TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, DIRECTOR OF PUBLIC WORKS
SUBJECT
title
Approve the Consolidation, Amendment, and Reconciliation of Lewis Companies Construction Credit Reimbursement Agreements for Circulation Development Impact Fees (DIF).
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RECOMMENDATION
recommendation
1) Approve the First Amendment to Contract No. 2025-167, the Construction Credit and Reimbursement Agreement for The Preserve Circulation (Streets, Signals and Bridges) Development Impact Fee Program for projects constructed between 2004 and 2019, in the amount of $2,944,627.25, for a revised total contract amount not to exceed $38,076,155.62, between the City of Chino and Chino Development Corporation, a California corporation, and Chino Preserve Development Corporation, a California corporation; 2) accept the updated Circulation DIF Credit and Reimbursement Reconciliation for project-specific development projects in the amount of $10,720,544.70 through May 31, 2025; and 3) authorize the City Manager to execute all the necessary documents on behalf of the City.
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FISCAL IMPACT
There is no direct fiscal impact to the City.
Staff will conduct an annual reconciliation of Development Impact Fee (DIF) credits and will return to the City Council annually with an updated audit and reconciliation until the outstanding obligations and balances under the applicable agreements have been fully resolved.
Public improvements financed through Community Facilities District No. 2003-3 are not eligible for cash reimbursement under the DIF Program. Such improvements may only be recognized as DIF credits to the extent permitted under the applicable agreements and in a manner consistent with the City’s DIF program requirements.
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
• Public Service Excellence through Internal and External Partnerships
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BACKGROUND
In preparation for the upcoming Development Impact Fee (DIF) Nexus Study Update, staff is conducting a comprehensive review of all existing DIF-related agreements, including those associated with circulation, water, sewer, storm drain, and miscellaneous residential amenity improvements. This reconciliation is intended to identify and confirm any outstanding deferred DIF obligations, including remaining credit balances and reimbursement amounts owed to the developer. The purpose of this review is to ensure prior commitments are accurately documented and appropriately incorporated into the updated Nexus Study.
Please note, this City Council item is limited to the Circulation DIF Program. This program includes several existing agreements and obligations, including construction credit and reimbursement agreements, covenant agreements, and project-specific agreements as discussed below. Collectively, these agreements establish the framework for issuing DIF credits and reimbursements for eligible backbone infrastructure, such as arterial roadways, traffic signals, and related circulation improvements necessary to support growth within the City.
1. Validation of Additional Eligible Costs
Contract No 2025-167 (First Amendment)
The Preserve Development Agreement required the master developer, Lewis Management Corporation (Lewis), to construct major circulation improvements necessary to support long-term development within The Preserve. Accordingly, Lewis completed various eligible circulation improvements, including streets and traffic signals, that qualify for reimbursement or credit under the City’s Circulation DIF Program.
On November 19, 2024, the City and Lewis entered Contract No. 2025-167 as a comprehensive true-up and reconciliation of eligible Preserve circulation improvements constructed between 2004 and 2019. The agreement established the total validated cost of the eligible improvements, documented the Circulation DIF credits issued to date, and identified the remaining reimbursement and credit balance owed to the developer. The total not-to-exceed amount under the original agreement is $35,131,528.37.
Following execution of Contract No. 2025-167, staff continued reviewing historical documentation and coordinating with the developer to ensure that all eligible circulation improvements had been accurately captured. As part of that reconciliation effort, staff, in coordination with David Taussig & Associates, Inc. (DTA), identified an additional $2,944,627.25 in eligible circulation improvements that were not included in the original agreement. These improvements are associated with Tract Map Nos. 18840 and 19994 (Harvest Project), generally located at the northwest corner of Hellman Avenue and Pine Avenue, as well as the Block 4 development, generally located at the southwest corner of Hellman Avenue and Market Street.
The additional eligible costs include street, traffic signal, landscaping, parkway, and median improvements along Market Street, Discovery Park Avenue, East Preserve Loop, and Hellman Avenue. These costs were not included in the original reconciliation under Contract No. 2025-167, as they were associated with subsequent reimbursement requests submitted by Lewis through CFD Payment Request No. 61, CFD Payment Request No. 61 Supplement 1, and CFD Payment Request No. 62. The timing of these CFD reimbursement requests did not align with the initial reconciliation process, and therefore, the costs were not available for inclusion at that time.
Below is a summary of the Validated Costs:
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Description |
Amount |
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Original Validated Costs |
$35,131,528.37 |
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Total Additional Eligible Costs |
$ 2,944,627.25 |
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Revised Total Validated Costs |
$38,076,155.62 |
As a result of this reconciliation, Contract No. 2025-167 must be amended to incorporate the additional validated costs. The First Amendment increases the total validated cost under the agreement from $35,131,528.37 to $38,076,155.62.
Additionally, under the reconciled totals reflected in Contract No. 2025-167, Lewis received $4,000,000 in cash reimbursement in December 2024 and $28,527,475.23 in Circulation DIF credits toward eligible circulation improvement costs. After application of those reimbursements and credits to the total validated cost of the eligible improvements, a remaining credit/reimbursement balance of $5,548,680.39 is still owed to the developer, as summarized below.
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Description |
Amount |
|
Revised Total Validated Costs |
$38,076,155.62 |
|
Circulation DIF Credits |
($28,527,475.23) |
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Cash Reimbursement |
($ 4,000,000.00) |
|
Remaining Balance |
$ 5,548,680.39 |
2. Circulation DIF Credit Reconciliation
Project Specific Agreements (2020 through Present)
In addition to Contract No. 2025-167, the City has executed several project-specific Construction Credit and Reimbursement Agreements for Preserve circulation improvements completed from 2020 through the present. These agreements document additional eligible circulation infrastructure associated with specific tracts and development phases. Collectively, these agreements account for $10,720,544.70 in additional Circulation DIF credits issued to the developer through May 31, 2025.
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Contract No. |
Tract No. |
Project Description |
DIF Credits |
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2022-029 |
18480 |
Harvest (for Pine) |
$ 5,326,638.73 |
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2022-163 |
16420-3 |
Commercial Town Center |
$ 2,154,012.17 |
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2022-163 |
16420-3 |
Homecoming Phase 5 |
$ 1,070,696.00 |
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2023-249 |
16420-4 |
Block 9 |
$ 1,340,967.46 |
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2024-277 |
16420-5 |
Block 3A |
$ 635,628.00 |
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2026-209 |
16420-6 |
Block 11 |
$ 192,602.34 |
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Total |
$10,720,544.70 |
3. Covenant Agreement Reconciliation
As part of staff’s broader reconciliation of Preserve-related Circulation DIF obligations, staff also reviewed previously executed Covenant Agreements associated with prepaid DIF obligations for certain residential developments along Pine Avenue within The Preserve.
These agreements were established to support the ultimate design and construction of Pine Avenue. Lewis was originally conditioned to construct Pine Avenue from Euclid Avenue to Johnson Avenue under Tract Map No. 20161 as part of its development obligations. That requirement was subsequently removed through a development modification, and the City ultimately assumed responsibility for delivery of the project.
As a result, Lewis was required to prepay the applicable Circulation DIF to ensure funding would be available for the City to proceed with the improvements. These improvements include elevating the roadway profile with embankments on both the north and south sides, as well as improvements to the Euclid Avenue and Pine Avenue intersection to enhance safety and reduce congestion.
The prepaid DIF was collected through building permits associated with the Van Vliet development, generally located north of Pine Avenue, south of Bickmore Avenue, west of Rincon Meadows Avenue, and east of Mayhew Avenue, as well as the Block 4 development located at the southwest corner of Hellman Avenue and Market Street. Collectively, these developments generated a little over $7 million in prepaid Circulation DIF.
Because the developer prepaid the DIF, they are entitled to corresponding DIF credits in accordance with the terms of the Covenant Agreements.
As part of this reconciliation effort, staff, in coordination with DTA conducted a comprehensive review of all Circulation DIF credits issued through May 31, 2025. The purpose of this review was to confirm that the appropriate fees were assessed and that all associated prepaid balances were properly applied.
Based on this analysis, staff identified the need to true-up the remaining prepaid fee balances to ensure that the City’s records accurately reflect the final reconciled credit amounts. Specifically, the proposed amendment acknowledges and reconciles the status of the following agreements:
• Covenant Agreement for Prepayment of Circulation DIF related to Tract Map No. 20161 (Van Vliet), dated July 21, 2020; and
• Covenant Agreement for Prepayment of Circulation DIF related to Tract Map No. 20164 (Block 4), dated July 21, 2020.
The reconciliation confirms that:
• No remaining credit balance exists under the Block 4 Covenant Agreement; and
• A balance of $169,977.90 Circulation DIF credits remain under the Tract 20161 Covenant Agreement, which will be applied toward the remaining 32 units within that tract moving into the future.
This reconciliation does not create any new credit or reimbursement obligation. Rather, it formally documents the remaining prepaid balance held under the existing agreements and confirms the amount to be applied to future building permits.
ISSUES/ANALYSIS
In addition to reconciling the various credit, reimbursement, and covenant agreements, staff and DTA conducted a detailed review of historical fee application records to verify that all DIFs, across all fee categories, were assessed using the appropriate land use categories and fee schedules in effect at the time each fee was paid or credited.
Staff’s analysis also includes fee categories for which Lewis is responsible for direct payment, including Law Enforcement, Fire Suppression, Congestion Management Program (CMP), Administrative, and General Facilities fees. These categories represent obligations for which Lewis is required to remit payment, and for which no DIF credits or reimbursements are permitted under the applicable ordinances, nexus methodology, and governing agreements.
Based on staff’s audit, Lewis owed the City $160,206 in Administrative fees, $11,696 in Police DIF, and $2,091 in Fire DIF; these amounts have been invoiced and paid. The review also determined that Lewis is entitled to a refund of $309,567 in Congestion Management Program (CMP) fees and $2,710 in General Facilities fees.
Staff is in the process of issuing the refunds, which will require a corresponding accounting adjustment to Community Facilities District (CFD) No. 2003-3, as these fees were previously satisfied through CFD bond proceeds. Staff will coordinate with the City’s CFD consultant, Webb & Associates, to ensure the adjustment is implemented in a legally compliant and fiscally defensible manner, and that no duplication of funding occurs.
Therefore, staff recommends that the City Council take the following actions:
1. Approve the First Amendment to the Construction Credit and Reimbursement Agreement for The Preserve Circulation (Streets, Signals & Bridges) DIF Program to incorporate the additional eligible circulation improvements and update the corresponding credit and reimbursement balances; and
2. Approve the Circulation DIF Credit Reconciliation through May 31, 2025, for the project-specific agreements identified above.
Approval of these actions will finalize the City’s reconciliation of Preserve Circulation DIF obligations, bring all related agreements current, improve the accuracy and defensibility of the City’s DIF records, and provide a reliable foundation as staff moves forward with the upcoming DIF Nexus Study Update. This effort also establishes a clean baseline for future administration. Staff anticipates returning in September with an annual reconciliation item to true up all Circulation DIF credits and reimbursements for Fiscal Year 2025-26.
Attachment - Rev Circulation DIF Credit Reconciliation and Amendment