TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, PE, DIRECTOR OF PUBLIC WORKS
SUBJECT
title
Construction Credit/Reimbursement Agreement with Chino Development Corporation, a California Corporation, and Chino Preserve Development Corporation, a California Corporation for the Construction of Water Source, Storage, and Distribution Improvements at Various Locations in The Preserve.
end
RECOMMENDATION
1) Adopt Resolution 2024-009 memorializing Chino Development Corporation, a California corporation rights to the highest priority reimbursement from the Preserve Water Source, Storage, and Distribution Development Impact Fee Fund (Fund 261); 2) approve a construction credit/reimbursement agreement with Chino Development Corporation, a California corporation and Chino Preserve Development Corporation, a California corporation for an amount not to exceed $28,753,683.02 for the construction of water source, storage, and distribution improvements at various locations in The Preserve; and 3) authorize the City Manager to execute all the necessary documents on behalf of the City.
body
FISCAL IMPACT
Staff will continue to monitor the fund balance in The Preserve Water Source, Storage, and Distribution 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 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
• Responsible Long-Range Planning
• Financial Stability
|
Revenue: Click or tap here to enter text. |
Expenditure: 5207300-43640 |
|
Transfer In: 5201000-50000 |
Transfer Out: 2611000-40001 |
BACKGROUND
In 2004, the City of Chino (“City”) 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 set 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 and restated on July 21, 2023, in conjunction with the conditions of approval for Tracts 16419, 16419-1, 16420, 16420-1, 16797, 17057, 17571, 17572, and 19994, requires Lewis to design and construct various master-planned water source, storage, and distribution improvements as a condition to the development of The Preserve. Major projects completed by Lewis from 2004 to 2019, include the Eastside Water Treatment Facility (“EWTF”) Phase I and Phase II, several drinking water wells and appurtenances, and various potable and recycled water lines (collectively referred to as “Water Improvements”) as shown in Exhibits A & B.
The Water Improvements are included in the City’s Water Source, Storage, and Distribution Development Impact Fee (“DIF”) programs for the General City and The Preserve. The City’s Municipal Code, Chapters 3.40 and 3.45, titled Development Impact Fees, 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, Developer shall be eligible to receive reimbursement and or fee credit toward the DIFs 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.
It should be noted that it was not until 2019 that the City adopted a Policy and updated the DIF Ordinance to include provisions for public bidding and construction for DIF-eligible projects. As a result, development projects (post 2019) are conditioned to enter into an agreement with the City (as applicable) for DIF credit and reimbursement prior to building permit issuance. Developers are also implementing the City’s Policy for Bidding Public Projects. This has been working out well and the developers are able to follow the City’s process from final engineering through final acceptance. Staff’s ability to reconcile at the end of the project has become increasingly more efficient and simplified because the work is completed upfront.
All water DIF facilities constructed prior to 2019 are being retroactively reconciled. Consequently, Lewis submitted to the City the backup documentation for all the costs associated with the construction of the Water Improvements. The costs are summarized in Exhibit 1 of the attached Construction Credit & Reimbursement Agreement (“Agreement”). The City worked with Lewis on the water DIF reimbursement package to ensure that the information that was being presented was clear and concise. The City created and provided a comprehensive checklist for Lewis to use to help show the costs more effectively.
Lewis has completed all work required in connection with the design and construction of the Water Improvements according to the specifications of the City and under the inspection and to the satisfaction of the Director of Public Works. The Director of Public Works reviewed the final accepted/approved "as-built" plans, specifications and supporting documentation and determined that $26,578,869.28 is eligible for DIF credit and/or reimbursement. Additionally, Lewis purchased Water DIF credit from Watson Land Company per the terms of Credit/Reimbursement Agreement for the Phase 2 EWTF in the amount of $2,174,813.74 thereby bringing the total available credits/ reimbursements to $28,753,683.02.
Upon the costs being validated by the City, staff reconciled the Water DIF credits issued to all Lewis developments through September 30, 2023, totaling $26,449,219.80, which is summarized in Exhibit 2 of the Agreement. The credits issued were deducted from the validated costs above, bringing a balance forward still owed to the developer in the amount of $2,304,463.22. This amount may be applied to future building permits and/or may be reimbursed depending on available fund balances.
ISSUES/ANALYSIS
In January 2024, staff brought an informational item to the Infrastructure Streets Committee (“Committee”) to briefly discuss the Water Improvements constructed by Lewis, the costs associated, and the DIF credits issued over the last 20 years. This was necessary due to the size of Lewis’s submittal and to better explain the nuances associated with staff’s review of the backup documentation provided by the developer.
Additionally, staff conveyed to the Committee that Lewis would be utilizing DIF credits toward future building permits in-lieu of taking a cash reimbursement upfront. However, Lewis recently expressed that upon the availability of funds, that a cash reimbursement is desired in conjunction with the issuance of DIF credit toward future building permits. At this time, there are no available funds in The Preserve Water Source, Storage, and Distribution Development Impact Fee program. Staff will continue to monitor the fund balance and will make progress payments to the developer (when funds are available) until the terms of the agreement are fulfilled. As well, staff reconciled the water DIF credits associated with 5,174 units of Lewis’s required 8,104 units per the Preserve DA. It is estimated that Lewis will begin paying Preserve Water DIFs around the 5,450th building permit.
The City Council by resolution may designate certain public facilities as “high priority,” The Water Improvements subject of this Agreement were constructed and accepted by the City for use prior to the date of the completion and acceptance by the City of any other Water DIF facilities, which may be eligible for reimbursement. Accordingly, pursuant to the first-in/first-out provision of the DIF Ordinance (i.e., Section 3.45.130.A7), reimbursement to Lewis for the Water Improvements shall have priority and be first in line over all other Water DIF facilities constructed by other developers.
The proposed Agreement includes a provision that each year, the City and Lewis’s representatives will meet for the purpose of ascertaining credits for water DIFs issued by the City to Lewis for developments within Lewis’s properties. The City and Lewis will prepare a document that reconciles the foregoing Water DIF credit and reimbursement reconciliation until the terms of the agreement are fulfilled.
Lastly, on June 6, 2023, the City Council approved an amendment to the existing DA to ensure responsible Long-Range Planning and Fiscal Stability by addressing and further clarifying Lewis's water infrastructure obligations. Moving forward, Lewis will only be required to design and construct potable water and recycled water pipelines as it relates to the remaining Lewis properties in The Preserve. The prior condition that Lewis provide supply, storage, and treatment facilities as conditioned per the terms of the original DA was removed. The City will act as the lead on all the large-scale water projects moving forward unless mutually agreed upon in writing by both parties.
Therefore, staff recommends that the City Council adopt Resolution 2024-009 memorializing the developer’s right to the highest priority reimbursement of funds from The Preserve Water Source, Storage, and Distribution Development Impact Fee Fund; and approve a construction credit/reimbursement agreement with Lewis for an amount not to exceed $28,753,683.02 for the construction of water source, storage, and distribution improvements at various locations in the Preserve.
Attachments: Exhibit A & B - Water Atlas Maps
Exhibit C - Construction Credit/Reimbursement Agreement
Exhibit D - Resolution 2024-009