Prairie Farms Water Usage AgreementTHE CITY OF
Dui
Masterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Prairie Farms Water Usage Agreement
DATE: May 1, 2014
Dubuque
band
AI -America City
r
2007 • 2012 • 2013
I respectfully request Mayor and City Council approval of an agreement with Prairie
Farms Dairy for a substantial increase in the amount of City water they use in the plant.
Prairie Farms General Manager Bob Walker has worked with the Greater Dubuque
Development Corporation as they evaluated their water needs. Currently they use a
combination of well water and City water for their needs. They compared the options of
constructing a new well on site or upgrading their water system in order to purchase
water entirely from the City.
Bob Walker advised the City that it would only be feasible for Prairie Farms Dairy to
purchase water from the City provided they were provided a discounted rate. This is
based on their need to upgrade their facility's plumbing at a cost in excess of $300,000.
Prairie Farms now has a consumption of 26.8 million gallons per year and pays the City
about $64,000 annually for water. If they were to convert their complete water
operations over to the City, according to Prairie Farms, it would increase their usage by
an additional 46 million gallons and the City calculated they would pay an additional
$102,000 per year to the City.
Prairie Farms Dairy is proposing that they continue paying the City the current amount
of $64,000 per year (plus annual rate adjustments) for water and that the estimated
additional 46 million gallons be discounted. An eight year agreement was negotiated
that would provide a discount on the additional water used for the first seven years.
If this agreement is not acceptable to the City, Prairie Farm Dairy would proceed with
the construction of a new water well, which they say will cost approximately $750,000,
and only utilize City water as a backup, resulting in the loss of approximately $64,000 in
revenue to the City annually.
Nationally, Prairie Farms has 36 production facilities, 111 distribution centers and $2.4
billion in annual sales. They operate in 20 states with 6,200 employees.
In Dubuque, Prairie Farms has a 100,000 sq. ft. facility, with 9 packaging lines
producing up to one million gallons of milk per week. This is then distributed in 5 states,
traveling approximately 100,000 miles per week. The Dubuque facility has $140 million
in sales per year. One hundred percent of producers serving this plant are within 200
miles of the facility. Prairie Farms is a significant employer in the City of Dubuque with
an annual payroll of approximately $16 million.
This is the first time the City has negotiated this type of agreement, but I believe it is the
appropriate course of action to keep the facility competitive as a City of Dubuque water
customer, taking into account the significant capital costs to maintain that relationship.
I respectfully request Mayor and City Council approval of the Water Usage Agreement.
Mic ael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Bob Green, Water Department Manager
Jennifer Larson, Budget Director
2
Prairie Farms Country...
Dairy fresh distribution throughout
Mid-America and the South.
Hiland Dairy
Joint Venhue
Bite
Dodge Cdy,
Great Bend
Hutchinson
Manhattan
Wichita (Flom)
Roberts Dairy
Joins Venture
Soliro
`polio
Prairie Farms Dairy
Cape Girardeau
Pacific
Park Hill;
Poplar Bluff
Si. Charles
St. louts - Haze;v ad (Plum)
Central Dairy
Brookfield
Jefferson City {Plant)
Moberly
ke Cream Specialties
Subsidiary
St. LCIS (Plant)
btorth Star Dixtribuiing
Hiland Dairy
Joint Verdure
Branson
Jap'In
Kansas City (Beicnb chit)
Lake Ozark
Ne:oda
Rollo
Springfield [Haat)
Warrensbrrg
West Pain
Madison Farms Butter
Joint Venture
St. Louts (Plow)
Roberts Dairy
Joint Venture
Kansas City (Plant(
Joseph
Roberts Dairy
Joint Venture
Chandren
Grand [sand
Lincoln
Norfolk
Nash Platte
Omaha iFioni
Scottsbluff
\'V Paint
Hiland-Roberts Ice
Cream Company
joint Venture
\Lil,xldl (Plant)
�1f1
Roberts Dairy
Joint lenLre
Des Moines
Iowa City (Plant]
Swiss Valley Farms
Subsidiary
\.1.)ubugoc (Fant)
Prairie Farms Dairy
Battle C reel. (Plant)
Detre!
Gross Lal,
Hiland Dairy
Joico Venture
Ardmore
Chanter (Plant)
Enid
lavaon
bbsAtE$' f
Mus',,Cgee
No'rran (Plant)
C lohorna City
Ponca City
cyLa
Hiland Dairy
Joint Venture
Fayettemlle (Plant(
Ft Smith (Plant)
Harrison
Mena
Mauilion
Maintain Hone
Turner Dairy
Joint Verdure
Camden
Hct Spricgs
Little Rock (Mont)
Paragould
Pine Bid
Texarl ono
Prairie Farms Dairy
McKenzie
Turner Dairy
Jain) Venru e
Covington (Mont(
Huntingdon
Jackson
Memphis (Plant(
Southern Belle Dairy
Subsidiary
Cooi•.evi he
Johnson City
Knoxnie
t lashvill= J
Prairie Farms Dairy
Louisville
Madisonville
Owensboro
Turner Dairy
1Cinr Venture
Fulton. (Nag)
Paducah
Southern Belle Dairy
Subadiary
Fowling Groan
Hazard
lexinptcn
London
Morehead
`o.merset (Plant)
LuVel Dairy
Subsidiary
Greenville
Greenwood
Gulfport
Judson
Kosduslo (Plant(
Meridian
Moselle
Oxford
Tupelo
Turner Dairy
Joint Venture
Tupelo
Prairie Fam
4.1
Dairy
Prairie Farms Dairy
Carbondale Cheese Font(
tont(
Carbondale Milk
* Cartinvilla rang
(Corporate Headquorlers)
Centralia
Chicago
Decatur Ice Cream Irian')
Decothr Mill.
Granite Cdy (Fang
Harrisburg
Jolliet
O Fdlon Ice Creem IPlanl[
Olney (Plant)
Peoria [Plant)
Quincy (v L
Quincy Cheese (Pian')
Springfie'-a' M IPlanl)
Springfield Mill.
Streator
IJlbana
Watseka
Muller -Pinehurst Dairy
Joint \e:nlure
Rcci,fard Mont(
Hawthorn Mellc.iy Chicago
GMS Transportation
Sub si iiwy
`rD
ranite Cisy
Southern Bello Dairy
Subsldrory
Ashville
Prairie Faints Dairy
Fart Wayne (Plant)
Greencastle
Mishaysako
Monticello
Terre Haute
East Side Jersey Dairy
Subsidiory
Anderson (Plant(
Bedford
Co!um6u;
Evansville
Holland (Plant)
Indianapolis
t:okamo/Marion
ke Cream Specialties
Subsidiary
Lafayette (Plant)
�V entllville
Our Family of Dairies...
Dairy fresh distribution throughout
Mid-America and the South.
A.5 aai offieaA r/alp,
Farm quality...
from our family to yours
❑iliiiiddtober(4 l
het, (output,
LtattijtatiftiVip
uVei lU��67NI.IC/ir��t�
SouthernBelle
PINEHURST
DAIRY
COLEMAN
DAIRY
9ce Dream Sizea pillet, c.
City of Dubuque
Water Projections for Prairie Farms
Actual Calender Year 2013 Usage Increased Usage Projections
Gallons $ Gallons $
January 1,998,716 4,567 January 5,433,718 11,781
February 1,739,707 4,023 February 4,729,575 10,296
March 2,070,046 4,717 March 5,627,636 12,188
April 2,780,028 6,208 April 7,557,796 16,241
May 1,819,620 4,191 May 4,946,827 10,758
June 2,046,701 4,668 June 5,564,170 12,055
July* 2,873,878 6,985 July* 7,812,937 18,295
August 1,876,796 4,701 August 5,102,266 12,088
September 2,369,090 5,829 September 6,440,618 15,152
October 2,541,436 6,223 October 6,909,159 16,225
November 2,424,476 5,955 November 6,591,191 15,497
December 2,311,519 5,697 December 6,284,106 14,794
26,852,013 $ 63,764 73,000,000 $ 165,370
*City of Dubuque water rates generally change on July 1. Since the tables are based on calender
year, two rate schedules were used in calende year 2013. The same rate schedules were used in
both tables in order to show the increased cos strictly based on increased consumption, not
including rate changes scheduled to take effec on Ju y 1, 2014.
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
Consumption
■ Actual 2013 ■ Projected Increase
A IPP charges for 2013 were $308,091. This should not increase, based on the assumption that
total wastewater should be staying the same, the source of water if what is changing. (City vs. well)
Mike Van Milligen - Re: water project
From:
To:
Date:
Subject:
Attachments:
"Bob Walker/prairiefarms" <BWalker@prairiefarms.com>
"Mike Van Milligen" <ctymgr@cityofdubuque.org>
4/30/2014 4:52 PM
Re: water project
City Water Agreement.pdf
Page 1 of 1
Mike, Thank you for all of your efforts on this. We will proceed with the water infrastructure upgrade. Here is an
executed agreement. If you need an original by mail let me know. The project was approved based upon this
city's latest proposal. Thanks again.
Robert Walker
General Manager
Prairie Farms Dairy
563 564 7227 Cell
Click here to report this email as spam.
file : ///C : /Users/mvanmill/AppD ata/L o c al/Temp/XP grpwise/5 3 612A64DB Q_D ODB Q_P O 1... 5/1/2014
AGREEMENT
BETWEEN
THE CITY OF DUBUQUE, IOWA
AND
PRAIRIE FARMS DAIRY, INC.
This Agreement, dated for reference purposes the ! day of /11 rY , 2014, is
made and entered into by and between the City of Dubuque, Iowa (City) and Prairie
Farms Dairy, Inc., an Illinois Agricultural Cooperative (Prairie). The aforementioned
parties may also be referred to as a "Party" or the "Parties" to this Agreement.
Whereas, Prairie owns and operates a dairy facility at 3510 Central Avenue,
Dubuque, Iowa; and
Whereas, Prairie desires to purchase water from City for its dairy facility; and
Whereas, City is willing to sell water to Prairie upon the terms and conditions set
forth herein.
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
SECTION 1. OPTION TO PURCHASE.
1.1. City hereby grants Prairie the option to purchase water from City at a monthly
volume of 2,300,000 gallons (the Base Usage) at the rates established by Section 13-
1 C -1(A) of the City of Dubuque Code of Ordinances (the Base Usage Rate) (the current
Base Usage Rate is set out in attached Ordinance No's. 10-13 and 17-14) with a
discounted rate (the Discounted Rate) applied to water usage above the Base Usage as
follows:
Discounted Rate
Year %o Active Date Ending Date
1 90% July 1, 2014 June 30, 2015
2 75% July 1, 2015 June 30, 2016
3 60% July 1, 2016 June 30, 2017
4 60% July 1, 2017 June 30, 2018
5 60% July 1, 2018 June 30, 2019
6 10% July 1, 2019 June 30, 2020
7 10% July 1, 2020 June 30, 2021
8 0% July 1, 2021 June 30, 2022
042414ba1
1.2. The Base Usage Rate is subject to increases approved by the City Council
through the city's annual budget process, as such increases apply to all City of
Dubuque water customers.
SECTION 2. TERM. The term of this Agreement is from the 1st day of July, 2014, to
midnight on the 30th day of June, 2022.
SECTION 3. CONSTRUCTION OF WELLS. Prairie may not construct any new wells
during the Term of this Agreement.
SECTION 4. BINDING ON SUCCESSORS. This Agreement is binding on Prairie's
successors and assigns.
SECTION 5. INSTALLATION OF WATER LINE. Prairie must install a twelve -inch
(12") service line connected to the City water system with appropriate sized backflow
devices and water meter.
SECTION 6. CITY COUNCIL APPROVAL. This Agreement is subject to final
approval by the city council by no later than May 5, 2014. If this Agreement is not
approved by such date, it will be null and void.
SECTION 7. DEFAULT.
7.1. Default Defined. Failure by either Party to substantially observe or perform any
material covenant, condition, obligation or agreement under this Agreement shall
constitute a default of this Agreement.
7.2. Remedies on Default. Whenever a Default referred to in Section 7.1 of this
Agreement occurs and is continuing, the non -defaulting Party may take any one or more
of the following actions after the non -defaulting Party gives written notice to the
defaulting Party of the Default, but only if the Default has not been cured within sixty
(60) days following such notice, or if the Default cannot be cured within sixty (60) days
and the defaulting Party does not provide assurances to the non -defaulting Party that
the Default will be cured as soon as reasonably possible thereafter:
(1) The non -defaulting Party may suspend its performance under this
Agreement until it receives assurances from the defaulting Party deemed
adequate by the non -defaulting Party, that the defaulting Party will cure the
Default and continue its performance under this Agreement; or
(2) The non -defaulting Party may take any action, including legal, equitable or
administrative action, which may appear necessary or desirable to collect any
payments due under this Agreement or to enforce performance and observance
of any obligation, agreement, or covenant under this Agreement.
SECTION 8. GENERAL TERMS AND PROVISIONS
2
8.1 Notices and Demands. Whenever this Agreement requires or permits any notice
or written request by one party to another, it will be deemed to have been properly given
if and when delivered in person or three (3) business days after having been deposited
in any U.S. Postal Service and sent by registered or certified mail, postage prepaid,
addressed as follows:
If to Prairie:
With copy to:
If to City:
General Manager
3510 Central Avenue
Dubuque, IA 52001
Phone: (563) 582 7206
Fax: (563) 582 1228
Office of the General Counsel
1701 Towanda Avenue,
PO Box 2901
Bloomington, IL 61702-2901
City Manager
50 W. 13th Street
Dubuque, Iowa 52001
Phone: (563) 589.4110
Fax: (563) 589.4149
With copy to: City Attorney
City Hall
50 W. 13th Street
Dubuque IA 52001
Or at such other address with respect to either party as that party may, from time to time
designate in writing and forward to the other as provided in this Section.
CITY OF DUBUQUE, IOWA
ATTEST:
oez
JAr'J//
Kevin :. Firnstah , City II erk
3
PRAIRIE FARMS DAIRY, INC.
By:
F:\USERS\tsteckle\Lin dah I\Agreements\PrairieFarmsAgreement_042414.doc
4
ORDINANCE NO. 1 0-1 3
AMENDING CITY OF DUBUQUE CODE OF ORDINANCES TITLE 13 PUBLIC
UTILITIES, CHAPTER 1 WATER USE AND SERVICE, ARTICLE CRATES, SECTION
13 -1C -1(A} ESTABLISHING WATER RATES FOR RESIDENTIAL, COMMERCIAL,
INDUSTRIAL, AND ALL OTHER USES
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF DUBUQUE, IOWA:
Section 1. Section 13 -1C -1(A) of the City of Dubuque Code of Ordinances is
hereby amended to read as follows:
Section 13 -1C -1A: Residential, Commercial, Industrial and All Other Uses.
A. Rates Established: The rates to be charged for water for residential,
commercial, industrial and all other uses and purposes by any person, firm or
corporation within the city shall be based on units of one hundred cubic feet (748
gallons) or per gallon as follows:
Monthly Consumption
(in Hundreds of Cubic Feet)
First 30
Next 120
Next 350
Next 500
Next 1,000
Monthly Consumption
(in Gallons)
First 22,440
Next 89,760
Next 261,800
Next 374,000
Next 748,000
Charae per
Hundred Cubic Feet
$2.90
$2.37
$2.19
$1.94
$1.72
Charge per
Gallon
$0.00387
$0.00316
$0.00294
$0.00261
$0.00229
Rates shall be subject to the following minimum monthly charge according to the
size of the meter:
Meter Size
Inches
5/8
3/4
1
1 1/2
2
3
4
6
8
Monthly Consumption
(In Hundreds of Cubic Feet)
2
5
8
26
46
106
168
368
625
5
Monthly Consumption
(In Gallons)
1,496
3,740
5,984
19,448
34,408
79,288
125,664
275,264
467,500
Minimum Charge
$ 5.79
$ 14A7
$ 23.16
$ 75.26
$ 124.66
$ 266.48
$ 410.07
$ 849.89
$1,384.21
Attest:
A property owner shall pay a $50.00 disconnect fee for water service that is
disconnected by the city for a meter not in service. When a tenant account is
subject to disconnection due to delinquency, the tenant shall pay the $50.00
disconnect fee.
A $50.00 service call fee shall be charged to property owners or tenant account
for those service calls that are determined to be related to customer negligence.
A $5.00 minimum monthly charge shall be assessed for meters not in service.
Section 2. This Ordinance shall take effect July 1, 2013.
Passed, approved and adopted this 28th day of February , 2013.
Key' Firnstahl, ciyy C erk
6
Roy D. uol, May
ORDINANCE NO. 17-14
AMENDING CITY OF DUBUQUE CODE OF ORDINANCES TITLE 13 PUBLIC
UTILITIES, CHAPTER 1 WATER USE AND SERVICE, ARTICLE C RATES, SECTION
13 -1C -1(A) ESTABLISHING WATER RATES FOR RESIDENTIAL, COMMERCIAL,
INDUSTRIAL, AND ALL OTHER USES
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF DUBUQUE, IOWA:
Section 1. Section 13 -1C -1(A) of the City of Dubuque Code of Ordinances is
hereby amended to read as follows:
Section 13 -1C -1A: Residential, Commercial, Industrial and All Other Uses.
A. Rates Established: The rates to be charged for water • for residential,
commercial, industrial and all other uses and purposes by any person, firm or
corporation within the city shall be based on units of one hundred cubic feet (748.
gallons) or per gallon as follows:
Monthly Consumption Charge per
(in Hundreds of Cubic Feet} Hundred Cubic Feet
First 30 $3.05'.
Next 120 $2.48
Next 350 . $2.30
Next 500 $2.04
Next 1,000 $1.81
Monthly Consumption Charge per
(in Gallons) Gallon
First 22,440 $0.00406
Next 89,760 $0.00332 •
Next 261,800 $0.00309
Next 374,000 $0.00274
Next 748,000 $0.00240.
Rates shall be subject to the following minimum monthly charge according to the
size of the meter:
Meter Size Monthly Consumption Monthly Consumption
Inches (In Hundreds of Cubic Feet) (In Gallons) Minimum
5/8 2 1,496 $ 6.07
3/4 5 3,740 $ 15.18
1 8 5,984 $ 24.30
1 1/2 26 19,448 $ 78.96
2 46 34,408 $ 130.84
3 106 79,288 $ 279.84
4 168 125,664 $ 430.71
6 368 275,264 $ 892.98
8 625 467,500 $1,454.26
7
A property owner shall pay a $50.00 disconnect fee for water service that is
disconnected by the city for a meter not in service. When a tenant account is
subject to disconnection due to delinquency, the tenant shall pay the $50.00
disconnect fee.
A $50.00 service call fee shall be changed to property owners or tenant account
for those service calls that are determined to be related to customer negligence.
A $5.00 minimum monthly charge shall be assessed for meters not in service.
Section 2. This Ordinance shall take effect July 1, 2004.Passed, approved and
adopted this 5th day of March, 2014.
Attest:
rYr'
Kevin
rnstahl, City
8
Roy D. Buol, Mayor