MEETING DATE:
JANUARY 13, 2015
SUBJECT:
Title
RESOLUTION NO. 2015-8026 - CONSIDERATION AND ACTION ON PROPOSED SECOND AMENDMENT TO OWNER PARTICIPATION AND SUBSTANTIAL CONFORMANCE AGREEMENT AND AMENDMENT TO FIRST IMPLEMENTATION AGREEMENT FOR THE PALOMAR STATION PROJECT
Body
Recommendation
Recommendation
ADOPT a resolution authorizing the City Manager and City Attorney to finalize and execute the proposed Second Amendment to Owner Participation and Substantial Conformance Agreement and Amendment to First Implementation Agreement for the Palomar Station Project.
Body
Introduction
Palomar Station is a mixed-use project on approximately 14.3 acres, consisting of 370 dwelling units and a separate, free standing lot intended for commercial use ("Project"). The current owner of the Project is Integral Project Owner II, LLC ("Owner"), successor in interest to The Palomar Station Owner, LLC.
As a part of the Owner's development entitlement conditions, Owner was to contribute to the design and construction of a pedestrian bridge across Mission Road (Pedestrian Bridge). The City has since obtained a federal grant in the amount of $782,640 to be applied to the Pedestrian Bridge, which grant required the City to take over the Pedestrian Bridge project. The City has also received updated construction cost estimates for the Pedestrian Bridge based on changes in scope and design resulting from regulatory input received from NCTD and the California Public Utilities Commission, which construction cost estimates exceed the Project's reasonable fair share contribution to the Pedestrian Bridge.
Staff and the Owner have negotiated amendments to the existing agreements between the parties to address the construction of the Pedestrian Bridge, and the relationship to the residential occupancies for the Project, given these new circumstances. The amendments also address the timing of the Owner's obligation to construct the commercial component of the Project (Commercial Lot), and Owner's obligations to the City with respect to the same.
Discussion
The City and Owner's predecessor previously entered into that certain Owner Participation and Substantial Conformance Agreement dated July 26, 2011 (OP/SCA), and in its capacity as the legislative body of the City subsequently approved the amendment of the non-redevelopment-related provisions that document pursuant to the First Amendment to Owner Participation and Substantial Conformance Agreement dated December 11, 2012 (First Amendment). Subsequently, the City and Owner entered into the First Implementation Agreement to Substantial Conformance Agreement and Real Property Security and Lien Agreement dated December 11, 2012 (Implementation Agreement), for the purpose of implementing Owner's obligations with respect to the development entitlement conditions for the Project and its obligations under the First Amendment concerning the design and construction of the Pedestrian Bridge. All of the above-referenced agreements are collectively referenced as the "Palomar Agreements."
Subsequent to execution of the Palomar Agreements, the City has also received updated construction cost estimates for the Pedestrian Bridge based on changes in scope and design resulting from regulatory input received from NCTD and the California Public Utilities Commission, which construction cost estimates exceed the Project's reasonable fair share contribution to the Pedestrian Bridge.
Construction of the Pedestrian Bridge was originally estimated to be approximately $2.1 million dollars. In addition to its agreement to provide $100,000 of in kind City services to the Pedestrian Bridge, the City applied for and received a federal grant of $782,640 for the Pedestrian Bridge. The Owner has already deposited with the City $100,000 as its Design Contribution, plus $700,000 as the Initial Construction Contribution as required by the Palomar Agreements, less a $430,855 credit against circulation streets component of the Public Facilities Fee ("PFF Credit") given the congestion relief that will occur on Mission Road due to the Pedestrian Bridge. Under the previous Palomar Agreements, Owner was required to make up any difference in the cost of the Pedestrian Bridge Construction ("Owner's Additional Contribution").
The proposed Amendment to the Palomar Agreements primarily addresses two areas, costs and respective responsibilities associated with the Pedestrian Bridge and the timing of the issuance of a building permit for the Commercial Lot ("Building Permit).
Pedestrian Bridge
The federal grant requires the City to be the grant recipient and lead on the Pedestrian Bridge Project. Additionally, because of changes in scope and design resulting from regulatory input received from NCTD and the California Public Utilities Commission (CPUC) and detailed design information, the City has also received updated construction cost estimates for the Pedestrian Bridge. The updated and revised construction cost estimates would, if the Palomar Agreements are not amended, result in an Owner share of Pedestrian Bridge costs that would greatly exceed the Project's reasonable fair share contribution to that improvement.
The estimated cost for construction of the Pedestrian Bridge has increased well beyond the original $2.1 million estimate because of changes noted above. In light of the increased cost estimates the Amendment includes a cap of $250,000 on Owner's Additional Contribution in place of an unlimited liability and obligation. Owner is also relinquishing its right to establish a reimbursement district to recoup some of its costs for the Pedestrian Bridge from other properties as they develop.
The City anticipates that the Pedestrian Bridge will be completed before December 31, 2020. It should be noted (i) that if the Pedestrian Bridge is not constructed, the proposed amendments provide that City will reimburse the Owner for its contributions for Pedestrian Bridge construction, up to a maximum $519,145, and (ii) Owner has already paid its full Public Facilities Fee for the Project.
Building Permit for Commercial Lot
Under the existing Palomar Agreements, the Owner was to pull a building permit for the Commercial Lot within two months of the first occupancy of the residential portion of the Project, with construction to commence within three months of residential occupancy. There was a trigger for an adjusted date if a lease with a major tenant had been executed, which did not occur. If those deadlines were not met, the Commercial Lot was to be conveyed to the City in fee.
On August 11, 2014, the City Manager granted an extension of the building permit issuance deadline to July, 2015, assuming that the building permit would be pulled within two months of achieving 75% residential occupancy. The Owner has requested an extension of the building permit deadline to December 31, 2015. Staff recommends approval of the requested extension, and in exchange has negotiated a list of non-permitted uses to ensure that the Commercial Lot is developed in harmony with the residential component, and with desired plans for that area. The City Manager is also to be kept apprised of Owner's commercial leasing efforts.
Fiscal Impact
As proposed, given the excess over the Project's fair share contribution amount for the Pedestrian Bridge, the additional construction costs will be the City's responsibility. Those capital costs have not yet been determined. Maintenance of the bridge will be addressed through the Community Facilities District special improvement area established by the Project.Outline the fiscal impact, if any, that the issue raises. Fiscal impact should include at a minimum whether the item is a onetime cost or has ongoing costs associated with it. Show both one time and ongoing costs (if applicable). Indicate whether or not the item is part of the approved budget and where funding is coming from.
Attachment(s)
1. Proposed Second Amendment to Owner Participation Agreement and Substantial Conformance Agreement and Amendment to First Implementation Agreement;
2. Proposed Resolution Approving a Second Amendment to Owner Participation Agreement and Substantial Conformance Agreement and Amendment to First Implementation Agreement;
3. Background Documents: First Amendment to Owner Participation Agreement and Substantial Conformance Agreement and First Implementation Agreement to Substantial Conformance Agreement and Real Property Security and Lien Agreement
Prepared by: Helen Holmes Peak, City Attorney
Approved by: Jack Griffin, City Manager