TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, PE, DIRECTOR OF PUBLIC WORKS
SUBJECT
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Storm Drain Development Impact Fee (DIF) Reimbursement - Scannell Properties #404, LLC.
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RECOMMENDATION
1) Authorize a reimbursement in the amount of $500,000 to Scannell Properties #404, LLC, pursuant to Construction Credit and Reimbursement Agreement No. 2020-223; 2) appropriate $500,000 from The Preserve Storm Drainage Collection System Facilities Development Impact Fee Fund 260 to fund the reimbursement payment; 3) and authorize the City Manager to execute all necessary documents on behalf of the City.
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FISCAL IMPACT
Requires an appropriation in the amount of $500,000 from the available FY 2026-27 Preserve Storm Drainage Collection System Facilities Development Impact Fee Fund 260.
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:
• Financial Stability
• Responsible Long-Range Planning
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Revenue: |
Expenditure: 2607005-40010 |
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Transfer In: |
Transfer Out: |
BACKGROUND
On June 17, 2019, the City of Chino Planning Commission approved Master Site Approval No. PL16-0719 for Scannell Properties #404, LLC (Scannell), authorizing the development of a 476,285-square-foot sorting and distribution facility on approximately 74.4 acres of land located at the southwest corner of Merrill and Flight Avenues. On September 17, 2019, the City Council approved the associated General Plan Amendment to facilitate the proposed development.
As part of the project approvals, Scannell was required to satisfy various conditions of approval, including the construction of public improvements within and along Merrill and Flight Avenues. These improvements included street, traffic signal, storm drain, water, and sewer facilities, as well as associated right-of-way dedications and easements. Certain improvements provided regional infrastructure benefits beyond those required to serve the development and were eligible for Development Impact Fee (DIF) credits and reimbursements.
In addition to the required public improvements, the project included a $5 million community benefit contribution designated for perimeter roadway and transportation-related improvements in the vicinity of the Chino Airport. These funds were utilized for the ultimate street design and construction of street improvements along the south side of Merrill Avenue. The project was also subject to a Special Use Tax, representing a separate financial obligation associated with the development.
On February 18, 2020, the City and Scannell entered into Construction Credit and Reimbursement Agreement No. 2020-223, establishing the terms and conditions for DIF credits and reimbursements associated with eligible public improvements constructed by Scannell. The Agreement identified eligible improvements within the City's Circulation, Water, Sewer, and Storm Drain DIF programs and established the framework for applying DIF credits and reimbursing eligible improvement costs.
Following construction of the improvements, the City, Scannell, and the City's consultant, DTA, conducted a reconciliation of project costs, DIF credits, reimbursement obligations, and other financial commitments associated with the development. The reconciliation included a review of eligible public infrastructure expenditures, right-of-way dedications involving the County of San Bernardino, and outstanding tax-related payments to determine the final reimbursement obligations and resolve outstanding financial matters associated with the project.
As a result, the City and Scannell subsequently entered into a Payment Reconciliation and Release Agreement to resolve outstanding matters associated with approximately $1 million in tax revenue, certain County dedications, and related reimbursement obligations. Under the terms of the agreement, Scannell agreed to remit an initial payment of $750,000 to the City, with the remaining $250,000 payable upon the City's full satisfaction of its outstanding reimbursement obligations.
The reconciliation also acknowledged that insufficient funds were available in The Preserve Storm Drainage Collection System Facilities DIF Fund to fully reimburse Scannell for eligible storm drain improvements. Accordingly, the remaining reimbursement obligation would be satisfied as funds became available, consistent with the applicable agreements and the City's DIF reimbursement procedures.
On June 6, 2023, the City issued a reimbursement payment of $4,147,706 to Scannell. Through the application of DIF credits, reconciliation of eligible costs, and reimbursement payments, the City has satisfied all reimbursement obligations associated with the Circulation, Water, and Sewer DIF categories. The Storm Drain DIF category remains the only outstanding reimbursement obligation under Agreement No. 2020-223.
ISSUES/ANALYSIS
Following reconciliation of eligible public infrastructure improvements and applicable DIF credits under Construction Credit and Reimbursement Agreement No. 2020-223, the City's remaining cash reimbursement obligation to Scannell was determined to be $7,175,605. On June 6, 2023, the City issued an initial reimbursement payment of $4,147,706, leaving an outstanding balance of $3,027,899.
To date, all reimbursement obligations associated with the Circulation, Water, and Sewer DIF categories have been satisfied. The remaining balance is attributable exclusively to eligible Storm Drain DIF improvements.
The following table summarizes the City's reimbursement obligations:
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Description |
Amount |
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Total Eligible DIF Reimbursement |
$7,175,605 |
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Initial Reimbursement Payment - June 6, 2023 |
($4,147,706) |
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Outstanding Storm Drain DIF Reimbursement |
$3,027,899 |
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Proposed 2026 Progress Payment |
($500,000) |
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Remaining Reimbursement Balance |
$2,527,899 |
Staff has reviewed the available funding within The Preserve Storm Drainage Collection System Facilities DIF Fund (Fund 260) and recommends authorizing a $500,000 progress payment toward the outstanding reimbursement obligation. The proposed payment would reduce the remaining balance to $2,527,899 and represents a partial reimbursement for previously constructed public infrastructure improvements.
Reimbursement Priority and Future Payments
Pursuant to Chino Municipal Code Section 3.45, eligible DIF reimbursement obligations are administered in accordance with the City's established first-in, first-out reimbursement procedures, subject to available funding.
Lewis Operating Corp. (Lewis) has also constructed eligible storm drain infrastructure improvements within The Preserve. However, certain improvements were financed through Community Facilities District (CFD) No. 2003-3 and are eligible for applicable DIF credits rather than cash reimbursement from The Preserve Storm Drainage Collection System Facilities DIF Fund.
The City also has an existing reimbursement obligation under the Pine Avenue Agreement with Lewis, which includes an eligible storm drain component and holds reimbursement priority ahead of Scannell. Staff confirmed that sufficient funds are available within the Storm Drain DIF Fund to satisfy the Pine Avenue reimbursement obligation while accommodating the proposed $500,000 progress payment to Scannell.
The City will continue to monitor available DIF revenues and outstanding reimbursement obligations through its annual reconciliation process and return to the City Council with future reimbursement recommendations as sufficient funds become available.
Payment Reconciliation and Release Agreement
As outlined in the Background, the City and Scannell entered into a separate Payment Reconciliation and Release Agreement to resolve certain financial matters associated with the development, including tax-related payments and County right-of-way dedications.
Under the terms of that agreement, Scannell agreed to remit a total of $1 million to the City, consisting of an initial $750,000 payment and a remaining $250,000 payment contingent upon the City's full satisfaction of its outstanding reimbursement obligations.
The proposed $500,000 progress payment would reduce the City's outstanding Storm Drain DIF reimbursement balance but would not trigger Scannell's final $250,000 payment. That payment would become due upon the City's full satisfaction of the remaining reimbursement obligation, in accordance with the terms of the Payment Reconciliation and Release Agreement.
Therefore, staff recommend authorizing a $500,000 progress payment to Scannell, consistent with the City's established reimbursement priority procedures and available DIF funding. Staff will continue to monitor available DIF revenues and outstanding reimbursement obligations through the annual reconciliation process and return to the City Council with recommendations for future payments as sufficient funds become available.
Attachments - DIF Credit/Reimbursement Summary
Payment Reconciliation and Release Agreement
Credit and Reimbursement Agreement