TO: LINDA REICH, CITY MANAGER
FROM: WARREN MORELION, AICP, DEVELOPMENT SERVICES DIRECTOR
SUBJECT
Approval of The Preserve Sewer Main Improvements Annual Reconciliation of Sewer Credits Fiscal Year 2022-23 (Chino Preserve Development Corporation).
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RECOMMENDATION
1) Authorize Sewer Development Impact Fee (“DIF”) credits in the amount of $364,282 issued to Chino Preserve Development Corporation (“CPDC”) for properties in The Preserve south of Pine Avenue; 2) apply the Sewer DIF credits to the balance owed to CPDC per the terms of the Construction Credit/Reimbursement Agreement for various Sewer Main Improvements in The Preserve, bringing forward the remaining balance owed to CPDC in the amount of $12,802,615; and 3) authorize the City Manager to execute all necessary documents on behalf of the City.
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FISCAL IMPACT
There is no direct fiscal impact. Staff will continue to monitor the fund balance in The Preserve Sewer 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 will 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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BACKGROUND
In 2004, the City of 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 sets 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, in conjunction with the conditions of approval for Tracts 16419, 16419-1, 16420, 16420-1, 16797, 17057, 17571, 17572, and 19994, required Lewis to design and construct various sewer improvements as a condition to development of The Preserve, as depicted on Exhibit A.
Lewis completed all work required in connection with the design and construction of the sewer main improvements according to the specifications of the City and under the inspection and to the satisfaction of the City Engineer. The sewer main improvements south of Pine Avenue were formally accepted by the City Council on May 17, 2022.
The sewer main improvements are master-planned and are included in the City’s Preserve Sewer Development Impact Fee (“DIF”) program. The DIF Ordinance 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, the developer shall be eligible to receive reimbursement and a fee credit toward the DIF 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.
On September 20, 2022, the City Council approved a Credit/Reimbursement Agreement (“Agreement”) between the City and Lewis for the sewer main improvements, attached as Exhibit B, titled Original Credit and Reimbursement Agreement No. 2023-1330.
ISSUES/ANALYSIS
Pursuant to the terms of the Agreement, Lewis will receive sewer development impact fee credit and/or be reimbursed for the actual validated costs. The City Engineer reviewed the final accepted/approved "as-built" plans, specifications and supporting documentation and determined that a total of $13,166,897 is eligible for DIF credit and/or reimbursement.
Per the terms of the Agreement, the City is required to reconcile the sewer DIF credits issued to Lewis for its residential and commercial developments and monitor the sewer DIFs collected from developers in The Preserve on an annual basis, which is outlined in Exhibit C, titled Payment and Reconciliation Summary. Lewis received sewer DIF credit in the amount of $364,282 for Fiscal Year 2022-23 for development projects south of Pine Avenue.
It should be noted, the Agreement adheres to the first-in/first-out provision of the DIF Ordinance (i.e., Section 3.45.130.A7). Reimbursement to Lewis for the sewer main improvements shall have priority and be first in line over all other sewer facilities and improvements, excepting the prior Lewis agreement for the Sewer Lift Station project. As stated above, the credits issued for Fiscal Year 2022-23 are for developments south of Pine Avenue. The sewer main improvements under the current Agreement serve these developments; therefore, Lewis requested that the City apply the sewer credits for Fiscal Year 2022-23 to the sewer main improvements Agreement versus the prior agreement for the Sewer Lift Station project.
As a result, staff deducted the sewer DIF credits issued to Lewis from the validated costs, bringing forward a new balance owed in the future to the developer in the amount of $12,802,615, which is summarized below.
Validated Costs $ 13,166,897
Fiscal Year 2022-23 Credits $ (364,282)
Balance Forward $ 12,802,615
It should be further noted, there is no cash reimbursement owed to Lewis currently due to the limited available fund balance in The Preserve Sewer DIF Fund in The Preserve.
Construction of master-planned sewer improvements are part of the City’s long range planning efforts to ensure the orderly development of The Preserve Specific Plan area. In addition, the City’s goal of sustaining financial stability and integrity in the implementation of the DIF program would be achieved through the continued efforts to fulfill the terms of the Agreement.
Therefore, it is Staff’s recommendation to the City Council to authorize the credits issued to the Developer in The Preserve in the amount of $364,282 bringing forward a new balance owed to the developer in the amount of $12,802,615.
Attachments: Exhibit A - Sewer Main Improvements Locations
Exhibit B - Original Credit and Reimbursement Agreement No. 2023-133
Exhibit C - Payment and Credit Reconciliation Summary