HomeMy WebLinkAboutResolution No. 2026-61 | MOU between City of Gilroy and SCRWA | Adopted 08/17/2026
RESOLUTION NO. 2026-61
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF GILROY TO ENTER INTO A MEMORANDUM OF
UNDERSTANDING BETWEEN THE CITY OF GILROY
AND THE SOUTH COUNTY REGIONAL WASTEWATER
AUTHORITY FOR ON-SITE RECYCLED WATER
IMPROVEMENTS
WHEREAS, the City of Gilroy and the City of Morgan Hill are member agencies of the
South County Regional Wastewater Authority (“SCRWA”), which is a Joint Powers Authority;
and,
WHEREAS, the wastewater treatment plant owned and operated by SCRWA provides
sewage treatment and disposal services through percolation basins, as well as reclamation through
tertiary treatment; and,
WHEREAS, the reclamation is used for non-potable purposes to augment the use of
groundwater and potable water, thus further reducing the reliance on groundwater use and
ensuring water is put to its maximum beneficial use; and,
WHEREAS, the Santa Clara Valley Water District’s 2024 South County Recycled Water
Master Plan Update (“Master Plan”) identified the need for additional recycled water storage by
SCRWA for redundancy, current usage, and for future users; and,
WHEREAS, the improvements identified in the Master Plan to provide this storage
included a new three-million-gallon storage reservoir, pump station, piping and appurtenances
(collectively, the “Improvements”); and,
WHEREAS, Amazon Data Services, Inc. (“Amazon”) is currently building a data center
in the City of Gilroy; and,
WHEREAS, the City of Gilroy has conditioned Amazon to require them to build or to
pay for infrastructure necessary to facilitate the provision and usage of recycled water, which
includes the Improvements, all to be at Amazon’s cost; and,
WHEREAS, SCRWA maintains the necessary experience, staffing and knowledge to
facilitate the design and construction of the Improvements; and,
WHEREAS, the City of Gilroy and Amazon are entering into a Reimbursement
Agreement for the design and construction of all required Improvements at the SCRWA plant
site; and,
WHEREAS, as part of the Reimbursement Agreement, Amazon will deposit all funds
necessary to the City of Gilroy for the design and construction of the Improvements; and,
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Resolution No. 2026-61
MOU between City of Gilroy and SCRWA Resolution
City Council Regular Meeting | August 17, 2026
Page 2 of 3
WHEREAS, the proposed Memorandum of Understanding (“MOU”) between the City
of Gilroy and SCRWA will identify the terms and conditions to ensure timely payment from the
City of Gilroy to reimburse SCRWA for the design and construction of the Improvements.
NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby:
1. Adopt Resolution No. 2026-61 approving the draft MOU between the City of Gilroy and
SCRWA attached hereto as Exhibit A.
2. Authorize the City Administrator or their designee to work directly with SCRWA staff
and its Board of Directors to undertake all actions necessary or convenient to execute the
MOU and to present it to SCRWA for their approval.
3. Authorize the City Administrator to make non-substantive changes to the MOU as
necessary in order to facilitate the approval of the MOU by SCRWA.
PASSED AND ADOPTED this 17 day of August 2026 by the following roll call vote:
AYES: COUNCIL MEMBERS: BRACCO, CLINE, FUGAZZI, HILTON,
MARQUES, RAMIREZ, BOZZO
NOES: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
APPROVED:
______________________________
Greg Bozzo, Mayor
ATTEST:
Kim Mancera, City Clerk
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Resolution No. 2026-61
MOU between City of Gilroy and SCRWA Resolution
City Council Regular Meeting | August 17, 2026
Page 3 of 3
CERTIFICATE OF THE CLERK
I, KIM MANCERA, Interim City Clerk of the City of Gilroy, do hereby certify that the
attached Resolution No. 2026-61 is an original resolution, or true and correct copy of a City
Resolution, duly adopted by the Council of the City of Gilroy at a Regular Meeting of said held
on Council held Monday, August 17, 2026, with a quorum present.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of
the City of Gilroy this Tuesday, August 18, 2026
____________________________________
Kim Mancera
City Clerk of the City of Gilroy
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MEMORANDUM OF UNDERSTANDING FOR CONSTRUCTION OF A
RECYCLED WATER RESERVOIR
This MEMORANDUM OF UNDERSTANDING FOR CONSTRUCTION OF A
RECYCLED WATER RESERVOIR (“MOU”) is made and entered into effective this _____day
of __________, 2026 (“Effective Date”) by and between the City of Gilroy, a California municipal
corporation (“City” or “Gilroy”) and the South County Regional Wastewater Authority, a Joint
Exercise of Powers Authority (“SCRWA”) as follows:
WHEREAS, Amazon Data Services, Inc., a Delaware corporation (along with any related
Amazon entities, “Amazon”) currently has a project underway to construct a data center (the
“Data Center”) in the City of Gilroy, located on a 56-acre undeveloped parcel (the “Amazon
Site”) located at the southeast end of Arroyo Circle, identified as Assessor’s Parcel Number 841-
69-044. As approved, the Data Center was conditioned by City to use recycled water; and
WHEREAS, The SCRWA Wastewater Treatment Plant (the “SCRWA Facility”)
produces recycled water from the wastewater treated at the SCRWA Facility for distribution by
Santa Clara Valley Water District to end-users, which may include the Data Center; and
WHEREAS, Amazon filed an application in 2020 for an Architectural and Site Permit to
allow construction of the Data Center. City prepared a full Environmental Impact Report (“EIR”)
pursuant to the California Environmental Quality Act; and
WHEREAS, Once completely built out, the Data Center facility will require City potable
water and recycled water. Water requirements and availability were extensively analyzed in the
EIR. The bulk of the Data Center’s water use (e.g., industrial and process water use, landscaping
and other allowed uses) will be provided by recycled water. As a condition of approval by the City
of Amazon’s Data Center project, Amazon is obligated to either construct, or pay for the
construction of, certain improvements to facilitate the production of recycled water at the SCRWA
Facility and the delivery of recycled water to users thereof, including the Amazon Site. This will
require certain improvements (the “Recycled Water Improvements”) to be built at the SCRWA
Facility and at the Amazon Site, as well as distribution pipelines between the two sites; all hard
and soft costs related thereto are to be paid for by Amazon; and
WHEREAS, One of the Recycled Water Improvements is required by the Santa Clara
Valley Water District’s South County Recycled Water Master Plan (the “Master Plan”) for
recycled water, adopted in 2024. That particular Recycled Water Improvement, which is the
subject of this MOU and the Amazon Agreement (as defined below), is a Three Million Gallon
reservoir and associated improvements to the existing pump station and related ancillary
improvements, including, but not limited to, new piping, valving, inlet/outlet structures, ventilation
systems, SCADA, electrical systems, motors, pumps, and other supporting structures and features
(collectively, the “Reservoir”) to be built, installed, and operated at the SCRWA Facility.
Construction and operation of the Reservoir is for the benefit of SCRWA to increase reliability of
recycled water availability to recycled water users consistent with the Master Plan; and
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WHEREAS, SCRWA has particular technical expertise and experience, and facility-
specific knowledge of the existing infrastructure and operations of the SCRWA Facility. This
specialized knowledge of the SCRWA Facility makes the SCRWA uniquely qualified to design
and construct improvements on the SCRWA Facility; and
WHEREAS, Because the SCRWA Facility processes wastewater for the Cities of Morgan
Hill and Gilroy, it is deemed critical infrastructure, whose on-going operations should not be
disrupted or otherwise taken offline for any significant period of time. Due to the risk of disrupting
treatment plant operations, SCRWA has historically managed the construction of all improvements
within the SCRWA Facility, including the existing recycled water storage and distribution
facilities, instrumentation, piping and pumps on the SCRWA Facility; and
WHEREAS, The designing, permitting, approval, bidding and construction process for the
construction, installation and implementation of the Reservoir will require a coordinated effort
among SCRWA, the City and Amazon. Since the Reservoir will be constructed on the SCRWA
Facility, and SCRWA oversees all construction at the SCRWA Facility, it has been determined
that SCRWA will be in charge of designing and constructing the Reservoir, with all hard and soft
costs incurred by SCRWA and City in connection therewith to be paid for by Amazon pursuant to
a separate reimbursement agreement between the City and Amazon (“Amazon Agreement”).
NOW THEREFORE, in consideration of the foregoing recitals and the mutual conditions
and covenants contained herein, the parties hereto agree as follows:
1. Purpose; Term of MOU; Scope of Costs Eligible for Payment or Reimbursement.
(a) Purpose. City and SCRWA hereby agree and acknowledge that the purpose of this
MOU is to memorialize the parties’ rights and obligations with respect to (and
outline the design, permitting and approval processes for) the construction,
installation and implementation of the Reservoir.
(b) Term of MOU. The term of this MOU shall commence on the Effective Date and
expire on the date that is six (6) months following the date that City notifies
Amazon pursuant to the Amazon Agreement that final acceptance of the
construction of the Reservoir has occurred, as determined by SCRWA; provided,
however, in the event that the Amazon Agreement is terminated pursuant to the
terms and conditions set forth therein prior to final acceptance of the construction
of the Reservoir occurring, this MOU shall terminate three (3) months following
the date that the Reservoir is placed in the condition set forth in the following
sentence and Amazon has deposited sufficient funds into the Reservoir Fund (as
defined in Section 2 below) sufficient for all outstanding Reservoir Costs (as
defined below) permitted to be incurred under this MOU. In furtherance of the
foregoing, in the event that the Amazon Agreement is terminated pursuant to the
terms and conditions set forth therein prior to final acceptance of the construction
of the Reservoir occurring, SCRWA shall inform City of its election to place the
Reservoir into (A) a state of “safe and stable” condition or (B) the condition existing
prior to date of any construction under this MOU, and shall use commercially
reasonable efforts to (i) minimize the amount of any Reservoir Costs it incurs, (ii)
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cease all services and procurement of equipment and materials, and (iii) determine
the amount of all Reservoir Costs due to be reimbursed by Amazon.
(c) Scope of Costs Eligible for Payment or Reimbursement. “Reservoir Costs” means
any and all hard and soft costs incurred by SCRWA and City in connection with
the Reservoir, including: (i) contractor, subcontractor, and supplier costs; (ii) costs
incurred by staff for SCRWA and City , including the City Attorney for Gilroy and
the Legal Counsel for SCRWA, and including all staff time to review plans and
documents and manage the process; (iii) labor, materials, equipment, and rental
costs; (iv) mobilization, site preparation, excavation and grading costs; (v)
concrete, structural, mechanical, electrical and plumbing costs; (vi) testing,
inspection, and commissioning; (vii) permits, fees, and governmental charges; (viii)
surveying, geotechnical, environmental, engineering, permitting, bidding and
design costs; (ix) construction management and project management costs; (x)
legal, accounting, and insurance costs allocable to the Reservoir; (xi) bonds and
bond premiums; (xii) consultant costs; (xiii) change orders, unforeseen conditions,
scope gaps, escalation, and other costs necessary to complete the construction and
installation of the Reservoir; (xiv) supervisory fees; and (xv) any other costs
reasonably necessary to complete the Reservoir in accordance with the approved
plans and specifications and bid.
2. Establishment of the Fund; Fund Administration. City shall establish a dedicated, interest-
bearing fund (the “Reservoir Fund”), which shall be used solely for payment or
reimbursement of Reservoir Costs to City and SCRWA and for no other purpose. Funds
in the Reservoir Fund shall be maintained separately and shall not be commingled with any
other funds, and any interest accrued on such funds shall be for the benefit of Amazon.
City shall administer the Reservoir Fund and disburse funds for Reservoir Costs incurred
by City and SCRWA pursuant to any Draw Requests (as defined in Section 6(b) below)
made by either party.
3. Design Budget. SCRWA will prepare (or cause to be prepared) an estimated budget for
the estimated Reservoir Costs expected to be incurred in connection with the design phase
of the Reservoir, including the preparation of any plans and specifications, up to the point
where bids have been received and SCRWA is ready to award a construction contract, plus
an additional contingency equal to thirty percent (30%) of such estimated Reservoir Costs
(“Design Budget”). City shall cause Amazon to deposit the amount of the Design Budget
into the Reservoir Fund (the “Design Deposit”).
4. Bidding Process; Construction of Reservoir. SCRWA will (i) solicit, receive, evaluate and
negotiate bids for the permitting and approval processes and the construction, installation
and implementation of the Reservoir, and (ii) supervise the public bidding process,
resulting in the selection of the contractor to receive the award of the contract to construct
the Reservoir. Thereafter, SCRWA will oversee and manage the construction of the
Reservoir.
5. Construction Budget. Based on the chosen bid, SCRWA will prepare or cause to be
prepared an estimated budget of all Reservoir Costs expected be incurred in connection
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with the construction phase of the Reservoir, including permitting and approval processes
and the construction, installation and implementation of the Reservoir, plus an additional
contingency equal to thirty percent (30%) of such estimated Reservoir Costs
(“Construction Budget”). The thirty percent (30%) contingency may be used for
Reservoir Costs, including change orders, unforeseen conditions, scope gaps, escalation,
and other Reservoir Costs necessary to complete the construction and installation of the
Reservoir. City shall cause Amazon to deposit the amount of the Design Budget into the
Reservoir Fund (the “Construction Deposit”).
6. Disbursement of Funds; Draw Requests; Additional Payments.
(a) Disbursement of Funds. SCRWA and City shall submit Draw Requests (defined
below) to City for Reservoir Costs incurred by SCRWA and City, respectively, and
City shall disburse funds to (i) SCRWA for such Reservoir Costs and (ii) City for
such Reservoir Costs.
(b) Draw Requests. SCRWA and City shall submit written requests to City for
disbursement of funds from the Reservoir Fund (each, a “Draw Request”) on
whatever basis each party wishes (e.g., weekly/biweekly/monthly). Each Draw
Request shall include: (i) the amount requested; (ii) reasonable description of the
Reservoir Costs; (iii) invoices and reasonable supporting documentation; and (iv)
payment and remittance instructions.
(c) Additional Payments for Reservoir Costs. In the event, SCRWA reasonably
anticipates that the Reservoir Costs to design or construct the Reservoir are
increasing beyond the originally estimated Design Budget or Construction Budget,
SCRWA shall notify City of such anticipated increase in Reservoir Costs before
incurring such Reservoir Costs. Pursuant to the Amazon Agreement, City will
provide Amazon with written request for such increase in Reservoir Costs, and
Amazon will remit payment to City for deposit into the Reservoir Fund, which shall
also include the contingency equal to thirty percent (30%) of such Design or
Construction Budget.
7. Mutual Indemnification. SCRWA shall indemnify, defend, and hold harmless City and its
officers, directors, employees, agents, successors, and assigns from and against all third
party claims, demands, injuries (including personal injury, death, and property damage)
and legal proceedings and all damages, losses, costs, and expenses (including reasonable
attorneys’ fees) to the extent caused by: (a) the negligence or willful conduct of SCRWA,
or any of its officers, directors, affiliates, employees, agents, representatives, or contractors
in connection with performance of its/their obligations under this MOU or the Amazon
Agreement; (b) any violation of applicable law arising from the activities of SCRWA or
any of its officers, directors, affiliates, employees, agents, representatives, or contractors
in connection with the performance of its/their obligations under this MOU or the Amazon
Agreement; (c) the failure by SCRWA to perform any of its obligations under this MOU
or the Amazon Agreement; and/or (d) SCRWA’s infringement, misappropriation, or other
violation of any third party’s intellectual property rights.
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City shall indemnify, defend, and hold harmless SCRWA and its officers, directors,
employees, agents, successors, and assigns from and against all third party claims,
demands, injuries (including personal injury, death, and property damage) and legal
proceedings and all damages, losses, costs, and expenses (including reasonable attorneys’
fees) to the extent caused by: (i) the negligence or willful conduct of City, or any of its
officers, directors, affiliates, employees, agents, representatives, or contractors in
connection with performance of its/their obligations under this MOU or the Amazon
Agreement; (ii) any violation of applicable law arising from the activities of City or any of
its officers, directors, affiliates, employees, agents, representatives, or contractors in
connection with the performance of its/their obligations under this MOU or the Amazon
Agreement; (iii) the failure by City to perform any of its obligations under this MOU or
the Amazon Agreement; and/or (iv) City’s infringement, misappropriation, or other
violation of any third party’s intellectual property rights.
8. Insurance. SCRWA hereby agrees and acknowledges to cause its professional service
provider(s) and contractor(s) to maintain the insurance required under the Amazon
Agreement during the Term of this MOU.
9. Entire Agreement. This MOU supersedes any and all prior agreements, whether oral or
written, between the parties hereto with respect to the subject matter of this MOU and
contains all the covenants and agreements between the parties with respect to such topics.
Each party to this MOU acknowledges that no representations, inducements, promises or
agreements, orally or otherwise, have been made by any party, or anyone acting on behalf
of any party, which are not embodied herein. No other agreements or conversation with
any officer, agent or employee of City prior to execution of this MOU shall affect or modify
any of the terms or obligations contained in any documents comprising this MOU.
10. Amendment & Modification. No amendment, modification, alteration or change to the
terms of this MOU will be effective unless and until made in a writing signed by both
parties hereto.
11. No Third-Party Beneficiaries. This MOU shall not be construed or deemed to be an
agreement for the benefit of any third party or parties (including Amazon), and no third
party or parties (including Amazon) will have any claim or right of action hereunder for
any cause whatsoever.
12. Severability. If any provision of this MOU, including any exhibit hereto, is held by a court
of competent jurisdiction to be invalid, void, or unenforceable, the court is authorized and
instructed to modify this MOU so that the transactions and agreements contemplated herein
are consummated as originally intended to the fullest extent possible.
13. Counterparts; Electronic Signatures. This MOU may be executed in counterparts, each of
which shall be deemed an original. This MOU and any other documents to be delivered in
connection herewith may be electronically signed. Any digital or electronic signatures
(including pdf, facsimile or electronically imaged signatures provided by DocuSign or any
other digital signature provider) appearing on this MOU or such other documents shall
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have the same force and effect as handwritten signatures for the purposes of validity,
enforceability and admissibility.
14. Notices. Any notices required or permitted to be given hereunder shall be given in writing
and shall be delivered by U.S. Mail, registered or certified, return receipt requested, postage
prepaid, or by overnight delivery service showing receipt of delivery, or by personal
delivery, or by facsimile (fax) or email. Notices or demands shall be addressed as follows:
City: City of Gilroy
Attn: City Administrator
7351 Rosanna Street
Gilroy, CA 95020
Fax: 408-846-0500
Email: Matt.Morley@cityofgilroy.org,
Harjot.Sangha@cityofgilroy.org
With a copy to: City of Gilroy
Attn: Director, Utilities Department
7351 Rosanna Street
Gilroy, CA 95020
Fax: 408-846-0500
Email: Derek.Cray@cityofgilroy.org,
Bret.Swain@cityofgilroy.org
SCRWA: SCRWA
Attn: SCRWA Manager
1500 Southside Drive
Gilroy, CA 95020-7042
Fax: 408-842-0873
Email:
or to such other address as either party may from time to time specify in writing to the other party
in accordance with this Section 14.
Notices shall be deemed to have been given upon the earlier of actual receipt; or the next
business day after delivery to an overnight delivery service; or three (3) days after the deposit in
the U.S. mail; or the same day notice is faxed or emailed (if faxed or emailed before 5:00 p.m.
PST), and on the next business day (if faxed or emailed after 5:00 p.m. PST).
[Signatures Appear on Following Page]
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IN WITNESS WHEREOF, the parties hereto have set their signatures below as of the date
below each party’s respective signatures.
Executed at Gilroy, California, on the date and year written below.
SCRWA: CITY or GILROY:
SOUTH COUNTY REGIONAL
WASTEWATER AUTHORITY,
a Joint Exercise of Powers Authority
CITY OF GILROY,
a California municipal corporation
By: By:
Name: Name:
Title: Title:
Date: Date:
Approved as to Form ATTEST:
City Attorney City Clerk
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