17.11 Interpretation. The Parties agree that the normal rule of construction to the effect that any ambiguity is to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any amendment or Exhibit hereto.
17.12 Consent. When either Party is required to give its consent to the other Party, the Party whose consent is required will not unreasonably withhold or delay that consent, unless it is specifically stated that it is within the Party’s sole discretion to give or withhold its consent.
17.13 Venue. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. Each Party hereby waives any right it may have pursuant to Code of Civil Procedure Code section 394 to file a motion to transfer any action arising from or relating to this Agreement to a venue outside of Santa Clara County, California, without the prior express written consent of the other Party.
17.14 Attorney’s Fees. The prevailing Party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorney’s fees expended in connection with that action.
17.15 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement, the exhibits, or any amendment thereto, is void or unenforceable, the unaffected provisions of this Agreement, the exhibits, or any amendment thereto, will remain in full force and effect.
[Signature page follows.]
35 Improvement Agreement
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
40 Packet Pg. 445 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this Agreement on the Effective Date.
APPROVED AS TO FORM: CITY OF PALO ALTO
Molly Stump, City Attorney
APPROVED:
Ed Shikada, City Manager
Dean Batchelor, Director of Utilities
TESLA, INC ration
Vaibhav Taneja, Chief Financial
Officer
36 Improvement Agreement
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
41 Packet Pg. 446 of 553
Exhibit A to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT A
PROJECT DESCRIPTION
The Project will consist of design, construction, installation and/or connection of the following elements at Substation and in the area surrounding Substation:
1. 2.
3. 4.
5. 6.
7. 8.
Grading and structural site improvements for the new Substation Improvements; Two 60 kV transformer bank circuit breakers;
One 60 kV bus tie breaker;
Two 50 MVA, 60 to 12 kV transformers;
One 12 kV power distribution center;
Two 12 kV feeders to serve the Tesla Facilities.
Bus switches, buswork, wiring, and feeder outlets to Tesla’s onsite switchgear; and Testing and commissioning of all equipment and components. 1 Improvement Agreement
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
42 Packet Pg. 447 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT B
ENCROACHMENT PERMIT
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
43 Packet Pg. 448 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E This document is recorded for the benefit
of the City of Palo Alto and is entitled
to be recorded free of charge in accordance
with Section 6103 of the Government Code.
After recordation, mail to:
CITY OF PALO ALTO/REAL ESTATE
DIVISION
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94301
SPACE ABOVE THIS LINE FOR RECORDER'S USE
A.P. No.:
Permit No.:
Project:
CITY OF PALO ALTO
ENCROACHMENT PERMIT
(# )
THIS ENCROACHMENT PERMIT (“Permit”) dated as of January 16, 2024, is made by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“City”), and TESLA, INC., a Delaware corporation (“Permittee”), individually, a “Party” and collectively, the “Parties.”
RECITALS
A. This Permit is required by and issued in conjunction with the Parties’ Hanover Substation Improvement Agreement (“Improvement Agreement”), effective January 16, 2024.
B. The Improvement Agreement involves improvements to the City’s Hanover Substation (“Substation”) on certain real property (“Property”) which the City has leased from the Board of Trustees for the Leland Stanford Junior University (“Lessor”), pursuant a lease effective on July 1, 1957, and the 1962 amendment thereto (“Stanford Lease”, attached hereto as Exhibit B) for the purposes of constructing, maintaining and operating an electric power substation.
6056800 1
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
44 Packet Pg. 449 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E C. The Stanford Lease as amended expired on its terms on or about June 30, 2007, the Lease has not been amended to extend the original term, and no rent has ever been due under the Lease besides the City’s payment of applicable taxes. Stanford and the City have continued to conduct themselves in their dealings in respect to the Hanover Substation in accord with the amended Lease, notwithstanding the expiration.
TERMS AND CONDITIONS
City and Permittee agree as follows:
1. Encroachment Permit. City confers to Permittee and the employees, contractors and agents of Permittee (“Permittee’s Agents”) a revocable (pursuant to Section 7 hereof), non-exclusive and non-possessory privilege to enter upon, use, and encroach into the Property, which is situated in the County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto (the “Permit Area”), for the limited purpose and subject to the terms, conditions and restrictions set forth below. This Permit gives Permittee a license only and notwithstanding anything to the contrary herein, this Permit does not constitute a grant by City of any ownership, leasehold, easement or other property interest or estate whatsoever in the Permit Area, or any portion thereof.
2. Use of Permit Area. Permittee and Permittee’s Agents may enter and use the Permit Area for the sole purpose of the design, construction, installation, and commissioning of the “Substation Improvements” as defined in the Improvement Agreement ( “Substation Improvements”) and ingress and egress thereto, and for no other purpose whatsoever.
3. Term of Permit. The privilege conferred to Permittee pursuant to this Permit shall apply for a term (“Term”) which will commence on the date on which this Permit is executed and delivered by City, and shall expire upon the earlier of: (a) City acceptance of the “Project” as defined and specified in the Improvement Agreement (“Project”), (b) thirty (30) days written notice from City revoking this Permit pursuant to Section 7 hereof or, (c) ten (10) days written notice of termination from Permittee.
4. Subject to City Uses. Notwithstanding anything to the contrary in this Permit, any and all of Permittee’s activities hereunder shall be subject and subordinate at all times to City’s existing and future use of the Permit Area for public utility or other public purposes.
City shall in no way be liable for any damage or destruction to Permittee’s property and/or Improvements resulting from any repair or maintenance activities by City. Permittee shall, at City’s request, immediately remove or relocate any personal property of Permittee or Permittee’s Agents, including temporary facilities or equipment, on or in the Permit Area to allow City access to the utilities or other City owned facilities. In the event City deems 6056800 2
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
45 Packet Pg. 450 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E it necessary, in City’s sole discretion, City shall have the right to remove or relocate any such property and City shall not be responsible for restoring or returning same to its prior condition.
5. Responsibility for Maintenance of Improvements. During the Term, and as further specified in the Improvement Agreement, Permittee shall be solely responsible for repairing and maintaining all Substation Improvements placed by Permittee in or on the Permit Area pursuant hereto in good and safe condition prior to the date of the transfer of ownership of the Substation Improvements to the City and the City’s acceptance thereof in accordance with the terms of the Improvement Agreement.
6. Covenant to Maintain Permit Area. In connection with its use, Permittee shall at all times during the Term, at its sole cost, maintain the Permit Area in a good, clean, safe, secure, sanitary and sightly condition, so far as the Permit Area may be affected by Permittee’s activities under this Permit.
7. Revocability. This Permit is subject to revocation if the Improvement Agreement is terminated pursuant to Section 14 of the Improvement Agreement or if the City is unable to proceed with the Project due to any third party legal action preventing use of the Permit Area for the Project. Revocation of this Permit in accordance with the terms hereof shall be effected by the City sending written notice to Permittee as specified in Sections 3 and 9. If the Permit is revoked after work has commenced on installation of the Substation Improvements pursuant to the Improvement Agreement, the provisions of Section 14.2.B of the Improvement Agreement will apply, including, but not limited to, those provisions addressing removal of personal property, restoration, disposition of materials and equipment, and responsibility for expenditures and loss.
8. Damage. Permittee shall not do anything in, on, under or about the Permit Area that could cause damage or interference to any City utilities or other property located in, on, under or about the Permit Area. As used in this Section 8 and Section 13, below, “damage” expressly excludes alterations to the Permit Area which are authorized by the “Construction Documents” as that term is defined in Section 1.2 of the Improvement Agreement. Permittee agrees to reimburse City for any damage caused by Permittee to City owned property or facilities by virtue of Permittee’s construction of Substation Improvements or other activities of Permittee or Permittee’s Agents within the Permit Area within thirty (30) calendar days of City’s demand.
9. Notice. If any notice given pursuant to this Permit is not personally delivered to Permittee, the notice shall be deemed to be delivered five (5) days after deposit of the notice in a sealed envelope, postage fully prepaid, in a mailing facility regularly maintained by the United States Post Office Department, or the next business day after deposit of the notice with a nationally recognized overnight courier, addressed to as the Party to be notified as follows:
6056800 3
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
46 Packet Pg. 451 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E To Permittee:
1 Tesla Road, Austin, TX 78725
Attn: General Counsel / Legal
Phone: +1. 512.516.8177
Email: [email protected];
cc : [email protected]
To City:
City of Palo Alto
City Clerk
250 Hamilton Avenue
Palo Alto, CA 94303
Email: [email protected]
cc: [email protected]
cc: [email protected]
10. Compliance with Laws. During the Term, Permittee shall, at its expense, conduct and cause to be conducted its activities on the Permit Area in a safe and reasonable manner and in compliance with all applicable laws of any governmental or other regulatory entity (including, without limitation, the Americans with Disabilities Act) and all covenants, restrictions and provisions of record, whether presently in effect or subsequently adopted and whether or not in the contemplation of the Parties, including any applicable terms of the Stanford Lease, attached hereto as Exhibit B, including the original 1957 lease agreement and the 1962 amendment.
11. Removal of Property. Without limiting City’s rights under this Permit, if during the Term, Permittee or Permittee’s Agents fail to comply with the terms of this Permit or the Improvement Agreement with respect to placement or storage of personal property on the Property, including materials, tools, or equipment, Permittee shall promptly, at City’s written request, remove or relocate at its sole expense any and all such personal property of Permittee or Permittee’s Agents, including temporary facilities or equipment, installed or placed in, on, under or about the Property by Permittee or Permittee’s Agents (excluding, however, the Substation Improvements, which shall not be altered, removed and/or relocated except as otherwise may be permitted under the Improvement Agreement), under any of the following circumstances:
(a) as may be necessary to avoid any actual or reasonably likely interference with the Substation or any of City’s utilities or other structures now or later constructed or with the maintenance thereof;
(b) to avoid or remedy any potential violation of the Stanford Lease; or 6056800 4
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
47 Packet Pg. 452 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (c) to avoid unauthorized interference with any other operations or land uses by City.
In the request, City shall specify reasonable time limits for removal or relocation of the property. If after such written notice Permittee fails to complete the removal or relocation within the prescribed time limits, City shall notify Permittee of same and have the right to perform the requested removal or relocation and charge Permittee all reasonable, direct and documented out of pocket costs and expenses (excluding overhead and salaries for the City’s personnel) incurred by City in performing the work.
Undisputed portions of such amount shall be due and payable within thirty (30) days after the City’s demand therefor. In the event of an emergency, City may, at its sole option and without notice, remove, relocate, or protect at Permittee’s sole expense, any and all property installed or placed in, on, under or about the Property by Permittee (excluding, however, the Substation Improvements, which shall not be altered, removed and/or relocated except as otherwise may be permitted under the Improvement Agreement).
12. Surrender. Upon the expiration of the Term, Permittee shall immediately surrender the Permit Area, including the Substation Improvements located thereon, broom cleaned, and free from hazards created by Permittee or Permittee’s Agents and clear of all of Permittee’s debris. At such time, Permittee shall remove all of its personal property and equipment from the Permit Area, and shall repair, at its cost, any damage to the Permit Area caused by such removal, reasonable wear and tear excepted.
Permittee’s obligations under this Section shall survive any termination of this Permit.
13. Repair of Damage. If any portion of the Permit Area or any property of City located on or about the Permit Area is damaged or threatened by any of the activities conducted by Permittee or Permittee’s Agents, in a manner not contemplated nor authorized under the terms of the Improvement Agreement or Construction Documents, Permittee shall, at its sole cost, immediately notify City in writing of such damage or threat after becoming aware of same. City may remedy, but shall not be obligated to remedy, such damage or threat at Permittee’s sole cost, based on the City’s reasonable, direct and documented out of pocket costs, but excluding regular salary and benefit costs for salaried City employees. In the event City elects not to remedy such damage or threat, Permittee shall repair any and all such damage and restore the Permit Area or property to its previous condition subject to City’s inspection, review and approval (excluding, however, the Substation Improvements, which shall remain in the Permit Area and not be subject to alteration, removal and/or relocation except as may otherwise be provided under the Improvement Agreement).
14. Defaults by Permittee. Permittee’s failure to perform any of its obligations under this Permit, or Permittee’s default in the performance of any of its other obligations under this Permit, will be governed by the terms in Section 14 of the Improvement Agreement 6056800 5
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
48 Packet Pg. 453 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E pertaining to default and cure. Permittee’s obligations under this Section shall survive the expiration or termination of this Permit.
15. Indemnity; Limitations on Liability. The respective indemnification obligations of the City and Permittee during the Term shall be as set forth under the terms of the Improvement Agreement, such obligations to survive the expiration or other termination of the Permit.
16. Insurance Requirements. During the term of this Permit, Permittee, and each of its contractors and agents which enter onto the Property to carry out permitted activities, shall each maintain in full force and effect the insurance coverage specified in Section 9 of the Improvement Agreement and corresponding Exhibits thereto.
17. Assignment. This Permit is personal to Permittee and Permittee shall not assign, transfer, or encumber its interest in this Permit and/or the Substation Improvements, except as authorized in Section 11 of the Improvement Agreement.
18. General Provisions. (a) This Permit may be amended or modified only by a writing signed by City and Permittee. (b) This instrument (including the exhibit(s) hereto) contains the entire agreement between the parties and all prior written or oral negotiations, discussions, understandings and agreements are merged herein. (c) If Permittee consists of more than one person then the obligations of each person shall be joint and several. (d) Permittee may not record this Permit or any memorandum hereof without the prior consent of City. (e) City will promptly notify Permittee of any action or steps by Lessor that may affect the rights granted pursuant to this Permit, whereupon City and Permittee will meet and confer to consider available options with reference to the purpose of the Improvement Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
6056800 6
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
49 Packet Pg. 454 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E The Parties agree to the foregoing as witnessed by the following signatures:
"OWNER" “PERMITTEE"
CITY OF PALO ALTO TESLA, INC.
By:
City Manager Vaibhav Taneja
Chief Financial Officer
1 Tesla RoadAPPROVED AS TO FORM:
Austin, TX 78725
1.512.516.8177
Asst. City Attorney
APPROVED AS TO CONTENT:
Director of Utilities
Attachments:
EXHIBIT “A”: DESCRIPTION OF PERMIT AREA
EXHIBIT “B”: STANFORD LEASE
6056800 7
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
50 Packet Pg. 455 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT A
DESCRIPTION OF PERMIT AREA
The Permit Area is located at 3350 Hanover Street, Palo Alto, California, 94304, shown on the map below, and is coextensive with the leased premises as described in Exhibit B. 3350 Hanover Street
6056800 8
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
51 Packet Pg. 456 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT B
STANFORD LEASE
6056800 9
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
52 Packet Pg. 457 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
53 Packet Pg. 458 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
54 Packet Pg. 459 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
55 Packet Pg. 460 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
56 Packet Pg. 461 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
57 Packet Pg. 462 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
58 Packet Pg. 463 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
59 Packet Pg. 464 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
60 Packet Pg. 465 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
61 Packet Pg. 466 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
62 Packet Pg. 467 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
63 Packet Pg. 468 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
64 Packet Pg. 469 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla Substation
Agreement
Item 14: Staff Report
Pg.
65 Packet Pg. 470 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
66 Packet Pg. 471 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
67 Packet Pg. 472 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
68 Packet Pg. 473 of 553
Exhibit B to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E I. CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF )
)
)
COUNTY OF
On , before me,
(insert name and title of the officer)
who proved topersonally appeared
me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
6056800 10
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
69 Packet Pg. 474 of 553
Exhibit C to Substation Improvement AgreementDocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT C
PROJECT BUDGET
1. Estimated Project Cost. The estimated cost to design and construct the Project is $24,000,000, including the estimated Construction Cost of $15,000,000 (subject to modification by subsequent change orders).
2. Tesla’s Contribution. Tesla is responsible for all costs to design and construct the Project, including design and procurement costs incurred prior to approval of the Construction Documents, subject to reimbursement from the City, as set forth in Section 5 of the Agreement, and as further specified below. Tesla’s Contribution includes the following cost components:
A. All Project-related costs incurred by Tesla prior to the Effective Date of the Agreement.
B. 100% of the costs associated with feeders and any switches installation at the Tesla Facility needed to serve a 30MVA load.
C.
D.
All permit fees that are not waived by the City.
The cost for insurance policies required pursuant to Section 9 of the Agreement.
I. The cost of all other items specified as Tesla’s obligation under the Agreement and the Encroachment Permit.
2. City Reimbursement. Subject to a cumulative total cap of $12 million, the City is responsible for reimbursing Tesla as specified in Section 5 of the Agreement. Tesla will timely provide City with documents evidencing the costs subject to the City Reimbursement, such as paid invoices and the like, sufficient to establish the actual expenditures which are subject to reimbursement herein. 6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
70 Packet Pg. 475 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT D
CAPACITY RESERVATION AGREEMENT
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
71 Packet Pg. 476 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E DATED JANUARY 16, 2024
CITY OF PALO ALTO
-and-
TESLA, INC.
CAPACITY RESERVATION AGREEMENT
relating to
the Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
72 Packet Pg. 477 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
TABLE OF CONTENTS
1. INTERPRETATION ....................................................................................................... 2
2. TERM......................................................................................................................... 8
3. CAPACITY RESERVATION ............................................................................................ 8
4. CAPACITY USAGE CREDITING.................................................................................... 10
5. BILLING AND INVOICING .......................................................................................... 10
6. TERMINATION.......................................................................................................... 10
7. DISPUTE RESOLUTION .............................................................................................. 12
8. REPRESENTATIONS, WARRANTIES AND COVENANTS ................................................ 13
9. ASSIGNMENT AND NOVATION ................................................................................. 14
10. NOTICES .................................................................................................................. 14
11. CONFIDENTIALITY AND ANNOUNCEMENTS............................................................... 14
12. MISCELLANEOUS...................................................................................................... 15 SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS............ SCHEDULE 1 SCHEDULE 2: MONTHLY CAPACITY USAGE REPORT .................................... SCHEDULE 2 6056801
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
73 Packet Pg. 478 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E THIS CAPACITY RESERVATION AGREEMENT is made on January 16, 2024 BETWEEN:
(1)
(2)
CITY OF PALO, a California chartered municipal corporation "City"); and TESLA, INC., a corporation organized under the laws of Delaware, whose principal place of business is at Giga Texas, 1 Tesla Road, Austin, TX 78725 ("Tesla").
RECITALS:
A
B
C
D
The City and Tesla have entered into the Improvement Agreement pursuant to which the Parties shall jointly design, construct, install and fund improvements to the Hanover Substation to increase the Capacity of the Hanover Substation, on the terms and subject to the conditions therein.
Following completion of the improvements to the Hanover Substation contemplated under the Improvement Agreement, the City is willing to allocate and reserve, in respect of the Hanover Substation, the Reserved Capacity to serve the electricity needs of the Tesla Facilities, on the terms and subject to the conditions set forth in this Agreement.
In addition to the terms that apply to Tesla as a CPAU Electric Service customer pursuant to the CPAU Rules and Regulations, the City and Tesla have agreed that in consideration for the City making the Reserved Capacity available for Tesla, Tesla will pay the City a Monthly Capacity Reservation Fee as further specified in this Agreement.
The City and Tesla have further agreed that in addition to the consideration paid by the City under the terms of the Improvement Agreement for the Hanover Substation improvements designed and installed by Tesla, Tesla will be afforded a Monthly Capacity Usage Credit as a credit against the Monthly Capacity Reservation Fee, if applicable, subject to a Capacity Usage Credit Maximum.
E It is a condition precedent to the effectiveness of the Improvement Agreement that the City and Tesla shall have executed and delivered this Agreement.
IT IS AGREED:
1. INTERPRETATION
1.1 Definitions
In this Agreement:
"Agreement" means this Capacity Reservation Agreement.
"Billing Period" has the meaning provided in Rule and Regulation 2 of the CPAU Rules and Regulations as may be amended from time to time.
"Business Day" means any day other than a Saturday, Sunday or any other day observed as a legal holiday by the City.
"Capacity" means the maximum instantaneous power (expressed and measured in kVA) that can be delivered by CPAU in compliance with its operating practices, to Electric Service customers served by the Hanover Substation.
6056801 1
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
74 Packet Pg. 479 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E "Capacity Reservation Fee Start Date" means the earlier of (i) the date falling 18 months from the Effective Date, or (ii) the date on which the monthly Demand for the Tesla Facilities has reached 9.00 MW.
"Capacity Reservation Modification" has the meaning given in Clause 3.5(a). "Capacity Reservation Period" means the period commencing on the Effective Date and ending on the date that is seven (7) years from the Effective Date. "Capacity Usage Credit Maximum" has the meaning given in paragraph (a) of Schedule 2. “Capacity Usage Credit Period” means the period commencing on the Capacity Reservation Fee Start Date and ending on the date that is seven (7) years from the Capacity Reservation Fee Start Date.
"Consultation Period" has the meaning given in Clause 6.3(c). "Contracted Peak Demand" has the meaning given in paragraph (a) of Schedule 1. "CPAU" means the City’s Utilities Department, which operates the City’s electrical utility system, including the Hanover Substation, to provide Electric Service. "CPAU Event of Default" has the meaning given in Clause 6.2. "CPAU Rules and Regulations" means the rules and regulations relating to utility service approved and adopted by resolution of the City of Palo Alto City Council, pursuant to Chapter
12.20 of the Palo Alto Municipal Code, as may be amended from time to time, and accessible online via the City’s website.
"Default" means any CPAU Event of Default or Tesla Event of Default, as the context requires.
"Defaulting Party" means:
(a)
(b)
the City, in respect of a CPAU Event of Default; and
Tesla, in respect of a Tesla Event of Default.
"Delivered Energy" means the energy delivered to a Tesla Facility at a Point of Delivery. "Demand" means the highest rate of metered Delivered Energy, expressed and measured in kW, registered within a specific time interval (normally fifteen minutes within a monthly Billing Period unless otherwise specified).
“Distribution Demand Charge” means the Distribution component of a Demand charge listed in a rate schedule established by the City for provision of Electric Service, often varying based on season and time period, and with the possibility of multiple demand charges applying to a specific time period, all of which are charged based on the metered Demand for that time period. "Dispute" means any dispute, disagreement or claim between the Parties concerning, relating to or arising from this Agreement, excluding any dispute, disagreement or claim concerning billing for Electric Service that is subject to the provisions of the CPAU Rules and Regulations. "Due Date" means, in relation to any Monthly Invoice, the date on which payment is due in accordance with Clause 5.3(a).
6056801 2
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
75 Packet Pg. 480 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E "Effective Date" means the date determined in accordance with Clause 2.1, on which this Agreement comes into full force and effect.
"Electric Service" means the generation, transmission, and distribution of electrical power by CPAU for retail use.
"Expiration Date" means the date on which the Term ends and this Agreement expires in accordance with its terms.
"General Use Utility Asset Costs" has the meaning given in paragraph (a) of Schedule 2. "Governmental Agency" means any national, regional or local government, any political subdivision thereof, or any governmental, quasi-governmental, regulatory, judicial or administrative agency, authority, commission, board or similar entity having jurisdiction over operation of the Substation or CPAU operations, or either Party, including any applicable independent system operator or regional transmission organization, the California Public Utilities Commission, the Federal Energy Regulatory Commission, and the North American Electric Reliability Corporation.
"Hanover Substation" means the substation owned and operated by the City, including any facilities ancillary thereto, located at 3350 Hanover Avenue, Palo Alto, California 94304. "Hanover Substation Improvement Completion Date" means the date on which the City accepts the installation of the improvements to the Hanover Substation as complete in accordance with the Improvement Agreement.
"Improvement Agreement" means the Substation Improvement Agreement relating to the Hanover Substation dated on or about the date of this Agreement and entered into between the City and Tesla.
"JAMS" has the meaning given in Clause 7.2(a).
"kVA" means kilo-volt-amperes, which is a measure of apparent power. "kW" means kilowatts, a unit of power equal to 1,000 watts. "kWh" means kilowatt-hours, the amount of energy delivered in one hour where delivery is at a constant rate of one kilowatt.
"Law" means all applicable local, state, and federal laws, regulations, rules, codes, ordinances, permits, orders, and the like enacted or imposed by or under the auspices of any Governmental Agency with jurisdiction over the Hanover Substation or either Party, including labor, health and safety requirements, the Palo Alto City Charter, the Palo Alto Municipal Code, and the CPAU Rules and Regulations.
"MW" means megawatts, a unit of power equal to 1,000 kW. "Monthly Capacity Reservation Fee" has the meaning given in paragraph (b) of Schedule 1 as a payment due from Tesla to the City as consideration for the Reserved Capacity. "Monthly Capacity Usage Credit" has the meaning given in paragraph (b) of Part 2 of Schedule 1.
"Monthly Capacity Usage Credit Rate" has the meaning given in paragraph (b) of Schedule
2. 6056801 3
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
76 Packet Pg. 481 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E "Monthly Invoice" means an invoice in respect of Monthly Capacity Reservation Fees and Monthly Capacity Usage Credits in any Billing Period.
"Monthly Payment" means the sum of the Monthly Capacity Reservation Fee (less any Monthly Capacity Usage Credit).
"Monthly Statement" means a statement provided with the Monthly Invoice giving the information set out in Clause 5.2(b).
"Non-Defaulting Party" has the meaning given in Clause 6.3(a). "Party" means a party to this Agreement, and shall include its successors in title, permitted assignees and permitted transferees.
"Point of Delivery" has the meaning provided in Rule and Regulation 2 of the CPAU Rules and Regulations, as applied to electricity delivered to a Tesla Facility pursuant to this Agreement.
"Reserved Capacity" means the portion of Capacity that is reserved by CPAU to provide Electric Services to the Tesla Facilities, measured in kVA, as further set forth in Schedule 1 (as such schedule may be amended from time to time).
"Signature Date" means the date on which both the City and Tesla have executed this Agreement.
"Subsequent Period" means the period commencing on the expiration of the Capacity Reservation Period and ending on the Expiration Date or upon early termination of this Agreement, whichever occurs first.
"Term" means ten years from the Effective Date as stated in Clause 2.1. "Termination Notice" has the meaning given in Clause 6.3(h). "Tesla Event of Default" has the meaning given in Clause 6.1. "Tesla Facility" means the Tesla site located at 1501 Page Mill Road in the City of Palo Alto, and subject to mutual agreement of the Parties memorialized in an amendment to this Agreement, may also include additional Tesla facilities located on other sites that are connected to and served by the Hanover Substation.
"US Dollars" or "USD" means United States Dollars, the lawful currency of the United States of America.
1.2 1.3
Headings
Clause headings used in this Agreement and the table of contents are for convenience only and will have no effect on the interpretation or construction of any of the terms of this Agreement.
Interpretation
(a) Wording
In this Agreement, unless provided otherwise:
6056801 4
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
77 Packet Pg. 482 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (i) the use of the singular form of a word includes the plural form and the use of the plural form includes the singular;
(ii)
(iii)
a word of any gender includes the corresponding words of each other gender and a reference to one sex includes a reference to all sexes; any cognate with respect to a word or expression defined in this Agreement shall bear a corresponding meaning;
(iv)
(v)
the words "include" and "including" are to be construed without limitation; and wherever provision is made for the giving or issuing of any notice, decision, consent, acceptance, agreement, expression of satisfaction, endorsement, approval, certificate, instruction or determination by any person, unless otherwise specified, such notice, decision, consent, acceptance, agreement, expression of satisfaction, endorsement, approval, certificate, instruction or determination shall be in writing (and writing shall be inclusive of mail transmitted electronically) and the words "notify", "decide", "consent", "accept", "agree", "endorse", "approve", "certify", "instruct" or "determine" and other cognate expressions shall be construed accordingly. (b) Dates & Times
In this Agreement, unless provided otherwise:
(i) a time of day shall be construed as a reference to the current Pacific time zone; (ii) a "month" shall be construed as a calendar month according to the Gregorian calendar beginning at 24:00 hours on the last day of the preceding month and ending at 24:00 hours on the last day of that month;
(iii)
(iv)
(v)
a "day" shall be construed as a twenty-four (24) hour period ending at 24:00 hours;
where a period of time is specified to run from or after a given day or the day of an act or event, it is to be calculated exclusive of that day; and where a period of time is specified as commencing on a given day or the day of an act or event, it is to be calculated inclusive of that day. (c) References
In this Agreement, unless provided otherwise, a reference to:
(i) a statute or enactment shall be construed as a reference to such statute as it may have been, or may from time to time be, amended or re-enacted; (ii)
(iii)
an obligation includes a liability and a duty and a reference to performance includes observance;
materials, information, data and other records shall be to materials, information, data and other records whether stored in electronic, written or other form; and
6056801 5
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
78 Packet Pg. 483 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (iv) a clause or a Schedule shall be reference to a clause or Schedule of this Agreement. References to this Agreement or any other document shall be construed as a reference to this Agreement or that other document as it may have been, or may from time to time be, amended, varied, novated, replaced or supplemented.
(d) General Terminology
In this Agreement, unless provided otherwise, "average" for any calculation shall, subject to any contrary indication, be construed as meaning an arithmetic mean.
1.4 Construction
(a) Force of Definitions
If any provision in a definition in this Agreement is a substantive provision conferring rights or imposing obligations on either Party, then, notwithstanding that it is in a definition, effect shall be given to it as a substantive provision of this Agreement. (b) Force of Recitals
The recitals are not intended to create any legally binding rights or obligations for the Parties, but may be used to evidence the intention of the Parties in entering into this Agreement wherever any such intention is relevant in interpreting any particular term of this Agreement.
(c) Persons and Corporations
(i) A reference to a "person" includes any individual, company, corporation, firm, partnership, joint venture, undertaking, organisation, trust, government authority or government department (in each case whether or not having separate legal personality).
(ii) A reference to a person includes that person's successors and permitted assigns and, in the case of a natural person, that person's legal personal representatives. (iii) Where any person to whom reference is made ceases to exist or is reconstituted, renamed or replaced, or its functions or powers are transferred to another person, that reference shall (unless the context requires otherwise) be taken to be to the person so established or constituted in its place or succeeding to its powers or functions.
(d) Laws
Save where the contrary is indicated, in this Agreement any reference to an act of a Governmental Agency, code, rules, regulations or any Law or any section of, or schedule to, or other provisions thereof, shall be construed, at the particular time, as including a reference to any modification, extension or re-enactment thereof then in force and to all instruments, orders, rules or regulations then in force and made under or deriving validity from the relevant act of a Governmental Agency, code, or Law. 6056801 6
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
79 Packet Pg. 484 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
2. TERM
2.1 Effectiveness and Term
This Agreement shall take effect on the Hanover Substation Improvement Completion Date (the "Effective Date") and shall continue until ten (10) years from the Effective Date (the "Term"), unless terminated sooner pursuant to Clause 6 herein.
3. CAPACITY RESERVATION
3.1 Determination of payments for Reserved Capacity
(a)
(b)
The Monthly Capacity Reservation Fee for the Reserved Capacity provided by the City to Tesla pursuant to Clause 3 of this Agreement will be calculated in accordance with the provisions of Schedule 1.
Tesla’s payment of the Monthly Capacity Reservation Fee will apply for each month that Reserved Capacity is made available for Tesla until expiration of the Term or termination of the Agreement, including the Capacity Reservation Period and the Subsequent Period.
3.2 Reservation of Capacity during the Capacity Reservation Period (a) Commencing on the Effective Date, the City shall reserve and make available not less than the amount of Reserved Capacity for Electrical Service provided to the Tesla Facilities for the Capacity Reservation Period.
(b) In consideration for the Reserved Capacity made available in any Billing Period during the Capacity Reservation Period, beginning with the first full Billing Period after the Capacity Reservation Fee Start Date Tesla shall pay to the City a Monthly Capacity Reservation Fee calculated in accordance with paragraph (b) of Part 1 of Schedule 1. (c) For the avoidance of doubt, following the Capacity Reservation Fee Start Date Tesla shall pay the Monthly Capacity Reservation Fee to the City during the Capacity Reservation Period irrespective of whether Tesla's aggregate 12-month average monthly peak demand in respect to the Tesla Facilities drops below the Reserved Capacity.
(d)
(e)
The Monthly Capacity Reservation Fee applies solely as consideration for the Reserved Capacity and does not apply to payment for Electric Services billed pursuant to the CPAU Rules and Regulations.
The City reserves the right but not the obligation to meet its obligations with respect to the Reserved Capacity in whole or in part at any given point in time from CPAU facilities other than the Hanover Substation without affecting Tesla’s obligations with respect to the Monthly Capacity Reservation Fee or the City’s obligations with respect to the Monthly Capacity Usage Credit.
3.3 Reservation of Capacity during the Subsequent Period (a) During the Subsequent Period, the City shall, in respect of the Hanover Substation, continue to reserve and make available not less than the Reserved Capacity to serve the electricity needs of the Tesla Facilities, provided that if Tesla's aggregate 12-month average monthly peak electricity demand in respect to the Tesla Facilities drops below the Reserved Capacity, the City shall:
6056801 7
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
80 Packet Pg. 485 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (i) promptly notify Tesla in writing of such event; and (ii) if Tesla fails to increase its aggregate twelve (12)-month average monthly peak electricity demand in respect to the Tesla Facilities to at least the Reserved Capacity within six (6) months of receipt of such written notice from the City, the City will have the right to divert any of the Capacity originally reserved for Tesla to other Electric Service customers.
(b)
(c)
In consideration for the Reserved Capacity made available during any Billing Period during the Subsequent Period, Tesla shall pay to the City a Monthly Capacity Reservation Fee, calculated in accordance with Schedule 1.
No Monthly Capacity Reservation Fee shall be payable by Tesla to the City if the City fails to make available to Tesla the Reserved Capacity at any time during that Billing Period.
3.4 3.5
Sale and Purchase of Electric Service
In addition to the Capacity Reservation Fee, if any, Tesla shall pay the City on a monthly basis for Electric Service provided to the Tesla Facilities in accordance with the CPAU Rules and Regulations. In addition to the rights and obligations conferred by this Agreement in respect to the Reserved Capacity, the City will provide Electric Service to the Tesla Facilities in accordance with the CPAU Rules and Regulations.
Capacity Reservation Modification
(a) Tesla may request a change to the amount of Reserved Capacity provided by the City to Tesla, including a corresponding adjustment to the amount of the Monthly Capacity Reservation Fee, during the Term pursuant to this Agreement (a "Capacity Reservation Modification"), subject to approval by the CPAU Director or his or her authorized delegee.
(b) To initiate a Capacity Reservation Modification, Tesla must send a written notice to the City requesting the modification. If Tesla’s requested modification seeks an increase in the amount of Reserved Capacity, City approval of the request will be subject to a determination by the CPAU Director that the CPAU system can accommodate the requested increase at that time. The approved changes to the amount of Reserved Capacity, the corresponding Monthly Capacity Reservation Fee, and Contracted Peak Demand in Schedule 1 will go into effect in the Billing Period no sooner than 90 days from receipt of the notice and approval by the City. The Parties shall determine the revised Reserved Capacity, Monthly Capacity Reservation Fee, and Contracted Peak Demand promptly following Tesla’s request for a Capacity Reservation Modification in accordance with the provisions of Schedule 1. For purposes of a Capacity Reservation Modification, the CPAU Director is authorized to modify Schedule 1, consistent with the terms and conditions of this Agreement, without City Council approval.
(c) Once the Capacity Reservation Modification is initiated the revised Monthly Capacity Reservation Fee will apply for each month that the revised Reserved Capacity is made available for Tesla until expiration of the Term or termination of the Agreement, including the Capacity Reservation Period and the Subsequent Period, unless the amount of Reserved Capacity is subsequently changed pursuant to a later Capacity Reservation Modification, in which case the most recent approved version of Schedule 1 will control.
6056801 8
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
81 Packet Pg. 486 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
4. CAPACITY USAGE CREDITING
Monthly Capacity Usage Credit4.1
(a) In respect to each Billing Period from the Capacity Reservation Fee Start Date until either the Capacity Usage Credit Period expires or the Capacity Usage Credit Maximum has been reached, whichever occurs first, Tesla shall receive from the City a Monthly Capacity Usage Credit, calculated in accordance with Schedule 2. (b)
(c)
In no event shall the aggregate of all Monthly Capacity Usage Credits accrued during the Term exceed the Capacity Usage Credit Maximum.
Any Monthly Capacity Usage Credit accrued during any Billing Period shall be set-off against the Monthly Capacity Reservation Fee payable in that Billing Period, if applicable, and only the balance shall be paid by Tesla to the City pursuant to Clause 5 below.
5. BILLING AND INVOICING
5.1 Currency of Monthly Invoices and payments
Except as otherwise expressly provided in this Agreement, each Monthly Invoice shall be for amounts in USD and all payments shall be made in USD in accordance with the CPAU Rules and Regulations.
5.2 Delivery of Monthly Invoices
(a) Commencing with the Billing Period following the month in which the Effective Date occurs, the City shall submit to Tesla, in accordance with the CPAU Rules and Regulations, a Monthly Invoice setting out the City's computation of the Monthly Payment for that Billing Period in respect to the Monthly Capacity Reservation Fee, if applicable, and the Monthly Capacity Usage Credit.
(b) Each Monthly Invoice shall include a Monthly Statement setting out:
(i) a calculation of:
(A)
(B)
the Monthly Capacity Reservation Fee, if applicable; and the Monthly Capacity Usage Credit; and
(ii) such further supporting documentation and information as Tesla may reasonably request, provided that no such request shall prejudice or delay payment of the amount due in respect of the relevant Monthly Invoice.
5.3 Payment of Monthly Invoices
(a) An amount payable under a Monthly Invoice shall be paid in immediately available and freely transferable cleared funds for value on or before the due date specified therein (the "Due Date") to such account of the City as shall have been previously notified to Tesla.
(b) Tesla shall pay to the City any amount referred to in a Monthly Invoice on or before the Due Date.
6056801 9
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
82 Packet Pg. 487 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
5.4 Set off rights
(a) Where in any Billing Period there is both a Monthly Capacity Reservation Fee and a Monthly Capacity Usage Credit, the two amounts shall be set-off against each other and only the balance shall be paid by Tesla to the City in lieu of each such payment in respect of that Billing Period. Any payment shall be made to the appropriate account of the City.
(b) Save insofar as permitted by the provisions of Clause 5.4(a) above, all payments by Tesla to the City under this Agreement shall be made free of any restriction or condition, whether by way of set-off or otherwise, but the making of payments shall be without prejudice to the other rights of Tesla.
5.5 5.6
Application of payments
Payments due from Tesla to the City pursuant to this Agreement, including payments for Electric Service and Monthly Capacity Reservation Fees, will be subject to the provisions of Rule and Regulation 11 of the CPAU Rules and Regulations.
Disputed Monthly Invoices
If Tesla wishes to dispute a Monthly Invoice, it shall do so in accordance with the CPAU Rules and Regulations.
6. TERMINATION
6.1 Termination for Tesla Events of Default
The City may give notice to Tesla of its intention to terminate this Agreement before the Expiration Date upon the occurrence of any of the following events (each, a "Tesla Event of Default"), except where such event arises as a result of a material breach by the City of this Agreement or a CPAU Event of Default:
(a) Tesla commits a material breach of any of its material obligations under this Agreement and does not remedy the breach within thirty (30) Business Days of receiving notice from the City of such breach, provided that if such failure cannot be remedied by Tesla within such period of thirty (30) Business Days with the exercise of reasonable diligence, then such cure period shall be extended for an additional reasonable period of time (not to exceed thirty (30) Business Days), so long as such breach is capable of being remedied with the exercise of reasonable diligence and Tesla is exercising reasonable diligence to remedy such breach; or
(b) a representation or warranty made or repeated by Tesla in accordance with Claus e 8.1 proves to have been incorrect or misleading in any material respect when made or repeated.
6.2 Termination for CPAU Events of Default
Tesla may give notice to the City of its intention to terminate this Agreement before the Expiration Date upon the occurrence of any of the following events (each, a "CPAU Event of Default"), except where such event arises as a result of a material breach by Tesla of this Agreement or a Tesla Event of Default:
(a) the City commits a material breach of any of its material obligations under this Agreement and does not remedy the breach within thirty (30) Business Days of 6056801 10
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
83 Packet Pg. 488 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E receiving notice from Tesla of such breach, provided that if such failure cannot be remedied by the City within such period of thirty (30) Business Days with the exercise of reasonable diligence, then such cure period shall be extended for an additional reasonable period of time (not to exceed thirty (30) Business Days), so long as such breach is capable of being remedied with the exercise of reasonable diligence and the City is exercising reasonable diligence to remedy such breach; or (b) a representation or warranty made or repeated by the City in accordance with Clause
8.1 proves to have been incorrect or misleading in any material respect when made or repeated.
6.3 Termination Procedure
Upon the occurrence of Tesla Event of Default or a CPAU Event of Default, the following procedures shall be followed by the Parties:
(a) Upon the occurrence of a Tesla Event of Default or a CPAU Event of Default, as the case may be, which is not cured by the Defaulting Party within the applicable grace period, if any, the other Party (the "Non-Defaulting Party") may, at its option, initiate termination of this Agreement by delivering a notice of its intention to terminate this Agreement (a "Notice of Intention to Terminate") to the Defaulting Party. The Notice of Intention to Terminate shall specify in reasonable detail the Tesla Event of Default or CPAU Event of Default, as the case may be, giving rise to such notice. (b)
(c)
A Notice of Intention to Terminate given pursuant to Clause s 6.3(a) shall be specified as such, and shall specify in reasonable detail the event giving rise to such notice.
Service of a Notice of Intention to Terminate by one Party shall not at any time preclude service of a Notice of Intention to Terminate by the other Party.
Following the delivery of a Notice of Intention to Terminate, the Parties shall, consult for a period ("Consultation Period") of thirty (30) days commencing on such delivery date with respect to any such Tesla Event of Default or CPAU Event of Default (or such longer period as the Parties may mutually agree), as to what steps shall be taken with a view to mitigating the consequences of the relevant Tesla Event of Default or CPAU Event of Default, as applicable, taking into account all the circumstances. (d) During the Consultation Period:
(i) the Defaulting Party may continue to undertake efforts to cure the Default, and if the Default is cured at any time prior to the delivery of a Termination Notice in accordance with Clause 6.3(e), then the Non-Defaulting Party shall have no right to terminate this Agreement in respect of such cured Default (but without prejudice to any rights in respect of any future breach of this Agreement); (ii) each Party shall not impede or otherwise interfere with the other Party's efforts to remedy the Tesla Event of Default or CPAU Event of Default, as the case may be, which gave rise to the issuance of the Notice of Intention to Terminate; and
(iii) both Parties shall, save as otherwise provided in this Agreement, continue to perform their respective obligations under this Agreement. (e) If, during the Consultation Period, the Defaulting Party has diligently pursued the cure of the Default but the Default could not, with the exercise of reasonable diligence, be cured within such Consultation Period, then the Defaulting Party shall have the further 6056801 11
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
84 Packet Pg. 489 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E period of time which is reasonably necessary to cure that Default, which, further period shall, subject to Clause 6.3(g), not exceed thirty (30) days, and the Consultation Period shall be extended in accordance with such extension.
(f) An extension to the Consultation Period of greater than the thirty (30) days referred to in Clause 6.3(e) may be established if agreed by the Non-Defaulting Party. (g) If a Defaulting Party determines that it requires the benefit of a further period to cure the Default as provided for under Clause 6.3(e), it shall, as soon as reasonably practicable thereafter (but not later than the expiration of the thirty (30) day period established in accordance with Clause 6.3(e)) give notice to the Non-Defaulting Party that more time is required to rectify the Default, giving a reasonable explanation as to why more time is required and requesting that the Consultation Period be extended by the further period referred to in the notice.
(h) Within fifteen (15) days of the expiration of the Consultation Period (as it may be extended in accordance with the foregoing clauses), or, if there is no Consultation Period, within fifteen (15) days of the date of the Notice of Intention to Terminate, or unless, in the case of a Tesla Event of Default or a CPAU Event of Default giving rise to the Notice of Intention to Terminate such Default shall have been remedied, the Party having given the Notice of Intention to Terminate may terminate this Agreement by delivering a notice to the other Party terminating this Agreement ("Termination Notice"), whereupon this Agreement shall terminate on the date of the Termination Notice.
7. DISPUTE RESOLUTION
Negotiation and Mediation7.1
(a) Any Dispute arising from or relating to this Agreement shall first be promptly referred to the Parties' respective senior level management for resolution. (b) If the Parties' senior level management are unable to resolve any such Dispute within twenty (20) days after referral, or within any mutually agreed upon extension thereof, either Party may, by notice to the other Party (the "Mediation Notice"), require such Dispute to be submitted to non-binding mediation in Palo Alto, California, with a single mediator who is mutually acceptable to the Parties. The Parties will use reasonable efforts to cause such mediation to be convened, conducted and completed within a reasonable period of time, from the date of the Mediation Notice, subject to the availability of a mutually acceptable mediator and commensurate availability of the individuals that each Party, respectively, requires to represent it at mediation, including legal counsel, percipient witnesses, expert witnesses, sureties, and individuals authorized to negotiate a settlement. The cost of mediation, including the mediator’s fee, will be shared equally by the Parties, but each Party is solely responsible for its own legal costs and its own legal representation.
7.2 Arbitration
(a) If and to the extent the Parties are unable to resolve the Dispute through mediation, then either Party may take the unresolved portion of a Dispute to arbitration in accordance with the then-current Streamlined Arbitration Rules of the Judicial Arbitration and Mediation Services ("JAMS"). The existence, content and result of the arbitration shall be held in confidence by the Parties, their representatives, any other 6056801 12
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
85 Packet Pg. 490 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E participants and the arbitrator, subject to the limits of Law governing the City’s public disclosure obligations.
(b)
(c)
(d)
The arbitration will be conducted by a single arbitrator selected by agreement of the Parties or, failing such agreement, appointed in accordance with JAMS, in either case, in San Francisco County, California.
The arbitration award shall be final and binding on the Parties and the Parties shall not have the right to appeal any such award, except to the extent expressly required by California Law.
Each Party will bear its own expenses in the arbitration and will share equally the costs of the arbitration; provided, however, that the arbitrator may, in their discretion, award reasonable costs and fees to the prevailing Party.
7.3 Performance of Obligations to Continue
(a) Pending final resolution of each Dispute hereunder, the Parties shall each continue to fulfil their respective obligations hereunder, irrespective of whether any Dispute has been noticed, submitted, or is under negotiation or consideration by either Party. (b) Upon resolution of each Dispute, whether by agreement of the Parties or through a Dispute proceeding, any amounts found to be owing by either Party shall be promptly paid by the Party owing payment to the other Party from the day following the date of the overpayment or underpayment, as applicable, until the date of repayment in full.
7.4 Specific Performance
Notwithstanding anything to the contrary contained in this Clause 7, if, due to a material breach or threatened material breach a Party is suffering irreparable harm for which monetary damages are inadequate, or if a Party is seeking to enforce an arbitration award obtained pursuant to this Clause 7, such Party may petition a court of competent jurisdiction for injunctive relief, specific performance or other equitable relief.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS
General Representations and Warranties8.1
Each Party represents and warrants to the other Party on the Signature Date and the Effective Date that:
(a)
(b)
(c)
it is a legal entity, duly organized, validly existing and in good standing under the Law of jurisdiction of incorporation or formation, as applicable; this Agreement constitutes a legal, valid and binding obligation of such Party enforceable in accordance with its terms; and
the execution, delivery and performance of this Agreement (i) is within its powers; (ii) has been duly authorized by all requisite action; and (iii) to the best of the Party’s knowledge will not violate any agreement, commitment, certificate or other document to which it is a party or by which any of its assets may be bound or affected. 6056801 13
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
86 Packet Pg. 491 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
8.2 Covenants
Each Party shall comply with all applicable Law required for the performance of its obligations under this Agreement.
9. ASSIGNMENT AND NOVATION
General9.1
Subject to Clause 9.2, neither Party shall assign or transfer its rights or obligations under this Agreement without the prior written consent of the other Party. Any purported assignment, novation or transfer without such consent, whether voluntary or involuntary, by operation of Law, under legal process or proceedings, by receivership, in bankruptcy or otherwise, is void.
9.2 Unauthorized Assignments
Any attempted assignment of this Agreement (or any part thereof) or any of the rights, duties and obligations under this Agreement other than in strict conformance with this Clause 9 is null and void and of no force or effect.
10. NOTICES
Notices10.1
(a) All notices allowed or required under this Agreement shall be in writing, sent to the address for notices given for the City and Tesla on the signature page to this Agreement, or such other address as either Party may notify the other Party in writing from time to time, and shall be deemed given:
(i) if sent by courier, on the date when left at the address of the recipient if such date is a Business Day or on the next Business Day if such date is not a Business Day; and
(ii) if sent by email, upon receipt by the sender of an email confirming receipt (or otherwise evidencing receipt) of the notice by the recipient (in which case the email will be deemed received on the date it was a received by the recipient if such date is a Business Day, or on the next Business Day if such date is not a Business Day). An automatic "read receipt" shall not constitute confirmation of receipt for purposes of this Clause 10.1.
(b) Notices shall be sent to the notice address given for the City and Tesla on the signature page to this Agreement, or such other address as either Party may notify the other Party in writing from time to time. Nothing in this Clause 10.1 shall be construed to restrict the transmission of routine communications between representatives of the City and Tesla.
11. CONFIDENTIALITY AND ANNOUNCEMENTS
The Parties acknowledge that the City is subject to California Law governing charter cites, including public disclosure requirements which include, but are not limited to, open meeting requirements pursuant to Government Code section 54950 et seq. and public record disclosure requirements pursuant to Government Code section 7920 et seq. Except as required for compliance with applicable Law, neither Party shall advertise or issue any public announcement regarding the execution of this Agreement or its contents, disclose the existence of this Agreement or otherwise disclose its contents, or use the other Party’s mark, name or logo in 6056801 14
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
87 Packet Pg. 492 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E any marketing literature, web sites, articles, press releases (including interviews with representatives of media organizations of any form), or any other document or electronic communication, without the prior written consent of the other Party. The foregoing shall not prohibit a Party from making any public disclosure or filing that it determines in good faith is required by Law, including, but not limited to, in respect of Tesla, the rules of the stock exchange on which its shares, or the shares of its parent company, are listed.
12. MISCELLANEOUS
Governing Law12.1
This Agreement and all claims arising out of or relating to this Agreement and the transactions contemplated hereby shall in all respects be governed by and interpreted in accordance with the Law of the state of California, without regard to the conflicts of Law principles that would result in the application of any Law other than the Law of such state.
12.2 No Waiver
(a) No waiver by either Party of any default or defaults by the other Party in the performance of any of the provisions of this Agreement:
(i) shall operate or be construed as a waiver of any other or further default or defaults whether of a like or different character; or
(ii) shall be effective unless in writing duly executed by a duly authorised representative of such Party.
(b) Neither the failure by either Party to insist on any occasion upon the performance of the terms, conditions, and provisions of this Agreement nor time or other indulgence granted by one Party to the other shall act as a waiver of such breach or acceptance of any variation or the relinquishment of any such right or any other right under this Agreement, which shall remain in full force and effect.
12.3 Entire Agreement; Severability
This Agreement constitutes the entire agreement between the Parties regarding the subject matter hereof and supersedes all prior agreements, representations and understandings, oral or written, between the Parties regarding the subject matter hereof. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, such term shall be severable from the remainder of this Agreement and the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected and each term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by the Law.
12.4 Costs
Each Party will be solely responsible for its own costs and expenses incurred in connection with the preparation, negotiation, execution, delivery and performance of, and compliance with, this Agreement.
6056801 15
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
88 Packet Pg. 493 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
12.5 Amendment; Modification; Waiver
No amendment or modification of this Agreement is effective unless it is in writing and signed by each Party. No waiver by either Party of any provision of this Agreement is effective unless explicitly set forth in writing and signed by such Party. No failure to exercise, or delay in exercising, any right or remedy arising from this Agreement operates or may be construed as a waiver thereof. No single or partial exercise of any right or remedy hereunder precludes any other or further exercise thereof or the exercise of any other right or remedy.
12.6 Relationship of the Parties
The relationship between the Parties is that of independent contractors. Nothing contained in this Agreement shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment or fiduciary relationship between the Parties, and neither Party shall have authority to contract for or bind the other Party in any manner whatsoever.
12.7 12.8
Further Assurances
Each Party agrees to execute and deliver all further instruments and documents, and take all further action, as may be reasonably necessary to complete performance by the Parties hereunder and to effectuate the purposes and intent of this Agreement.
No Third-Party Beneficiaries
This Agreement and all rights hereunder are intended for the sole benefit of the Parties and shall not imply or create any rights on the part of, or obligations to, any other person. Claims by non-Parties indemnified pursuant to this Agreement may only be brought by a Party to this Agreement.
12.9 Survival
Provisions of this Agreement which by their nature contemplate or govern performance or observance subsequent to the termination or expiration of this Agreement or any transactions contemplated herein shall survive such termination or expiration. Except as otherwise set forth in this Agreement, the expiration or termination of this Agreement will not affect any liabilities of the Parties that accrued prior to such expiration or termination.
12.10 Good Faith and Fair Dealing
Each Party's actions in connection with this Agreement (including in the performance of its obligations and enjoyment of its rights hereunder), will be undertaken in accordance with the principles of good faith and fair dealing. Such obligation shall be interpreted to mean that a Party must act honestly and reasonably, but shall not be required to otherwise act contrary to its legitimate commercial interests.
12.11 Successors and Assigns
This Agreement shall be binding upon, and inure to the benefit of the Parties and their respective successors and permitted assigns.
12.12 Counterparts
This Agreement may be executed by each Party on a separate counterpart, each of which when executed and delivered shall constitute an original, but both counterparts shall together constitute one and the same instrument.
6056801 16
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
89 Packet Pg. 494 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
12.13 Mutuality of drafting
The Parties hereby stipulate and agree that each of them fully participated and was adequately represented by counsel in the negotiation and preparation of this Agreement and the Parties further stipulate and agree that in the event of an ambiguity or other necessity for interpretation to be made of the content of this Agreement, this Agreement shall not be construed in favour of or against either Party as a consequence of such Party having had a greater role in the preparation of this Agreement, but shall be construed as if the language were mutually drafted by both Parties with full assistance of counsel. [Remainder of Page Intentionally Left Blank]
6056801 17
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
90 Packet Pg. 495 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E In witness whereof the Parties, intending to be legally bound, have caused this Agreement to be executed by their duly authorised officers as of the date first above written.
CITY OF PALO ALTO
By:
Name: Ed Shikada
Title: City Manager
APPROVED AS TO FORM:
By:
Name: Molly Stump
Title: City Attorney
APPROVED:
By:
Name: Dean Batchelor
Title: Director of Utilities
ADDRESS:
City of Palo Alto
City Clerk
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
With copies to:
Utilities Department
250 Hamilton Avenue
Palo Alto, CA 94303
Signature Page to Capacity Reservation Agreement
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
91 Packet Pg. 496 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E ATTN: Tomm Marshall
TESLA, INC.
By:
Name: Vaibhav Taneja
Title: Chief Financial Officer
Address:
Attn:
1 Tesla Road, Austin, TX 78725
General Counsel / Legal
+1.512.516.8177Phone:
Email:
cc:
[email protected]
[email protected]
6056801 2
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
92 Packet Pg. 497 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS The Reserved Capacity for the Tesla Facilities is 11,200 kVA unless modified by a Capacity Reservation Modification.
Determination of the Monthly Capacity Reservation Fee
The Monthly Capacity Reservation Fee for the Reserved Capacity listed above is calculated in kW rather than kVA. This is because the City meters peak energy Demand based on kW rather than kVA.
To calculate a Monthly Capacity Reservation Fee based on kW for a Reserved Capacity based on kVA, a conversion from kVA to kW is required. In actual day-to-day operation of the CPAU electric system, a capacity of 1 kVA might be able to transmit a range of kW quantities depending on the characteristics of the electric load. For the purpose of the Monthly Capacity Reservation Fee this Agreement assumes that 11,200 kVA Reserved Capacity corresponds to 9,000 kW Demand. Because the Monthly Capacity Reservation Fee is intended to reimburse the City for the opportunity cost of reserving unused capacity for Tesla rather than marketing it to other customers, it is indexed to the Distribution Demand Charge for the applicable rate schedule. However, because the Distribution Demand Charges are designed to recover costs based on a month-varying metered peak Demand, the Capacity Reservation Fee includes a month-varying Contracted Peak Demand below that corresponds to a monthly load shape that the City and Tesla have agreed is reflective of what the Parties expect Tesla’s eventual actual load shape will be.
(a) For the purposes of this Schedule 1, the following term has the following meaning:
"Contracted Peak Demand" means, for each Billing Period corresponding with the relevant month:
(i) January:
February:
March:
April:
7,500 kW;
7,500 kW;
7,500 kW;
7,500 kW;
7,500 kW;
9,000 kW;
9,000 kW;
9,000 kW;
9,000 kW;
7,500 kW;
7,500 kW; and
7,500 kW.
(ii)
(iii)
(iv)
(v) May:
(vi)
(vii)
June:
July:
(viii) August:
(ix)
(x)
September:
October:
(xi)
(xii)
November:
December:
(b) Determination of the Monthly Capacity Reservation Fee Schedule 1
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
93 Packet Pg. 498 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E The "Monthly Capacity Reservation Fee" for any Billing Period shall be an amount in USD equal to:
(B – A)*C
where:
A is the highest fifteen (15) minute peak Demand measured by CPAU meter(s) in relation to the Tesla Facilities during that Billing Period;
B
C
is the Contracted Peak Demand for that Billing Period; and is the Distribution Demand Charge(s) applicable to the peak time period for the season corresponding to the Billing Period defined in the applicable rate schedule set by the City and selected by Tesla (if multiple rate schedules apply) pursuant to the CPAU Rules and Regulations.
Notwithstanding the foregoing, if application of the formula set forth hereinabove for determining the Monthly Capacity Reservation Fee results in a negative number sum for any Billing Period, for purposes of this Agreement, that negative number sum will be deemed to equal zero for that Billing Period.
Schedule 1
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
94 Packet Pg. 499 of 553
Exhibit D to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E SCHEDULE 2: MONTHLY CAPACITY USAGE CREDIT
Determination of the Monthly Capacity Usage Credit
(a) For the purposes of paragraph (b) of this Schedule 2, the following terms have the following meaning:
"Capacity Usage Credit Maximum" means an amount in USD equal to the aggregate amount of the General Use Utility Asset Costs incurred by Tesla pursuant to the Improvement Agreement, excluding therefrom those amounts that have reimbursed to Tesla by the City under the terms of the Improvement Agreement. The Parties will amend this Schedule 2 to include the amount of the Capacity Usage Credit Maximum within 14 Business Days following payment of the “City Reimbursement” pursuant to the Improvement Agreement, as that term is defined therein.
"General Use Utility Asset Costs" means, in relation to the improvements installed by Tesla and accepted by the City pursuant to the Improvement Agreement, the aggregate documented cost in USD incurred by each Party associated with the material cost, but excluding the design and construction costs, of all equipment and fixed assets that can be used for any CPAU customer (and not restricted to serving a Tesla Facility), as determined by CPAU, including, but not limited to, transformers, switchgear, protection equipment, and cables, but expressly excluding any costs associated with the acceleration of production or accelerated delivery of such equipment.
(b) Determination of the Monthly Capacity Usage Credit
The "Monthly Capacity Usage Credit Rate" for any Billing Period during the Capacity Reservation Period shall be an amount specified on a USD per kWh basis equal to:
A / (B * C)
where:
A
B
is the Capacity Usage Credit Maximum;
is the estimated annual electrical consumption of the Tesla Facilities expressed in units of kWh, being 75,000,000 kWh; and
C is the Capacity Usage Credit Period expressed in years, being seven (7) years.
The “Monthly Capacity Usage Credit” for any Billing Period shall be an amount specified in USD equal to the Monthly Capacity Usage Credit Rate multiplied by the Delivered Energy for the Billing Period.
Schedule 2
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
95 Packet Pg. 500 of 553
Exhibit E to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT E
PROJECT SCHEDULE
Pursuant to Section 8.2, the below schedule, dated December 14, 2024, constitutes the planned schedule for design and construction of the Project as of the Effective Date of the Agreement.
Project completion is expected to occur 245 days after the latter of the issuance of the Notice to Proceed, applicable permits, or execution of this Agreement. •
•
•
•
•
City Council Approval: January 16, 2024
Construction begins: January 29, 2024
Demolition: January 29, 2024 – March 2024
Power Distribution Center delivery: April 2024
Project Completion: September 17, 2024
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
96 Packet Pg. 501 of 553
Exhibit F to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT F
INSURANCE REQUIREMENTS (TESLA)
1.1. Commercial General Liability Insurance.
1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage.
1.1.2. USD $10,000,000 general aggregate
1.1.3. Coverages.
1.1.3.1. met by combination of Primary and Umbrella or Excess Liability policies.
1.1.3.2. Include the City as additional insured where required by written contract.
The total of required limits for liability coverage required herein may be
1.2. Business Automobile Liability Insurance.
1.2.1. USD $1,000,000 combined single limit for third party bodily injury or third party property damage,
1.2.2. Coverages.
1.2.2.1. with the work performed under this Agreement.
1.2.2.2. Include the City as additional insured where required by written contract.
Coverage with respect to any l vehicles of Tesla used in connection
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1. 1.3.1.1.1.
1.3.1.1.2. Coverages.
As required by state or federal laws.
Tesla may waive Workers’ Compensation Insurance
requirement if it is a qualified self-insured in the state in which the work under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1. 1.3.2.2.
1.3.2.3. USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit F shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. Tesla shall give the other party prior written notice in the event of cancellation of any policy required to be obtained under Exhibit F.
Deductibles and Self-Insured Retentions. Tesla may select their own insurance deductibles or self-insured retentions for insurances required under Exhibit F, to the extent 6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
97 Packet Pg. 502 of 553
Exhibit F to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E such deductibles or self-insured retentions are reasonable. Tesla’s self-insured retentions and deductibles are the sole responsibility of Tesla.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the other party evidencing the required insurance in Exhibit F.
Subcontractor Insurance. Tesla shall require each of its subcontractors performing work during the Term to maintain insurance coverage in accordance with the insurance requirements of Tesla’s standard subcontract, supplier or designer agreements, as applicable.
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
98 Packet Pg. 503 of 553
Exhibit G to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT G
INSURANCE REQUIREMENTS (ENGINEER)
1.1. Commercial General Liability Insurance.
1.1.1. USD $2,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage.
1.1.2. USD $2,000,000 general aggregate
1.1.3. Coverages.
1.1.3.1. The total of required limits for liability coverage required herein may be met by combination of Primary and Umbrella or Excess Liability policies.
1.1.3.2. 1.1.3.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.2. Business Automobile Liability Insurance.
1.2.1. USD $1,000,000 combined single limit for third party bodily injury or property damage.
1.2.2. Coverages.
1.2.2.1. Coverage with respect to any and all vehicles of the General Contractor whether owned, hired, leased, borrowed, or non-owned, assigned to or used in connection with the work performed under this Agreement.
Include the City and Tesla as additional insured.1.2.2.2.
1.2.2.3. Separation of insureds/severability of interests.
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1. 1.3.1.1.1.
1.3.1.1.2. Coverages.
As required by state or federal laws.
The General Contractor may waive Workers’ Compensation
Insurance requirement if it is a qualified self-insured in the state in which the work under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1. 1.3.2.2.
1.3.2.3. USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
1.4. Professional Liability or Errors and Omissions Insurance.
1.4.1. USD $5,000,000 each claim.
1.4.2. USD $5,000,000 in aggregate.
1.4.3. Coverages.
1.4.3.1. Written on a Claims-made basis
1.4.3.2. The retroactive date shall be not later than the Effective Date. 6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
99 Packet Pg. 504 of 553
Exhibit G to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit G shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. The Engineer shall give the City prior written notice in the event of cancellation of any policy required to be obtained under Exhibit F.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing the required insurance in Exhibit G.
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
100
Packet Pg. 505 of 553
Exhibit H to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT H
INSURANCE REQUIREMENTS (GENERAL CONTRACTOR)
1.1. Commercial General Liability Insurance.
1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage.
1.1.2. USD $5,000,000 general aggregate
1.1.3. USD $5,000,000 products/completed operations aggregate.
1.1.4. Coverages.
1.1.4.1. The total of required limits for liability coverage required herein may be met by combination of Primary and Umbrella or Excess Liability policies.
1.1.4.2. 1.1.4.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.2. Business Automobile Liability Insurance.
1.2.1. USD $5,000,000 combined single limit for third party bodily injury or property damage,
1.2.2. Coverages.
1.2.2.1. Coverage with respect to any and all vehicles of the General Contractor whether owned, hired, leased, borrowed, or non-owned, assigned to or used in connection with the work performed under this Agreement.
1.2.2.2. 1.2.2.3.
Include the City and Tesla as additional insured.
Separation of insureds/severability of interests.
1.3. Workers Compensation and Employers Liability Insurance.
1.3.1. Workers Compensation
1.3.1.1. 1.3.1.1.1.
1.3.1.1.2. Coverages.
As required by state or federal laws.
The General Contractor may waive Workers’ Compensation
Insurance requirement if it is a qualified self-insured in the state in which the work under this Agreement is performed.
1.3.2. Employer Liability
1.3.2.1. 1.3.2.2.
1.3.2.3. USD $1,000,000 bodily injury for each accident.
USD $1,000,000 bodily injury by disease for each employee.
USD $1,000,000 bodily injury by disease policy limit.
1.4. Contractor’s Pollution Liability Insurance.
1.4.1. USD $1,000,000 each claim.
1.4.2. USD $2,000,000 in aggregate.
1.4.3. Coverages.
1.4.3.1. 1.4.3.2.
Written on a Claims-made basis.
The retroactive date shall be not later than the Effective Date. 6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
101
Packet Pg. 506 of 553
Exhibit H to Substation Improvement Agreement
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit H shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party.
Notice of Cancellation. The General Contractor shall give the City prior written notice in the event of cancellation of any policy required to be obtained under Exhibit H.
Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing the required insurance in Exhibit H.
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
102
Packet Pg. 507 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT I
CONSTRUCTION CONTRACT FORM
Master Services Agreement (Construction)
This Master Services Agreement (“MSA” or “Agreement”) is entered into by and between Tesla Inc., a Delaware corporation with offices at 13101 Tesla Road, Austin, Texas 78725 (“Tesla” or “Owner”) and the service provider identified below (“Contractor”) effective as of the date signed below by Tesla (“Effective Date”) and govern Contractor’s performance, and Tesla’s purchase, of services.
1. THE SERVICES
1.1 Obligation to Provide the Services, Generally. The parties intend through this Agreement to create a master contract setting forth the terms and conditions under which the Contractor will perform the Work and/or specified services, which make up the whole or a portion of particular Project or Projects. Individual work orders (“Work Authorization” or “Work Authorizations”) will be executed in the form attached hereto as Exhibit A, setting forth the agreement regarding Project-specific terms. This Agreement does not obligate Owner to engage Contractor to perform any work or Contractor to perform any work, until both parties have signed a Work Authorization, and then only for the Project specified in the Work Authorization. Any affiliate of Owner (the “Service Recipient”) will have the right to enter into a Work Authorization pursuant to this Agreement, and with respect to such Work Authorization, such affiliate becomes a party to this Agreement and references to Owner in this Agreement are deemed to be references to such affiliate.
1.2 Authorization of Services through Work Authorization. Contractor shall provide, and Tesla may purchase, Services pursuant to a Work Authorization. Both parties must sign a Work Authorization for it to be effective. If Contractor commences services for Owner or any affiliate of Owner in the absence of a Work Authorization, this Agreement will nevertheless apply, unless the parties agree otherwise in a writing signed by both parties. If there is a conflict between this Agreement and an Work Authorization, the terms of this Agreement will prevail; except that an Work Authorization may amend or override the terms of this Agreement if and to the extent that the Work Authorization identifies the provision(s) of the Agreement the Work Authorization is intended to amend or override and expressly states that the Parties intend to amend or override such provision(s) for purposes of that Work Authorization. The execution of a Work Authorization by the Owner and the Contractor creates a separate and distinct standalone construction contract that is applicable only to the Project identified in the Work Authorization, even though such Project-specific construction contract incorporates and makes reference to this Agreement, and other Project-specific construction contracts may also incorporate and refer to this Agreement. In no event shall the rights and obligations of the Owner and Contractor under one Project-specific construction contract affect the rights and obligations of Owner and Contractor under a different Project-specific construction contract.
1.3 Work; Scope of the Services. For each Project, the term “Work” means all reasonably necessary and inferable construction and services required of the Contractor by the Contract Documents (including, without limitation, all work, labor, materials, tools, equipment, transportation, procedures, techniques, and supplies), whether completed or partially completed, and whether completed by Contractor, Subcontractors, Sub- subcontractors, Suppliers or any other entity for whom the Contractor is responsible under or pursuant to the Contract Documents, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor’s obligations, including final completion of the construction in accordance with the Drawings and Specifications to achieve a complete and functioning Project in compliance with the Contract Documents. The Work may constitute the whole or a part of the Project, as described in the applicable Work Authorization. The “Services” are the following, as they may be supplemented, modified or replaced during the Term: (a) the functions described in this Agreement or in an Work Authorization as functions for which Contractor is responsible; and (b) any functions related to the foregoing that are not specifically described in this Agreement or in an Work Authorization but are required for the provision of the Services and the completion of the Work in accordance with this Contract Documents.
1.4 Services Not Exclusive. Contractor is a non-exclusive provider of Services. Tesla and its Affiliates have no obligation to order or purchase any Services. The extent and quantity of Services purchased shall be Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
103
Packet Pg. 508 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E determined by Tesla. Tesla may purchase from any third party services that are identical or similar to the Services described in this Agreement. Contractor will cooperate and coordinate with Tesla or any other service providers selected by Tesla as reasonably required for Tesla or the service provider to perform services for which it is responsible.
1.5 Relationship of the Parties. The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Owner and all of the Owner’s consultants, and exercise the Contractor’s skill and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with the Owner’s interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor and to make payments to the Contractor in accordance with the requirements of the Contract Documents.
Nothing in this Agreement shall be deemed to create a joint venture or partnership between Contractor and Tesla or any of Tesla’s Affiliates.
1.6 The Contract Documents. The Contract Documents form the “Contract for Construction” or the “Contract”. The Contract represents the entire and integrated agreement between the Owner and Contractor and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Work Authorization or Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Owner and a Subcontractor or a Sub- subcontractor, or (2) between any persons or entities, other than the Owner and the Contractor. For each Project, the Contract Documents consist of this Agreement, any Supplementary Conditions of the Agreement as set forth in the applicable Work Authorization, Drawings, Specifications, Addenda issued prior to execution of this Agreement, the applicable Work Authorization, other documents listed in the Work Authorization and Modifications issued after execution of this Agreement, all of which form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. Except as provided to the contrary in any Work Authorization or Modification, the Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral, including, without limitation the terms of any purchase order now or hereafter accepted (or deemed accepted) by Contractor.
2. PERFORMANCE
2.1 Time of Performance.
(a) Contract Time. The Commencement Date shall be the date of the notice to proceed with construction on the Project site ("Notice to Proceed") sent by Owner to Contractor with respect to the Project or such other date as set forth in the Work Authorization. No Work on site shall be commenced by Contractor until receipt of a Notice to Proceed from Owner. However, during the period between the date the Agreement is executed and the date the Notice to Proceed is issued, certain elements of the Work may be authorized by the Owner.
During such period all of the terms of the Agreement shall apply. The Contract Time shall be measured from the Commencement Date as specified in the applicable Work Authorization or Notice to Proceed. The Contractor shall achieve Substantial Completion of the Work within the Contract Time(s) specified in the applicable Work Authorization, subject to adjustments of the Contract Time as provided in the Contract Documents. Contractor will provide the resources necessary to, and will, complete all Services diligently, in a timely manner, and in accordance with the time schedules set forth in this Agreement (or applicable Work Authorization). Time is of the essence with respect to the provision of Services under this Agreement.
Contractor will promptly notify Tesla in writing upon becoming aware of any circumstances that may reasonably be expected to jeopardize the timely completion of any Services. Contractor will use Commercially Reasonable Efforts to avoid or minimize any delays in performance and will inform Tesla of (a) the steps Contractor is taking or will take to do so and (b) the projected completion time. Within thirty days after the Effective Date, Contractor shall prepare and submit to Owner for Owner’s approval a schedule for performance of the Work in a format and with a level of detail acceptable to Owner (the “Construction Schedule”). The Construction Schedule shall be of a critical path method type, acceptable to the Owner, that shall also (i) provide a graphic representation of all activities and events that will occur during the performance of the Work; (ii) identify each phase of construction and occupancy; (iii) set forth dates that are critical in ensuring the timely and orderly completion of the Work in accordance with the requirements of the Contract Documents (“Project Milestones”); and (iv) include time loss for normal adverse weather conditions whether shown in the Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
104
Packet Pg. 509 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Contractor’s logic and durations or not. The schedule shall be regularly updated by Contractor to reflect Project progress and conditions and any such updates shall be promptly provided to Owner in electronic and hard copy.
(b) Substantial Completion.
(i) Unless otherwise defined in an applicable Work Authorization, Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use, subject only to a list (“Punchlist”) of minor items that do not adversely affect such use (“Punchlist Items”), provided, in addition, that as a condition precedent to Substantial Completion, the Contractor shall provide the Owner with a schedule of all permits required for the Work and occupancy of the Project and, attached to such schedule, a copy of each such permit.
(ii) When the Contractor considers that the Work, or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Contractor and Owner will make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Owner’s inspection discloses any item, including a Punchlist Item, which is not sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work or designated portion thereof for its intended use, the Contractor shall, before issuance of the Certificate of Substantial Completion, complete or correct such item upon notification by the Owner. In such case, the Contractor shall then submit a request for another inspection by the Owner to determine Substantial Completion.
(iii) When the Work or designated portion thereof is substantially complete, the Contractor will prepare a “Certificate of Substantial Completion” that shall establish the date of Substantial Completion, shall establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and shall fix the time within which the Contractor shall finish any and all items on the Punch List accompanying the Certificate of Substantial Completion. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Contractor shall complete all items within 30 days after issuance of the Certificate of Substantial Completion, provided, however, if certain items cannot be completed due to the unavailability of necessary labor or materials, the Contractor shall have such additional time as is reasonably required to complete such items. All Work to be performed by the Contractor after Substantial Completion, including but not limited to Punch List work, shall be coordinated with the Owner and shall be performed after-hours unless otherwise agreed to by the Owner. (iv) The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such certificate. Upon such acceptance and consent of surety, if any, the Owner shall make payment of retainage applying to such Work or designated portion thereof. Such payment shall be adjusted for Work that is incomplete or not in accordance with the requirements of the Contract Documents (c) Late Delivery Damages. Without limiting the foregoing and subject to the limitations, if any, set forth in the Work Authorization, Owner shall have the right to recover its damages incurred for actual, out-of-pocket costs either, in Owner’s sole discretion, (i) to expedite Owner’s vendors’ work to avoid having to hold over in existing premises or to find replacement premises due to a delay caused by Contractor; or (ii) to hold over in existing premises or to find and occupy replacement premises, including, but not limited to, increased rent, moving, storage, transportation, fit-out and temporary occupancy costs due to a delay caused by Contractor. (d) Delays and Extensions of Times. If the Contractor is delayed at any time in the commencement or progress of the Work by (i) an act or neglect of the Owner or of an employee or of separate contractor employed by the Owner; or by changes ordered in the Work by Owner (collectively “Compensable Delays”); or by (ii) labor disputes beyond the Contractor’s control, fire, or unavoidable casualties (collectively “Excusable Delays”), then in either case, the Contract Time shall be extended by Change Order to the extent such delay will prevent Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
105
Packet Pg. 510 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E the Contractor from achieving Substantial Completion within the Contract Time, taking into consideration, without limitation, any float in the critical path Project schedule. The Contractor acknowledges and agrees that equitable adjustments in the Contract Time and equitable adjustments to the Contractor’s General Conditions will be permitted for a delay only to the extent such delay (i) is not caused by the Contractor or its Subcontractors of any tier or its Suppliers, (ii) could not be limited or avoided by the Contractor’s timely notice to the Owner of the delay or reasonable likelihood that a delay will occur, or (iii) could not be avoided or mitigated by reasonable work-around or precautionary measures. If there is a concurrent delay to the critical path attributable to Contractor and Owner, it will be proportionately allocated between Owner and Contractor based on the percent of impact caused by each party. The part of a concurrent delay allocated to the Owner is an Excusable Delay. Any adjustment in the Contract Time shall be limited to the impact of a delay on the critical path of the Project schedule. The Contractor further agrees that its right to receive an extension of time pursuant to the provisions of this Section shall be Contractor’s sole and exclusive remedy with regard to any delays or interferences with the Contractor’s schedule for completion of the Work, and Contractor hereby waives any and all claims for monetary damages arising out of or related to any such delay or interference, including, without limitation, claims for delay damages, and any other form of time-related damages, or any other claimed direct or consequential damages of any type or nature whatsoever. (e) Change Orders
(i) Change Orders Generally. Changes in the Services may be accomplished after execution of the Work Authorization by written agreement (including via email) of Contractor and Tesla (each a “Change Order”) using the change order form set forth in Exhibit B. Tesla will not be responsible for any change to the Contract Price unless Tesla approves or directs additional or changed Services through a Change Order before such additional or changed Services are commenced.
Upon mutual execution of a Change Order, Contractor will promptly comply with such Change Order and all the terms and conditions of the Agreement apply to any Change Order. The Contract Price or Contract Time shall not be increased or extended by a Change Order except as specifically set forth in the Change Order. The adjustment to Contract Price, if any, for any change agreed to by the Contractor and Tesla in a particular Change Order shall constitute full and total payment for such change and for the impact (direct or indirect) to the remainder of the Services, and no other claim for any additional cost, damage, loss or expenses of any kind may be made by Contractor as a result of such Change Order.
(ii) Change Order Requests by Contractor. Contractor may request changes to a Work Authorization by delivering a written request to Tesla (a “Change Order Request”). Any Change Order Request made by Contractor will include the following information: (a) a clear and concise explanation of the proposed changes; (b) validation of the requirements of the changes; (c) the exact amount and explanation of methods used to calculate any adjustments in the Contract Price and/or Work Schedule resulting from the Changes; and (d) a proposal for an updated Contract Price, Contract Time and Project Milestones, as applicable. A Change Order Request will not modify any Order until Tesla executes a Change Order expressly accepting the Change Order Request. Contractor will continue to perform obligations under the Agreement and Order regardless of the status or outcome of Change Order Requests.
2.2 Manner of Performance. The Contractor agrees to provide the Work in accordance with the requirements of the Contract Documents and in accordance with the construction industry standards and practices. For each Project, the Contractor shall fully execute the Work described in the Contract Documents, except as specifically indicated in the Contract Documents to be the responsibility of others. The Contractor shall supervise and direct the Work, using the Contractor’s best skill and attention in accordance with the Contract Documents, all Laws, and the construction standards and practices for the industry. The Contractor shall be solely responsible for, and have control over, initiating, maintaining, and supervising all safety precautions and programs to insure the safe provision or performance of the Work, and will control, supervise and direct the construction means, methods, techniques, sequences and procedures and coordinate all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters. If the Contract Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures, the Contractor shall evaluate the jobsite safety thereof and, except as Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
106
Packet Pg. 511 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E stated below, shall be fully and solely responsible for the jobsite safety of such means, methods, techniques, sequences or procedures. If the Contractor determines that such means, methods, techniques, sequences or procedures may not be safe, the Contractor shall give timely written notice to the Owner and shall not proceed with that portion of the Work without further written instructions from the Owner. If the Contractor is then instructed to proceed with the required means, methods, techniques, sequences or procedures without acceptance of changes proposed by the Contractor, the Contractor shall not be responsible for any loss or damage arising solely from those Owner-required means, methods, techniques, sequences or procedures.
Except with respect to third-party vendors performing work at the Project site pursuant to separate contracts between the Owner and such vendors, Contractor shall be solely responsible for all construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work. Contractor shall give Contractor's personal supervision to the Work using Contractor's best skill and attention. Contractor agrees to cooperate and coordinate with any third-party vendors performing work at the Project site pursuant to separate contracts between the Owner and such vendors, including reasonable cooperation in scheduling the use of shared items such as freight elevators, cranes and loading areas
2.3 Review of Project Site and Contract Documents. Execution of the Agreement by Contractor constitutes a representation by Contractor that it has visited the Project Site and reviewed the Contract Documents, and is familiar with the requirements of the Work and the conditions under which the Work will be performed. In particular, Contractor represents that it has satisfied itself with regard to the geotechnical and underground conditions related to the Work, and has performed all of the investigation of such conditions the Contractor has determined is necessary. The Contractor shall promptly send written notice to the Owner if the Contractor encounters any differing site conditions, or if the Drawings and Specifications are incomplete or if there are any errors or omissions in the Drawings. In addition, as part of the Work, the Contractor must satisfy all applicable federal and local laws, codes, regulations, ordinances and orders, as well as applicable regulations of any other body with jurisdiction over the Project and requirements of public or private utilities with no increases in the Contract Price or Contract Time. The Contractor acknowledges that (a) the Contractor has included the Contract Price to cover all costs which may result from the risks assumed by the Contractor in this Agreement, (b) the Contractor waives all rights to claim additional costs above the Contract Price as a result of the assumption of these risks, and (c) the provisions of this paragraph 2.3 apply notwithstanding any provisions to the contrary contained in the Contract Documents.
2.4 Responsibility for Supplying Certain Resources. Contractor shall provide and pay for all labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated into the Work. Contractor shall be responsible for the proper delivery, handling, application, storage, removal and disposal of all materials and substances brought to the Project Site by Contractor. The Contractor shall have the responsibility to coordinate the Contractor’s work with the utility service providers, municipal and/or off-site Contractors related to the Project and in the absence of other special provision of Contract Documents to the contrary, shall be required to coordinate with said entities the physical street/right-of-way work and connection to the structures and/or extensions from the structures to the off-site and/or on-site utilities so that the Work constructed by the Contractor is properly sequenced, and functional for the intended use and purpose thereof. Such coordination and supervision costs incidental thereto, are incidental to the Work and part of the Contract Price. Contractor shall plan and lay out all Work in advance of operations so as to coordinate all Work without delay or revision. Contractor shall establish and maintain existing lot lines, restrictions and benchmarks. Contractor shall establish and maintain all other lines, levels and benchmarks necessary for execution of the Work and take necessary steps to prevent dislocation or destruction.
2.5 Compliance with Laws and Tesla Policies.
(a) Except for permits and fees that are specifically made the responsibility of Tesla by this Agreement or any Work Authorization, Contractor will, at its cost and expense, obtain all necessary regulatory approvals, licenses, and permits (collectively, “Permits”) applicable to its business and comply with all Laws applicable to its business or the performance of its obligations under this Agreement, as such Laws may be revised from time to time. Contractor shall provide copies of any such Permits at Tesla’s request. (b) Contractor will comply with, and perform the Services in compliance with, all Laws pertaining to:
(i) occupational safety and health; (ii) protection of persons and property from death, injury or damage; (iii) the environment and the use, handling, storage, labeling and disposal of toxic or hazardous materials; Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
107
Packet Pg. 512 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (iv) labor and employment conditions; (v) wages and hours; (vi) workmen’s compensation and unemployment insurance, (vii) affirmative action and equal employment opportunity; and (viii) to the extent relevant to Contractor’s performance of Services, Laws with respect to data privacy, data protection, and consumer privacy.
(c) To the extent not prohibited by Law, Contractor will promptly notify Tesla in writing of any investigation or inquiry into whether Contractor (or any of its Subcontractors) is charged with failing to comply with any Laws that may or will impact, or are otherwise applicable to, Contractor’s performance under this Agreement.
(d) If the Project site is a site that Owner leases from the underlying owner of the site (the “Landlord”) and Owner is making improvements to the site for purposes of occupancy as a tenant in connection with the use and occupancy of the Project site, Contractor will comply with the requirements of the use, license, or lease agreement to which Owner and Landlord are a party, together with any rules and regulations of the Project site put in place by the Landlord. Contractor acknowledges that disputes between Owner and Landlord (if any) may become subject to arbitration under the provisions of lease between Owner and Landlord, and if requested in writing by Owner to do so, Contractor shall participate in and become a party to any such arbitration proceeding and agrees to be bound by any final and binding arbitration decision rendered therein. This Section shall apply only to issues and claims directly relating to Contractor and only so long as Contractor has the opportunity and rights to fully participate in any arbitration, including, but not limited to, selection of arbitrators.
(e) Contractor will comply with any Tesla policies, standards, rules, and procedures (collectively, “Tesla Policies”) applicable to performance of the Services or the Tesla Facility that are disclosed to Contractor in writing, as such Tesla Policies may be revised from time to time.
2.6 Suspension of Performance. The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine.
The Contract Price and Contract Time shall be adjusted for increases and decreases in the cost and time caused by suspension, delay or interruption as described in Section 2.1(d). No adjustment shall be made to the extent:
(1) that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Contractor is responsible; or (2) that an equitable adjustment is made or denied under another provision of the Contract.
2.7 Warranty. In addition to any other warranty provisions contained in the Agreement, Contractor warrants to Tesla that Materials and equipment furnished under the Agreement will be of good quality and new unless otherwise required or permitted, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform to the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved, shall be considered defective. Contractor’s warranty excludes damage or defect caused by abuse, modifications not executed by Tesla, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage.
Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment. The minimum warranty provided by Contractor shall be 1 year from the date of Substantial Completion. Contractor will promptly correct any Work that are defective or that do not otherwise comply with the Work Authorization at Contractor’s sole expense without causing unreasonable interruption to Customer’s business operations in the Project. All warranties shall survive completion, acceptance and final payment. In the event that damage or defect is caused by abuse, improper modification, or lack of maintenance on Tesla’s part, the warranty shall only exclude any such specific damage or defect and shall continue to cover the rest of the assembly, provided that in the event the defect relates to material or equipment that has been specified by Tesla by brand name, the manufacturer’s warranty shall apply in the event of conflict between the manufacturer’s warranty and this sentence. To the extent the Work consist of equipment or other movable or functional components manufactured by other companies, Contractor will obtain warranties for such equipment or components for a period of no less than the manufacturer’s standard warranty period and Contractor will manage administration of the warranties issued by those companies. Contractor will not be liable for defects in these components or damages resulting from these defects, unless due to Contractor’s negligent procurement or installation.
2.8 Hazardous Materials. Contractor is responsible for compliance with any requirements included in the Contract Documents regarding hazardous materials. If the Contractor encounters a hazardous material or substance not addressed in the Contract Documents, Contractor shall, upon recognizing the condition, Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
108
Packet Pg. 513 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E immediately stop Work in the affected area and report the condition to the Owner in writing. Owner shall obtain the services of a licensed laboratory to verify the presence or absence of the material or substance reported by the Contractor and, in the event such material or substance is found to be present, to cause it to be removed or rendered harmless. The Owner shall not be responsible under this Article 5.8 for materials Contractor brings to the Project Site. Except to the extent of the Contractor, Contractor’s employees and agents, or subcontractor’s negligence, or Contractor’s failure to immediately provide notice to Owner regarding the hazardous materials (other than hazardous materials to which Contractor was already aware prior to the Effective Date herein referred to as “Known Environmental Conditions”) as set forth above, the Owner shall indemnify and hold harmless the Contractor, subcontractors, and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work in the area affected by hazardous materials (other than Known Environmental Conditions) if in fact the material or substance presents the risk of bodily injury or death and has not been rendered harmless within a reasonable period of time after its discovery, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), except to the extent that such damage, loss or expense is due to the fault or negligence of the party seeking indemnity.
2.9 Clean Project. Contractor shall keep the Project site and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Agreement. At completion of the Work, Contractor shall remove waste materials, rubbish, Contractor’s tools, equipment, machinery and excess materials from the Project Site.
2.10 Progress Reports. By 2:00 p.m. (PST) each Friday during the Contract Time, Contractor will deliver to Tesla in electronic format a weekly progress report, which report shall include, without limitation, (1) pictures of the Project site detailing progress made during the week, (2) a Change Order log, detailing any Change Orders that have been agreed to by the parties in the previous week, or have been proposed by either party during the previous week. Tesla’s acceptance of Contractor’s weekly progress report shall in no way serve as Tesla’s acceptance of any Change Order that has not been otherwise agreed to by the parties.
3. CONTRACTOR PERSONNEL AND SUBCONTRACTING
3.1 General Requirements for Contractor Personnel.
(a) “Contractor Personnel” means any personnel furnished by Contractor to perform any part of the Services, including employees and independent contractors of Contractor, its Affiliates and Subcontractors. (b) Contractor will assign an adequate number of Contractor Personnel to perform the Services who are properly educated, trained, familiar with and fully qualified for the Services they are assigned to perform (including, without limitation, licensed in the relevant regions to provide work that requires a license).
Contractor will assign sufficient supervisory personnel to provide adequate liaison with Tesla. Contractor will manage, supervise and provide direction to Contractor Personnel and cause them to comply with the obligations and restrictions applicable to Contractor under this Agreement. Contractor is responsible for the acts and omissions of Contractor Personnel under or relating to this Agreement. Contractor is responsible for validating the identity of and ensuring that Contractor Personnel assigned to perform Services (i) have the legal right to work in the country(ies) in which they are assigned to work, and (ii) conform to all applicable Tesla Policies with respect to personal and professional conduct (including the wearing of an identification badge and adhering to general safety, dress, behavior, and security practices). (c) Prior to assigning any Contractor Personnel to perform any Services, Contractor shall perform background checks of the personnel. Such background checks may have been performed as part of Contractor’s standard pre-employment screening process and will include the following, at a minimum: (i) education verification; (ii) prior employment verification for all employees; (iii) social security verification; and (iv) felony and misdemeanor criminal checks. Tesla may require Contractor to provide written evidence of successful background checks on Contractor Personnel at any time. Unless prohibited by law, Contractor may not assign any person to perform Services for Tesla who was convicted of any criminal offense involving extortion, embezzlement, money laundering, or who has been convicted of a felony crime without Tesla’s prior written consent.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
109
Packet Pg. 514 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
3.2 Key Contractor Positions. “Key Contractor Positions” means those positions designated as such in Exhibit A or the applicable Work Authorization. Contractor will cause each of the Contractor Personnel filling the Key Contractor Positions to devote substantially full time and effort to the provision of the Services during the period of assignment. The appointment, removal and replacement of any person to a Key Contractor Position may only be made with Tesla’s prior written approval, such approval not to be unreasonably withheld.
3.3 (a)
Subcontracting.
Work not performed by Contractor with its own forces shall be performed by Subcontractors (“Subcontractors”). Subject to Section 3.3(b), Contractor may not subcontract or delegate the performance of any part of the Services without Tesla’s prior written consent, which Tesla may withhold in its sole discretion.
If Tesla approves a Subcontractor that is an Affiliate of Contractor, such approval is subject to the Subcontractor remaining an Affiliate of Contractor. Tesla may require Contractor to replace any previously approved Subcontractor whose performance, in the reasonable judgment of Tesla, has been unacceptable. Contractor is responsible for managing all Subcontractors and is responsible for all Subcontractors to the same extent as if the subcontracted Services were retained by Contractor. Contractor will be Tesla’s sole point of contact regarding the Services and all subcontracted Services, including for payment. Contracts entered into between Contractor and Subcontractors and Suppliers shall bind the Subcontractors and Suppliers to all the provisions of this Agreement as they apply to the Subcontractors’ and Suppliers’ portions of the Work, (b) Contractor may, in the ordinary course of business, utilize third party services or products that are not dedicated to performance of Services for Tesla and that are not material to any particular function constituting a part of the Work. Contractor may also engage individual independent contractors to supplement its employee workforce. Such arrangements do not constitute Subcontracting for the purposes of this Section. Contractor will nevertheless be responsible for such parties. The Contractor shall be responsible to the Owner for acts and omissions of the Contractor Parties, the Contractor’s employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, the Contractor or any of its Subcontractors.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
110
Packet Pg. 515 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
4. CHARGES
4.1 Contract Price. For each Project, the Owner shall pay the Contractor in current funds the Contract Price in the applicable Work Authorization, as adjusted for additions or deductions made by Change Order in accordance with the Contract Documents. For clarification, Owner will make no payments to Contractor apart from those it makes for Work Authorization and shall not exceed the Contract Price.
4.2 Schedule of Values. Owner shall pay Contractor for successfully carrying out the Work according to the agreed schedule of values defined in the relevant Work Order unless specified therein that Contractor will only be entitled to request payment of amounts associated with a Construction Milestone upon completion of the applicable Construction Milestone conditions precedent.
4.3 Progress Payment. Subject to the terms of this Section 4.3, on or before the 25th day of each month after the Effective Date, Contractor shall submit to Owner an application for payment (“Application for Payment”) in a form acceptable to Owner, for payment of the portion of the Work actually completed in the period covered by the Application for Payment. Based upon Applications for Payment submitted to the Owner by the Contractor with all necessary supporting documentation required by this Agreement, the Owner shall make progress payments for Work completed in accordance with the Contract Documents. Such payments shall be made to the Contractor as provided below and elsewhere in the Contract Documents. The period covered by each Application for Payment shall be one calendar month ending on the last day of the month or as set forth in the applicable Work Authorization. Owner shall make payment to the Contractor sixty (60) days after receipt of an Application for Payment that complies with this Agreement. Contractor shall submit Applications for payment for the labor and materials furnished the prior month, on a monthly basis. (a) Each Application for Payment submitted by Contractor shall contain sufficient detail for Owner to discern how the amount requested in such application is broken out among Contractor’s costs of supplies, materials, Subcontractors (identified individually with specificity), taxes, fee, overhead and any other costs, and any other details which Owner may request. Each such Application for Payment shall be accompanied by (i) conditional lien releases from all Subcontractors and material Contractors who performed and were paid for any Work or provided and were paid for any materials for the Work through the date of the Application for Payment and (ii) unconditional lien releases from all Subcontractors and material Contractors who performed and were paid for Work or provided and were paid for any materials for the Work through the date of the prior Application for Payment, such that at the time of an Application for Payment the unconditional and conditional lien releases for the Project shall be current for all materials provided to and Work performed on the Project through the respective Application for Payment. Owner’s obligation to pay Contractor the amount requested in the correct Application for Payment shall be subject to Owner’s receipt of both such lien releases, which must be reasonably satisfactory to Owner. All lien waivers and releases and all stop payment documents shall comply with all Laws of the state in which the Project is located. (b) Each Application for Payment shall be based on the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The Contractor shall update the schedule of values as reasonably requested by Owner, but no less than every three months, to show changes therein. The schedule of values shall allocate the entire Contract Price among the various portions of the Work. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may require. This schedule, unless objected to by the Owner, shall be used as a basis for reviewing the Contractor’s Applications for Payment.
(c) Each Application for Payment shall show the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage of completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed; or (2) the percentage obtained by dividing (a) the expense that has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application
(d) Each Application for Payment made by the Contractor to the Owner shall constitute a warranty to Owner that the Work has progressed to the point indicated and that the quality of the Work is in accordance with the Contract Documents. In taking action on the Contractor’s Applications for payment or by making payments upon any Application for Payment, the Owner shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
111
Packet Pg. 516 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Owner has made a detailed examination, audit or arithmetic verification of the documentation or other supporting data; that the Owner has made exhaustive or continuous on-site inspections, or that the Owner has made any on-site inspections; or that the Owner has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner’s auditors or other personnel acting in the sole interest of the Owner.
(e) Charges, if any, that Contractor fails to invoice to Tesla within 120 days of the date that such charges should have been billed to Tesla will not be payable by Tesla. In the case of third party charges for which Tesla is responsible for paying or reimbursing Contractor, the 120-day period will not begin to run until Contractor has been invoiced for such charges by the applicable third party. (f) The amount to be paid on an Application for Payment shall be calculated by:
(i) Take that portion of the Contract Price properly allocable to completed Work as determined by multiplying the percentage of completion of each part of the schedule of values less retainage. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included; (ii) Add that part of the schedule of values allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work, or if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing, less retainage; (iii)
(iv)
Subtract the aggregate of previous payments made by the Owner; Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Section 4.3(a) to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner’s auditors in such documentation; and (v) Subtract amounts, if any, for which the Owner has withheld payment as provided in Section 4.4.
4.4 Owner Withholding. Owner shall be permitted to withhold progress payments from Contractor for any of the reasons identified below until the reasons giving rise to the withholding are removed:
(a)
(b)
defective Work not remedied;
third party claims filed or reasonable evidence indicating probable filing of such claims unless security acceptable to the Owner is provided by the Contractor;
(c) failure of the Contractor to make payments properly to Subcontractors and/or Suppliers or for labor, materials or equipment;
(d)
(e)
(f)
reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Price; damage to the Owner or a separate contractor;
reasonable evidence that the Work will not be completed within the Contract Time, and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; (g)
(h)
failure to carry out the Work in accordance with the Contract Documents; any claims which Owner has against Contractor under or in connection with the Contract Documents or Contractor’s work; or
(i) failure of the Contractor to provide updated weekly status reports and progress schedules.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
112
Packet Pg. 517 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E When the reasons giving rise to the withholding are removed, Owner shall pay the withheld amounts within thirty (30) days.
4.5 Retention. Except with the Owner's prior approval, payments to Subcontractors and Contractors at all tiers (including all major fabricators and manufacturers) and to the Contractor for self-performed work shall be subject to retainage of not less than ten percent (10%) unless stated otherwise in the applicable Work Authorization. The Owner and the Contractor shall agree upon a (1) mutually acceptable procedure for review and approval of payments to Subcontractors and (2) the percentage of retainage held on Subcontracts, and the Contractor shall execute subcontracts in accordance with those agreements. Payments to Contractor shall be subject to a retainage of 10% of the Contract Price with the final 10% of Contract Price payable upon Final Completion unless stated otherwise in the applicable Work Authorization.
4.6 Contractor Payment of Subcontractors. Within seven days after receipt of any progress payment by Contractor, Contractor shall pay (and secure the discharge of any liens asserted by) all persons furnishing labor, equipment, materials or other items in connection with the performance of the Work (including, but not limited to, any Subcontractors, Sub-subcontractors or Suppliers). Contractor agrees that provided Owner has paid Contractor in accordance with the Contract, Owner has the right to a lien free Project. Owner may, at its discretion, make joint payments to Contractor and its creditors. Owner reserves the right, in the event a claim is made against Owner arising out of any obligation incurred by Contractor under the Contract or in connection with performance of the Work, to withhold payments due to or become due to Contractor in such amounts as are necessary to cover the claim and any costs or expenses arising in connection with the legal settlement thereof. Contractor further agrees that if any lien or claim is filed or made against the Project site, Project or Owner as a result of Contractor’s failure to meet its obligations, Owner upon fourteen (14) days prior written notice shall have the right to settle said lien or claim directly and deduct the cost of the settlement from payments due Contractor, provided that Contractor within such fourteen (14) day period has not settled such lien or claim or bonded around such lien claim in a manner satisfactory to Owner.
4.7 Final Payment. Provided that the Contract Price is not exceeded, final payment, constituting the entire unpaid balance of the Work (which shall include the retention withheld), shall be made by the Owner to the Contractor when
(a) the Contractor has fully performed the Contract (including completing work on Punch Lists) except for the Contractor’s responsibility to correct Work, and to satisfy other requirements, if any, which extend beyond final payment;
(b)
(c)
the Contractor has submitted a final accounting for the Work and a final Application for Payment; Contractor has submitted to Tesla both a physical copy (to be left at the Project site) and a digital copy of the final as-built record Drawings and Specifications in both of physical copy (d)
(e)
(f)
Contractor has submitted to Tesla all warranties and all operation and maintenance manuals; Completion of Punch List items;
Appropriate final lien releases have been delivered to the Owner for Contractor, all Subcontractors, and all Contractors; and
(g) the Contractor has recorded a certificate of completion with the applicable governmental authority in accordance with the Laws.
As used herein, the term “Final Completion” and words of similar impact shall mean that all of the requirements set forth above have been fully performed, and “Final Completion Date” shall mean the date on which Final Completion occurs. The Owner’s final payment to the Contractor shall be made no later than sixty (60) days after receipt by Owner of a final Application for Payment containing confirmation of the items set forth above and such other terms as a required pursuant to the terms of the Contract Documents.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
113
Packet Pg. 518 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
4.8 (a)
Incidental and Out-of-Pocket Expenses.
Unless expressly provided otherwise in a Work Authorization, Tesla is not responsible for any additional costs or expenses of any nature incurred by Contractor in connection with the provisions of the Services, including travel expenses, clerical or administrative personnel, long distance telephone charges, etc. (“Incidental Expenses”). To the extent that an Work Authorization requires Tesla to reimburse Contractor for Incidental Expenses, Tesla is not responsible for any such reimbursement unless the expenses are (i) approved, in each instance, in advance by Tesla; (ii) substantiated by appropriate receipts and related documentation; and (iii) in compliance with Tesla’s corporate travel policies and procedures, as amended from time to time in Tesla’s sole discretion. In no event will Tesla be liable for payment of any Incidental Expenses that exceed Contract Price under a Work Authorization by 10% or more. (b) “Out-of-Pocket Supply Expenses” are the reasonable, demonstrable and actual out-of-pocket expenses incurred by Contractor for equipment, materials, or supplies required for performance of the Services and specified in writing by Tesla as reimbursable, and “Out-of-Pocket Service Expenses” are the reasonable, demonstrable and actual out-of-pocket expenses incurred by Contractor for services (such as with tier 2 service providers) required for performance of the Services and specified in writing by Tesla as reimbursable (“Out-of- Pocket Expenses” refers collectively to Out-of-Pocket Supply Expenses and Out-of-Pocket Service Expenses).
Out-of-Pocket Expenses are to be determined net of all rebates, discounts and allowances received by Contractor, and shall not include Contractor's actual or allocated overhead costs, administrative expenses or other mark-ups; provided, however, that Contractor may charge Tesla a five percent (5%) markup on Out-of- Pocket Supply Expenses.
4.9 (a)
Taxes.
Contractor may charge, and Owner will pay, applicable federal, state or local sales or use taxes or value added taxes that Contractor is legally obligated to charge with respect to the Work (“Taxes”), provided that the Contractor shall identify the amount of Taxes due on each payment as a separate line item on its Application for Payment and shall be responsible for remitting to the appropriate office of the State in which the Project is located, the amount received from the Owner for payment of Taxes. Although not included as part of the Contract Price, the Contractor shall show Taxes for the Contract Price on the schedule of values as a separate line item. Owner may provide Contractor an exemption certificate acceptable to the relevant taxing authority, in which case Contractor shall not collect the Taxes covered by such certificate, and if the Contract Price assumed that such Taxes would be collected, the Contract Price shall be reduced by the amount of such Taxes.
Contractor will be solely responsible for all other taxes or fees (including penalties, interest, and other additions thereto) arising from the Contract and Work.
(b) Withholding Taxes. Owner shall maintain the right to deduct or withhold any taxes that Owner determines it is obligated to withhold from any amounts payable to Contractor under this Agreement, and payment to Contractor as reduced by such deductions or withholdings will constitute full payment and settlement to Contractor of such amounts. Tesla shall not be obligated to pay for any Taxes (i) that are assessed on any goods or services used or consumed by Contractor (or its Subcontractors) in providing the Services where the tax is imposed on Contractor’s (or its Subcontractor’s) acquisition or use of the goods or services in its provision of the Services; or (ii) that are assessed by taxing authorities in countries other than the United States or the country in which Tesla receives the Services.If laws, rules or regulations require the withholding of income taxes or other taxes imposed upon payments set forth in this Section 4, Tesla shall make such withholding payments as required and subtract such withholding payments from the payments. Tesla shall submit appropriate proof of payment of the withholding taxes to the Contractor within a reasonable period of time. At the request of Contractor, Tesla shall give Contractor such reasonable assistance, which shall include the provision of appropriate certificates of such deductions made together with other supporting documentation as may be required by the relevant tax authority, to enable Contractor to claim exemption from such withholding or other tax imposed or obtain a repayment thereof or reduction thereof and shall upon request provide such additional documentation from time to time as is reasonably required to confirm the payment of tax.
4.10 Failure of Payment. If the Owner, through no fault of the Contractor, does not pay the Contractor within thirty (30) days after the date established in the Contract Documents the undisputed portion of any Application for Payment or the amount awarded by binding dispute resolution, then the Contractor may, upon five (5) additional business days’ written notice to the Owner, stop the Work until payment of the amount owing has Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
114
Packet Pg. 519 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E been received. The Contract Time shall be extended appropriately and the Contract Price shall be increased by the amount of the Contractor’s reasonable costs of shut-down, delay and start-up, plus interest as provided for in the Contract Documents.
5. OWNER
5.1 General. The Owner is the person or entity identified as such in the Agreement or applicable Work Authorization and is referred to throughout the Contract Documents as if singular in number. The Owner shall appoint an individual named in the Work Authorization as its representative for the Project (“Owner’s Representative”). Notwithstanding anything to the contrary in this Agreement, no person or entity may bind Owner in any manner with respect to this Agreement other than (i) Owner’s Representative; (ii) the president or a vice president of Owner, and (iii) any other representative of Owner that is expressly granted such authority in a Work Authorization or other document executed by Owner (and then only to the extent of such grant). The term “Owner” refers to the entity or individual named in the Work Authorization as such, or its successors in interest. Neither the presence of, nor the monitoring or observations of the Owner’s Representative shall limit or reduce the Contractor’s liability for defects in the Work, and it is understood that the Contractor will be solely and completely responsible for its Work, compliance with the Contract Documents, and the working conditions on the job site, including safety, during the performance of the Work. The day-to- day communications between the Owner and Contractor, including all written authorizations and written communications shall be directed to the Owner and, if one is designated in the Work Authorization, the Owner’s Representative.
5.2 Information and Services Required of the Owner. Except for Permits that are the responsibility of the Contractor under the Contract Documents, including those required under Section 2.6, the Owner shall secure and pay for necessary approvals, easements, assessments and charges required for Owner’s use or occupancy of permanent structures or for permanent changes in existing facilities. If the Contractor becomes aware of any such approvals or permits that are the Owner’s responsibility, Contractor shall promptly, in writing, notify the Owner of the requirement. The Owner shall furnish information or services required of the Owner by the Contract Documents with reasonable promptness. The Owner shall also furnish any other information or services under the Owner’s control and reasonably required for the Contractor’s performance of the Work with reasonable promptness after receiving the Contractor’s written request for such information or services.
5.3 Savings Clause. Tesla's failure to perform, or cause to be performed, any of its responsibilities (other than payment as required under Article 4) will not constitute grounds for termination by Contractor except as provided in Section 8.4 (Termination by Contractor); provided, however, that Contractor’s nonperformance of its obligations under this Agreement will be excused if and to the extent (i) such nonperformance results from Tesla’s failure to perform any of its responsibilities, and (ii) Contractor provides Tesla with reasonable notice of such nonperformance and, if requested by Tesla, uses Commercially Reasonable Efforts to perform notwithstanding Tesla’s failure to perform. If Contractor’s use of Commercially Reasonable Efforts to perform in such a circumstance would cause Contractor to incur significant uncompensated expenses, Contractor may notify Tesla. In that case, Contractor’s obligation to continue its efforts to work around Tesla’s failure to perform will be subject to Tesla agreeing to reimburse Contractor for its incremental uncompensated expenses.
5.4 (a)
Access to Tesla Systems and Facilities.
From time to time, Tesla may provide Contractor with access to proprietary computer systems and technologies owned and operated by Tesla and/or its affiliates to facilitate the Services (the “Systems”).
Contractor will only use the Systems for the business purposes of Tesla. Tesla may periodically monitor all uses of the Systems as allowed by law and review user access records maintained by Contractor. Contractor’s users will have no expectation of privacy when using the Systems. Contractor shall be solely responsible for obtaining and maintaining the hardware and software it uses which are necessary to properly access the Systems and perform the Services.
(b) Tesla will provide to Contractor Personnel assigned to work at a Tesla Facility the reasonable use of the facility. Contractor will use the Tesla Facility for the sole purpose of providing the Services. Contractor will be responsible for any damage to the Tesla Facility caused by Contractor Personnel. Contractor will permit Tesla and its agents and representatives to enter into those portions of Tesla Facility that are occupied by Contractor Personnel at any time and, when those portions of the Tesla Facility are no longer required for performance of the Services, Contractor will return them to Tesla in substantially the same condition as they were in when Contractor began use of them, subject to reasonable wear and tear.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
115
Packet Pg. 520 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
6. CONFIDENTIALITY
6.1 Confidentiality. Tesla’s mutual non-disclosure agreement as of the Effective Date or, if applicable, the signed non-disclosure agreement then in effect between the Parties (“NDA”) sets forth the Parties’ respective confidentiality obligations hereunder. The NDA is hereby incorporated by reference in this Agreement, and the terms and conditions of the NDA will continue in force throughout the Term. Tesla’s Confidential Information shall be deemed, for purposes of this Agreement, to include all Intellectual Property Rights owned or separately licensed by Tesla.
6.2 Data Security. Contractor will: (i) establish, implement and maintain commercially reasonable safeguards against the destruction, loss, alteration and unauthorized access and use of Tesla Data in the possession or control of Contractor (or its Subcontractors) that are no less rigorous than those maintained by Tesla as of the Effective Date and are no less rigorous than those maintained by Contractor for its own data of a similar nature; and (ii) comply with Tesla’s information and data security policies as disclosed to Contractor from time to time. Upon written request by Owner, Contractor will deliver to Tesla a copy of all Tesla Data in its possession or control in the form and format requested by Tesla.
7. Intellectual PRoperty Rights
7.1 Tesla Material. “Tesla Material” means all information systems and technology, software, tools, methods, forms, processes, workflows, data, compilations, designs, manuals and other material owned, licensed to, or developed by Tesla (or its Affiliates) that is made available to Contractor Personnel for use in rendering the Services. Subject to any limitations or restrictions set forth in agreements between Tesla (or its Affiliate) and third party licensors of Tesla Material, Tesla grants Contractor a limited, nonexclusive, non- transferable, no-charge license during the Term to Use the Tesla Material in the location(s) approved by Tesla as set forth in Work Authorizations in accordance with this Agreement for the sole purpose of providing the Services. When Tesla Material is no longer required for performance of the Services, or in any event upon expiration or termination of the Agreement, Contractor will return it to Tesla in an agreed format or, at Tesla’s election, destroy it and certify the destruction of all copies in Contractor’s (and any Subcontractor’s) possession or control.
7.2 Developed Material. Subject to Section 7.3, Tesla will own all Intellectual Property Rights in and have the sole right to use all Deliverables and other work product created by Contractor Personnel for Tesla under this Agreement (collectively, “Developed Material”). Developed Material will be deemed to be works made for hire owned by Tesla upon their creation. To the extent that any such Developed Material is not deemed to be a work made for hire and the property of Tesla by operation of Law, Contractor irrevocably assigns, transfers and conveys to Tesla, without further consideration, all of its right, title and interest (including all Intellectual Property Rights) in and to such Developed Material. Contractor shall execute (and cause its employees to execute) such documents or take such actions as Tesla may reasonably request to perfect Tesla’s ownership of Developed Material. Contractor will promptly disclose the creation of Developed Material to Tesla. Tesla grants to Contractor a fully paid-up, royalty-free, nonexclusive license during the Term to Use such Developed Material solely as necessary to perform the Services, and to sublicense Subcontractors involved in rendering the applicable Services to do the same on Contractor’s behalf.
7.3 Contractor Material. Tesla’s ownership of Developed Material that incorporates any material created and owned by Contractor (or its Subcontractor) outside the performance of Services hereunder (“Contractor Material”) will be subject to Contractor’s (or its applicable Subcontractor’s) ownership of such Contractor Material. Unless otherwise agreed in a separate written license agreement executed by the Parties, Contractor grants to Tesla (and its Affiliates) a non-exclusive, royalty-free, perpetual, irrevocable, transferable, fully paid- up, world-wide license to Use, sublicense and distribute Contractor Material that is incorporated into any Developed Material or is reasonably required to Use any Developed Material in a cost-effective manner (e.g., tools). Contractor shall obtain Tesla’s written approval prior to incorporating any Contractor Material into any Developed Material.
7.4 Third Party Material. Contractor will not incorporate any third party proprietary materials, information or intellectual property (“Third Party Material”) into Developed Material, including all Deliverables or other work product to be delivered to Tesla, unless Contractor has obtained for Tesla a perpetual, worldwide, fully paid-up, royalty-free, non-exclusive license permitting Tesla and its Affiliates to use, sublicense and distribute such Third Party Material in the conduct of their normal business operations.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
116
Packet Pg. 521 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
7.5 Open Source Code. Contractor represents and warrants that it will not incorporate any Open Source Code into a Deliverable or other work product to be delivered to Tesla without Tesla’s express, prior written consent.
7.6 Intellectual Property Rights Agreements with Contractor Personnel. Contractor is responsible for having in place with all Contractor Personnel (either directly or indirectly through their respective employers) such agreements respecting Intellectual Property Rights as are necessary to comply with this Section 7 (Intellectual Property Rights).
7.7 Licenses and Rights Survive Bankruptcy. All licenses and rights of Use granted under or pursuant to this Agreement shall be deemed to be licenses to rights in “intellectual property” for the purposes of Section 365(n) of the United States Bankruptcy Code.
7.8 No Interference. Nothing in this Agreement will be deemed to prevent Contractor from carrying on its business or developing for itself or others materials that are similar to or competitive with those produced as a result of the Services provided they do not contain or disclose any Confidential Information or proprietary information of Tesla or otherwise infringe or constitute a misappropriation of Tesla’s Intellectual Property Rights.
8. TERM AND TERMINATION
8.1 Initial Term. Unless terminated earlier as provided below, the term of the Agreement will be from the Effective Date until the first anniversary of the Effective Date (the “Term”). Thereafter, this Agreement will be automatically extended on a month-to-month basis until either party terminates this Agreement pursuant to this Section 8 or by providing at least 180 days prior written notice of termination to the other party.
8.2 Termination, Generally. This Agreement or a Work Authorization may only be terminated as provided in this Section 8. Termination by a Party will be without prejudice to any other rights and remedies available to a Party. Tesla will not be obliged to pay any termination charges or demobilization fees in connection with the termination of this Agreement.
8.3 (a)
Termination by Tesla.
For Convenience. Owner may, at any time and for any reason or for no reason, terminate the Agreement or any Work Authorization. Following a termination for convenience, Contractor shall be entitled to receive payment for Work executed, and the reasonable costs incurred by reason of such termination, but shall not be entitled to any recovery for lost profits or lost business opportunity. (b) For Cause.
(i) Tesla may terminate this Agreement, a Work Authorization or a Project, for cause, as follows: (a) for default without affording Contractor any additional time or opportunity to cure: (i) if Contractor commits a breach of Section 6 (Confidentiality) of this MSA; (ii) if Tesla is not able to perform under this Agreement by a reason outside of it’s reasonable control, including without limitation, by reason of a casualty or other destruction of the Project site; (iii) if Contractor violates any Tesla Policies of which Contractor has been given notice or applicable Laws; (iv) if Contractor breaches Section 9.6 (Debarment) of this MSA; or (v) if Contractor commits multiple breaches of this Agreement, none of which is necessarily a material breach, but which Tesla determines have had an aggregate effect comparable to that of a material breach; or (b) if Contractor has breached any material obligation under this Agreement and does not cure the breach within 15 days after receiving notice of it from Tesla, including, without limitation, (i) refusal or failure to supply enough properly skilled workers or proper materials, (ii) fails to make payment to Subcontractors or Suppliers for materials or labor in accordance with this Agreement; (iii) fails to provide Owner with a construction schedule, construction schedule updates, weekly progress reports, certificates of insurance or any required payment or performance bond in the form and within the time required under the Contract Documents, (iv) failure to achieve Substantial Completion or Final Completion on or before the dates specified in the Contract Documents or otherwise fails to adhere to the Construction Schedule in performing the Work, or (v) fails to timely remove Mechanic’s Liens, provided, in each case, Contractor shall not be entitled to a grace period if it has breached the same obligation more than once.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
117
Packet Pg. 522 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (ii) Upon termination of this Agreement for cause by Owner, Contractor will discontinue the Work, and Owner will be entitled to take possession of the Work and the Project Site and all or any part of the equipment and materials delivered or en route to the Project Site for incorporation into the Work. If requested by Owner, Contractor will make every reasonable effort to cancel any existing orders, subcontracts, and other contracts specified by Owner upon terms satisfactory to Owner, and Contractor will not place any further orders or enter into further subcontracts for Equipment and Materials, labor, services or facilities for the terminated Work. Contractor, upon request, will also deliver and assign to Owner, and Owner may assume, any and all contracts, subcontracts, purchase orders, and options made by Contractor in performance of the terminated Work. In addition to any other remedies and damages to which Owner may be entitled to pursue, Owner shall be permitted to seek enforcement of the provisions of this Section by means of specific enforcement or injunction. Notwithstanding any termination, Contractor will take such steps as are reasonably necessary to preserve and protect Work completed and in progress and to protect materials, supplies, plant and equipment at the Work Site or in transit. (iii) Upon termination by Owner for cause, Contractor shall not be entitled to receive any further payment until the Work is completed. If the unpaid balance of the Contract Price ultimately exceeds the Owner’s cost of completing the Work, such excess shall be paid to Contractor. If the costs of completing the Work exceed Contractor’s unpaid Contract Price, Contractor shall pay the difference to Owner.
8.4 Termination by Contractor. The Contractor may terminate the Contract if the Work is stopped for a period of 90 consecutive days through no act or fault of the Contractor or a Subcontractor, Sub-subcontractor or their agents or employees or any other persons or entities performing portions of the Work under direct or indirect contract with the Contractor, for any of the following reasons only: (1) Issuance of an order of a court or other public authority having jurisdiction that requires all Work to be stopped; (2) An act of government, such as a declaration of national emergency that requires all Work to be stopped; or (3) Owner has not delivered payment pursuant to an Application for Payment for two (2) consecutive months without providing notice of any withholding.
8.5 Operational Transition. Upon termination or expiration of this Agreement, Contractor will deliver to Tesla and/or a subsequent supplier any remaining property of Tesla in Contractor’s possession, including reports, data, work product, and Confidential Information (alternatively, as requested by Tesla, Contractor will destroy such property), and certify that all such Tesla property has been removed from Contractor’s systems, premises and control and either returned or destroyed. All materials in electronic form shall be delivered to Tesla on such media and in such file format as Tesla may direct.
9. REPRESENTATIONS AND WARRANTIES OF CONTRACTOR
9.1 Performance of Services. Contractor represents and warrants that it will perform all Services (i) in accordance with this Agreement and the Work Authorizations; (ii) in a good, professional and workmanlike manner, free from defects in material and workmanship and in accordance with industry standards; (iii) in strict accordance with Contractor’s specifications, samples or other descriptions provided to Tesla or approved or adopted by Tesla; (iv) in compliance with all applicable Laws; (v) efficiently and in a cost-effective manner subject to the requirements of this Agreement; and (vi) using qualified personnel with suitable training, education, experience and skill to perform the Services in accordance with timing and other requirements of the Agreement.
9.2 Contractor Registration. The Contractor hereby warrants and represents that it is a duly licensed Contractor under the laws of the state in which the Project is located and that its Contractor’s license number is as set forth in the Work Authorization.
9.3 Sufficient Information. Execution of a Work Authorization by the Contractor is a representation that the Contract Documents are sufficient to have enabled the Contractor to determine the cost of the Work therein, to enter into the Work Authorization, and to accomplish the Work for an amount not in excess of the Contract Price within the Contract Time provided for in the Contract Documents. The Contractor further represents and warrants that prior to execution of the applicable Work Authorization it has visited and examined the Project site, examined all physical, legal, and other conditions affecting the Work and is fully familiar with all of the conditions thereon and thereunder affecting the same, including (1) the nature, location and character of the Project site, including all structures and obstructions thereon, both natural and man-made; (2) the nature, Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
118
Packet Pg. 523 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E location, and character of the general area in which the Project is located, including without limitation, its climatic conditions, available labor supply and labor costs, and available equipment supply and equipment costs; and (3) the quality and quantity of all materials, supplies, tools, equipment, labor and professional services necessary to complete the Work in the manner and within the cost and time frame required by the Contract Documents. THE FAILURE OF THE CONTRACTOR TO FULLY ACQUAINT ITSELF WITH ANY
PROVISION OF THE CONTRACT DOCUMENTS OR OTHER MATTER SHALL NOT IN ANY WAY RELIEVE IT FROM
THE RESPONSIBILITY FOR PERFORMING THE WORK IN ACCORDANCE WITH THE CONTRACT DOCUMENTS
AND WITHIN THE GUARANTEED MAXIMUM PRICE AND THE CONTRACT TIME AS PROVIDED FOR IN THE CONTRACT DOCUMENTS.
9.4 Non-Infringement. Contractor represents and warrants that: (a) the Services will not infringe or misappropriate any Intellectual Property Rights of any third party; (b) Contractor has all rights and licenses necessary to convey to Tesla the ownership of (or license rights to Use) as required under this Agreement or the Work Authorization, all Intellectual Property Rights in Deliverables, Developed Materials and other materials provided to Tesla; and (c) no Deliverables or other materials provided to Tesla, nor their use by Tesla will infringe or constitute an infringement or misappropriation of any Intellectual Property Rights of any third party.
9.5 Malware. Contractor represents and warrants that it will not introduce Malware into Tesla’s or any of its Affiliates’ systems and that Contractor will exercise Commercially Reasonable Efforts to prevent Malware from being so introduced. If Malware is found to have been introduced into Tesla’s or any of its Affiliates’ systems as a result of a breach of the foregoing warranty, Contractor will, at no additional charge, assist Tesla in eradicating the Malware and reversing its effects and, if the Malware causes a loss of data or operational efficiency, to assist Tesla in mitigating and reversing such losses.
9.6 Debarment. For the full Term of the Agreement, Contractor represents and warrants that it shall not:
(a) be debarred, suspended, excluded or disqualified from doing business with the United States Government; or (b) be listed on the Excluded Parties List System maintained by the General Services Administration of the United States Government (found at www.sam.gov/SAM ); or (c) be an entity with which U.S. entities are prohibited from transacting business of the type contemplated by the Agreement or with which U.S. entities must limit their interactions to types approved by the Office of Foreign Assets Control, Department of the Treasury (“OFAC”), such as by Law, executive order, trade embargo, economic sanction, or lists published by OFAC. Contractor agrees to immediately notify Tesla in writing in the event Contractor breaches any of its representations and warranties or has reason to believe that it will become in breach of any of such representations and warranties.
10. INSURANCE
10.1 Types of Insurance. During the Term of this Agreement, unless otherwise set forth in a Work Authorization, Contractor shall obtain and maintain at its own cost and expense (and shall cause each Subcontractor to maintain) policies for the following insurance coverages:
(a) Commercial general liability insurance with minimum coverage of at least One Million Dollars ($1,000,000) combined single limit per occurrence and Two Million Dollars ($2,000,000) general aggregate, naming Tesla as an additional insured. This will include coverage for: bodily injury; property damage; premises and operations; products and completed operations; broad form property damage including completed operations; explosion, collapse, underground hazards; contractual liability; contractors’ protective liability; and personal injury liability.
(b) Products and completed operations coverage, which shall include broad form property damage and XCU endorsements.
(c) Automobile liability insurance on all owned, non-owned and/or hired vehicles with minimum coverage of at least One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury and/or property damage, and physical damage insurance for the actual cash value of each such vehicle. (d) Umbrella general liability coverage in the minimum amount of $5,000,000 or as established in the Work Authorization.
The policies furnished in compliance with Section 10.1 (a) – (d) shall be primary insurance to any other liability insurance of Owner.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
119
Packet Pg. 524 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (e) Employer’s liability insurance with minimum coverage of at least One Million Dollars ($1,000,000).
Contractor shall also comply with all applicable workers’ compensation and/or other laws that may accrue in favor of any Contractor Personnel in all locales where Contractor Personnel perform(s) hereunder. (f) Contractor’s Professional Liability Insurance with minimum limits of $5,000,000 per claim and aggregate and Contractor’s Pollution Liability Insurance coverage with minimum limits of $5,000,000 per claim and in the aggregate, or as established in the applicable Work Authorization for both insurance requirements, with all coverage retroactive to the earlier of the date of the Agreement or the commencement of work. (g) If the Work include design/build work, Professional Liability Insurance covering liability for loss or damage due to an act, error, omission or negligence, with a minimum limit of (i) Five Million Dollars ($5,000,000) per claim and aggregate for mechanical (including fire protection), electrical and curtain wall enclosure, and (ii) Two Million Dollars ($2,000,000) per claims and aggregate for all other trades. Professional liability coverage shall be provided by annual policy or policies to be renewed for a continuous period of two years following the Final Completion Date of the Project by the Owner or such longer period as the Contract Documents may require. Renewal policies during this period shall maintain the same retroactive date.
10.2 Insurance, Generally. Contractor will be responsible for all deductibles and retentions with regard to its insurance. In the case of loss or damage or other event that requires notice or other action under the terms of any insurance coverage described above, Contractor will be solely responsible for taking such action.
Contractor will provide Tesla with contemporaneous notice and such other reasonable and relevant information as Tesla may request regarding the event. The policies shall: (a) be primary and not contributory with any liability coverage carried by Tesla or any Affiliate of Tesla; (b) name Tesla and any other entity reasonably requested by Tesla as additional insureds; (c) provide for severability of interests; (d) provide for waiver of subrogation; (e) be with one or more insurance companies rated A minus or better (as determined by A.M. Best & Company), and licensed to do business in the locations where Services are to be performed; (f) shall remain in force for the benefit of the Owner for claims arising out of the Work under this Agreement for at least 24 months after Final Completion, except for completed operations coverage which shall extend for a period of six (6) years from Substantial Completion, and (g) require the insurer to give Tesla at least 30 days’ prior written notice of any restrictive change, non-renewal or cancellation that may affect Tesla’s rights thereunder. Contractor will furnish to Tesla a certificate evidencing such coverage, upon request.
11. INDEMNIFICATION
11.1 Indemnification by Contractor. To the fullest extent provided by Law, Contractor will indemnify, defend and hold harmless Tesla, its Affiliates and their respective officers, directors, employees, agents and representatives (collectively, “Tesla Indemnitees”), from any and all losses arising from, in connection with, or based on allegation of any of the following:
(a)
(b)
Any Claim by, on behalf of or relating to Contractor Personnel; Any Claim that, if true, would constitute a breach of Contractor’s obligations under Section 6 (Confidentiality);
(c) Any Claim that, if true, would arise from or be attributable to a breach of Contractor’s obligations under Section 2.5 (Compliance with Laws and Tesla Policies);
(d) Any Claim that, if true, would arise from or be attributable to a breach of Contractor’s obligations under Section 9.4 (Non-Infringement);
(e) Any Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of third parties (including employees of Tesla and Contractor and their respective Subcontractors) caused by the tortious conduct of Contractor, any Contractor Personnel, or any of Contractor’s third-party suppliers; and
(f) The inaccuracy or untruthfulness of any representation or warranty made by or on behalf of Contractor in this Agreement.
If Losses are caused or alleged to be caused in part by any joint or concurrent negligent act (either active or passive), willful misconduct, omission or breach of contract by the Tesla Indemnitees, the Contractor shall indemnify, hold harmless and defend the Tesla Indemnitiees from such Losses only to the extent such Losses do not arise out of or result from the sole and active negligence or willful misconduct of the Tesla Indemnitiees. In no event shall Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
120
Packet Pg. 525 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Contractor be obligated to indemnify a Tesla Indemnitee for Losses which arise out of or result from the sole and active negligence or willful misconduct of such Tesla Indemnitee or its agents, servants or independent contractors who are directly responsible to such Tesla Indemnitee, excluding Contractor herein.
11.2 Infringement Claims. If any item used by Contractor to provide the Services becomes, or in Contractor's reasonable opinion is likely to become, the subject of an infringement or misappropriation Claim, Contractor will at its expense, in addition to indemnifying Tesla Indemnitees as provided in this Section 11 (Indemnification) and to the other rights Tesla may have under this Agreement, (i) promptly secure the right to continue using the item, or (ii) if this cannot be accomplished with Commercially Reasonable Efforts, then replace or modify the item to make it non-infringing or without misappropriation; provided, however, that any such replacement or modification may not degrade the performance or quality of the affected components of the Services or disrupt Tesla’s business operations, or (iii) if neither of the foregoing can be accomplished by Contractor with Commercially Reasonable Efforts, then upon at least 180 days’ prior written notice to Tesla, Contractor may remove the item from the Services, in which case Contractor's charges will be equitably adjusted to reflect such removal. If removal of the item from Services causes material loss or degradation of the Services, such loss or degradation will constitute a material breach of this Agreement by Contractor in respect of which Tesla may exercise its termination and other rights and remedies.
11.3 Indemnification Procedures. Tesla will give Contractor prompt written notice of any Claim for which indemnification is sought under this Section 11 (Indemnification). Failure to give notice will not diminish Contractor’s obligation under this Section if Contractor has or receives knowledge of the existence of such Claim by any other means or if the failure does not materially prejudice Contractor's ability to defend the Claim.
Contractor may select legal counsel to represent Tesla (said counsel to be reasonably satisfactory to Tesla) and otherwise control the defense of such Claim. If Contractor elects to control the defense of such Claim, Tesla may participate in the defense at its own expense. If Contractor, within a reasonable time after receipt of such notice, fails to defend Tesla, Tesla may undertake the defense of and compromise or settle the Claim on behalf and at the risk of Contractor. If the Claim is one that cannot by its nature be defended solely by Contractor, then Tesla will make available information and assistance as Contractor may reasonably request, at Contractor's expense. Contractor may not, without the prior written consent of Tesla, (i) consent to the entry of any judgment or enter into any settlement that provides for injunctive or other non-monetary relief affecting any Tesla Indemnitee, or (ii) consent to the entry of any judgment or enter into any settlement unless such judgment or settlement provides for an unconditional and full release of the Tesla Indemnitees and does not diminish any of Tesla’s rights under this Agreement or result in additional fees or charges to Tesla.
12. Liability
12.1 For any breach of this Agreement or this Master Services Agreement by Contractor, Contractor shall be liable to Tesla for direct damages caused by Contractor’s breach, incidental damages incurred by Tesla as a result of such breach, other damages that were reasonably foreseeable at the time of the breach as a result of such breach, and costs and expenses incurred by Tesla in connection with the foregoing types of damages, including without limitation any costs and expenses of containment, sorting, repair, replacement, cure, cover, or other costs and expenses incurred by Tesla (including labor).
12.2 TESLA WILL NOT BE LIABLE TO CONTRACTOR IN CONNECTION WITH THE AGREEMENT OR THIS MASTER SERVICES
AGREEMENT FOR ANY INTEREST, PENALTIES OR CONSEQUENTIAL, INCIDENTAL, INDIRECT, MULTIPLE, EXEMPLARY, OR PUNITIVE
DAMAGES, OR ANY LOSS OF REVENUE, BUSINESS, SAVINGS OR GOODWILL, REGARDLESS OF THE FORM OF ACTION OR THE THEORY OF RECOVERY, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (a) .
13. 13.1
DISPUTE RESOLUTION
Informal Dispute Resolution.
(a) The Owner and Contractor shall first endeavor to negotiate resolution of Claims and disputes relating to the Contract directly. If the Claims cannot be resolved through such negotiations within a reasonable time, either Party may request non-binding mediation to be conducted in San Francisco, California, by the Judicial Arbitration and Mediation Services/Endispute (“JAMS”) or by a mediator approved by both Parties, and neither Party shall unreasonably withhold approval of a mediator proposed by the other Party in good faith. Each Party shall participate in the mediation process in good faith, with each bearing its own expenses and equally sharing the fees and expenses of the mediator.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
121
Packet Pg. 526 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (b) If the Parties are unable to resolve a Claim through good-faith negotiations within 60 days after commencing mediation, the Claim shall be resolved exclusively by final and binding arbitration conducted by the JAMS in accordance with the then-current JAMS Streamlined Arbitration Rules & Procedures. The existence, content and result of the arbitration shall be held in confidence by the Parties, their representatives, any other participants, and the arbitrator. The arbitration will be conducted by a single arbitrator selected by agreement of the Parties or, failing such agreement, appointed in accordance with the JAMS rules. The arbitrator shall be experienced in agreements for capital equipment. Any demand for arbitration and any counterclaim will specify in reasonable detail the facts and legal grounds forming the basis for the claimant’s request for relief and will include a statement of the total amount of damages claimed, if any, and any other remedy sought by the claimant. The arbitration will be conducted in the English language in Palo Alto, California. Each Party will bear its own expenses in the arbitration and will share equally the costs of the arbitration; provided, however, that the arbitrator may, in their discretion, award reasonable costs and fees to the prevailing Party. The arbitrator will have full power and authority to determine issues of arbitrability and to interpret or construe the applicable provisions of the Contract and/or this Master Services Agreement and to fashion appropriate remedies for breaches of the Contract and/or this Master Services Agreement (including interim or permanent injunctive relief); provided that the arbitrator will not have any right or authority:
(i) in excess of the authority of a court having jurisdiction over the Parties and the dispute would have absent this arbitration agreement; (ii) to award damages in excess of the types and limitation of damages found in the Contract and/or this Master Services Agreement; or (iii) to modify the terms of either the Contract or this Master Services Agreement. The award of the arbitrator will be issued within 30 days of the completion of the hearing, shall be in writing, and shall state the reasoning on which the award is based. Judgment upon the award rendered in the arbitration may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, the Parties acknowledge that Seller’s breach of an obligation under this Master Services Agreement or the Contract will subject Tesla to irreparable and continuing injury for which remedies at law would be inadequate and, accordingly, Tesla shall be entitled to temporary, preliminary, or permanent injunctive relief, specific performance, or other equitable relief as appropriate.
Seller hereby waives any bond requirements for obtaining equitable relief. The Parties further consent to the jurisdiction of any state or federal court with subject matter jurisdiction located within a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment (or award) against the assets of such Party.
(c) Each Party shall continue performing its obligations under the Master Services Agreement and the Contract while a dispute is being resolved unless and until such obligations are terminated by the termination or expiration thereof.
13.2 (a)
Jurisdiction and Venue.
If the Owner and Contractor do not resolve the Claim or dispute through mediation, any and all such Claims or disputes shall be decided through litigation under the laws of the State of California. The exclusive venue for such litigation shall be a court of competent jurisdiction located in the United States District Court for the Northern District of California or, if that court does not have jurisdiction, in the Superior Court of the State of California, County of Santa Clara. The Parties irrevocably and unconditionally waive any objection to the laying of venue of any proceeding arising out of or relating to the Agreement in such courts. The Parties further consent to the jurisdiction of any state or federal court with subject matter jurisdiction located within a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment (or award) against the assets of such Party. (b) Contractor may not sue or bring any action of any kind whatsoever against Owner on any Claim or dispute under the Contract Documents after the expiration of three hundred sixty-five (365) days from Substantial Completion. This contractual period of limitation takes precedence over any contrary or conflicting statutory provision or rule of law applicable to any Claims or disputes which the Contractor may seek to bring.
14. MISCELLANEOUS
14.1 Waiver. No failure or delay by a Party in exercising any right, power or remedy will operate as a waiver of that right, power or remedy, and no waiver will be effective unless it is in writing and signed by an authorized representative of the waiving Party. If a Party waives any right, power or remedy, the waiver will not waive any successive or other right, power or remedy that Party may have.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
122
Packet Pg. 527 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
14.2 Remedies Cumulative. All remedies provided in this Agreement are cumulative and in addition to and not in lieu of any other remedies available to a Party under this Agreement, at law, or in equity.
14.3 Assignment. Contractor may not assign, transfer or otherwise convey or delegate any of its rights or duties under this Agreement to any other Party (except to the successor in a merger or acquisition of Contractor) without the prior written consent of Tesla, and any attempt to do so will be void. This Agreement shall be binding upon the respective successors and permitted assigns of the Parties.
14.4 Governing Law. This Agreement will be interpreted and construed in accordance with the substantive laws of California and the United States generally applicable therein, without regard to any provisions of its choice of law rules that would result in a different outcome. Notwithstanding the foregoing, if a Claim relates to or is the subject of a mechanic’s lien, the party asserting such Claim may proceed in accordance with applicable law to comply with the lien notice or filing deadlines.
14.5 Audits and Records. During business hours and upon reasonable advance notice, Tesla and its agents may inspect, examine and audit the records and data of Contractor (and its Subcontractors) that pertain to the Services to verify (a) the accuracy of Contractor’s invoices, and (b) Contractor’s compliance with this Agreement. In support of the foregoing right, Contractor will keep and maintain (i) financial records relating to this Agreement in accordance with generally accepted accounting principles, (ii) records substantiating Contractor’s invoices, (iii) records pertaining to Contractor’s compliance with this Agreement and the Work Authorizations, and (iv) such other operational records pertaining to performance of the Services as Contractor keeps in the ordinary course of its business. Contractor will retain such records for the longer of three (3) years after the Term ends or as required by applicable Laws. Contractor will make such records available to Tesla and its auditors for examination and copying upon request.
14.6 Notices. All formal notices, requests, demands, approvals and communications under this Agreement (other than routine operational communications) (collectively, “Notices”) will be in writing and may be served either (i) in person or (ii) by registered or certified mail with proof of delivery, addressed to the Party at the addresses set forth below. Notices given as described in the preceding sentence will be considered received on the day of actual delivery. A Party may change its address or designee for notification purposes by giving the other Party prior written notice of the new address or designee in the manner provided above. The Parties may mutually agree that certain types of routine approvals and notices of a non-legal nature may be given by electronic mail.
In the case of Tesla: With a copy to:
Tesla, Inc. Tesla, Inc.
13101 Tesla Road
Austin, Texas 78725
13101 Tesla Road
Austin, Texas 78725
Attn: Attn: Legal Department
In the case of Contractor: (Note: If no information is listed here for Contractor, notices shall be sent to the attention of
the Contractor representative who signs this
MSA.)
Attn:
14.7 Interpretation. Section references are to sections of the document in which the reference is contained and will be deemed to refer to and include all subsections of the referenced section. The section headings in this Agreement are for reference purposes only and may not be construed to modify or restrict any of the terms of this Agreement. This Agreement will be deemed to have been written by both Parties. Section references are to sections of the document in which the reference is contained and will be deemed to refer to and include all subsections of the referenced section. The section headings in this Agreement are for reference purposes only and may not be construed to modify or restrict any of the terms of this Agreement. This Agreement is written in the English language, and the English text of this Agreement shall prevail over any translation hereof.
Unless the context requires otherwise, (i) “including” (and any of its derivative forms) means including but not limited to, (ii) “may” means has the right, but not the obligation to do something and “may not” means does not Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
123
Packet Pg. 528 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E have the right to do something, and (iii) “will” and “shall” are expressions of command, not merely expressions of future intent or expectation.
14.8 Order of Precedence. In the event of conflicts or discrepancies among the Contract Documents, interpretations will be based on the following priorities: (a) Work Authorization, solely to the extent the Work Authorization parties agree that the Work Authorization amends this Agreement, (b) this Agreement, as amended, including all Exhibits; (c) Addenda, if any, with those of later date having precedence over those of earlier date; (d) Modifications to the Drawings and Specifications issued after the execution of the Work Authorization, Specifications, Drawings, and Addenda issued prior to execution of the Work Authorization; and (f) Specifications and Drawings. Unless specifically enumerated in the Agreement or any Work Authorization, the Contract Documents do not include the advertisement or invitation to bid, instructions to bidders, sample forms, other information furnished by the Owner in anticipation of receiving bids or proposals, the Contractor’s bid or proposal, or portions of Addenda relating to bidding requirements.
14.9 Severability. If any provision of this Agreement or a Work Authorization is held invalid by a court with jurisdiction over the Parties to this Agreement, such provision will be severed from the Agreement, and the remainder of this Agreement will remain in full force and effect.
14.10 Third Party Beneficiaries. This Agreement is entered into solely between Tesla and Contractor and, except for the Parties’ indemnification obligations under Section 11 (Indemnification) and the Service Recipients, will not be deemed to create any rights in any third parties or to create any obligations of either Tesla or Contractor to any third parties.
14.11 Survival. Any provision of this Agreement that contemplates or governs performance or observance subsequent to termination or expiration of this Agreement will survive the expiration or termination of this Agreement for any reason, including the following Sections: 6 (Confidentiality), 7 (Intellectual Property Rights), 9 (Representations and Warranties of Contractor), 11 (Indemnification), 12 (Liability), 13 (Dispute Resolution) and 14 (Miscellaneous) .
14.12 Entire Agreement. This Agreement including all Schedules constitutes the entire agreement between the Parties with respect to its subject matter and merges, integrates and supersedes all prior and contemporaneous agreements and understandings between the Parties, whether written or oral, concerning its subject matter. Any terms and conditions on any order or written notification from either Party that purport to vary or supplement this Agreement shall not be effective or binding on the other Party. This Agreement may be amended or modified solely in a writing signed by a duly authorized representative of each Party.
14.13 Defined Terms. Terms used in this Agreement with initial capitalization have the meanings specified where used or in this Section 14.13.
(a) “Addenda” or “Addendum” means written information adding to, clarifying or modifying the bidding documents.
(b) “Affiliate” means with respect to an entity, any other entity or person controlling, controlled by, or under common control with, such entity. For purposes of this Agreement, "control" means possessing, directly or indirectly, the power to direct or cause the direction of the management, policies or operations of an entity, whether through ownership of voting securities, by contract or otherwise. (c) “Change” means any material change to the scope of, charges for, or other contractual commitments of a Party with respect to, the Services being provided by Contractor. (d) “Change Order” means a mutually agreed Change to the scope, timing, manner or cost of performing the Services pursuant to an Work Authorization. A change order may not modify the terms of the body of this Agreement.
(e) “Claim” means any demand, or any civil, criminal, administrative or investigative claim, action or proceeding (include arbitration) asserted, commenced or threatened against an entity or person by an unaffiliated third party. For the purposes of this definition, an employee of either Party is considered an unaffiliated third party.
(f) “Commercially Reasonable Efforts” means taking all such steps and performing in such a manner as a well managed company would undertake where it was acting in a determined, prudent and reasonable manner to achieve a particular desired result for its own benefit.
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
124
Packet Pg. 529 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E (g) “Deliverable” means any work product identified as a ‘Deliverable’ in the Agreement or an Work Authorization.
(h) “Drawings” mean graphic and pictorial portions of the Contract Documents showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams.
(i) “Intellectual Property Rights” means all (i) patents, patent applications, patent disclosures and inventions (whether patentable or not), (ii) trademarks, service marks, trade dress, trade names, logos, corporate names, Internet domain names, and registrations and applications for the registration for any of them, together with all goodwill associated with any of them, (iii) copyrights and copyrightable works (including computer programs and mask works) and registrations and applications for registration, (iv) trade secrets, know-how and other confidential information, (v) waivable or assignable rights of publicity, waivable or assignable moral rights, (vi) unregistered and registered design rights and any applications for registration, and (vii) database rights and all other forms of intellectual property, such as data. (j) “Law(s)” means any statute, regulation, ordinance, rule, order, decree or governmental requirement enacted, promulgated or imposed by any governmental authority at any level (e.g., municipal, county, province, state or national).
(k) “Malware” means program code or programming instruction(s) or set(s) of instructions intentionally designed to disrupt, disable, harm, interfere with or otherwise adversely affect computer programs, data files or operations, or other code typically described as a virus, Trojan horse, worm, back door or other type of harmful code.
(l) “Modification” is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Work Authorization or (4) a written order for a minor change in the Work issued by the Owner that does not increase costs or construction time.
(m) “Open Source Code” means software that requires as a condition of its use, modification or distribution, that it be disclosed or distributed in source code form or made available at no charge, including, without limitation, software licensed under the GNU General Public License (GPL) or the GNU Lesser/Library GPL. (n)
(o)
“Party” means either Tesla or Contractor, as required by the context. “Project” means a group of related functions or activities that spans multiple days, weeks, or months and builds cumulatively toward the achievement of defined target outcomes or objectives. A Project typically has multiple phases or life-cycle stages and involves written project plans with defined interim milestones and deliverables to measure progress toward the achievement of its target outcomes or objectives. The Services provided for each Tesla Facility will be deemed a separate Project for purposes of this Agreement. (p) “Specifications” means that portion of the Contract Documents consisting of the written requirements for materials, equipment, systems, standards and workmanship for the Work, and performance of related services.
(q) “Substantial Completion” or “Substantially Complete” is further defined as the date certified respectively, by the Owner when (i) the Owner have prepared a Punchlist of Work remaining to be performed and has established sufficient reserves for purposes of completing such Punchlist of Work, and (ii) all required governmental or regulatory inspections applicable to the Contractor’s Work have been conducted and all final approvals required for occupancy have been obtained from all authorities having jurisdiction over the Project.
Any such occupancy or use described above shall not negate or change the responsibility of the Contractor to Owner for satisfactory completion of the Work nor shall such occupancy or use negate any insurance provisions required hereunder.
(r) “Supplier” means a person or entity who has a direct or indirect contract with Contractor or a Subcontractor at any tier to provide any equipment, supplies, materials, or other goods in connection with the Work and who is not a Subcontractor or a Sub-subcontractor. (s) “Tesla Data” means all data and information regarding Tesla, its customers and suppliers that is either:
(i) furnished, disclosed or otherwise made available to Contractor Personnel, directly or indirectly, by or on behalf of Tesla pursuant to this Agreement; or (ii) collected or created by Contractor Personnel on behalf of Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
125
Packet Pg. 530 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Tesla in the course of performing the Services. Tesla Data will be deemed to be Confidential Information that is subject to the NDA.
(t) “Tesla Facility” means, collectively, the Tesla facility or real property at which Contractor will perform Services and the reasonable office space, furniture, fixtures, equipment, hardware, software, telephones, office supplies, and other facility resources to be provided or made available by Tesla to Contractor Personnel who are assigned by Contractor to work on Tesla premises by mutual agreement of the Parties, as evidenced in the applicable Work Authorization.
(u) “Use” means the right to use, execute, display, copy, perform, distribute copies of, maintain, modify, enhance, and create derivative works of software or other copyrighted or copyrightable works. (v) “Work Authorization” means the form of document that will be used to authorize Contractor to perform Services by mutual agreement of the Parties. When duly executed by the authorized representatives of both Parties, a Work Authorization becomes an “Work Authorization.”
15. MECHANIC’S LIENS
15.1 If at any time, a lien is filed on the Project arising out of the Work, the Contractor, within five (5) days after the date of the filing of such notice of lien, and to the Owner’s satisfaction and in accordance with the mechanic’s lien laws of the place where the Project is located, shall discharge and remove the lien or post a bond satisfactory to the Owner for such lien or claim of lien and shall indemnify and hold the Owner harmless for all costs, including, but not limited to, attorneys’ fees and expert fees, regarding such lien or claim of lien, together with interest on the same from the date any such cost was paid by Owner until reimbursed by Contractor at the rate of interest provided in the Agreement, except if the lien is the result of Owner’s nonpayment of an amount contained in a previously submitted pay application over which no good-faith dispute exists between Owner and Contractor. The obligations of Contractor under this Subsection shall survive the expiration or termination of the Contract.
15.2 Contractor shall promptly advise Owner in writing of any action, administrative or legal proceeding or investigation as to which Subsection 15.1may apply, and provided the Owner is not in default of its payment obligations to the Contractor, Contractor, at Contractor’s expense, shall assume on behalf of Owner, and conduct with due diligence and in good faith, the defense thereof with counsel satisfactory to Owner, provided that Owner shall have the right to be represented therein by advisory counsel of its own selection and at Contractor's expense, and provided further that if the defendants in any such action include Contractor and Owner and Owner concludes that Contractor has a conflict of interest and cannot adequately represent the Owner, then the Owner shall have the right to select separate counsel to participate in the defense of such action on its own behalf for which fifty percent (50%) of the cost shall be at the Contractor’s expense. In the event of failure by Contractor to fully perform in accordance with this Subsection, Owner, has the option of, and without relieving Contractor of its obligations hereunder, to so perform, but all costs and expenses, including but not limited to attorneys’ fees and expert fees, so incurred by Owner in that event shall be reimbursed by Contractor to Owner, together with interest on the same from the date any such expense was paid by Owner until reimbursed by Contractor at the rate of interest provided in the Agreement. The obligations of Contractor under this Subsection shall survive the expiration of termination of the Contract.
15.3 The Owner shall release any payments withheld due to a lien or claim of lien if the Contractor removes the lien or obtains security acceptable to the Owner or a lien bond that is (i) issued by a surety acceptable to Owner, (ii) in a form and substance satisfactory to the Owner, and (iii) in an amount not less than one hundred fifty percent (150%) of such lien claim. By posting a lien bond or other acceptable security, however, the Contractor shall not be relieved of any responsibilities or obligations under this Section 15.3, including without limitation the duty to defend and indemnify the Owner. The cost of any premiums incurred in connection with such bonds and security shall be the responsibility of the Contractor and shall not be a part of, or cause any adjustment to, the Contract Price.
15.4 Notwithstanding anything to the contrary contained herein, if the Contractor does not promptly post the bond, the Owner may withhold 150% of the amount of such lien until such lien is discharged or the Owner is protected by bond satisfactory to the Owner in the amount of at least 150% of the amount of the lien or other Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
126
Packet Pg. 531 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E means satisfactory to the Owner. If no monies are available to be withheld, the Contractor shall within three (3) consecutive calendar days refund to the Owner 150% of the amount of such lien(s).
15.5 Notwithstanding anything in Section 15 to the contrary, and in the event the Contractor fails to make payments to its Subcontractors or Suppliers in accordance with this Contract and does not provide justifiable reasons to the Owner upon Owner’s request, Owner may, at the Owner’s sole discretion, elect to make any payment requested by the Contractor on behalf of a Subcontractor of any tier or a Supplier, jointly payable to the Contractor and each Subcontractor and/or Supplier. The Contractor and such Subcontractor or Supplier shall be responsible for the allocation and disbursement of funds included as part of any such joint payment. In no event shall any joint payment be construed to create any (i) contract between the Owner and a Subcontractor or Supplier of any tier, (ii) obligations from the Owner to such Subcontractor or Supplier, or (iii) rights in such Subcontractor or Supplier against the Owner. The Contractor agrees to sign such additional documents and take such action as the Owner shall deem necessary to carry out the intent of this Section 15.5.
Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute this Agreement as of the Effective Date.
Tesla, Inc. Contractor
By: By:
Printed:
Title:
Date:
Printed:
Title:
Date:
Company:
Address:
Master Services Agreement (Construction)
Version January 2022
General Terms and Conditions
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
127
Packet Pg. 532 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT A
APPROVED WORK ORDER NO. FOR SERVICES
1. Introduction. This Work Order is entered into as of the Date of Order set forth below by and between the Tesla affiliate set forth below (for the purposes of this Work Order, “Tesla”) and Contractor, and made a part of that certain Master Services Agreement between [INSERT TESLA ENTITY] (“Tesla”) and [CONTRACTOR NAME AND ADDRESS] ( hereinafter “Contractor”) dated [INSERT AGREEMENT DATE] (the “Agreement”). This Work Order sets forth the terms and conditions for the Project described in this Work Order. All capitalized terms not defined in this Work Order have the respective meanings set forth in the Agreement.
2. Description of Project Services and Performance Measurement.
Contractor will perform the following Services pursuant to this Work Order. (a) [describe services, any required resources, any Deliverables, and any deadlines or milestones]:
(b) Project Site:
(c) Project Milestones (specify delivery dates): [IF APPLICABLE] (i) Contractor shall begin Work on , and shall be substantially complete as soon as due . ordiligence and good practice will permit, but not later than (ii)
Project Milestones Deadline
Substantial Completion Date
Final Completion Date
(d) List of applicable Plans and Specifications:
3. Work Schedule:
From the mutual execution of this Work Order until Substantial Completion, at Tesla’s request, Contractor shall provide weekly written updates to Tesla describing the Services completed to date and a comparison of costs incurred versus budgeted amounts and providing an updated Work Schedule for the remainder of the Services, including the anticipated date of Substantial Completion.
Tesla may request additional services after the Effective Date. Unless otherwise agreed by the Parties in writing, the fees for such services will be calculated by multiplying the Productive Hours by the applicable agreed billing rates set forth herein, or currently on file.
Tesla shall have the right within the general scope of the Work and without notice to any surety or sureties of the Contractor, to make changes in the Work pursuant to a written change order (“Change Order”), either by altering the nature of the same or by adding to or deducting from it as more specifically set forth in the Construction General Master Services Agreement (Construction) Annex 2
Page A-2-1
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
128
Packet Pg. 533 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Conditions incorporated herein.
4. Contract Price. With reference to Section 4 (Charges) of the Agreement, Tesla will pay the Contractor for the performance of work specified herein the total price of (INSERT TOTAL AMOUNT OF WORK ORDER IN TEXTand no cents) ($00,000.00).
5. Monthly Invoicing: Tesla will pay Contractor the amount above in accordance with the Agreement, subject to receipt of invoices from Contractor in a form and content reasonably acceptable to Tesla. Such invoices shall contain sufficient information to allow Tesla to determine the accuracy of the amounts billed and shall include invoices from all subcontractors, any relevant certificates of completion, unconditional lien waivers for all past work and conditional lien waivers for current work. Tesla will pay invoices not disputed in good faith as per the Agreement, less a retainage of 10%. Tesla will pay the accumulated retainage 30 days after the later of (a) receipt of the Close Out Book; or (b) Final Completion; in each case together with invoices and final unconditional lien waivers from all subcontractors.
Payment terms are otherwise as set forth in the Agreement, however Contractor shall be paid by Tesla within ( days of Tesla’s receipt of the applicable invoice for such amounts. )
6. Key Contractor Positions. With reference to Section 3.2 (Key Contractor Positions) of the MSA, the Key Contractor Positions for purposes of this Work Order, if any, are:
7. Service-Specific Terms and Conditions. Annexes or additional documents attached hereto set forth additional terms and conditions which may apply for purposes of this Work Order, if applicable to the Services to be performed hereunder.
Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute this Approved Work Order as of the date last entered below.
TESLA, INC. Contractor
By: By:
Printed:
Title:
Date:
Printed:
Title:
Date:
Company:
Address:
Master Services Agreement (Construction) Annex 2
Page A-2-2
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
129
Packet Pg. 534 of 553
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E
EXHIBIT B
FORM OF CHANGE ORDER
TESLA MASTER SERVICES AGREEMENT (CONSTRUCTION) CHANGE ORDER Work Authorization No:
Change No.: Date:
Architect/Engineer:
To (Contractor):
Your proposal dated has been accepted for making the following changes:
DESCRIPTION OF CHANGE DECREASE INCREASE
(Attach additional sheets if required.)
NOTICE TO PROCEED DATE: ORIGINAL CONTRACT SUM:
Contract Time Days Complete* Subtotal
Present Contract
This Change
New Contract Time
New (Add) (Deduct)
Present Contract Sum
New Contract Sum
*SUBSTANTIAL COMPLETION DATE
This Change Order is an amendment to the Agreement, and all contract provisions shall apply unless specifically exempted. The amount and time Change designated are the maximum agreed to by both the Owner and the Contractor for this change. In consideration of the foregoing adjustments in Contract Time and Contract Sum, the Contractor hereby releases Owner from all Claims, demands, or causes of action arising out of the transactions, events and occurrences giving rise to this Change Order. This written Change Order is the entire agreement between Owner and Contractor with respect to this Change Order. The cost of the change indicated on the face of this Change Order is the entire amount of the change, and no backup documentation attached hereto may reserve the Contractor’s right to increase the contract time or the cost of this change for extended overhead or general conditions or any other reason.
AGREED TO IN FORM AND CONTENT
CONTRACTOR
ARCHITECT/ENGINEER
TESLA, INC.
DATE
DATE
DATE
Master Services Agreement (Construction) Annex 2
Page A-2-3
Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
130
Packet Pg. 535 of 553
T = S L n
DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Item 14
Attachment A - Tesla
Substation Agreement
Item 14: Staff Report
Pg.
131
Packet Pg. 536 of 553
City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORT
Lead Department: Administrative Services
Meeting Date: January 16, 2024
Report #:2311-2207
TITLE
Sales Tax Digest Summary Calendar 2023 Q2 (April 2023 – June 2023)
DISCUSSION
This report transmits information regarding the City of Palo Alto’s sales tax receipts for the second (calendar) quarter (April to June) of 2023. These figures have been factored into the FY 2023 Annual Comprehensive Financial Report and the FY 2025 Long Range Financial report released in November and December 2023 respectively.
There are two components to the report in Attachment A that provides further and more detailed levels of information:
a. City of Palo Alto Sales Tax Digest Summary 2023 Q2
b. California Legislative Update for Local Taxes
The City’s sales tax cash receipts of $9.4 million for the second quarter (April to June 2023) is $1.8 million higher than the same quarter of the prior year (see Attachment A, Historical Analysis by Calendar Quarter). When adjusted for non-period related payments, the overall economic quarter over quarter sales tax activity (Q2 2022 to Q2 2023) in Palo Alto increased by
4.2% (Attachment A, p. 8). The segments showing increases were business to business, food produces, and general retail, while there was a decrease in transportation (see Attachment A, p. 10, City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2).
For the year ending in the second quarter of 2023, cash receipts (including county pools) for the City increased by 23.3% from the prior year. In comparison, both statewide and Northern California decreased by 1.0%. Overall, the decline in California sales tax receipts for the quarter was due to a number of factors, most notably, lower inflation, and higher interest rates which made financing larger purchases more expensive. These factors contributed to an overall decrease in consumer spending. After adjustments for non-period related payments, the overall Item 15
Item 15 Staff Report
Item 15: Staff Report
Pg.
1 Packet Pg. 537 of 553
economic sales tax activity in Palo Alto for the year increased by 5.5% while it increased 1.5% statewide and increased 1.0% in the San Francisco Bay Area.
The second quarter includes $1.8 million of sales tax receipts from the county pool. The City’s share of the county pool for this quarter is 6.3% up from 5.5% in the second quarter of 2022.
County pools are primarily from online purchases from out-of-state companies, remote sellers who ship merchandise to California/County destinations, and private vehicle sales that are not directly allocated to a jurisdiction. County pools are allocated to local jurisdictions based on each jurisdiction’s share of total sales tax.
ATTACHMENTS
Attachment A: 2023 Q2 Sales Tax Data and Legislative Update APPROVED BY:
Kiely Nose, Assistant City Manager
Item 15
Item 15 Staff Report
Item 15: Staff Report
Pg.
2 Packet Pg. 538 of 553
City of Palo Alto
Sales Tax Digest Summary
Collections through August 2023
Sales April through June 2023 (2023Q2)
www.avenuinsights.com (800) 800-8181 Page 1
California Overview
For the year ending in the second quarter of 2023, cash receipts increased 2.4% statewide, 3.9% in S.F.
Bay Area. However, when adjusted for non-period related payments, the overall economic sales tax activity for the year ending in second quarter of 2023 increased by 1.5% statewide and increased by
1.0% in S.F. Bay Area.
City of Palo Alto
For the year ending in the second quarter of 2023, sales tax cash receipts for the city increased by 13.5% from the prior year. However, when adjusted for non-period related payments, the overall economic sales tax activity in Palo Alto for the year ending in second quarter of 2023 increased by 5.5%.
Sales tax cash receipts decreased by 1.0% in California from Q2 2022 to Q2 2023, while the citywide sales tax cash receipts increased by 23.3% over the same period. Overall, the decline in sales tax cash receipts in California in Q2 2023 was due to a combination of factors, including bad weather, lower inflation, and higher interest rates. Unusual amounts of rain and bad weather affected most of the state. This led to an overall decrease in consumer spending. Inflation declined by 1.6% from an average of 8.0% in Q1 2022 to
6.4% in Q1 2023. Interest rates increases made financing larger purchases, such as new autos, more expensive. According to Experian, the average interest rate for an auto loan in California for the year ended 2023Q1 was 5.41%, up from 4.73% in the year ended 2022Q1. This represents a 14.2% increase in the average interest rate.
The Transportation Category in Palo Alto saw the largest decline in taxable sales on an economic basis over the past year, falling by 14.1%. This was driven by a 18.6% year-over-year decline in taxable sales of new autos, which make up 76.4% of the category. The average price of a new car in California was $48,451 in 2023Q2, up from $48,257 in 2022Q2, a 0.4% increase. The average price of a Tesla in California declined by $13,290 in the year ended 2023Q 2, from $68,233 in 2022Q2 to $54,943 in 2023Q2, a 19.5% decline.
The decrease in the Transportation category for the Palo Alto can be attributed to CDTFA’s determination that Tesla had not been reporting the local tax correctly based on Point -of-Sale criteria for auto dealerships.
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
3 Packet Pg. 539 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 2 % of Total / % Change Palo Alto California
Statewide S.F. Bay Area Sacramento
Valley Central Valley South Coast Inland Empire North Coast General Retail 27.1 / 2.8 28.0 / 1.3 23.5 / -2.1 28.5 / 3.0 36.6 / -1.0 26.7 / 2.1 32.8 / 4.5 26.8 / -5.0 Food Products 17.7 / 15.5 20.8 / 4.7 22.8 / 8.6 16.6 / 6.3 14.7 / 2.8 22.6 / 4.0 17.6 / 3.0 17.9 / -2.7 Transportation 17.5 / -14.1 24.2 / 0.6 20.0 / -0.5 26.8 / -2.2 22.8 / -1.7 25.0 / 0.9 25.9 / 6.1 29.5 / -7.5 Business to Business 34.5 / 19.4 16.2 / 1.3 21.9 / -0.4 14.5 / 5.7 15.1 / 1.1 15.9 / 0.5 11.3 / 10.5 10.2 / -12.5 Misc/Other 3.6 / -14.3 10.8 / -1.1 11.9 / -1.0 13.6 / -4.3 10.9 / -3.6 9.8 / 0.3 12.4 / -2.0 15.7 / -2.4 Total 100.0 / 5.5 100.0 / 1.5 100.0 / 1.0 100.0 / 1.4 100.0 / -0.6 100.0 / 1.8 100.0 / 4.4 100.0 / -5.8 Palo Alto California
Statewide S.F. Bay Area Sacramento
Valley Central Valley South Coast Inland Empire North Coast Largest Segment Leasing Restaurants Restaurants Miscellaneous Retail
Miscellaneous
Retail Restaurants Miscellaneous
Retail Service Stations
% of Total / % Change 22.1 / 16.3 14.9 / 7.6 16.8 / 12.6 11.3 / 10.1 14.1 / 5.4 16.6 / 6.7 15.9 / 7.9 11.3 / -5.3 2nd Largest Segment Restaurants Auto Sales -
New
Auto Sales -
New Restaurants Department
Stores
Auto Sales -
New
Auto Sales -
New Restaurants
% of Total / % Change 15.8 / 16.7 11.6 / 3.3 9.7 / 2.2 11.3 / 7.4 11.0 / -0.9 12.9 / 4.0 11.2 / 6.7 11.3 / -2.7 3rd Largest Segment Auto Sales -
New
Miscellaneous
Retail
Department
Stores
Auto Sales -
New Restaurants Miscellaneous
Retail Restaurants Service Stations
% of Total / % Change 13.4 / -18.6 9.5 / 7.9 7.6 / 0.3 11.3 / 1.5 9.8 / 4.1 8.2 / 11.6 11.1 / 7.4 11.0 / -9.1 ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 2nd Quarter 2023 ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 2nd Quarter 2023
Regional Overview
The first chart on page two shows adjusted economic benchmark year amounts, which means that it shows the year ended second quarter of 2023 compared to the year ended second quarter of 202 2 (benchmark years are rolling annual comparisons through the current quarter). The decrease is different between the state and Palo Alto because the sales tax from businesses in Palo Alto were more impacted than those statewide.
Regional Overview Chart (Economic)
BENCHMARK YEAR 2023Q2 COMPARED TO BENCHMARK YEAR 2022Q2
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
4 Packet Pg. 540 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 3 $-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
Quarterly Benchmark Year
Leasing
22.1%
Restaurants
15.8%
Auto Sales - New
13.4%
Office Equipment
7.4%Apparel Stores
6.7%
All Other
34.7%
Net Pools & Adjustments
24.9%
Gross Historical Sales Tax Cash Receipts by Benchmark Year and Quarter (Before Adjustments)
Net Cash Receipts for Benchmark Year second Quarter 2023: $35,791,903
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023Q2 BMY is sum of 2023 Q2, 2023 Q1, 2022 Q4, 2022 Q3)
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
5 Packet Pg. 541 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 2 Anderson Honda Macy's Department Store Shreve & Co.
Apple Stores Magnussen's Toyota of Palo Alto Stanford Health Care Arco AM/PM Mini Marts Neiman Marcus Tesla
Audi Palo Alto Nordstrom Department Store Tesla Lease Trust Bloomingdale's Richemont Tiffany & Company
Hengehold Trucks Rivian Automotive Union 76 Service Stations Hermes Sephora Varian Medical Systems
HP Enterprise Services Shell Service Stations Volvo Cars Palo Alto Louis Vuitton
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order and represents the year ended second quarter of 2023. The Top 25 Sales/Use Tax contributors generate
60.8% of Palo Alto’s total sales and use tax revenue.
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
6 Packet Pg. 542 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 5
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
Benchmark Year 2023Q2 Benchmark Year 2022Q2
Sales Tax from Largest Non-Confidential Sales Tax Segments (Economic)
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
7 Packet Pg. 543 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 5
Economic Category % 2023Q2 2023Q1 2022Q4 2022Q3 2022Q2 2022Q1 2021Q4 2021Q3 2021Q2 2021Q1 2020Q4 Business To Business 25.8% 2,439,519 2,350,567 2,571,178 2,194,817 2,095,020 2,031,199 2,136,501 1,689,561 1,559,814 1,700,725 1,937,072 M isc ellaneous/Other 16.4% 1,546,096 1,302,322 1,517,005 1,597,816 1,724,861 1,701,538 1,687,189 1,812,731 1,743,358 1,558,859 1,777,635 Gener al Retail 21.4% 2,017,885 1,640,927 2,305,038 1,802,777 1,920,316 1,639,417 2,282,253 1,687,461 1,740,666 1,153,240 1,608,823 Food Products 14.3% 1,349,926 1,195,458 1,260,287 1,230,824 1,227,240 1,018,577 1,083,309 999,729 912,939 635,705 674,469 Subtotal Ec onomic (Loc al Business) 77.9% 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 5,997,999 Net Pools & Adjus tments 22.1% 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 1,343,184 Total C ash Rec eipts 100.0% 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802 7,341,183 Economi c Segment % 2023Q2 2023Q1 2022Q4 2022Q3 2022Q2 2022Q1 2021Q4 2021Q3 2021Q2 2021Q1 2020Q4 M isc ellaneous/Other 44.5% 4,197,978 3,818,384 4,490,992 4,087,158 4,008,008 3,949,786 3,969,954 3,752,178 3,570,610 3,406,995 3,982,753 Res taurants 12.9% 1,214,502 1,073,621 1,114,637 1,102,248 1,093,944 902,707 947,771 884,911 799,544 540,244 557,662 M isc ellaneous Retail 5.4% 512,077 448,322 545,797 381,616 479,710 432,956 679,381 412,016 514,516 338,032 489,417 Appa rel Stores 5.4% 509,894 423,470 538,573 435,730 495,508 392,724 540,782 406,274 398,447 264,318 365,627 Department Stores 5.2% 492,374 356,626 533,032 423,601 454,349 367,144 525,295 388,703 384,763 237,522 315,453 Ser v ic e Stations 2.4% 222,029 192,723 215,640 233,387 250,715 191,755 190,610 181,460 157,268 116,258 111,242 Food Markets 1.2% 111,465 101,978 116,810 99,811 104,253 91,634 108,203 90,773 89,773 74,397 89,739 Business Serv ices 1.0% 93,106 74,150 98,027 62,683 80,950 62,025 227,256 73,169 41,858 70,763 86,107 Subtotal Ec onomic (Loc al Business) 77.9% 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 5,997,999 Net Pools & Adjus tments 22.1% 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 1,343,184 Total C ash Rec eipts 100.0% 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802 7,341,183
Historical Analysis by Calendar Quarter
The chart above shows the categories and segments in quarterly economic basis amounts. The total amount is the net cash recei pts, and it was obtained by adding up the categories/segments with the “Net Pools & Adjustments” amount.
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
8 Packet Pg. 544 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 7 Economic Category % 2023Q2 2022Q2 2021Q2 2020Q2 2019Q2 2018Q2 2017Q2 2016Q2 2015Q2 2014Q2 Business To Business 27.6% 9,893,339 8,286,992 7,485,938 8,193,739 7,496,054 6,707,627 5,418,731 5,120,759 4,034,581 4,713,800 M isc ellaneous/Other 16.7% 5,964,981 6,940,297 5,980,661 5,389,899 7,990,749 6,336,507 6,023,496 5,828,635 5,526,056 5,279,967 Gener al Retail 21.7% 7,751,380 7,538,308 6,113,299 7,106,633 8,543,599 8,381,689 8,508,010 8,180,392 8,079,780 8,106,060 Food Products 14.1% 5,055,390 4,376,428 2,835,515 3,891,336 4,885,701 4,776,697 4,596,100 4,609,460 4,323,122 4,035,894 Subtotal Ec onomic (Loc al Business) 80.1% 28,665,089 27,142,025 22,415,414 24,581,607 28,916,104 26,202,519 24,546,336 23,739,246 21,963,538 22,135,721 Net Pools & Adjus tments 19.9% 7,126,814 4,393,682 5,709,337 5,310,618 7,173,726 3,517,503 4,313,668 4,407,390 4,034,611 3,441,331 Total 100.0% 35,791,903 31,535,707 28,124,751 29,892,225 36,089,829 29,720,022 24,546,336 28,146,636 25,998,149 25,577,052
Economi c Segment % 2023Q2 2022Q2 2021Q2 2020Q2 2019Q2 2018Q2 2017Q2 2016Q2 2015Q2 2014Q2 M isc ellaneous/Other 47.2% 16,902,798 16,028,739 14,884,738 15,705,174 17,022,880 14,508,248 12,802,455 12,024,028 10,653,521 11,130,513 Res taurants 12.6% 4,523,610 3,877,041 2,410,193 3,388,800 4,304,101 4,166,128 3,993,417 4,010,073 3,761,655 3,516,294 M isc ellaneous Retail 5.2% 1,848,192 2,012,947 1,590,233 1,273,539 1,639,505 1,676,488 2,137,729 1,885,952 1,506,384 1,497,498 Appa rel Stores 5.3% 1,912,134 1,834,771 1,282,785 1,400,225 2,004,839 1,835,953 1,692,171 1,627,846 1,655,700 1,660,948 Department Stores 5.1% 1,809,245 1,735,491 1,124,004 1,260,329 1,885,556 2,068,624 2,065,427 2,250,100 2,397,566 2,403,841 Ser v ic e Stations 2.4% 870,389 814,667 488,904 572,745 698,559 651,979 587,986 581,619 699,331 776,593 Business Serv ices 1.0% 368,276 443,531 302,590 577,822 907,685 796,402 762,154 850,451 799,913 700,153 Food Markets 1.2% 430,445 394,839 331,966 402,973 452,977 498,697 504,997 509,177 489,468 449,881 Subtotal Ec onomic (Loc al Business) 80.1% 28,665,089 27,142,025 22,415,414 24,581,607 28,916,104 26,202,519 24,546,336 23,739,246 21,963,538 22,135,721 Net Pools & Adjus tments 19.9% 7,126,814 4,393,682 5,709,337 5,310,618 7,173,726 3,517,503 4,313,668 4,407,390 4,034,611 3,441,331 Total 100.0% 35,791,903 31,535,707 28,124,751 29,892,225 36,089,829 29,720,022 24,546,336 28,146,636 25,998,149 25,577,052
Historical Analysis by Calendar BMY from 2014Q2 to 2023Q2
The chart above shows the categories and segments in benchmark year economic basis amounts. The total amount is the net cash receipts, and it was obtained by adding up the categories/segments with the “Net Pools & Adjustments” amount. Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023Q2 BMY is sum of 2023 Q2, 2023 Q1, 2022 Q4, 2022 Q3).
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
9 Packet Pg. 545 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 8
General Retail
Food Products
Transportation
Business to Business
Misc/Other
2023/2 Total
2022/2 Total
% Chg
Largest Gain
Second Largest
Gain
Largest Decline
Second Largest
Decline
Campbell -5.2% 4.5% -5.8% 67.2% 1.5% 3,370,786 2,964,148 13.7% I.T. Infrastructure Light Industry Electronic Equipment Service Stations Cupertino -3.6% 8.1% -4.0% -30.9% -10.6% 5,974,054 7,974,786 -25.1% Restaurants Bldg.Matls-Retail Office Equipment I.T. Infrastructure Gilroy -4.1% 5.3% -7.7% -9.7% -5.3% 4,340,101 4,553,438 -4.7% Auto Sales - New Restaurants Misc. Vehicle Sales Service Stations Los Altos -15.2% 2.3% -25.4% -17.2% 5.2% 645,408 703,169 -8.2% Food Markets Health & Government Service Stations Miscellaneous Retail Los Gatos 7.4% -1.0% -10.7% 25.6% -29.9% 1,538,907 1,585,258 -2.9% Biotechnology Apparel Stores Miscellaneous Other Service Stations Milpitas 6.4% 6.7% -12.5% 0.6% -8.9% 5,955,173 5,980,175 -0.4% Office Equipment Miscellaneous Retail Electronic Equipment Auto Sales - New Morgan Hill 6.2% 4.7% 1.2% -26.0% 3.1% 2,711,516 2,742,041 -1.1% Auto Sales - New Bldg.Matls-Whsle Light Industry Service Stations Mountain View -4.5% 13.2% -14.7% -8.6% -8.7% 4,800,562 4,874,063 -1.5% Restaurants Light Industry Auto Sales - New Energy Sales Palo Alto 4.9% 8.5% -6.7% 14.0% -33.5% 7,415,373 7,118,709 4.2% Leasing Restaurants Health & Government Auto Sales - New San Jose -7.3% 5.0% -8.9% 21.0% -8.2% 49,529,258 49,235,373 0.6% Office Equipment Green Energy Service Stations Bldg.Matls-Whsle Santa Clara -8.6% 12.2% -2.5% 14.1% 21.0% 12,710,915 11,748,360 8.2% Office Equipment Bldg.Matls-Whsle I.T. Infrastructure Heavy Industry County of Santa Clara 1.3% 3.6% 49.9% 15.8% 13.5% 1,398,881 1,256,453 11.3% Misc. Vehicle Sales Leasing Business Services Auto Parts/Repair Saratoga 0.5% -0.1% -29.3% 26.0% -37.1% 262,293 280,920 -6.6% Light Industry Furniture/Appliance Service Stations Miscellaneous Other Sunnyvale -6.6% 10.5% 30.5% -12.0% -12.3% 7,339,420 7,171,301 2.3% Auto Sales - New Light Industry Office Equipment Electronic Equipment Quarterly Analysis by Sales Tax Category: Change from 2022Q2 to 2023Q2 (Economic)
Unlike the chart on page one which showed a ‘benchmark year’ through second quarter of 2023, the chart above shows a comparison of one quarter only – second quarter of 2023 to second quarter of 2022. This chart is for local ‘brick and mortar’ businesses and it excludes county pools and adjustments.
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
10 Packet Pg. 546 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 9 California Avenue % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL FOOD PRODUCTS 21.2% 98,752 81,447 60.7% 51.6%
GENERAL RETAIL -27.6% 20,523 28,346 12.6% 18.0%
ALL OTHER -9.8% 43,314 48,003 26.6% 30.4%
TOTAL 3.0% 162,589 157,797 100.0% 100.0%
El Camino Real and Midtown % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL FOOD PRODUCTS -0.2% 161,383 161,689 42.6% 26.6%
GENERAL RETAIL 1.2% 39,467 39,015 10.4% 6.4%
ALL OTHER -56.1% 178,382 406,746 47.0% 67.0%
TOTAL -37.6% 379,232 607,450 100.0% 100.0%
Greater Downtown % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL FOOD PRODUCTS 10.8% 538,341 485,837 61.4% 60.0%
GENERAL RETAIL 2.0% 275,468 270,075 31.4% 33.3%
BUSINESS TO BUSINESS 19.4% 42,631 35,703 4.9% 4.4%
MISCELLANEOUS 24.9% 9,104 7,288 1.0% 0.9%
CONSTRUCTION 3.2% 8,503 8,236 1.0% 1.0%
TRANSPORTATION 9.4% 3,276 2,994 0.4% 0.4%
TOTAL 8.3% 877,324 810,133 100.0% 100.0%
Stanford Shopping Center % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL GENERAL RETAIL 8.2% 1,457,795 1,346,744 76.9% 78.7%
FOOD PRODUCTS 3.7% 167,448 161,418 8.8% 9.4%
ALL OTHER 32.4% 270,100 203,974 14.3% 11.9%
TOTAL 10.7% 1,895,343 1,712,136 100.0% 100.0%
City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2 (Economic)
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
11 Packet Pg. 547 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 10
Town And Country Shopping Center % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL FOOD PRODUCTS 4.9% 118,145 112,593 61.5% 62.9%
GENERAL RETAIL 13.5% 70,254 61,894 36.5% 34.6%
ALL OTHER -12.5% 3,857 4,408 2.0% 2.5%
TOTAL 7.5% 192,256 178,895 100.0% 100.0%
All Other Geos combined with Balance of Jurisdiction % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL BUSINESS TO BUSINESS 15.4% 2,328,118 2,017,258 34.0% 31.4% GENERAL RETAIL 6.4% 1,952,382 1,834,998 28.5% 28.5%
TRANSPORTATION -6.7% 1,314,080 1,408,859 19.2% 21.9%
FOOD PRODUCTS 9.1% 1,167,248 1,069,414 17.0% 16.6%
MISCELLANEOUS -13.4% 57,767 66,697 0.8% 1.0%
CONSTRUCTION -0.6% 32,731 32,922 0.5% 0.5%
TOTAL 6.6% 6,852,325 6,430,147 100.0% 100.0%
All Geo Area Totals Comparison 23Q2 & 22Q2 % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL Balance of Jurisdiction 12.9% 3,345,582 2,963,737 48.8% 46.1% Stanford Shopping Center 10.7% 1,895,343 1,712,136 27.7% 26.6% Greater Downtown 8.3% 877,324 810,133 12.8% 12.6%
El Camino Real and Midtown -37.6% 379,232 607,450 5.5% 9.4% Town And Country Shopping Center 7.5% 192,256 178,895 2.8% 2.8% California Avenue 3.0% 162,589 157,797 2.4% 2.5%
TOTAL 6.6% 6,852,325 6,430,147 100.0% 100.0%
Palo Alto citywide QE 23Q2 & 22Q2 % CHANGE QoQ 2023Q2 QE 2022Q2 QE 23Q2 % OF TOTAL 22Q2 % OF TOTAL BUSINESS TO BUSINESS 14.0% 2,497,077 2,189,789 33.7% 30.8% GENERAL RETAIL 4.9% 2,017,885 1,922,833 27.2% 27.0%
FOOD PRODUCTS 8.5% 1,349,926 1,243,678 18.2% 17.5%
TRANSPORTATION -6.7% 1,318,080 1,412,974 17.8% 19.8%
MISCELLANEOUS -38.7% 188,332 307,262 2.5% 4.3%
CONSTRUCTION 4.5% 44,073 42,172 0.6% 0.6%
TOTAL 4.2% 7,415,373 7,118,709 100.0% 100.0%
City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2 (Economic) Cont.
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
12 Packet Pg. 548 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 11
FOOD PRODUCTS,
21.2% CHANGE, $98,752 ,
60.7% TOTAL
GENERAL RETAIL, -27.6%
CHANGE, $20,523 ,
12.6% TOTAL
ALL OTHER,
-9.8% CHANGE, $43,314 ,
26.6% TOTAL
California Avenue 2023Q2 SALES TAX AMOUNTS
FOOD PRODUCTS, $81,447 ,
51.6% TOTAL
GENERAL RETAIL,
$28,346 , 18.0%TOTAL
ALL OTHER, $48,003 ,
30.4% TOTAL
California Avenue 2022Q2 SALES TAX AMOUNTS
FOOD PRODUCTS,
-0.2% CHANGE, $161,383 ,
42.6% TOTAL
GENERAL RETAIL, 1.2% CHANGE,
$39,467 , 10.4%TOTAL
ALL OTHER,
-56.1% CHANGE,
$178,382 ,
47.0% TOTAL
El Camino Real and Midtown 2023Q2 SALES TAX AMOUNTS
FOOD PRODUCTS, $161,689 ,
26.6% TOTAL
GENERAL RETAIL,
$39,015, 6.4% TOTAL
ALL OTHER, $406,746
67.0% TOTAL
El Camino Real and Midtown 2022Q2 SALES TAX AMOUNTS
City of Palo Alto Geo Area Pie Charts
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
13 Packet Pg. 549 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 12
FOOD PRODUCTS,
10.8% CHANGE, $538,341 ,
61.4% TOTAL
GENERAL RETAIL,
2.0% CHANGE,
$275,468 ,
31.4% TOTAL
BUSINESS TO BUSINESS,
19.4% CHANGE, $42,631 ,
4.9% TOTAL
MISCELLANEOUS,
24.9% CHANGE, $9,104 ,
1.0% TOTAL
CONSTRUCTION, 3.2% CHANGE,
$8,503 , 1.0% TOTAL TRANSPORTATION,
9.4% CHANGE, $3,276 ,
0.4% TOTAL
Greater Downtown 2023Q2 SALES TAX AMOUNTS
FOOD PRODUCTS,
$485,837 , 60.0% TOTAL
GENERAL RETAIL,
$270,075 , 33.3% TOTAL
BUSINESS TO BUSINESS,
$35,703 , 4.4% TOTAL
MISCELLANEOUS, $7,288 ,
0.9% TOTAL
CONSTRUCTION,
$8,236 , 1.0% TOTAL
TRANSPORTATION, $2,994 ,
0.4% TOTAL
Greater Downtown 2022Q2 SALES TAX AMOUNTS
GENERAL RETAIL
$1,346,744 ,
78.7% TOTAL
FOOD PRODUCTS, $161,418 ,
9.4% TOTAL
ALL OTHER, $203,974 ,
11.9% TOTAL
Stanford Shopping Center 2022Q2 SALES TAX AMOUNTS
GENERAL RETAIL,
8.2% CHANGE, $1,457,795 ,
76.9% TOTAL
FOOD PRODUCTS,
3.7% CHANGE,
$167,448 ,
8.8% TOTAL
ALL OTHER, 32.4% CHANGE,
$270,100 , 14.3% TOTAL
Stanford Shopping Center 2023Q2 SALES TAX AMOUNTS
City of Palo Alto Geo Areas Pie Charts
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
14 Packet Pg. 550 of 553
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 13
FOOD PRODUCTS,
4.9% CHANGE, $118,145 ,
61.5% TOTALGENERAL RETAIL,
13.5% CHANGE, $70,254 ,
36.5% TOTAL
ALL OTHER, -12.5% CHANGE, $3,857 , 2.0% TOTAL
T own And Country Shopping Center 2023Q2 SALES TAX AMOUNTS
FOOD PRODUCTS,
$112,593 ,
62.9% TOTAL
GENERAL RETAIL, $61,894 ,
34.6% TOTAL
ALL OTHER, $4,408 , 2.5% TOTAL
T own And Country Shopping Center2022Q2 SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
15.4% CHANGE,
$2,328,118 ,
34.0% TOTAL
GENERAL RETAIL,
6.4% CHANGE, $1,952,382,
28.5% TOTAL
TRANSPORTATION,
-6.7% CHANGE,
$1,314,080,
19.2% TOTAL
FOOD PRODUCTS,
9.1% CHANGE, $1,167,248 ,
17.0% TOTAL
MISCELLANEOUS, -13.4% CHANGE,
$57,767 , 0.8% TOTAL
CONSTRUCTION,
-0.6% CHANGE, $32,731 ,
0.5% TOTAL
All Other Geos combined with Balance of Jurisdiction 2023Q2
SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
$2,017,258 ,
31.4% TOTAL
GENERAL RETAIL, $1,834,998,
28.5% TOTAL
TRANSPORTATION,
$1,408,859
21.9% TOTAL
FOOD PRODUCTS,
$1,069,414 ,
16.6% TOTAL
MISCELLANEOUS,
$66,697 , 1.0% TOTAL
CONSTRUCTION,
$32,922 , 0.5% TOTAL
All Other Geos combined with Balance of Jurisdiction 2022Q2
SALES TAX AMOUNTS
City of Palo Alto Geo Area Pie Charts
Item 15
Attachment A - 2023 Q2 Sales Tax
Data and Legislative Update
Item 15: Staff Report
Pg.
15 Packet Pg. 551 of 553
California Legislative
Update September 1,
2023
This edition of our policy update provides information on the incoming Senate pro Tempore, Mike McGuire; ACA
13, which will increase the voter threshold for certain initiative constitutional amendments; and the Mental
Health Services Act reforms being driven by the
administration.
The legislature is scheduled to adjourn for interim recess on September 14. Governor Newsom will have until
October 14 to sign or veto legislation. We will send a
legislative update once we know which legislation he will be considering this year.
Tax returns are due in mid-October, and revenues in the first month of the 2023-24 fiscal year are about $1 billion lower than estimated in the Budget Act. Should revenues look particularly bleak after returns are in, the governor could call a special session of the legislature to consider budget solutions prior to January.
We hope that this update is helpful, and we will provide additional updates in the future regarding legislation and budget activity in Sacramento. Please reach out to us with any questions.
Government Relations Contact
[email protected]
/ 559.288.7296
New Senate pro Tempore
On Monday August 28, Senator Mike McGuire (D-
Geyserville) quietly secured enough votes from his
colleagues to become the new Senate pro Tempore. The
official transition from current Senate pro Tem Toni
Atkins (D-San Diego) will take place next year at a date to be determined.
McGuire was elected to the Senate in 2014, following
serving on the Sonoma County Board of Supervisors and
as mayor of Healdsburg. He currently represents the
counties of Del Norte, Humboldt, Lake, Marin,
Mendocino, Sonoma (partial), and Trinity. He plans to
prioritize climate change, wildfires, insurance markets, reproductive rights, and homelessness.
The new Senate pro Tem will be instrumental in
determining the Senate’s legislative and budget priorities and will decide on committee chairmanships and
appointments. Senator McGuire is currently the Senate
Majority Leader and will be termed out of office in 2026.
ACA 13 (Ward) Voting Thresholds
Assemblyman Chris Ward (D-San Diego) amended
ACA 13 on August 17, to require an initiative
constitutional amendment to comply with any increased
voter approval threshold that it seeks to impose on future ballot measures. Under current law, a ballot measure
approved by a simple majority of voters can selectively change the law so that a future measure would require a supermajority to pass. Additionally, ACA 13 guarantees in the state constitution the ability of local governments to submit advisory questions to voters.
Of particular note, if passed by California voters, ACA 13 would impact The Taxpayer Protection and Government
Accountability Act (initiative) by requiring it to be
approved by two-thirds of the voters in order to take
effect. The initiative, which has qualified for the
November 2024 ballot, is sponsored by the California
Business Roundtable and would limit the ability for state and local governments to impose taxes, fees, and other
charges, as well as the ability of a local government to place an advisory measure on the ballot if the measure is related to the potential use of revenues derived from a general tax that is appearing on the same ballot.
Should both ACA 13 and the initiative pass, the California Constitution would include potentially conflicting
provisions governing local advisory measures. In such a situation, it is unclear which provision would prevail if a local jurisdiction sought to place an advisory measure on the ballot related to the use of revenues from a general tax appearing on the same ballot.
Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
16 Packet Pg. 552 of 553
Local government associations including CSAC and the
League of California Cities as well as labor interests have weighed in supporting ACA 13 which passed the
Assembly Elections Committee on August 23, the
Assembly Appropriations Committee on September 1, and
will be heard on the Assembly floor within the next two weeks. The California Business Roundtable and Howard
Jarvis Taxpayers Association are opposed. Lawmakers
have received numerous calls on both sides of the issue.
Mental Health Services Act Reform
and Bond
In June, Governor Newsom announced details of his
proposal to modernize the Mental Health Services Act
(MHSA) as well as place a bond on the ballot to provide funding for behavioral health housing, language was
introduced through AB 531 (Irwin) The Behavioral Health Infrastructure Bond Act of 2023 and SB 326 (Eggman)
The Behavioral Health Services Act. These measures are
anticipated to be sent to the governor by September 14
when the legislature adjourns for the year.
AB 531 would, upon voter approval at the March 5, 2024, statewide primary election, allow $4.68 billion in bonds to be issued for the provision of grants administered by the Department of Health Care Services for the acquisition of capital assets for, and the construction and rehabilitation of, unlocked, voluntary, and community-based treatment
settings and residential care settings, as well as grants administered by the Department of Housing and
Community Development to acquire capital assets for, and to construct and rehabilitate housing for, veterans and others who are experiencing homelessness or are at risk of homelessness and are living with a behavioral health
challenge.
Language in the measure specifies that a housing project funded, in whole or in part, by the bond shall be a use by right subject to a streamlined, ministerial review. In
addition, contractors and subcontractors performing work on the project must receive prevailing wages for any
proposed rehabilitation, construction, or major alterations.
SB 326 would make several major and minor changes to
the MHSA by focusing on providing services to the most
seriously ill and homeless or those at risk of homelessness.
Many current programs that do not align with the new
parameters will have to be reduced or eliminated.
Changes to the MHSA include renaming it the Behavioral
Health Services Act (BHSA) to reflect the allowance of
treatment of substance use disorders (SUDs).
County allocations are proposed to be adjusted as follows:
● 30% for Housing Interventions including rental and
operating subsidies, family housing for children and
youth. 50% of this funding bucket must be for
chronically homeless individuals.
● 35% for Full-Service Partnership (FSP) programs -
assertive community treatment, substance use disorder
treatment, and employment services.
● 35% for behavioral health services and supports,
including early intervention; adult, older adult, and
youth focused services; capital facilities; deposits into prudent reserves; and outreach and engagement
services. The majority of this funding bucket must be
for early intervention and at least 51% of early
intervention shall be used to serve individuals who are 25 years of age or younger.
The Legislative Analyst’s Office (LAO), which advises the legislature on the budget and legislative proposals, has been critical of SB 326, in large part because the MHSA is funded through a 1% tax on individuals earning more than $1 million annually, and is therefore an extremely volatile revenue source. In 2020, the tax amounted to $2.8 billion which was paid by 109,000 people, however, about 70% of the total was concentrated among about 13,000 filers with taxable income of $5 million and over.
To reduce volatility, the LAO suggests the legislature
consider changing the MHSA tax base by reducing the rate and expanding the population of people taxed, or shifting a dedicated portion of the General Fund tax base to fund the MHSA, such as a portion of the sales and use tax or personal income tax. These options would increase
stability, but would also reduce long-term growth. Thus far, the administration does not seem inclined to amend the bill to adjust the revenue source.
Many cities are supportive of the proposals, while counties have concerns about having to cut current programs. We
fully anticipate that this proposal will make it to the governor in September, he will sign it, and it will be placed on the March 2024 ballot.
2 Item 15
Attachment A - 2023 Q2
Sales Tax Data and
Legislative Update
Item 15: Staff Report
Pg.
17 Packet Pg. 553 of 553