s employees and the Owner, and (v) unless a longer period is provided for in the Order, return all drawings or other documents submitted by Envirogen to Purchaser for review, comment and/or approval within a commercially reasonable time following submission not to exceed ten (10) business days. Any failure to return documents within the time prescribed shall be considered a waiver by Purchaser of its right to review and approve or comment on the documents.

3. Price, Costs and Payments.

3.1 Unless otherwise stated therein, the price(s) and charges for Products and/or services specified in any Order are exclusive of any sales, use, value added, excise, gross receipts, business and occupation or similar present or future taxes imposed by any governmental entity on the sale, delivery, use or other handling of the Product or service or in connection with any transactions contemplated by the Order to which these General Conditions apply. If any such taxes are incurred by Envirogen, Purchaser shall reimburse Envirogen the amount of such taxes.

3.2 Whenever rates or prices in any Order include transportation or when transportation is charged separately by Envirogen, such rates, prices or charges shall be exclusive of (i) material increases in the cost of transportation occasioned by significant increases in the costs of fuel or weather, road or access conditions which could not have been reasonably anticipated in advances of pricing the cost of transportation or (ii) any extraordinary or excess demurrage charges incurred by Envirogen from third party carriers which arise from delays or demurrage at the delivery point. Demurrage will be charged to Purchaser except to the extent such demurrage primarily results from the negligence or other fault on the part of Envirogen or its carrier.

3.3 Unless otherwise specifically indicated in the Order, all prices (or other values) in the Order are stated in U.S. dollars and all payments are to be made in U.S. dollars.

3.4 Invoices may be provided to Purchaser, at the option of Envirogen, by mail, delivery service, electronic mail or fax and payments by Purchaser shall, at the election of Envirogen, be made by mail, overnight delivery service or electronic funds transfer. Purchaser shall provide Envirogen with contact information for delivery of invoices. Invoices shall be due and payable within thirty (30) days of receipt by Purchaser of the invoice. TIME IS OF THE ESSENCE for payment of all fees and charges. Interest on delinquent payments shall accrue until paid at the greater rate of (i) twelve percent (12%) per annum or (ii) the prime interest rate as quoted by the Wall Street Journal plus 500 basis points (adjusted on the first day of each calendar quarter.) In the event that the interest rate described above exceeds the maximum interest rate chargeable under law for such transactions, such maximum legal rate shall apply.

3.5 Should any portion of an Envirogen invoice be disputed by Purchaser, Purchaser will pay the #6..
- 103 -
Proposal 24304 City of Modesto
March 7, 2023 Page 17
Envirogen Technologies Confidential – Trade Secret and Proprietary Information undisputed portion and within the payment period prescribed above shall provide Envirogen with written notice of the disputed portion of the invoice and the reasons for the dispute. In no event shall Purchaser withhold payment of any undisputed portion of a Envirogen invoice based on the set-off of a Purchaser claim against Envirogen or as a back-charge for monies claimed to be owed Purchaser by Envirogen. At the request of Purchaser, Envirogen shall provide Purchaser with a written partial release of statutory liens utilizing Envirogen’s standard form which shall be conditioned on actual receipt of payment of a particular invoice.

3.6 Envirogen may, from time to time, establish such credit terms as it shall, in the sole judgment of Envirogen, deem reasonably necessary, including, but not limited to, credit limits.

3.7 In the event that Envirogen should incur Costs, including, but not limited to, attorney’s fees and collection agency fees, to collect overdue invoices and accounts, Purchaser shall reimburse Envirogen for all such reasonable Costs whether or not litigation has been initiated to collect the overdue account.

3.8 When fees or charges are based in whole or in part on a reimbursement by Purchaser of Envirogen’s actual costs, with or without a mark-up, such costs shall be determined at the time of invoicing whether or not the cost has already been paid by Envirogen or has, as of that time, accrued as an expense for purposes of accounting. Any future rebate or credit to Envirogen which may be associated either directly or indirectly with the cost or expense, shall not give rise to a similar rebate or credit from Envirogen to Purchaser.

4. Delivery and Risk of Loss.

4.1 Except as otherwise set forth in the Order, delivery of Product shall be DAP work/installation site (Incoterms 2010).

4.2 Except as otherwise set forth in the Order, Purchaser agrees to take delivery of Product upon notice from Envirogen that the Product is ready for delivery. If for any reason Purchaser is either unable or unwilling to accept delivery, Purchaser shall be responsible to pay or reimburse Envirogen for all additional Costs incurred for storage, insurance and/or transportation.

4.3 Title to and risk of loss with respect to Products shall pass from Envirogen to Purchaser at the time the Product is delivered to Purchaser. Product shall be deemed to be delivered when the Product has been loaded to Purchaser’s carrier or if delivered by Envirogen to Purchaser’s or Owner’s work site, upon arrival at the work site. (See Section 4.1) Offloading from the Envirogen carrier is the responsibility of Purchaser. Damages to the Product incurred during offloading shall be the responsibility of Purchaser. To qualify for a credit, any shortage or damages (other than those incurred after delivery DAP) to the Product shall be reported in writing to Envirogen by Purchaser within five (5) business days of the date of delivery of the Product.

5. Force Majeure. If Envirogen is rendered unable to perform its obligations under the Order by an event beyond the reasonable control of Envirogen, Envirogen shall not be liable to Purchaser for failure or delay in such performance to the extent that the failure or delay is due to such force majeure event. Force majeure events shall include, but shall not be limited to, war (whether declared or undeclared), fire, flood, lightning, earthquake, hurricane, storm or any other act of God; strikes, lockouts or other labor difficulties; civil disturbances, riots, sabotage, accident not involving fault on the part of Envirogen or explosion; inability to secure necessary fuel, power, #6..
- 104 -
Proposal 24304 City of Modesto
March 7, 2023 Page 18
Envirogen Technologies Confidential – Trade Secret and Proprietary Information equipment, transportation or raw materials and/or any other reason beyond the reasonable control of Envirogen.

6. Supervening Event. ‘Supervening Event’ is defined as an event or circumstance beyond Envirogen’s control that could not reasonably have been provided against before entering into the Purchase Order, which, having arisen, could not reasonably have been avoided or overcome, and which is not substantially attributable to the fault of Purchaser. A Supervening Event may include, but is not limited to exceptional events or circumstances of the following kind:
6A. Civil commotion, civil disobedience or dissent, riot, theft, vandalism or civil commotion or any declared State of Emergency, third-party protest
6B. Blockade or embargo, industrial action, or other labor-related disputes, strike, or lockout by persons other than Envirogen's personnel and other employees of Envirogen and Envirogen’s subcontractors;
6C. Munitions of war, explosive materials, ionizing radiation, or contamination by radioactivity, except as may be attributable to the Envirogen's use of such munitions, explosives, radiation, or radioactivity;
6D. Commercial impracticability, irreparable disruption of the economy or solvency of the agreement that is no fault of Envirogen;
6E. Governmental acts or omissions, changes in laws or regulations, failure of any utility supplier or governmental authority;
6F. Epidemic, pandemic, mandatory quarantine as declared by local governmental authority; 6G. Generalized lack of availability of materials or critical components or equipment within the local market;
This offer is predicated on the Parties acknowledging that the war in Ukraine and the COVID-19 pandemic are currently causing global disruption. While neither party is aware of any current cause that would prevent or delay Envirogen in its contract performance, it is understood that both Parties acknowledge that a Supervening Event could arise because of future impacts of these events.

Envirogen is neither responsible nor liable for any failure, hindrance, or delay in performing any obligation due to any ‘supervening or exceptional event’ beyond its reasonable control. If such an event occurs, Envirogen will work collaboratively with the Purchaser and take reasonable steps to meet contractual obligations and other associated provisions or find alternative solutions acceptable to the relevant counterparties. If Envirogen is prevented from performing any of his obligations under the Purchase Order due to a supervening event and suffers delay and/or incurs cost because of such event, in that case, Envirogen shall be entitled to an extension of time for any such delay (if completion is or will be delayed) and additional compensation associated with the event, which will be collaboratively and transparently agreed with Purchaser as soon as such an event materializes

7. Warranties. The following warranties are in addition to any other warranties specifically set forth in the Order:
#6..
- 105 -
Proposal 24304 City of Modesto
March 7, 2023 Page 19
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

7.1 Products. Envirogen warrants to Purchaser that (i) Envirogen will have title to all Products delivered to Purchaser, free and clear of all liens, encumbrances and security interests, and (ii) that all Product will conform at the time of delivery to the written mechanical product description and/or specifications set forth or otherwise referenced in the Order. In the event of a failure by Envirogen to materially meet the terms of the warranty set forth in this Subsection 7.1, Envirogen, at its own expense, shall remove the defective, non-conforming product and replace it with a like quantity of conforming Product meeting the description or specifications.

7.2 Equipment, Parts and Goods. Except as otherwise provided for in the Order, Envirogen warrants as follows:

A. Equipment and systems which are the subject of the Order shall, when constructed, installed, used, maintained and operated in strict compliance with the plans, specifications and instructions of Envirogen, meet the performance criteria specifically set forth in the Order during the performance testing period described therein.

B. At the time of delivery, equipment and parts will be free from any and all material defects which would reasonably interfere with their use by Purchaser. In the event such defect is reported to Envirogen within twelve (12) months from date of installation of the equipment or part or within fourteen (14) months following delivery by Envirogen, whichever comes first, Envirogen will repair or replace the defective component without charge.

7.3 Services. Envirogen warrants as follows:

A. In providing services under the Order, Envirogen will comply with all federal, state and local laws.

B. The services to be provided by Envirogen shall be performed utilizing the same generally accepted standards of due diligence, skill, reasonable care and safety ordinarily employed by service providers similarly situated in the same geographic region and at the same time.

C. All Envirogen personnel engaged in providing the services pursuant to the Order (i) shall be appropriately supervised by qualified persons in Envirogen’s employ, (ii) shall be appropriately skilled to perform the work to which they are assigned, and (iii) shall have met appropriate licensing and certification requirements of the state in which the service are to be provided.

7.4 Media and Resins. Unless otherwise set forth in the Order, Envirogen warrants that media supplied by Envirogen meets or exceeds Envirogen’s specifications for the media and manufacturer’s specifications for the media at the time of shipment.

7.5 Patents. Envirogen warrants that neither its Products nor its services shall infringe upon any patent(s) or copyright(s), or misappropriate or misuse trade secret(s) or other confidential information unless such Product or service is provided in compliance with Purchaser provided specifications. In the event of a default under this patent and intellectual property warranty, upon notice of the default by Purchaser, Envirogen shall obtain on behalf of Purchaser such releases, licenses or other appropriate authorizations as shall be necessary to prevent the infringement.

7.6 ENVIROGEN MAKES NO WARRANTY, EXPRESSED OR IMPLIED, PURSUANT TO THESE

GENERAL CONDITIONS, THE ORDER OR OTHERWISE OTHER THAN AS IS SPECIFICALLY SET FORTH IN THIS WARRANTIES PARAGRAPH AND THE ORDER AND NONE SHALL BE IMPLIED. THE #6..
- 106 -
Proposal 24304 City of Modesto
March 7, 2023 Page 20
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

WARRANTIES AND ANY REMEDIES SET FORTH IN THIS WARRANTIES PARAGRAPH AND/OR THE ORDER ARE EXCLUSIVE. THE WARRANTIES ARE GIVEN AND ACCEPTED BY PURCHASER IN LIEU

OF ANY AND ALL OTHER WARRANTIES, WHETHER EXPRESSED OR IMPLIED, INCLUDING

WITHOUT LIMITATION ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE, ALL SUCH WARRANTIES BEING HEREBY EXPRESSLY DISCLAIMED BY ENVIROGEN AND WAIVED BY PURCHASER. ANY REMEDIES PROVIDED FOR IN THIS

WARRANTIES PARAGRAPH AND OR THE ORDER ARE IN LIEU OF ALL OTHER REMEDIES AT LAW OR IN EQUITY FOR BREACH OF A WARRANTY.

7.7 Purchaser may assign Envirogen’s warranty obligations to the Owner without the consent of Envirogen and shall provide Envirogen with written notice of such an assignment.

8. Indemnification.

8.1 Each Party hereby agrees to defend, indemnify and hold the other Party and their respective partners, affiliates and subsidiaries, and their respective directors, officers, partners, members, employees and agents (collectively “Indemnified Parties”), harmless from and against any and all claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, Costs and expenses (including, without limitation, costs of defense, settlement and reasonable attorneys’ fees and expenses) (all of the foregoing herein collectively called “Liabilities”), arising out of (i) the indemnifying Party’s negligence or willful misconduct; and, (ii) failure of the indemnifying Party or any of its employees or agents to observe or comply with any of the indemnifying Party’s duties or obligations under these General Conditions or the Order, including, without limiting the generality of the foregoing, any failure to observe or comply with any applicable laws, ordinances, codes, orders, rules or regulations; violation or breach of any provision in these General Conditions or the Order including, but not limited to, any warranty for which a remedy is not specified. The foregoing obligations of indemnity will include, but not be limited to, any and all Liabilities for or relating to (i) injury to or death of any person (including, without limitation, employees or agents of the Parties), (ii) damage to or loss or destruction of any property (including, without limitation, property of the Parties, or their respective employees or agents), and (iii) any spill, release or leak of any hazardous substance or waste or any contamination of, injury or damage to or adverse effect on the environment. The indemnifying Party shall be liable, however, only for that percentage of total Liabilities that corresponds to the indemnifying Party’s percentage of total negligence or fault as compared to that of the indemnified Party.

8.2 Neither Party shall have any liability to the other Party for any indirect, incidental, aggravated, exemplary, punitive, or consequential damages incurred by the other Party, whether brought on an action for breach of contract, breach of warranty, tort, strict liability, or otherwise and irrespective of whether caused or allegedly caused by either Party’s negligence or willful misconduct and none shall be awarded by any tribunal against a Party hereto in favor of a Party hereto; provided, however, that the limitations on liability contained in this Section 7.2 shall not apply to damages which are part of a third party claim for which a Party is claiming an indemnity obligation under this agreement from the other Party and the Party entitled to indemnity protection under this agreement is seeking an indemnity or other relief against the payment of such damages from the Party required to provide such indemnity or other relief. Anything in the #6..
- 107 -
Proposal 24304 City of Modesto
March 7, 2023 Page 21
Envirogen Technologies Confidential – Trade Secret and Proprietary Information Order or these General Conditions notwithstanding, any liability of Envirogen under the Order shall not exceed in the cumulative aggregate, the lesser of the total fee or charges invoiced under the Order or $1,000,000.

9. Confidential Information.

9.1 Purchaser agrees that all information related to Envirogen’s systems, services, Products, methods, procedures, techniques, and equipment (“Confidential Information”) is and shall remain Envirogen’s exclusive proprietary and confidential information, know-how and property.

Purchaser agrees to use Confidential Information solely for the purposes set forth in the Order.

Purchaser agrees to keep Confidential Information confidential in accordance with the provisions of Section 8.2, and Purchaser shall not disclose, use or exploit for its benefit or the benefit of any third party Confidential Information other than in furtherance of the purpose of the Order.

Purchaser shall not reverse engineer, disassemble, chemically or biologically analyze or decompile any Product or other tangible objects which embody Envirogen’s Confidential Information.

9.2 Disclosure of Confidential Information may be in tangible form, by electronic media, by visual display or inspection or it may be provided orally. Confidential Information need not be marked “confidential”, “secret” or the like. Purchaser shall not use or disclose Confidential Information for any purpose other than as specified in the Order. Purchaser will use at least the same degree of care to avoid disclosure or unauthorized use of Confidential Information as Purchaser uses with respect to its own confidential information, but in no event less than a reasonable standard of care. Purchaser shall require in writing that the Owner agree to be contractually bound to Envirogen by the provisions of this Section 7.2. Envirogen may seek injunctive relief to enforce its rights under this Section without any requirement of proving irreparable injury. Confidential Information does not include the following: (a) information which prior to receipt by Purchaser was either generally available to the public or in Purchaser `s possession free of any restrictions on its use or disclosure from a source other than Envirogen; or (b) information which after the receipt thereof by the Purchaser either becomes available to the public through no fault of Purchaser or is acquired by Purchaser from a third party who has the legal right to transfer the information to Purchaser; or (c) information required to be disclosed by Purchaser pursuant to law but only after reasonable notice of the requirement of disclosure is provided to Envirogen.

10. Termination for Convenience. If the Order provides that the Purchaser may terminate the Order for its convenience and without cause, such termination shall be accomplished by written notice from the Purchaser to Envirogen. Upon such a termination for convenience, Purchaser shall pay Envirogen (i) for all Products and services delivered prior to the date of termination, and (ii) any and all Costs incurred by Envirogen prior the date of Termination incurred by Envirogen in the engineering, design, production, acquisition, transportation or otherwise for any Product or service as yet undelivered plus a mark-up of 25% and (iii) all reasonable Costs associated with the demobilization of Envirogen following the termination.

11. Insurance. If the services and/or the delivery of the Products require Envirogen or its contractors or carriers to enter on to any property owned or occupied by Purchaser, then Envirogen shall procure and maintain the following insurance coverages:
#6..
- 108 -
Proposal 24304 City of Modesto
March 7, 2023 Page 22
Envirogen Technologies Confidential – Trade Secret and Proprietary Information Coverage Policy Limits
Workers’ Compensation Statutory
Employer’s Liability Insurance $1,000,000 per accident or disease Commercial General Liability $1,000,000 per occurrence and including contractual liability; and $1,000,000 in the
aggregate
Automobile Liability Policy $1,000,000 per occurrence (including owned, non-owned, and hired vehicles) non-owned, and
hired vehicles)
All such policies shall name Purchaser and Owner as an additional insured as respects liability arising from work or operations performed by or on behalf of Envirogen (excluding the workers’ compensation policy). Envirogen shall promptly furnish Purchaser with certificates of insurance evidencing the required insurance coverage.

12. Miscellaneous Provisions.

12.1 For all purposes of the Order, Envirogen is and shall remain an independent contractor.

There are no intended third party beneficiaries to these General Conditions or the Order and nothing in this Contract will entitle any person other than Envirogen or Purchaser to any claim, cause of action, remedy or right of any kind under the Order.

12.2 Purchaser agrees that during the term of the Order and for a period of twelve (12) months thereafter, Purchaser will not, directly or indirectly, solicit, request or otherwise induce any Envirogen employee or personnel to terminate his or her employment with Envirogen if such employee has been materially engaged in providing Product or services to Purchaser under the Order. Nothing herein shall be construed to prohibit the hiring of Envirogen employees who have responded without any direct inducement by Purchaser to publically available employment advertisements by Purchaser.

12.3 Those provisions of these General Conditions or the Order which by their nature are intended to survive the termination, cancellation, completion or expiration of these general conditions or the Order to which they apply shall continue as valid and enforceable obligations of the Parties, notwithstanding any such termination, cancellation, completion or expiration. Such provisions include, but are not limited to, provisions concerning warranties, indemnifications and confidentiality.

12.4 The validity, interpretation and performance of these General Conditions shall be governed exclusively in accordance with and by the laws of the State of Texas, save and except those Texas laws governing choice of laws which would result in the choice of a law or laws of another jurisdiction.
#6..
- 109 -
Proposal 24304 City of Modesto
March 7, 2023 Page 23
Envirogen Technologies Confidential – Trade Secret and Proprietary Information

12.5 In the event of any dispute between the parties arising under these General Conditions or the Order, the parties agree that (i) the civil courts in and for the County of Montgomery, State of Texas, shall have exclusive jurisdiction and venue to determine such dispute(s) and each party hereby waives any objection to such jurisdiction and venue in any such court and any claim that such forum is an inconvenient forum and (ii) the prevailing Party shall be awarded its costs of suit, including reasonable attorney's fees.

12.6 The Order and these General Conditions set forth the entire agreement of the Parties regarding the services and Products described in the Order and supersede all prior discussions and agreements of the Parties, whether written or verbal other than prior confidentiality or nondisclosure agreements between Purchaser and Envirogen. The Order and these General Conditions may not be modified, amended, rescinded, canceled or waived in whole or in part by amendment or change order, except by written instrument, signed by both Parties, which makes specific reference to the Order and which specifies that the Order or these General Conditions are being amended, modified or otherwise altered. All change orders shall make specific reference to the Order and shall be signed by both Parties. All change orders shall indicate any modifications or amendment to the pricing or delivery schedule resulting from the change in scope. Any request by Purchaser to either accelerate or delay a deliverable date described in the Order for any reason shall require a mutually acceptable change order pursuant to this Section.

Such change order shall include the new schedule of deliverable due date(s) and any price adjustment occasioned by the change in schedule.

12.7 Any waiver by either Party of any provision or condition of the Order or these General Conditions shall not be construed or deemed to be a waiver of any other provision or condition of the Order or these General Conditions, nor a waiver of any subsequent breach of the same provision or condition.

12.8 If any section, subsection, paragraph, clause or sentence of the Order or these General Conditions shall be adjudged illegal, invalid or unenforceable, such event shall not affect the legality, validity or enforceability of the remaining portions of the Order and these General Conditions as a whole or any portion thereof.

12.9 The covenants and agreements contained herein shall be binding on and inure to the benefit of the Parties hereto and their respective successors and assigns.

12.10 The Order (or any amendment) may be executed in two or more identical counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute the Order when a duly authorized representative of each Party has signed a counterpart. Photographic, facsimiled and scanned copies of such executed counterparts may be used in lieu of the originals for any purpose. #6..
- 110 -
1 SOLE SOURCE # 2223-35

GRAYSON ENVIROGEN DUAL MINX TREATMENT
SYSTEM

BID FORM F - FINANCIAL INTEREST DISCLOSURE
Any contract award to result from this IFB process and Bidder’s submission of a Bid therewith will require approval by a majority vote of the City of Modesto’s City Council. In order to have full transparency in any City of Modesto commercial actions, the City Council may not approve an agreement between the City and the Bidder until all person with a direct or indirect financial interest of greater than $2,000 in the Bidder are identified by name.

Bidder must therefore complete this Bid Form F – Financial Interest Disclosure, listing by name all parties that have a material financial interest in the agreement, contract or development right.

PLEASE NOTE, any Council action that requires a Financial Interest Disclosure cannot be considered by the City Council until the required reporting is made. That means that City Council agenda items without the disclosure will be removed from the Council agenda.

Financial Interest Disclosure to City of Modesto
The Bidder shall identify any person with a financial interest in the Bidder by name, below.

For the purposes of this disclosure, a “Financial Interest” shall have the meaning contained in Modesto Municipal Code section 2-10.02.

Persons having an aggregate economic interest in the Bidder less than two thousand dollars ($2,000.00) at all times prior to final Council action of the proposed contract are not required to be listed on the Financial Interest Disclosure.

Notwithstanding the foregoing, a Financial Interest Disclosure is not required for a Bidder meeting the financial criteria for listing on the New York or the Pacific Stock exchanges unless it is reasonably foreseeable that a City Council decision will increase or decrease that entity's gross revenues or expenses by one million dollars ($1,000,000) or more and the requirements of Modesto Municipal Code Section 2-

10.03(h) are satisfied.

It is the legal obligation of all applicants for approval of an agreement or of an application for development rights to verify in writing, under penalty of perjury, that the identity of each person having a material financial interest in the Bidder is true, correct and complete. By signing below, the applicant understands that this information is provided under penalty of perjury, and that intentionally supplying misinformation or deception may result in either invalidation of the agreement or application, or criminal prosecution for misdemeanor violation of the Modesto Municipal Code, or both. Negligent provision of misinformation shall be grounds for invalidation. In accordance with the Modesto Municipal Code, each applicant has a continuing obligation to maintain the truth, accuracy and completeness of the financial interest disclosure information provided below until after final consideration by the City Council of any matter arising out of or relating to the agreement or application.
#6..
- 111 -
2 SOLE SOURCE # 2223-35

GRAYSON ENVIROGEN DUAL MINX TREATMENT
SYSTEM
Print Names of Persons Having a Financial Interest in Bidder Receiving this Agreement:

First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
First Name, Last Name
By signing this document, I agree to the information contained within.

Bidder Company Name:

Name of Bidder Signatory:

Signature of Bidder Representative:

Joe Higgins, CEO
Kris Sticinski, COO
Todd Webster, VP
Envirogen Technologies, Inc.

JOSEPH HIGGINS, Group CEO
80 #6..
- 112 -
#6..
- 113 -
03/20/2023
Please see attached justification from the department. CW 03/202/2023 #6..
- 114 -
#6..
- 115 -
A Lifecycle Performance Company
www.envirogen.com
September 16, 2022
Mr. Jeff Daniels
Water Division Manager
Utilities Department
Water Services Division
City of Modesto, CA
Re: Sole sourcing of Envirogen Technologies, Inc. for a Dual MinX Regenerable Ion Exchange System Dear Mr. Daniels:

On September 12, 2022, Envirogen Technologies, Inc. (Envirogen) was requested by the City of Modesto (City) to provide a justification regarding the potential sole sourcing of Envirogen as it relates to a new, updated regenerable ion exchange (IX) system. This letter is in response to that request.

Background
Currently, operating at the Grayson site (Wells 274 & 295), the City has two existing Envirogen SimPack regenerable IX treatment systems, both originally supplied by Envirogen in the 2004 timeframe. These IX treatment units are at the end of their useful life, utilizing outdated technology with parts that are becoming obsolete. Subsequently, for the past nine months, Envirogen has been in discussions with the City staff about the need to provide an equivalent, updated treatment system to replace the existing legacy units.

Equipment
Envirogen’s ion exchange treatment process is a patented technology that has been developed through two decades of research & development. At the Grayson site, the existing Envirogen SimPack IX technology continues to offer the City a safe source of nitrate-treated water for its ratepayers. However, over recent years, this legacy equipment has developed operational concerns and issues as it approaches the end of its useful life.

Envirogen is proposing to replace the legacy SimPack systems with a new Dual MinX ion exchange system. This Dual MinX system offers all of the existing features of the legacy SimPack units, but also incorporates numerous technology, controls, and operational advancements from the past twenty years of innovation of the technology.

Still, the Dual MinX design and operation are fundamentally similar to the existing SimPack systems. As the legacy system is replaced with the newer version of the technology, this similar design and operation aspect is important on two fronts:
(1) With the current baseline of City staff knowledge in the operation of the legacy equipment, a smoother transition to a similarly designed and operating newer unit will occur. (2) The Department of Drinking Water (DDW) observes this replacement of the existing equipment by Envirogen simply as an upgrade, and not a complete change to a new piece of treatment equipment.

This aspect is critical as it allows the drinking water permit to only be amended for the newer equipment.

Such an amended permit for the similar equipment will result in minimal delays in the implementation and permitting of this technology, ensuring that only limited downtime exists during the transition to a fully commissioned Dual MinX. During such times of continued drought, an efficient change from one similar technology to another (by the same manufacturer) is of significant importance, ensuring the ratepayers are receiving adequate and consistently treated supplies of water. #6..
- 116 -
A Lifecycle Performance Company
www.envirogen.com
In addition to the supply of the equipment, Envirogen continues to support the City through an established service contract. This relationship and effort will continue with the newly installed equipment, with Envirogen’s local and experienced service technicians available for operational assistance and staff training. In continuing to assist the City staff in maintaining the unit in a peak operational state, Envirogen also maintains a local warehouse supply of spare critical parts. Such a continued and ongoing commitment allows for further efficient operation of the new equipment by the City.

Conclusion
Sole-sourcing of Envirogen to provide such updated equipment and continued service is of paramount importance. The existing water treatment plant has been a critical resource for the City of Modesto in supplying safe potable water to its consumers, and the implementation and utilization of this upgraded Envirogen Dual MinX equipment will result in the continued operational robustness and reliability experienced by the City for the past twenty years.

Thank you for this opportunity to explain the uniqueness of the treatment equipment and the current relationship between the City and Envirogen. We are always open and available for discussions on how to strengthen our partnership and make it more effective for the City. If you require additional information, please contact me directly per my information below.

Sincerely,
Todd S. Webster, Ph.D., P.E.

Vice President
[email protected]
(619)887-1385
#6..
- 117 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: April 24, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: William Wong, Director of Utilities
SUBJECT: Second Amendment to All Season Lawn Landscaping Agreement CONTACT: Jeff Daniels, Water Division Manager, [email protected], 209-342-4585 DESCRIPTION:

Consider approving the Second Amendment to the Purchasing Agreement for Lawn Maintenance Services for Water Wells and Tanks to All Season Lawn Landscaping for a revised total amount of $402,671 and extending the term of the Agreement to December 31, 2023. (Funding Source: Water Fund)
STRATEGIC PLAN ELEMENT:

The recommended action supports the 2020-2025 City of Modesto Strategic Plan Initiatives, Goal D: Provide safe, efficient, and reliable infrastructure through proactive community investment, maintenance, and sustainability efforts.

BACKGROUND:

On August 18, 2014, the Purchasing Division awarded an agreement with Fletcher Landscape to maintain twelve water well and tank sites for an annual cost of $14,440, and a total not to exceed cost of $43,320 over three years. On January 23, 2018, by Resolution 2018-50, Council approved the addition of fourteen sites and an increase to the total spending authority of $32,180 to a new total of $73,812 over the term of the agreement.

On June 26, 2018, by Resolution 2018-263, Council approved an agreement with All Season Lawn Landscaping (“All Season”) for lawn maintenance and landscaping services twenty-six existing sites, plus three pending sites and the Northeast Corporation Yard at Litt Road. The estimated annual spending was $38,327 in the first year, with increases in subsequent years due to adding new sites, for a total not to exceed $310,871 over five years. #7..
- 118 -
Finance Committee, May 22, 2023
Second Amendment to All Season Lawn Landscaping Agreement

On April 2, 2019, by Resolution 2019-135, Council approved a First Amendment to the purchasing agreement with All Season, adding new sites and increasing the total to a new amount not to exceed $357,671. The current agreement is set to expire June 25, 2023.

DISCUSSION:

On February 28, 2023, the Purchasing Division issued Invitation For Bids (“IFB”) No.2223-23 for lawn maintenance services for water wells and tanks on the City’s website under commodity codes for landscape architecture, grounds maintenance, mowing, edging plant trimming, tree trimming and pruning services. Prospective bidders were notified online of the bid opportunity, and ten companies chose to download the IFB document. However, due to the ambiguity in the requested scope of work, the bid process was postponed to allow staff to modify the scope of work. The updated bid was posted to the public and additional time is needed to complete the bid process to award.

A Second Amendment is needed to extend the term of the agreement with All Season by six months to a new expiration date of December 31, 2023, and to increase the spending authority from $357,671 by $45,000, for a new total amount not to exceed $402,671.

FISCAL IMPACT:

Funds are budgeted in Fiscal Years 2022-23 and 2023-24, in Water Fund account 4100-45050- 53100, Repair and Maintenance Services. Expenditures over the past five years are below:

Contract Year Total
CY1 $39,556
CY2 $57,913
CY3 $78,414
CY4 $71,880
CY5 (YTD) $65,345
Grand Total $313,110
RECOMMENDED COMMITTEE ACTION:

Staff Recommendation:

Motion approving the Second Amendment to the Purchasing Agreement with All Season Lawn Landscaping, Escalon, CA, for Lawn Maintenance Services for Water Wells and Tanks, increasing the total amount of $357,671 by $45,000 for a new total amount not to exceed $402,671, and extending the term of the Agreement from June 25, 2023 to December 31, 2023; and forwarding to Council for approval.

Approved by:

William Wong, Director of Utilities
Joseph P. Lopez, City Manager
Attachments:

1. Second Amendment

2. Original Agreement

3. First Amendment
#7..
- 119 -
1 SECOND AMENDMENT TO PURCHASE AGREEMENT FOR FURNISHING OF LAWN

MAINTENANCE SERVICES FOR WATER WELLS AND TANK SITES
This SECOND AMENDMENT to the PURCHASE AGREEMENT, made and entered into in the City of Modesto, State of California, this _____ day of ____, 2023, by and between the City of Modesto, a municipal corporation of the State of California, hereinafter called CITY, and ALL SEASON LAWN LANDSCAPING, ESCALON CA, hereinafter referred to as CONTRACTOR.

This SECOND AMENDMENT to the PURCHASE AGREEMENT is made with reference to the following recitals:

A. A PURCHASE AGREEMENT NO. 143142, hereinafter referred to as AGREEMENT, was entered into by and between CITY and CONTRACTOR on the 8th day of August, 2018 to provide lawn maintenance services for water well and tank sites.

B. CITY and CONTRACTOR approved a First Amendment to the AGREEMENT on the 2nd day of April, 2019, to amend the total contract price by $46,800, to a new total amount not to exceed $357,671 over five years.

C. CITY and CONTRACTOR desire to amend the AGREEMENT by extending the termination date from June 25, 2023 to December 31, 2023, and increasing the annual spending limit by $45,000, for a new total amount not to exceed $402,671 through the end of the agreement.

D. CITY and CONTRACTOR now desire to memorialize the change to the terms of the AGREEMENT with this SECOND AMENDMENT.

NOW, THEREFORE, the parties hereto mutually agree to the following:

1. Section 1, “TERM OF THE CONTRACT” termination date shall be amended from June 25, 2023 to December 31, 2023, and the total not to exceed amount shall increase by $45,000 to #7..
- 120 -
2 $402,671.

2. Except as modified and amended by this SECOND AMENDMENT to the PURCHASE AGREEMENT, all other provisions of the AGREEMENT shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the CITY OF MODESTO, a Municipal Corporation, has authorized the execution of this Second Amendment to the Purchase Agreement in duplicate by its Purchasing Manager and attested by its City Clerk under authority of Resolution No. , adopted by the Council of the City of Modesto on the ___ day of ___________, 2023, and All Season Lawn Landscaping has caused this Second Amendment to the Purchase Agreement to be duly executed.
#7..
- 121 -
#7..
- 122 -
#7..
- 123 -
#7..
- 124 -
#7..
- 125 -
#7..
- 126 -
#7..
- 127 -
#7..
- 128 -
#7..
- 129 -
#7..
- 130 -
4/7/2020
#7..
- 131 -
#7..
- 132 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: May 1, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Bill Sandhu, Public Works Director
SUBJECT: Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services
CONTACT: Rosene Salmo, Integrated Waste Manager
[email protected], 209-577-5453
DESCRIPTION:

Consider approving the Solid Waste Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the Solid Waste Haulers, to become effective July 1, 2023, and rescinding Resolution No. 2022-276 for the July 1, 2022, annual rate adjustment, and forwarding to Council for approval. (Funding Sources: Solid Waste Fund, Geer Road Landfill Fund, Green Waste Fund, Compost Facility Improvements Fund).

STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s Strategic Plan Area of Focus: Quality of Life, “Engage partners across the community to ensure the safety, resilience, and attractiveness of Modesto”, Goal A: “Improve community safety and quality of life through a combination of prevention and intervention efforts that address safety and its underlying issues”, Strategy 6:

Motivate and encourage staff and community members to identify and mitigate blight issues; and Goal B: “Increase pride in Modesto’s diverse neighborhoods and business districts through beautification efforts and by investing in community assets and amenities”, Strategy 3: Evaluate current waste removal and city beautification policies and procedures. #8..
- 133 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

BACKGROUND:

Modesto has contracts with two private sector companies to collect residential, commercial, and industrial garbage, organics, and recyclables in the City. The City does not set the actual rate the collection companies can charge to pick up the solid waste. Instead, the City sets the maximum rate that the collection companies can charge for each type of service. Per the Service Agreement with the solid waste collection companies, if deemed necessary by the City Council, rate adjustments shall be made to become effective on July 1 of each year. A computer modeling formula is used to analyze audited financial data submitted by the solid waste collection companies. The maximum rate that the collection companies may charge for each service is then based on the lowest cost hauler’s rates. These maximum rates can also be reviewed and changed when costs increase or decrease.

For FY 22/23 rate review, the haulers submitted their audited financials. However, City staff believes that the computer modeling formula used by the haulers is outdated and City staff was not able to validate the financial numbers provided by the haulers. For this reason, staff recommends hiring a consultant to analyze the current rate setting methodology and test it for validity. Consultant will also review the true cost of solid waste services currently being provided to the community and calculate the true cost of services that need to be provided due to changes in law and regulations. Recommendations will be brought back to Council for approval.

DISCUSSION:

Utilizing the data previously provided by an independent consultant, R3 Consulting Group, Inc (Authorized by Resolution 2021-227 on June 22, 2021), staff is recommending that the City switch the current organics collection from bi-weekly to weekly. The following adjustments are being proposed for residential, commercial, and industrial solid waste collection.

1. Consumer Price Index (CPI) Increase
To keep enterprise revenues in line with the increases in expenses each year, staff reviewed the Bureau of Labor Statistics Consumer Price Index - West Region CPI adjustment ending in March 2023 and applied a CPI adjustment of 5.1% to the Green Waste Diversion Program Fee and Base Rate.

2. Residential Weekly Organics Collection
The City chose to coordinate with an independent consultant with expertise in implementing SB1383 requirements in lieu of developing a compliance plan internally because SB 1383 mandates could lead to significant changes in waste collection, waste processing, administrative responsibilities, and cost of service. Including an independent consultant in this process ensures that the City receives an impartial recommendation for changes resulting from the State’s unfunded mandate that will impact Modesto’s residents and businesses.

R3 Consulting Group provided the attached report, “SB 1383 Collection Program and Compliance Options” detailing their analysis (Attachment 2). The report includes the three different collection options. City staff posted a Solid Waste and Collection Services Survey on the City’s website. The survey allowed residents to vote on which option they preferred. The survey ran for three weeks (3/8/2022 to 3/29/2022). The Survey was sent directly via email to different associations within the cities, and it was posted on several social media outlets (Facebook, Instagram, Twitter, Next Door, and LinkedIn). City staff #8..
- 134 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

recommended option B to council because 54% of people who took the survey wanted their green container to be collected bi-weekly. Also, this option automatically ensured compliance with the SB 1383, and it would reduce costs by providing bi-weekly collection of recyclables and organics.

On June 14, 2022, Council approved (Resolution No.2022-276) a three-container collection program, with a 96-gallon organics container designated for yard, food, cardboard, and paper waste, a 96-gallon recycling container designated for glass, some metals and plastics, and clean cardboard, and a 96-gallon garbage container designated for other household trash. The garbage container is serviced weekly, and the recycling and organic containers are serviced bi-weekly. The bi-weekly organics container collection was approved as a one-year pilot program.

During the few months of implementation, City staff received an influx of requests for the organics to go back to weekly collection. Residents have the following concerns regarding the bi-weekly organics collection:

1. Overfilled organics containers

2. Decomposition of organics causing odors and attracting pests

3. Cross contamination issues: using recycling and garbage containers to place excess organics.

4. Illegal Dumping
R3 Consulting Group calculated the costs associated with switching from bi-weekly to weekly organics collection and determined it would be $2.99. This fee was determined in 2021 using financial data from FY 19/20, thus staff determined the proposed rate by applying the 5.1% CPI; the adjusted recommended rate is $3.14.

3. Allocation of Waste Adjustments
During the FY 16/17 Solid Waste Rate Study, it was determined that residential, commercial, and industrial customers should be contributing fees based on the allocation of waste combined with the number of customers from each sector. The FY21/22 rate review showed the allocation of waste being 52.95% residential, 26.16% commercial, and 20.89% industrial. These percentage allocations were then utilized in applying the fees accordingly.

4. Geer Road Landfill
Geer Road Landfill is located in Stanislaus County, eight miles southeast of the City of Modesto along the Tuolumne River. It is jointly owned by Stanislaus County and the City of Modesto, and accepted waste from 1970 through July 1990. It was formally closed in 1995. Closure and post closure costs and maintaining final assurances for the life of a closed landfill, are the responsibility of the owners of the landfill. The City and Stanislaus County equally contribute funds to an enterprise account solely for these purposes. Under a settlement agreement between the City and the County on #8..
- 135 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

November 6, 2018, both parties agreed to contribute to the ongoing expenses associated with the landfill closure.

In order to ensure enough funds are available for future post closure costs for the life of the landfill and for the payment for the settlement agreement, the following Geer Road Landfill Fees are recommended adjustments to the rates: Residential rate increase by $0.81 per household per month; Commercial rate increase by $0.95 per cubic yard per month; and Industrial rate increase by $29.77 per pull.

5. Fuel Rate Adjustment
On June 27, 2006, by Resolution No. 2006-410, Council approved making routine quarterly adjustments as needed to the component of the maximum rates attributable to the cost of fuel. This was due to severe fluctuations in the cost of diesel fuel, which is a significant cost factor for the collection companies. The methodology approved by the Council uses the average diesel fuel prices from the Department of Energy/Energy Information Agency (DOE/EIA) for a prior quarter to set the fuel component for a subsequent quarter. The rate is adjusted up or down accordingly.

When the fuel rates were analyzed for the July 1, 2023, rate review, it was determined that the haulers would receive a fuel rate adjustment of $0.04 for the residential accounts and $ 0.08 for the commercial accounts. To calculate the residential fuel component, a factor of 0.30 gallons of diesel fuel per residence per month was used, and for the commercial fuel component, a factor of $ 0.095 gallons of diesel fuel per cubic yard was used. For this rate review, the average diesel fuel prices from January 1, 2023, to March 31, 2023, were analyzed, and staff recommended a fuel adjustment for both residential and commercial maximum rates based on the prices of diesel fuel during that time frame.

6. Compost Facility Improvement Franchise Fees
The City of Modesto has agreements with Gilton Solid Waste and Bertolotti Disposal Services. These agreements require the haulers to pay, quarterly, an amount equivalent to 9.9% and 10.3% in franchise fees, respectively, of the gross receipts derived from the furnishing of such solid waste collection services within the City for the preceding quarter. The City has confirmed all City pass-through fees should be included as part of the gross receipts’ calculation for the franchise fee due to the City. This is consistent with how gross receipts have been calculated since the Service Agreement was executed.

However, this information was not confirmed to the haulers until after the increase in solid waste rates were already finalized and presented to Council on June 14, 2022. As part of the increase in solid waste rates, the City included a new City pass-through fee for Compost Facility Improvements in the amount of $1.70 for residential and $3.08 for commercial which became effective on July 1, 2022. This meant the franchise fee due on this new fee was not captured in the Base Rate.

The City allowed the portion of the Franchise Fee due for the new Compost Facility Improvement fee to be deferred, without interest, until an increase could be made to the solid waste rates. In addition, once the rates are increased, a payment arrangement will be established to capture the balance owed to the City due to this deferral. The Finance #8..
- 136 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

Department will coordinate this payment arrangement shortly after Council has approved the solid waste rate increase. Therefore, the City will be collecting the retroactive franchise fee of $0.38 in addition to the approved residential fee of $1.70 for residential and a retroactive franchise fee of $0.66 in addition to the approved commercial fee of $3.08. When the retroactive fee collection is complete, the City will adjust the rate accordingly.

FISCAL IMPACT:

The fiscal impact related to the necessary proposed adjustments for residential, commercial, and industrial solid waste collection services are as follows:

Residential Maximum Rate Recommendation
The City has a 3-container collection system: a 96-gallon container for garbage, 96-gallon container for organics, and a 96-gallon container for recycling. Currently the organics containers are picked up on a bi-weekly basis. City staff have received an influx of requests for the City to return to weekly organics collection. The table below shows the monthly residential cost for weekly organics collection.

Current Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $34.73 $1.77 $36.50
* Weekly Organics Collection $0.00 $3.14 $3.14
* Fuel Rate Adjustment $0.33 $(0.29) $0.04
Funds Adjustment
* Green Waste $5.01 $0.26 $5.27
* Geer Road $0.15 $0.66 $0.81
* Compost Facility Improvements $1.70 $0.38 $2.08
No Additional Changes
* SB 1383 Collection Fee $5.40 $ - $5.40
* Organic Waste Pre-Processing $1.72 $ - $1.72
* City Implementation $1.05 $ - $1.05
* Recycling Fees $0.46 $ - $0.46
* Carpenter Road $0.70 $ - $0.70
Total Residential Rate $51.25 $5.92 $57.17
Staff utilized the data provided by R3 Consulting Group and most recent CPI to determine that the cost associated with switching from bi-weekly to weekly organics collection would be $3.14.

The haulers will also receive a fuel rate adjustment of $0.04 for the residential accounts. The green waste fund will be increased by $0.26 adjusted by CPI 5.1%. The Geer Road landfill fund will be increased by $0.66 to cover future post closure costs and the payment for the settlement agreement. The Compost Facility Improvement will be adjusted by $0.38 to account for the haulers’ franchise fees.
#8..
- 137 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

Commercial Maximum Rate Recommendation
The current base maximum rate for commercial bin service for a one-cubic yard bin picked up once per week is $64.04 per month. Rate analyses were conducted by staff to determine the cost for one yard of service as shown in the table below.

Current
Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $42.92 $ - $42.92
* Fuel Rate Adjustment $0.47 $(0.39) $0.08
Funds Adjustment
* Green Waste $10.18 $0.52 $10.70
* Geer Road $0.21 $0.74 $ 0.95
* Compost Facility Improvements $3.08 $0.66 $3.74
No Additional Changes
* Litter Abatement $0.59 $ - $0.59
* Organic Pre-Processing $ 3.11 $ - $3.11
* City Implementation $1.90 $ - $1.90
* Recycling Fees $0.63 $ - $0.63
* Carpenter Road $0.95 $ - $0.95
Total Commercial Rate $64.04 $1.53 $65.57
Based on the average diesel fuel prices for January through March 2023, the maximum allowable fuel component for commercial rates is $0.08 per cubic yard. The green waste fund will be increased by $0.52 adjusted by CPI 5.1%. The Geer Road landfill fund will be increased by $0.74 to cover future post closure costs and the payment for the settlement agreement. The Compost Facility Improvement will be adjusted by $0.66 to account for the haulers’ franchise fees.

Industrial Drop Box/Roll-Off Compactors Maximum Rate Recommendation The maximum rates for industrial drop boxes and roll-off compactors are set for the pick-up charge and daily rental rate only. The actual disposal charge is negotiated directly between the solid waste company and the customer. These services are open to competition between the two authorized collection companies in the City. The current maximum rate per pick-up is $439.24. Based on rate analysis conducted by staff, the Geer Road landfill fund will be increased by $23.22 to cover future post closure costs and the payment for the settlement agreement. The new rate would be $462.46 per pick-up, to be effective July 1, 2023. The table below shows the proposed adjustments.
#8..
- 138 -
Finance Committee, May 22, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

Current
Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $383.21 $ - $383.21
Funds Adjustment
* Geer Road $6.55 $23.22 $29.77
No Additional Changes
* Recycling Fees $19.71 $ - $19.71
* Carpenter Road $29.77 $ - $29.77
Total Drop Box Rate $439.24 $23.22 $462.46
RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving the Annual Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the Solid Waste Haulers, for an increase of $5.92 per month for residential services with weekly green/organics container collection, an increase of $1.53 per cubic yard for commercial services, and an increase of $23.22 per pull for industrial services, to become effective July 1, 2023, and rescinding Resolution No. 2022-276 for the July 1, 2022 annual rate adjustment, and forwarding to Council for approval.

Motion approving a Fuel Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the haulers, for an adjustment of $0.29 per month for residential services, and an adjustment of $0.39 per cubic yard for commercial services, to become effective July 1, 2023, and forwarding to Council for approval.

Approved by:

Bill Sandhu, Public Works Director
Joseph P. Lopez, City Manager
Attachments:

1. Attachment A

2. R3 Final Draft Report
#8..
- 139 -
-1-

ATTACHMENT A
MAXIMUM CHARGES FOR SOLID WASTE SERVICE - JULY 1, 2023
RESIDENTIAL CONTAINERS - Maximum Monthly Rate
Standard container service includes the following:
 1 container each for garbage and organics picked up weekly, 1 container for recycling picked up bi-weekly
 2 bulky item collections per year by appointment
 City tree maintenance; collection & composting of green waste and forestry materials  Removal of illegally dumped items in streets and alleys  Drop off program for household hazardous waste
Base Rate $ 36.50
Fuel Adjustment $ 0.04
Compost Fee 2.08
SB 1383 Collection Fee $ 5.40
Organic Waste Preprocessing $ 1.72
City SB 1383 Implementation $ 1.05
Recycling Fee $ 0.46
Green Waste Fee $ 5.27
Carpenter Rd Landfill Fee $ 0.70
Geer Rd Landfill Fee $ 0.81
Weekly Organics Collection $ 3.14
Maximum Monthly Rate $ 57.17
Additional Garbage Container - $15.23 each per month picked up weekly Additional Organics Container Weekly - $15.23 each per month picked up weekly Additional Organics Container Bi-Weekly - $9.50 each per month picked up bi-weekly Additional Recycling Container - $9.50 each per month picked up bi-weekly *Containers must be placed in a location set forth in Section 5-5.121 of the MMC. #8..
- 140 -
-2-
COMMERCIAL AND MULTIFAMILY CONTAINERS - Maximum Monthly Rate Weekly rental for Containers shall not exceed the rate for 1 pick-up per week for each size container.

Bin Maximum Rates
Number of Collections Per Week
Container Size 1 2 3 4 5 6
1 CY $ 65.21 $ 130.42 $ 195.63 $ 260.84 $ 326.05 $ 391.26 2 CY $ 130.42 $ 260.84 $ 391.26 $ 521.68 $ 652.10 $ 782.52 3 CY $ 195.63 $ 391.26 $ 586.89 $ 782.52 $ 978.15 $ 1,173.78 4 CY $ 260.84 $ 521.68 $ 782.52 $ 1,043.36 $ 1,304.20 $ 1,565.04 5 CY $ 326.05 $ 652.10 $ 978.15 $ 1,304.20 $ 1,630.25 $ 1,956.30 6 CY $ 391.26 $ 782.52 $ 1,173.78 $ 1,565.04 $ 1,956.30 $ 2,347.56 96 Gallon Cart Maximum Rates
Material Type Number of Collection Per Week
1 2 3 4 5
Recycling/Organics $25.00 $50.00 $75.00 $100.00 $125.00 Base Rate $ 42.92
*Fuel Rate Adjustment $ 0.08
Compost Facility Improvements $ 3.74
Organic Waste Pre-Processing $ 3.11
City SB 1383 Implementation $ 1.90
Recycling Fee $ 0.63
Green Waste Fee $10.70
Litter Abatement $ 0.59
Carpenter Rd Landfill Fee $ 0.95
Geer Rd Landfill Fee $ 0.95
Maximum Rate 1 Cubic Yard $ 65.57
#8..
- 141 -
-3-
*Residential and Commercial Fuel Component Adjustments - The fuel component is set annually as part of the base cost. It is reviewed quarterly and adjustments shall be made as needed. The adjustment shall be based on the average price of fuel from January 1, 2023 to March 31, 2023. Average prices shall be determined based on published prices for California from the Department of Energy, Energy Information Agency and a fuel factor based on the haulers’ audited financials at annual rate review each year.

DROP BOX CONTAINERS – Maximum Rate Per Pick-Up
Actual disposal charges are paid and negotiated directly between the customer and the solid waste company. The solid waste company will provide up to 40CY Drop Box containers for stated charges subject only to load limit of transfer vehicle.

An AB 939 Green Waste Diversion Fee of $17.10 per ton is added to the disposal charges.

Base Rate $ 383.21
Recycling Fee $19.71
Carpenter Rd Landfill Fee $29.77
Geer Rd Landfill Fee $29.77
Maximum Rate Per Pick Up $462.46
Rental Fees
$0.85 per day up to 7-day maximum rental
$3.00 per day for boxes kept 7 or more days without servicing $10.00 per day for boxes kept 21 or more days without servicing #8..
- 142 -
-4-
COMPACTORS – Maximum Monthly Rate
Compactor Rates
Container NUMBER OF COLLECTIONS PER WEEK
Size 1 2 3 4 5 6
1 CY $ 195.63 $ 391.26 $ 586.89 $ 782.52 $ 978.15 $ 1,173.78 2 CY $ 391.26 $ 782.52 $ 1,173.78 $ 1,565.04 $ 1,956.30 $ 2,347.56 3 CY $ 586.89 $ 1,173.78 $ 1,760.67 $ 2,347.56 $ 2,934.45 $ 3,521.34 4 CY $ 782.52 $ 1,565.04 $ 2,347.56 $ 3,130.08 $ 3,912.60 $ 4,695.12 6 CY $ 978.15 $ 1,956.30 $ 2,934.45 $ 3,912.60 $ 4,890.75 $ 5,868.90 Other Compactor Fees
 Hospital Waste Compactors $265.00 per pick-up
 Washing Compactor $30.00
 Disposal Charge Actual charge to be paid by customer
 AB939 Green Waste Diversion Fee $17.10 per ton

EXTRA PICKUPS
Standard containers or equivalent $3.50 plus $2.30/container Detachable containers $12.00 plus $4.15/cubic yard

SPECIAL SERVICE CONDITIONS
In situations where none of the above maximum rates reasonably apply, the cost of service is to be negotiated between the solid waste company and the customer.

COMMERCIAL CONTAINER ONLY–Replacement and Cleaning Services 1 CY 1½ CY 2 CY 3 CY 4 CY 5 CY 6 CY
$10.12 $11.00 $12.10 $15.40 $20.24 $25.08 $29.92
NOTATION: Pursuant to Section 11-6.15(b)(2) of the Modesto Municipal Code, the solid waste company may require a deposit equivalent to two months service charge from customers prior to beginning service. The deposit will be credited back to the customer after 18 months under specified conditions.
#8..
- 143 -
#8..
- 144 -
#8..
- 145 -
#8..
- 146 -
#8..
- 147 -
#8..
- 148 -
#8..
- 149 -
#8..
- 150 -
#8..
- 151 -
#8..
- 152 -
#8..
- 153 -
#8..
- 154 -
#8..
- 155 -
#8..
- 156 -
#8..
- 157 -
#8..
- 158 -
#8..
- 159 -
#8..
- 160 -
#8..
- 161 -
#8..
- 162 -
#8..
- 163 -
#8..
- 164 -
#8..
- 165 -
#8..
- 166 -
#8..
- 167 -

CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

May 22, 2023
Date: May 1, 2023
TO: Finance Committee
David Wright, Chair
Rosa Escutia-Braaton, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Discount Program for Auto Pay and Paperless Billing Enrollment CONTACT: Jeni Martin, Revenue Collection and Compliance Manager, [email protected], 209-571-5892
DESCRIPTION:

Consider approving a new Utility Billing Discount Program for customers who enroll in Auto Pay and Paperless Billing for their City of Modesto Utility Bill and forwarding to Council for approval. (Funding Source: Water and Wastewater Funds)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

The Utility Billing Division provides customers with optional enrollment in convenient features for their utility bill such as Auto Pay and Paperless Billing. A customer enrolled in Auto Pay agrees to have the balance of their utility account automatically drafted each month on the due date of their bill. The customer has the option to have the funds drafted from a checking account, savings account, or a credit card. When a customer enrolls in Paperless Billing, they agree to receive their utility bill via email rather than having a paper bill mailed to them. Utilizing the Auto Pay and Paperless Billing feature provides benefit both to the City and to the customer.

When a customer is enrolled in Auto Pay, they are relieved of the burden of coming into the office, going online, or paying their bill by phone each month. Once enrolled, the customer’s bill is automatically paid each month when the City drafts the funds from their bank account or credit card. The City benefits by receiving on-time and guaranteed payments on customer accounts enrolled in Auto Pay. The City bills approximately 76,000 customer per month for water, sewer, garbage and storm drain. As of March 2023, there were 16,188 customers #9..
- 168 -
Finance Committee, May 22, 2023
Discount Program for Auto Pay and Paperless Billing Enrollment

enrolled in Auto Pay. The number of return payments from Auto Pay for reasons such as insufficient funds is less than 1% of all enrolled customers.

When a customer is enrolled in Paperless Billing, they receive a convenient email each month for their City of Modesto utility bill. The email provides the amount due on the bill and a link to our online portal to view the details of their charges and pay the bill using electronic check or a credit card. The cost savings on printing and mailing costs is approximately $0.76 per monthly bill for customers enrolled in Paperless Billing. As of April 2023, there were 13,934 customers enrolled in Paperless Billing. This provides an annual cost savings to the City of $127,078.

Paperless Billing Enrollment* Cost per Bill Annual Cost Savings 13,934 $0.76 $127,078
*as of April 2023
DISCUSSION:

Based on cost saving benefits both to the customer and to the City, the Utility Billing Division is seeking to increase enrollment in Auto Pay and Paperless Billing. One way to do this is by introducing a one-time discount of $10.00 for all customers who enroll in one of these programs.

The discount will be applied within the next two billing periods after enrollment is complete. The customer will be required to agree to keep the Auto Pay or Paperless Billing feature active for a minimum of six months. Customers already enrolled in Auto Pay or Paperless Billing would not be eligible for this one-time discount. If approved, the program would begin on July 1, 2023.

The discount program would be funded with miscellaneous late charge and penalty revenues. In Fiscal Year (FY)23, there are $2,600,000 budgeted for projected miscellaneous late charge and penalty revenues. Of this amount, approximately $1,400,000 is expected to be utilized for the Utility Billing Assistance Program funding. This leaves $1,200,000 available for this discount program. Based on current enrollment in each program with a robust estimated increase in enrollment of 10% in the first year, the annual cost for the discount program would be approximately $30,000. Staff does not expect enrollment to increase more than 10% in future fiscal years but will monitor. No revenue from rates will be used to pay for the discounts.

Current Enrollment Estimated increase
(10%)
Annual Program Cost
Auto Pay Customers 16,188 1,618 $16,188
Paperless Billing
Customers
13,934 1,393 $13,930
Total Annual Cost $30,118
The City will use all available resources, including community partnerships with local charities, school districts, non-profits, and community outreach events to advertise this program. In addition, the program will be highlighted in a bill insert with the utility bill, in our Utility Billing lobby, through social media, and the City’s website.

FISCAL IMPACT:

The annual estimated cost for Auto Pay and Paperless Billing Enrollment discount programs for fiscal year 2024 is $30,118. This item is funded by the Water and Wastewater Funds through revenues collected from miscellaneous late charges and penalties. Revenue from rates paid by customers are not used to pay for this program.
#9..
- 169 -
Finance Committee, May 22, 2023
Discount Program for Auto Pay and Paperless Billing Enrollment

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion approving a new Utility Billing Discount Program for customers who enroll in Auto Pay and Paperless Billing for their City of Modesto Utility Bill and forwarding to Council for approval.

Approved by:
____
DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
#9..
- 170 -