TO: LINDA REICH, CITY MANAGER
FROM: HYE JIN LEE, PE, DIRECTOR OF PUBLIC WORKS
SUBJECT
title
Approve the Consolidation, Amendment, and Reconciliation of Lewis Companies Construction Credit Reimbursement Agreements for Storm Drain Development Impact Fees (DIF).
end
RECOMMENDATION
1) Approve the First Amendment to Contract No. 2024-235, the Construction Credit and Reimbursement Agreement for Line F, increasing the agreement amount by $4,184,847.86 for a revised total contract amount not to exceed $10,669,969.97, between the City of Chino, Chino Development Corporation, a California corporation, and Chino Preserve Development Corporation, a California corporation; 2) accept the updated Storm Drain DIF Credit and Reimbursement Reconciliation for project-specific development projects in the amount of $37,359,059.65 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 on the City.
Staff will continue to conduct annual reconciliations of Storm Drain 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 Storm Drain DIF credits to the extent permitted under the applicable agreements and consistent with the City’s Storm Drain 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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BACKGROUND
Before the City Council for consideration is a Storm Drain Development Impact Fee (“Storm Drain DIF”) Credit and Reimbursement Reconciliation associated with regional backbone storm drainage infrastructure improvements constructed by the City’s master developer, Lewis Companies (“Lewis”), in support of development within The Preserve. The reconciliation provides a comprehensive accounting of Storm Drain 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 several storm drain-related agreements, including construction credit and reimbursement agreements, covenant agreements, and project-specific reimbursement agreements. Collectively, these agreements establish the framework for the issuance of Storm Drain DIF credits and reimbursements for eligible regional backbone infrastructure improvements. Eligible improvements include detention basins, Natural Treatment System facilities, regional storm drain lines, drainage channels, underground conveyance systems, and other major storm drainage facilities necessary to serve the ultimate buildout of The Preserve and surrounding benefit areas.
1. Contract No. 2016-118
Phase I - Storm Drain Improvements (Ontario Ranch and The Preserve)
This agreement established approximately $36.7 million in Storm Drain DIF-eligible costs associated with Phase I regional backbone improvements within the City of Chino, including the Kimball and Bickmore Natural Treatment System basins, regional storm drain lines, channels, and related facilities. Of this amount, approximately $23.8 million represented the City of Chino’s fair share, while the remaining $12.9 million represented Ontario Ranch’s fair share.
Although the obligations and term of this agreement have been fully satisfied, the agreement is included in this reconciliation because the credits associated with these improvements were reviewed, reconciled, and validated as part of the final comprehensive true-up of Storm Drain DIF-eligible costs and credits.
|
Agreement |
Purpose |
Validated Costs |
|
Contract No. 2016-118 |
Phase I regional backbone storm drainage improvements |
$23,818,767 Chino’s Fair-Share |
2. Validation of Additional Eligible Costs
Contract No. 2024-235 (First Amendment)
Storm Drain Lines F, B, and H
Following completion of the Phase I improvements, Lewis submitted reimbursement requests for eligible regional storm drainage improvements associated with portions of Lines F, B, and H, which formed the basis of Contract No. 2024-235. Line F was constructed in phases, and supporting documentation was submitted incrementally as construction progressed. Through the City's review and validation process, approximately $4.18 million in additional eligible costs associated with Line F have been determined to be Storm Drain DIF eligible.
As a result, the validated eligible costs under Contract No. 2024-235 increase from approximately $6.49 million to $10.67 million. Accordingly, as part of this reconciliation, Contract No. 2024-235 must be amended to incorporate the additional validated costs, establishing a revised total eligible reimbursement and credit amount not to exceed $10,669,969.97.
|
AgreementPurposeValidated Costs |
|
|
|
Contract No. 2024-235 |
Additional improvements including Lines F, B & H |
$10,669,969.97 amended total |
Project Specific Agreements
In 2019, the City adopted a formal policy governing DIF 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 prior to receiving DIF credits. As a result, all DIF-eligible improvements constructed after 2019 have been addressed through project-specific agreements on a tract-by-tract basis.
Subsequent project-specific Storm Drain DIF agreements were executed to address regional drainage improvements supporting later phases of The Preserve development, including Town Center and Blocks 3A, 9, and 11. These agreements established the framework for the issuance of Storm Drain DIF credits associated with eligible regional infrastructure improvements.
|
Agreement |
Purpose |
Eligible Costs |
|
Contract No. 2022-163 Tract Map No. 16420-3 |
Drainage improvements supporting Town Center |
$5,937,004 estimated; $2,870,322.68 validated |
|
Contract No. 2023-249 Tract Map No. 16420-4 |
Drainage improvements supporting Block 9 |
$1,106,149 estimated |
|
Contract No. 2024-277 Tract Map No. 16420-5 |
Drainage improvements supporting Block 3A |
$547,869 estimated |
|
Contract No. 2026-209 Tract Map No. 16420-6 |
Drainage improvements supporting Block 11 |
$1,450,979 estimated |
The credits associated with these agreements are currently based on estimated construction costs, as summarized in the table above. A portion of the costs associated with Contract No. 2022-163 have been submitted, reviewed, and validated by the City and are included in the validated credit amount discussed in the Issues and Analysis section below. However, the remaining costs have not yet been submitted for final review and validation. Accordingly, the estimated credit amounts remain subject to adjustment pending completion of the City's review and validation process.
3. Covenant Agreement Reconciliation
As part of staff’s broader reconciliation of Preserve-related Storm Drain 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, including the associated wet utility improvements. Lewis was originally conditioned to construct Pine Avenue from Euclid Avenue to Johnson Avenue as part of the development obligations for Tract Map No. 20161. However, that requirement was subsequently removed through an approved development modification, and responsibility for design and construction of the project was assumed by the City.
As a result, Lewis was required to prepay the applicable Storm Drain DIF to ensure funding would be available for the City to construct the ultimate Pine Avenue improvements. These improvements include raising the roadway profile through the construction of embankments on both the north and south sides of Pine Avenue, installation of storm drainage facilities, and improvements to the Euclid Avenue/Pine Avenue intersection designed to enhance traffic operations, improve 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 $3.0 million in prepaid Storm Drain 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 its consultant, David Taussig & Associates, Inc. (DTA) conducted a comprehensive review of all Storm Drain 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 Storm Drain DIF related to Tract Map No. 20161 (Van Vliet), dated July 21, 2020; and
• Covenant Agreement for Prepayment of Storm Drain 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 $55,816.80 Storm Drain DIF credits remain under the Tract 20161 Covenant Agreement, which will be applied toward the remaining 32 residential 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
Through the reconciliation of the various credit, reimbursement, and covenant agreements, City staff and DTA conducted a comprehensive review of historical fee application records to verify that DIFs across all fee categories were assessed using the appropriate land use classifications and fee schedules in effect at the time each fee was paid, credited, or reimbursed. This effort represents the final true-up of historical Storm Drain DIF activity associated with The Preserve, and no further retroactive reviews are anticipated.
The reconciliation provides a consolidated accounting of validated costs, credits issued, reimbursements processed, and remaining credit balances associated with regional backbone storm drainage improvements. As summarized below, the City has validated approximately $37.36 million in Storm Drain DIF-eligible costs under the following agreements:
|
Agreement |
Costs |
|
Contract No. 2016-118 (Phase I - Preserve) |
$23,818,767.00 |
|
Contract No. 2024-235 (Lines F, B, & H) |
$10,669,969.97 |
|
Contract No. 2022-163 (Town Center Costs) |
$ 2,870,322.68 |
|
Total Validated Costs |
$37,359,059.65 |
Of the approximately $37.36 million in validated Storm Drain DIF costs, approximately $25.75 million has been applied as Storm Drain DIF credits toward Preserve development activity, approximately $8.84 million has been reimbursed in cash pursuant to applicable agreements, and approximately $2.78 million remains available for future eligible credit utilization or reimbursement.
|
Description |
Amount |
|
Total Validated Costs |
$37,359,060 |
|
Less: Credits Issued |
($25,747,185) |
|
Less: Cash Reimbursements |
($8,835,557) |
|
Remaining Credits |
$2,776,318 |
The remaining available credit balance excludes any improvements associated with the aforementioned project-specific agreements for Town Center, Block 9, Block 3A, and Block 11, that have not yet been completed, reconciled, or approved by the City. These agreements collectively contain approximately $9.04 million in estimated future Storm Drain DIF-eligible costs. Of this amount, approximately $2.87 million has already been validated and incorporated into the reconciliation above, leaving approximately $6.17 million in estimated future credits subject to completion of eligible improvements, submission of supporting documentation, and City approval.
|
Agreement |
Improvement Area |
Estimated Additional Credits |
|
Contract No. 2022-163 |
Town Center (Tract 16420-3) |
$5,937,004.00 |
|
Contract No. 2023-249 |
Block 9 Independence |
$1,106,149.00 |
|
Contract No. 2024-277 |
Block 3A |
$547,869.00 |
|
Contract No. 2026-209 |
Block 11 |
$1,450,979.00 |
|
|
Total Estimated Costs |
$9,042,001.00 |
|
|
Less: Validated Costs |
($2,870,322.68) |
|
|
Remaining Credits |
$6,171,678.32 |
Lastly, staff confirmed that no prepaid balance remains under the Block 4 covenant agreement and identified an estimated remaining prepaid balance of $55,816.80 associated with Tract 20161. Consistent with the terms of the applicable covenant agreement, this balance will be applied toward the final 32 residential units within the tract.
Approval of the proposed amendment and reconciliation will establish a comprehensive and updated accounting of Storm Drain DIF obligations, credits, and reimbursements; improve long-term program transparency and tracking; satisfy reconciliation requirements contained within the applicable agreements; and support ongoing administration of the Storm Drain DIF Program as the City proceeds with the upcoming Development Impact Fee Nexus Study Update.
Attachment: Exhibit A - First Amendment to Construction Credit/Reimbursement Agreement for The Preserve Storm Drain Contract No. 2024-235 & DIF Credit Reconciliation Through May 31, 2025.