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HomeMy WebLinkAbout4585 Resolution - Burnham Tax Credit Proceeds TransferResolution – Burnham WTA TCPP - 1 RESOLUTION NO. 4585 A RESOLUTION OF THE CITY OF PASCO, WASHINGTON, RELATING TO THE CITY’S WASTEWATER UTILITY; AUTHORIZING THE INTERIM CITY MANAGER TO EXECUTE AN AGREEMENT EXERCISING OPTION WITH BURNHAM SEV PASCO LLC AND BURNHAM PASCO HOLDCO LLC FOR WASTEWATER TREATMENT AGREEMENT (WTA) TAX CREDIT PROCEEDS TRANSFER. WHEREAS, the City of Pasco (City) and Burnham Pasco Holdco LLC (Burnham) entered a Wastewater Treatment Agreement (WTA) on April 10, 2023 in respect of certain services provided by the Burnham to the City at the Pasco Process Water Reuse Facility (Resource Recovery Center); and WHEREAS, the WTA included a Tax Credit Proceed Provision related to the partial transfer to the City of U.S. federal income tax credits if/when available to Burnham; and WHEREAS, the City elects to receive the cash proceeds in the lump sum option established in the WTA, at 90% of the cash proceeds received by Burnham from the sale of any ITC available in respect of the Project; and WHEREAS, the City Council of the City of Pasco, Washington, has after due consideration, determined that it is in the best interest of the City of Pasco to enter into the Agreement. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON: That the City Council of the City of Pasco approves the terms and conditions of a Tax Credit Proceeds Transfer Agreement between the City of Pasco and Burnham substantially in the form attached hereto and incorporated herein as Exhibit A. Be It Further Resolved, that the City Manager of the City of Pasco, Washington, is hereby authorized, empowered, and directed to execute said Agreement on behalf of the City of Pasco. Be It Further Resolved, that this Resolution shall take effect immediately. Resolution – Burnham WTA TCPP - 2 PASSED by the City Council of the City of Pasco, Washington, on this 7th day of April, 2025. _____________________________ Pete Serrano Mayor ATTEST: APPROVED AS TO FORM: _____________________________ ______________________________ Debra Barham, MMC P. Stephen DiJulio, Special Counsel City Clerk FG: 103459971.1 AGREEMENT EXERCISING OPTION 1. THIS AGREEMENT EXERCISING OPTION (“Agreement”) is made and entered into as of the ___ day of March, 2025 (“Effective Date”) by and among Burnham SEV Pasco LLC, a Washington limited liability company with offices at 1776 Wilson Blvd., Suite 530, Arlington, VA 22209 (“Project Company”), BURNHAM PASCO HOLDCO LLC, a Washington limited liability company with offices at 1776 Wilson Blvd., Suite 530, Arlington, VA 22209 (“Burnham”), and THE CITY OF PASCO, a Washington municipal corporation with offices at 525 N 3rd Ave., Pasco, WA 99301 (“City”). Project Company, Burnham and the City are collectively the “Parties” and each singly a “Party” to this Agreement. The Parties agree as follows. 2. RECITALS 2.1 Reference is hereby made to that certain Wastewater Treatment Agreement by and between Project Company and the City dated as of April 10, 2023 (the “WTA”), in respect of certain services provided by Project Company to the City at the Pasco Resource Recovery Complex (the “Project”). 2.2 Burnham is party solely to Section 3.2 of the WTA (the “Tax Credit Proceeds Provision”) and solely for purposes of agreeing to cause the payment to the City of certain proceeds related to U.S. federal income tax credits available pursuant to Section 48 of the Internal Revenue Code of 1986, as amended and restated (the “Code”), in respect of the Project (the “ITC” and, any such right of the City, the “Tax Credit Proceeds Entitlement”). 2.3 The Tax Credit Proceeds Provision contemplates that the City may elect to receive either 90% of the cash proceeds received by Burnham from the sale of any ITC available in respect of the Project (the “Lump Sum Option”) or $7,200 per month for each $1,000,000 of such cash received (rounded to the nearest million. City elects the Lump Sum Option. 3. ITC TRANSFER. The City and Burnham acknowledge that Burnham intends to transfer to an unrelated person any ITC that is available in respect of the Project pursuant to Code Section 6418 (any such transaction, a “Transfer”). 4. LUMP SUM PAYMENT. Burnham shall pay to the City an amount equal to the product of (a) Burnham’s Net Cash Proceeds of any Transfer and (b) 90% (the “Lump Sum Payment”). Within 30 days following the date on which Burnham or its affiliate receives all amounts payable in respect of a Transfer, Burnham shall pay or shall cause to be paid to the City an amount of cash equal to the Lump Sum Payment and shall provide to the City a statement documenting the calculation of Net Cash Proceeds and documentation supporting that calculation. 5. PROVISIONS EXCLUSIVE. The City, Project Company and Burnham acknowledge and agree that no portion of the WTA other than the Tax Credit Proceeds Provision pertains to the Tax Credit Proceeds Entitlement or any other right, obligation, or remedy of the City, Burnham, or any affiliate of Burnham in respect of any U.S. federal income tax credits. 2 6. WTA LIMITED – WTA Section 3.2 SATISFIED. The City, Project Company and Burnham agree that, following the effective date of this Agreement and the payment to the City under Agreement Section 5, the WTA does not contain any right, obligation, or remedy of the City, Burnham, or any affiliate of Burnham in respect of any U.S. federal income tax credits. Following the effective date of this Agreement and the payment to the City under Agreement Section 5, Burnham has no further rights or responsibilities, and City has no further right of enforcement against Burnham under the WTA. The City’s rights against Burnham following the effective date of this Agreement and the payment to the City under Agreement Section 4 are only under this Agreement. 7. INDEMNIFICATION REGARDING TAX CREDIT LIABILITIES. 7.1 Burnham shall procure one or more insurance policies that list Burnham (or any of its affiliates) and any Transferee as beneficiaries or insureds for the purpose of recovering up to 120% of the amount payable by any of the forgoing to the IRS (less an agreed retention) as a result of a final determination that the ITC is not available in the quantity claimed by any Transferee on its U.S. federal income tax return for the year in which the Project is placed in service for U.S. federal income tax purposes (any such policy, a “Tax Credit Insurance Policy”). 7.2 Notwithstanding anything to the contrary, the City and Burnham agree that the event of a final determination of any dispute with the IRS or a Transferee, in each case, concerning the amount, availability, effective transfer, or recapture (pursuant to Code Section 50) of all or any portion of any ITC, the City and Burnham shall each contribute to the amount payable to the IRS or any Transferee to the extent such amount exceeds the amount received pursuant to any Tax Credit Insurance Policy (the “Net Damages”). Specifically: (1) Burnham shall be solely liable to the extent that any portion of the Net Damages was directly caused by any Excluded Reduction. (2) City shall be solely liable to the extent that any portion of the Net Damages was directly caused by any exercise by City of its right to acquire the Project pursuant to Section 5.5 of the WTA or RCW 70A.140.040. (3) In all other cases, (A) the City shall be liable for and pay to Burnham within 30 days after receipt of written notice from Burnham of the applicable final determination the lesser of (1) the amount of any Tax Credit Liability and (2) all amounts received by the City in respect of the Lump Sum Payment prior to that date (the “Paid Amount”) and (B) Burnham shall be liable for the balance of the Net Damages and pay over to the IRS such amount, plus the amount it receives from the City. (4) For this purpose, “Tax Credit Liability” means an amount equal to the lesser of (a) 90% of any Net Damages and (b) the Paid Amount. 7.3 Notwithstanding any other provision of this Agreement, the City’s maximum liability under this Agreement to Burnham, Project Company, Transferee or another entity is the amount of the Lump Sum Payment (or, Paid Amount). 3 8. DEFAULT. The occurrence of any of the following events with respect to either Party (the “Defaulting Party”) shall constitute an event of default (an “Event of Default”): 8.1 the Defaulting Party fails to make payment of any amount when due under this Agreement as required to be made by the Defaulting Party, which failure continues for thirty (30) days after receipt of written notice of such non-payment from the other Party; 8.2 the Defaulting Party attempts to assign this Agreement without the express written consent of the party not in default (the “Non-Defaulting Party”), which shall not be unreasonably withheld, conditioned, or delayed; 8.3 an Insolvency Event occurs with respect to the Defaulting Party; or 8.4 the Defaulting Party’s material misrepresentation, fraud or intentional misconduct in connection with this Agreement; and 8.5 an Event of Default described in Section 6.2(b) of the WTA that is not timely cured in accordance therewith, in which case, the City shall be the Defaulting Party. 9. REMEDIES. 9.1 Upon the occurrence of an Event of Default by the Defaulting Party (after any applicable cure period described in Agreement Section 8), the Non-Defaulting Party shall have the right to demand payment from the Defaulting Party of all amounts then due and owing, which shall include, in the case that (i) the City is the Non-Defaulting Party, an amount equal to the Net Payment less all amounts paid to the City on or prior to the date of the Event of Default in respect thereof and (ii) Burnham is the Non-Defaulting Party, any Tax Credit Liability. 9.2 In addition to any other remedy available pursuant to this Agreement, upon the occurrence of an Event of Default described in Section 8, the Non-Defaulting Party may, in its sole discretion, terminate this Agreement. 9.3 Limitations on Liability. 9.3.1 Notwithstanding any other provision to the contrary contained in this Agreement, each of the Parties acknowledges and agrees that (a) monetary damages at law paid by the Defaulting Party are a full and adequate remedy to compensate a Non-Defaulting Party for any breach or threatened breach of this Agreement by the Defaulting Party, and (b) an action at law for monetary damages that are paid by such Defaulting Party is the Non-Defaulting Party’s sole and exclusive remedy for any such breach. No breach by a Party pursuant to this Agreement will entitle the other Party to any equitable relief, including specific performance, injunctive relief, rescission, or any other form of equitable remedy. Without limiting the generality of the immediately preceding two sentences, neither Party shall seek equitable relief to rescind this Agreement or any grant of rights to the other Party hereunder or seek injunctive relief to enjoin or otherwise restrain or limit the other Party’s actions. 4 9.3.2 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF THIS AGREEMENT, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE; PROVIDED THAT NOTHING IN THIS SECTION 9.3 SHALL BE CONSTRUED TO LIMIT LIABILITY ARISING FROM FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY DAMAGES PAYABLE PURSUANT TO SECTION 9 HEREOF DOES NOT CONSTITUTE INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES. 10. DEFINITIONS. The capitalized terms set forth and not otherwise defined in this Agreement shall have the meaning set forth below: “Claims” means all liabilities, losses, lawsuits, penalties, claims, settlement payments, costs and expenses, interest, awards, judgments, damages, fines or demands (including the costs, expenses and reasonable attorneys’ fees on account thereof). “Excluded Reduction” means any (i) sale or other disposition of the Project (other than any disposition pursuant to Section 5.5 of the WTA or RCW 70A.140.040), the Project Company, Burnham, or any direct or indirect interest therein, and (ii) any reduction or denial of any ITC to the extent such reduction or denial arises from Burnham’s or any of its affiliates’ gross negligence, intentional misconduct, or fraud. “Insolvency Event” means with respect to any Party, when: (a) the Party commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, reorganization or other similar law of any jurisdiction now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of such Party or any substantial part of its property, or consents or agrees to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or makes a general assignment for the benefit of creditors, or becomes or is declared insolvent, or acknowledges, in writing, its inability to pay its debts as they become due, or takes any corporate action in any jurisdiction to authorize any of the foregoing; (b) an involuntary case or other proceeding is commenced against the Party seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency, reorganization or other similar law of any jurisdiction now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of such person or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of ninety (90) days; or (c) an order for relief has been entered against that Party under the United States federal, state or other bankruptcy laws of any jurisdiction as now or hereafter in effect. “Lender” means any third-party lender or financing party providing financing in connection with the WTA and “Lenders” refers to all such persons. 5 “Net Cash Proceeds” means the amount of cash actually received by Burnham or its affiliate for the Transfer, less associated transaction costs including legal, accounting, broker, and tax credit insurance. “Placed in Service” means placed in service for purposes of Section 48 of the Code. “Recapture Percentage” means: (1) in the first 12-month period following the date on which the Project is Placed in Service, 100%, (2) in the second consecutive 12-month period following the date on which the Project is Placed in Service, 80%, (3) in the third consecutive 12-month period following the date on which the Project is Placed in Service, 60%, (4) in the fourth consecutive 12-month period following the date on which the Project is Placed in Service, 40%, (5) in the fifth consecutive 12-month period following the date on which the Project is Placed in Service, 20%, and (6) thereafter, 0%. “Transferee” means any person that purchases any ITC in a transaction governed by Code Section 6418. 11. CONFIDENTIALITY. Confidentiality under this Agreement is governed by terms that are identical to those set forth in Section 14 of the WTA. 12. GOVERNING LAW AND DISPUTES. Governing law and disputes under this Agreement, and subject to Agreement Section 9, are governed by terms that are identical to those set forth in Section 15 of the WTA. 13. MISCELLANEOUS. Miscellaneous issues under this Agreement are governed by terms that are identical to those set forth in Section 16 of the WTA. (Signature page follows.) 6 The Parties, through their duly authorized representatives, have executed this Agreement as of the Effective Date. City of Pasco, a Washington municipal corporation __________________________ Name: Dave Zabell Its: Interim City Manager Burnham Pasco Holdco LLC, a Washington limited liability company __________________________ Name: Chris Tynan Its: Chief Executive Officer Burnham SEV Pasco LLC, a Washington limited liability company __________________________ Name: Chris Tynan Its: Chief Executive Officer