TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, PE, DIRECTOR OF PUBLIC WORKS
SUBJECT
title
Construction credit/reimbursement agreement with Chino Development Corporation, a California corporation, and Chino Preserve Development Corporation, a California corporation for the construction of storm drain improvements at various locations in The Preserve.
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RECOMMENDATION
recommendation
1) Appropriate $500,000.00 to the Storm Drain Fund with a corresponding year-end transfer in the same amount from The Preserve Storm Drain Development Impact Fee Fund (Fund 263); 2) adopt Resolution 2024-013 memorializing Chino Development Corporation, a California corporation rights to the highest priority reimbursement from The Preserve Storm Drain Development Impact Fee Fund (Fund 263); 3) approve a construction credit/reimbursement agreement with Chino Development Corporation, a California corporation and Chino Preserve Development Corporation, a California corporation for an amount not to exceed $6,485,122.11 for the construction of storm drain improvements at various locations in The Preserve; 4) approve an immediate reimbursement to Chino Development Corporation, a California corporation in the amount of $500,000.00 for said improvements; and 5) authorize the City Manager to execute all the necessary documents on behalf of the City.
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FISCAL IMPACT
Requires an appropriation of $500,000.00 to the Storm Drain Fund and schedule a corresponding year-end transfer in the same amount from The Preserve Storm Drain Development Impact Fee Fund (Fund 263).
Staff will continue to monitor the fund balance in The Preserve Storm Drain Development Impact Fee program and will make progress payments to the developer (when funds are available) until the terms of the agreement are fulfilled. Each progress payment requires an appropriation of funds and, therefore, each payment will be brought back to the City Council for approval.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Positive City Image
• Financial Stability
• Responsible Long-Range Planning
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Revenue: Click or tap here to enter text. |
Expenditure: 5407360 - 43640 |
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Transfer In: 5401000-50000 |
Transfer Out: 2631000-40001 |
BACKGROUND
In 2004, the City of Chino (“Chino”) entered into a Development Agreement (“DA”) with three entities of the Lewis Management Corporation known as Chino Development Corporation; Chino Preserve Development Corporation; and Chino Holding Company, LLC (collectively referred to as “Lewis”). The DA was entered into to help guide the orderly development of The Preserve, which was envisioned as a master-planned residential and commercial community. Additionally, the DA set the terms and conditions of development on property owned by Lewis and established the rights and obligations of the developer and the City during development.
The Preserve DA, as amended and restated on July 21, 2023, in conjunction with the conditions of approval for Tracts 16419, 16419-1, 16420, 16420-1, 16797, 17057, 17571, 17572, and 19994, requires Lewis to design and construct various master-planned storm drain improvements as a condition to the development of The Preserve.
Lewis completed approximately $36,755,652 in drainage improvements to support developments in the City of Ontario (New Model Colony, also referred to as Ontario Ranch) and The Preserve. Major projects completed by Lewis include the Kimball and Bickmore Natural Treatment System basins and channels, as well as various storm drain lines in the northern portion of The Preserve (“Phase 1 Improvements”) as depicted on Exhibit A.
In 2012, Chino entered into a Regional Storm Drain Improvement Reimbursement Agreement with the City of Ontario (“Ontario”) for the reimbursement of Ontario’s fair share costs totaling $12,956,885. This agreement was amended in 2021 to include a provision allowing Ontario to reimburse Chino from Regional Storm Drain DIF collected from developers “anywhere” within the Ontario Ranch / New Model Colony area, not just the area of benefit identified in the original agreement. Upon the execution of the amendment, Ontario paid a one-time lump sum payment to Chino (which was a straight pass-through to Lewis) equal to the unencumbered available balance of the Regional Storm Drain Development Impact Fee fund at that time, and the remaining balance owed to the developer converted to a DIF Credit Certificate, which the City assigned to Lewis, thus fulfilling the terms of the agreement.
Additionally, the City issued Preserve Storm Drain DIF credits to Lewis’s guest builders between 2004 - 2015, which were deducted from the amount owed to Lewis for Chino’s fair share totaling $23,818,767. Lewis also received cash reimbursements periodically as fees were collected from other developers in The Preserve, which were also deducted from the balance owed to Lewis, bringing a remaining balance forward in the amount of $13,409,387. Subsequently, on June 16, 2015, Chino entered into a formal reimbursement agreement with Lewis for the remaining amount. Over the next several years, staff completed an annual review of the credits issued to Lewis and evaluated the fees collected in The Preserve. Staff continued to deduct credits and make cash reimbursements to Lewis; thus, fulfilling the terms of the agreement for the Phase 1 Improvements in 2021.
More recently, Lewis submitted a reimbursement request to the City for additional storm drain facilities, which were not included as part of the Phase 1 Improvements previously reconciled. The additional improvements constructed by Lewis include a portion of Line F, Line B, and Line H (“Additional Improvements”) as depicted in Exhibit A.
The Additional Improvements are included in The Preserve Storm Drain Development Impact Fee (“DIF”) program. The City’s Municipal Code, Chapter 3.45, titled Development Impact Fees, provides that if, as a condition of approval of a development project, a developer constructs a public facility identified in the DIF Nexus and Calculation Report, for which a DIF is imposed, Developer shall be eligible to receive reimbursement and or fee credit toward the DIFs imposed on the development project for the same type of public facility so constructed and shall be entitled to credit for eligible costs of constructing the public facilities.
ISSUES/ANALYSIS
Lewis has completed all work required in connection with the design and construction of the Additional Improvements according to the specifications of the City and under the inspection and to the satisfaction of the Director of Public Works. The Director of Public Works reviewed the final accepted/approved "as-built" plans, specifications and supporting documentation and determined that $6,485,122.11 is eligible for DIF credit and/or reimbursement.
Upon the costs being validated by the City, staff reconciled the Preserve Storm Drain DIF credits issued to Lewis’s guest builders through December 31, 2023, totaling $19,984,914.52. Of this amount, $14,983,210.36 in DIF credit was deducted from the total credits issued for the Phase 1 Improvements, bringing forward a credit balance of $5,001,704.16. As stated above, the validated costs for the Additional Improvements are $6,485,122.11, which exceeds the credit balance amount. Therefore, Lewis is entitled to DIF credit and/or reimbursement in the amount of $1,483,417.95 moving forward.
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Total Credits |
$19,984,914.52 |
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Credits Phase 1 |
($14,983,210.36) |
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Credit Balance |
$ 5,001,704.16 |
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Additional Costs |
$ 6,485,122.11 |
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Credit Balance |
($ 5,001,704.16) |
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Credit Balance Forward |
$1,483,417.95 |
Lewis recently expressed that upon the availability of funds, that a cash reimbursement is desired in conjunction with the issuance of DIF credit toward future building permits. Currently, there is $3,974,220 in the Preserve Storm Drain Fund balance. Staff is recommending a $500,000.00 cash reimbursement; thus, bringing a balance forward still owed to the developer in the amount of $983,417.95.
The City Council by resolution, may designate certain public facilities as “high priority”. The Additional Improvements subject to this Agreement were constructed and accepted by the City for use prior to the date of the completion and acceptance by the City of any other Storm Drain DIF facilities which may be eligible for reimbursement. Accordingly, pursuant to the first-in/first-out provision of the DIF Ordinance (i.e., Section 3.45.130.A7), reimbursement to Lewis for the Additional Improvements shall have priority and be first in line over all other Storm Drain DIF facilities constructed by other developers.
The proposed Agreement includes a provision that each year, the City and Lewis’s representatives will meet for ascertaining credits for storm drain DIFs issued by the City to Lewis for developments within Lewis’s properties. The City and Lewis will prepare a document that reconciles the preceding storm drain DIF credit and reimbursement reconciliation until the terms of the agreement are fulfilled.
Staff recommends that the City Council to adopt Resolution 2024-013 memorializing the developer’s right to the highest priority reimbursement of funds from The Preserve Storm Drain Development Impact Fee Fund; approve a construction credit/reimbursement agreement with Lewis for an amount not to exceed $6,485,122.11 for the construction of storm drain improvements at various locations in The Preserve; and approve an immediate reimbursement to Chino Development Corporation of $500,000.00.
Attachments: Exhibit A - Atlas Map Storm Drain Improvements
Exhibit B - Construction Credit/Reimbursement Agreement
Exhibit C - Resolution 2024-013