Common use of Funding of Replacements Clause in Contracts

Funding of Replacements. Following Acceptance, the Parties, in consultation with the Advisory Committee, shall establish a budget for the current Calendar Year and a multi-Calendar Year budget (covering as many Calendar Years as the Parties determine is prudent) for the following repairs and replacements as required for the continued operation, safety and performance of the Project Facilities during the Term of this Agreement in accordance with Best Industry Practices and/or in order to satisfy MCWRA's and MCWD's obligations under Article 9 of this Agreement (the “Replacement Budget”): (i) routine or planned expenditures for capital equipment or facilities, capital additions, capital replacements, upgrades, betterments, extensions or improvements to the Project Facilities, (ii) unplanned expenditures of the type described in clause (i) above in order to address emergency and exigent circumstances, and (iii) individual expenditures for non-routine repairs which have a cost in excess of $250,000.00 (or such other amount established by the Advisory Committee from time to time) (collectively, subsections (i) through (iii) above, the “Replacements”). Replacements shall be paid for from the Reserve Fund Payments Account (each, a “Reserve Fund Expenditure”), and the Project Escrow Account Agreement shall provide, as follows: If the Replacement is anticipated by the Replacement Budget for the current Calendar Year, MCWD or MCWRA, as applicable, shall cause the Replacement to be paid from the Reserve Fund Payments Account. If the Replacement is not anticipated by the Replacement Budget for the current Calendar Year, the Parties must approve the Replacement and the estimated cost thereof. If such approval is given, MCWD or MCWRA, as applicable, shall cause the Replacement to be paid from the Reserve Fund Payments Account. Should the Parties determine that Replacements for the MCWD Owned Facilities and/or the MCWRA Owned Facilities cannot be funded from the Reserve Fund Payments Account, MCWD, MCWRA, or both as the circumstance requires, shall use their reasonable efforts to obtain MCWD Replacement Indebtedness or MCWRA Replacement Indebtedness, as applicable, which represents the maximum, best available financing, such as tax exempt private activity bonds, notes, or other evidence of indebtedness, SRF loans, any grants or any other similar funding opportunities for the Regional Desalination Project. If such financing is not obtained or if such financing will not fund the full amount of the required Replacement, the CAW Credit Line shall be used to fund the costs of the Replacements that cannot be funded by the Reserve Fund Payments Account or Replacement Indebtedness, unless otherwise agreed by the Parties. If the cost of the Replacement exceeds the funds available from the Reserve Fund Payments Account, Replacement Indebtedness and the CAW Credit Line, CAW shall be under no obligation to make any loan for the same or reimburse MCWD or MCWRA for such shortfall, however, the Parties shall meet and confer in order to attempt to decide on a means of funding the shortfall. As one alternative, the Parties shall consider seeking CPUC approval for CAW payment of the shortfall, provided, (i) MCWD or MCWRA, as applicable, has provided CAW with reasonable evidence of the subject cost, and (ii) the CPUC has approved of the recovery by CAW in the cost of the Product Water on terms reasonably acceptable to CAW. In such event, CAW will use its reasonable efforts to timely obtain such approval from the CPUC. In no event, however, will any such shortfall be a basis for any Financing Failure and it is the intention of the Parties that MCWD and MCWRA shall be reimbursed for any Replacements which cannot be funded from the Indebtedness incurred under this Agreement.