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HomeMy WebLinkAbout000731 Original Contract City of Port Angeles Record #000731 SETTLEMENT AGREEMENT THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into as of March 11, 2014, by and between THE CITY OF PORT ANGELES (the "City") a municipal corporation organized under the laws of the State of Washington, and NIPPON PAPER INDUSTRIES USA CO., LTD., a Washington corporation ("NPIUSA"). The City and NPIUSA are sometimes referred to herein individually as "Party" and together as "the Parties." RECITALS A. The City has established an Electric Utility that is operated by the City's Department of Public Works and Utilities. B. For all time relevant to the Demand Letter referenced in paragraph H below, NPIUSA was the City's only"Industrial Transmission"power customer as defined in the City's Municipal Code Section 13.12.071 (Schedule IT-03 —Industrial Transmission), and consumed more than fifty(50)percent of the total amount of electricity provided by the City to its consumers of electricity. C. In September 2011, the City revised its Industrial Transmission rate schedule as a result of the tiered rate methodology adopted by the Bonneville Power Administration("BPA"). The current rate schedule includes seven components enumerated in subsection E, which are summed to determine the amount owed for electrical service. D. Item 5 of the Industrial Transmission rate schedule is load shaping charges and credits. The Parties disagree as to how the load shaping charges and credits should be used in the calculation of"Gross Income" for purposes of determining the utility tax charge. E. In October 2011, NPIUSA notified the City that it believed the exclusion of the net load shaping and BPA REP credits from the calculation of"Gross Income" in subsection F, resulted in an over collection of the utility tax charge. F. On October 15, 2013,NPIUSA sent a demand letter to the City requesting that the City correct the alleged improper calculation of the utility tax charge and refund the over- collected amounts (hereinafter referred to as the "Claim"). G. The City disputes NPIUSA's Claim. H. To avoid the expense, inconvenience and uncertainty of litigation, and to settle and resolve NPIUSA's Claim and its demand for a refund of the over-collected utility tax charges, the Parties wish to forever settle, discharge and resolve any and all claims they may have against one another arising from NPIUSA's Claim and in connection with the calculation of the utility tax charge in the Industrial Transmission rate schedule have, therefore, reached a full and final settlement of all claims as expressed below. 1. This Agreement sets forth the terms and conditions under which(i)the Parties UTILITY TAX CHARGE SETTLEMENT AGREEMENT- 1 4841-2833-8968.04 16682.00006 will settle any and all claims arising from NPIUSA's Claim, and (ii)NPIUSA's demand that the City correct its calculation of the utility tax charge going forward. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the City and NPIUSA incorporate the foregoing recitals and agree as follows: ARTICLE I PAYMENTS 1.1 Payment to NPIUSA. The City shall pay $200,000 to NPIUSA within ten (10) business days from the date of this Agreement. ARTICLE 11 COVENANTS CONCERNING FUTURE ACTIVITIES 2.1 State Public Utility Tax Refund. The City shall request a refund (rather than a credit of the overpayment) as permitted by RCW 82.32.060, of State public utilities taxes it paid as a result of excluding the net load shaping and BPA REP credits from its calculation of Gross Income (hereinafter referred to as the "State Refund Request"). Pursuant to the Common Interest Agreement, NPIUSA will provide the legal representation needed to file and pursue the State Refund Request. The City shall cooperate with NPIUSA and permit NPIUSA to participate in any proceedings, including any conference for examination and review of the utility tax liability under RCW 82.32.170. If the City is successful in obtaining a refund of State public utilities taxes from the Department of Revenue, the City shall pay to NPIUSA any amounts received or credited to the City as a result of the State Refund Request, including tax, interest, and penalties, as well as any recovery of costs and fees, within ten (10) business days of receiving these amounts. 2.2 Interim Calculation of Utility Tax Charge. Starting with the February 2014 power bill, the City will include the net load shaping and BPA REP credits in the calculation of"Gross Income" for purposes of determining the utility tax charge, consistent with NPIUSA's position on how the utility tax charge should be calculated set forth in the October 15, 2013, Demand Letter. 2.3 Length of Interim Period. Except as provided in Section 2.5, the City will continue to calculate the utility tax charge according to the process described in Section 2.2, until Subsection E of Port Angeles Municipal Code Section 13.12.071 is amended (hereinafter referred to as the "Interim Period"). This time period may be extended by mutual agreement. 2.4 Calculation of Utility Tax Charge After Final Decision. If the City obtains a refund of State public utilities taxes, it will continue to calculate the utility tax charge according to the process described in Section 2.2 until Subsection E of Port Angeles Municipal Code Section 13.12.071 is amended or the City receives future reporting instructions from the Department of UTILITY TAX CHARGE SETTLEMENT AGREEMENT-2 4841-2833-8968.04 16682.00006 Revenue. If the City receives a final decision or judgment denying the State Refund Request, which cannot be further appealed, the City may calculate the utility tax charge according to the methodology held to be appropriate in the final decision until Subsection E of Port Angeles Municipal Code Section 13.12.071 is amended or the City receives future reporting instructions from the Department of Revenue. 2.5 Interim Period True-up Payment. If the City receives a final decision or judgment denying the State Refund Request, that cannot be appealed, NPIUSA agrees to pay the City the difference between the amount of the utility tax charge paid under Section 2.2 and the amount that would have been owed under the methodology held to be appropriate in the final decision during the Interim Period (hereinafter referred to as the "Interim True-Up Payment"). The Parties agree to work together in good faith to calculate the Interim True-Up Payment. NPIUSA agrees to pay the Interim True-Up Payment within 10 business days of reaching an agreed calculation of the Interim True-Up Amount. 2.6 Future Cost of Service Analyses. To determine the appropriate future rate structure for the "Industrial Transmission" rate classification, the City will conduct a cost-of-service study and will consider that study in determining whether or how Subsection E of the Port Angeles Municipal Code Section 13.12.071 should be amended. Any analyses conducted by the City of future rate structures related to the "Industrial Transmission" rate classification, shall calculate the utility taxes in a manner consistent with Section 2.4. The City agrees that the payment in Section 1.1 shall be excluded from any future cost of service analyses or utility rate making proceedings. 2.7 Mutual Good Faith. Both Parties shall act in good faith to implement this Agreement. 2.8 Rate Setting Authority. Nothing in this Agreement is intended to, or shall be construed to, constrain the discretionary authority of the City over rate setting. ARTICLE III COVENANTS NOT TO SUE 3.1 In consideration of the City's covenants and agreements contained herein, NPIUSA hereby agrees that it will not, at any time hereafter, commence, maintain or prosecute any action at law or otherwise or assert any claim against the City, its elected officials, managers, agents, employees, attorneys, either past or present, for any actions, causes of action, obligations, costs, expenses, damages, losses, claims, liabilities, and demands of whatever character in law or in equity arising out of or in any way relating to NPIUSA's Claim, except for any claims expressly excluded by this Agreement and any claims based upon a failure to comply with this Agreement. 3.2 In consideration of NPIUSA's covenants and agreements contained herein, the City hereby agrees that it will not, at any time hereafter, commence, maintain or prosecute any action at law or otherwise or assert any claim against NPIUSA, its affiliates, holding or parent company, officers, agents, employees, attorneys, either past or present, for any actions, causes of action, obligations, costs, expenses, damages, losses, claims, liabilities, and demands of whatever UTILITY TAX CHARGE SETTLEMENT AGREEMENT-3 4841-2833-8968.04 16682.00006 character in law or in equity arising out of or in any way relating to the NPIUSA Claim, except for any claims expressly excluded by this Agreement and any claims based upon a failure to comply with this Agreement. ARTICLE IV MUTUAL RELEASES 4.1 City's Release of NPIUSA. With the exception of(i) the obligations required under this Agreement, the City hereby releases and forever discharges NPIUSA, its affiliates, holding or parent company, shareholders, subsidiaries, successors, representatives, assigns, agents, employees, officers, directors, and attorneys, and each of them (herein collectively referred to as the "Releasees") of and from any and all claims, debts, liabilities, demands, obligations, costs, actions, causes of action known or unknown, vested or contingent, which it now owns or holds or has at any time owned or held against the Releasees, arising out of or in connection with NPIUSA's Claim. 4.2 NPIUSA's Release of the City. With the exception of (i) the obligations required under this Agreement, NPIUSA hereby releases and forever discharges the City, its elected officials, managers, agents, employees and attorneys, and each of them (herein collectively referred to as the "Releasees") of and from any and all claims, debts, liabilities, demands, obligations, costs, actions, causes of action known or unknown, vested or contingent, which it now owns or holds or has at any time owned or held against the Releasees, arising out of or in connection with NPIUSA's Claim. ARTICLE V MISCELLANEOUS 5.1 Notices. Whenever under the provisions of this Agreement, it shall be necessary or desirable for one Party to serve any notice, request, demand, report or other communication on another party, the same shall be in writing and shall not be effective for any purpose unless served (a)personally, (b) by independent, reputable, overnight commercial courier, (c) by facsimile transmission (i) where the transmitting party includes a cover sheet identifying the name, location and identity of the transmitting Party, the phone number of the transmitting device, the date and time of transmission and the number of pages transmitted (including the cover page), (ii) where the transmitting device or receiving device records verification of receipt and the date and time of transmission receipt and the phone number of the other device, and (iii) where the facsimile transmission is immediately followed by service of the original of the subject item by personal delivery, overnight courier or first-class mail, or (d)by deposit in the United States mail, postage and fees fully prepaid, registered or certified mail, with return receipt requested, addressed as follows: If to NPIUSA: A. Personal delivery or other delivery requiring a street address: UTILITY TAX CHARGE SETTLEMENT AGREEMENT-4 4841-2833-8968.04 16682.00006 Yoshifurni (Chris)Nagaura, President Nippon Paper Industries USA Co., Ltd. 1815 Marine Drive Port Angeles, WA 98362 Fax: (360) 452-6576 B. Mailing address: Yoshifumi (Chris)Nagaura President Nippon Paper Industries USA Co., Ltd. 1815 Marine Drive Port Angeles, WA 98362 Fax: (360) 452-6576 With a copy to: Riddell Williams P.S. 1001 Fourth Avenue , Suite 4500 Seattle, WA 98154-1065 Attention: Harry E. Grant Fax: 206-389-1708 If to the City: Dan McKeen City Manager City of Port Angeles PO Box 1150 Port Angeles, WA 98362 With a copy to: Bill Bloor City Attorney City of Port Angeles PO Box 1150 Port Angeles WA 98362 Any Party may, from time to time, by notice in writing served upon the other party as aforesaid, designate an additional and/or a different mailing address in Washington or an additional and/or a different person to whom all such notices, requests, demands, reports and communications are thereafter to be addressed. Any notice, request, demand, report or other communication served personally shall be deemed delivered upon receipt, if served by mail or independent courier shall be deemed delivered on the date of receipt as shown by the addressee's registry or certification receipt or on the date receipt at the appropriate address is refused, as shown on the records or manifest of the U.S. Postal Service or independent courier, and, if served by facsimile UTILITY TAX CHARGE SETTLEMENT AGREEMENT-5 4841-2833-8968.04 16682.00006 transmission, shall be deemed delivered on the date of receipt as shown on the received facsimile (provided the original is thereafter delivered as aforesaid). 5.2 No Admission of Liability. The Parties understand and agree that this Agreement is the compromise of disputed claims and that the act of entering into and performing this Agreement does not constitute and shall not be construed as an admission of liability, fault or responsibility by any Party. 5.3 Further Acts. The Parties hereby agree to perform all further acts and to execute all documents necessary or reasonably desirable to effect the terms of this Agreement. 5.4 Attorney Fees and Costs. In the event of any dispute over the meaning, effect, performance or validity of this Agreement, the prevailing party shall be entitled to its costs and reasonable attorney fees. 5.5 No Third Party Beneficiaries. Nothing contained in this Agreement is intended or shall be construed as creating or conferring any rights, benefits or remedies upon, or creating any obligations of the parties hereto toward, any person or entity not a party to this Agreement. 5.6 Waiver. No waiver of any term, covenant or condition of this Agreement shall be valid unless in writing and signed by the obligee Party. No waiver by any party of any right or remedy under this Agreement shall be deemed to be a waiver of any other subsequent right or remedy under this Agreement. The consent by one Party to any act by the other Party requiring such consent shall not be deemed to render unnecessary the obtaining of consent to any subsequent act for which consent is required, regardless of whether similar to the act for which consent is given. 5.7 Governing Law. This Agreement shall be governed and construed in accordance with the internal laws of the State of Washington. 5.8 Construction and Interpretation of Agreement. The captions of the articles, sections and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. 5.9 Counterparts. This instrument may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 5.10 Entire Agreement; Amendment. This Agreement with incorporations shall constitute the entire and exclusive agreement between the Parties relating to the specific matters covered in this Agreement. All prior or contemporaneous verbal or written agreements, understandings, representations and/or practices relative to the foregoing are hereby superseded, revoked and rendered ineffective for any purpose. This Agreement may be altered, amended or revoked only by an instrument in writing signed by each Party hereto. No verbal agreement or implied covenant shall be held to vary the terms hereof, any statute, law or custom to the contrary notwithstanding. Both of the Parties are co-drafters of this Agreement. UTILITY TAX CHARGE SETTLEMENT AGREEMENT-6 4841-2833-8968.04 16682.00006 IN WITNESS WHEREOF, the Parties, intending to be legally bound, have executed this Agreement on the date first written above. CITY: THE CITY OF PORnNGELES By: Name: C6n I g4 Title: —Cf)-i NPIUSA: NIPPON PAPER INDUSTRIES USA CO.,LTD., a Washington corporation By: Na m i FIA4,7' Title: UTILITY TAX CHARGE SETTLEMENT AGREEMENT-7 4841-2833-8968.04 16682.00006