TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, DIRECTOR OF PUBLIC WORKS
SUBJECT
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Memorandum of Understanding and Construction Credit and Reimbursement Agreement with Lewis Companies for the Preserve Community Center Construction.
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RECOMMENDATION
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1) Approve the Memorandum of Understanding (MOU) and Construction Credit and Reimbursement Agreement with Chino Holding Company, LLC, a Delaware limited liability company; Chino Development Corporation, a California corporation; and Chino Preserve Development Corporation, a California corporation (collectively, the “Lewis Companies”), for Community Center Construction in the The Preserve; and 2) authorize the City Manager to execute all necessary documents on behalf of the City.
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FISCAL IMPACT
There is no immediate fiscal impact associated with approval of the MOU. The MOU establishes a framework for potential financing of the Community Center. The City's financial obligations, including applicable repayment provisions and potential loan forgiveness, are outlined in the MOU and Construction Credit and Reimbursement Agreement, which will be further defined through a future amendment to the Development Agreement, subject to City Council consideration and 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
• Public Service Excellence through Internal and External Partnerships
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BACKGROUND
The City of Chino and Lewis Companies entered into the Preserve Development Agreement (DA), effective July 1, 2004, which was subsequently amended and superseded by the Amended and Restated DA, effective July 20, 2023. Pursuant to Section 6.4.4 of the Amended and Restated DA, Lewis Companies is required to design and construct certain Public Use Facilities within The Preserve. The DA identifies a total need of approximately 54,781 square feet of community facilities, of which 12,386 square feet have been credited toward previously constructed facilities, leaving 42,395 square feet of remaining facilities to be constructed.
The City has been working closely with Lewis Companies on a Construction Credit and Reimbursement Agreement to address construction of the remaining Community Center facilities, including project costs, Development Impact Fee (DIF) credits, and reimbursement obligations. During these discussions, the parties identified additional matters involving increased construction costs, financing options, and potential future development approvals. To memorialize those remaining matters, the parties developed a Memorandum of Understanding (MOU) to establish a framework for addressing the outstanding financial and development matters.
The proposed MOU establishes two financing options for construction of the remaining Community Center facilities. Both options include additional funding by Lewis Companies, repayment provisions, and potential loan forgiveness contingent upon specified future development approvals.
ISSUES/ANALYSIS
The proposed MOU establishes a framework for addressing a major component of the Amended and Restated DA: the remaining Community Center facilities within The Preserve. The MOU identifies proposed financial arrangements, funding options, and related development considerations that will be addressed through a future amendment to the DA.
Community Center Construction and Financing Options
Section 6.4.4 of the Amended and Restated DA establishes the requirements for construction of the remaining Community Center facilities, including the City's reimbursement obligations for eligible costs exceeding Lewis Companies' Public Use DIF obligations.
The construction budget for the remaining Community Center facilities has increased by approximately $17.1 million. To address the increased costs and provide additional funding for construction, the proposed MOU identifies two financing options:
• Option 1 - $5.7 Million: Lewis Companies would provide an additional $5.7 million toward construction of the Community Center as an interest free loan to the City, with repayment subject to the provisions of the MOU.
• Option 2 - $20 Million: Lewis Companies would provide an additional approximately $20 million toward construction of the Community Center as an interest free loan to the City, with repayment subject to the provisions of the MOU.
Under either option, Lewis Companies would proceed with construction upon issuance of a Notice to Proceed by the City. The City would be required to notify Lewis Companies of its selected financing option before October 20, 2028.
Potential Loan Forgiveness and Development Approvals
In addition to the financing options, the proposed MOU identifies potential development approvals that, if obtained, would provide for forgiveness of the additional funding advanced by Lewis Companies.
Under Option 1, the $5.7 million loan would be forgiven if the City Council approves an additional 128 residential units within Block 10, without changing the existing zoning.
Under Option 2, the approximately $20 million (not to exceed $23 million) loan would be forgiven if the City Council approves an additional 128 residential units within Block 10, without changing the existing zoning, and a partial rezoning of approximately 54 acres within Block 2 to allow an additional 243 residential units.
Under either option, loan forgiveness would be contingent upon the required development approvals becoming final, including resolution of any applicable California Environmental Quality Act (CEQA) challenges.
Approval of the MOU does not constitute approval of the additional residential units, zoning changes, or other development entitlements. These matters will be subject to separate review, applicable environmental requirements, public hearings, and consideration by the appropriate approving authority.
Conclusion
Approval of the proposed MOU will allow the City and Lewis Companies to proceed with negotiating an amendment to the Amended and Restated DA to address the remaining Community Center construction and funding obligations and related development provisions. Approval of the Construction Credit and Reimbursement Agreement will allow the Lewis Companies to begin construction of the Preserve Community Center as expeditiously as possible.
The proposed DA amendments, to incorporate matters from the MOU will be brought back to the City Council for consideration and approval at a future Council Meeting. Accordingly, staff recommend that the City Council approve the Memorandum of Understanding and Construction Credit and Reimbursement Agreement with Lewis Companies for Community Center Construction.
Attachments: Memorandum of Understanding
Construction and Reimbursement Agreement