Regional Water System
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Authorization of the Execution of the Potable Water Supply Contract with the City of Melissa, a current Customer of NTMWD.
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SUBJECT
recommendation
Authorize execution of new Potable Water Supply Contract with City of Melissa , a current Customer of NTMWD.
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PURPOSE
The City of Melissa requests an additional Point of Delivery and time to construct facilities to receive water from NTMWD. NTMWD and Melissa wish to restate and enter into a new Potable Water Supply Contract.
RECOMMENDATION
The Executive Director, NTMWD staff and Lloyd Gosselink Rochelle & Townsend, P. C., recommend the Board of Directors authorize execution of a potable water supply contract with City of Melissa.
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Contracting Party: |
City of Melissa, Texas |
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Purpose: |
Potable Water Supply Contract |
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Project: |
N/A |
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Amount: |
N/A |
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Committee: |
This will be an item on the May 27, 2026, Water Committee meeting agenda |
DRIVER(S) FOR THIS PROJECT
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Strategic Objective: |
1.1 High Quality Services 3.2 Engaged Members, Customers and Stakeholders |
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☐ Regulatory Compliance |
☐ Asset Condition |
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☐ Capacity |
☐ Redundancy/Resiliency |
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☐ Relocation or External Requests |
☐ Operational Efficiency |
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☐ Safety |
☒ Administrative |
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☐ Policy |
☐ Other _____________ |
BACKGROUND
PURPOSE
• NTMWD and Melissa previously entered into the Potable Water Supply Contract dated August 2003 and receives NTMWD water through City of McKinney' s water distribution system.
• Melissa also receives treated water from Greater Texoma Utility Authority (“GTUA”) pursuant to that certain Potable Water Supply Contract between GTUA and NTMWD dated September 29, 2020, on behalf of Customer.
• Melissa requested an additional Point of Delivery and time to construct facilities necessary to receive water from NTMWD and to renew their Potable Water Contract.
• NTMWD acknowledges that GTUA will seek to transfer a volume of water to Customer that will be added to Customer’s Annual Minimum and subtracted from GTUA’s Annual Minimum pursuant to GTUA’s Potable Water Supply Contract with NTMWD (the “Transfer”). To achieve the Transfer, GTUA and Customer will submit a written request for the Transfer to NTMWD that includes the agreed upon volume of the annual minimum to be transferred from GTUA to Customer and the date the Transfer is requested to be effective.
• Melissa desires to adopt the updated customer contract template in order to take advantage of the favorable terms negotiated with Member and Customers and formally adopted by NTMWD.
COMPONENTS OF THE CUSTOMER CONTRACT
• Contract allows Customer an additional 36 months to construct facilities to receive water from NTMWD.
• Contract term of 20 years.
• Point of Delivery No. 1:
o NTMWD delivers the required quantity of water for Customer’s use to the City of McKinney system at the Gerrish Street metering station.
o Customer Point of Delivery is generally near the intersections of Denton Street and DART Railroad in the City of Melissa and the twelve-inch (12”) 121 Site Facility Phase 1 Pipeline.
• Point of Delivery No. 2: Located at 5852 Collin County Road 471, McKinney, Texas near the eighty-four-inch (84") Leonard-to-McKinney Pipeline.
• Point of Delivery No. 1 will be abandoned when construction of Point of Delivery No. 2 is complete and delivers water directly from NTMWD to Customer.
• Customer rate shall be equal to the rate set by the NTMWD Board of Directors for Member Cities (“Member City Rate”) plus $0.05.
• Commencing FY 2029, the customer rate shall be made up of two tiers and a cap that includes the Legacy Premium Component, Growth Premium Component, and Effective Premium Cap, as follows:
o Legacy Premium Component: For that portion of the Customer’s annual minimum equal to its Fiscal Year (FY) 2028 annual minimum plus 5% (“Legacy Volume”) the Customer Rate applied shall be the Member City Rate plus 5-cents (“Legacy Charge”);
o Growth Premium Component: For that portion of the Customer’s annual minimum greater than the Legacy Volume (“Growth Volume”), the Customer Rate applied shall be the Member City Rate plus 10% (“Growth Charge”); and
o Effective Premium Cap: For the purposes of this calculation, “Effective Rate” means the amount to be paid by Customer per 1,000 gallons resulting from the calculation of the Legacy Premium Component and the Growth Premium Component. If the Customer’s calculated Effective Rate exceeds the Member City Rate plus 2.8%; the Customer Rate shall be adjusted to result in payment by the Customer that equals the Member City Rate plus 2.8% (“Effective Premium Rate”). After a Customer reaches the Effective Premium Rate, the Customer Rate cannot fall below the Effective Premium Rate.
o This phase-in will only be available to Customers executing the new Customer contract template prior to July 31, 2028.
• The new Customer rate methodology and Customer contract are of benefit to Customers and the region in that it:
o Provides certainty on the Customer rate for years to come;
o Incentivizes conservation; and
o Allows a reasonable phase-in for Customers through recognition of the Legacy Premium Component and Effective Premium Cap.
• An Annual Minimum of 350,960,000 gallons per year.
• An Annual Maximum of 1,495,000,000 gallons per year.
• Cost of potable water is set at the Customer Rate.
• Any water delivered in excess of the annual minimum will also be purchased at the water rate established by the Board of Directors.
• If Customer exceeds the maximum rate of delivery of 2.2 times the daily average, then Customer shall pay three times the Customer entity water rate for such quantity. There is a provision for emergency conditions extending up to 48 hours during which NTMWD may, at its sole discretion, waive the additional cost.
• NTMWD, in its sole discretion and at any time, may deliver water to Customer at a delivery rate greater than 2.2 times the daily average for the purpose of (i) minimizing or managing energy costs (4CP); or (ii) managing hydraulic constraints in NTMWD’s system. If NTMWD exercises either of these options, Customer shall only pay the contract water rate for water received.
• If NTMWD does not have infrastructure installed with the capability of limiting the delivery rate of water to 2.2 times the daily average, or such infrastructure is currently inoperable, Customer shall pay the contract water rate for water received from NTMWD.
• A provision that allows NTMWD to charge three times the water rate for such quantity of water used by the Customer that is above the authorized amount or authorized rate of delivery as allowed by NTMWD’s Water Conservation and Drought Contingency Plan, as such plan may be amended from time to time.
The City of Melissa approved this contract at its April 28, 2026, meeting, and their board signed the Contract on May 5, 2026. A copy of the contract is attached.
FUNDING
No funding is requested.