TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, PE, DIRECTOR OF PUBLIC WORKS
SUBJECT
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Approve a Reimbursement and Credit Reconciliation for Sewer Development Impact Fee (DIF) Construction Credit Reimbursement Agreements with various Lewis Companies.
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RECOMMENDATION
1) Approve a reimbursement to Chino Development Corporation in the amount of $800,000 from Sewer Development Impact Fee (DIF) Fund 262 for eligible costs associated with The Preserve/Prado Sewer Lift Station, Force Main, and Gravity Line project; 2) approve the Sewer DIF Credit Reconciliation through May 31, 2025, for various development within The Preserve; and 3) authorize the City Manager to execute all documents necessary on behalf of the City.
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FISCAL IMPACT
The $800,000 reimbursement is funded entirely by Sewer DIF Fund 262 and will have no impact on the General Fund. There is sufficient Fund Balance for the reimbursement.
Staff will continue to conduct annual reconciliations of the Sewer DIF credits and reimbursements and will return to the City Council periodically with updated reconciliations until all 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 City’s Development Impact Fee Program. Such improvements may only be recognized as Sewer DIF credits to the extent permitted under the applicable agreements and consistent with the City’s Sewer 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 Partnership
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Expenditure: 2627005-43640 |
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BACKGROUND
Before the City Council for consideration is a Sewer Development Impact Fee (DIF) Credit Reconciliation associated with various Preserve development projects and related public improvements constructed by the Lewis Companies ("Lewis"). The reconciliation provides a comprehensive accounting of Sewer DIF credits issued, non-CFD (Community Facilities District No. 2003-3) cash reimbursements processed, validated eligible costs, and remaining credit balances through May 31, 2025.
Over the years, the City and Lewis have entered into multiple Sewer DIF agreements that establish the framework for issuing Sewer DIF construction credits and reimbursements for eligible growth-related public improvements within The Preserve Specific Plan area. Eligible improvements generally include backbone sewer mains, gravity sewer lines, lift stations, and force mains that are identified in the City's Sewer Master Plan or otherwise provide regional capacity to serve future development.
The reconciliation includes eligible sewer improvements constructed pursuant to the following Sewer DIF agreements:
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Agreement No. |
Description |
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2019-220 |
Sewer Lift Station/Force Main /Gravity Line |
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2022-133 |
Various Sewer Improvements |
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2022-163 |
Town Center |
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2023-249 |
Block 9 Independence (Tract 16420-4) |
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2024-277 |
Block 3A (Tract 16420-5) |
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2026-209 |
Block 11 (Tract 16420-6) |
Under Agreement No. 2019-220 and No. 2022-133, the City’s Consultant (DTA), City staff, and Lewis completed a comprehensive reconciliation of all eligible project costs, Sewer DIF credits issued, reimbursements processed, and remaining balances through May 31, 2025, for the Sewer Lift Station, Force Main, Gravity Line, and other backbone sewer improvements constructed before 2019. The reconciliation confirmed a total of $25,329,329 in eligible Sewer DIF construction costs under the agreements. Of that amount, $6,092,768.12 has been applied as Sewer DIF credits and $3,869,486 has been reimbursed, leaving a remaining Sewer DIF credit balance of $15,367,074.88, as summarized below.
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DIF Credit Summary Contracts 2019-220 & 2022-133 |
Credit Amount |
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Validated Construction Costs |
$25,329,329.00 |
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DIF Credits Used |
$6,092,768.12 |
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Cash Reimbursements |
$3,869,486.00 |
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Remaining Sewer DIF Credit Balance |
$15,367,074.88 |
In 2019, the City adopted a formal policy governing Sewer DIF construction credits and reimbursements. Consistent with the policy and Chapter 3.45 of the Chino Municipal Code, developers are required to enter into a reimbursement and credit agreement with the City before receiving Sewer DIF credits. As a result, all DIF-eligible sewer improvements constructed after 2019 have been addressed through project-specific agreements on a tract-by-tract basis.
Since then, the City has executed additional Sewer DIF reimbursement and credit agreements for backbone sewer improvements serving later phases of The Preserve, including Town Center and Blocks 3A, 9, and 11. These agreements establish the framework for issuing Sewer DIF construction credits for eligible regional sewer infrastructure improvements.
The costs associated with these agreements have not yet been submitted for final review and validation by the City’s Consultant DTA. Accordingly, any estimated credit amounts remain preliminary and are subject to adjustment upon completion of the City's review and validation process.
|
Agreement |
DIF Credits Used |
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Contract No. 2022-163 (Town Center) |
$129,307.17 |
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Contract No. 2023-249 (Block 9) |
$585,582.58 |
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Contract No. 2024-277 (Block 3A) |
$252,402.00 |
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Contract No. 2026-209 (Block 11) |
$ 14,512.83 |
Total $981,804.57
ISSUES/ANALYSIS
Consistent with the applicable reimbursement agreements and the City's administration of the Sewer DIF Program, City staff completed a comprehensive reconciliation of all Sewer DIF construction credits issued, credits utilized, reimbursements processed, and remaining balances associated with eligible regional sewer improvements constructed within The Preserve Specific Plan area through May 31, 2025. The reconciliation verified the accuracy of the City's DIF records, confirmed the remaining credit and reimbursement obligations under the applicable agreements, and established an updated baseline for implementation of the proposed DIF Nexus Study Update.
Based on the reconciliation, no additional Sewer DIF construction credits are recommended for approval beyond those previously authorized by the City Council. Any future Sewer DIF credits associated with eligible improvements will remain subject to completion of the improvements, City acceptance, verification of eligible costs, and compliance with the applicable reimbursement agreements and Sewer DIF Program requirements.
Approval of the recommended action will finalize the Sewer DIF credit reconciliation through May 31, 2025, update the City's DIF accounting records, and confirm the remaining credit and reimbursement obligations under the applicable agreements.
City staff also reviewed the available balance in the Sewer DIF Fund and determined that sufficient funds are available to process a reimbursement of $800,000. Consistent with the applicable reimbursement agreement, the reimbursement will be applied toward eligible costs incurred under the Sewer Lift Station, Force Main, and Gravity Line Agreement (Contract No. 2019-220). The reimbursement will reduce the outstanding reimbursable balance under the agreement and will be reflected in the next Sewer DIF credit reconciliation and true-up scheduled for Fall 2026, bringing the agreement current through Fiscal Year 2025-26.
Staff will continue conducting periodic Sewer DIF reconciliations as necessary to ensure reimbursement agreements, account balances, and related obligations remain current and accurately reflected in the City's DIF records.
The City of Chino did not have expertise in operating a large sewer lift station such as this. Therefore, City of Chino contracted with the Inland Empire Utility Agency (IEUA) to operate the Preserve Sewer Lift Station, the corresponding sewer force main and gravity line. On July 1, 2028, the City of Chino will be the lead agency to operate this sewer lift station. Staff is collaborating with IEUA for a transition plan and staff training.
Attachment: Exhibit A - Sewer DIF Credit Reconciliation