Page 191 - Sustainable Cities and Communities Design Handbook

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qualifications of the private entity; and (2) the proposed facility must be
operated at fair and reasonable prices to the user of the infrastructure facility
services. The competitive negotiation process must specifically prohibit prac-
tices that may result in unlawful activity, including, but not limited to, rebates,
kickbacks, or other unlawful consideration, and any prohibited conflict of
interest involving the employees of the governmental agency in violation of
Government Code section 87100, which states:
No public official at any level of state or local government shall make, partic-
ipate in making or in any way attempt to use his official position to influence a
governmental decision in which he knows or has reason to know he has a
financial interest.
The Power Purchase Agreement to be entered into with the private entity is
required to contain provisions to ensure the following:

1. Provide whether the facilities will be owned by the agency or contractor
during the term of the Agreement. If the facilities are leased to the
contractor, the Agreement must provide for a complete reversion of
ownership in the facility at the expiration of the term (may not exceed
35 years), without charge to the governmental agency.
2. Compliance with the California Environmental Quality Act (“CEQA”)
commencing at Public Resources Code section 21000 before the
commencement of project development. Although cogeneration projects
at existing facilities may be categorically exempt from CEQA if the
conditions set forth at Title 14, California Code of Regulations, section
15329 are satisfied, typically, a negative declaration or mitigated negative
declaration will be required to demonstrate that the facility will not have a
significant adverse impact on the environment.
3. Performance bonds as security to ensure completion of the construction of
the facility and contractual provisions that are necessary to protect the
revenue streams of the project. Insurance provisions (example under item
11 below), hold harmless and indemnity clauses also provide such
protection.
4. Adequate financial resources of the private entity to design, build, and
operate the facility, after the date of the agreement.
5. Authority for the governmental agency to impose user fees for use of the
facility in an amount sufficient to protect the revenue streams necessary
for projects or facilities. The user fee revenue must be dedicated exclu-
sively to payment of the private entity’s direct and indirect capital outlay
costs for the project, direct and indirect costs associated with operations,
direct and indirect user fee collection costs, direct costs of administration
of the facility, reimbursement for the direct and indirect costs of main-
tenance, and a negotiated reasonable return on investment to the private
entity.