The West Surprise Landowner Group (WSLG) has requested the City suspend all activity on the design and construction of the first phase of the SPA 3 regional water reclamation facility (“First Phase”) and refund any unexpended design funds that the WSLG was required to deposit under the agreements.
As you may recall the City and the WSLG entered into the SPA 3 Water Reclamation Facility Development Agreement and First Amendment. Due to economic conditions, approximately 18 months ago the WSLG requested that the City halt all design work on the First Phase. The City agreed and directed Brown and Caldwell to immediately stop all design work on the First Phase.
Since that time, the WSLG re-evaluated the market conditions for new home construction and concluded that it may be a number of years before the economy recovers. Given the market conditions and the wastewater treatment plant capacity already secured by the WSLG in the SPA 3 Developer Phase, the WSLG believes that the need to design and construct the First Phase within the next 2-3 years is neither necessary nor an efficient use of their limited capital resources. Therefore, the WSLG has requested that the City cancel the Brown and Caldwell contract and refund to the WSLG any unexpended design funds that the WSLG was required to deposit under the agreements.
The WSLG fully acknowledges and agrees that all work on the First Phase has stopped and that pursuant to the underlying development agreement the WSLG is responsible for funding all of the design and construction costs associated with the First Phase, and that until such time the WSLG has re-deposited the funds necessary to complete the design and construction of the First Phase the City of Surprise is under no obligation to move forward with any work on the First Phase. Thus, there is little or no harm to refunding the deposit. Furthermore, the WSLG understands that the costs associated with completing the design of the First Phase will most likely increase over time and that amount needed to complete the work may exceed the amount being refunded to the WSLG. The WSLG also understands that delaying the design and construction schedule may also cause the construction costs associated with the First Phase to increase, both over what was originally estimated as well as what may be incurred if construction were to occur as planned. In this regard, the City is requiring the WSLG to indemnify, defend and hold harmless the City of Surprise against any claims made by any party to the Agreement or Amendment alleging a breach of contract by the City of Surprise on account of any delay in completing the design and/or construction of the First Phase.
Finally, a component of the project was the securing of an underground water storage permit. The City will hold back an amount of the deposit sufficient to obtain the permit.
The balance due back to the developers for the SPA 3 Regional WRF portion is $592,894.11 and the Project Management portion is $132,759.11 for a total of $725,653.22.